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Annual report and accounts 2016
Our products are working behind the scenes,
in more industries than you think...
Contents
Strategic report
01
Introduction
02 At a glance
04 Chairman’s statement
42 Performance – Healthcare
44 Performance – Financial review
48 Risk and risk management
50 Principal risks and uncertainties
Financial statements
94 Consolidated income statement
95
Consolidated statement of comprehensive
income and expense
08
Additive manufacturing for custom solutions
52 Corporate social responsibility
96
Consolidated balance sheet
54 Our strategy in action – People
97 Consolidated statement of changes in equity
62 The power generation market
98 Consolidated statement of cash flow
09 Our business model
10 Our markets
12
Our business sectors – Metrology
14 The aerospace market
16 The automotive market
Governance
Introduction
64
66 Board of directors and company secretary
18
Our business sectors – Healthcare
68 Executive Board
69
International Sales and Marketing Board
70 Directors’ corporate governance report
76 Nomination Committee report
77 Audit Committee report
80
Directors’ remuneration report
87 Other statutory and regulatory disclosures
90 Directors’ responsibilities
91
Independent auditor’s report
20 The healthcare market
22 Our strategy
23 Key performance indicators
24 Our strategy in action
26
28
30
32
Our strategy in action
– Focus on delivering solutions
Our strategy in action
– Global customer support
Our strategy in action
– Efficient high-quality manufacturing
Our strategy in action
– Continual research creating strong
market positions with innovative products
34 Performance – Overview
36 Performance – Metrology
38 The consumer products market
40 The construction market
99
Notes (forming part of the
financial statements)
121 Company balance sheet
122 Company statement of changes in equity
123 Notes to the Company financial statements
Shareholder information
134 10 year financial record
135 Shareholder information
136 Shareholder notes
01
Applying innovation to a range of our markets
Construction see pages 40–41
Consumer products see pages 38–39
Power generation see pages 62–63
Automotive see pages 16–17
Aerospace see pages 14–15
Healthcare see pages 20–21
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. 95% of our sales are outside the UK.
Our continuing investment in new product development, plant and
equipment, and facilities (c.£100m in the last year) is the key to
our confidence in the Group’s long-term strategy and prospects.
With 4,286 skilled and motivated people, we continue to be at the
leading edge of technological innovation.
For more information visit:
www.renishaw.com
All dates within this document refer to
financial years unless stated otherwise.
GovernanceFinancial statementsShareholder informationStrategic report 02
At a glance
2016
in numbers
Who we are
Renishaw is a world-leading metrology
company operating in two key business
areas, metrology and healthcare.
The Group has 79 locations in 35
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.
What we do
Metrology products:
Our technology solutions help
manufacturers to maximise production
output, to significantly reduce the
time taken to produce and inspect
components, and to keep their machines
running reliably. In the fields of industrial
automation and motion systems, our
high-quality position measurement and
calibration systems allow machine builders
to manufacture highly accurate and
reliable products.
Healthcare products:
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.
£436.6m
£80.0m
Revenue
Profit before tax
US office near Chicago
Renishaw, Inc. to be
consolidated into one new
133,000 sq ft facility
North and South America
Locations
11
Metrology revenue
£87.4m
Healthcare revenue
£4.8m
Indicates Renishaw Group locations
Metrology
Healthcare
95%
5%
Strategic reportRenishaw plc Annual report and accounts 2016 03
48.0p
Total dividend for the year
4,286
Number of employees
as at 30th June 2016
1,500+
Patents – continual innovation
in new technologies
Miskin, UK
460,000 sq ft
site is now fully refurbished
and 60% occupied
Taiwan office
relocated to larger
14,800 sq ft facility
India
New Solutions Centre
UK and Ireland
Locations
15
Metrology revenue
£18.5m
Healthcare revenue
£4.7m
Continental Europe
Locations
20
Metrology revenue
£103.1m
Healthcare revenue
£9.0m
Other regions
Locations
9
Metrology revenue
£11.6m
Healthcare revenue
£2.2m
Far East
Locations
24
Metrology revenue
£187.6m
Healthcare revenue
£7.7m
80%
20% 92%
8%
84%
16% 96%
4%
GovernanceFinancial statementsShareholder informationStrategic report 04
Chairman’s statement
I am pleased to report our 2016 annual results, with
revenue for the year ended 30th June 2016 of £436.6m
compared to £494.7m for last year. The Group’s profit before
tax for the year was £80.0m.
Sir David R McMurtry, Chairman and Chief Executive
I am pleased to report our 2016 annual
results, with revenue for the year ended
30th June 2016 of £436.6m compared
to £494.7m for last year. As highlighted
in our Interim results, we had a number
of large orders from Far East customers
in the consumer electronics markets
during the previous year which generated
exceptional growth in our metrology
business sector. Adjusting for these large
orders and restating revenue at last year’s
exchange rates resulted in an underlying
revenue growth of 4% for the year and
6% at actual exchange rates.
Geographically, revenue in the Far East
was £195.3m compared to £257.7m
last year, but with an underlying growth
of 12% when excluding the large orders.
Revenue in Europe was £112.1m
(2015: £103.1m), in the Americas was
£92.2m (2015: £96.3m) and in the UK
was £23.2m (2015: £25.5m).
The Group’s profit before tax for the year
was £80.0m compared to £144.2m
last year.
£87.4m (2015: £89.4m), in Europe was
£103.1m (2015: £96.2m) and in the UK
was £18.5m (2015: £20.7m).
This year’s tax charge amounts to £11.5m
(2015: £22.8m) representing a tax rate of
14.3% (2015: 15.8%). The tax rate has
benefited from the continued phasing in
of the patent box tax regime, the research
and development tax credit and a further
reduction in the UK corporation tax rate.
Earnings per share were 94.9p compared
to 167.5p last year.
Metrology
Revenue from our metrology business
for the year was £408.2m compared to
£467.0m last year.
Revenue in the Far East was £187.6m
compared to £249.9m last year, a
decrease of 25%, but an underlying
increase of 13% after excluding the large
orders. Revenue in the Americas was
There was good growth in our
measurement automation, additive
manufacturing (AM) and encoder
products lines.
Operating profit for our metrology
business was £85.9m (2015: £150.7m).
We have continued to invest in research
and development, with total engineering
costs in this business segment of £60.1m
net of capitalised costs (2015: £55.0m)
and a number of new product launches
during the year. The CMM products line
launched both REVO-2, a new version
of the REVO® multi-sensor 5-axis
measurement system with a vision probe
option, and MODUS 2™, a new CMM
metrology software package. Our spatial
measurements products line launched
Merlin, a marine surveying system.
2016 performance
Revenue (£m)
Operating profit (£m)
Profit before tax (£m)
Earnings per share (pence)
Dividend per share (pence)
2016
2015
Change
436.6
494.7
79.5
80.0
94.9
48.0
143.9
144.2
167.5
46.5
-12%
-45%
-44%
-43%
+3%
Strategic reportRenishaw plc Annual report and accounts 2016 05
New RenAM 500M additive manufacturing
system for volume production.
Open day in the Renishaw Innovation
Centre attended by 1,100 people.
now been approved for sale in Australia.
In our medical dental products line we
increased sales of AM machines for the
manufacture of dental products and
maxillofacial and cranial products.
In our spectroscopy products line, we
introduced the inVia Qontor confocal
Raman microscope, with the addition of
Renishaw’s latest innovation, LiveTrack™
focus tracking technology, which enables
users to analyse samples with uneven,
curved or rough surfaces.
There was an operating loss of £6.4m,
compared to a loss of £6.8m last year.
We remain focused on moving this
business sector into profit.
In relation to the AM products line we
launched the AM400, demonstrated
the RenAM 500M and established
four innovative AM solution centres to
support the adoption of AM technology
in volume production.
Healthcare
Revenue from our healthcare business
for the year was £28.4m, an increase
of 3% over the £27.7m last year.
We experienced growth in our medical
dental and neurological products lines.
Healthcare also saw continued investment
in research and development, with
total engineering costs in this business
segment of £9.0m net of capitalised costs
(2015: £8.3m).
We have continued to expand the market
for our neuromate® surgical robot,
including sales in the UK and Spain, along
with our neuroinspire™ surgical planning
software. Our neuroinspire™ software has
Continued investment for
long-term growth
The Group continues its strategy to
invest for the long-term, expanding
our global marketing and distribution
infrastructure, along with increasing
manufacturing capacity and research and
development activities. During the year,
we established new sales and marketing
subsidiary companies in Denmark, Finland
and Hungary.
Our workforce at the end of June 2016
was 4,286, an increase of 174, of which
106 were apprentices and graduates
taken on as part of our on-going aim and
commitment to train and develop skilled
resource for the Group in the future.
Capital expenditure on property, plant
and equipment for the year was £53.0m,
of which £17.4m was spent on property
and £35.6m on plant and equipment.
New premises for our USA headquarters
near Chicago are nearing completion.
Financial highlights
Revenue (£m)
494.7
436.6
355.5
346.9
331.9
Adjusted profit
before tax (£m)
144.2
80.0
Adjusted earnings
per share (pence)
Dividend per
share (pence)
167.5
94.9
48.0
46.5
41.2
40.0
38.5
86.0
79.2
70.1
95.6
88.9
82.3
2016
2015
2014
2013
2012
2016
2015
2014
2013
2012
2016
2015
2014
2013
2012
2016
2015
2014
2013
2012
GovernanceFinancial statementsShareholder informationStrategic report 06
Investor communications
In line with our commitment to improve
investor communications, our third
investor day was held on 12th May 2016,
for existing and potential new investors.
This involved presentations on group
strategy, business segments and product
lines, given by members of the Board
and senior management, as well as tours
covering the Group’s activities and various
Q&A sessions. The event was again well
attended and gives shareholders another
opportunity, in addition to the AGM and
half-year and year-end webcasts, to
learn more about Renishaw’s business
and strategy.
Merlin is a new dedicated time-tagged
marine laser scanning system.
Chairman’s statement (continued)
In the UK, the refurbishment of the
remaining half of the facility at Miskin,
South Wales, was completed and
incorporates product display, training,
research and development areas and a
Healthcare Centre of Excellence. Also at
Miskin we obtained planning consent
for 1.74m sq ft building development
at the site.
Also at board level, Kath Durrant took
on the role of Chair of the Remuneration
Committee. This role was previously
held by Sir David Grant, our senior
independent director, who we are
delighted to congratulate on his
knighthood in the Queen’s Birthday
Honours 2016 for his contribution to
engineering, technology and education.
Working capital
Group inventory increased from £77.7m
at the start of the year to £95.0m, as we
continued our policy of holding sufficient
finished inventory to ensure customer
delivery performance, given our short
order book of approximately five weeks.
Trade debtors increased from £101.2m
to £114.9m, with debtor days outstanding
at the end of the current year at 70 days
(2015: 67 days).
Net cash balances at 30th June 2016
were £21.3m, compared to £82.2m
at 30th June 2015. Additionally, there
is an escrow account of £15.3m
(2015: £14.7m) relating to the provision
of security to the UK defined benefit
pension scheme. The lower cash balance
reflects the high capital expenditure
during the year, along with higher working
capital demands.
Directors and employees
During the year we have made
several changes at Board and senior
management level to enhance the
operations of the business. Will Lee,
formerly the head of our machine tool
products line and laser and calibration
products line, was appointed as Director
of Sales and Marketing to support Ben
Taylor in the transition to his retirement
from the Board at the end of July this year.
I am now delighted to announce that Will
is to be appointed to the Board as Group
Sales and Marketing Director with effect
from 1st August 2016.
I would like to take this opportunity to
thank Ben for his outstanding contribution
to the Group’s performance over the last
31 years. Ben has helped me to articulate
the vision for Renishaw and has been
a partner in developing long-standing
relationships with customers worldwide.
He will be missed by all within the Group,
both personally and professionally.
We wish him well in his retirement.
We have reviewed the management of our
overseas sales operations and appointed
Leo Somerville as President – Renishaw
North America to oversee our sales
subsidiaries in Canada, USA and Mexico
and Howard Salt as President – Renishaw
Inc. our principal USA sales subsidiary.
These new appointments will provide
strategic focus to our sales activities
in these regions.
The directors would also like to thank
employees for their invaluable support
and contribution during the year.
UK defined benefit pension
scheme
The Company and the trustees of the
UK defined benefit pension scheme
have entered into a funding agreement
to conclude the latest triennial valuation
of the fund as at 30th September 2015.
This agreement came into effect on 30th
June 2016 and provides for a 15-year
recovery plan under which the Company
will pay member pensions, retirement
lump sums and transfer payments (up to
£1m per annum) over this period.
In addition, the Company has provided
security over UK property to the value of
£62m, and the fund will retain the cash
held in an escrow account providing
further security for a period of six years,
over which time this escrow account will
be scaled back to zero.
The Company and the trustees have
agreed a higher funding target than
agreed previously in order to make the
fund self-sufficient over the 15-year
period (or earlier, if achieved in the
meantime) and will measure this at each
triennial actuarial valuation. The funding
agreement has been submitted to The
Pensions Regulator.
Strategic reportRenishaw plc Annual report and accounts 2016 07
RVP is a new vision measurement
probe for use with the REVO® 5-axis
measurement system.
The 2016 Investor Day was held at our
Miskin site in South Wales.
Brexit
Whilst the full business implications of Brexit
remain uncertain, and will do for some
time, the Board believes the Group to be
well positioned to react to the potential
challenges and opportunities ahead.
The Group has a strong presence in the
EU, which this year comprised 23% of our
revenue, with a number of subsidiaries
performing a range of functions including
sales, marketing and distribution, research
and development and manufacturing.
We believe this infrastructure will assist the
Group in its planning for and response to
changes in trading arrangements between
the UK and the EU. Our risk committee
will be assessing all potential impacts and
putting in place strategies and actions,
both in the shorter-term whilst the UK
government negotiates the UK’s exit from
the EU and in the longer-term as the
UK’s trading arrangements with the EU
become clearer.
Outlook
The Group continues to invest in the
development of new products and
applications, along with targeted
investment in production, and sales and
marketing facilities around the world.
Despite current uncertainty surrounding
Brexit and significant fluctuations in
currency exchange rates, your directors
remain confident in the long-term
prospects for the Group and currently
anticipate growth in both revenue and
profits over the next financial year.
Dividend
A final dividend of 35.5p net per share
will be paid on 17th October 2016,
to shareholders on the register on
16th September 2016, giving a total
dividend of 48.0p for the year, an increase
of 3.2% over last year’s 46.5p.
Sir David R McMurtry
CDE, RDI, FRS, FREng, CEng, FIMechE
Chairman and Chief Executive
27th July 2016
The new inVia Qontor is Renishaw's
most advanced Raman microscope.
Opening of new Additive Manufacturing
Solutions Centre in Pune, India.
GovernanceFinancial statementsShareholder informationStrategic report 08
Additive manufacturing for custom solutions
“ People often say ‘we couldn’t
have done it without you’, but
the fact is Robot Bike Co really
couldn’t have got to where
it is today without the help
and expertise that Renishaw
provided us with, and for that
we are hugely appreciative.”
Ed Haythornthwaite, CEO, Robot Bike Co
(manufacturer of the world’s first fully
customisable carbon fibre mountain bike frame).
For further information on Renishaw’s additive manufacturing
solutions please see the case study on pages 26–27 and more
information on our website.
Strategic reportRenishaw plc Annual report and accounts 2016 09
Our business model
We identify customer needs, and then apply
innovative engineering to deliver successful solutions.
1. Customer needs
• We anticipate future trends and seek to solve problems
before they appear to be happening.
• All areas of our organisation work in partnership with their
customers to understand and solve their customers’ current
and anticipated real-life problems.
2. Innovative engineering
• Renishaw’s strategy of investment in R&D and engineering
skills enables us to take a longer-term view of the viability
of new technologies.
• We are actively expanding our significant portfolio
of innovative and patented products.
• We provide solutions that drive efficiency and
reduce costs.
Driving sustainable growth
and shareholder return
4
Customer
needs
1
Innovative
engineering
2
3
Successful
solutions
3. Successful solutions
• We are a highly vertically integrated company so that we can
ensure success for our customers. We not only undertake
design of innovative products, we also manufacture and
sell them through our wholly-owned manufacturing and
sales organisations.
4. Driving sustainable growth and
shareholder return
• Our ordinary dividend, funded from our annual cash flows,
is the primary form of shareholder return. We have increased
the ordinary dividend per share by over 20% over the
last three years. We aim to maintain a progressive and
sustainable dividend policy.
Key performance indicators
Our key performance indicators are shown on page 23.
Risks and uncertainties
Information on the risks associated with our business and how we
manage them is contained on pages 48 to 51.
GovernanceFinancial statementsShareholder informationStrategic report 10
Our markets
We develop innovative products that significantly
advance our customers' operational performance –
from improving manufacturing efficiencies and raising
product quality, to maximising research capabilities
and improving the efficacy of medical procedures.
Our products serve truly diverse markets
across a wide range of industries,
customer types and geographic regions.
From the manufacture of jet engines
and wind turbines, through to dentistry
and brain surgery, our products, and our
people who service them, are making a
real difference to the capabilities of our
manufacturing and healthcare clients.
These benefits are extended to the end
consumer of our clients’ products and
services, whether using a smartphone,
driving a car, riding a mountain bike, or
having a new dental crown fitted, many
of these products rely on Renishaw’s
technology and applications expertise.
As Sir David McMurtry has said, “We are
confident that there are not many modern-
day planes, trains or automobiles in the
world that have not been touched in some
way by Renishaw products.”
On these two pages we have listed
some of our principal markets and the
specific key drivers of growth within those
markets, for our products. However, there
are more generic market growth drivers
that are positive for our business:
• Global skills shortages – increased
investments in automation and user-
friendly technology.
• Rising energy costs – increased
demand for products that
maximise output.
• Focus on reducing emissions and
waste – increased demand for high
performance products with ever tighter
manufacturing tolerances and products
that help minimise waste and re-work.
• Population growth and rising incomes
– increased consumption in our
principal markets.
• Life expectancy rising globally –
increased demand for healthcare
products and continuing demand for
consumer products.
We are also increasingly spreading
risk through the diversification of our
applications for product lines, our
customer base and our routes to market.
Renishaw’s business has transitioned
over recent years from primarily being a
supplier of products to capital equipment
manufacturers, to becoming much more
focused on delivering a full solution directly
to end-users. Our experience in our core
product lines, which has highlighted that
our global customers need assistance in
solving their problems, is being carried
across into our newer offerings.
Today, many of our products lines
including measurement and automation,
additive manufacturing and healthcare
lines are primarily sold direct to the
end-user. This helps to build brand
loyalty and open up new revenue
opportunities including hardware and
software upgrades, the cross-selling
of complementary products and
maintenance contracts.
Our business focus is to provide
solutions for our customers across these
highlighted markets and to be seen as
a trusted technology partner meeting
their needs.
Automotive
Continuing investment in
manufacturing capacity
to meet growing global
demand. Improved fuel
efficiency requires tighter
tolerances on powertrain
components. Cost
efficiencies and automated
processes required
throughout the supply chain.
See pages 16–17
Power generation
Manufacture of components
for civil nuclear, wind and
solar energy. Increasing
focus on maximising output
from machinery used in
power generation. Increasing
research into energy storage.
See pages 62–63
Strategic reportRenishaw plc Annual report and accounts 2016 11
Agriculture
Increasing global demand
for food products from
developing nations. Increasing
global demand for biofuels.
Greater investment in
machinery for intensive
farming capabilities.
Healthcare
Neurological disorders
require highly precise
surgical therapies. Growing
demand for cosmetic dentistry
with superior aesthetics.
Need to rapidly diagnose
infectious diseases for faster,
more specific treatments.
Growing demand for patient-
specific implants.
See pages 20–21
Aerospace
New aircraft production
to meet growing global
demand for civil air transport.
New fuel-efficient engines with
complex parts requiring faster
measurement. Improvements
to fuel efficiency by
minimising airframe weight.
See pages 14–15
Consumer products
Ever shorter product life
cycles require flexible
manufacturing systems.
New generations of electronic
devices demand precision
manufacturing systems for
form and function.
See pages 38–39
Construction
Major infrastructure projects
driving heavy equipment
sales. Skills shortages
requiring more automation in
equipment manufacturers.
See pages 40–41
Resource exploration
Equipment manufactured
to stringent safety
requirements requires
accurate, cost-effective
and traceable processes.
Non-renewable resources
require exploration in
demanding terrains and
appropriate surveying tools.
Global population growth and
urbanisation drive long-term
demand for fossil fuels.
GovernanceFinancial statementsShareholder informationStrategic report 12
Our business sectors – Metrology
Our metrology products help
manufacturers to maximise production
output, significantly reduce the
time taken to produce and inspect
components, and keep their machines
running reliably. In the fields of
industrial automation and motion
systems, our position measurement
and calibration systems allow machine
builders to manufacture highly accurate
and reliable products.
Metrology revenue (-13%)
£408.2m
Metrology operating profit (-43%)
£85.9m
Percentage of group revenue
93%
Equator™ gauge integrated within
a robot-loaded manufacturing cell.
Machine tool probe system for
on-machine measurement.
Precision styli ensure accurate
acquisition of measurement data.
Laser calibration system being used to
test positioning accuracy of a rotary axis.
Strategic reportRenishaw plc Annual report and accounts 2016 13
Incremental encoder for rotary motion
control on an air-bearing stage.
Modular fixtures are used to hold parts
securely for dimensional inspection.
Prototype manifold produced by a
vacuum casting machine.
The product range
includes the following:
Co-ordinate measuring
machine (CMM) products
Sensors, software and control systems for
three-dimensional CMMs, including touch-
trigger and scanning probes, automated
probe changers, motorised indexing
probe heads and 5-axis measurement
systems, which enable the highly
accurate measurement of manufactured
components and finished assemblies.
Machine tool probe systems
Sensors and software for computer
numerically controlled (CNC) metal-cutting
machine tools that allow the automation
of setting and on-machine measurement
operations, leading to more productivity
from existing machines and reductions in
scrap and rework. These include laser tool
setters, contact tool setters, tool breakage
detectors, touch probes, contact
scanning systems and high-accuracy
inspection probes.
Styli for probe systems
Precision styli that attach to probe sensors
for CMMs, machine tools and EquatorTM
gauging systems to ensure that accurate
measurement data is acquired at the point
of contact.
Performance testing products
Calibration and testing products to
determine the positioning accuracy of
a wide range of industrial and scientific
machinery to international standards,
including a laser interferometer, rotary axis
calibrator, wireless telescoping ballbar and
software for data capture and analysis.
Gauging
EquatorTM enables process control by
delivering highly repeatable, thermally
insensitive, versatile and reprogrammable
gauging to the shop floor, both as
a standalone device and as part of
an automated manufacturing cell.
Combined with INTUOTM software,
Equator is also an ideal alternative to
traditional manual gauging, with training
in a few hours, allowing engineers to
program parts in minutes.
Spatial measurement
High-speed laser measurement and
surveying systems for use in extreme
environments, such as mine and quarry
surveying, marine positioning and
mobile mapping.
Fixtures
Modular and custom fixtures used to hold
parts securely for dimensional inspection
on CMM, vision and gauging systems.
Position encoders
Position encoders that ensure
accurate linear and rotary motion
control in a wide range of applications
from electronics, flat panel displays,
robotics and semiconductors to
medical, precision machining and print
production. These include magnetic
encoders, incremental optical encoders,
absolute optical encoders and laser
interferometer encoders.
Additive manufacturing (AM)
Advanced metal AM systems for direct
manufacturing of 3D-printed metallic
components. A total solution is offered
from systems, materials, ancillaries and
software through to consultancy, training
and support for a range of industries
including industrial, healthcare and
mould tooling.
Vacuum casting
Vacuum casting machines from entry-level
to high capacity for rapid prototyping and
production of polymer end-use parts.
GovernanceFinancial statementsShareholder informationStrategic report 14
The aerospace market
Equator gauging system is used at
Renishaw’s customer, High-Tech
Engineering to inspect aerospace
components.
Applied innovation to the aerospace market
Air travel popularity continues
to grow, especially in Asia, and
demand for passenger aircraft
is higher than ever as a result.
The 2015 Boeing Global Market
Forecast sees the commercial fleet
doubling by 2034, with 58% of the
38,000 new aircraft required to
accommodate growth. New fuel-
efficient engines with complex
parts require faster measurement,
whilst there is also a drive to
minimise airframe weight to further
aid fuel efficiency.
Gauging success
High-Tech Engineering, a precision
engineering company based in Dunstable,
Bedfordshire, UK, has always focused
on the quality of the parts it produces.
Started in 1985, High-Tech built a
reputation in the motorsport industry for
delivering high-quality machined parts.
The company has since moved into the
aerospace market and gained some key
industry approvals, including becoming
a preferred supplier to leading UK
aerospace companies. Recently
High-Tech won a contract to produce
precision-milled titanium parts for a large
aerospace customer. Due to the nature
of the parts, High-Tech was instructed
to carry out 100% part inspection, and
for this requirement, Hi-Tech is using a
Renishaw Equator™ gauging system for
one particularly complex component.
The Equator system works by comparing
the manufactured parts against a
matching master part, gauging all the
features in a single operation with an
immediate pass/fail decision, along with
a report of the component dimensions.
High-Tech has also managed to reduce
the cost of producing the aerospace part
by 27%. This has had a real impact on the
competitiveness of this type of production,
allowing the company to make the
same precision quality parts, whilst also
delivering better value to its customers.
Around 150 features on the part are
inspected by the Equator system,
including a number of bores, thicknesses
Typical parts manufactured by
High-Tech Engineering.
Renishaw's Equator is a highly repeatable
and versatile shop floor gauging system.
and form measurements, with typical
tolerances of plus or minus 25 microns.
The Equator does this within 10 minutes,
and well within the production
requirements, far less than the machining
time. This is almost a 50% reduction
in cycle time compared to running the
program on High-Tech’s co-ordinate
measuring machines.
The Equator is fully programmable
and can be used on multiple parts,
meaning High-Tech can perform highly
repeatable and rapid automated routines
across numerous contracts, resulting in
significantly reduced labour costs.
Following the success of High-Tech’s
manufacturing cell, the company plans to
use Equator as part of future cells they will
be commissioning for jobs in the pipeline.
According to High-Tech’s Managing
Director, Steve Tickner, “Since we started
using Equator we have not made a single
bad part. When you find something which
helps you make a perfect part every
time, reduces manpower commitments,
reduces overall costs and doesn’t cost
a fortune itself, it’s a winning solution”.
Strategic reportRenishaw plc Annual report and accounts 2016 15
Aircraft are highly complex
structures and key assemblies,
from engines and wings to
control systems and landing gear,
all rely on Renishaw products
for process control and post-
process inspection during their
manufacture. This illustration
of a typical passenger aircraft
highlights a few key applications
for our products.
Landing gear components
Precision machining of high-value materials
uses on-machine probing to eliminate costly
scrap in the production of undercarriage
and landing gear equipment.
Advanced manufacture of control
surfaces
Adaptive machining relies on probing
technology and advanced software
to enable the economic production
of aircraft control surfaces (e.g. flaps and
rudders) with complex geometries.
Control systems and actuators
Fluid power componentry, including control
valves and actuators, benefit from metal
additive manufacturing which enables part
consolidation, functional improvements and
significant weight reductions.
Quiet and efficient aero engines
Scanning technology for machine tools
and inspection equipment benefits the
production and maintenance of a broad
range of engine components, including
the adaptive machining and precision
inspection of blades.
Wings and wing spars
Long-range laser encoders provide the
accuracy required for large-scale machining
of composite wing skins whilst on-machine
probing systems enable efficient production
of wing spars and other machined
components.
GovernanceFinancial statementsShareholder informationStrategic report 16
The automotive market
Improving quality and throughput
Worldwide demand for vehicles
continues to grow and there is
increasing focus on fuel efficiency
and emissions control from
both domestic and commercial
transport. There is also an
increasing need to produce
extremely accurate and reliable
manufacturing systems, with
a trend towards automated
manufacturing processes to
reduce cycle times.
Applying additive technology
to automotive production
Katcon, based in Nuevo Leó, Mexico, is
a manufacturer of catalytic converters,
treatment devices and exhaust modules
for diesel and for gasoline systems, all
designed to protect the environment from
vehicle emissions. Katcon decided to
adopt additive manufacturing (3D printing)
technology to speed up and improve their
processes to develop components.
The company believes that metal 3D
printing allows more design freedom;
it is ideal for producing prototypes and it
is also more efficient for the production
of parts that are currently very costly due
to the multiple processes involved in their
manufacture. After investigating available
additive manufacturing systems, Katcon
chose Renishaw’s AM 250 additive
manufacturing system. Alberto Serna,
Tooling Engineer at Katcon explains,
“The advantage we have with the additive
technology is that we design in a free
space, in a free volume, and we generate
our welding fixtures. Compared to the
normal process of machining which can
take up to four to five weeks, we have
been able to reduce the time to 36 hours
depending on the complexity of the
design. We are offering in some scenarios
a lower cost at a higher speed.”
Katcon, Mexico, produces automotive
parts using a Renishaw additive
manufacturing system.
A Renishaw RMP60 touch probe
measuring an alloy wheel at SAI.
Dr Henry Shih, CEO of automotive supplier
SuperAlloy Industrial Company (SAI).
Driving down re-work
and scrap
Another company benefiting from
Renishaw’s technology within the
automotive industry is Taiwanese
manufacturer SuperAlloy Industrial
Company Ltd (SAI). The company is a
supplier of high-quality lightweight forged
metal products. They produce more
than 200 types of wheel and have 600
CNC machine tools working on wheel
rim production.
In order to increase production precision
and reduce scrap, SAI equipped the
relevant lathes with Renishaw OLP40
touch probes. The CNC milling machines
were equipped with RMP60 machine tool
probes which measure workpiece position
as well as providing in-line key dimension
detection, thereby increasing production
performance. The OLP40 systems allow
SAI to carry out in-process measurement
control to improve cutting and efficiency
for surface precision processing after
coating. Even more importantly, it reduces
rework by 80%.
Dr Shih says, “When we choose suppliers,
we don’t just look at the price of the
product; we also attach a great deal of
value to their R&D capabilities and service.
Renishaw has an excellent reputation
in manufacturing industries, and also
provides service for different industries,
so it doesn’t just offer a product or a
solution, but also shares with us its
experience, expertise and the industry’s
best practices.”
Strategic reportRenishaw plc Annual report and accounts 2016 17
The majority of key
components on domestic
and commercial vehicles
are subject to process
control using Renishaw
products. This illustration
highlights just a few
key applications for our
products relating to a
typical car.
Latest engine technology
From camshaft manufacture to quality
control of valve seats, probing systems
enable modern engines to deliver enhanced
performance, higher reliability and reduced
emissions.
Body panels and components
Automated production lines rely on
indexable and scanning probe systems for
checking car bodies (known as Body in
White) prior to painting and assembly.
Precision gears and reliable gearbox
components
High-volume precision machining and
rapid part inspection necessary to support
automotive gearbox and drivetrain
production are made possible with process
control and gauging technologies.
Suspension and braking components
Systems which enable automation and the
quality control of parts on the shop floor are
paramount for the economic production of
high-quality components in the volumes
required by the automotive industry.
Wheels
Alloy wheel manufacture requires highly
productive precision machining which can
adapt to the variation inherent in forging
processes. On-machine probing systems
ensure productivity through automated
process control.
GovernanceFinancial statementsShareholder informationStrategic report 18
Our business sectors – Healthcare
Our technologies are helping within
applications such as craniomaxillofacial
surgery, dentistry, neurosurgery, chemical
analysis and nanotechnology research.
These include engineering solutions for
stereotactic neurosurgery, diagnosis of
infectious diseases, analytical tools that
identify and characterise the chemistry
and structure of materials, the supply
of implants to hospitals and specialist
design centres for craniomaxillofacial
surgery, and products and services that
allow dental laboratories to manufacture
high-quality dental restorations.
Healthcare revenue (+3%)
£28.4m
Healthcare operating loss
£6.4m
Percentage of group revenue
7%
Neuroinspire software is used in the
planning of stereotactic neurosurgery.
The neuromate stereotactic robot is used for a
range of functional neurosurgical procedures.
inVia Raman microscope integrated with
a Bruker atomic force microscope.
RenDx SP-2000 used to process a diagnostic
assay for infectious disease diagnosis.
Strategic reportRenishaw plc Annual report and accounts 2016 19
Support for a dental laboratory using
Renishaw’s dental CAD software.
Titanium craniomaxillofacial implants
produced using a Renishaw metal
additive manufacturing system.
DS30 blue light dental scanner
and accessories.
Hybrid Raman systems
Renishaw’s hybrid systems unite the
chemical analysis power of Raman
spectroscopy with the high spatial
resolution of other techniques,
such as atomic force microscopy
and scanning electron microscopy.
These new instruments are vital tools
for investigating materials and devices
for nanotechnology applications.
Turn-key Raman analysis
The RA800 benchtop platform provides
companies with a high-performance
chemical imaging and analysis system
that can be tailored for the needs of their
customers. RA800 gives research-grade
Raman microscopy performance in a
Class 1 laser-safe, simple-to-use form.
Diagnostic systems
Renishaw Diagnostics Limited has
developed the RenDx Multiplex Assay
System, an automated, multiplex platform
for clinical diagnosis of infectious disease,
and has CE certification for the platform
and its first assay, Fungiplex, for diagnosis
of invasive fungal infections.
The product range
includes the following:
Dental scanners
3D contact scanners and non-contact
optical scanners used for digitising of
dental preparations and the measurement
of implant locations for tooth-supported
frameworks and custom abutments.
Dental computer-aided design
(CAD) software
Dental CAD software that allows set-up of
scanning routines and enables laboratory
staff to design abutments and structures
for crowns and bridges, including powerful
anatomic design functions.
Dental structures manufacturing
service
A central manufacturing service that can
handle CAD files from a wide variety
of dental CAD systems to produce
structures for crowns and bridges in
zirconia, cobalt chrome, PMMA (used
for temporary restorations) and wax,
and abutments in cobalt chrome.
Craniomaxillofacial custom-
made implants
Additively manufactured from titanium,
custom-made craniomaxillofacial implants
are structural implants that are used in the
reconstruction of a patient’s head, face or
jaw. These are most commonly required
after oncology treatment or as a result
of trauma.
Neurosurgical robot
A stereotactic robot that provides a
platform solution for a broad range of
functional neurosurgical procedures
including deep brain stimulation
(DBS), stereoelectroencephalography
(SEEG), neuroendoscopy and
stereotactic biopsies, and is being
used within the context of clinical trials
for both neurosurgical disorders and
brain oncology.
Neurosurgical planning
software
Software that allows advanced
planning of targets and trajectories for
stereotactic neurosurgery.
Neurosurgical implants
Implantable devices that allow surgeons
to verify expected DBS electrode
position relative to targeted anatomy
using magnetic resonance imaging
(MRI) for the treatment of Parkinson’s
disease, other movement disorders
and neuropathic pain.
Neurosurgical accessories
Specialist electrodes and instruments
for use in epilepsy neurosurgery,
manufactured by DIXI Medical.
Raman microscopes
Scientists and engineers worldwide use
Renishaw’s research-grade inVia Raman
microscope for the non-destructive
chemical analysis and imaging of
materials. Its high-speed, high-quality
results and upgradeability are valued
in fields as diverse as nanotechnology,
biology and pharmaceuticals.
GovernanceFinancial statementsShareholder informationStrategic report 20
The healthcare market
Pre and post surgery comparison for
cranioplasty procedure at the Centro
Médico Teknon in Barcelona, Spain.
Additive manufacturing for customised care
From complex reconstructive facial
surgery to orthopaedic and trauma
surgery, advances in additive
manufacturing have inspired a
growing number of progressive
surgeons to commission metal
3D-printed patient specific
implants (PSIs) and cutting
guides for both complex and
straightforward procedures.
Personalising patient
treatments
UK NHS hospitals, in their quest for
better quality and efficiency, have used
3D-printed anatomical models, guides
and implants to improve the predictability,
accuracy, safety and speed of operations.
Now, a hospital in Spain has proved
that the technology can also be used
across international borders in a classic
example of global technology transfer with
UK experts.
At the Centro Médico Teknon in
Barcelona, neurosurgeon Bartolomé Oliver
MD, PhD, was introduced to a 68-year-old
female patient with a benign growth from
the left side of her cranium, caused by a
meningioma, a tumour that arises from the
meninges – the membranes surrounding
brain and spinal cord.
The computerised tomography (CT)
scan revealed the growth was expanding
outwards into the skull-bone. The patient
required a craniotomy to remove the
growth and a cranioplasty to rebuild her
skull. Dr Oliver planned for the combined
craniotomy and cranioplasty operation
allowing the patient to be treated in a
single procedure.
UK. The parts were manufactured on
a Renishaw AM 250 metal additive
manufacturing machine in titanium with a
satin finish as per Dr Oliver’s specification.
The material used was Ti MG1 tested to
ISO 10993 part 1, which was then treated
with Renishaw’s X-flex™ technology.
This ensures high ductility, which is
important to prevent the risk of breakages
in surgery should the implant need to be
adjusted, for example, due to unexpected
hard tissue changes.
The operation was successful and
incident-free with the cranial plate being
fitted safely and accurately.
The hospital’s CT scans were transferred
from Spain to PDR, a world-leading
design consultancy and applied research
centre, based in Cardiff, UK, where they
were imported into the MIMICS® software
program and then converted into an STL
file for modelling by PDR.
Renishaw received the files of the
approved designs for both the implant and
cutting guide and 3D-printed them at its
central manufacturing unit in Stonehouse,
With safety being the paramount priority,
supplying a predefined cutting guide
and the corresponding implant helped
eliminate all the risk that might come
from the current manual nature of the
procedure. Dr Oliver’s own verdict: “It
ensured an absolutely safe operation with
no risk to the patient.”
Dr Oliver reported a 30% saving in theatre
time which was a further benefit of this
streamlined method.
Metal 3D printed models, guides and
implants for cranial surgery.
Strategic reportRenishaw plc Annual report and accounts 2016 Our technologies are being applied
to an ever increasing number of
applications within healthcare,
including brain surgery,
re-constructive surgery, dentistry
and infectious disease diagnosis.
This illustration highlights areas
in which Renishaw products
are making a real
difference to
patient outcomes.
21
Drug delivery systems for oncology
and other treatments
Metal 3D printing techniques are used to
build compact multi-channel ports and the
neuromate surgical robot with neuroinspire
planning software enables precise
placement of implantables.
Maxillofacial implants and surgical
guides
Customised implants and cutting guides
for use during surgery are designed using
specially developed software and built with
additive manufacturing systems, optimised
for healthcare applications.
Orthopaedic implants
Metal 3D printing machines enable the
production of patient specific custom
implants in bio-compatible materials, and
with surfaces that aid osseointegration.
Rapid diagnosis of infectious disease
In vitro tests for rapid identification of
fungal diseases reduce the need for costly
prophylaxis and improve patient outcomes
through earlier diagnosis of life threatening
infections.
Dental implants and restorations
Precision machining combined with 3D
printing results in shorter manufacturing
lead times and improved fit of dental
frameworks, meaning patients need to
spend less time in the dentist’s chair.
GovernanceFinancial statementsShareholder informationStrategic report 22
Our strategy
Eight strategic priorities
drive our business model
2
Continual
research creating
strong market
positions with
innovative
products
3
Efficient,
high-quality
manufacturing
1
People
4
Global
customer
support
8
Supplementing
the business
via niche
acquisitions
7
Consistent
organic
growth
6
Strong market
presence
and focus on
emerging markets
5
Focus
on delivering
solutions
We have tried to build a different company. Different in
how we apply technology to real world problems; in how
we invest for the long term; in how we manufacture
rather than outsource; in how we work in partnership
with our customers.
Sir David R McMurtry, Chairman and Chief Executive
John Deer, Deputy Chairman
Strategic reportRenishaw plc Annual report and accounts 2016
23
Key performance indicators
The main performance measures monitored by the Board are:
Financial KPIs
494.7
436.6
355.5
346.9
331.9
2016
2015
2014
2013
2012
Revenue (£m)
We are focused on growth in
revenue, through increasing
our market and geographic
penetration and continually
introducing new products.
We have also made a number of
acquisitions over the last five years
which expand our product range
and will support revenue growth
by using the Group’s worldwide
marketing and distribution
infrastructure to expand
these businesses.
Non-financial KPIs
Renishaw employee turnover
compared to the bar chart
showing the UK average.
10.7%
10.0%
9.5%
8.0%
8.0%
7.4%
5.7%
2016
2015
5.0%
2014
5.5%
2012
3.2%
2013
Employee turnover (%)
We continue to train, develop
and reward our employees so
that we retain skilled and effective
teams of people. Our aim is to
maintain a UK employee turnover
rate which is below the UK
average for the manufacturing
and production sector.
Included in the Consolidated
income statement
69.1
Gross expenditure
66.1
63.3
56.8
53.3
51.8
48.7
47.9
45.0
72.2
167.5
94.9
48.0
46.5
41.2
40.0
38.5
95.6
88.9
82.3
2016
2015
2014
2013
2012
2016
2015
2014
2013
2012
2016
2015
2014
2013
2012
Total engineering costs
including research and
development (£m)
The growth of the business
is fundamentally dependent
on the continuing investment
in engineering costs for the
development of new products and
processes. The Group continues
to make significant investment in
future products, with engineering
costs equal to approximately 16%
of group revenue, and has also
been accelerating new product
development in certain areas.
120
114
105
71
51
2016
2015
2014
2013
2012
Number of apprentices
in training
We believe we need to provide
many options for career entry for
young people and we are proud
of our apprenticeship scheme
and the success it has achieved,
both for the apprentices that have
trained with us and for Renishaw
in terms of addressing skills gaps.
In a period of growth, we intend to
increase the number of apprentices
taken into training each year.
Adjusted earnings per
share (pence)
In order to provide an increasing
return to shareholders, along
with retaining adequate funds
for reinvestment in the business,
we aim to achieve year-on-year
growth in earnings per share.
Dividend per share (pence)
We aim to achieve significant
long-term returns to shareholders
by maintaining a progressive
dividend policy, whilst maintaining
a solid capital base with sufficient
working capital to support the
forecast growth.
Total lost working time injuries per
100,000 hours worked.
0.08
0.05
0.03
0.03
0.02
2014
2013
2012
2016
2015
Health and safety
In a manufacturing environment,
it is crucial that we maintain high
standards of health and safety.
Our aim is to have zero fatalities
and zero lost working time injuries.
Number of new placements and
members of the graduate and
apprenticeship schemes (on a
calendar year basis).
40
68
108
24
55
94
2014
2013
25
40
80
2012
46
76
40
70
100
105
2016
2015
New apprenticeships
New graduates
New placements
Training
Our strategy is to grow organically,
so developing students and
taking on apprentices and
graduates forms a key element
of this strategy. Dependent on
economic conditions, we propose
to increase year-on-year the
number of new apprenticeships,
graduate and student placements
we take on.
GovernanceFinancial statementsShareholder informationStrategic report
24
Our strategy in action
People
Continual research creating
strong market positions with
innovative products
Efficient high-quality
manufacturing
Renishaw’s people are central to the
success of its business. Our innovative,
hard-working and loyal employees
make Renishaw the business success
that it is. A significant number of them
have worked in the Group for two
or three decades, creating a large
collaborative team with a wealth of
specialised engineering expertise.
Renishaw has actively focused on the
ongoing recruitment and training of
many bright and enthusiastic young
graduates and apprentices and
experienced professionals in order to
further develop talent.
For further information see pages 54–55
Renishaw is well known for its
sector-leading investment in R&D and
engineering. “Apply innovation” is a
way of life for Renishaw employees, not
just a strap-line. We have continued
to protect our core businesses with
exciting new patented technology
and process developments, whilst
also diversifying into new product and
market areas.
For further information see pages 32–33
Renishaw is a highly vertically
integrated organisation with significant
in-house manufacturing capabilities.
With high-quality manufacturing
plants located in the UK, Ireland,
India, Germany, USA and France, we
are able to deliver robust and reliable
products tested to our exacting
standards. Our efficiencies, through
in-house automation and the use of
our own latest product developments,
enable us to be competitive with the
highest volume processes.
For further information see pages 30–31
Global customer
support
Focus on delivering
solutions
Renishaw is founded on the belief that
excellent customer support delivers
success. Our customers are often
global, with an order being placed in
one country, the product shipped to
another and the eventual end-user
often located on a different continent.
By having “local” global support
through our wholly-owned subsidiary
network, we are able to assure
customers that whatever their needs,
we are able to support and assist
them, resulting in a positive return on
their investment.
For further information see pages 28–29
Renishaw’s business has transitioned
over recent years from primarily
being a supplier of products to
capital equipment manufacturers, to
becoming much more focused on
delivering a full solution directly to the
end-user. Our experience in our core
product lines, which has highlighted
that our global customers need
assistance in solving their problems,
is being carried across into our
newer offerings.
For further information see pages 26–27
Strategic reportRenishaw plc Annual report and accounts 2016 25
Strong market presence
and focus on emerging
markets
Consistent organic
growth
Supplementing the
business via niche
acquisitions
We actively undertake acquisitions as a
means to expand our product portfolio,
quicken geographic market penetration
and gain access to new patents,
technologies and customers.
Progress
We continue to integrate acquired
businesses and evaluate acquisition
opportunities. We have deepened
our relationship with and increased
our investment to 24.9% in HiETA
Technologies Limited, a UK company
specialising in the design and delivery
of additive manufacturing products,
such as heat exchangers for a range
of applications – a complementary
business for our additive manufacturing
products line.
Renishaw has always been a global
group with a strong local presence.
By ensuring we target emerging
markets we are able to develop
strong working partnerships with
newly developing businesses.
These loyal relationships build quickly
as our customers realise that all our
customers are important to us.
Progress
Renishaw’s expansion into new
growth economies continues, and
this year we have established new
subsidiaries in Finland, Denmark and
Hungary. We have also relocated to
larger 14,800 sq ft premises in Taiwan
in order to accommodate growth
in the Far East region. The process
of developing larger offices in the
USA, Mexico, Spain and Sweden is
also underway.
Whilst Renishaw does invest for the
long term, it also closely manages
costs at all levels and ensures that
it does not undertake undue risks.
It is through this approach that
Renishaw has been able to deliver
such a long-term track record of
profitable growth.
Progress
Renishaw has continued to experience
underlying growth, which has justified
further investment in infrastructure
including our people, facilities and
subsidiaries. For example, our ROW
(Rest of the World) sales operation,
which is responsible for 11 overseas
areas has expanded this year by
opening new subsidiaries in Finland,
Denmark and Hungary as well as
recruiting extra sales and technical
support staff, in order to support
growth. ROW is also progressing
upgraded facilities in Sweden and
new offices in Turkey and Hungary as
well as increased investment generally
in India. Furthermore, our additive
manufacturing business is establishing
a global network of Solutions Centres
in order to support existing and
future growth. This year we have
already opened our first Solutions
Centres in Europe, North America
and Asia with further facilities due to
open later in 2016, see page 27 for
more information.
GovernanceFinancial statementsShareholder informationStrategic report 26
Our strategy in action – Focus on delivering solutions
Additive manufacturing
(AM) provides tremendous
freedom to create
complex, intricate and
customised products,
manufactured direct from
a “sliced” CAD model,
with no need for expensive
tooling. Renishaw is
leading the transition
of metal AM to volume
production applications.
Strategic reportRenishaw plc Annual report and accounts 2016 27
Re-using AM powder
At the end of a build, unmelted metal
powder is collected and sieved ready for
re-use. Potentially, powder can change
either physically and/or chemically with
repeated re-use, causing it to go out of
specification and rendering it unsuitable
for the AM process. Renishaw has
conducted a study examining to what
extent powder is affected by multiple
re-uses. Tests were carried out on
the Renishaw AM 250 metal additive
manufacturing system, which features
a class-leading inert atmosphere inside
the build chamber whilst processing.
Titanium alloy (Ti6A14V) was selected
for the study, due to its high cost and
propensity to pick up oxygen and
nitrogen impurities from the atmosphere.
Over the course of 38 builds the same
batch of titanium powder was used, with
no addition of fresh powder, to test a
“worst case” scenario. The conclusion
was that the powder did not change to
any significant extent, either chemically
or physically, over multiple re-use cycles.
For more details, see www.renishaw.com/
powder-recycling.
innovative products. AM is transitioning
from a niche technique to a mainstream
manufacturing process.
Solutions Centres
To accelerate this process, Renishaw
is establishing a global network of
Solutions Centres, where it can work
collaboratively with companies that intend
to deploy AM in production. The Solutions
Centres support customers from
conceptual design, through product and
process optimisation, to pre-production
scale-up and production deployment.
Customers can access AM machines and
application engineering support, as well
as Renishaw’s expertise in machining,
metrology and finishing operations.
Private “incubator cells” provide a secure
environment in which to develop AM
designs, whilst pre-production facilities
enable stable, capable production
processes to be established. The first
Solutions Centres in Europe, North
America and Asia are now operational,
with further facilities due to open later
in 2016.
Renishaw is working with customers to
develop production AM processes in
a wide range of sectors, including civil
aerospace, defence, space, automotive,
medical devices, mould and die, oil
and gas, consumer electronics and
sporting goods.
Build plate showing a set of titanium
lugs for a bespoke mountain bike.
Robot Bike Co’s R160 mountain bike frame
benefits from additive manufacturing.
Customised AM parts
Robot Bike Co’s R160 mountain bike features a unique construction using additive
manufactured titanium lugs, proprietary carbon fibre tubing and double lap bonded
joints. AM enables each bike to be tailored to suit its owner’s body shape and
riding style – a great example of product and business model innovation using AM.
For further information see page 8
Additive manufacturing machines build
components up layer by layer.
How AM works
Unlike subtractive manufacturing
processes such as machining, which
start with a billet of metal and then
remove material to create finished
features, additive manufacturing (AM)
builds components up layer by layer.
In Renishaw’s metal laser powder bed
fusion machines, a thin layer of fine metal
powder is spread evenly across a build
plate and a focused laser beam traces out
a slice of the CAD model. The laser melts
the powder, which cools to form a dense
alloy. The build plate drops by a small
amount so that another layer of powder
can be deposited and the next slice of the
component is built on top of the previous
one. Unmelted powder is available for re-
use on subsequent builds, creating very
little waste.This layer-wise build process
yields benefits in both the manufacturing
process itself and in product performance.
Production benefits include the
minimisation of tooling, reduction of waste
and automation of the manufacturing
process. But the real power of AM lies
in its ability to create innovative products
that are difficult or impossible to make
by alternative methods. AM components
can be made lighter by making them
hollow, filling them with lattice structures
or by locally optimising wall sections.
Surfaces can be shaped and textured
for effective bonding, and complex
assemblies can be integrated into a single,
multi-functional component. AM can also
be used to manufacture parts from high-
performance alloys that are very difficult
to process conventionally. Finally, there is
minimal cost penalty to making products
that are customised for perfect adaptation
to their application.
Whilst AM has been used very effectively
for many years to produce prototypes, its
future lies in the volume manufacture of
GovernanceFinancial statementsShareholder informationStrategic report 28
Our strategy in action – Global customer support
Through the life-cycle of
all our product ranges,
Renishaw is focused
on providing innovative
services to support
changing customer
expectations and
market requirements.
We are flexible with our
approach, and support
customer needs from
initial purchase right
through to obsolescence,
irrelevant of global
location.
Strategic reportRenishaw plc Annual report and accounts 2016 29
Top-tier service centres
7
Test and calibration locations
10
Renishaw support structure
As well as local support within our
subsidiary network, we have invested in
seven top-tier service centres as well as
ten test and calibration locations. Our local
offices have facilities and the ability to
provide local training courses in product
operation, applications and maintenance.
We have invested in over 400 support
personnel, offering their expertise in field
service, application support, training and
technical help desk assistance.
The majority of our support teams have
had a long career within Renishaw and
we encourage them to develop skills
and technical knowledge so that they
can become a specialist in a particular
product range.
We invest heavily in training our people,
providing test rigs and documentation
when a new product is launched, and also
throughout the life-cycle of the product.
Where we don’t have a local subsidiary,
we have agreements with local agents
and distributors to support our customers.
These have been trained and supported
as though they themselves were
employees of Renishaw.
We are very focused on having a long-
term relationship with our customers.
It is not just about a sale but more about
supporting and helping our customers
develop their processes and improving
the quality of their product output.
Whenever they need our support, we are
there providing them with tailored service
solutions to meet their needs.
Our skilled support engineers provide
service in maintenance, retrofits
and any breakdowns.
All of our global service centres carry out
product repairs to the same high standards
as our manufacturing facilities.
Accessing Renishaw support
Renishaw continues to invest in the
infrastructure and service capabilities
to provide seamless customer service
through the variety of channels used
to distribute products. In many cases
our relationship with customers now
encompasses multiple product solutions,
each with unique service requirements.
We are constantly reviewing our customer
journey, whenever they have a need to
contact our support department, whether
their request is for:
• detailed information regarding any
of our after-sales product offerings;
• access to our technical literature;
• purchase of spare parts; or
• emergency contact in a
breakdown situation.
Irrelevant of which Renishaw subsidiary
will be looking after the local customer,
we recognise the importance that our
support message is cohesive and
easily accessible.
Understanding our customers
With a diversity of products and markets
to service, Renishaw understands the
requirement to be flexible with any after-
sale offerings.
Customer satisfaction is a fundamental
factor when creating any after-sale
product. Renishaw doesn’t just want to
meet customer requirements, it wishes to
exceed expectations.
Innovation in the support of our products
is critical in the long-term relationship with
our current and future customers and this
is why we have implemented:
• repair by exchange service – for
customers that require a fast repair
turnaround time, ensuring minimal
system downtime;
• loan units – for those customers
requiring return of their original unit
once repaired;
• transfer of equipment operational skills
– from healthcare applications, where
our technical teams proactively attend
medical procedures, to our metrology
customers who visit our global training
centres for bespoke courses; and
• support agreements – from extended
warranty to 24/7 support, whatever
the customer requires, we will try and
flex our offer to meet each individual
customer’s needs.
We continually review our support policies
and create new services to help our
customers in their changing markets.
GovernanceFinancial statementsShareholder informationStrategic report 30
Our strategy in action – Efficient high-quality manufacturing
PCB test equipment installed within the
Miskin electronics facility.
Manufacturing overview
During the last year, the manufacturing
operations have continued to support
significant activity levels for all product
lines, the development of in-house
processes to support new product
development and growth for the future of
the healthcare and additive manufacturing
businesses. A substantial investment
has been made during the year by
refurbishing the second manufacturing
hall at Miskin and the associated office
accommodation to create additional
capacity, and also manufacturing facilities
to support the healthcare business, as
well as reorganising the operations to
separate piece parts manufacturing and
assembly operations to allow for future
capacity requirements.
Strategy
At a strategic level, Renishaw’s
manufacturing operations are highly
vertically integrated. This is as a result of
our commitment to delivering exceptional
service levels in terms of delivery, service,
and product quality to our customers.
This approach also ensures that we are
in control of our costs, quality and many
of the supply chains that are critical to the
success of our business. This approach
has continued during the year with
substantial investments in processes
and capital to support the future of the
AM business.
Over many years, we have strived to
ensure that our products are designed
to optimise manufacturing capability,
whether in relation to our machining
and assembly processes, or that of third-
party suppliers. This is best illustrated by
our approach to metal cutting, where a
high degree of standardisation has been
applied to the hardware used to perform
machining operations, since we have
an excellent understanding of process
capability for each platform. A secondary
benefit to this strategy is that it provides
the ability to upscale production through
duplication, as required, without the need
to invent alternative techniques, and this
has been key to delivering the growth in
our turnover in recent years.
The same standardisation philosophies
are applied to design for assembly
and test during product and process
development, and during the last year, a
number of new products have transferred
from pre-production to the assembly sites
in the UK, Ireland and India.
The Group has manufacturing facilities
in the UK (Woodchester 165,000 sq ft,
Stonehouse 100,000 sq ft, Miskin
460,000 sq ft and smaller operations
at New Mills, Old Town, Stone and York),
Ireland (Swords 70,000 sq ft), India
(Pune 50,000 sq ft), Germany (Völklingen
19,000 sq ft), France (Lyon 5,500 sq ft)
and the USA (Grand Haven 14,000 sq ft).
Long-term investment
Renishaw continues to be committed to
significant investment in its manufacturing
capability for both the medium and
long-term. The Renishaw Automated
Mill Turn Inspection Centre (RAMTIC)
system developed in the early 1990s
uses a standard machine tool platform
that has been modified to provide a
highly efficient manufacturing solution,
involving a high degree of automation
and closed-loop control that is facilitated
by Renishaw probing technology for
tool setting, in-process monitoring and
component validation. Whilst the base
machine platform has evolved with
Line of RAMTIC systems used to
machine precision metal components.
improvements in machine tool technology,
the fundamental process remains the
same and is the mainstay of Renishaw’s
standard machining platforms for
prismatic parts, with 62 RAMTIC systems
now in operation.
The same approach has also been
taken with respect to our investments
in assembly-based technologies.
Renishaw has a very broad product
range that is largely produced in low
to medium volumes, but through our
strategies of standardisation and design
for manufacture we have created the
circumstances to develop and invest in
highly efficient and capable assembly
systems that deliver exceptional process
control and efficiencies. The electronics
production facilities utilise the very latest
technology capable of placing 40,000
components per hour, process control
by using in-line component validation,
automated optical inspection and
innovative technology to validate the
performance of assembled printed circuit
boards (PCBs). Another example is the
in-house development of automation
systems for assembly of certain products
in the UK and Ireland facilities, where
automation and closed-loop controls have
delivered significant reductions in process
variation, hence providing enhanced
product quality, as well as reducing
our costs.
There has been continual and substantial
investment in the latest manufacturing
technologies in order to optimise the
cost and capability of our manufacturing
systems, where investment in new
equipment in the UK over the period 2010
to 2016 has been £35m.
Strategic reportRenishaw plc Annual report and accounts 2016 31
Renishaw apprentice being trained at an
apprentice training centre.
Supply chain management
As a manufacturer operating in a high mix/
low volume situation, with a strategy of
delivering exceptional customer service,
our approach has been to maintain as
much control as possible of our supply
chains. This has been achieved through
a combination of in-house manufacturing
(including the creation of in-house
capability for critical processes as they
become financially viable), duplication
of critical processes, dual sourcing and
strategic long-term partnerships with our
third-party suppliers. We also have supply
chain management teams based in China,
India and at our manufacturing facilities
in Ireland.
Risk management
We have duplicated key processes in
order to reduce the risks associated
with certain critical in-house supply
chains such as machining, anodising of
aluminium components and the assembly
and test of electronic PCBs. For third-
party supply chains, regular monitoring
and review takes place with a view to
determining supply risk, dual sourcing
strategies and our contractual terms with
suppliers in order to ensure continuity
of supply.
People
Consistent with the strategy in other
parts of the business, the manufacturing
operations take a long-term view with
regard to development of people.
In many cases employees transfer
from manufacturing into other parts
of the business to assist other roles
such as new product development or
applications engineering, making best
use of the experience gained within the
manufacturing arena.
The investment in apprentices and
graduates is very much in evidence
at the manufacturing operations at
each site. All manufacturing graduates
and apprentices follow a well-defined
programme that provides exposure to a
wide range of functions and technologies
such that we develop well-rounded
individuals with a broad grounding
in a variety of manufacturing-related
disciplines. Many of our apprentices and
graduates succeed in developing career
paths into more senior engineering and
operational roles within the organisation
(for example, see pages 54 and 55).
Electronics production lines at the award-
winning Woodchester assembly facility.
Progress at a glance
During the last year, investment
in manufacturing facilities and
equipment have continued to ensure
that future requirements can be
satisfied in a highly efficient and cost-
effective manner.
The remaining factory floor space has
been refurbished at the Miskin facility
and operations have been relocated to
create separation between assembly
and piece part manufacturing.
Substantial capital investments and
process development activities have
taken place to provide both in-house
piece part manufacturing capabilities
and new assembly processes for the
new RenAM 500M machine.
Production of various products have
transferred to alternative assembly
locations in the UK, Ireland and India
as a result of capacity forecasts
or the completion of new product
development activities.
GovernanceFinancial statementsShareholder informationStrategic report 32
Our strategy in action – Continual research creating
strong market positions with innovative products
“ From the perspective of
societal impact, the Renishaw
technology that excites me the
most has to be our neurological
developments and the potential
of significantly improving survival
rates in oncology. Commercially,
I think that the application of
metal additive manufacturing
is very exciting.”
Geoff McFarland
Group Engineering Director
Strategic reportRenishaw plc Annual report and accounts 2016 33
A Renishaw engineer discusses the
Company's innovative products at an
open day.
additive layer manufacturing – knowledge
built up over many decades. I think
that we really underrate our process
technology innovation.
querying how they will work in a difficult
environment or, in the case of healthcare
products, how it can be easily adapted,
as each patient is different.
Q
Where do ideas for new
products originate?
A
Many come from the market
bringing us a problem, but
they are also generated internally
– what issues do we face in our own
manufacturing and what we would like to
solve? However a key differentiator is that
part of the Renishaw culture is saying “well
if you solve that problem, what is the next
problem – are they connected and where
do you want to jump to?”
Quite often customers will ask you for a
solution but at the same time they are
usually asking other suppliers exactly the
same question, and often they are also
suggesting a solution. What we really
need to understand is the fundamental
problem – we can then create a solution
that is well beyond what other suppliers
will conceive, and which therefore gives
rise to the potential for the creation of
valuable intellectual property.
Q
How do you decide
which ideas should go
forward?
A
Saying “no” is a difficult thing
to do, but the sooner we can
say “no” the more productive we
can be. We also get many approaches
from all sorts of people in differing
sectors presenting us with what they
believe is a great idea and asking for us
to get involved. But unfortunately, an
awful lot of those ideas are knocked out
quickly by considering the application
of the suggested products – whether
You really have to turn the decision-
making around and find out reasons
why you can say “yes” to an idea –
if it’s a reason to say “no” then it can
overwhelm your decision-making.
Q
You have been involved
with many products, but
is there one that gives you
the most satisfaction?
A
Probably the REVO measuring
system, as I spent a lot of my early
design career working on that project.
It gives me the most satisfaction, and
it also gives me the most frustration – it
was such a breakthrough product, but
manufacturing is quite a conservative
industry and the adoption of something
that is such a breakthrough is so difficult,
because you have to create the market.
Q
A
What makes you most
proud about Renishaw?
One of the things that I am
incredibly proud about is our
employees and the Renishaw “family”.
I think that we have a group of talented
and like-minded people who are really well
respected within the wider engineering
community, where most people have
heard of Renishaw. The respect that we
receive is very gratifying.
The other thing that I am very proud
about is our technology pipeline because
there are awful lot of projects in there,
at very different stages in the development
life cycle.
REVO measuring system for co-ordinate
measuring machines.
We asked, Geoff McFarland,
Group Engineering Director to
explain what drives Renishaw’s
strong culture of innovation.
Q
Why has Renishaw
been able to sustain
innovation for so long?
A
There is a fundamental
answer to this and watching
my kids reinforces this for me.
When my daughter first started cooking
as a seven-year-old she had no fear of
the outcome – Renishaw also has that
in-built confidence that we can make
things work, that we can always find a
solution. It is also because there is a real
understanding that behind every problem
lies an opportunity.
Q
A
Where does this in-built
confidence come from?
It was the original culture – it
was there when I joined. Lots of
people, especially engineers, have
lots of great ideas about how they might
solve a problem, but it never gets any
further because they don’t know how
they are going to put the back-end
together; they haven’t a clue how they are
going to make it. That’s the bit that was a
real eye-opener to me when I first joined
Renishaw. When someone suggested a
great technical idea, but then said “How
are we going to make this?”, the answer
was always go away and find out – see
what knowledge we already have within
the business and then “let’s have a go!”
The front-end idea is the easy bit.
Renishaw’s advantage is that we have
the core knowledge of how it might be
made, whether it’s electronics, optics,
software, machining, fabrication or
GovernanceFinancial statementsShareholder informationStrategic report 34
Performance – Overview
Despite a reduction in revenue
and profit due to a number of
large orders in the Far East in the
previous year not repeating to the
same extent this year, Renishaw
continued its focus on investments
required to achieve long-term
business growth, including new
product development, global
marketing and distribution
infrastructure, manufacturing
capacity, and the recruitment
and training of skilled people.
The Healthcare Centre of Excellence
includes an “operating theatre” for training.
Architect’s impression of the new
building for Renishaw Mexico.
Review of 2016
Revenue last year benefited from
a number of large orders in the Far
East, particularly in the consumer
electronics markets, which have not
been repeated to the same extent this
year. After adjusting for these factors,
there was still underlying growth of 6%.
This provided us with the confidence to
continue our ongoing investments for
the long-term sustainability of the Group,
including recruitment and training of
skilled employees, global marketing and
distribution infrastructure, IT infrastructure,
new product development and
manufacturing capacity.
The year saw another high level of capital
investment in the development and
refurbishment of property. At the Miskin
site in South Wales, around £40m has
now been invested in site acquisition,
refurbishment and purchase of plant
and machinery. During the second half
of the year the refurbishment of a
122,000 sq ft production hall was
completed, which has enabled machining
and assembly operations to be separated,
whilst an annexe now houses newly
completed R&D facilities, a demonstration
area, a Fabrication Development Centre
for educating students and a Healthcare
Centre of Excellence. The latter, which
includes an “operating theatre” for training
neurosurgeons, will be formally opened in
September 2016 and is already producing
additively manufactured metal dental and
medical components.
The planning application for 1.74m sq ft
of development at the Miskin site,
including 400,000 sq ft for long-term use
by Renishaw, has now been granted and
work has started on the next stage in this
exciting development.
The Old Town site in Wotton-under-Edge,
which was vacated by our spectroscopy
products line at the start of the year, has
also been fully refurbished as an R&D
facility and re-occupation will start during
the summer of 2016.
In Stone, Staffordshire, there has been
significant ongoing refurbishment of the
two adjacent properties, totalling 90,000
sq ft, which were purchased last year to
allow Renishaw’s additive manufacturing
products line to relocate from its former
premises. The new facilities now house
our UK Solutions Centre, one of a
global network that is being established
to increase the adoption of additive
manufacturing technology by providing
a secure development environment in
which our customers can expand their
AM knowledge and confidence to enable
it to be deployed in their own facilities for
volume production (see page 26).
Outside the UK, there were further
investments in group facilities, including
the creation of new Solutions Centres
– a new facility in Canada close to our
existing office and a centre at our existing
facility in Pune, India, which was formally
opened by the British Deputy High
Commissioner, Colin Wells, in June 2016.
In the USA, the new build of a 133,000 sq
ft facility in West Dundee, near Chicago,
Illinois, is nearing completion. This new
US facility will allow us to consolidate
operations from two existing sites and is
due for occupation in autumn 2016.
Strategic reportRenishaw plc Annual report and accounts 2016 35
The new building for Renishaw, Inc. near
Chicago is nearing completion.
Following the acquisition of land last
year, work is underway to create a new
building that will provide expansion space
for sales and marketing operations in
Mexico, whilst in Europe, refurbishment
of existing premises in Sweden, Italy and
France is also in progress. In Taiwan, we
have moved to a facility in an industrial
area of Taichung that provides a new
demonstration facility and is close to many
of our key customers in the machine tool
and motion control industries.
Market conditions
Last year was exceptional for our
Far East business, primarily due to
large orders from China and South
Korea for our machine tool products
used in the manufacture of consumer
electronics. However these did not
repeat at the same levels this year, but
there was a favourable environment for
position encoders as a result of new
investments in LED manufacture and the
semiconductor sector.
Whilst there was weaker trading in the Far
East electronics sector, globally we are still
seeing ongoing investment in production
systems and processes for key sectors
such as aerospace, automotive and
energy, as evidenced by our underlying
growth. All these sectors require Renishaw
systems to meet their need for ever tighter
production tolerances and cost controls.
These new facilities require supporting
IT infrastructure, and during the
year, there was also a focus on the
creation of regional data centres to
improve performance across our
subsidiary network.
Competition for the best talent that will
ensure the future success of the business
is very strong and we continue to promote
Renishaw regionally and nationally as a
desirable employer. This has been aided
by Renishaw being recognised for the
third consecutive year by The JobCrowd
(a UK graduate job review website)
as a Top 3 employer of graduates in
the UK’s engineering/manufacturing
sector. We have a planned record intake
of 75 graduates and 45 apprentices
this summer, whilst our in-house
academy delivered 6,500 training days
(2015: 5,700).
UK Additive Manufacturing Solutions
Centre at Stone, Staffordshire.
Strategy
To meet our key strategic aims, we
continued to make investments, which
this year included focusing on enhancing
our manufacturing capabilities, our ability
to demonstrate our products and their
applications, and our continuing drive to
develop a strong market presence in both
established and emerging markets.
Our investment during the year at the
Miskin facility has further reduced supply
chain risk, whilst increasing manufacturing
capacity for component part machining,
electronics assembly, the production of
additive manufacturing machines, and
dental structures/medical implants. It has
also provided a healthcare training facility
and product demonstration area, and
importantly for our talent pipeline, has
also seen the creation of a Fabrication
Development Centre which aims to
raise awareness amongst students
and teachers of the value of a career
in engineering.
We continued to invest heavily in R&D to
create strong market positions through
technology leadership, with £69.1m (net
of capitalised costs) expenditure on R&D
and engineering during the year. We filed
45 new patent applications and there
were 68 previously filed applications
granted this year.
During the year we also created new
subsidiaries in Denmark (Renishaw ApS),
Hungary (Renishaw Hungary Kft) and
Finland (Renishaw Oy) to support the
increasing level of sales and potential
for growth in those countries.
GovernanceFinancial statementsShareholder informationStrategic report 36
Performance – Metrology
Performance
There was a large reduction for our
machine tool products line due to non-
repeating large orders from the Far East,
but there was good growth for our
measurement and automation, metal
additive manufacturing and encoder
products lines. As for the previous year,
the measurement and automation
products line, currently focused on the
Equator™ gauging system, continues
to see high levels of success in the
automotive, aerospace and consumer
electronics sectors on a global basis,
with integration within automation cells
continuing to be a notable trend.
The AM products line, which includes
the LBC business in Germany
(specialising in AM parts manufacture,
including conformally cooled mould
tools and tool inserts for injection
moulding and die-casting applications),
continues to benefit from high levels of
investment and integration within the
Group’s infrastructure, including the
previously mentioned Solutions Centres.
These new centres require machines
for benchmarking and customer use
with additional machines required for
demonstration facilities around the Group.
Whilst the majority of AM machine sales
are still for research and prototyping, these
are being supplied worldwide to major
manufacturing OEMs and key suppliers in
a range of sectors, including aerospace,
automotive and medical.
Awareness of our fixtures line continues
to grow and whilst the R&R brand has
been retained in the USA due to long-term
recognition, elsewhere we sell under the
Renishaw name. Growth is also being
aided by our increasing drive to provide
full metrology solutions to end-use
customers, which includes the supply of
fixtures to users of co-ordinate measuring
machines and Equator gauging systems.
The web shop, introduced last year,
continues to increase the range of styli,
fixtures and other metrology accessories
available for sale or quotation, including
products for the measurement and
automation, co-ordinate measuring
machine, machine tool and calibration
products lines. The site is now available
in 25 different countries.
Position encoders again achieved solid
growth, with particular benefit derived
from the ongoing global drive towards
industrial automation which aims to
increase capacity and flexibility, whilst
reducing manufacturing lead times and
costs. There were also high levels of
investment in the Far East semiconductor,
electronics and robotics sectors, including
in flat panel displays. All these sectors
require rapid, reliable and accurate
measurement of position between moving
parts, and our award-winning RESOLUTE
absolute encoder continues to win
new business.
Especially in Asia, we are seeing orders
for position encoders on ever shorter
lead times. Our ongoing investments in
manufacturing capacity have given us an
agile capability that allows us to respond
quickly to such demands.
Market conditions
The drivers for our metrology business
are similar across the world. Many of
our lines are benefiting from global skills
shortages in the engineering sector,
requiring increased investments in
automation to offset the need for highly
skilled machine operators and demanding
user-interfaces and software that are
easier to operate. Manufacturers are also
faced with a relentless drive to reduce
costs, shorten lead times, meet the need
for increased complexity and closer
tolerances in product design, and supply
into markets where shorter product life-
cycles are compressing times for process
development. Renishaw technologies
provide them with proven solutions to
keep machines running reliably, maximise
output from those machines, assist fast
changeover between different products,
and significantly reduce the time taken to
inspect finished components.
A key sector for Renishaw continues
to be the civil aviation sector. The 2015
Boeing Global Market Forecast sees the
commercial fleet doubling by 2034, with
58% of the 38,000 new aircraft required
to accommodate growth. Our products
are used heavily in the aerospace sector
and the drive towards “lightweight”
components is generating strong interest
in additive manufacturing.
A notable weakness during the year was
the oil and gas sector, which has suffered
from a lack of investment due to lower oil
prices. The impact has been most notably
felt by our spatial measurement products
line, which has historically been highly
reliant on the sector, although we continue
to expand our range of surveying products
which target alternative applications.
Strategy for growth
A key focus is on developing technologies
that provide patented products and
methods which support our product
strategies, with £60.1m (net of capitalised
costs) expenditure on R&D and
engineering during the year. The current
technology focus includes user-friendly
metrology software for CMMs, machine
tool probing, calibration systems and
gauging; miniaturised high-resolution
position feedback systems that support
the manufacture of high-precision
electronics; and the development of
AM systems with faster processing
capability and improved process control
for large-scale manufacturing.
We continue to position Renishaw as a
“solutions provider” and reduce the risks
of over-reliance on large customers who
integrate our products. Our measurement
and automation, calibration, additive
manufacturing and spatial measurement
products, plus accessory ranges, such
as styli and fixtures, can be supplied
direct to the end-user, whilst we continue
to strengthen our portfolio of hardware
and software for CMMs that can be
used to upgrade machines that are
already installed. For example, our new
REVO® vision measurement probe (RVP)
is compatible with the new REVO-2
five-axis measuring head and offers a
solution for the inspection of parts with
large numbers of holes that cannot be
accurately measured with tactile probing
or manual methods.
We also constantly evaluate
new opportunities for existing or
complementary technologies both to
increase sales to our existing customer
base and to expand upon that base.
The new RenAM 500M system features
a Z-axis fitted with a RESOLUTE absolute
encoder for highly accurate positioning,
and many of the opportunities for AM
sales are to existing customers who
Strategic reportRenishaw plc Annual report and accounts 2016 37
understand Renishaw’s holistic approach
to manufacturing and the complementary
products that can assist their part
production, such as machine tool probes,
gauging or CMM inspection products.
Key developments
During the year, we launched new spatial
measurement products that will continue
to reduce reliance on the oil and gas
markets. Merlin is a dedicated time-
tagged marine laser scanning system
that will help cut the cost of vessel-based
surveying. It supports safer, faster and
more comprehensive data acquisition for
coastal, offshore and inland waterway
project management. Also introduced
was Boretrak® Viewer software which
can be used for safer and more efficient
planning of drilling and blasting in quarries
and mines.
Several new software products were also
introduced, all designed to simplify and
enhance the operation of our metrology
products. For machine tool probe
users, Inspection Plus with SupaTouch
optimisation automatically optimises probe
measurement cycles on CNC machine
tools to minimise cycle times, whilst Set
and Inspect is part of a developing family
of on-machine apps that complements
the new range of touchscreen CNC
controllers, allowing interactive part
set-up, inspection and tool setting using
Renishaw probes. Allowing time-based
data capture with the QC20-W ballbar,
the new Ballbar Trace software package
opens up many new applications,
including static monitoring and data
capture for the ISO 10791-6 test.
There were also key new developments
for the AM products line. The RenAM
500M is an additive manufacturing system
designed specifically for the volume
production of metal components on
the factory floor. It features automated
powder and waste handling systems
that enable consistent process quality,
reduce operator interaction and ensure
high standards of system safety.
Also introduced was the AM 400 machine
which is a development of the existing
AM 250 system, offering improved
control software, revised gas flow and
optical window protection system, and a
new 400 W optical system that gives a
reduced laser beam diameter.
A further important development is the
QuantAM build preparation software
which prepares CAD models for
production on Renishaw AM systems.
The software allows tighter integration
into the machine control software and
the ability to accurately and rapidly review
all build files for Renishaw AM systems,
including those from third party packages.
It can also be used as a tool to help
guide a customer’s Design for Additive
Manufacturing (DfAM) process, which is
essential to gain the full benefits of AM.
Outlook
We continue to be confident that there will
be increased adoption of AM technologies
by many of our existing customer groups,
whilst a continuing drive to automate
manufacturing processes in many sectors,
both to minimise labour costs and reduce
the need for skilled labour, will benefit
our position encoder, measurement
and automation, and machine tool
products lines.
Growth in the world’s middle-classes,
with increasing disposable income, is
also forecast to drive demand in areas
such as civil aviation, consumer products,
agriculture, construction and power
generation (including renewables and
a recovery in oil and gas). These trends
should all result in increased demand
for our metrology products to help
drive efficiencies, reduce waste,
increase automation and aid product
measurement traceability.
New QuantAM build preparation
software for Renishaw AM systems.
The year saw strong growth for the
measurement and automation
products line.
GovernanceFinancial statementsShareholder informationStrategic report 38
The consumer products market
Improving manufacturing capabilities
Consumer products and
electronics continue to change
at a rapid pace, with ever shorter
life cycles driven as much by
fashion as functional requirements.
Advances in technology, including
more sophisticated hardware
and sleeker physical design,
call for rapid improvements in
manufacturing capabilities.
Focusing on fast and accurate
positioning
Smartphone cameras have become
indispensable tools. Lens quality is more
important now than ever, due to the ever-
increasing number of megapixels found in
today’s digital phone cameras. Taiwan’s
UMA Technology Inc (UMA) develops
optical testing equipment for industry to
provide accurate, rapid and reliable lens
error detection schemes.
Lens testing equipment is used to ensure
image quality. The optical quality of lenses
is measured using a uniformly illuminated
ISO 12233 chart standard projected
directly onto an imaging sensor by the lens.
This test pattern is an image evaluation tool
for determining the resolving power, limiting
resolution and modulation transfer function
(MTF) of electronic still-picture cameras.
Different lenses project differing image
qualities such that high-quality lenses
closely reproduce the chart standard,
whereas poor-quality lenses do not.
Renishaw has supplied the optical
encoder components required by UMA’s
DSC-E1 series, designed for small lens
mass production line testing. The general
test process starts with the precise
placement of a lens tray on the DSC-E1
series’ mobile platform; the candidate
lens is then lined up with the standard
chart and the imaging sensor beneath.
Each lens test examines 9 – 25 different
image regions such that the total time
taken for each lens is less than 3 seconds.
The platform moves with high speed back
and forth, in both X and Y directions,
and accuracy depends on high-quality
closed-loop feedback information
provided by an optical encoder on
each axis.
UMA linear stage incorporates
Renishaw RGH22 optical encoders.
The lens quality of smartphone cameras
is constantly improving.
Optical testing equipment from UMA
Technology checks smartphone lens quality.
Speed is another important factor in
the industry’s assessment of equipment
performance. UMA states, “There is a
gap between the edge of the lens and
the insert on the lens tray. The original
system had to readjust position until
the lens, light source and image sensor
were aligned, which often took several
attempts. Consequently, enhancing
process efficiency was a big challenge
for us. Renishaw’s high-performance
encoder allows our latest system to locate
the correct position at once, reducing
processing time significantly.”
UMA adds, “Benefiting from the
explosive growth in smartphones and
mobile devices, our potential market
has grown 20 times. We must enhance
our equipment speed to maintain our
leading position in order to seize these
opportunities. Renishaw’s encoders are
well known in the market and, when
compared with other brands, have the
best cost-performance ratio. We have
no reason to choose others”.
Strategic reportRenishaw plc Annual report and accounts 2016 39
The fast-paced nature of the
consumer products market
demands flexible manufacturing
systems that can adapt to
shorter lifecycles, yet still meet
the requirements for high-quality,
high-volume components. This
illustration of a typical household
shows a few examples of how
Renishaw products are allowing
manufacturers to satisfy these
demanding requirements.
Digital display manufacture
Large-scale manufacturing of flat panel
displays requires accurate encoders for
position and motion control of high-speed
systems. Absolute encoders improve
reliability and productivity.
Metal housings for computers
High-volume production machining needs
probing technology to automate part setting
and control cutting tools to minimise scrap
and maximise production capacity from
each machine tool.
High-quality look and feel
Precision manufacturing using multiple
process control techniques is used to
produce the high standard of fit and finish
required on casings and components for
phones and tablets.
Lens testing for digital cameras
High-quality cameras incorporated into
compact devices require good lenses.
Position encoders are used to enable
high-speed automated testing of optics
at the production rates required by
smartphone manufacturers.
Plastic moulded casings
Additive manufacturing and precision
machining technology are used to produce
injection mould tooling with optimised
conformal cooling for leading consumer
brands, enhancing product quality and
production efficiency.
GovernanceFinancial statementsShareholder informationStrategic report 40
The construction market
C-ALS® borehole-deployable laser scanner
for concealed cavity and void scanning.
Scanning for safety and accuracy
An important part of any
construction, mining and quarrying
project is surveying, and sites need
to be rapidly assessed to aid in the
efficient planning of operations,
such as the re-routing of roads and
positioning of heavy machinery.
There is therefore an increasing
use of laser scanning technology
to map construction sites so as
to gain accurate measurements
in a fraction of the time of
traditional methods.
Out of sight, but top of mind
Fondasol is a firm of consulting engineers
which advises constructors in the design
of geotechnical structures. The company
was contracted by Schiltigheim Town
Council to conduct a survey on a
brownfield site in the 9th century town
which is located in north east France,
where the site contained a series of
subterranean man-made cellars below
a demolished building.
The Council required verification that the
section of underground cellars extending
beneath public land had been made safe
and that there was no risk of collapse.
The entrance to the cellar network had
been sealed and Fondasol required a
solution that would enable them to survey
the voids in detail, from a safe location
without entering the cellars.
The solution was to use Renishaw’s
C-ALS® cavity monitoring system, a
surface-operated laser scanner that
is used to obtain the 3D geometry
of underground cavities. The system
is deployed down a borehole using
lightweight rods with communication
and power supplied from a dedicated
surface unit.
An integrated nosecone camera provides
forward-looking visibility during use.
This means that operators can observe
any obstructions, and judge when the
C-ALS probe has entered the cavity.
The sensors ensure the C-ALS probe’s
position can be tracked down the
borehole so that the scan is automatically
georeferenced relative to the borehole
collar position.
In conclusion, it was found that the cellar
network beneath the public land had not
been filled by the previous occupant.
The C-ALS survey, however, also showed
that the cellar network appeared to
be in good condition and indicated
no concerning structure dimensional
deformation, meaning no risk of collapse.
The Council now has a detailed record of
the area, including cavity volumes, which
can be consulted for future development
of the site and should future infill
be required.
C-ALS proved to be the only
non-destructive way of effectively and
safely mapping and assessing the
condition of the cellars while minimising
time and disruption on site.
Fondasol trusted Renishaw for its
C-ALS system, noting that “it is the most
complete and practical tool that we
tested” and that it “completely meets the
expectations that we had on the issues
related to subterranean cavities”.
Deploying a C-ALS system for
measuring underground voids.
Complete scan of the underground site
in Schiltigheim performed by Fondasol.
Strategic reportRenishaw plc Annual report and accounts 2016 41
From heavy earthmoving
equipment to surveying systems
and mineral analysis, Renishaw’s
products are used in a diverse
range of construction industry
applications. This illustration
of a typical quarry highlights
just a few areas in which
our products are helping to
improve manufacturing and
process efficiency.
Investigation of underground structures
and cavities
Borehole-deployable scanners are used
from the surface to map voids and old or
unrecorded workings, improving safety and
project planning for mining, quarrying and
construction activities.
Manufacture of large high-value
components
Wireless probing technology is used to
control and automate the machining
of chassis and other components for
earthmoving plant where scrap is too costly
to accept.
Quarry surveying and stockpile
monitoring
Laser scanning systems are used to profile
whole rock faces for blast optimisation,
enabling improved safety and productivity
in quarrying.
Precision parts for power plants
High-precision manufacturing uses
advanced scanning probe systems to
control quality, enabling power plants to
deliver enhanced performance, higher
reliability and reduced emissions.
Materials identification
Analysis of geological samples and
identification or certification of gemstones
are two of the many applications for Raman
spectroscopy, sometimes combined with
scanning electron microscopes.
GovernanceFinancial statementsShareholder informationStrategic report 42
Performance – Healthcare
Performance
During the year there was growth from
our medical dental and neurological
products lines.
The medical dental products line
again achieved a record year for the
annual production levels of additively
manufactured metal dental structures
created from cobalt chrome powder
using Renishaw AM machines. This came
from a mix of LaserPFM™ frameworks
(crowns and bridges), new LaserRPD™
partial dentures (see page 43) and
LaserAbutments™, which are implant-
supported custom abutments that are
made by Renishaw’s hybrid manufacturing
– additively manufactured to capture
fine occlusal details and then precision
machined to achieve precisely fitting
interface geometry for screw-retained
implants; porcelain is then applied directly
to the abutment without the need for a
separate crown. Sales of the latter have
been boosted by a collaboration with
global implant innovator, BioHorizons,
which is allowing its customers to offer
a custom AM abutment for the first time.
There has also been substantial progress
in the supply of additively manufactured
LaserImplants™ which were introduced
at the end of the previous year.
These custom-made craniomaxillofacial
patient specific implants (PSIs) and
associated cutting guides are supporting
reconstructive surgery, typically resulting
from head or neck trauma, birth defects
or cancer treatment (see Centro Médico
Teknon case study on page 20).
The majority of medical dental AM
products manufacture now takes
place in the new Healthcare Centre of
Excellence which has been established
at the Miskin site. The Centre operates
under an ISO13485 quality management
system for the design and manufacture of
medical devices and will operate additive
manufacturing processes to produce
medical products. The manufacture of
zirconia dental structures continues at our
Stonehouse facility.
The medical dental products line also
benefits from sales of Renishaw AM
machines which are configured specifically
for healthcare applications, which includes
sales to world-leading dental company
DENTSPLY Implants following an
agreement reached last year.
There was good progress for the
neurosurgical products line, with
key strategic sales of the neuromate
stereotactic robotic system achieved
during the year. The second installation
of a system in Spain was made in the
renowned Sant Joan de Déu Barcelona
Children’s Hospital with the first surgery
being a stereoelectroencephalography
(SEEG) implantation case for epilepsy.
Neuromate systems along with the
neuroinspire surgical planning software
were also installed in leading hospitals in
the UK including Great Ormond Street
Hospital for children in London, UK
and these have been successfully used
for SEEG cases as well as biopsies of
tumours in delicate regions of the brain.
Whilst we are able to meet the high
performance Raman instrumentation
requirements for a wide range of research
applications, including life sciences,
graphene and other 2D materials,
pharmaceuticals and advanced materials
for the green energy market, there is an
increasing use of our technology within
medical research.
During the year, we highlighted several
such applications for our inVia system:
in Canada, The Irving K Barber School
of Arts and Sciences at the University
of British Columbia, is using our system
to detect radiation damage in cells and
tissues during cancer treatments, so that
dosages can be adjusted to be more
precise and targeted; The Children’s
Hospital of Michigan, USA, is analysing
childhood diseases with the ultimate goal
to have Raman technology available in
the operating room for accurate, real-time
diagnosis of tissue during operations;
and, also in the USA, the University
of Colorado Boulder is analysing the
mechanical behaviour and underlying
materials science of biological tissues
and biomaterials, including those used
in biological tissue replacement (e.g., for
tissue repair and regeneration).
Hybrid systems, combining Raman
chemical analysis with the high spatial
resolution of either scanning electron
microscopy or atomic force microscopy,
continue to be in strong demand.
Likewise, the growing life science
market is showing renewed interest in
Raman combined with laser scanning
confocal microscopy.
Market conditions
Life expectancy is increasing in both
developed and developing markets,
meaning that key drivers include the
requirement for faster procedures
to reduce waiting times, more
economical treatments, more patient-
specific treatments (e.g., implants and
personalised medicines), and safer
procedures with reduced human errors.
All our healthcare products lines are well
placed to deliver for these requirements.
Global economic conditions continue to
limit the availability of academic research
funding in certain markets, while remaining
strong in others. We entered the first
half in a very positive mood with strong
first half growth for our spectroscopy
line, but this has not been sustained into
the second half where further delays
to funding have been experienced.
Key research areas including 2D and 3D
materials, green energy and biomedical
research continue to attract funding
and our spectroscopy products are
well placed to service these sectors,
particularly with the launch of our new
inVia Qontor with LiveTrack™ technology.
Strategy for growth
We aim to develop innovative healthcare
products that will significantly advance our
customers’ operational performance by
maximising research capabilities, reducing
process times and improving the efficacy
of medical procedures. We are also
increasingly addressing the requirement
for personalised healthcare treatments.
As a key Renishaw focus is to develop
technologies that provide patented
products and methods, we invested
£9.0m (net of capitalised costs) of
expenditure on R&D and engineering
during the year.
Strategic reportRenishaw plc Annual report and accounts 2016 43
Outlook
In developing markets, levels of wealth
are increasing at a national and individual
level, which is driving demand for higher-
quality medical treatments, often requiring
more technologically advanced products.
Increased life expectancy on a global
basis means greater incidences of
degenerative neurological diseases,
which will require surgical therapies.
With appropriate regulatory approvals
and increasing numbers of reference sites
we are increasingly well-placed to supply
neurosurgeons with the products and
techniques to support such procedures.
The market for Raman spectroscopy
continues to grow in fields such as
nanotechnology, advanced materials,
life sciences and medical research.
The regulatory requirements for healthcare
products demand significant investment,
but make barriers to entry high for
competitive products.
Our metrology and healthcare businesses
are interconnected and we employ
core metrology technologies and
manufacturing expertise to minimise
technology risks. This is illustrated very
clearly in our medical dental products line
where we utilise our own AM machines in
the manufacture of dental structures and
medical implants, whilst also utilising our
knowledge of subtractive machining in the
hybrid manufacture of LaserAbutments.
Our Raman systems are supplied with
a high-speed encoded stage which
incorporates our position encoders,
whilst a key aspect of our offering is the
ability to give customers the flexibility to
rapidly change key components within our
spectrometers, such as diffraction grating
and Rayleigh filters – this is made possible
by kinematic mounts which are also used
extensively in our CMM and machine tool
probing systems.
Key developments
A key launch for the spectroscopy line
was the inVia Qontor, our most advanced
Raman microscope which builds on the
market-leading inVia Reflex. The new
system includes Renishaw’s innovative
LiveTrack™ focus tracking technology,
which enables users to analyse samples
with uneven, curved or rough surfaces.
Optimum focus is maintained in real-time
during data collection and white light
video viewing, removing the need for
time consuming manual focusing,
pre-scanning or sample preparation.
During the year the medical dental
products line introduced LaserRPD™
removable partial dentures which are
additively manufactured from cobalt
chrome powder. For patients, these
offer a lower-cost alternative to implants
and for people who are concerned
about the invasive surgery required to
place implants.
We have supplied an investigational
drug delivery system for a clinician-led
clinical trial for a therapy for the treatment
of Parkinson’s disease. The convection
enhanced delivery (CED) system was
manufactured for North Bristol NHS Trust
and used to infuse glial cell line-derived
neurotrophic factor (GDNF). The same
system is also being used for the delivery
of a chemotherapy drug for the treatment
of childhood brain tumours.
Installation of a neuromate system at
Great Ormond Street Hospital in London.
Two LaserRPD removable partial
dentures 3D-printed in cobalt chrome.
GovernanceFinancial statementsShareholder informationStrategic report 44
Performance – Financial review
Group revenue for the year was £436.6m (2015: £494.7m)
with a profit before tax of £80.0m. Last year’s substantial
revenues arising from trading with Far East customers in the
consumer electronics industry were not repeated to the same
extent this year. Adjusting for last year’s exceptional Far East
sales, we experienced underlying revenue growth of 6%.
Allen Roberts, Group Finance Director
International Financial
Reporting Standards (“IFRS”)
In accordance with EU law, the
consolidated financial statements of the
Company are prepared in accordance
with IFRS adopted by the EU.
The Company has elected to prepare its
parent company financial statements in
accordance with FRS 101.
Brexit
The 2016 financial year ended just one
week after the UK’s referendum on
whether to remain in the EU was held.
The weakening of Sterling in that final
week had no significant impact on the
income statement but the balance sheet
was affected substantially. The currency
translation reserve now shows a gain
of £6.4m (2015: £2.7m loss) reflecting
the impact of year-end exchange rates
on overseas third party net assets and
currency overdrafts in the Company
classified as hedging instruments.
Revenue by region
Cash balances were reduced by £16.6m
as a result of exchange rate fluctuations
since the start of the year, £9m of which
was subsequent to the referendum, with
the loss being recorded directly in the
currency translation reserve. The cash
flow hedging reserve moved from a
gain of £17.2m at 30th June 2015 to
a loss of £56.5m at 30th June 2016,
primarily reflecting the impact of exchange
rate movements on currency forward
contracts outstanding at the year-end.
Trading with other EU countries in the year
amounted to £100.8m, representing 23%
of group revenue. At the end of the year,
the headcount located in EU countries
outside the UK totalled 490, compared
to the Group total headcount of 4,286.
Given the recent volatility in exchange
rates, we will closely monitor the Group’s
cash flow hedging approach.
Revenue
Group revenue for the year was
£436.6m, compared with £494.7m last
year. Last year, there were substantial
revenues arising from trading with
Far East customers in the consumer
electronics industry, which were not
repeated to the same extent this year.
Revenue benefited by £6.9m compared
to prior year exchange rates. Adjusting for
the exceptional Far East sales last year,
we experienced underlying revenue
growth of 6% for the year and 4% at
constant exchange rates.
Geographically, revenue in the Far East
was down by 24% (26% at constant
exchange rates), although there was
underlying growth of 12% after adjusting
for the sales to customers in the
consumer electronics industry referred to
above. We experienced growth of 9% in
Europe (9% at constant exchange rates),
but 4% lower sales in the Americas (6%
at constant exchange rates) and a 9%
reduction in the UK.
Far East, including Australasia
Continental Europe
North, South and Central America
UK and Ireland
Other regions
Total group revenue
2016 revenue
at actual
exchange rates
£’000
195,343
112,075
92,198
23,208
13,774
436,598
Change
from
2015
%
-24%
+9%
-4%
-9%
+13%
-12%
2016 revenue
at 2015
exchange rates
£’000
189,671
112,144
90,938
23,208
13,772
429,733
Change
from
2015
%
-26%
+9%
-6%
-9%
+13%
-13%
2015 revenue
at actual
exchange rates
£’000
257,665
103,106
96,284
25,499
12,166
494,720
Strategic reportRenishaw plc Annual report and accounts 2016
45
Earnings per share and dividend
Earnings per share were 94.9p, compared
with 167.5p last year.
In line with the Group’s progressive
dividend policy, a final dividend of 35.5p
net per share (2015: 34.0p) results in
a total dividend for the year of 48.0p,
an increase of 3.2% over the 46.5p
in 2015. Dividend cover is 2.0 times
(2015: 3.6 times).
Research and development
Gross expenditure on engineering costs,
including research and development
on new products, was £72.2m
(2015: £66.1m). The capitalisation of
development costs (net of amortisation
charges) amounted to £3.1m
(2015: £2.8m), giving a net charge in
the Consolidated income statement
of £69.1m (2015: £63.3m). The gross
charge amounts to 17% of group revenue
(2015: 13%).
Between the business segments,
net of the capitalisation costs,
£60.1m (2015: £55.0m) was spent
in the metrology segment and £9.0m
(2015: £8.3m) was spent in our
healthcare segment.
New product research and development
expenditure amounted to £46.0m,
which compares with £42.3m spent last
year. There have been a number of new
product releases in both our metrology
and healthcare business segments, and a
number of new product introductions are
anticipated during the 2017 financial year.
Group headcount
Group headcount has increased from
4,112 at 30th June 2015 to 4,286 at
30th June 2016, with the average for the
year of 4,192, compared with 3,811 last
year. The increase during the year of 174
comprised 57 additional employees in
the UK and 117 overseas. The increase
in the UK included 42 apprentices and 64
graduates, and, in addition, we sponsor
43 students at universities across the UK.
Labour costs, the most significant cost for
the Group, increased by 6% to £183.8m
(2015: £173.7m) reflecting an annual
pay increase, the incremental cost of the
employees recruited in both 2015 and
2016 and offset by a reduction in the staff
bonus provision. There was no directors’
bonus this year.
The Group hedges a proportion of its
revenue by the use of forward contracts
which had the effect of increasing
reported revenue by £4.9m.
The table on page 44 shows the analysis
of group revenue by geographical market.
In our metrology business segment,
revenue was £408.2m, compared with
£467.0m last year. Revenue in our
healthcare business segment increased
from £27.7m last year to £28.4m.
A geographical analysis of our metrology
and healthcare businesses is shown in the
Strategic report.
Profit and tax
The Group profit before tax amounted to
£80.0m (2015: £144.2m).
In our metrology business, operating profit
was £85.9m, compared with £150.7m
last year. In our healthcare business we
recorded an operating loss of £6.4m,
compared with a loss of £6.8m last year.
The overall effective rate of tax was 14.3%
(2015: 15.8%). The Group operates
in many countries around the world
and the overall effective tax rate is a
result of the combination of the varying
tax rates applicable throughout these
countries. In the UK, the tax charge
for the current year benefited from a
lower UK current corporation tax rate
of 20% (2015: 20.75%), the research
and development tax credit and patent
box benefit, amounting to £2.4m, and a
reduction in the deferred tax rate to 19%.
Financial highlights
Working capital (£m)
(excluding cash and
derivatives)
182.5
130.6
120.1
103.6
95.4
29.9%
2013
28.8%
2012
41.8%
2016
26.4%
2015
33.8%
2014
% of revenue
Capital expenditure
(£m)
53.0
35.6
48.4
27.5
39.2
17.9
28.0
30.3
16.7
21.1
21.3
13.6
2012
6.9
2013
2014
20.9
17.4
2016
2015
Plant and vehicles
Land and buildings
GovernanceFinancial statementsShareholder informationStrategic report
46
Performance – Financial review (continued)
Consolidated balance sheet
The Group’s shareholders’ funds at the
end of the year were £384.5m, compared
with £431.2m at 30th June 2015.
Reserves increased from our trading
results which gave an after tax profit of
£68.6m but were reduced by movements
relating to the remeasurement of defined
benefit pension scheme liabilities of
£17.4m, dividends paid of £33.8m and
cash flow hedging. The cash flow hedging
reserve, which accounts for the valuation
of all outstanding forward contracts at the
year-end which mature at some date in
the future, moved from a gain of £17.2m
at 30th June 2015 to a loss of £56.5m at
30th June 2016.
Additions to property, plant and
equipment totalled £53.0m, of which
£17.4m was spent on property and
£35.6m on plant and machinery and IT
equipment and infrastructure.
The main property additions were:
As noted below under Treasury policies,
the Group uses forward contracts to
hedge future foreign currency inflows.
At the end of the year, these contracts,
which mature over the next three and a
half years, showed a loss of £56.5m, net
of tax, when re-valued at the year-end,
compared with a gain of £17.2m at the
start of the year, with movements reported
through the cash flow hedging reserve.
A significant element of this loss was
as a result of the weakening of Sterling
at the end of June 2016 following the
EU referendum.
Defined benefit pension
schemes
At the end of the year, the Group’s
defined benefit pension schemes, now
closed for future accrual, showed a
deficit of £67.8m, compared with a
deficit of £48.1m at 30th June 2015.
Defined benefit pension scheme assets
at 30th June 2016 increased to £149.2m
from £140.5m at 30th June 2015,
representing investment performance
during the year. Pension scheme liabilities
increased from £188.6m to £217.0m,
reflecting the market rates at 30th June
2016 and the effect of applying IFRIC
14 to the liabilities arising from the new
recovery plan provided by the Company in
respect of the UK pension scheme deficit.
The agreement supersedes all previous
arrangements and the liabilities are
calculated on the basis of funding to
self-sufficiency. The obligations under the
recovery plan are secured by charges over
certain UK properties to the value of £62m
and the escrow account. The application
of IFRIC14 increased pension scheme
liabilities by £15.4m (2015: £10.2m).
For the UK and Irish defined benefit
pension schemes, a guide to the
sensitivity of the value of the respective
liabilities is as follows:
Valuation sensitivity
Variation
Approximate effect on liabilities
• at Miskin, South Wales, the
refurbishment of the second half of our
facility was completed; and
UK – discount rate
UK – future inflation
Increase/decrease by 0.5%
-£18.7m/+£21.5m
Increase/decrease by 0.5%
+£18.8m/-£16.8m
Ireland – discount rate
Increase/decrease by 0.5%
Ireland – future inflation
Increase/decrease by 0.5%
-£1.7m/+£1.9m
+£2.0m/-£1.7m
UK – mortality
Ireland – mortality
Increased life by one year
Increased life by one year
UK – early retirement
One year earlier than assumed
Ireland – early retirement
One year earlier than assumed
+£6.8m
+£0.6m
+£6.1m
£nil
• in the USA, construction of a new
facility near Chicago for the relocation
of our USA subsidiary Renishaw, Inc.
later this year.
Within working capital, inventories
increased to £95.0m from £77.7m at
the beginning of the year to support
growth in revenue and our policy of
holding finished stock to maintain delivery
performance given our short order book
of approximately five weeks and to
support future growth and strategic stock
holdings for certain of our products.
Trade debtors increased from £101.2m to
£114.9m, including an increase of £15.7m
arising from the weakening of Sterling
during the year and particularly as a result
of the EU referendum. There is a small
increase in debtor days from 67 in 2015
to 70 in 2016.
Cash balances at 30th June 2016 were
£21.3m (2015: £82.2m), in addition to
which is the pension scheme escrow
account of £15.3m (2015: £14.7m).
Strategic reportRenishaw plc Annual report and accounts 2016 47
Treasury policies
The Group’s treasury policies are designed
to manage financial risks to the Group
that arise from operating in a number
of foreign currencies and to maximise
interest income on cash deposits. As an
international group, the main exposure is
in respect of foreign currency risk on the
trading transactions undertaken by group
companies and on the translation of the
net assets of overseas subsidiaries.
The information below includes
disclosures which are required by IFRS
and are an integral part of the financial
statements. Weekly groupwide cash
management reporting and forecasting is
in place to facilitate management of this
currency risk. The operations of group
treasury, which is situated at head office,
are governed by Board-approved policies.
All Sterling and foreign currency balances
not immediately required for group
operations are placed on short-term
deposit with leading international highly-
rated financial institutions.
The Group uses a number of financial
instruments to manage foreign currency
risk, such as foreign currency borrowings
to hedge the exposure on the net assets
of the overseas 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 Dollar and Japanese Yen cash inflows.
Also, currency contracts are used to
minimise the interest cost of maintaining
the currency borrowings. The foreign
currency borrowings are short-term
with floating interest rates. The Group
does not speculate with derivative
financial instruments.
See note 20 to the group financial
statements for an analysis of cash
balances and currency borrowings at the
year end.
Investment for the future
We will continually look to the long-term
growth of the Group and to invest in
the research and development of new
products, improving manufacturing
and production processes to provide
capacity for the future, and expanding our
marketing and support presence around
the world.
Allen Roberts
Group Finance Director
27th July 2016
GovernanceFinancial statementsShareholder informationStrategic report 48
Risk and risk management
Effective risk
management is critical to
the achievement of our
strategic objectives. Risk
management controls
are integrated into all
levels of our business and
across all our operations.
We continually assess our
exposure to risk and seek
to ensure that risks are
appropriately mitigated.
Overview of risk management
The Board is responsible for the
overall stewardship of our system of
risk management and internal control.
It has established the level of risk
that is appropriate for our business
and acceptable in the pursuit of our
strategic objectives and has therefore
set appropriate policies. It has also set
delegated authority levels to provide
the framework for assessing risks and
ensuring that they are escalated to the
appropriate levels of management,
including up to the Board where
appropriate, for consideration and
approval. The roles and responsibilities of
the Board, key committees and all levels
of management from a risk management
perspective are summarised in the
infographic on page 49. This process
ensures that risks are not just the product
of a bottom-up approach but are also
examined from a top-down perspective
via an integrated senior management
approach, which is closely aligned with
the Group’s strategy. In order to enhance
the Group’s approach to risk generally in
2016, a new risk committee was formed
creating greater linkage across our review
and assessment of risk. The committee
will also be monitoring mitigation of risk
and in 2016 conducted a thorough review
of our principal risks.
Assessment of prospects
and viability
Analysis for the new “viability statement”
reporting requirement (included on
page 73) has been based on our strategic
plan. The tools and information we use
for managing our risks have facilitated
the quantification of potential downside
scenarios and the analysis required to
make this statement. The three-year
period selected for the viability statement
is covered by the Group’s strategic plan
and this has supported the analysis
with the ability to use a consistent set of
underlying assumptions.
These include the forecast growth and
profitability of the Group and financial
position reflecting current expectations as
well as assessments of risk probabilities
and risk impact over the three-year period.
The assessment of the Group’s prospects
considered stress testing of the strategic
plan using key methodologies including
consideration of the Group’s principal risks
and uncertainties and a simulation model
to quantify the impact of combinations of
risks, including an economic downturn.
The results of the stress test and
simulation modelling were considered
against the Group’s financial position
to determine that in these severe but
plausible downside scenarios, the Group
would have sufficient resources to
continue to operate and meet its liabilities
over the three-year assessment period.
The Group’s resilient business model has
proven strong and defensive in the long-
term and has enabled consistent growth.
The increasing diversity of our markets
and customers, broad product range,
investment in new product development,
plant and equipment and facilities, wide
geographic spread and service capability
and large base of installed equipment
worldwide, enhances the viability of the
Group in the face of adverse conditions,
as does our ability to self-generate
business through our skilled people
identifying solutions to our customers’
difficult process challenges.
Key focus areas for 2016
• A robust assessment of the principal risks facing the Group, including those that
would threaten its business model, future performance, solvency or liquidity.
• On-going monitoring of the group risk management and internal control systems.
• Enhanced evaluation and integration of the Group’s approach to
risk management.
• Creation of an executive risk committee comprising key senior management to
facilitate on-going monitoring activities.
• Creation of an executive anti-bribery monitoring working group.
• Creation of an executive information and cyber security working group.
• Creation of an executive data protection working group.
Going concern
for more information see page 73
Viability statement
for more information see pages 73–74
For further explanation of our approach to
risk management and internal control
see page 74
Strategic reportRenishaw plc Annual report and accounts 2016 49
Risk management framework – information and feedback flow
t
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Board
Audit Committee
Executive Board
Risk Committee
Top-down review
Group risk register
Bottom-up review
ISM Board (Group
operating companies)
Other operational
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Risk likelihood and impact
before mitigation
The diagram to the right shows the
Board's analysis of the principal risks
affecting the Group, before mitigation.
h
g
H
i
1 Current trading levels and
order book
2 Research and development
3 Supply chain management
4 Regulatory legislation for
healthcare products
5 Defined benefit pension schemes
6 Exchange rate fluctuations
Further descriptions and associated
mitigations are shown on pages 50–51.
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c
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6
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Low
Likelihood of risk
High
GovernanceFinancial statementsShareholder informationStrategic report
50
Principal risks and uncertainties
Our performance is subject to a number of risks, of which the principal risks and changes impacting on them are set out in the table below.
The Board has conducted a robust assessment of the principal risks facing the business. With the exception of the potential impacts
of Brexit, no new principal risks have emerged during the financial year. As reported in the Chairman’s statement on page 7 the full
business implications of Brexit remain uncertain, which will be the case for some time, and any risks arising will be a key focus area
for the risk committee in the next financial year. Currency fluctuations, trading arrangements, employment issues and other risks that
become apparent over time will be monitored by the committee and mitigation put in place where possible.
Potential impact
1 Current trading levels and order book
Revenue growth is
unpredictable and orders
from customers generally
involve short lead-times
with the outstanding order
book at any time being
around one month’s worth
of revenue value.
Related strategic priorities:
Global market conditions continue
to highlight risks to growth and
demand which can lead to
fluctuating levels of revenue.
Whilst global investment in
production systems and processes
is expected to expand, future
growth is difficult to predict,
especially with such a short-term
order book. This limited forward
order visibility leaves the annual
revenue forecasts uncertain.
2
4
5
6
8
* No change.
2 Research and development
The development of new
products and processes
involves risk, such as
development timescales,
meeting the required
technical specification and
the impact of alternative
technology developments.
Related strategic priorities:
Potential impact
Being at the leading edge of new
technology in metrology and
healthcare, there are uncertainties
whether new developments will
provide an economic return.
2
5
7
* No change.
3 Supply chain management
Customer deliveries may be
threatened by a failure in the
supply chain.
Related strategic priorities:
Potential impact
Inability to meet customer deliveries
could result in loss of revenue
and profit.
3
* Increased production capacity in
multiple locations.
* Explanation of change in risk.
Mitigation
Year-on-year change
• The Group is expanding and diversifying its
product range in order to maintain a world-
leading position in its sales of metrology
products. Investment in sales and marketing
resources continues in order to support the
breadth of the product offerings.
• The Group is applying its measurement
expertise to grow its healthcare and additive
manufacturing business activities.
• The Group retains a strong balance sheet and
has the ability to flex manufacturing resource
levels and shift patterns.
Mitigation
Year-on-year change
• Patent and intellectual property generation is
core to new product developments.
• R&D programmes are regularly reviewed
against milestones and, when necessary,
projects are cancelled.
• Medium to long-term R&D strategies are
monitored regularly by both the Board and
Executive Board, including reviews of the
allocation of R&D resource to key projects.
• Product development processes around
the Group are reviewed and aligned
where possible to provide consistency
and efficiency.
• New products involve beta testing at
customers to ensure they will meet the needs
of the market.
• Market developments are closely monitored.
Mitigation
Year-on-year change
• Production facilities are maintained with fire
and flood risk in mind.
• Critical production processes are replicated at
different locations where practical.
• The Group is highly vertically integrated
providing increased control over many
aspects of the supply chain.
• Ability to flex manufacturing resource levels
and shift patterns.
• Regular vendor reviews are performed for
critical part suppliers.
• Stock policies are reviewed by the Board on a
regular basis.
• Product quality is closely monitored.
Strategic reportRenishaw plc Annual report and accounts 2016
51
Mitigation
Year-on-year change
• Specialist legal and regulatory staff are in
place to support the healthcare business.
• Experience of healthcare regulatory matters at
board level.
• Healthcare operations in UK and France
have ISO13485 certification for their quality
management systems, with Ireland and other
subsidiary healthcare operations falling under
the UK quality management system.
Mitigation
Year-on-year change
• The investment strategy is managed by the
pension scheme trustees who operate in line
with a statement of investment principles.
• A new recovery plan was agreed in June
2016 for the 2015 actuarial valuation based
on funding to self-sufficiency.
Mitigation
Year-on-year change
• The Group enters into forward contracts in
order to hedge varying proportions of forecast
US Dollar, Euro and Japanese Yen revenue.
• The Group uses currency borrowings to
hedge the foreign currency denominated
assets held in the Group’s balance sheet.
• Monthly board review of currency rates and
hedging position.
Potential impact
4 Regulatory legislation for healthcare products
The expansion of the
Group’s business into the
healthcare markets involves
a significantly increased
requirement to obtain
regulatory approval prior to
the sale of these products.
Related strategic priorities:
Regulatory approval can be very
expensive and time-consuming.
This area is also very complex
and there is a risk that the correct
approvals are not obtained.
2
5
6
* No change.
Potential impact
5 Defined benefit pension schemes
Investment returns and
actuarial valuations of the
defined benefit pension
fund liabilities are subject to
economic and social factors
which are outside of the
control of the Group.
Related strategic priorities:
Volatility in investment returns
and actuarial assumptions can
significantly affect the defined benefit
pension scheme deficit, impacting
on future funding requirements.
1
* Agreement of a recovery plan for
the 2015 actuarial valuation.
6 Exchange rate fluctuations
Fluctuating foreign
exchange rates may affect
the results of the Group.
Related strategic priorities:
Potential impact
With 95% of revenue generated
outside of the UK, there is an
exposure to major currency
fluctuations, mainly in respect of the
US Dollar, Euro and Japanese Yen.
Such fluctuations could adversely
impact both the Group’s income
statement and balance sheet.
6
7
* Recent positive
movements offset by future
Brexit uncertainty.
* Explanation of change in risk.
Our business model
for more information see page 9
Our strategy
for more information see page 22 onwards
Increased
Decreased
No change
GovernanceFinancial statementsShareholder informationStrategic report
52
Corporate social responsibility
Our overarching goal in all of our CSR activities is to support
the sustainable growth of our business and ensure its longevity
and prosperity. To support this aim, our CSR strategy focuses
on the material enviromental impacts that we are best placed
to influence and control.
Allen Roberts, Group Finance Director
Strategy update
At Renishaw we seek excellence in
every aspect of our business and are
committed to managing our business in
a responsible manner. We recognise that
we have a responsibility to our people,
and the communities within which we
operate. We are seeking to address the
fact that our operations, products and
sourcing have both direct and indirect
environmental impacts. We believe that by
minimising these impacts and operating
in an ethical and sustainable manner,
we are able to reduce risks in our supply
chain and make a positive difference in
these communities. We have focused
our sustainability efforts on areas where
we believe we are best placed to make
improvements. These areas are resource
and energy, education, community and
innovation. We are proactively addressing
issues such as rising energy costs,
constraints on emissions, finite resources,
increasing water scarcity, the need for
greater transparency and skills shortages.
We have assessed our CSR impacts
and have identified those most material
to our business; these include waste
management, energy consumption, GHG
emissions and people.
Human rights and slavery
A strict non-discrimination policy is
embedded into our Group Business
Code, which states the minimum
standards expected within the Group and
from our representatives. This Code sets
out our position that our employees have
the right to non-discriminatory treatment
and equal opportunities, and to work in
a safe and secure working environment,
with a fair wage. Proper consideration is
given to applications for employment from
all genders, ethnic backgrounds and from
those with disabilities. Opportunities are
given to employees who become disabled
to continue in their employment or to be
trained for other positions.
This year, we have developed a new
strategy to strengthen the level of due
diligence applied to our supply chain.
This policy has built upon the processes
already developed to mitigate the risk of
utilisation of conflict minerals within our
supply chains, and applied these general
principles tailored as required, to modern
slavery and human rights risks. We have
developed a risk-based approach to
ensure that our efforts are focused on
the “at risk” areas.
We continue to use our Group
Business Code and other policies in
order to set expectations with potential
suppliers. The full Code can be found
at www.renishaw.com.
Aerial view of the Miskin site showing
installation of solar panels.
Strategic reportRenishaw plc Annual report and accounts 2016 53
2016 CSR targets and progress
Targets
Progress
Waste management:
5% reduction of waste to landfill
from UK operations
For more information see page 61
• We have been re-certified to the
Carbon Trust waste standard.
• Just over 2,478 tonnes of waste
from our UK operations was diverted
from landfill.
73%
reduction of waste to landfill from
our UK operations.
95%
of all waste diverted from landfill.
Energy consumption:
Decrease reliance on fossil fuel
derived energy
For more information see pages 59–60
• We commissioned two further solar
arrays this year.
• We have added more low energy
lighting systems, reducing our
demand by a further 1.2m kWh.
• Over 600,000 kWh reduction of
energy demand for space heating.
816,000 kWh
of electricity generated this year.
Solar arrays with an annual generating
capacity in excess of
1,308,000 kWh
are now in operation.
GHG emissions:
3% reduction in GHG tCO2e per
million pounds turnover compared
to 2015.
For more information see page 60
• A further 12% (2015: 33%) reduction
of GHG emissions from natural
gas consumption.
• 8% reduction in Scope 3
GHG emissions.
• £2.7m invested in energy
reduction projects.
10%
increase in GHG tCO2e emissions per
£m turnover compared to 2015.
3%
decrease in absolute GHG emissions.
• 4,286 people employed, an increase
of 4.5% since last year.
• Over 238 people across the Group
on structured apprenticeship and
graduate programmes.
• Over £2m invested in training this year.
5%
of our people are on structured
apprenticeship or graduate
programmes.
People:
5% of our employees as
apprentices, graduates or
sponsored students on structured
programmes.
For more information see pages 54–55
GovernanceFinancial statementsShareholder informationStrategic report
54
Our strategy in action – People
Roxanne Pollard,
Mechanical Design
Engineer, started
at Renishaw as an
apprentice engineer
and completed a 4-year
apprenticeship, during
which she obtained a
NVQ level 3, VRQ, HNC
and HND in engineering.
She has since gone
on to work with the
Group Engineering
team as a mechanical
design engineer,
whilst completing a
Renishaw-funded
part-time mechanical
engineering degree.
Strategic reportRenishaw plc Annual report and accounts 2016 55
Recently appointed as a director on the
Board, Will Lee benefited from an MBA
sponsored by Renishaw (see below).
People
Diversity
Renishaw enjoys the advantages of
being a global company. With over 20
nationalities represented in our senior
management group, we benefit from their
understanding of different cultures, and
acknowledge the advantages that these
varied experiences bring to the business.
On 30th June 2016, we employed 4,286
people across the Group, an increase
of 4% since last year. Of these, 3,296
(77%) are male and 990 (23%) are female.
There are nine directors on the Board,
consisting of seven males and two
females. The senior management group
is made up of 60 people, of which 58
(97%) are male and 2 (3%) are female.
Renishaw regards its senior management
group to be the Executive Board, the
heads of each products line, sales
territory, and manufacturing organisation
that report directly into the Executive
Board, and the directors of Renishaw’s
subsidiary undertakings.
Communication and participation
As a group that operates in a large
number of territories across the globe,
we recognise the need for clear and open
communication between sites, functions
and levels of management. Our flat
structure encourages our people to voice
their ideas or concerns and we have
received many excellent ideas as a result.
To facilitate the dissemination of top-
down information, regular communication
meetings are held with a Board member
present. Presentations of the annual
and half-year financial results are given
to employees at our larger locations,
supplemented by video-conference
presentations for smaller, remote sites.
We also actively encourage upward
communication through various other
channels. Our suggestion scheme
enables our people to submit ideas for
consideration. The suitability for adoption
is assessed, with awards given for
the most successful implementations.
There is also an inventors’ award scheme
for individuals who are named as inventors
of granted patents.
Training and development
We value our highly-skilled people and
recognise that retaining them is essential
to the future of our business; as such,
we place a large emphasis on ensuring
that our training programmes work
effectively for our people and business
needs. To illustrate this Will Lee, who
joined Renishaw as a graduate in 1996,
has progressed all the way to become
a Board director in 2016. This year,
we invested around £2m in training
programmes. This investment has been
used to develop 120 apprentices, 118
graduates on our graduate training
programme, and career development for
employees. We are currently funding the
further education of 190 of our people
across the business at HNC, HND and
degree level, in engineering, software and
commercial/business disciplines.
MySkills was launched in May 2015 and is
a library of training that can be accessed
by employees around the world. It has
been designed to equip middle and
senior managers with the necessary
skills and behaviours to lead Renishaw
to meet business challenges. Our people
participate in the programmes and actively
pursue their own development plans
with the support of their line manager.
Within the library we have a broad range
of courses focused on equal opportunities
and diversity, technical development,
Training for the Equator gauging system
taking place at New Mills.
leadership/management development,
induction, soft skills, career development
and health and safety.
The Academy was launched in 2010
with the aim to develop future application
engineers to meet the growing demand of
Renishaw’s increasingly diverse range of
products. Training is vital to maintain our
reputation for excellent technical support,
and since its inception, the Academy
has provided a wide and varied range of
training programmes from “Face-to-Face
Communication” and “Report Writing”,
to “Fundamentals of Manufacturing”
and “CNC Programming”. In October
2015, the first bespoke Key Account
Management (KAM) course was delivered
to Renishaw Hong Kong employees with
further courses scheduled throughout the
coming year.
In order to expand this facility and
maintain the quality of the courses
being delivered to our people and
customers, the Academy introduced
a module management system to
ensure that the content of all training
documentation is kept up-to-date.
This will be vitally important as we expand
the Academy training material into other
Renishaw subsidiaries.
This summer, some 100 (2015: 105)
students join Renishaw for paid
placements – 60 summer placements,
and 40 one-year industrial placements.
There are 120 craft and technical
apprentices currently in training
(2015: 114), with 4 in our German
subsidiary, and the rest in the UK.
We have a further 48 new apprentices
confirmed for September 2016, (2015: 44)
and 76 new graduates also start with
Renishaw this summer (2015: 70).
GovernanceFinancial statementsShareholder informationStrategic report 56
Corporate social responsibility (continued)
Renishaw is an official supplier to the
Land Rover BAR America’s Cup team.
Health and safety
We continue to further develop our
health and safety management system
and we are bringing more sites online
with our health and safety strategy.
Our management system has been
designed to be in line with best practice
and the requirements of the ISO18001
standard. We recognise the importance
of dealing with any and all injuries, as
anything, without the correct medical
attention, could develop into something
more serious. All injuries, from the smallest
of paper cuts, are recorded, enabling us
to manage treatment and investigate all
incidents effectively.
The total number of accidents for the
period was 296 (2015: 230) against
a year-end headcount of 4,286
(2015: 4,112). This equates to an accident
ratio of 0.069 accidents per person
and is 23% up on the same period the
year before. This is because we have
extended our reporting programme
to all sites across the Group and so
have a much increased scope of data
capture. Our online incident reporting
system continues to be used effectively,
encouraging employees to report all
incidents regardless of severity, and
is enabling us to record trends more
effectively. We currently do not see any
overall trends with the data we capture
other than that the majority of our
incidents are minor cuts.
There were four reportable accidents
under the UK RIDDOR reporting
requirements: one neck strain; two
fractured fingers; and one deep cut,
resulting in a total lost time of 714 hours,
or 96.5 days.
No work-related ill health or disease was
reported, but health monitoring in the form
of lung 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).
To support the physical and mental
welfare of our people we have regular
onsite visits from two occupational
physicians who are available for our
employees to discuss any issues that
they have. These doctors also act as
senior advisors to our Group Health and
Safety and HR functions to ensure that
best practices in occupational health
are observed.
A total of 113 (2015: 67) near-misses were
recorded for the period. No significant
repeating common causes have
been established.
Community
With an increasing global footprint, we
recognise the positive contribution that
can be made to our local communities
through varied interactions with local
residents, businesses, schools and
not-for-profit organisations. This is
especially true in the West of England
and South Wales, where we are a
significant employer.
In many of our markets, we communicate
a positive story about the role played by
science, engineering and manufacturing to
enhance the lives of the general populace
and the attractive nature of a career within
these sectors. We see this as a vital step
to overcome perceptions about career
options in these areas and to ensure a
strong pipeline of future talent, not just
for our own needs, but also for our wider
supply chain and customer base.
Renishaw sponsors half-time tag rugby
for local schools at Scarlets Rugby.
During the past year we have hosted
tour groups and given talks to a range
of organisations including primary and
secondary schools, universities and
colleges, business clubs and societies.
This is true on a global basis and includes
events held by our subsidiaries in Mexico,
Italy, Spain, the Czech Republic and
Taiwan. With an increasing profile, we are
also regularly asked to give interviews
to international, national and local
media, and contribute our knowledge
through conferences and debates
on a range of topics including skills,
apprenticeships, additive manufacturing,
IT systems, exports, education, human
resource management, innovation
and manufacturing.
We continue to actively support the
business community regionally, nationally
and internationally, through membership
of trade and lobbying associations such
as the European Society for Precision
Engineering & Nanotechnology, the
Confederation of British Industry, the
Dental Laboratories Association (UK),
the Association of British Healthcare
Industries, the Additive Manufacturing
Users Group (USA), Verein Deutscher
Werkzeugmaschinenfabriken e.V.
(Germany), UCIMU-SISTEMI PER
PRODURRE (Italy) and the UK’s
Manufacturing Technologies Association,
where two senior managers are
board members. We also support
local chambers of trade and business
networking groups.
Renishaw is also a member of various
industry research centres across the
globe; some of these include The
Manufacturing Technology Centre (UK),
the Advanced Manufacturing Research
Centre (UK), Canada Makes (Canada),
PräziGen (Germany), Light Alliance
(Germany) and BazMod (Germany).
Strategic reportRenishaw plc Annual report and accounts 2016 57
Training school teachers at Scuola
Camerana in Turin, Italy.
Indian child Poorva whose operation
was financed by Renishaw employees.
Renishaw supported a facial implant
operation in Nepal.
We continue to sponsor and judge a
range of regional and national business
award programmes that help encourage
and recognise business and individual
excellence. Ben Taylor was a judge
for the West of England Business
Awards in the period, whilst Head
of Communications, Chris Pockett,
helps to judge the main business and
technology awards programmes in Bristol
and Gloucestershire.
To further our aim of establishing
awareness of Renishaw as a significant
regional employer, we continue to sponsor
a wide range of festivals, sports clubs
and organisations in the West of England
and South Wales. During the year, we
sponsored the Bristol Post’s “Super
Science” schools competition which gave
a prize of £10,000 to the winner to spend
on science-related projects.
In South Wales, we have developed a
relationship with Scarlets Rugby, one
of the four professional Welsh regional
rugby union teams, where we sponsor
Welsh international Samson Lee and the
Club’s half-time tag rugby sessions for
local schools. We also sponsor Swansea
City footballer Ki Sung-Yeung, who plays
internationally for South Korea, and Ben
Morgan, the Gloucester and England
rugby international. In Germany, we
continue to sponsor Handball-Bundesliga
team HBW Balingen-Weilstetten, which is
based in an area where many of our major
customers are located.
With significant ongoing public interest in
3D printing, we have collaborated with
individuals and organisations on a range
of projects, which this year included
assistance to the Jet Age Museum in
Gloucestershire which is restoring the
cockpit of a 1936 Hawker Typhoon
aircraft. We also joined Land Rover BAR’s
Technical Innovation Group as an official
supplier, providing expertise in additive
manufacturing and position feedback
encoding to assist the team in its attempt
to win the America’s Cup.
Charity
In the UK, the Renishaw Charities
Committee (RCC) was formed in the
1980s to distribute funds to charitable
and voluntary organisations and support
the individual fundraising efforts of UK
employees. The RCC is made up of
representatives from Renishaw’s main
Gloucestershire sites and has a particular
focus on assisting organisations that help
enrich the lives of children and adults, from
toddler groups and sports clubs, through
to organisations that support disabled
people and the bereaved. Donations are
also made to organisations located close
to other UK sites. A separate international
fund is administered by the RCC, that
donates monies to aid the victims of
natural and other disasters.
During the year, the RCC made
donations to 260 diverse organisations
totalling £102,000 (2015: £99,000).
Beneficiaries included Cubs and Brownies
groups, church restoration funds, disability
support groups, primary and secondary
schools, counselling and carers support
groups, hospice care organisations,
animal sanctuaries and senior citizen
groups. The RCC also fully matches
funds raised by employees for UK-wide
organisations such as Children in Need
and MacMillan Cancer Support.
Significant donations of £2,000 or
more were made by the RCC to six
organisations, including a 3D printer for
the National Star College, support for a
new centre for Cotswold Cats & Dogs,
and support to the Dean Forest Railway.
Renishaw is also highly supportive of
its local communities elsewhere in the
world. In Turin, Renishaw S.p.A. is running
a project with Scuola Camerana, a
school supported by Turin’s Industrial
Union and Chamber of Commerce,
which aims to train both employed and
unemployed people using the most
up-to-date industrial technologies.
Renishaw is supplying metal 3D-printed
parts, software, training, application
engineers and access to Renishaw’s
demo area, to help educate the school’s
teachers about additive manufacturing
and future technologies.
In India, Renishaw employees raised
funds to support Poorva, a four-year-
old girl, who contracted Guillain-Barré
syndrome, a rare and serious condition
of the peripheral nervous system which
paralysed her from the neck down.
Poorva’s family was unable afford the
necessary operation, but together with
a contribution from Renishaw India’s
charities committee, they were able to
pay for the operation. Today, Poorva has
completely regained mobility and is able to
talk, eat and move her hands.
As a result of Renishaw’s work with
the British Association of Oral and
Maxillofacial Surgeons, we sponsored
its sub-committee, the Norman Rowe
International Educational Foundation,
to help undertake a mission to Nepal
to train local surgeons. Renishaw also
donated an additively manufactured
orbital floor implant. The implant patient
was previously imaged using a CT
scanner. The scan data then allowed a
digital design to be created which was
manufactured using Renishaw’s metal
3D printing technology. The implant was
successfully fitted to the patient during
the mission.
GovernanceFinancial statementsShareholder informationStrategic report 58
Corporate social responsibility (continued)
Pupils building a Greenpower Goblins
car at the FDC in Miskin.
Education
Five years ago, The Engineering UK report
stated that 27% of 11–14 year-olds
thought engineering was a desirable
career, and 37% of 15–16 year-olds would
consider a career in engineering. In 2015,
the good news is that those figures had
risen to 43% and 49% respectively.
Clearly the work that the engineering
community has been doing in schools is
starting to have an impact but there is still
lots of work to do in particular areas.
Lack of information about the realities
of engineering is an obvious issue for
schools. Few are exposed to engineering
at school directly, and the applied maths
modules of GCSE and A-Level only
give a taste of engineering calculations.
There is some exposure in physics, and
maybe in the better-equipped design
and technology workshops, but going
from school to engineering, whether as
a degree or apprenticeship, is going to
be a step into the unknown for most
young people.
Renishaw genuinely believes that
participating in making things, and
understanding how products are
designed is important in influencing
young people considering a career in
engineering. With support from the Welsh
Government, we have developed a
Fabrication Development Centre (FDC) at
our manufacturing site at Miskin, Wales,
which we believe is unique in the UK.
Our aim is to become a key educational
resource for hands-on learning of
design, fabrication, manufacturing and
engineering skills, through which process
we will raise engineering’s profile to
encourage more students, especially girls,
to choose STEM (science, technology,
engineering and mathematics) subjects.
This will encourage more young people
to take up apprenticeships, jobs or further
education career pathways in high-
value engineering.
Moreover, the FDC will aim to underpin
and enhance students’ contextual
understanding of the school curriculum.
We hope this will start to address the
criticism raised in this year’s Engineering
UK report that pupils are not exposed to
engineering, science or maths.
This year we recruited our first
Education Liaison Officer for Wales,
based at the Miskin site. This new role
will aim to implement the successful
model of schools engagement from
Gloucestershire, and work with schools
across South Wales to create our long-
term talent pipeline.
One of the successful initiatives that
we run is “Technology Teardowns”.
Everyday products such as printers,
mobile phones and laptops are taken
apart and with the help of experienced
Renishaw engineers, pupils begin to
understand how the item works and
why it is designed in a particular way.
Pupils from primary to sixth form, and
both girls and boys, really gain from
this experience.
We have now established good
relationships with schools in
Gloucestershire and North Bristol, but
we wish to work harder with schools in
the more populated Bristol region to get
our name known by pupils as a potential
company with whom they can have a
great career. Renishaw and the Bristol
Post newspaper teamed up to offer
one Bristol school the chance to win
£10,000 to fund anything in the name of
science education. The winning school,
Wicklea Academy, is intending to create
an environmental area as part of an
“outdoor classroom”.
A “Technology Teardown” session
in progress.
Another Bristol initiative is our sponsorship
of the Bristol Aerospace Centre (BAC),
where we are donating £180,000 over
three years to create a museum and
educational resource that will showcase
the city’s role in aviation history and
highlight engineering innovation.
Sitting alongside a new permanent hangar
for the Concorde aircraft, the BAC aims
to be a highly participative centre for
education and skills training. Its proximity
to our main operations and motorway
networks means that the Centre will form
a key part of our schools’ engagement
programmes, making resources
accessible to our “special relationship”
schools in Bristol, Gloucestershire and
South Wales.
We have continued to train all our new
graduates and second-year apprentices
to be STEM ambassadors. We now have
over 140 ambassadors who carry out at
least one STEM-related activity each year,
to sustain and grow our multiple initiatives
with schools and universities, including
talks and lectures, career fairs, after
school clubs and STEM projects.
We are continuing to develop relationships
with key universities that have been
identified as having relevant courses for
our business needs. This includes the
sponsorship of engineering societies
and Formula Student teams. We have a
number of research projects, PhD and
undergraduate projects with several
universities, and often give lectures,
employability talks and attend career
fairs to raise the profile of engineeing
and Renishaw.
We continue to work with leading industry
organisations and engineering peers to
advise government on national policy
that will benefit the sector in general.
For example, we are a board member
Strategic reportRenishaw plc Annual report and accounts 2016 59
Over 2,500 students have attended
Miskin Education Days since 2012.
Renishaw has independent certification
for its impact on CO2 emissions.
Renishaw's waste reduction achievements
have been independently recognised.
of the Royal Academy of Engineering’s
Diversity Leadership Group which
has been set up to help to remove
barriers and encourage more women
and other under-represented groups
into engineering.
This year through the Diversity Leadership
Group Renishaw has made a major
contribution to the Engineering Fast
Track programme. This was a series
of workshops delivered to students
from ethnic minority backgrounds
and women who were studying an
engineering degree but were struggling
to know how to get into the industry.
Renishaw collaborated with other large
engineering companies and Sponsors for
Educational Opportunity (SEO) London to
deliver a programme that helped them to
apply for jobs and understand the career
opportunities available.
Environment
We recognise that improving the
operational efficiencies of our locations
across the world contributes to the
sustainable growth of our business.
We continue to work hard to ensure
that the impact of our business activities
is as low as practical. Through our
assessments we have identified that the
areas of our operations with the most
significant impact are energy consumption
and waste generation. We also recognise
that our business travel and product
shipments contribute heavily to our
carbon footprint.
Over the past 12 months, we have
invested in additional onsite energy
generation in the UK which has
significantly increased our solar
photovoltaics generating capacity. At the
end of 2015 we had just over 250,000
kWh generating capacity at our New Mills
site. We have added further generating
potential of around 846,000 kWh at
our Miskin site and 212,000 kWh at
Stonehouse. This brings us to a total
generating capacity of just over 1,308,000
kWh, which is 4.4% of our UK (3.5%
global) electricity demand.
This year we have achieved an absolute
reduction of our total GHG emissions
of 3% but our normalised statutory
emissions have increased by 10%.
At our sites across the globe we house
over 4,286 people, with sites ranging
in size from two people, to our UK
headquarters, which houses 1,380 in
eight buildings. Our buildings range from
a 19th century Grade II listed cotton
mill, to state-of-the-art, purpose-built
modern buildings, and offices in large
and small multipurpose properties
around the world. Across our 14 UK
sites we have undergone an extensive
programme of refurbishment. As part
of this process, we have changed
our thinking with respect to financial
payback periods for energy efficiency
investment. Accepting significantly longer
payback when considering investment
in solar panels, triple glazing, LED
lighting, insulation etc., has allowed
us to create a much more sustainable
building infrastructure. We have invested
over £4.3m this year to increase the
energy efficiency of our buildings.
This work has allowed us to reduce
our electricity demand for the future by
around 2,220,000 kWh per annum.
We are currently looking at the feasibility
of renewable energy at some of our
overseas sites and further optimisations
at our larger UK sites as a priority.
We have also recognised that an area in
which we can reduce our environmental
impact is our approach to the design of
product packaging. We have established
a packaging development team with
the task of improving the design of
packaging by using alternative materials,
improving recyclability, reducing material
costs, reducing labour costs, reducing
volumetric weight during shipping
and reducing the GHG impact of our
shipments and the raw materials that
we purchase. This initiative is considered
strategically important for both current and
new products, given that we export 95%
of our goods and can therefore make
improvements to our overall CO2 impact
associated with logistics activities, as well
as those associated with the purchasing
of raw materials. In addition, work is
ongoing to reduce the polystyrene-based
products used to transport goods within
the business and to move towards more
recyclable materials.
In the UK, Renishaw continues to
participate in the Carbon Reduction
Commitment (CRC) Energy Efficiency
Scheme and the Carbon Disclosure
Project (CDP). We use the CDP as a
benchmarking tool and are working
extensively to ensure that our efforts in
GHG emission management are fully
disclosed and are as transparent as is
expected by our people, customers, and
investors. We successfully completed
our energy audits for the Energy
Savings Opportunity Scheme and
through this work, we have identified a
number of opportunities to make further
energy savings.
GovernanceFinancial statementsShareholder informationStrategic report 60
Corporate social responsibility (continued)
Renishaw is legally obliged to report on
Scope 1 and 2 emissions (as defined by
the Greenhouse Gas Protocol). However,
through analysis, it is evident that our
Scope 3 emissions amount to a significant
proportion of our carbon footprint. We will
continue to disclose our Scope 1, 2, and
significant Scope 3 emissions, and to put
efforts into improving data quality, and
expanding our Scope 3 data capture to
present a more complete picture of our
GHG emissions. During the year, our
total GHG emissions for Scope 1 and
2 (statutory disclosure) was 21,192.39
(2015: 20,659.07) tCO2e. Our significant
Scope 3 emissions (voluntary disclosure)
was 20,684.59 (2015: 22,403.09) tCO2e.
To calculate our GHG emissions, we
have used the GHG Protocol Corporate
Accounting and Reporting Standard
(revised addition), data gathered for
our CRC submission and the UK
Government’s GHG reporting guidance
as the basis of our methodology and the
source of emissions factors. Our GHG
emissions are based on actual data
taken from bills, invoices, meter readings
and expense claims wherever possible.
For our Scope 1 and 2 emissions, less
than 1% of the data is based on estimates
from averaged data sets.
Scope 1
Gas consumption
Owned transport
Generator diesel
Heating oil
Fugitive emissions
Electricity generated
Out of scope (bio fuel blend)
Total Scope 1 (tCO2e)
2014
20151
20163
1,438.39
2,684.40
24.74
43.57
252.67
–
55.35
4,443.76
962.30
2,293.66
124.31
41.09
262.79
5.98
59.58
3,690.13
846.00
2,515.38
32.61
253.91
305.73
52.02
75.95
4,005.65
Scope 2
Purchased heat
Electricity – Location Based
Total Scope 2 (tCO2e) – Location Based
–
16,576.71
16,576.71
5.44
16,963.50
16,968.94
20.76
17,165.98
17,186.74
Electricity – Market Based
Total Scope 2 (tCO2e) – Market Based5
17,416.00
17,416.00
19,619.00
19,624.44
20,104.00
20,124.76
Total statutory GHG emissions2 (tCO2e)
Normalised statutory GHG emissions2 by
revenue (tCO2e/£m)
21,020.47
20,659.07
21,192.39
59.13
41.76
48.54
Scope 3
Business travel
Product distribution
Raw material purchase
Post and communications
WTT and T&D total6
Out of scope (bio fuel blend)
Total significant Scope 3 (tCO2e)
Total GHG emissions (tCO2e)
Normalised total GHG emissions4 by
revenue (tCO2e/£m)
6,916.31
5,292.98
799.72
557.85
4,766.80
49.97
18,333.66
39,354.13
4,030.00
11,482.33
1,088.41
598.66
5,203.68
38.97
22,403.09
43,062.16
5,226.99
9,179.69
277.66
774.00
5,226.25
53.58
20,684.59
41,876.99
110.70
87.05
95.92
1 2015 figures have been restated due to improvements in our methodology, updated GHG conversion factors
and replacing the calculation used for the June 2015 data last year – see footnote 3.
2 Statutory emissions are Scope 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 Scope 1 and 2 (statutory) and significant Scope 3 (voluntarily reported)
emissions.
5 Market Based electricity is used where it is available to us. This is currently only within the UK and Europe.
Where Market Based factors are not available Location Based ones are used in their place. Currently 87% of
our electricity consumed is covered by Market Based factors.
6 Well To Tank and Transmission and Distribution losses total use Location Based conversion factors
for calculations.
Strategic reportRenishaw plc Annual report and accounts 2016 61
Global waste totals (tonnes)
Landfilled
Re-used
Composted
Incinerated
Recycled
2013
2014
2015
20161
220.40
131.54
82.15
152.22
9.33
12.96
0.96
2.64
32.62
394.71
418.87
1,210.97
1,515.10
1,835.96
2,204.46
Total non-landfilled
1,210.97
1,524.43
2,246.27
2,656.91
Percentage of waste sent to landfill
15.4%
7.94%
3.53%
5.42%
Total waste
1,431.37
1,655.97
2,328.42
2,809.13
2,809.13
2016
2,328.42
1,431.37
1,655.97
Landfilled
Re-used
Composted
Incinerated
Recycled
1 Includes US data for the first time which accounts for 87.2 tonnes of landfill waste in 2016.
Product compliance
We continue to prepare for the Restriction
of the use of Hazardous Substances
Regulations (RoHS), which require
the majority of our products to be
compliant in 2017. Our encoder product
range is RoHS compliant, with robust
design procedures in place to ensure
that all future products are compliant.
We continue to monitor substances
against those identified as “substances of
very high concern” under the Registration,
Evaluation, Authorisation and Restriction
of Chemicals Directive. Whilst we do
not fall within the remit of the USA’s
Dodd-Frank Wall Street Reform and
Consumer Protection Act, we recognise
that compliance with the conflict minerals
assessment and disclosure aspects of
such legislation is important to a number
of our customers. We also recognise we
should have a supply chain with minimum
risk, that is free of unethical practices.
As such, we have used our best efforts
to mitigate against conflict minerals within
our supply chain. Continual investigations
in our supply chain are carried out to help
ensure conflict minerals are not present;
we are working with a number of key
suppliers on this project. Any issues we
consider to be against the spirit of our
Group Business Code are monitored,
and we work with suppliers where issues
are identified.
2013
2014
2015
The Strategic report was approved by
the Board on 27th July 2016 and signed
on its behalf by
Sir David R McMurtry
Chairman and Chief Executive
Recycling centres have been installed
across Renishaw sites in the UK.
Waste management
During the year, we have completed
the UK roll-out of our segregation-at-
source waste management strategy.
This has involved removing personal
under-desk bins and installing office
floor recycling centres across the sites.
This centralised methodology has
been designed to ensure that as much
waste as feasibly possible is diverted
from landfill. This strategy, which was
started in February 2014 and proved
to be effective, has continued to drive
our efforts throughout the year, resulting
in a further 2,656.91 (2015: 2,246.27;
2014: 1,524.43) tonnes of waste being
diverted from landfill. Approximately 90%
of all waste generated this year originated
from our UK sites which have been
recertified to the Carbon Trust Waste
Standard. These sites have been
recognised by the Carbon Trust for their
efforts in moving waste away from landfill
as a disposal option, towards recovery,
recycling and re-use.
Last year, we set a target of 5% for the
reduction of waste to landfill in our UK
operations. Despite a global rise of waste
to landfill of 85% we have had a decrease
from our UK operations of 73%. We are
still re-using, recycling or recovering
around 95% (2015: 96%; 2014: 92%) of
our waste around the world.
GovernanceFinancial statementsShareholder informationStrategic report 62
The power generation market
Dr Taiki Inoue, University of Tokyo, using
an inVia Raman microscope.
R&D support for energy generation and storage
Worldwide attention is continuing
to focus on expanding our
use of renewable energy.
Whilst equipment such as solar
panels and wind turbines are in
increasing supply, and research
continues into making this
equipment as efficient as possible,
the storage of energy generated is
another area where significant R&D
efforts are being applied.
Researching battery life
The US Army Research Laboratory
(ARL) in Maryland, USA, is studying
electrochemical energy storage materials
with a hybrid instrument consisting
of a Renishaw inVia confocal Raman
microscope and a Bruker Dimension Icon
atomic force microscope (AFM).
Dr Collin Becker is a mechanical engineer
at ARL and his group studies materials
for advanced lithium ion batteries and
future-generation energy storage systems,
with a focus of developing high capacity
anode materials to improve overall energy
density, rate of discharge and safety of
electrochemical energy storage materials
for electronics and vehicles.
Dr Becker investigates in situ changes
in materials during battery charge and
discharge with his Renishaw/Bruker
combined Raman/AFM. This system -
unlike scanning electron microscopes and
x-ray photoelectron spectrometers - does
not require samples to be in high vacuum.
Therefore, he uses the Renishaw/Bruker
system to study cells with standard
electrolytes, in an inert environment
provided by a glovebox. This provides the
most realistic picture of the chemical and
mechanical events taking place during
battery cycling.
“The capability to use systems like the
inVia in an argon-filled glovebox is critical
for lithium ion battery materials since they
are typically air and moisture sensitive,”
says Dr Becker. “The ability to do mapping
experiments and still be able to have the
system coupled with the electrochemical
cell used for in situ AFM is very important.”
Studying advanced materials
The Mechanical Engineering Department
at the University of Tokyo, Japan, uses
a Renishaw inVia confocal Raman
microscope to study graphene and other
nano-materials in the development of
energy-related devices such as solar cells.
The department’s laboratory focuses its
research on the synthesis and analysis of
carbon nanotubes (CNT), graphene and
other nano-materials. The laboratory uses
scanning Raman spectroscopy as an
important tool for the investigation of the
synthesised materials and their structure.
Lecturer Dr Shohei Chiashi says, “The
Renishaw inVia is one of the most
frequently used instruments in our
university. Scanning Raman imaging
spectroscopy is very useful for observing
the structure of CNTs and graphene. It is
one of the most important tools for our
research. We find it possible to measure
Raman images quickly and stably using
inVia. Additionally, we find the software
very useful for image analysis.”
Dr Collin Becker using a combined
Raman AFM system at ARL.
Strategic reportRenishaw plc Annual report and accounts 2016 63
From fossil fuels to renewable
energy, Renishaw products
are at the heart of associated
manufacturing processes. Whether
in exploration and production
in the oil and gas sector or
solar panel manufacture, our
products are used to control the
production of key componentry.
This illustration highlights just a
few key applications within the
renewables sector.
Gearboxes and power transmission
Equipment for inspection and quality control
ensures power transmission systems meet
the demanding specifications required
for efficient service in power stations and
hostile environments.
Wind turbine blades
Probing and other process control
technologies enable precision manufacture
of both large and small-scale components
for high performance operation and
reliability of turbines in service.
Photovoltaic panel testing
Analysis of chemical deposits on thin film
layers using Raman spectroscopy enables
quality control and assurance for solar panel
production.
Solar panel manufacturing
Absolute position encoders provide
smooth velocity control and high accuracy
for automated operations in solar panel
manufacturing and other high-tech
industries.
GovernanceFinancial statementsShareholder informationStrategic report 64
Corporate governance report – Introduction
The Board is ultimately responsible to shareholders for
all the Group’s activities, its strategy and financial performance,
the efficient use of the Group’s resources and social,
environmental and ethical matters.
Sir David Grant, Senior Independent Director
With the assistance of the Audit
Committee, the Board approves the
Group’s governance framework and
reviews its risk management and
internal control processes with a view to
maintaining high standards of corporate
governance throughout the Group.
A key area of focus for 2016 was the
tender of our external audit contract.
The Audit Committee ran a rigorous
process resulting in Ernst & Young being
selected as the preferred new audit
firm, subject to shareholder approval
at the annual general meeting (AGM) in
October 2016.
On behalf of the Board, I would like
to thank Ben Taylor, who retires on
31st July 2016 for his huge commitment
and contribution to Renishaw over
31 years. Will Lee is appointed to the
Board as Group Sales and Marketing
Director from 1st August 2016 and will
be proposed for election as a director at
the AGM.
I am delighted that Kath Durrant took
on the role of Chair of our Remuneration
Committee from May 2016 bringing a
wealth of experience to this role.
In relation to our remuneration report on
pages 80 to 86, the policy table from our
three-year remuneration policy, which was
approved by 86% of shareholder proxy
votes at our annual general meeting in
October 2014, is set out for information
purposes only.
The Annual report on remuneration
2016 sets out the details of directors’
compensation throughout this financial
year, which will be subject to the normal
advisory vote at the AGM.
Other appropriate steps were also taken
in order to maintain adequate procedures.
We have now trained 1,282 people
worldwide via our anti-bribery E-Learning
module, as well as other training initiatives.
In the period, the Board reviewed its
risk management and internal control
framework, and has enhanced its
operation, including setting up an
executive risk committee which has,
in turn, formed working groups to
focus on anti-bribery, information and
cyber security, and data protection.
Further details are set out on pages 48
and 49.
The Board also considered the new
viability statement requirement, and an
explanation of our process is contained
on page 48 and the viability statement is
contained on page 73.
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
anti-corruption culture is embedded in
our Group Business Code and Anti-
Bribery Policy which can be found at
www.renishaw.com/en/renishaw-group-
business-code--14444. In 2016, we have
continued to closely monitor operational
risks in key regions and are implementing
additional compliance policies in
certain areas.
Scope of disclosures
This corporate governance report has
been prepared in accordance with
the UK Corporate Governance Code
2014 (Code). The Code can be viewed
at www.frc.org.uk. This report, which
incorporates the reports of the Audit
Committee and Nomination Committee,
together with the Directors’ remuneration
report, describes how we have applied
the main principles of the Code.
We report on the operation of our
business in the following ways:
A review of the Group’s business and
likely future developments is given in the
Chairman’s statement and the Strategic
report. Segmental information by
geographical market is given in note 2 to
the financial statements.
The UK Listing Authority’s Disclosure
Rules and Transparency Rules (DTR),
require the Annual report to include a
management report which can be found
in the Strategic report.
The Directors’ corporate governance
report and other statutory and regulatory
disclosures set out on pages 64 to 75
and 87 to 89 form the Directors’ report
(Directors’ report).
GovernanceRenishaw plc Annual report and accounts 2016 65
Disclosure of information under Listing Rule 9.8.4R
The information that fulfils the reporting requirements under this rule can be found in the
Directors’ report, the Directors’ remuneration report and on the pages identified below,
as applicable.
Section
(1)
(2)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
Topic
Location
Interest capitalised
Not applicable
Publication of unaudited financial information Not applicable
Not applicable
Details of long-term incentive schemes
Not applicable
Waiver of emoluments by a director
Not applicable
Waiver of future emoluments by a director
Not applicable
Non pre-emptive issues of equity for cash
Not applicable
As item (7), in relation to major subsidiary
undertakings
Parent participation in a placing by a listed
subsidiary
Contracts of significance
Provision of services by a controlling
shareholder
Shareholder waivers of dividends
Shareholder waivers of future dividends
Agreements with controlling shareholders
Not applicable
Not applicable
Directors’ remuneration report
pages 80–86
Not applicable
Not applicable
Other statutory and regulatory
disclosures pages 88–89
For the purposes of the DTR, which
require a corporate governance statement
to be included in the Directors’ report,
the Company’s corporate governance
practices are set out in the Directors’
corporate governance report, which forms
part of the Directors’ report.
For the purposes of the UK Listing
Authority’s Listing Rules (LR), certain
information required to be provided to
the shareholders is also contained in
the Directors’ corporate governance
report, the Directors’ remuneration
report and the Other statutory and
regulatory disclosures, including certain
information relating to arrangements with
controlling shareholders.
For the purposes of the DTR, the
information required by section 7 of
such rules is referred to in the Directors’
corporate governance report.
Cautionary note and safe harbour; 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 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.
Under the Companies Act 2006, a safe harbour limits the liability of directors in respect of statements in, and omissions from, the Strategic report contained on pages
1 to 61 and the Directors’ report. Under English law the directors would be liable to the Company (but not to any third party) if the Strategic report and/or Directors’ report
contains errors as a result of recklessness or knowing misstatement or dishonest concealment of a material fact, but would not otherwise be liable.
GovernanceFinancial statementsShareholder informationStrategic report 66
Board of directors and Company Secretary
Sir David McMurtry
N*
CBE, RDI, FRS, FREng, CEng, FIMechE
John Deer
Chairman and Chief Executive
Deputy Chairman
Allen Roberts
FCA
Group Finance Director
• Formerly employed by Rolls-Royce plc,
Bristol, for 17 years, holding the positions of
Deputy Chief Designer and Assistant Chief
of Engine Design for all Rolls-Royce engines
manufactured at Filton, Bristol.
• Invented the original measuring probe in the
early 1970s and co-founded Renishaw with
John Deer in 1973.
• Responsible for group technology.
• Trained as a mechanical engineer and
worked for Rolls-Royce plc, Bristol, for
14 years.
• Qualified as a chartered accountant in 1972
and is a Fellow of the Institute of Chartered
Accountants in England and Wales.
• Co-founded Renishaw with Sir David
• Joined Renishaw in 1979 and appointed to
McMurtry in 1973, serving as Managing
Director from 1974 to 1989.
• Primarily involved in the commercial
direction of the Group, with particular
emphasis on marketing and the
establishment of the Group’s wholly-
owned subsidiaries.
• Responsible for group manufacturing
and Chair of the overseas marketing
subsidiaries.
the Board of Renishaw plc in 1980.
• Heads group finance, business systems,
human resources and Wotton Travel Ltd.
• Responsible for both metrology and
healthcare regulatory and quality
assurance functions.
• Reports to the Board on corporate social
responsibility matters.
Geoff McFarland
Will Lee
Sir David Grant
CBE, FREng, FLSW, CEng, FIET
A R N
Group Engineering Director
Group Sales and Marketing Director
Senior Independent Director
• Joined Renishaw in 1996.
• Appointed to the Board of Renishaw plc
• Graduated with a BEng in computer-aided
mechanical engineering at Heriot-Watt
University, and subsequently worked for
several years as a research associate.
• After working briefly in the high-volume
manufacturing electronic sector, joined
Renishaw in 1994.
• Appointed to the Board of Renishaw plc
in 2002.
• 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 new role of Director
of Group Sales and Marketing in
December 2015.
• Responsible for group engineering, group
• Holds a degree in physics from
IP and the neurological products line.
Oxford University and an MBA from
Bath University.
in April 2012.
• Currently senior independent director of IQE
plc, non-executive director of the Defence
Science and Technology Laboratory (Dstl),
chair of STEMNET, and chair of the National
Physical Laboratory (NPL).
• Vice-Chancellor of Cardiff University from
2001 to 2012.
• Previously held leadership positions at
Dowty Group, GEC, the Royal Academy
of Engineering and Innovate UK.
• Appointed to the Executive Board in 2015.
• Received a knighthood in the Queen’s
• Appointed to the Board with effect from
1st August 2016.
Birthday Honours 2016 for his contributions
to engineering, technology and education.
GovernanceRenishaw plc Annual report and accounts 2016 67
Carol Chesney
FCA
Non-executive director
A* R N
Kath Durrant
R* N
John Jeans
CBE, CEng
A R N
Non-executive director
Non-executive director
• Appointed to the Board of Renishaw plc
• Appointed to the Board of Renishaw plc in
• Appointed to the Board of Renishaw plc
in October 2012.
January 2015.
in April 2013.
• Chartered accountant who worked
• Currently Group HR Director for Wolseley
at Arthur Andersen for seven years in
audit services.
plc and an Advisory Board member for the
Lancaster University Management School.
• Currently chair of Imanova, UK Biocentre
Ltd and Edinburgh Molecular Imaging.
• Non-executive director of ProMetic Pharma
• Worked for some time in the group
accounts function at English China
Clays plc.
• Currently Company Secretary of Halma plc,
having also been Group Financial Controller.
• Was previously the Group HR Director at
Small Molecule Therapeutics Ltd.
Rolls-Royce plc and held a variety of senior
positions at AstraZeneca plc,
including Vice President, HR and
Communications for its research and
development division.
• Serves on several government bodies
including the Ministerial Committee on
Medical Technologies.
• Leads Innovate UK’s Stratified Medicine
Advisory Board and the KTN’s Health Board.
• Appointed advisor to the Prime Minister at
the Office of Life Sciences in June 2014.
Norma Tang
General Counsel and Company Secretary
Ben Taylor (retires 31st July 2016)
CEng, FIMechE
Assistant Chief Executive
• Joined Renishaw plc in 2001.
• Ben Taylor retires from the Board on
• Qualified as a solicitor in 1988 and since
then has specialised in company and
commercial legal matters, advising
business clients and as an in-house
counsel.
• Heads the group legal and company
secretariat function, advising the Board on
legal, compliance and governance matters.
31st July 2016 following an outstanding
contribution to the Group’s performance
over the last 31 years. Ben has helped to
articulate the vision for Renishaw and has
been a partner in developing longstanding
relationships with customers worldwide.
We wish him well in his retirement.
Committees
A Audit Committee
R Remuneration Committee
N Nomination Committee
* Denotes Chair of committee
GovernanceFinancial statementsShareholder informationStrategic report 68
Executive Board
Sir David McMurtry
CBE, RDI, FRS, FREng, CEng,
FIMechE
Chairman and Chief Executive
See page 66 for biography
John Deer
Deputy Chairman
See page 66 for biography
Allen Roberts
Group Finance Director
See page 66 for biography
Geoff McFarland
Group Engineering Director
See page 66 for biography
Will Lee
Group Sales and
Marketing Director
See page 66 for biography
Norma Tang
General Counsel and
Company Secretary
See page 67 for biography
Leo Somerville
President, Renishaw
North America
Dave Wallace
Director and General
Manager, CMM, and Styli
and Fixturing Products
• Joined Renishaw in 1984.
• Joined Renishaw in 1989
through Renishaw’s
sponsored student scheme.
• Worked in various functions
of the business including
a one-year secondment
at Renishaw’s German
subsidiary, before being
appointed Director and
General Manager for the
CMM products line in 2002.
• Appointed to the Executive
Board in 2008.
• Initially served as business
manager for machine tool
probing and calibration
products at Renishaw, Inc.
• Became President of
Renishaw, Inc. in 1993 and
appointed to the Executive
Board in 2004.
• Appointed as a member of
the International Sales and
Marketing Board in 2008.
• Became President, Renishaw
North America upon a
re-organisation of the
management of the region
in 2016.
GovernanceRenishaw plc Annual report and accounts 2016 69
International Sales and Marketing Board
Kevin Gani
Sean Hymas
Director of Sales Development
President and Representative
Director, Renishaw KK
Stewart Lane
General Manager,
UK Sales and Group
Business Development
Rainer Lotz
Managing Director,
Renishaw GmbH
• Joined Renishaw in 1989
• Joined Renishaw in 2000
• Joined Renishaw in 2006.
• Joined Renishaw in 2011 and
appointed Director of Sales
Development in 2012.
• Responsible for the
development of commercial
teams, systems and
processes.
following a year’s sandwich
placement between 1987
and 1988.
• Over 25 years’ experience of
marketing, international sales,
and product management.
• Manages and leads the
development of the Renishaw
Academy.
• Moved to Japan in 2008
to further drive sales and
marketing at Renishaw KK.
• Appointed as a member of
the International Sales and
Marketing Board in 2012.
• Appointed President of
Renishaw KK and to the
International Sales and
Marketing Board in 2012.
• Over 20 years’ experience in
related positions.
• Responsible for the operations
in Germany and Austria.
• Appointed as a member of
the International Sales and
Marketing Board in 2008.
working as both a design and
business manager within the
machine tool products line.
• Appointed as the Group’s
Business Development
Manager in 2012 and General
Manager for the UK sales
organisation in 2013.
• On the boards of the West
of England Aerospace
Forum, the Manufacturing
Technologies Association
(MTA) and CECIMO, the
European Machine Tool
Association.
John Deer
Deputy Chairman
See page 66 for biography
Allen Roberts
Group Finance Director
See page 66 for biography
Will Lee
Group Sales and Marketing
Director
See page 66 for biography
Leo Somerville
President, Renishaw
North America
See page 68 for biography
Norma Tang
General Counsel and
Company Secretary
See page 67 for biography
Clive Martell
Head of Global
Additive Manufacturing
Jean-Marc Meffre
Managing Director,
Far East
Rhydian Pountney
General Manager,
ROW Sales
• Joined Renishaw in 2015.
• Responsible for the strategy
and direction of additive
manufacturing.
• Over 30 years’ experience
in advanced engineering and
international sales.
• Progressed from graduate
engineer to CEO of Delcam
plc, and managed transition
from AIM listed company to
a division of Autodesk.
• Appointed as a member of
the International Sales and
Marketing Board in 2015.
• Joined Renishaw in 1988
as Managing Director of
Renishaw France.
• Holds a master’s degree in
Economics and Marketing.
• Moved to Renishaw Hong
Kong in 1997. Responsible for
all the operations in the Far
East and Australasia, except
Japan.
• Appointed as a member of
the International Sales and
Marketing Board in 2008.
• Joined Renishaw in 1979.
• Appointed as a member of
the International Sales and
Marketing Board in 2008.
• Over 30 years’ experience
in sales and marketing.
Responsible for 11 overseas
operations, including India
and Russia.
• UK Chair of the Technology
Collaboration in Advanced
Engineering working group of
the UK-India joint economic
and trade committee.
GovernanceFinancial statementsShareholder informationStrategic report 70
Directors’ corporate governance report
Board structure
Board
Executive
Board
Audit
Committee
Nomination
Committee
Remuneration
Committee
International Sales and Marketing Board, divisions and subsidiary undertakings
A. Leadership
The role of the Board
The Board comprises four executive and
four independent non-executive directors
in addition to the executive Chairman.
The directors holding office at the date
of this report and short biographical
details are given on pages 66 to 67
(Ben Taylor retired on 31 July 2016 and
is not offering himself for re-election at
the AGM). Full biographical details are
available at www.renishaw.com. Will Lee
was appointed by the Board as a director
with effect from 1st August 2016, and
along with all other directors, will be
retiring and putting himself up for election
at the AGM. Will’s biography is set out on
page 66. The Company maintains liability
insurance for its directors and officers,
as disclosed in the Other statutory and
regulatory disclosures.
There is a formal schedule of matters
specifically reserved for its decision.
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, patent-related disputes
and other material litigation, forecasts and
major product development projects.
The Board meets as often as is necessary
to discharge its duties effectively. In the
financial year ended 30th June 2016,
the Board met for 10 scheduled and
two short notice meetings and the
directors’ attendance record at board
and committee meetings is set out at the
end of this report. In addition, the non-
executive directors met a number of times
without executive directors present.
A high-level summary of subject areas
discussed during the year are set out on
page 71.
The Board has three formally constituted
committees, the Audit Committee,
the Remuneration Committee and the
Nomination Committee.
There is an executive management
committee known as the Executive
Board that is responsible for the
executive management of the Group’s
businesses. It is chaired by the Chairman
and includes the executive directors
and senior managers as noted on page
68. The Executive Board usually meets
for two days on a monthly basis and
considers the performance and strategic
direction of the metrology and healthcare
businesses and other matters of general
importance to the Group. In addition,
there is an executive sales and marketing
committee known as the International
Sales and Marketing Board which meets
quarterly to determine the Group’s sales
and marketing policies and strategies and
review its sales and marketing activities.
This committee is chaired by the Deputy
Chairman and includes the Group Finance
Director, the Group Sales and Marketing
Director, the directors of the five largest
sales regions, the Director of Sales
Development and the Head of Global
Additive Manufacturing.
A framework of delegated authorities is
in place that maps out the structure of
delegation below the Board and includes
the matters reserved to the Executive
Board and the level of authorities given to
management below the Executive Board.
An executive risk committee meets
regularly to review risks which may impact
on the Group’s business and to implement
mitigation actions. The framework for
managing risk is set out on pages 48
and 49.
The Board has adopted a conflict
of interests policy, putting in place
procedures for the disclosure and review
of any conflicts and potential conflicts,
and authorisation by the Board (if felt
appropriate). Authorisations granted and
the terms of such are reviewed on an
annual basis. New disclosures are made
where applicable.
GovernanceRenishaw plc Annual report and accounts 2016 71
High-level summary of subjects discussed by the Board during
the year:
Strategy
• Business strategy
• Reviewing potential acquisitions/disposals
• New subsidiaries
• Products and technology
• Key business relationships
• Brexit
Risk
• Group’s risk analysis
• Patent litigation
• Tax risk register and updates
Governance
• Legal updates
• Market Abuse Regulation
• Modern Slavery Act
• Board evaluation
• Committee terms of reference
• Controlling shareholder agreement
Scheduled Board and
committee meetings
in the period
July 2015
August 2015
R
B
A
A
R
September 2015
October 2015
B
A
B
November 2015
December 2015
B
January 2016
February 2016
• Export control
B
B
A
R
March 2016
April 2016
Finance
• Forecasts and targets
• Oversight of the preparation and management of the financial statements
• Dividend policy
• Trading statements
Stakeholder engagement
• AGM and other shareholder feedback
B
B
• Investor day
May 2016
June 2016
• Succession planning/executive management structure
HR
B
R
N
• Pensions
• Remuneration policy
• Salary reviews
• Bonus
• Health and safety system and updates
B
Key
Audit Committee (4)
A
R Remuneration Committee (4)
N Nomination Committee (1)
B Board (10)
GovernanceFinancial statementsShareholder informationStrategic report 72
Directors’ corporate governance report (continued)
Division of responsibilities/
the Chairman
The role of Chairman and Chief Executive
is a combined role and thus contrary
to the recommendations of the Code.
Sir David McMurtry has held this position
since the Company listed in 1983 and he
and John Deer hold the majority of the
voting interests in the Company.
There has been a voting agreement in
place between Sir David and John Deer
since 1983, further details of which are set
out in the Other statutory and regulatory
disclosures on page 87. The Board
considers that there is still a clear division
of responsibilities at board level to ensure
an appropriate balance of power and
authority so that there is no one person
with unfettered powers of decision.
The Board and Executive Board meet
on a sufficiently regular basis to make
decisions of significance to the metrology
and healthcare business segments and
review management actions. It is intended
that this combined role will continue for
so long as Sir David McMurtry remains
on the Board and he and John Deer
hold a majority of the voting interests in
the Company.
The Chairman has no other significant
commitments as regards employment or
directorships of other companies.
Non-executive directors
Sir David Grant is the Senior Independent
Director and is available to discuss
material concerns with shareholders
should the normal channels of the
Chairman and Chief Executive or the
Group Finance Director fail to resolve such
concerns. The non-executive directors
meet without the executive directors
present to discuss performance and
other matters.
B. Effectiveness
Composition of the Board
All the non-executive directors are
considered by the Board to be
independent in character and judgement
and there are no relationships or
circumstances that are likely to affect a
non-executive director’s judgement.
Sir David Grant is currently the senior
independent director of IQE plc (having
been appointed in September 2012),
chair of STEMNET (appointed in
December 2011), chair of the National
Physical Laboratory (appointed in May
2015) and on the board of the Defence
Science and Technology Laboratory
(Dstl) (appointed in June 2012). He was
previously Vice-Chancellor of Cardiff
University from October 2001 to August
2012. The Company has dealings with
these organisations from time to time,
such as grant-funded research projects,
or research, collaboration or supply
agreements. The Company confirms
that Sir David Grant has taken no
part in decisions relating to any of the
dealings between the Company and
these organisations.
John Jeans was chair of the Council of
Cardiff University from December 2011
until December 2015, is chair of Innovate
UK’s Stratified Medicine Steering Group
(having been appointed in February 2014)
and was chair of MRC Technology from
December 2008 until November 2014.
John has also been since March 2016
interim Chair of the Scottish Medical
Device Hub at Strathclyde University.
The Company has dealings with these
organisations from time to time, such
as grant-funded research projects,
or research, collaboration or supply
agreements. The Company confirms that
John Jeans has taken no part in decisions
relating to any of the dealings between the
Company and these organisations.
The dealings referred to above are not
material (i.e., in aggregate they are less
than 0.5% of the Company’s revenue for
the financial year ended 30th June 2016).
The Code recommends that at least
half the Board, excluding the Chairman,
should comprise independent non-
executive directors. The Board has
complied with this requirement during
the period.
Appointments to the Board
A description of the structure and activities
of the Nomination Committee are set out
in the Nomination Committee report on
page 76.
Commitment
The terms of appointment of the non-
executive directors, which includes
the expected time commitment and
requirement to discuss any changes
to other significant commitments with
the Chairman and Chief Executive in
advance, are available for inspection at
the AGM and the registered office upon
written request.
None of the executive directors hold a
directorship in a FTSE 100 company.
Development
Directors are offered the opportunity
to attend formal training courses to
update their knowledge of their duties as
directors. Guidance notes, papers and
presentations on changes to law and
regulations are provided as appropriate.
Non-executive directors are invited
to attend internal conferences, which
provide information to the Group on new
product development and marketing
initiatives, as well as our investor days.
Business presentations are given at board
meetings to provide updates on, and
opportunities to discuss, products and
business strategies.
An induction pack is provided to new
appointees to the Board, and the
induction programme (together with the
continuing development programme)
includes site visits and briefings by senior
managers, attendance at internal senior
management conferences and external
trade shows, as well as foreign subsidiary
visits, as applicable. For example, this
year, non-executive directors visited
Renishaw’s Miskin facility for the annual
investor day and attended strategy days,
as well as a board meeting at Renishaw’s
Stone premises. This has facilitated a
deeper understanding of the Group,
leadership team and Renishaw’s products
and markets.
GovernanceRenishaw plc Annual report and accounts 2016 73
Information and support
The Board receives appropriate
documentation, management accounts,
forecasts and commentaries thereon
in advance of each board meeting
to enable its members to review the
financial performance of the Group,
current trading and key business
initiatives. Regular financial updates
are also provided between meetings.
The Company Secretary advises the
Board on all governance matters.
All directors have access to the
Company Secretary and to independent
professional advice at the Company’s
expense where necessary to discharge
their responsibilities as directors.
The appointment and removal of the
Company Secretary is a matter reserved
for the Board.
Evaluation
The Board and its committees undertake
an annual evaluation of their performance.
The format of the evaluation varies
each year.
The 2015 evaluation focused on
improving the rolling forward agenda
process and succession planning,
including overseas senior management.
For 2016, Equity Communications Limited
(which assisted with the last externally
facilitated evaluation in 2013) undertook
interviews with the directors, discussing
a list of subjects agreed by the Board.
The results of this evaluation will be
discussed early in the new financial year.
Equity Communications Limited has no
other connection with the Company.
Re-election
In accordance with the Code all the
directors will retire from the Board at the
next AGM and will offer themselves up for
re-election or election (as the case may
be) at the AGM.
C. Accountability
Financial and business reporting
The respective responsibilities of the
directors and auditor in connection with
the financial statements are explained in
Directors’ responsibilities on page 90 and
the Independent auditor’s report on pages
91 to 93.
Fair, balanced and understandable
The directors consider that the Annual
report, taken as a whole, is fair, balanced
and understandable, and provides the
information necessary for shareholders
to assess the Group’s performance,
business model and strategy.
Going concern
The Group’s strategy for delivering its
objectives and business model, together
with the factors likely to affect its future
development and performance are set
out in the Strategic report, where details
of the financial and liquidity positions are
also given. In addition, note 20 to 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 both the
Company and the Group have adequate
resources to continue in operation for the
next twelve months. Accordingly, they
continue to adopt the going concern
basis in preparing the Annual report
and accounts.
Viability statement
The Board undertakes an annual review
of the corporate strategy, which includes
medium term financial forecasts and an
assessment of the major risks facing the
business. In addition, current financial year
forecasts are reviewed regularly by the
Board, underpinned by regular briefings
from its business sectors and subsidiaries
on progress. The corporate strategy
provides the foundations for monitoring of
performance, budgets, risk and strategic
actions by the Board.
The Board confirms that its assessment
during the year of the principal risks
facing the Group, including those that
would threaten its business model, future
performance, solvency and/or liquidity,
and which are set out in the Group’s
Principal risks and uncertainties on
pages 50 to 51, was robust. In making
the assessment, severe but plausible
scenarios have been considered that
estimate the potential impact of the
principal risks on the financial forecasts
over the assessment period.
In accordance with provision C.2.2 of the
Code, whilst the Board has no reason
to believe the Group will not be viable
over a longer period, the period over
which the Board considers it possible to
form a reasonable expectation as to the
Group’s longer-term viability, based on the
risk and sensitivity analysis undertaken,
is the three-year period to 30th June
2019, taking account of the Group’s
current position, financial forecasts,
future prospects and the potential impact
of the Principal risks and uncertainties
documented in the Strategic report.
The Board believes that a three-year
viability assessment period is appropriate
as the timeframe is covered by the
Group’s corporate strategy, takes account
of the Group’s short order book and
together with the planning process set
out above, it gives management and the
Board sufficient, realistic visibility on the
future in the context of the industry and
world economic environment.
GovernanceFinancial statementsShareholder informationStrategic report 74
Directors' corporate governance report (continued)
On the basis of the above and other
matters considered and reviewed by the
Board during the year, the Board has a
reasonable expectation that the Group
will be able to continue in operation and
meet its liabilities as they fall due over the
period to 30th June 2019. In assessing
the Group’s viability over the next three
years, it is recognised that all future
assessments are subject to a level of
uncertainty that increases for the later
part of the assessment period and that
future outcomes cannot be guaranteed
or predicted with any certainty.
Risk management and internal
control
The Board is responsible for the
Company’s systems of risk management
and internal control, and for reviewing
their effectiveness. Any system of internal
control is designed to manage rather
than eliminate the risk of failure to achieve
business objectives and can only provide
reasonable and not absolute assurance
against material misstatement or loss.
There are defined lines of responsibility and
delegation of authorities. Established and
centrally documented control procedures
also exist, including, for example, capital
and other expenditure, information
and technology security and legal and
regulatory compliance. These are applied
throughout the Group.
The Group internal audit function provides
independent and objective assurance that
the control procedures are appropriate
and effectively applied. The Group Audit
Manager attends Audit Committee
meetings to present annual internal audit
plans and the results of such internal
audits. Actions are monitored by the Audit
Committee on an ongoing basis.
There is an established process for the
review of business risks throughout the
Group which has been enhanced in 2016
by the formation of an executive risk
committee as explained on page 48.
The Board ensures that there are
effective internal controls over the
financial reporting and consolidation
processes. Monthly accounts and
forecasts are presented to the Board for
review. The Group internal audit function
undertakes a review of subsidiaries’
accounting processes and performance
to provide assurance to the Board on the
integrity of the information supplied by
each company forming part of the Group’s
consolidated results.
The Board undertakes an annual
formal review of the effectiveness of
the Group’s system of internal controls
and an updated risk and controls
analysis. The review covers all material
controls, including financial, operational
and compliance controls and risk
management systems.
The Board has conducted a robust
assessment of the principal risks facing
the Group, including those that would
threaten its business model, future
performance, solvency or liquidity.
The Board is satisfied that there is an
ongoing process for identifying, evaluating
and managing the significant risks facing
the Group, that it has been in place
during the year, is regularly reviewed and
accords with the FRC guidance on risk
management and control. The Board
confirms that necessary action has been
or is being taken to remedy any significant
failings or weaknesses identified from
its review.
Audit Committee and auditor
A description of the structure and activities
of the Audit Committee are set out in the
Audit Committee report on pages 77
to 79.
D. Remuneration
The Directors’ remuneration report
explains how the Company applies the
Code principles relating to remuneration.
E. Relations with shareholders
Dialogue with shareholders
The Board announced a new policy
in the 2013 Annual report. No private
meetings will be held other than
shareholder meetings with the Chairman,
Senior Independent Director and/or any
other non-executive director where a
shareholder has material issues, concerns
or questions. The director attending
such a meeting will communicate the
shareholder’s issues, concerns or
questions to the Board. The Board’s
response will be published on the
Renishaw website for the benefit of
all shareholders where appropriate.
The interim and annual results and
presentations are posted on the website
promptly after announcement of the
results to the UK Listing Authority via
an RIS.
Open webcasts of presentations on
annual and half-year results are held
and recordings of the presentations and
the subsequent question and answer
sessions made available after the webcast
on the Company’s website. Analysts’ and
brokers’ reports will be circulated to the
Board. The Board intends to hold open
discussions with any shareholder who
wishes to share views with the directors
at the AGM or the annual investor day at
which presentations on group strategy,
business segments and product lines
will be given by members of the Board
and senior management, as well as
tours covering the Group’s activities.
This year, 72 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.
GovernanceRenishaw plc Annual report and accounts 2016 75
Constructive use of the AGM
The AGM takes place at the Company’s
headquarters or one of the Company’s
other sites and formal notification is sent
to the shareholders at least 20 working
days before the meeting. A business
presentation is given and all directors are
available for questions during and after
the meeting, including the chairs of the
Audit, Remuneration and Nomination
Committees. Tours of the Company’s
facilities are offered.
Separate resolutions are proposed for
each substantially separate issue, and
all resolutions will be taken on a poll.
The Company reports on the number
of votes lodged on each resolution, the
balance for and against each resolution
and the number of votes withheld.
This information is published via an RIS
and on the Company’s website following
the meeting.
Disclosure rule DTR 7.2.6 R
The information regarding share capital
required to be disclosed by this rule is
contained in the Other statutory and
regulatory disclosures.
Board and committee meeting
attendance record
Shown against each director’s name in the
table below is the number of scheduled
meetings of the Board and its committees
at which the director was present, and,
in brackets, the number of meetings that
the director was eligible to attend during
the year.
Compliance statement
The Board considers that it has complied
with the requirements of the Code
throughout the year except in relation
to the following matter (the reasons
for non-compliance are stated in the
report above):
• the combined role of Chairman and
Chief Executive (Code provision A.2.1).
Sir David Grant
Senior Independent Director
27th July 2016
Board attendance record
Meetings
The following table sets out attendance at the scheduled meetings of the Board and committees during the year. There were two
ad hoc Board meetings which were called on short notice, which are not included in this table.
Director
Sir David McMurtry
D J Deer
B R Taylor
A C G Roberts
G McFarland
C T Chesney
K L Durrant
Sir David Grant
D J Jeans
Board
10 (10)
10 (10)
10 (10)
10 (10)
10 (10)
10 (10)
9 (10)1
10 (10)
10 (10)
Audit
Committee
–
–
–
–
–
4 (4)
–
4 (4)
4 (4)
Remuneration
Committee
–
–
–
–
–
4 (4)
4 (4)
3 (4)2
4 (4)
Nomination
Committee
1 (1)
–
–
–
–
1 (1)
1 (1)
1 (1)
1 (1)
1 One of the Board meetings was postponed on short notice due to a family bereavement but it was not possible for Kath Durrant to change prior arrangements to attend
the re-scheduled meeting.
2 As Sir David Grant had prior commitments elsewhere, he was unable to attend this committee meeting due to a delayed close to the Board meeting that immediately
preceded it.
GovernanceFinancial statementsShareholder informationStrategic report 76
Nomination Committee report
The Nomination Committee has an important role in leading
the process for Board appointments and ensuring that the Board
has the correct balance of experience, diversity and skills to
support our business model and strategy.
Sir David R McMurtry, Chairman and Chief Executive
Chair of the Nomination Committee
Nomination Committee role
and composition
The Nomination Committee, which
meets on an ad hoc basis as required,
is responsible for reviewing the size,
structure and composition of the Board,
including its balance of skills, knowledge
and experience and for nominating
candidates for appointment to the Board.
The members of the Nomination
Committee are Sir David McMurtry (Chair),
Carol Chesney, Kath Durrant, Sir David
Grant and John Jeans. The majority
of the members of this committee are
independent non-executive directors.
The terms of reference of this committee
are published on the Company’s website.
Activities during the year
The committee met once during the year
to consider and propose the appointment
of Will Lee to the Board as Group Sales
and Marketing Director. Will has been
a long-standing member of the senior
leadership team in a number of roles at
Renishaw and was appointed Director
of Group Sales and Marketing during the
year, working with Ben Taylor to take over
Ben’s sales and marketing duties in his
transition to retirement on 31st July 2016.
The appointment was confirmed on 27th
July 2016 and takes effect on 1st August
2016. The committee believes that Will
has the required skills and experience
to provide an invaluable contribution to
the Board.
In relation to non-executive positions,
the four non-executive directors were
all appointed within the last four years
and the Board considers that they are
working effectively together in order to
support the Board and the Company.
Consequently there were no further
appointments or changes considered
necessary during the year other than
to appoint Kath Durrant as Chair of the
Remuneration Committee.
Boardroom diversity
The Board has considered the
recommendations of the “Women on
Boards” report issued by Lord Davies of
Abersoch, and his subsequent annual
reviews, as regards setting out aspirations
for the appointment of women to boards,
and has decided that it is inappropriate
to set out any levels that may require
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 for board
appointment, that a proportion of female
candidates are included in their shortlist.
Sir David R McMurtry
Chair of the Nomination Committee
27th July 2016
GovernanceRenishaw plc Annual report and accounts 2016 77
Audit Committee report
Audit Committee role and
composition
The Audit Committee is appointed by the
Board from the non-executive directors
of the Company. The Audit Committee’s
terms of reference include all matters
indicated by Disclosure and Transparency
Rule 7.1 and the Code. The terms of
reference are considered annually by the
Audit Committee and any changes are
recommended to the Board for approval.
The Audit Committee reviews the Group’s
accounting policies and procedures, its
annual and interim financial statements
before submission to the Board and its
compliance with statutory requirements.
The committee monitors the integrity
of the Group’s financial statements and
announcements relating to financial
performance and reviews the significant
reporting judgements contained therein.
It also reviews the scope, remit and
effectiveness of the internal control
systems and internal audit function.
The Audit Committee comprises three
non-executive directors; Carol Chesney
(Chair), Sir David Grant and John Jeans.
The Board is satisfied that at least one
member of the committee has recent
and relevant financial experience, being
Carol Chesney. The terms of reference are
available on the Company’s website.
Meetings
The committee meets at least three times
a year with the Group Finance Director,
the Group Financial Controller, the Group
Audit Manager, the Company Secretary
and the external auditor in attendance.
At least one meeting, or part thereof, is
held with the external auditor without
executive directors present. This year the
committee met four times; further details
are on page 78.
The Audit Committee has a vital role to play in ensuring the integrity of our
financial statements, the effectiveness of our risk management processes
and internal controls, and in evaluating the performance of the external audit
process. During 2016 we also monitored the various changes to the Code,
agreed the content of the viability statement and recommended to the Board
that Ernst & Young LLP be appointed as the external auditor for the 2017
financial year, subject to shareholder approval at the AGM.
Carol Chesney, Non-executive director
Chair of the Audit Committee
Member Financial experience
Company and position
Sector
Sector experience
Carol
Chesney
Sir David
Grant
John
Jeans
Chartered accountant
Company Secretary at Halma plc
Technology
Worked at Arthur
Anderson for 7 years
Previously Group
Financial Controller at
Halma plc
Senior Independent
Director of IQE plc
Director of Dstl
Chair of NPL
Technology
Technology
Metrology
Previously worked for Dowty Group
Manufacturing
Previously Group Technical Director of
GEC plc
Previously Vice-President of the Royal
Academy of Engineering
Engineering
Engineering
Chair of Imanova
Imaging services
Chair of UK Biocentre
Healthcare
Chair of Edinburgh Molecular Imaging Biotechnology
Non-executive director of ProMetic SMT Biopharmaceuticals
Member of the Ministerial Committee
on Medical Technologies
Advisor to the Prime Minister at the
Office of Life Sciences
Biotechnology
Medical technology
Previously worked for Smith & Nephew Medical equipment
Previously President of Dravon Medical
(Smith & Nephew)
Previously Senior Vice President of
Zimmer (Bristol-Myers Squibb)
Previously President at Ortho Clinical
Diagnostics International (Johnson
& Johnson)
Previously Chairman at GE
Healthcare Ltd
Medical equipment
Healthcare
Medical diagnostics
Healthcare
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 and its internal
and external audit activities.
GovernanceFinancial statementsShareholder informationStrategic report 78
Audit Committee report (continued)
The principal activities in the year:
Financial statements
and reports
• Reviewed the effectiveness of the
Group’s risk management and
internal controls and disclosures
made in the 2016 Annual report;
• reviewed the 2016 Annual report,
the 2016 Interim report and all
other trading updates issued
during the year. The committee
received a report from the
external auditor on the audit of
the 2016 Annual report;
• reviewed areas of the accounts
requiring judgement including
the carrying value of goodwill,
the carrying value of inventory,
capitalisation of internally
generated development costs,
amortisation of intangible
assets, debtor provisions,
warranty provisions and
taxation provisions;
• reviewed the accounting and
disclosures in relation to the
Group’s defined benefit pension
schemes; and
• reviewed the content of the
viability statement (see below).
Risk management
Internal audit
External auditor and
non-audit work
• Reviewed the output from the
Group’s risk review process to
identify, evaluate and mitigate
risks and considered whether
changes in risk profile were
adequately addressed;
• received updates on compliance
with the Group’s anti-bribery and
corruption policy;
• reviewed proposals to enhance
the Group’s whistleblowing policy
and process which will include
an external reporting facility for
employees; and
• reviewed the Group’s proposed
approach to compliance with
the requirements of the Modern
Slavery Act.
• Evaluated the scope of work to
be undertaken by the internal
audit function;
• Undertook a tender for
the 2017 group external
audit service;
• reviewed progress on
recommendations brought
forward and considered
recommendations arising during
the year; and
• reviewed, considered and
agreed the scope and
methodology of the 2016 audit
work to be undertaken by the
external auditor;
• considered the resource
• evaluated the independence
levels available to the internal
audit function.
and objectivity of the
external auditor;
• agreed the terms of
engagement and the fees to
be paid to the external auditor
for the audit of the 2016
financial statements;
• reviewed the level and nature of
non-audit services provided by
the external auditor;
• undertook an effectiveness
review of the external audit
process; and
• reviewed and approved
updates to the non-audit
services policy.
The committee agreed the content of the viability statement following a thorough review process which included an assessment of the
potential downside impact of the Group’s principal risks. The viability statement is set out on page 73.
Risk management and internal
controls
The committee monitors the effectiveness
of the Group’s internal controls and risk
management processes which allows it
to maintain a good understanding of the
business performance and key areas of
judgement and decision making within
the Group.
Details of risk management and internal
controls are set out on page 48 and 49
and page 74.
Fair, balanced and
understandable report and
accounts
One of the key governance requirements
is for the Annual report to be fair, balanced
and understandable. Ensuring that this
standard is met requires continuous
assessment of the financial reporting
issues affecting the Group on a year-
round basis in addition to a number of
focused exercises that take place during
the accounts production process within a
strict timeframe.
An extensive verification exercise was
undertaken to ensure the factual accuracy
of the Annual report by the Board and
senior management. An advanced draft of
the Annual report was considered by the
committee at its meeting on 6th July 2016
with a final draft being reviewed on 22nd
July 2016, prior to it being presented to
the Board. Following those discussions,
the committee advised the Board that the
Annual report, taken as a whole, is fair,
balanced and understandable.
The directors’ statement on a fair,
balanced and understandable Annual
report is set out on page 73.
Significant issues in relation to
the financial statements
As part of the reporting and review
process, the committee has regular
discussions with management and the
external auditor relating to significant
issues. During the year the committee
considered the significant issues set
out below in relation to the financial
statements. Also contained below is
a commentary on how these issues
were addressed:
i) The carrying value of goodwill
The committee focused on the impairment
testing by the Company of the carrying
value of goodwill. By applying knowledge
and making enquiries of the relevant cash-
generating units, reviewing the forecasts
and the sensitivity analysis, the committee
agreed with the conclusion reached that
no impairments were required.
ii) The carrying value of inventory
Provisions are made to write down
slow-moving and obsolete inventory
items to net realisable value, based on
an assessment of technological and
market developments and on an analysis
of historic and projected demand.
The assessment used to calculate the
provisions needed requires the application
of judgement by management.
The committee received confirmation from
management that the approach used to
determine the provision was consistent
with the previous year and made enquiries
GovernanceRenishaw plc Annual report and accounts 2016 79
of management to gain an understanding
of how business developments, both
technological and market-driven, had
impacted the provision during the year.
• global coverage for the
Company’s subsidiaries;
• value for money;
The external auditor explained to the
committee the work they had performed
in respect of the carrying value of
goodwill and inventory provisions during
the year. The committee was satisfied
that management judgements were
appropriate and that the carrying value of
goodwill and the inventory provision were
appropriately stated at the year end.
Approach to auditor
appointment and audit quality
The committee has primary responsibility
for making the recommendation on
the appointment, reappointment and
removal of the external auditor, which
the Board puts to shareholders for
approval at the AGM. KPMG LLP and
its predecessor firms have been auditor
since 1974 and the lead audit partner
has changed in line with their internal
rotation requirements. During the year the
external audit contract for 2017 was put
out to tender. KPMG LLP was not invited
to tender which will allow the group to
use KPMG LLP for non-audit services
which are prohibited under the latest EU
audit regulation. Additionally the tender
coincided with the mandatory rotation of
the KPMG LLP lead partner.
The committee agreed the tender process
and approved a Request for Proposal
(RFP) document which was sent to
selected firms. Services, such as tax
compliance and advice, were not within
the scope of the RFP.
The committee, together with the
Group Finance Director, the Group
Audit Manager and the Group Financial
Controller, reviewed the proposals which
culminated in presentations by each firm.
The committee considered the following
aspects in arriving at its recommendation
to the Board:
• skills and knowledge of the team
proposed to do the work;
• independence of the audit firm from
the Company;
• audit partner rotation and
succession planning;
• audit approach and methodology
including the use of data
analytic techniques;
• internal governance processes;
• transition plan;
• verbal references for senior members of
the proposed audit teams;
• technical capabilities of the firm as a
whole; and
• ethical behaviour and fair dealing.
Following the review, the committee made
a recommendation to the Board that Ernst
& Young LLP be appointed as the external
auditor for the 2017 financial year, subject
to shareholder approval at the AGM in
October this year.
When the committee assesses the
effectiveness of the external audit
process and the quality of the audit work
throughout the year it considers:
• any issues arising from the prior
year audit;
• the proposed audit plan including
the identification of risks specific
to the Group, audit scope and
materiality thresholds;
• feedback from executive management,
including the review of a report
presented by the Group Finance
Director, Group Financial Controller
and the Group Audit Manager on
the effectiveness of the external
audit process;
• the delivery of the audit in line with
the plan;
• the communication of matters arising
during the audit to the committee;
• private meetings with the auditor
without management being present;
and
• the independence and objectivity of
the auditor.
Independence of external
auditor
In order to safeguard the independence
and objectivity of the external auditor,
the committee reviews the nature and
extent of the non-audit services supplied,
receiving reports on the balance of
audit to non-audit fees. For 2016, the
committee regarded it most cost efficient
to use the external auditor for tax advice
and compliance since this requires an
in-depth knowledge and understanding
of the Company’s business, products,
customer base and markets.
Beyond 2016, tax advice and compliance
will not be undertaken by the external
auditor. The non-audit services policy has
been updated in the year to reflect the
extended list of prohibited services as
set out in the latest EU audit regulation.
There are also specified services which
require the prior approval of the Group
Finance Director and Chair of the Audit
Committee before the auditor may be
appointed to provide such services.
In addition, there are specified levels of
authorisation to be obtained before the
auditor may be permitted to tender for
non-audit services.
An analysis of fees paid to KPMG LLP,
including the split between audit and
non-audit services, is included in note 5
to the group financial statements.
Other matters
The committee reviews the policy by
which employees of the Company may,
in confidence, raise matters of concern,
including possible improprieties in
financial reporting or other matters. It was
recommended to the Board that this
policy is enhanced in the early part of next
financial year by the implementation of
an external reporting line. It also monitors
the effectiveness of the Company’s
procedures to avoid any bribery related to
the activities of the Group.
Carol Chesney
Chair of the Audit Committee
27th July 2016
GovernanceFinancial statementsShareholder informationStrategic report 80
Directors’ remuneration report
I am pleased to have taken over as Chair of this committee
as we continue to further develop senior management talent,
performance management processes and executive director
remuneration policies and governance.
Kath Durrant, Chair of the Remuneration committee
Remuneration Committee
role and composition
The Remuneration Committee is
responsible for deciding the Company’s
framework of executive director
remuneration and setting remuneration
packages for each of the executive
directors. The committee’s policy is to
motivate and retain executive directors
by rewarding them with competitive
salary, benefit packages and incentives.
These are linked to the overall
performance of the Group and, in turn,
to the interests of the shareholders.
The committee reviews annually the
executive directors’ remuneration in the
context of the Group’s performance
during the year.
The committee also reviews the
remuneration structure and packages
for the next level of senior leaders across
the business to ensure appropriate
competitiveness, equity and progression
for those identified as potential successors
to the Board and senior executive team.
All the members of the committee are
non-executive directors, comprising Kath
Durrant (Chair), Sir David Grant, Carol
Chesney and John Jeans. The terms
of reference of the committee are
published on the Company’s website.
Executive directors only attend meetings
of the committee by invitation for
parts of the agenda as appropriate.
Independent advisors are used
as required.
On behalf of the Board, I am pleased to
present the Directors’ remuneration report
for 2016.
The report continues to comply with the
requirements for reporting on directors’
pay introduced in October 2013 and is
split into the following three sections:
1. A statement from the Chair of the
Remuneration Committee;
During the year, the committee approved
executive directors’ base salaries for
2016, which rose in line with increases
typical for UK staff; no bonus was
payable to executive directors in 2016,
the thresholds for payment not having
been met. The committee approved a
new remuneration package for Will Lee in
respect of his appointment to the Board
as Group Sales and Marketing Director.
The committee also reviewed and
approved the Chairman and Chief
Executive's expenses.
As indicated in last year's report, the
committee commenced a review of
executive remuneration and this year,
worked with Kepler, who advised on
remuneration governance and conducted
a benchmarking of remuneration for
the senior leadership group, including
executive directors. The committee
have made the benchmarking available
to management within the Company,
with guidelines for its ongoing use.
The committee has also reviewed the
quality of performance management
processes with the Company and made
recommendations on strengthening that
process further.
2. The remuneration policy table (pages
82 and 83) which was approved at the
AGM on 16th October 2014 for a three-
year period; and
3. An annual report on remuneration,
setting out information on directors’
remuneration paid during the year.
Remuneration Committee
activities during the year
During 2016 Sir David Grant stepped
down from the role of Remuneration
Committee Chair, and I was pleased
to step into the role. 2016 was a more
challenging year for the Company when
compared to the exceptional performance
of 2015, where the Company benefited
from large orders from the Far East.
Nevertheless, underlying growth of 5.6%
in core businesses demonstrates the
resilience of Renishaw, and should be
noted positively.
The Remuneration Committee’s approach
continues to be to align executive
director remuneration with the Group’s
performance, using clear and simple
remuneration structures.
GovernanceRenishaw plc Annual report and accounts 2016 81
In relation to setting remuneration for
the next financial year, the committee
has taken into account the cyclical
nature of the market, the performance
of the Company over time, the present
uncertain economic environment and the
remuneration conditions within the Board
and the overseas markets in which
we operate. With respect to executive
director bonus targets, the committee
has agreed with the Company the
long-term strategic profitable growth
ambitions for Renishaw, which in
turn underpin bonus arrangements.
In addition to the usual measure of profit
before tax, the committee has decided
to introduce an additional measure
related to prudent management of cash.
Renishaw’s executive directors do not
participate in a long-term incentive plan
(LTIP). The Remuneration Committee
recognises that this is unusual compared
with many other companies, and we
therefore question annually whether
Renishaw’s performance would be
enhanced through the introduction of
such a scheme. At present there are no
proposals to introduce such a scheme.
The committee considers it essential
that the Group can assure its ability
to attract and retain talent, in different
markets and in both established and
emerging businesses. As a result, the
committee will carefully consider the
potential changes to the remuneration
policy of the Company (including, but
not confined to long-term incentive
proposals) in readiness for policy re-
approval in October 2017, to ensure
it remains able to attract and retain
talent of the right calibre over the
coming years.
Kath Durrant
Chair of the Remuneration Committee
27th July 2016
GovernanceFinancial statementsShareholder informationStrategic report 82
Directors’ remuneration report (continued)
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 13th October 2016.
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 the 2014 Annual report (as explained above).
Element of
remuneration
Base salary
Purpose and relevance
to strategy
To provide a competitive fixed
salary to motivate and retain
executive directors of the
required quality to meet the
Group’s objectives.
Benefits
To provide market-
competitive benefits to
motivate and retain executive
directors of the required
quality to meet the Group’s
objectives and to support
them to give maximum
attention to their role.
Bonus
To incentivise and
reward execution of the
Group’s objectives.
Operation
Renishaw aims to pay the base rate
salary at least at the current median
market rate or above, as compared to
the equivalent job position/ level in the
relevant industrial sector(s) applicable to
Renishaw, as defined in the appropriate
benchmarking pay surveys, statistics
and peer comparisons (such peer
selection to include factors such as size
and location).
Base salary is reviewed annually
taking into account the award for the
UK workforce.
Benefits provided on an ongoing basis
include the following principal benefits:
• a car or car allowance;
• private medical insurance;
• life assurance;
• long-term disability cover; and
• home telephone costs.
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.
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 to a target at which
75% of salary would be earned and
a cap at which a maximum 100% of
salary would be earned.
Part or all of any bonus paid may be
subject to repayment in the case of
any financial misstatement, errors in
calculation or gross misconduct.
Maximum
110% of median salaries
in a comparator group as
decided by the committee.
Renishaw has historically
paid base salaries that
are higher than median,
reflecting the lack of an
LTIP (see Statement on
page 81).*
The committee retains
the discretion to make
adjustments at the annual
review to take into account
matters affecting an
individual director such as
changes in responsibility
and anomalies discovered
during benchmarking.
Excluding accommodation
and relocation costs, not to
exceed £50k p/a.
Performance
measures
To reflect the director’s role,
performance and experience.
Not applicable.
100% of salary.
Based on group
performance, primarily
financial, but the committee
may introduce non-financial
metrics or make adjustments
to reflect appropriate
performance or competitive
factors, provided that the
bonus will always be subject
to achievement of the
baseline financial targets and
such non-financial metrics
shall not form more than 25%
of the bonus opportunity.
GovernanceRenishaw plc Annual report and accounts 2016 83
Executive directors’ policy table continued
Element of
remuneration
Purpose and relevance
to strategy
Operation
Pension
To provide a competitive
pension as appropriate
to motivate and retain
executive directors of the
required quality to meet the
Group’s objectives.
Each of Allen Roberts, Ben Taylor and
Geoff McFarland receive an additional
payment of 15% of base salary, being
the amount that would otherwise be
contributed to a pension scheme on
their behalf.
For any new executive director,
annual contributions based on a
percentage of base salary will be
made to the Company’s defined
contribution scheme or additional
salary may be paid in lieu, as agreed by
the committee.
Geoff McFarland is a deferred member
of the Company’s defined benefit
scheme which closed for future
accruals on 5th April 2007.
Performance
measures
Not applicable.
Maximum
The maximum contribution
to the defined contribution
scheme, or, where
applicable, additional
salary payment in lieu of
contributions will be 15% of
base salary.
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
remuneration
Purpose and relevance
to strategy
Operation
Fee
To provide a competitive
fee to motivate and retain
non-executive directors of the
required quality to meet the
Group’s objectives.
The non-executive directors are
paid the same fee, irrespective of
membership of or acting as a Chair of
a committee.
The fees are reviewed annually with
reference to fees payable to non-
executive directors of companies of a
similar size and complexity.
Reasonable expenses incurred in
undertaking duties as a director
are reimbursed.
Performance
measures
Not applicable.
Maximum
The maximum fees
payable will be set by the
Company’s Articles of
Association, currently an
aggregate of £300,000
per annum.
GovernanceFinancial statementsShareholder informationStrategic report 84
Directors’ remuneration report (continued)
ANNUAL REMUNERATION REPORT
This section of the report sets out the remuneration of the directors in the year ended 30th June 2016.
Single total figure table (audited)
Sir David McMurtry
D J Deer
B R Taylor
A C G Roberts
G McFarland
C T Chesney
K L Durrant1
Sir David Grant
D J Jeans
Salary/fees
Benefits
Bonus
Pension
Total
2016
£’000
666
402
463
377
377
44
44
44
44
2015
£’000
648
392
451
367
367
43
22
43
43
2016
£’000
2
20
22
19
18
n/a
n/a
n/a
n/a
2015
£’000
2
19
20
20
18
n/a
n/a
n/a
n/a
2016
£’000
0
0
0
0
0
n/a
n/a
n/a
n/a
2015
£’000
648
392
451
367
367
n/a
n/a
n/a
n/a
2016
£’000
n/a
n/a
70
57
57
n/a
n/a
n/a
n/a
2015
£’000
n/a
n/a
68
55
55
n/a
n/a
n/a
n/a
2016
£’000
668
422
555
453
452
44
44
44
44
2015
£’000
1,298
803
990
809
807
43
22
43
43
1 K L Durrant was appointed a director with effect from 1st January 2015.
Benefits
Sir David McMurtry
D J Deer
B R Taylor
A C G Roberts
G McFarland
Car
allowance
£’000
n/a
18
18
18
18
Private medical cover applies to all
executive directors and home telephone costs,
insurance on personal cars, M4 bridge toll fees,
US tax return advice is provided to certain directors
£’000
2
2
4
1
0
Bonus
For the year in question, the bonus
was determined by group performance
targets for the year, based on an adjusted
profit before tax set at levels above the
previous year’s profit before tax and with
a threshold below which no bonus is
earned. A target profit before tax set for
the year in question enabled 75% of salary
to be earned as a bonus. A further bonus
could be earned based on performance
subject to a maximum 100% of salary.
No other performance measures were set.
Total pension entitlements
G McFarland is a member of the
Company’s closed defined benefit
scheme. At 30th June 2016, the value of
the defined benefit pension entitlement
was £28,641 per annum. The normal
retirement age for G McFarland is 65.
On death, pension benefits would pass
to dependants.
Current year pension scheme
contributions payable by the Company
have been taken as cash.
The value of G McFarland’s defined
contribution scheme at 30th June 2016
was £425,277.
Payments to past directors
No payments were made to past directors
during the year.
Loss of office payments
There was no termination of employment
of directors during the year.
GovernanceRenishaw plc Annual report and accounts 2016 85
1,000
900
800
700
600
500
400
300
200
100
0
Renishaw
FTSE mid 250
2009
2010
2011
2012
2013
2014
2015
2016
Performance graph
The graph above shows the Company’s
total shareholder return (TSR)
performance, compared with the FTSE
mid 250 index, which the directors believe
is the most appropriate broad index
for comparison.
The share price and the FTSE mid 250
index have been rebased to 100 at
1st July 2009.
Executive directors serving
as non-executive directors of
other companies
During the year none of the executive
directors served as a non-executive
director of any other company in respect
of which any remuneration was received.
Statement of directors’
shareholding and
share interests
None of the directors are required to own
shares in the Company. The interests of
the directors who have served during
the year in shares (including connected
persons) are:
Sir David McMurtry
D J Deer
B R Taylor
A G Roberts
G McFarland
C T Chesney
K L Durrant
Sir David Grant
D J Jeans
Number of ordinary
shares of 20p each
26,377,291
12,233,040
10,147
5,165
2,000
500
–
–
–
There were no share-based payments
made or share schemes in place during
the year.
Chief Executive
total remuneration
The table below sets out information
relating to Sir David McMurtry, who was
the Chief Executive for each of the years
in question:
Annual
bonus
payout
against
maximum
opportunity
%
0%
100%
0%
10%
69%
100%
Long-term
incentive
vesting rates
against
maximum
opportunity
%
n/a
n/a
n/a
n/a
n/a
n/a
Single figure
of total
remuneration
(£‘000)
668
1,298
632
663
969
1,066
Year
2016
2015
2014
2013
2012
2011
Percentage change in
remuneration of the
Chief Executive
The following table sets out a
comparison of the percentage change
in the Chief Executive’s remuneration
to the percentage change in average
remuneration of UK employees from 2015
to 2016.
2016
£’000
666
2
2015
£’000
648
2
UK
Chief
employees
Executive
(average)
% change
% change
+2.7% +4.0%
-2%
0%
0
648
-100%
-51%
Salary
Benefits
Annual
bonus
UK employees have been chosen as a
comparator group in order to avoid the
impact of exchange rate movements over
the year. UK employees make up 65% of
the total number of group employees.
Relative importance of spend
on pay
The following table sets out the total
amount spent in the current financial year
and the previous year on remuneration
to all group employees and on dividends
to shareholders:
2016
£’000
2015
£’000
change
%
Employee
remuneration 183,769 173,744
Shareholder
dividends paid 33,847
30,841 +10%
+6%
Except as shown above, no other
distributions have been made to
shareholders or other payments or uses
of profit or cash flow which impact on the
understanding of the relative importance
of spend on pay.
Statement of implementation
of remuneration policy in the
next year
The executive directors’ salaries will be
increased by 2.2% for the 2017 financial
year, which is in line with the UK workforce
salary review. The bonus scheme targets
have been set based on the policy as set
out in the policy table.
GovernanceFinancial statementsShareholder informationStrategic report 86
Directors’ remuneration report (continued)
Statement of voting at
general meeting
At the annual general meeting held on
15th October 2015, votes cast in respect
of the Directors’ remuneration report were
as follows:
Resolution
Approval of
remuneration
report
Votes for
% for
Votes
against
%
against
Total
votes cast
Votes
withheld
58,907,567
97.54% 1,487,278
2.46% 60,394,845 760,571
At the annual general meeting on 16th
October 2014, votes cast by proxy in
respect of the remuneration policy were
as follows:
Resolution
Approval of
remuneration
policy
Votes for
% for
Votes
against
%
against
Total
votes cast
Votes
withheld
52,998,077
86.42% 8,323,776
13.57% 61,321,853 623,285
As the Company deems that a significant
percentage of votes against as being
more than 20%, as a result of which the
Company would be required to provide
in this report any reasons known to it
for such a vote and any actions taken,
no commentary is necessary in respect
of the voting in respect of either of the
above resolutions.
The report was approved by the Board
of directors and has been signed on its
behalf by:
Kath Durrant
Chair of the Remuneration Committee
27th July 2016
Consideration by directors
of matters relating to
directors’ remuneration
During the year, the Remuneration
Committee considered the amount
of the executive directors’ salary and
the framework for the annual bonus.
The members of the Remuneration
Committee for this purpose were:
Sir David Grant (Chair until 10th
May 2016)
C T Chesney
D J Jeans
K L Durrant (Chair from 11th May 2016)
Kepler (a brand name and the executive
remuneration advisory division of Mercer
Limited) assisted the committee in
reviewing and benchmarking the director
and senior management remuneration
arrangements. Total fees paid to
Kepler during the year were £33,000.
The committee is of the opinion that
the advice received was objective and
independent. Kepler were appointed by
the committee as they were known to
members of the committee. They have
not advised the Company on any other
matters. However, during the year, Mercer
Limited’s actuarial advisory division
provided advice to the trustees of the
Company’s UK defined benefit pension
scheme and in relation to the defined
contribution scheme.
The Company Secretary acts as secretary
to the committee.
GovernanceRenishaw plc Annual report and accounts 2016
87
Other statutory and regulatory disclosures
Review of the business
A review of the business and likely future
developments is given in the Chairman’s
statement and the Strategic report.
Segmental information by geographical
market is given in note 2 to the
financial statements.
The Group has established and acquired
overseas manufacturing, marketing and
distribution subsidiaries to manufacture
some of the Group’s products and to
provide support to customers in our major
markets in the following regions outside
the UK:
• Europe: Denmark, Finland, Germany,
Hungary, France, Italy, Spain,
Switzerland, Netherlands, Czech
Republic, Poland, Russia, Sweden
and Austria;
• Americas: USA, Mexico, Brazil
and Canada;
• Far East: Japan, Hong Kong, Australia,
South Korea, People’s Republic of
China, Singapore and Taiwan; and
• other regions: India and Israel.
There are also representative offices in
Turkey, Malaysia, Vietnam, Indonesia and
Thailand and an associate company in
Slovenia, RLS, which is 50%-owned.
Also part of the Group is a subsidiary in
Slovenia which designs and arranges
the procurement of application-specific
integrated circuits for the Group and RLS.
Further information is available on the
Company’s website: www.renishaw.com.
Dividends
The directors propose a final dividend
of £25,839,932 or 35.5p per share
(2015: £24,748,105 or 34.0p per share)
which, together with the interim dividend
of £9,098,568 or 12.5p per share
(2015: £9,098,568 or 12.5p) makes a
total amount of dividends for the year
of £34,938,500 or 48.0p per share,
compared to £33,846,673 or 46.5p per
share for the previous year.
Directors and their interests
The directors at the end of the year
are listed on page 85 together with
their interests in the share capital of the
Company (with the equivalent number of
voting rights), as notified to the Company.
All the interests were beneficially held
with the exception of 2,434,411 shares
(2015: 2,434,411 shares) which were non-
beneficially held by D J Deer but in respect
of which he has voting rights.
There has been no change in the holdings
shown on page 85 in the period 1st July
2016 to 27th July 2016. In accordance
with the provisions of the Code all
directors will retire and, being eligible,
offer themselves for re-election at the
annual general meeting (AGM) to be
held on 13th October 2016. Details of
directors who offer themselves up for
re-election or election, as the case may
be, are shown on pages 66 and 67 and
full biographical details are available at
www.renishaw.com.
Sir David McMurtry, as one party, and
D J Deer and Mrs M E Deer, as the other
party, have entered into an agreement
relating to the way each party would vote
in respect of his or her shares if requested
by the other party to do so. Under this
agreement Sir David McMurtry, John Deer
and Mrs Deer agree that (i) Mr and Mrs
Deer will vote their shares in favour of any
ordinary resolution if requested to do so
by Sir David McMurtry and (ii) Sir David
McMurtry will vote his shares against
any special or extraordinary resolution
if requested to do so by John Deer.
The voting arrangement was renewed in
2013 for a further period of five years and
will terminate on the earlier of 25th May
2018 and the deaths of both of Sir David
McMurtry and John Deer.
The rules on appointment, reappointment
and retirement by rotation of the directors
and their powers are set out in the
Company’s Articles of Association.
There are no powers given to the directors
that are regarded as unusual.
Directors’ and officers’
indemnity insurance
Subject to the provisions of the
Companies Act 2006, the Company’s
Articles of Association provide for the
directors and officers of the Company
to be appropriately indemnified.
The Company maintains insurance for
its directors and officers in respect of
their acts and omissions during the
performance of their duties.
Share capital and change
of control
Details of the Company’s share capital,
including rights and obligations, is given
in note 19 to the financial statements.
The Company is not a party to any
significant agreements that might
terminate upon a change of control of
the Company.
A shareholder’s authority for the purchase
by the Company of a maximum of 10%
of its own shares was in existence during
the 2016 financial year. However, the
Company did not purchase any of its own
shares during that time.
Auditor
Following selection by the Audit
Committee as a result of a tender
process, a resolution to appoint Ernst
& Young LLP as the new auditor of
the Company will be proposed at the
forthcoming AGM.
Disclosure of information
to auditor
The directors who held office at the date
of approval of this statement confirm that,
so far as they are each aware, there is
no relevant audit information of which the
Company’s auditor is unaware, and each
director has taken all the steps that he
or she ought to have taken as a director
to make himself/herself aware of any
relevant audit information and to establish
that the Company’s auditor is aware of
that information.
Annual general meeting
The notice convening the AGM and an
explanation of the resolutions sought
are set out in a separate circular. At the
meeting, the Company will be seeking
shareholder approval for, amongst
other things, the ability to make market
purchases of its own ordinary shares,
up to a total of 10% of the issued share
capital as well as the appointment of a
new auditor.
The directors consider that all the
resolutions proposed are in the best
interests of the Company and its
shareholders as a whole and unanimously
recommend that shareholders vote in
favour of the resolutions, as they intend to
do in respect of their own holdings.
GovernanceFinancial statementsShareholder informationStrategic report 88
Other statutory and regulatory disclosures (continued)
Substantial shareholdings
Apart from the shareholdings (and
corresponding voting rights) of Sir David
McMurtry and John Deer (36.23% and
16.80% respectively), the table below
discloses the voting rights that have
been notified to the directors under the
requirements of the UK Listing Authority’s
Disclosure Rules and Transparency Rules
DTR 5, which represent 3% or more of the
voting rights attached to issued shares in
the Company, as at 30th June 2016.
Substantial
shareholdings
Baillie Gifford & Co
BlackRock Inc.
Capital Research
and Management
Company
Standard Life
Investments
Limited
% of issued
share
capital
Number of
shares
5.25% 3,846,993
4.92% 3,578,133
4.76% 3,465,730
4.99% 3,631,612
Research and development
The Group has a continuing commitment
to a high level of research and
development. The expenditure involved
is directed towards the research and
development of new products relating
to metrology, including computer-aided
design and manufacturing systems, and
relating to healthcare products, including
Raman spectroscopy systems, dental
and craniomaxillofacial implants and
certain areas in the medical devices field.
Further information on the expenditure on
research and development is contained in
the financial review section of the Strategic
report and the interview with Geoff
McFarland on page 33.
Employees
The retention of highly-skilled employees is
essential to the future of the business, and
the directors place great emphasis on the
continuation of the Company’s approved
training policy. Health and safety matters
are given special attention by the directors
and well established systems of safety
management are in place throughout
the Group to safeguard employees,
customers and visitors.
Employment policies are designed to
provide equal opportunities irrespective of
race, colour, religion, sex, age, disability or
sexual orientation. Proper consideration
is given to applications for employment
from disabled people where suitable for
appropriate vacancies. Employees who
become disabled whilst with the Company
will be given every opportunity to continue
their employment through reasonable
adjustment to their working conditions,
equipment, or where this is not possible,
re-training for other positions. They will
also be afforded opportunities to continue
training and gain promotion on the same
basis as any other employee.
Details on information provided to
employees on the performance of the
business, consultation with employees
and performance incentives are contained
in the description of corporate social
responsibility activities set out on pages
52 to 61.
There are no agreements with employees
providing for compensation for any loss
of employment that occurs because of a
takeover bid.
Donations
No political donations were made during
the year.
Controlling shareholders’
arrangements
The Listing Rules require that premium
listed companies with “controlling
shareholders” (defined as a shareholder
who individually or with any of their
concert parties exercises or controls 30%
or more of the votes able to be cast on
all or substantially all the matters at the
Company’s general meeting) must enter
into a relationship agreement containing
specific independence provisions.
The independence provisions required by
the Listing Rules are that:
(i) transactions and arrangements with
the controlling shareholder (and/or any
of its associates) will be conducted
at arm’s length and on normal
commercial terms;
(ii) neither the controlling shareholder nor
any of its associates will take any action
that would have the effect of preventing
the Company from complying with its
obligations under the Listing Rules; and
(iii) neither the controlling shareholder nor
any of its associates will propose or
procure the proposal of a shareholder
resolution which is intended or appears
to be intended to circumvent the
proper application of the Listing Rules.
GovernanceRenishaw plc Annual report and accounts 2016 89
By virtue of his shareholding in the
Company, Sir David McMurtry (Chairman
and Chief Executive 36.2% shareholder)
is a controlling shareholder. John Deer
(Deputy Chairman, together with his wife,
16.8%) is also a controlling shareholder by
virtue of a long-standing voting agreement
between John Deer (and his wife) with
Sir David McMurtry. The Board confirms
that the Company has not been able to
enter into a relationship agreement with
its controlling shareholders, containing
the independence provisions required
by the Listing Rules. The Financial
Conduct Authority (FCA) has been
notified of this, as required by the Listing
Rules. The controlling shareholders
have informed the Board that they are
not willing to enter into a relationship
agreement because they are of the view
that the requirement to enter into the
relationship agreement infringes upon
their rights as shareholders and their track
record demonstrates that they act in the
best interests of the Company.
As a result of there being no relationship
agreement in place, the Listing Rules
provide that certain enhanced oversight
measures will apply to the Company.
This means that, unless and to the
extent that the FCA agrees otherwise,
all transactions with the controlling
shareholders must be approved by the
Company’s shareholders (excluding the
controlling shareholders) in accordance
with the related party transaction
requirements of the Listing Rules, and
none of the normal exemptions apply.
Guidance has been received from
the FCA about the application of the
enhanced oversight measures to the
remuneration and benefits received by the
controlling shareholders in their capacity
as executive directors (in accordance with
the Company’s approved remuneration
policy) as well other ordinary course
corporate matters, such as the payment
of dividends by the Company to all
shareholders. The FCA confirmed that
either these are not transactions or
arrangements that fall within the enhanced
oversight measures or that the FCA will
permit a modification of the enhanced
oversight measures so that they will not
apply provided that the arrangements
remain in the ordinary course of business
and, in the case of salary reviews and
bonuses, provided that they fall within the
small transaction exemption in the Annex
to LR 11.
Greenhouse gas emissions
The disclosures concerning greenhouse
gas emissions required by law are set
out in the Corporate social responsibility
report on page 60.
Norma Tang
Company Secretary
27th July 2016
Renishaw plc
Registered number 1106260
England and Wales
GovernanceFinancial statementsShareholder informationStrategic report 90
Directors’ responsibilities
The directors are responsible for preparing
the Annual report and the group and
parent company financial statements
in accordance with applicable law
and regulations.
Company law requires the directors to
prepare group and parent company
financial statements for each financial
year. Under that law they are required to
prepare the group financial statements in
accordance with IFRSs as adopted by the
EU and applicable law and have elected
to prepare the parent company financial
statements in accordance with UK
Accounting Standards, including FRS 101
Reduced Disclosure Framework.
Under company law the directors must
not approve the financial statements
unless they are satisfied that they give a
true and fair view of the state of affairs
of the group and parent company and
of their profit or loss for that period.
In preparing each of the group and
parent company financial statements, the
directors are required to:
• select suitable accounting policies and
then apply them consistently;
• make judgements and estimates that
are reasonable and prudent;
• for the group financial statements, state
whether they have been prepared in
accordance with IFRSs as adopted by
the EU;
• for the parent company financial
statements, state whether applicable
UK Accounting Standards have been
followed, subject to any material
departures disclosed and explained
in the parent company financial
statements; and
• prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the group
and the parent company will continue
in business.
The directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the parent
company’s transactions and disclose
with reasonable accuracy at any time the
financial position of the parent company
and enable them to ensure that its
financial statements comply with the
Companies Act 2006. They have general
responsibility for taking such steps as are
reasonably open to them to safeguard the
assets of the group and to prevent and
detect fraud and other irregularities.
Under applicable law and regulations,
the directors are also responsible for
preparing a strategic report, directors’
report, directors’ remuneration report
and corporate governance statement
that complies with that law and
those regulations.
The directors are responsible for the
maintenance and integrity of the corporate
and financial information included on
the company’s website. Legislation in
the UK governing the preparation and
dissemination of financial statements may
differ from legislation in other jurisdictions.
Responsibility statement of
the directors in respect of the
annual financial report
We confirm that to the best of
our knowledge:
• the financial statements, prepared in
accordance with the applicable set
of accounting standards, give a true
and fair view of the assets, liabilities,
financial position and profit or loss of
the Company and the undertakings
included in the consolidation taken as a
whole; and
• the Strategic report includes a fair
review of the development and
performance of the business and
the position of the Company and
the undertakings included in the
consolidation taken as a whole,
together with a description of the
principal risks and uncertainties that
they face.
We consider the Annual report and
accounts, taken as a whole, is fair,
balanced and understandable and
provides the information necessary
for shareholders to assess the group’s
position and performance, business
model and strategy.
Signed on behalf of the Board
Allen Roberts
Group Finance Director
27th July 2016
GovernanceRenishaw plc Annual report and accounts 2016 91
Independent auditor’s report to the members of Renishaw plc only
Opinions and conclusions
arising from our audit
1.Our opinion on the financial
statements is unmodified
We have audited the financial statements
of Renishaw plc for the year ended 30th
June 2016 set out on pages 94 to 133.
In our opinion:
• the financial statements give a true and
fair view of the state of the Group’s
and of the parent company’s affairs as
at 30th June 2016 and of the Group’s
profit for the year then ended;
• the group financial statements have
been properly prepared in accordance
with International Financial Reporting
Standards as adopted by the European
Union (IFRSs as adopted by the EU);
• the parent company financial
statements have been properly
prepared in accordance with UK
Accounting Standards, including FRS
101 Reduced Disclosure Framework;
and
• the financial statements have been
prepared in accordance with the
requirements of the Companies Act
2006 and, as regards the group
financial statements, Article 4 of the
IAS Regulation.
2. Our assessment of risks of material
misstatement
In arriving at our audit opinion above
on the financial statements the risks
of material misstatement that had
the greatest effect on our audit were
as follows.
(a) Carrying value of Goodwill £21.3 million
(2015: £19.7 million) Risk vs 2015:
Refer to pages 78 and 79 (Audit Committee
report), page 101 (accounting policy) and
pages 109 and 110 (financial disclosures).
• The risk – The Group has engaged in
a number of business combinations in
recent years; a number of acquisitions
are still in the research and development
phase and have not yet started trading;
this makes forecasting inherently
more judgemental.
Adverse changes in assumptions,
particularly relating to forecast cash
flows and discount rates, could reduce
the recoverable amount below the
carrying amount, and give rise to an
impairment charge. The forecasting
of cash flows and the selection of an
appropriate discount rate are therefore
key judgemental areas.
(b) Carrying value of Work in progress
(£26.2 million (2015: £20.1 million))
and Finished goods (£32.8 million
(2015: £29.2 million)) Risk vs 2015:
• Our response – Our audit procedures
included evaluating the Group’s
budgeting procedures upon which
the forecast cash flows are based
by performing an assessment of
the historical accuracy of budgets
for trading entities by comparing
previously budgeted figures to actual
results. We also critically assessed
the ongoing forecasts for companies
in the research and development
phase, by considering the assumptions
adopted by the directors and taking
into account the experience of the
Group at maturing past research and
development companies into profitable
trading entities.
We challenged the Group’s selection of
the discount rates used by considering
the assumptions underlying the
calculation of each discount rate; using
external data (including competitor
analysis) to determine an appropriate
range for each type of business and
comparing the actual rate used to
that range. For the period beyond
the financial budgets and forecasts,
we assessed whether the growth
rate used was consistent with both
historical performance and future
business strategies.
Where the forecasts utilised were
inconsistent with historical performance,
we challenged these assumptions with
the key decision makers within divisional
management to assess whether these
forecasts were, in our view, achievable
with reference to the historical accuracy
of budgeting.
We evaluated the Group’s sensitivity
analysis, by performing our own
analysis to assess the sensitivity of the
impairment reviews to changes in the
key assumptions of the discount rate,
the forecast cash flows and growth rate
beyond the financial budgets.
We assessed the adequacy of the
Group’s disclosures in respect of
the impairment testing of goodwill
and whether disclosures about the
sensitivity of the outcome of the
impairment assessment to changes in
key assumptions properly reflected the
risks inherent in it.
Refer to pages 78 and 79 (Audit Committee
report), page 101 (accounting policy) and
page 114 (financial disclosures).
• The risk – The Group trades globally
and holds significant levels of inventory
in the key manufacturing centres in
the UK, Ireland and India and sales
offices around the world. There is an
ongoing risk of product obsolescence
on Finished goods and Work in
progress due to the fast-paced nature
of the industry.
The Group maintains an inventory
provision for potential product
obsolescence to the extent that the
cost of inventory is not deemed to
be recoverable through future sales.
The inventory provision is calculated
at a disaggregated level. For each
individual stock item, a provision is
initially calculated based on historic
and budgeted sales and standard
selling prices. The results of these initial
calculations are then assessed by group
management and adjusted as deemed
necessary, based on management’s
expectation of future demand and
selling prices. The assumptions
underlying the provision calculations are
judgemental and changes could have a
material impact on the carrying value of
Work in progress and Finished goods.
• Our response – In this area our audit
procedures included challenging the
Group’s key assumptions, being the
future demand and selling pricing, in
respect of the provision calculation.
We assessed the historical accuracy of
the inventory provision and, based on
our own knowledge of the industry, we
challenged material adjustments made by
group management to the initial provision
calculations. We also identified slow
moving line items, considering whether
appropriate levels of provision were held
against these items by comparison to the
most recent sales invoices. In addition,
for a sample of inventory items we
compared the carrying amount to recent
sales invoices to assess whether these
items have been written down to net
realisable value.
We assessed the adequacy of the
Group’s disclosures in this area.
GovernanceFinancial statementsShareholder informationStrategic report
92
Independent auditor’s report to the members of Renishaw plc only (continued)
3. Our application of materiality and
an overview of the scope of our audit
The materiality for the financial statements
as a whole was set at £4.0 million
(2015: £7.0 million), determined with
reference to a benchmark of group profit
before taxation (of which it represents
5.0% (2015: 4.9%).
We report to the Audit Committee
any corrected or uncorrected
identified misstatements exceeding
£0.2 million, in addition to other identified
misstatements that warranted reporting
on qualitative grounds.
Of the Group’s 48 (2015: 42) reporting
components, we subjected 7 (2015: 7) to
audits for group reporting purposes.
The components within the scope of
our work accounted for the following
percentages of the Group’s results:
The components for which we performed
work other than audits for group reporting
purposes were not individually significant
but were included in the scope of our
group reporting work in order to provide
further coverage over the Group’s results.
For the remaining components, we
performed analysis at an aggregated
group level to re-examine our assessment
that there were no significant risks of
material misstatement within these.
The Group audit team instructed
component auditors as to the significant
areas to be covered, including the relevant
risks detailed above and the information to
be reported back.
The Group audit team approved
component materiality, which was set at
£2.0 million, having regard to the mix of
size and risk profile of the Group across
the components.
The work on five of the audits for group
reporting purposes was performed by
component auditors and the rest by the
Group audit team.
Telephone conference meetings were held
with the component auditors to assess
the audit risk, strategy and audit findings.
During these meetings, the findings
reported to the Group audit team were
discussed in more detail.
4. Our opinion on other matters
prescribed by the Companies Act
2006 is unmodified
In our opinion:
• the part of the Directors’ remuneration
report to be audited 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 year for which the financial
statements are prepared is consistent
with the financial statements.
Audits for group reporting purposes
Reviews of financial information
(including enquiry)
Coverage
Number of
components
7
Revenue
(%)
83%
Profit before
tax (%)
90%
Total assets
(%)
78%
13
20
15%
98%
10%
100%
11%
89%
GovernanceRenishaw plc Annual report and accounts 2016 93
Scope of report and
responsibilities
As explained more fully in the Directors’
responsibilities statement set out on page
90, the directors are responsible for the
preparation of the financial statements
and for being satisfied that they give a
true and fair view. A description of the
scope of an audit of financial statements
is provided on the Financial Reporting
Council’s website at www.frc.org.uk/
auditscopeukprivate. This report is made
solely to the Company’s members as
a body and is subject to important
explanations and disclaimers regarding
our responsibilities, published on
our website at www.kpmg.com/uk/
auditscopeukco2014a, which are
incorporated into this report as if set out
in full and should be read to provide an
understanding of the purpose of this
report, the work we have undertaken and
the basis of our opinions.
Virginia Stevens
(Senior Statutory Auditor)
for and on behalf of KPMG LLP,
Statutory Auditor
Chartered Accountants
100 Temple Street
Bristol
BS1 6AG
27th July 2016
5. We have nothing to report on the
disclosures of principal risks
Under the Companies Act 2006 we are
required to report to you if, in our opinion:
• adequate accounting records have not
been kept by the parent company, or
returns adequate for our audit have not
been received from branches not visited
by us; or
• the parent company financial
statements and the part of the
Directors’ remuneration report to be
audited are not in agreement with the
accounting records and returns; or
• certain disclosures of directors’
remuneration specified by law are not
made; or
• we have not received all the information
and explanations we require for
our audit.
Under the Listing Rules we are required
to review:
• the directors’ statements, set out on
pages 73 and 74, in relation to going
concern and longer-term viability; and
• the part of the corporate governance
statement on page 75 relating to the
Company’s compliance with the eleven
provisions of the 2014 UK Corporate
Governance Code specified for
our review.
We have nothing to report in respect of
the above responsibilities.
Based on the knowledge we acquired
during our audit, we have nothing material
to add or draw attention to in relation to:
• the directors’ statement of principal
risks and uncertainties on pages 50 and
51, concerning the principal risks, their
management, and, based on that, the
directors’ assessment and expectations
of the Group’s continuing in operation
over the three years to 30th June 2019;
or
• the disclosures in note 1 of the financial
statements concerning the use of the
going concern basis of accounting.
6. We have nothing to report in
respect of the matters on which we
are required to report by exception
Under ISAs (UK and Ireland) we are
required to report to you if, based on
the knowledge we acquired during our
audit, we have identified other information
in the annual report that contains a
material inconsistency with either that
knowledge or the financial statements, a
material misstatement of fact, or that is
otherwise misleading.
In particular, we are required to report to
you if:
• we have identified material
inconsistencies between the knowledge
we acquired during our audit and the
directors’ statement that they consider
that the annual report and financial
statements taken as a whole is fair,
balanced and understandable and
provides the information necessary for
shareholders to assess the Group’s
performance, business model and
strategy; or
• the Audit Committee report does
not appropriately address matters
communicated by us to the
Audit Committee.
GovernanceFinancial statementsShareholder informationStrategic report 94
Consolidated income statement
for the year ended 30th June 2016
from continuing operations
Revenue
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Operating profit
Financial income
Financial expenses
Share of profits of associates
Profit before tax
Income tax expense
Profit for the year from continuing operations
Profit attributable to:
Equity shareholders of the parent company
Non-controlling interest
Profit for the year from continuing operations
Dividend per share arising in respect of the year
Dividend per share paid in the year
Earnings per share (basic and diluted)
notes
2
2016
£’000
2015
£’000
436,598
494,720
(218,308)
(221,089)
218,290
273,631
(97,808)
(40,969)
(87,879)
(41,828)
79,513
143,924
872
(1,800)
1,451
884
(1,492)
880
80,036
144,196
(11,465)
(22,850)
68,571
121,346
69,095
(524)
68,571
121,908
(562)
121,346
pence
48.0
46.5
94.9
pence
46.5
42.4
167.5
4
4
10
5
6
19
19
7
Financial statementsRenishaw plc Annual report and accounts 2016 95
Consolidated statement of comprehensive income and expense
for the year ended 30th June 2016
Profit for the year
Other items recognised directly in equity:
Items that will not be reclassified to the Consolidated income statement:
Remeasurement of defined benefit liabilities
Deferred tax on remeasurement of defined benefit scheme liabilities
Total for items that will not be reclassified
Items that may be reclassified to the Consolidated income statement:
Foreign exchange translation differences
Comprehensive income and expense of associates
Effective portion of changes in fair value of cash flow hedges, net of recycling
Deferred tax on effective portion of changes in fair value of cash flow hedges
Total for items that may be reclassified
Total other comprehensive income and expense, net of tax
Total comprehensive income and expense for the year
Attributable to:
Equity shareholders of the parent company
Non-controlling interest
Total comprehensive income and expense for the year
notes
2016
£’000
68,571
2015
£’000
121,346
13
19
19
19
(20,868)
3,480
(17,388)
8,409
753
(91,168)
17,537
(64,469)
(6,032)
1,580
(4,452)
111
–
(10,511)
2,102
(8,298)
(81,857)
(12,750)
(13,286)
108,596
(12,762)
(524)
(13,286)
109,158
(562)
108,596
GovernanceShareholder informationStrategic reportFinancial statements 96
Consolidated balance sheet
at 30th June 2016
Assets
Property, plant and equipment
Intangible assets
Investments in associates
Deferred tax assets
Derivatives
Total non-current assets
Current assets
Inventories
Trade receivables
Current tax
Other receivables
Derivatives
Pension scheme cash escrow account
Cash and cash equivalents
Total current assets
Current liabilities
Trade payables
Overdraft
Current tax
Provisions
Derivatives
Other payables
Total current liabilities
Net current assets
Non-current liabilities
Employee benefits
Deferred tax liabilities
Derivatives
Other payables
Total non-current liabilities
Total assets less total liabilities
Equity
Share capital
Share premium
Currency translation reserve
Cash flow hedging reserve
Retained earnings
Other reserve
Equity attributable to the shareholders of the parent company
Non-controlling interest
Total equity
notes
2016
£’000
2015
£’000
8
9
10
11
12
14
20
12
13
15, 20
15, 20
16
12
17
13
11
12
18
19
19
19
213,917
61,255
5,658
40,996
76
321,902
94,959
114,945
1,166
18,090
859
15,279
31,278
276,576
22,379
9,975
3,558
2,375
19,987
18,345
76,619
169,592
57,664
3,480
19,536
10,504
260,776
77,673
101,213
1,064
12,809
14,889
14,731
82,171
304,550
21,154
–
10,775
1,715
764
28,561
62,969
199,957
241,581
67,823
21,999
50,652
–
140,474
48,094
21,991
3,165
589
73,839
381,385
428,518
14,558
42
6,448
(56,460)
420,419
(460)
384,547
(3,162)
381,385
14,558
42
(2,714)
17,171
402,559
(460)
431,156
(2,638)
428,518
These financial statements were approved by the Board of directors on 27th July 2016 and were signed on its behalf by:
Sir David R McMurtry
Directors
A C G Roberts
Financial statementsRenishaw plc Annual report and accounts 2016 97
Consolidated statement of changes in equity
for the year ended 30th June 2016
Year ended 30th June 2015
Balance at 1st July 2014
Profit/(loss) for the year
Other comprehensive income
and expense (net of tax)
Remeasurement of defined benefit
pension liabilities
Foreign exchange translation differences
Changes in fair value of cash flow hedges
Total other comprehensive income
Total comprehensive income
Share
capital
£’000
14,558
Share
premium
£’000
42
Currency
translation
reserve
£’000
(2,825)
Cash flow
hedging
reserve
£’000
25,580
Retained
earnings
£’000
315,944
Other
reserve
£’000
(460)
Non-
controlling
interest
£’000
Total
£’000
(2,076) 350,763
–
–
–
–
–
–
–
–
–
–
–
–
–
–
121,908
–
111
–
111
–
–
(8,409)
(8,409)
(4,452)
–
–
(4,452)
111
(8,409) 117,456
–
–
–
–
–
–
(562) 121,346
–
–
–
–
(4,452)
111
(8,409)
(12,750)
(562) 108,596
Dividends paid
Balance at 30th June 2015
–
14,558
–
42
–
(2,714)
–
17,171
(30,841)
402,559
–
(460)
–
(30,841)
(2,638) 428,518
Year ended 30th June 2016
Profit/(loss) for the year
Other comprehensive income
and expense (net of tax)
Remeasurement of defined benefit
pension liabilities
Foreign exchange translation differences
Relating to associates
Changes in fair value of cash flow hedges
Total other comprehensive income
Total comprehensive income
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
69,095
–
8,409
753
–
9,162
–
–
–
(73,631)
(73,631)
(17,388)
–
–
–
(17,388)
9,162
(73,631)
51,707
–
–
–
–
–
–
(524)
68,571
–
–
–
–
–
(17,388)
8,409
753
(73,631)
(81,857)
(524)
(13,286)
Dividends paid
Balance at 30th June 2016
–
14,558
–
42
–
6,448
–
(33,847)
(56,460) 420,419
–
(460)
–
(33,847)
(3,162) 381,385
More details of share capital and reserves are given in note 19.
GovernanceShareholder informationStrategic reportFinancial statements 98
Consolidated statement of cash flow
for the year ended 30th June 2016
Cash flows from operating activities
Profit for the year
Adjustments for:
Amortisation of development costs
Amortisation of other intangibles
Depreciation
Profit on sale of property, plant and equipment
Share of profits from associates
Financial income
Financial expenses
Tax expense
Increase in inventories
Increase in trade and other receivables
(Decrease)/increase in trade and other payables
Increase in provisions
Defined benefit pension contributions
Income taxes paid
Cash flows from operating activities
Investing activities
Purchase of property, plant and equipment
Development costs capitalised
Purchase of other intangibles
Investment in subsidiaries and associates
Sale of property, plant and equipment
Interest received
Dividends received from associates
Payments to pension scheme escrow account (net)
Cash flows from investing activities
Financing activities
Interest paid
Dividends paid
Cash flows from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at the end of the year
notes
2016
£’000
2015
£’000
68,571
121,346
9
9
8
10
4
4
6
16
9
4
10
4
19
15
9,116
2,313
18,258
166
(1,451)
(872)
1,800
11,465
40,795
(17,286)
(2,951)
(12,439)
660
(32,016)
(2,708)
(19,463)
55,179
(52,996)
(12,246)
(1,294)
(284)
826
872
310
(548)
(65,360)
(231)
(33,847)
(34,078)
(44,259)
82,171
(16,609)
21,303
10,141
2,990
14,925
(99)
(880)
(884)
1,492
22,850
50,535
(14,694)
(21,712)
15,204
421
(20,781)
(2,427)
(16,410)
132,263
(48,387)
(12,975)
(1,207)
(480)
2,408
884
110
(5,190)
(64,837)
(43)
(30,841)
(30,884)
36,542
43,634
1,995
82,171
Financial statementsRenishaw plc Annual report and accounts 2016 99
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 parent company financial statements have been prepared in
accordance with Financial Reporting Standard 101 “Reduced Disclosure Framework”.
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 2015
and 2016 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 9).
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 13.
(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.
GovernanceShareholder informationStrategic reportFinancial statements 100
Notes (continued)
1. Accounting policies (continued)
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 to the buyer, which is normally the time of despatch. Where certain products require installation,
part of the revenue may be deferred until the installation is complete. No revenue is recognised if there are significant uncertainties
regarding recovery of the consideration due, or the possible return of goods.
Revenue from the sale of services is recognised over the period to which the service relates. Where goods and services are sold as
a bundle, the fair value of services is deferred and recognised over the period to which the service relates with the remaining revenue
recognised on despatch.
New, revised or changes to existing accounting standards
The following accounting standards have been issued but are not yet effective and have not been applied by the Group:
IFRS 15 Revenue from contracts with customers – This is effective for accounting periods beginning on or after 1st January 2018.
The new standard requires the separation of performance obligations within contracts with customers and the contractual value
to be allocated to each of the performance obligations. Revenue is then recognised as each performance obligation is satisfied.
The introduction of this standard is not expected to have a material impact on the results of the Group due to the relatively
straightforward contractual terms and conditions with customers.
IFRS 9 Financial instruments – This is effective for accounting periods beginning on or after 1st January 2018. The introduction of this
standard is not expected to have a material impact on the net assets or results of the Group, but may result in additional disclosures.
IFRS 16 Leases – This has a mandatory effective date of 1st January 2019. The new standard will eliminate the classification of
leases as either operating or finance leases and result in operating leases being treated as finance leases. This will result in previously
recognised operating leases being treated as property, plant and equipment along with a finance leases creditor. The introduction
of this standard will increase the value of property, plant and equipment and the finance lease liability on the balance sheet but it is
unlikely to have a material effect on the profit in any year.
Basis of consolidation
Subsidiaries – Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed or has rights to
variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.
In assessing control, the Group takes into consideration potential voting rights that are exercisable. The acquisition date is the date
on which control is transferred to the acquirer. The financial statements of subsidiaries are included in the consolidated financial
statements from the date that control commences until the date that control ceases. Losses applicable to the non-controlling
interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a
deficit balance.
Associates – 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 between 20% and 50% of the voting power of
another entity.
Application of the equity method to associates – Associates are accounted for using the equity method (equity accounted investees)
and are initially recognised at cost. The Group’s investment includes goodwill identified on acquisition, net of any accumulated
impairment losses. The consolidated financial statements include the Group’s share of the total comprehensive income and equity
movements of equity accounted investees, from the date that significant influence commences until the date that significant influence
ceases. When the Group’s share of losses exceeds its interest in an equity accounted investee, the Group’s carrying amount is
reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal obligations or
made payments on behalf of an investee.
Transactions eliminated on consolidation – Intra-group balances and transactions, and any unrealised income and expenses
arising from intra-group transactions, are eliminated. Unrealised gains arising from transactions with equity accounted investees are
eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same
way as unrealised gains, but only to the extent that there is no evidence of impairment.
Financial statementsRenishaw plc Annual report and accounts 2016 101
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
immediately upon enforcement of the charge over the account.
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”.
GovernanceShareholder informationStrategic reportFinancial statements 102
Notes (continued)
1. Accounting policies (continued)
Intangible assets – research and development costs
Expenditure on research activities is recognised in the Consolidated income statement as an expense as incurred. Expenditure on
development activities is capitalised if the product or process is technically and commercially feasible and the Group intends and has
the technical ability and sufficient resources to complete development, future economic benefits are probable and the Group can
measure reliably the expenditure attributable to the intangible asset during its development.
Development activities involve a plan or design for the production of new or substantially improved products or processes. The
expenditure capitalised includes the cost of materials, direct labour and an appropriate proportion of overheads. Other development
expenditure is recognised in the Consolidated income statement as an expense as incurred.
Capitalised development expenditure is amortised over five years and is stated at cost less accumulated amortisation and less
accumulated impairment losses. Capitalised development expenditure is removed from the balance sheet ten years after being
fully amortised.
Intangible assets – software licences
Intangible assets, comprising software licences that are acquired by the Group, are stated at cost less accumulated amortisation and
impairment losses. Amortisation is charged on a straight-line basis over the estimated useful life of the assets. The useful life of each
of these assets is assessed on an individual basis and they range from two to 10 years.
Property, plant and equipment
Freehold land is not depreciated. Other assets are stated at cost less accumulated depreciation. Depreciation is provided to write off
the cost of assets less their estimated residual value on a straight-line basis over their estimated useful economic lives as follows:
Freehold buildings
Plant and equipment
Vehicles
Warranty provisions
50 years
3 to 25 years
3 to 4 years
The Group provides a warranty from the date of purchase, except for those products that we install where the warranty starts from
the date of completion of the installation. This is typically for a 12-month period, although up to three years is given for a small number
of products. A warranty provision is included in the financial statements, which is calculated on the basis of historical returns and
internal quality reports.
Employee benefits
The Group operates contributory pension schemes, largely for UK, Ireland and USA employees, which were of the defined benefit
type up to 5th April 2007, 31st December 2007 and 30th June 2012 respectively, at which time they ceased any future accrual for
existing members and were closed to new members.
The schemes are administered by trustees who are independent of the group finances. Pension scheme assets of the defined benefit
schemes are 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 to the liability. Remeasurements arising
from defined benefit schemes comprise actuarial gains and losses, the return on scheme assets (excluding interest) and the effect of
the asset ceiling (if any, excluding interest). The Company recognises them immediately in other comprehensive income and all other
expenses related to defined benefit schemes are included in the Consolidated income statement.
The pension schemes’ surpluses, to the extent that they are considered recoverable, or deficits are recognised in full and presented
on the face of the Consolidated balance sheet under employee benefits. Where a guarantee is in place in relation to a pension
scheme deficit, liabilities are reported in accordance with IFRIC 14. Foreign-based employees are covered by state, 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 limited number of foreign employees. For defined contribution schemes, the amount charged to
the Consolidated income statement represents the contributions payable to the schemes in respect of the accounting period.
Accruals are made for holiday pay, based on a calculation of the number of days holiday earned during the year, but not yet taken.
Financial statementsRenishaw plc Annual report and accounts 2016
103
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 20 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 next 12 months. 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.
GovernanceShareholder informationStrategic reportFinancial statements 104
Notes (continued)
2. Segmental analysis
Renishaw manages its operations in two segments, comprising metrology and healthcare products. The results of these segments
are regularly reviewed by the Board to allocate resources to segments and to assess their performance. The Group evaluates
performance of the segments on the basis of revenue and profits. Within metrology, there are multiple operating segments that are
aggregated into a reporting segment for reportable purposes, where they have similar economic characteristics, and where the nature
of the products and production processes and their customer base are similar. The revenue, depreciation and amortisation, and
operating profit for each reportable segment were:
Year ended 30th June 2016
Revenue
Depreciation and amortisation
Operating profit/(loss)
Share of profits from associates
Net financial expense
Profit before tax
Year ended 30th June 2015
Revenue
Depreciation and amortisation
Operating profit/(loss)
Share of profits from associates
Net financial expense
Profit before tax
Metrology
£’000
408,184
26,334
85,895
1,451
–
–
Metrology
£’000
467,001
24,055
150,770
880
–
–
Healthcare
£’000
28,414
3,353
(6,382)
–
–
–
Healthcare
£’000
27,719
4,001
(6,846)
–
–
–
There is no allocation of assets and liabilities to operating segments. Depreciation is included within certain other overhead
expenditure which is allocated to segments on the basis of the level of activity.
The analysis of revenue by geographical market was:
Far East, including Australasia
Continental Europe
North, South and Central America
UK and Ireland
Other regions
Total group revenue
2016
£’000
195,343
112,075
92,198
23,208
13,774
436,598
Total
£’000
436,598
29,687
79,513
1,451
(928)
80,036
Total
£’000
494,720
28,056
143,924
880
(608)
144,196
2015
£’000
257,665
103,106
96,284
25,499
12,166
494,720
Revenue in the previous table has been allocated to regions based on the geographical location of the customer. Countries with
individually material revenue figures in the context of the Group were:
China
USA
Japan
Germany
South Korea
2016
£’000
107,628
79,984
49,328
48,509
13,245
2015
£’000
119,551
82,350
43,946
44,658
73,113
Financial statementsRenishaw plc Annual report and accounts 2016 105
2. Segmental analysis (continued)
For the current financial year, there was no revenue from transactions with a single external customer which amounted to more than
10% of the Group’s total revenue. In the previous financial year 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:
United Kingdom
Overseas
Total non-current assets
2016
£’000
190,396
90,434
280,830
2015
£’000
166,468
64,268
230,736
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:
Wages and salaries
Compulsory social security contributions
Contributions to defined contribution schemes
Total payroll costs
The average number of persons employed by the Group during the year was:
UK
Overseas
Average number of employees
The total remuneration of the directors was:
Salary and fees
Bonus
Benefits
Pension contributions
Total remuneration of the directors
Full details of directors’ remuneration are given in the Directors’ remuneration report.
4. Financial income and expenses
Financial income
Interest receivable
Financial expenses
Net interest on pension schemes’ liabilities (note 13)
Bank interest payable
Unwinding of discount on deferred consideration
Total financial expenses
2016
£’000
148,852
16,856
18,061
183,769
2016
Number
2,755
1,437
4,192
2016
£’000
2,461
–
81
184
2,726
2016
£’000
872
2016
£’000
1,569
231
–
1,800
2015
£’000
141,392
16,005
16,347
173,744
2015
Number
2,529
1,282
3,811
2015
£’000
2,376
2,225
79
178
4,858
2015
£’000
884
2015
£’000
1,421
43
28
1,492
GovernanceShareholder informationStrategic reportFinancial statements 106
Notes (continued)
5. Profit before tax
Included in the profit before tax are the following costs/(income):
Depreciation of property, plant and equipment
Amortisation of intangibles
Research and development expenditure
Loss/(profit) on sale of property, plant and equipment
Foreign currency (gains)/losses
Auditor:
Audit of these financial statements
Audit of subsidiary undertakings pursuant to legislation
Audit assurance
Tax compliance
Tax advisory
Audit of pension schemes
Other services in relation to pension schemes
All other non-audit fees
notes
(a)
(a)
(b)
(c)
(c)
(c)
(c)
(c)
(c)
(c)
(c)
(c)
(c)
2016
£’000
18,258
11,429
46,026
166
(642)
169
195
13
30
103
20
264
46
2015
£’000
14,925
13,131
42,260
(99)
339
121
181
22
88
167
20
125
48
These costs/(income) can be found under the following headings in the Consolidated income statement: (a) within cost of sales,
distribution costs and administrative expenses; (b) within cost of sales; and (c) within administrative expenses.
6. Income tax expense
Current tax:
UK corporation tax on profits for the year
UK corporation tax – prior year adjustments
Overseas tax on profits for the year
Total current tax
Deferred tax:
Origination and reversal of other temporary differences
Effect on deferred tax for change in UK tax rate to 19% (2015: 20%)
Tax charge on profit
2016
£’000
3,389
860
7,651
11,900
494
(929)
(435)
11,465
2015
£’000
11,526
327
12,131
23,984
(1,134)
–
(1,134)
22,850
Effective tax rate (based on profit before tax)
14.3%
15.8%
Financial statementsRenishaw plc Annual report and accounts 2016
107
6. Income tax expense (continued)
The tax for the year is lower (2015: lower) than the weighted average of the UK standard rate of corporation tax of 20% (2015: 20.75%).
The differences are explained as follows:
Profit before tax
Tax at 20% (2015: 20.75%)
Effects of:
Different tax rates applicable in overseas subsidiaries
Research and development tax credit and patent box
Expenses not deductible for tax purposes
Companies with unrelieved tax losses
Items with no tax effect
Prior year adjustments
Effect on deferred tax for change in UK tax rate to 19%
Other differences
Tax charge on profit
2016
£’000
80,036
2015
£’000
144,196
16,007
29,921
(2,594)
(2,359)
266
461
(290)
860
(929)
43
11,465
(2,723)
(5,745)
324
749
(183)
327
–
180
22,850
On 26th October 2015, the reduction in the UK rate of corporation tax to 19% from 1st April 2017 and 18% from 1st April 2020 was
substantively enacted. Deferred tax assets and liabilities have been calculated based on the rate of 19%.
7. Earnings per share
Basic and diluted earnings per share are calculated on earnings after tax of £69,095,000 (2015: £121,908,000) 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.
8. Property, plant and equipment
Year ended 30th June 2016
Cost
At 1st July 2015
Additions
Transfers
Disposals
Currency adjustment
At 30th June 2016
Depreciation
At 1st July 2015
Charge for the year
Released on disposals
Currency adjustment
At 30th June 2016
Net book value
At 30th June 2016
At 30th June 2015
Freehold
land and
buildings
£’000
127,097
4,462
2,141
(1,020)
9,985
142,665
Plant and
equipment
£’000
145,642
23,865
14,042
(2,162)
5,661
187,048
22,608
2,915
(621)
2,339
27,241
91,393
14,283
(1,831)
3,200
107,045
Motor
vehicles
£’000
Assets in the
course of
construction
£’000
8,575
1,475
–
(1,190)
740
9,600
5,596
1,060
(1,129)
469
5,996
7,875
23,194
(16,183)
–
–
14,886
–
–
–
–
–
Total
£’000
289,189
52,996
–
(4,372)
16,386
354,199
119,597
18,258
(3,581)
6,008
140,282
115,424
104,489
80,003
54,249
3,604
2,979
14,886
7,875
213,917
169,592
GovernanceShareholder informationStrategic reportFinancial statements 108
Notes (continued)
8. Property, plant and equipment (continued)
At 30th June 2016, properties with a net book value of £66,485,000 (2015: £45,033,000) were subject to a fixed charge to secure
the UK defined benefit pension scheme liabilities.
Additions to assets in the course of construction of £23,194,000 (2015: £27,286,000) comprise £12,938,000 (2015: £13,556,000)
for freehold land and buildings and £10,256,000 (2015: £13,730,000) for plant and equipment.
Year ended 30th June 2015
Cost
At 1st July 2014
Additions
Transfers
Disposals
Currency adjustment
At 30th June 2015
Depreciation
At 1st July 2014
Charge for the year
Released on disposals
Currency adjustment
At 30th June 2015
Net book value
At 30th June 2015
At 30th June 2014
9. Intangible assets
Year ended 30th June 2016
Cost
At 1st July 2015
Additions
Transfers
Disposals
Currency adjustment
At 30th June 2016
Amortisation
At 1st July 2015
Charge for the year
Released on disposal
Currency adjustment
At 30th June 2016
Net book value
At 30th June 2016
At 30th June 2015
Freehold
land and
buildings
£’000
98,056
7,329
25,495
(1,381)
(2,402)
127,097
21,114
2,292
(303)
(495)
22,608
Plant and
equipment
£’000
131,134
12,222
7,846
(4,120)
(1,440)
145,642
83,952
11,444
(2,985)
(1,018)
91,393
Motor
vehicles
£’000
8,049
1,550
–
(695)
(329)
8,575
5,181
1,189
(599)
(175)
5,596
Assets in the
course of
construction
£’000
13,930
27,286
(33,341)
–
–
7,875
–
–
–
–
–
Total
£’000
251,169
48,387
–
(6,196)
(4,171)
289,189
110,247
14,925
(3,887)
(1,688)
119,597
104,489
76,942
54,249
47,182
2,979
2,868
7,875
13,930
169,592
140,922
Goodwill on
consolidation
£’000
Other
intangible
assets
£’000
Internally
generated
development
costs
£’000
Software licences
In use
£’000
In the course
of acquisition
£’000
19,736
–
–
–
1,532
21,268
–
–
–
–
–
10,655
44
–
–
550
11,249
9,914
617
–
408
10,939
89,475
12,246
–
(258)
–
101,463
58,824
9,116
(258)
–
67,682
21,490
1,201
74
(249)
71
22,587
14,979
1,696
(48)
64
16,691
25
49
(74)
–
–
–
–
–
–
–
–
Total
£’000
141,381
13,540
–
(507)
2,153
156,567
83,717
11,429
(306)
472
95,312
21,268
19,736
310
741
33,781
30,651
5,896
6,511
–
25
61,255
57,664
Financial statementsRenishaw plc Annual report and accounts 2016 109
9. Intangible assets (continued)
Year ended 30th June 2015
Cost
At 1st July 2014
Additions
Transfers
Disposals
Currency adjustment
At 30th June 2015
Amortisation
At 1st July 2014
Charge for the year
Released on disposal
Currency adjustment
At 30th June 2015
Net book value
At 30th June 2015
At 30th June 2014
Goodwill on
consolidation
£’000
Other
intangible
assets
£’000
Internally
generated
development
costs
£’000
Software licences
In use
£’000
In the course
of acquisition
£’000
19,873
–
–
(198)
61
19,736
198
–
(198)
–
–
10,644
36
–
–
(25)
10,655
8,631
1,293
–
(10)
9,914
78,188
12,975
–
(1,688)
–
89,475
50,371
10,141
(1,688)
–
58,824
20,509
994
188
(189)
(12)
21,490
13,479
1,697
(189)
(8)
14,979
36
177
(188)
–
–
25
–
–
–
–
–
Total
£’000
129,250
14,182
–
(2,075)
24
141,381
72,679
13,131
(2,075)
(18)
83,717
19,736
19,675
741
2,013
30,651
27,817
6,511
7,030
25
36
57,664
56,571
Goodwill acquired has arisen on the acquisition of a number of businesses and has an indeterminable useful life. Therefore it is not
amortised but is tested for impairment annually and at any point during the year when an indicator of impairment exists. Goodwill is
allocated to the CGUs, which are mainly 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 Group’s operating segments. In the table below, only the goodwill relating
to the acquisition of R&R Fixtures, LLC is expected to be subject to tax relief.
The analysis of acquired goodwill on consolidation is:
itp GmbH
Renishaw Diagnostics Limited (92.4%)
Renishaw Mayfield S.A. (75%)
Measurement Devices Limited
Renishaw Software Limited
R&R Fixtures, LLC
Other smaller acquisitions
Total acquired goodwill
2016
£’000
2,886
1,784
1,738
6,661
1,559
5,168
1,472
21,268
2015
£’000
2,456
1,784
1,537
6,661
1,559
4,411
1,328
19,736
The recoverable amounts of acquired goodwill are based on value in use calculations. These calculations use cash flow projections
based on either the financial business plans approved by management for next five financial years, or estimated growth rates, which
are set out below. The cash flows beyond this forecast are extrapolated to perpetuity using a nil growth rate on a prudent basis,
to reflect the uncertainties over forecasting further than five years.
Key assumptions
The key assumptions utilised in the value in use calculations are:
Discount rate
The following pre-tax discount rates have been used in discounting the projected cash flows:
GovernanceShareholder informationStrategic reportFinancial statements 110
Notes (continued)
9. Intangible assets (continued)
itp GmbH
Renishaw Software Limited
Measurement Devices Limited
R&R Fixtures, LLC
Renishaw Diagnostics Limited
Renishaw Mayfield S.A.
Forecast cash flows and future growth rates
itp GmbH
Renishaw Software Limited
Measurement Devices Limited
R&R Fixtures, LLC
Renishaw Diagnostics Limited
Renishaw Mayfield S.A.
2016
Discount rate
12%
12%
12%
12%
15%
15%
2015
Discount rate
12%
12%
12%
12%
15%
15%
2016
Basis of forecast
5% growth rate
5% growth rate
5 year business plan
5 year business plan
5 year business plan
5 year business plan
2015
Basis of forecast
5% growth rate
5% growth rate
5 year business plan
5 year business plan
5 year business plan
5 year business plan
These forecast cash flows are considered prudent estimates based on management’s view of the future and experience of past
performance of the individual CGUs and are calculated at a disaggregated level. The key judgement within these business plans is the
forecasting of revenue growth.
The average growth rates included in the significant CGUs’ business plans are as follows:
Measurement Devices Limited
R&R Fixtures, LLC
2016
Average revenue
growth
15%
13%
2015
Average revenue
growth
11%
30%
These business plans are recognised as key inputs to the impairment calculation. They are monitored by management regularly and
updated for expected variances in future performance.
Sensitivity to key assumptions
Management have performed sensitivity analysis on the key assumptions detailed above.
Discount rate
An increase of 5% in the discount rate would not result in an impairment on any of the CGUs. Management believe any increase in
discount rates above 5% to be remote.
Forecast cash flows and future growth rates
Given the average revenue growth assumptions included in the five-year business plans, management’s sensitivity analysis involves
a reduction of 10% in the forecast cash flows utilised in those business plans and therefore into perpetuity. For there to be an
impairment there would need to be a reduction of 33% in the forecast cash flows for Measurement Devices Limited and a reduction
of 42% for R&R Fixtures, LLC. Management deem the likelihood of these reductions to be remote.
10. Investments in associates
The Group’s investments 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:
RLS merilna tehnika d.o.o.
Metrology Software Products Limited
HiETA Technologies Limited (31st December)
Country of
incorporation
Slovenia
England & Wales
England & Wales
Ownership
2016
%
50.0
50.0
24.9
Ownership
2015
%
50.0
50.0
20.0
Financial statementsRenishaw plc Annual report and accounts 2016 10. Investments in associates (continued)
Movements during the year were:
Balance at the beginning of the year
Dividends received
Share of profits of associates
Other comprehensive income and expense
Additions
Balance at the end of the year
Summarised aggregated financial information for associates:
Revenue
Share of profits for the year
Assets
Liabilities
11. Deferred tax assets and liabilities
Balances at the end of the year were:
Property, plant and equipment
Intangible assets
Intragroup trading (inventory)
Pension schemes
Other
Balance at the end of the year
Assets
£’000
–
–
13,454
12,529
15,013
40,996
2016
Liabilities
£’000
(6,969)
(8,061)
–
–
(6,969)
(21,999)
Net
£’000
(6,969)
(8,061)
13,454
12,529
8,044
18,997
Assets
£’000
–
–
9,237
9,398
901
19,536
The movements in the deferred tax balance during the year were:
Balance at the beginning of the year
Movements in the Consolidated income statement
Movement in relation to the cash flow hedging reserve
Movement in relation to the pension schemes
Total movement in the Consolidated statement of comprehensive income and expense
Balance at the end of the year
The deferred tax movement in the Consolidated income statement is analysed as:
Property, plant and equipment
Intangible assets
Intragroup trading (inventory)
Pension schemes
Other
Total movement for the year
111
2016
£’000
3,480
(310)
1,451
753
284
5,658
2016
£’000
6,282
1,451
6,953
2,495
2015
Liabilities
£’000
(5,589)
(8,017)
–
–
(8,385)
(21,991)
2016
£’000
(2,455)
435
17,537
3,480
21,017
18,997
2016
£’000
(1,380)
(44)
4,217
(349)
(2,009)
435
2015
£’000
2,230
(110)
880
–
480
3,480
2015
£’000
5,713
880
4,978
2,393
Net
£’000
(5,589)
(8,017)
9,237
9,398
(7,484)
(2,455)
2015
£’000
(7,271)
1,134
2,102
1,580
3,682
(2,455)
2015
£’000
(1,150)
(293)
2,013
(323)
887
1,134
No deferred tax asset has been recognised in respect of tax losses carried forward of £16,393,000 (2015: £13,045,000) due to the
uncertainty over their recoverability, as a significant proportion held in overseas subsidiaries may only be carried forward for a limited
period of time.
GovernanceShareholder informationStrategic reportFinancial statements 112
Notes (continued)
12. Derivatives
For both the Group and the Company:
Derivatives comprising the fair value of outstanding forward contracts with positive fair values are shown within:
Non-current assets
Current assets
Total of derivatives with positive fair values
Derivatives comprising the fair value of outstanding forward contracts with negative fair values are shown within:
2016
£’000
76
859
935
Non-current liabilities
Current liabilities
Total of derivatives with negative fair values
2016
£’000
50,652
19,987
70,639
2015
£’000
10,504
14,889
25,393
2015
£’000
3,165
764
3,929
13. 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 £18,061,000 (2015: £16,347,000), of which £184,000 (2015: £178,000) related
to directors and £4,854,000 (2015: £5,035,000) related to overseas schemes.
The latest full actuarial valuation of the UK defined benefit scheme was carried out as at September 2015 and updated to 30th
June 2016 by a qualified independent actuary. The mortality assumption used for 2016 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:
Rate of increase in pension payments
Discount rate
Inflation rate (RPI)
Inflation rate (CPI)
Retirement age
30th June 2016
30th June 2015
30th June 2014
UK scheme Ireland scheme
1.5%
2.0%
1.5%
–
65
3.2%
3.2%
3.3%
2.3%
64
UK scheme
3.4%
4.0%
3.6%
2.6%
64
Ireland scheme
1.6%
3.0%
1.6%
–
65
UK scheme
3.5%
4.4%
3.7%
2.7%
64
Ireland scheme
1.9%
2.7%
1.9%
–
65
The assets and liabilities in the defined benefit schemes were:
Market value of assets:
Equities
Bonds and cash
Actuarial value of liabilities
Deficit in the schemes
Deferred tax thereon
30th June
2016
£’000
% of
total
assets
30th June
2015
£’000
% of
total
assets
30th June
2014
£’000
% of
total
assets
30th June
2013
£’000
% of
total
assets
30th June
2012
£’000
% of
total
assets
145,914
3,313
149,227
(217,050)
(67,823)
12,528
98
2
100
–
–
–
138,174
2,325
140,499
(188,593)
(48,094)
9,398
98
2
100
–
–
–
127,805
1,950
129,755
(172,823)
(43,068)
8,141
98
2
100
–
–
–
117,114
1,653
118,767
(160,485)
(41,718)
8,973
99
1
100
–
–
–
93,827
1,409
95,236
(137,224)
(41,988)
9,519
99
1
100
–
–
–
All equities have quoted prices in active markets in the UK, North America, Europe, Asia-Pacific, Japan and emerging markets.
Note C.35 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 £17,646,000 (2015: £14,410,000) and the actuarial value of liabilities was £23,348,000 (2015: £16,644,000).
Financial statementsRenishaw plc Annual report and accounts 2016 113
13. Employee benefits (continued)
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:
Year ended 30th June 2016
Balance at the beginning of the year
Contributions paid
Interest on pension schemes
Remeasurement gain/(loss)
Benefits paid
Balance at the end of the year
Year ended 30th June 2015
Balance at the beginning of the year
Contributions paid
Interest on pension schemes
Remeasurement gain/(loss)
Benefits paid
Balance at the end of the year
Assets
£’000
140,499
2,708
5,552
3,166
(2,698)
149,227
Assets
£’000
129,755
2,427
5,547
5,028
(2,258)
140,499
Liabilities
£’000
(188,593)
–
(7,121)
(24,034)
2,698
(217,050)
Liabilities
£’000
(172,823)
–
(6,968)
(11,060)
2,258
(188,593)
Total
£’000
(48,094)
2,708
(1,569)
(20,868)
–
(67,823)
Total
£’000
(43,068)
2,427
(1,421)
(6,032)
–
(48,094)
The analysis of the amount recognised in the Consolidated statement of comprehensive income and expense was:
Actuarial (loss)/gain arising from:
– Changes in demographic assumptions
– Changes in financial assumptions
– Experience adjustment
Return on plan assets excluding interest income
Adjustment to liabilities for IFRIC 14
Total amount recognised in the Consolidated statement of comprehensive income and expense
The history of experience gains and losses is:
2016
£’000
2015
£’000
1,523
(24,828)
6,968
669
(5,200)
(20,868)
358
(10,095)
672
5,233
(2,200)
(6,032)
Experience gains and losses on scheme liabilities
amount (£’000)
percentage of present value of scheme liabilities
Total amount recognised in the Consolidated
statement of comprehensive income and expense
amount (£’000)
percentage of present value of scheme liabilities
Year ended
30th June 2016
Year ended
30th June 2015
Year ended
30th June 2014
Year ended
30th June 2013
Year ended
30th June 2012
6,968
3%
672
0%
2,828
2%
1,089
1%
–
–
(20,868)
(10%)
(6,032)
(3%)
(2,233)
(1%)
(860)
(1%)
(7,781)
(6%)
The cumulative amount of actuarial gains and losses recognised in the Consolidated statement of comprehensive income and
expense was a loss of £105,656,000 (2015: loss of £84,788,000).
GovernanceShareholder informationStrategic reportFinancial statements 114
Notes (continued)
13. Employee benefits (continued)
The assumptions used for mortality rates for members, medium cohort at the expected retirement age of 65 years are:
Male currently aged 65
Female currently aged 65
Male currently aged 45
Female currently aged 45
2016
years
21.9
23.9
23.2
25.2
2015
years
22.3
24.4
23.6
25.7
An agreement has been entered into with the trustees of the UK defined benefit pension scheme in relation to deficit funding plans
which supersede the previous arrangements. The Company has agreed to pay all monthly pensions payments and lump sum
payments, and transfer payments up to a limit of £1,000,000 in each year (Benefits in Payment).
A number of UK properties owned by the Company are subject to fixed charges. One or more of the properties may be released from
the fixed charge if on a subsequent valuation, the value of all properties under charge exceed 120% of the deficit.
The Company has also established an escrow bank account, which is subject to a floating charge. The balance of this account was
£15,279,000 at the end of the year (2015: £14,731,000). The funds will be released back to the Company from the escrow account
over a period of 6 years.
The agreement continues until 30th June 2031, but may end sooner if the deficit (calculated on a self sufficiency basis as defined in
the agreement) is eliminated in the meantime. At 30th June 2031 the Company is obliged to pay any deficit at that time. All properties
will be released from charge when the deficit no longer exists. The charges may be enforced by the trustees if one of the following
occurs: (a) the Company does not pay any Benefits in Payment; (b) an insolvency event occurs in relation to the Company; or (c) the
Company does not pay any deficit at 30th June 2031.
Under the Ireland defined benefit pension scheme deficit funding plan, a property owned by Renishaw (Ireland) Limited is subject to a
registered fixed charge to secure the Ireland defined benefit pension scheme’s deficit.
No scheme assets are invested in the Group’s own equity.
The present value of projected future contributions under the new agreement relating to the UK defined benefit scheme exceeds the
value of the deficit at the year-end, therefore, under IFRIC 14, the UK defined benefit pension scheme’s liabilities have been increased
by £15,400,000, to represent the maximum discounted liability as at 30th June 2016 (2015: £10,200,000).
14. Inventories
An analysis of inventories at the end of the year was:
Raw materials
Work in progress
Finished goods
Balance at the end of the year
2016
£’000
35,932
26,225
32,802
94,959
2015
£’000
28,344
20,087
29,242
77,673
During the year, the amount of inventories recognised as an expense in the Consolidated income statement was £135,718,000
(2015: £144,547,000) and the amount of write-down of inventories recognised as an expense in the Consolidated income statement
was £2,454,000 (2015: £1,254,000). At the end of the year, the gross cost of inventories which had provisions held against them
totalled £10,134,000 (2015: £8,960,000).
15. Cash and cash equivalents
An analysis of cash and cash equivalents at the end of the year was:
Bank balances and cash in hand
Short-term deposits
Overdraft
Balance at the end of the year
2016
£’000
26,416
4,862
(9,975)
21,303
2015
£’000
77,282
4,889
–
82,171
The UK defined benefit pension scheme cash escrow account is shown separately within current assets. Overdrafts are shown
separately within current liabilities.
Financial statementsRenishaw plc Annual report and accounts 2016 16. Provisions
Warranty provision
Movements during the year were:
Balance at the beginning of the year
Created during the year
Utilised in the year
Balance at the end of the year
115
2016
£’000
1,715
1,878
(1,218)
660
2,375
2015
£’000
1,294
1,518
(1,097)
421
1,715
The warranty provision has been calculated on the basis of historical return-in-warranty information and other internal reports. It is
expected that most of this expenditure will be incurred in the next financial year and all expenditure will be incurred within three years
of the balance sheet date.
17. Other payables (current)
Balances at the end of the year were:
Payroll taxes and social security
Other creditors and accruals
Total other payables
2016
£’000
6,304
12,041
18,345
2015
£’000
5,097
23,464
28,561
The Group’s exposure to currency and liquidity risk related to trade and other payables is disclosed in note 20.
18. Other payables (non-current)
The deferred consideration in the previous year of £589,000 was in respect of investments in subsidiaries, which was payable
between one and two years. All outstanding deferred consideration is now shown within other payables (current).
19. Capital and reserves
Share capital
Allotted, called-up and fully paid 72,788,543 ordinary shares of 20p each
2016
£’000
14,558
2015
£’000
14,558
The ordinary shares are the only class of share in the Company. Holders of ordinary shares are entitled to vote at general meetings of
the Company and receive dividends as declared. The Articles of Association of the Company do not contain any restrictions on the
transfer of shares nor on voting rights.
Currency translation reserve
The currency translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of
the foreign operations, offset by foreign exchange differences on bank liabilities which have been accounted for directly in equity on
account of them being classified as hedging instruments.
Movements during the year were:
Balance at the beginning of the year
Gain/(loss) on net assets of foreign currency operations
(Loss)/gain on foreign currency overdrafts held for the purpose of net investment hedging
Gain in the year relating to subsidiaries
Currency exchange differences relating to associates
Balance at the end of the year
2016
£’000
(2,714)
28,778
(20,369)
8,409
753
6,448
2015
£’000
(2,825)
(2,390)
2,501
111
–
(2,714)
GovernanceShareholder informationStrategic reportFinancial statements 116
Notes (continued)
19. Capital and reserves (continued)
Cash flow hedging reserve
The cash flow hedging reserve, for both the Group and the Company, comprises all foreign exchange differences arising from the
valuation of forward exchange contracts which are effective hedges and mature after the year end. These are valued on a mark-to-
market basis, are accounted for directly in equity and are recycled through the Consolidated income statement and Company income
statement when the hedged item affects the income statement. The forward contracts mature over the next three and a half years.
Movements during the year were:
Balance at the beginning of the year
Amounts transferred to the income statement (within revenue)
Revaluations during the year
Deferred tax movement
Balance at the end of the year
Dividends paid
Dividends paid comprised:
2015 final dividend paid of 34.0p per share (2014: 29.87p)
Interim dividend paid of 12.5p per share (2015: 12.5p)
Total dividends paid
2016
£’000
17,171
(14,125)
(77,043)
17,537
(56,460)
2016
£’000
24,748
9,099
33,847
2015
£’000
25,580
(13,348)
2,837
2,102
17,171
2015
£’000
21,742
9,099
30,841
A final dividend in respect of the current financial year of £25,839,932 (2015: £24,748,105) at the rate of 35.5p net per share
(2015: 34.0p) is proposed to be paid on 17th October 2016 to shareholders on the register on 16th September 2016, with an ex-
dividend date of 15th September 2016.
Non-controlling interest
Movements during the year were:
Balance at the beginning of the year
Share of loss for the year
Balance at the end of the year
2016
£’000
(2,638)
(524)
(3,162)
2015
£’000
(2,076)
(562)
(2,638)
The non-controlling interest represents the minority shareholdings in Renishaw Diagnostics Limited – 7.6%, Renishaw Mayfield SARL
– 25% and Renishaw Mayfield S.A. – 25%.
20. Financial instruments
The Group has exposure to credit risk, liquidity risk and market risk arising from its use of financial instruments. This note presents
information about the Group’s exposure to these risks, along with the Group’s objectives, policies and processes for measuring and
managing the risks.
Fair value
There is no significant difference between the fair value of financial assets and financial liabilities and their carrying value in the
Consolidated balance sheet. All financial assets and liabilities are held at amortised cost, apart from the forward 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.
Financial statementsRenishaw plc Annual report and accounts 2016 117
20. Financial instruments (continued)
Credit risk
The Group carries a credit risk, being the risk of non-payment of trade receivables by its customers. Credit evaluations are carried out
on all new customers before credit is given above certain thresholds. There is a spread of risks among a large number of customers
with no significant concentration with one customer or in any one geographical area. The Group establishes an allowance for
impairment in respect of trade receivables where recoverability is considered doubtful.
An analysis by currency of the Group’s financial assets at the year end is as follows:
Currency
Pound Sterling
US Dollar
Euro
Japanese Yen
Other
Trade receivables
Other receivables
Cash (including overdraft)
2016
£’000
6,520
37,183
20,757
15,195
35,290
114,945
2015
£’000
8,029
32,400
18,701
10,660
31,423
101,213
2016
£’000
12,819
667
2,504
391
2,606
18,987
2015
£’000
8,541
3,882
14,720
9,388
1,671
38,202
2016
£’000
102,149
(34,733)
(37,823)
(17,946)
9,656
21,303
2015
£’000
146,603
(31,752)
(31,959)
(11,431)
10,710
82,171
The above trade receivables, other receivables and cash are predominately held in the functional currency of the relevant entity, with
the exception of £2,702,000 of Euro-denominated 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 borrowings by the Company in respect of its hedging activity.
The ageing of trade receivables past due, but not impaired, at the end of the year was:
Past due 0–1 month
Past due 1–2 months
Past due more than 2 months
Balance at the end of the year
Movements in the provision for impairment of trade receivables during the year were:
Balance at the beginning of the year
Changes in amounts provided
Amounts utilised
Balance at the end of the year
Liquidity risk
2016
£’000
16,033
5,345
6,998
28,376
2016
£’000
2,964
919
(962)
2,921
2015
£’000
16,636
5,163
2,372
24,171
2015
£’000
2,979
509
(524)
2,964
The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its
liabilities when due, without incurring unacceptable losses or risking damage to the Group’s reputation. The Group uses monthly cash
flow forecasts to monitor cash requirements.
In respect of net cash, the carrying value approximates to fair value because of the short maturity of the deposits and borrowings.
Interest rates are floating and based on libor/libid, which can change over time, affecting the Group’s interest income. An increase of
1% in interest rates would result in an increase in interest income of approximately £160,000.
The market value of forward exchange contracts is determined by reference to market data.
GovernanceShareholder informationStrategic reportFinancial statements 118
Notes (continued)
20. Financial instruments (continued)
The contractual maturities of financial liabilities at the year end were:
Year ended 30th June 2016
Trade payables
Other payables
Provisions
Forward exchange contracts
Year ended 30th June 2015
Trade payables
Overdraft
Other payables
Provisions
Forward exchange contracts
The maturities of non-current other receivables at the year end were:
Receivable between 1 and 2 years
Receivable between 2 and 5 years
Market risk
Contractual cash flows
Carrying amount
£’000
22,379
18,345
2,375
70,639
113,738
Carrying amount
£’000
21,154
9,975
28,561
1,715
3,929
65,334
Up to 1 year
£’000
22,379
18,345
2,375
19,987
63,086
Up to 1 year
£’000
21,154
9,975
27,972
1,715
764
61,580
1–2 years
£’000
–
–
–
22,801
22,801
1–2 years
£’000
–
–
589
–
863
1,452
2016
£’000
76
–
76
2–5 years
£’000
–
–
–
27,851
27,851
2–5 years
£’000
–
–
–
–
2,302
2,302
2015
£’000
6,295
4,209
10,504
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.
Exchange rates and sensitivity analysis
The Group has hedged a significant proportion of its forecasted US Dollar, Euro and Japanese Yen 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 Euro cent change and a one Japanese Yen 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.
2016
2015
Currency
US Dollar
Euro
Japanese Yen
Average US Dollar forward contract rates
Average Euro forward contract rates
Average Japanese Yen forward contract rates
Increase in
group profit for
one cent or one
Yen movement
£’000
350
60
110
Year end
exchange
rate
1.57
1.41
192
Year end
exchange
rate
1.34
1.20
137
Average
exchange
rate
1.47
1.33
171
1.58
1.23
125
Average
exchange
rate
1.57
1.32
182
1.54
1.17
121
Financial statementsRenishaw plc Annual report and accounts 2016 119
20. Financial instruments (continued)
The Company has US Dollar, Japanese Yen and Euro forward contracts which mature after the balance sheet date. The fair value of
these contracts at the year end resulted in a loss carried forward of £56,460,000 (2015: profit £17,171,000) (see note 19).
The nominal amounts of foreign currencies relating to these forward contracts are, in Sterling terms:
US Dollar
Euro
Japanese Yen
2016
£’000
354,416
132,013
81,581
2015
£’000
353,044
107,904
26,042
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 are noted in the treasury policies in the Financial review section of the
Strategic report.
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:
Currency
US Dollar
Euro
Japanese Yen
Net assets of
subsidiary
£’000
64,187
53,029
23,669
Currency
borrowing
£’000
43,187
42,606
22,159
Base borrowing
interest rate
%
0.7%
-0.3%
0.0%
The currency borrowings are short-term, with floating interest rates.
For the net assets of the overseas subsidiaries not hedged, a 1% change in exchange rates will affect reserves by approximately
£950,000.
Capital management
The Group defines capital as being the equity attributable to the owners of the Company, which is captioned on the Consolidated
balance sheet.
The Board’s policy is to maintain a strong capital base and to maintain a balance between significant returns to shareholders, with a
progressive dividend policy, whilst ensuring the security of the Group supported by a sound capital position. The Group may adjust
dividend payments due to changes in economic and market conditions which affect, or are anticipated to affect, group results.
21. Operating leases
The total of future minimum lease payments under non-cancellable operating leases (all of which relate to land and buildings in
subsidiaries) were:
Due in less than one year
Due between one and five years
Total future minimum lease payments
Lease payments recognised as an expense during the year were:
Total lease payments for the financial year
2016
£’000
3,165
6,239
9,404
2016
£’000
2,651
2015
£’000
2,309
4,913
7,222
2015
£’000
2,363
GovernanceShareholder informationStrategic reportFinancial statements 120
Notes (continued)
22. Capital commitments
Capital commitments at the end of the year, for which no provision has been made in the financial statements, were:
Authorised and committed
2016
£’000
17,783
2015
£’000
7,381
23. 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.
24. Related parties
Associates and other related parties had the following transactions and balances with the Group:
Purchased goods and services from the Group during the year
Sold goods and services to the Group during the year
Paid dividends to the Group during the year
Amounts owed to the Group at the year end
Amounts owed by the Group at the year end
Loans owed to the Group at the year end
There were no bad debts written off during the year (2015: £nil).
2016
£’000
640
8,573
310
264
411
4,366
2015
£’000
1,288
8,648
110
525
499
3,048
Financial statementsRenishaw plc Annual report and accounts 2016 Company balance sheet
at 30th June 2016
Assets
Property, plant and equipment
Intangible assets
Investments in subsidiaries
Investments in associates
Deferred tax assets
Derivatives
Total non-current assets
Current assets
Inventories
Trade receivables
Other receivables
Derivatives
Pension scheme cash escrow account
Cash and cash equivalents
Total current assets
Current liabilities
Trade payables
Overdraft
Current tax
Provisions
Derivatives
Other payables
Total current liabilities
Net current assets
Non-current liabilities
Employee benefits
Deferred tax liabilities
Derivatives
Other payables
Total non-current liabilities
Total assets less total liabilities
Equity
Share capital
Share premium
Cash flow hedging reserve
Retained earnings
Total equity
121
notes
C.26
C.27
C.28
C.29
C.30
12
C.31
C.32
12
13
C.33
12
C.34
C.35
C.30
12
C.36
C.37
19
2016
£’000
2015
£’000
137,677
46,786
309,023
1,468
25,102
76
520,132
60,051
146,994
8,053
859
15,279
1,921
233,157
16,955
10,735
762
1,787
19,987
86,072
136,298
117,459
33,684
319,257
1,184
9,172
10,504
491,260
49,740
116,702
5,465
14,889
14,731
57,395
258,922
14,623
–
5,337
1,294
764
58,556
80,574
96,859
178,348
62,121
12,051
50,652
–
124,824
45,860
15,011
3,165
589
64,625
492,167
604,983
14,558
42
(56,460)
534,027
492,167
14,558
42
17,171
573,212
604,983
These financial statements were approved by the Board of directors on 27th July 2016 and were signed on its behalf by:
Sir David R McMurtry
Directors
A C G Roberts
GovernanceShareholder informationStrategic reportFinancial statements 122
Company statement of changes in equity for the year ended 30th June 2016
Year ended 30th June 2015
Balance at 1st July 2014
Profit for the year
Other comprehensive income and expense (net of tax)
Remeasurement of defined benefit pension scheme liabilities
Changes in fair value of cash flow hedges
Total other comprehensive income and expense
Total comprehensive income and expense
Dividends paid
Balance at 30th June 2015
Year ended 30th June 2016
Profit for the year
Other comprehensive income and expense (net of tax)
Remeasurement of defined benefit pension scheme liabilities
Changes in fair value of cash flow hedges
Total other comprehensive income and expense
Total comprehensive income and expense
Share
capital
£’000
14,558
Share
premium
£’000
42
Cash flow
hedging
reserve
£’000
25,580
Retained
earnings
£’000
449,290
Total
£’000
489,470
–
–
–
–
–
–
–
–
–
–
–
161,945
161,945
–
(8,409)
(8,409)
(7,182)
–
(7,182)
(7,182)
(8,409)
(15,591)
(8,409) 154,763
146,354
–
14,558
–
42
–
17,171
(30,841)
573,212
(30,841)
604,983
–
–
–
–
–
–
–
–
–
–
–
8,616
8,616
–
(73,631)
(73,631)
(13,954)
–
(13,954)
(13,954)
(73,631)
(87,585)
(73,631)
(5,338)
(78,969)
Dividends paid
Balance at 30th June 2016
–
14,558
–
42
–
(33,847)
(56,460) 534,027
(33,847)
492,167
Financial statementsRenishaw plc Annual report and accounts 2016 123
Notes to the Company financial statements
C.25. Accounting policies
The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the
financial statements of the Company.
Basis of preparation
The financial statements were prepared in accordance with Financial Reporting Standard 101 “Reduced Disclosure
Framework” (FRS 101). The Company’s shareholders were notified of, and did not object to, the use of the EU-adopted IFRS
disclosure exemptions.
In preparing these financial statements, the Company applies the recognition, measurement and disclosure requirements of
International Financial Reporting Standards as adopted by the EU (adopted IFRS), but makes amendments where necessary in
order to comply with the Companies Act 2006 and has set out below where advantage of the FRS 101 disclosure exemptions has
been taken.
In the transition to FRS 101, the Company has applied IFRS 1 whilst ensuring that its assets and liabilities are measured in compliance
with FRS 101. An explanation of how the transition to FRS 101 has affected the reported financial position and financial performance
of the Company is provided in note C.40.
The Company has applied the exemptions available under FRS 101 in respect of the following disclosures:
– A cash flow statement and related notes.
– Comparative period reconciliations for share capital, tangible fixed assets and intangible fixed assets.
– Disclosures in respect of transactions with wholly-owned subsidiaries.
– Disclosures in respect of capital management.
– The effects of new but not yet effective IFRS.
– An additional balance sheet for the beginning of the earliest comparative period, following the reclassification of items in the financial
statements (see note C.40).
– Disclosures in respect of the compensation of key management personnel.
As the consolidated financial statements of Renishaw plc include the equivalent disclosures, the Company has also taken the
exemptions under FRS 101 available in respect of certain disclosures required by IFRS 13 “Fair value measurement” and the
disclosures required by IFRS 7 “Financial instruments disclosures”.
The financial statements have been prepared on the historical cost basis, except for the revaluation of financial instruments.
Historical cost is generally based on the fair value of the consideration given in exchange for the assets. The principal accounting
policies are set out below.
Under section 408 of the Companies Act 2006 the Company is exempt from the requirement to present its own profit and
loss account.
Investments
Investments in subsidiary and associated undertakings are stated at cost less any provision for permanent impairment losses.
Property, plant and equipment, and depreciation
Property, plant and equipment assets are stated at cost less accumulated depreciation. Depreciation is provided to write off the cost
of assets less their estimated residual value on a straight-line basis over their estimated useful economic lives as follows:
Freehold buildings – 50 years
Plant and equipment – 3 to 25 years
Motor vehicles – 3 to 4 years
No depreciation is provided on freehold land.
Inventories
Inventories are valued at the lower of cost and net realisable value. Cost comprises direct materials and labour plus overheads
applicable to the stage of manufacture reached.
Research and development
Expenditure on research activities is recognised in the income statement as an expense as incurred. Expenditure on development
activities is capitalised if the product or process is technically and commercially feasible and the Company intends and has the
technical ability and sufficient resources to complete development, future economic benefits are probable and the Company can
measure reliably the expenditure attributable to the intangible asset during its development.
GovernanceShareholder informationStrategic reportFinancial statements 124
Notes to the Company financial statements (continued)
C.25. Accounting policies (continued)
Taxation
The charge for taxation is based on the Company’s profit for the year. 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.
Deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will be recovered.
Employee benefits
The Company operated a contributory pension scheme, of the defined benefit type up to 5th April 2007, after which this scheme was
closed for future accruals to existing members and was closed to new members. Since 5th April 2007, the Company has operated a
defined contribution scheme.
The scheme is administered by trustees who are independent of the Company finances.
Pension scheme assets in the defined benefit scheme are 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 to the 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 other finance income.
The pension scheme’s surplus, to the extent that it is considered recoverable, or deficit is recognised in full and presented on the face
of the balance sheet, along with the related deferred tax.
Accruals are made for holiday pay, based on a calculation of the number of days holiday earned during the year, but not yet taken and
also for the annual performance bonus.
Warranty on the sale of products
The Company provides a warranty from the date of purchase, except for those products that we install where the warranty starts
from the date of completion of the installation. This is typically for a 12-month period, although up to three years is given for a small
number of products. A warranty provision is included in the 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
income statement at the same time as the hedged transaction. The ineffective part of any gain or loss is recognised in the income
statement immediately.
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 income statement.
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 20 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 next 12 months. Accordingly, they continue to adopt the going concern basis in preparing the
Annual report and accounts.
Financial statementsRenishaw plc Annual report and accounts 2016 125
Total
£’000
208,952
33,755
–
(1,073)
241,634
91,493
13,384
(920)
103,957
C.26. Property, plant and equipment
Year ended 30th June 2016
Cost
At 1st July 2015
Additions
Transfers
Disposals
At 30th June 2016
Depreciation
At 1st July 2015
Charge for the year
Released on disposals
At 30th June 2016
Net book value
At 30th June 2016
At 30th June 2015
Freehold
land and
buildings
£’000
78,975
1,061
2,141
–
82,177
12,291
1,431
–
13,722
68,455
66,684
Plant and
equipment
£’000
118,379
16,868
14,116
(684)
148,679
76,702
11,311
(531)
87,482
61,197
41,677
Motor
vehicles
£’000
Assets in the
course of
construction
£’000
7,900
14,703
(16,257)
–
6,346
–
–
–
–
3,698
1,123
–
(389)
4,432
2,500
642
(389)
2,753
1,679
1,198
6,346
7,900
137,677
117,459
At 30th June 2016, properties with a net book value of £66,485,000 (2015: £45,033,000) were subject to a fixed charge to secure
the UK defined benefit pension scheme liabilities. See note 13 for additional information.
Additions to assets in the course of construction comprise:
Freehold land and buildings
Plant and equipment
C.27. Intangible assets
Year ended 30th June 2016
Cost
At 1st July 2015
Additions
Re-allocation on transfer of business
Disposals
At 30th June 2016
Depreciation
At 1st July 2015
Charge for the year
Released on disposals
At 30th June 2016
Net book value
At 30th June 2016
At 30th June 2015
2016
£’000
4,398
10,305
14,703
2015
£’000
13,556
13,907
27,463
Internally
generated
development
costs
£’000
Software
licences and
intellectual
property
£’000
89,475
12,246
–
(258)
101,463
58,824
9,116
(258)
67,682
33,781
30,651
15,215
1,954
–
(249)
16,920
12,182
1,086
(48)
13,220
3,700
3,033
Goodwill
£’000
–
–
9,305
–
9,305
–
–
–
–
9,305
–
Total
£’000
104,690
14,200
9,305
(507)
127,688
71,006
10,202
(306)
80,902
46,786
33,684
In 2013 the trade and net assets of a subsidiary undertaking were transferred to the Company at their book value which was less than
their fair value. The cost of the Company’s investment in that subsidiary undertaking reflected the underlying fair value of its net assets
and goodwill at the time of acquisition.
GovernanceShareholder informationStrategic reportFinancial statements 126
Notes to the Company financial statements (continued)
C.27. Intangible assets (continued)
As a result of this transfer, the value of the Company’s investment in that subsidiary undertaking fell below the amount at which it was
stated in the Company’s accounting records. Schedule 1 to the Companies Act 2006 The Large and Medium-sized Companies and
Groups (Accounts and Reports) Regulations 2008 (SI 2008 No. 410) requires that the investment be written down accordingly and
that the amount be charged as a loss in the Company’s profit and loss account. However, the directors considered that, as there was
no overall loss to the Company, it failed to give a true and fair view to charge that diminution to the Company’s profit and loss account
for the year and was instead re-allocated to goodwill and the identifiable net assets transferred. The resultant goodwill recorded in the
Company balance sheet was £9,305,000.
C.28. Investments in subsidiaries
Balance at the beginning of the year
Impairment
Re-allocation on transfer of business (see note C.27)
Investments made during the year
Balance at the end of the year
2016
£’000
319,257
(929)
(9,305)
–
309,023
2015
£’000
316,772
–
–
2,485
319,257
During the year, management reviewed the carrying value of certain investments in subsidiaries and, as a result, included an
impairment write-off of £929,000 in the current year income statement.
The following are the subsidiary undertakings of Renishaw plc as at 30th June 2016, all of which are wholly-owned, unless otherwise
stated. 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 subsidiary undertaking is 30th June unless otherwise stated.
The shareholdings in all the subsidiary undertakings are in the ordinary share capital of those undertakings.
Company
Renishaw International Limited
Renishaw (Ireland) Limited (Republic of Ireland)*
Renishaw S.A.S. (France)*
itp GmbH (Germany)*
Wotton Travel Limited
Renishaw Diagnostics Limited (92.4%) (Scotland)
Principal activities
Overseas holding and investment company.
Manufacture and sale of advanced precision metrology and
inspection equipment.
Service, distribution, research and development of
group products.
Manufacture and sale of advanced precision metrology and
inspection equipment.
Travel agency.
Design, manufacture and sale of molecular diagnostics and
surface-enhanced Raman spectroscopy products.
Renishaw Mayfield S.A. (75%) (Switzerland)*
Marketing of surgical robots for neurosurgical applications.
Renishaw Mayfield SARL (75%) (France)*
Renishaw Metrology Systems Limited (India)* (31st March)
MTT Technologies Limited
Manufacture and sale of surgical robots for
neurosurgical applications.
Design, manufacture and sale of advanced precision metrology
and inspection equipment.
Design, manufacture and sale of additive manufacturing and
rapid prototyping systems.
Renishaw Software Limited
Development and sale of software solutions.
R&R Fixtures, LLC (USA)* (31st December)
Manufacture and sale of fixturing products.
Renishaw Advanced Consulting & Engineering, Inc. (USA)*
(31st December)
Renishaw Tehnicni Inženiring d.o.o. (Slovenia)
Supply of dimensional measurement products and services.
Design and procurement of application-specific integrated
circuits (ASICs).
Financial statementsRenishaw plc Annual report and accounts 2016
127
C.28. Investments in subsidiaries (continued)
Company – principal activity is the service and distribution of group products
Renishaw, Inc. (USA)*
Renishaw GmbH (Germany)*
Renishaw Ibérica S.A.U. (Spain)*
Renishaw KK (Japan)*
Renishaw S.p.A. (Italy)*
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)*
Renishaw AB (Sweden)*
OOO Renishaw (Russia)* (31st December)
Renishaw (Austria) GmbH (Austria)*
Renishaw (Korea) Limited (South Korea)*
Renishaw (Canada) Limited (Canada)*
Renishaw (Israel) Limited (Israel)*
Renishaw (Singapore) Pte Limited (Singapore)*
Renishaw (Taiwan) Inc. (Taiwan)*
Renishaw ApS (Denmark)*
Renishaw Hungary Kft (Hungary)*
Renishaw (Shanghai) Trading Company Limited (People’s
Republic of China)* (31st December)
Renishaw (Shanghai) Management Company Limited (People’s
Republic of China)* (31st December)
Renishaw México, S. de R.L. de C.V. (Mexico)*
Renishaw Oy (Finland)*
Company – non-trading (holding or dormant companies)
MTT Investments Limited
MTT Technologies srl (Italy)*
MTT Technologies Inc. (USA)*
Measurement Devices Limited (Scotland)
Measurement Devices US LLC (USA)*
Renishaw R&R Inc. (USA)*
Renishaw Metrology Limited
Renishaw PT Limited
Renishaw Transducer Systems 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.29. Investments in associates
Movements during the year were:
Balance at the beginning of the year
Additions
Balance at the end of the year
2016
£’000
1,184
284
1,468
2015
£’000
704
480
1,184
The following are the associated undertakings of Renishaw plc at 30th June 2016. 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.
GovernanceShareholder informationStrategic reportFinancial statements 128
Notes to the Company financial statements (continued)
C.29. Investments in associates (continued)
Company
RLS merilna tehnika d.o.o. (50%) (Slovenia)*
Metrology Software Products Limited (50%)
Principal activities
Manufacture and sale of angular magnetic encoder ICs, rotary
and linear encoders, interpolator ICs, and photodiode arrays.
Design and sale of precision software and part
manufacturing solutions.
HiETA Technologies Limited (24.9%, Ordinary-A shares)
(31st December)
Design and provision of additive manufacturing solutions and
heat exchangers.
* Equity held by a subsidiary undertaking.
C.30. Deferred tax
Balances at the end of the year were:
Property, plant and equipment
Intangible assets
Pension scheme
Other
Balance at the end of the year
Movements during the year were:
Assets
£’000
–
–
11,803
13,299
25,102
2016
Liabilities
£’000
(5,633)
(6,418)
–
–
(12,051)
Net
£’000
(5,633)
(6,418)
11,803
13,299
13,051
Assets
£’000
–
–
9,172
–
9,172
Balance at the beginning of the year
Movements during the year
Balance at the end of the year
C.31. Inventory
An analysis of inventory at the end of the year was:
Raw materials
Work in progress
Finished goods
Balance at the end of the year
C.32. Trade receivables
An analysis of trade receivables at the end of the year was:
Trade receivables
Amounts owed by group undertakings
Amounts owed by associated undertakings
Balance at the end of the year
2015
Liabilities
£’000
(4,607)
(6,130)
–
(4,274)
(15,011)
2016
£’000
(5,839)
18,890
13,051
2016
£’000
24,079
21,801
14,171
60,051
2016
£’000
10,959
131,405
4,630
146,994
Net
£’000
(4,607)
(6,130)
9,172
(4,274)
(5,839)
2015
£’000
(8,089)
2,250
(5,839)
2015
£’000
19,124
19,122
11,494
49,740
2015
£’000
11,908
101,221
3,573
116,702
Financial statementsRenishaw plc Annual report and accounts 2016 C.33. Provisions
Provisions comprised:
Warranty provision
Movements during the year were:
Balance at the beginning of the year
Created in the year
Utilised in the year
Balance at the end of the year
129
2016
£’000
1,787
2016
£’000
1,294
1,338
(845)
493
1,787
2015
£’000
1,294
2015
£’000
948
1,202
(856)
346
1,294
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.
C.34. Other payables (current)
An analysis of other payables due within one year at the end of the year was:
Amounts owed to group undertakings
Amounts owed to associated undertakings
Other taxes and social security
Other creditors
Balance at the end of the year
2016
£’000
82,291
209
2,736
836
86,072
2015
£’000
43,138
297
2,639
12,482
58,556
C.35. Pension scheme
The Company operated a defined benefit pension scheme, which, in April 2007, ceased any future accrual for current members
and was closed to new members. Employees of the Company are now covered by a defined contribution scheme. See note 13
regarding details of charges relating to the UK defined benefit pension scheme liabilities.
The total pension cost of the Company for the year was £12,915,000 (2015: £11,146,000), of which £184,000 (2015: £178,000)
related to directors. The latest full actuarial valuation of the scheme was carried out at September 2015 and updated to 30th June
2016 by a qualified independent actuary.
The major assumptions used by the actuary for the scheme were:
Rate of increase in pension payments
Discount rate
Inflation rate (RPI)
Inflation rate (CPI)
Retirement age
30th June 2016
3.2%
3.2%
3.3%
2.3%
64
30th June 2015
3.4%
4.0%
3.6%
2.6%
64
30th June 2014
3.5%
4.4%
3.7%
2.7%
64
The mortality assumption adopted for 2016 is S2PMA and S2PFA tables, CMI (core) 2014 model with long-term improvements of
0.2% per annum.
GovernanceShareholder informationStrategic reportFinancial statements 130
Notes to the Company financial statements (continued)
C.35. Pension scheme (continued)
The assets and liabilities in the scheme were:
Market value of assets:
Equities
Bonds and cash
Actuarial value of liabilities
Deficit in the scheme
Deferred tax thereon
30th June
2016
£’000
% of
total
assets
30th June
2015
£’000
% of
total
assets
30th June
2014
£’000
% of
total
assets
30th June
2013
£’000
% of
total
assets
30th June
2012
£’000
% of
total
assets
131,107
474
131,581
(193,702)
(62,121)
11,803
100
–
100
–
–
–
125,769
320
126,089
(171,949)
(45,860)
9,172
100
–
100
–
–
–
116,805
198
117,003
(154,279)
(37,276)
7,455
100
–
100
–
–
–
106,117
301
106,418
(132,685)
(26,267)
6,041
100
–
100
–
–
–
89,653
154
89,807
(126,946)
(37,139)
8,913
100
–
100
–
–
–
The history of experience gains and losses is:
Experience gains and losses on scheme liabilities
amount (£’000)
percentage of present value of scheme liabilities
Total amount recognised in the statement of
comprehensive income and expense
amount (£’000)
percentage of present value of scheme liabilities
Year ended
30th June 2016
Year ended
30th June 2015
Year ended
30th June 2014
Year ended
30th June 2013
Year ended
30th June 2012
6,609
3%
–
–
2,828
2%
–
–
–
–
(16,666)
(9%)
(8,981)
(5%)
(997)
(1%)
(1,230)
(1%)
(5,836)
(5%)
The movements in the scheme were:
Year ended 30th June 2016
Deficit in scheme at the beginning of the year
Contributions
Interest on pension scheme
Remeasurement gain/(loss)
Benefits paid
Deficit in scheme at the end of the year
Year ended 30th June 2015
Deficit in scheme at the beginning of the year
Contributions
Interest on pension scheme
Remeasurement gain/(loss)
Benefits paid
Deficit in scheme at the end of the year
Assets
£’000
126,089
1,796
5,030
1,137
(2,471)
131,581
Assets
£’000
117,003
1,649
5,140
4,327
(2,030)
126,089
Liabilities
£’000
(171,949)
–
(6,421)
(17,803)
2,471
(193,702)
Liabilities
£’000
(154,279)
–
(6,392)
(13,308)
2,030
(171,949)
Total
£’000
(45,860)
1,796
(1,391)
(16,666)
–
(62,121)
Total
£’000
(37,276)
1,649
(1,252)
(8,981)
–
(45,860)
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 scheme obligation is around 24 years.
Financial statementsRenishaw plc Annual report and accounts 2016 131
C.35. Pension scheme (continued)
The analysis of the amount recognised in the statement of comprehensive income and expense was:
Actuarial (loss)/gain arising from:
– Changes in demographic assumptions
– Changes in financial assumptions
– Experience adjustment
Return on plan assets excluding interest income
Adjustment to liabilities for IFRIC 14
Total recognised in the statement of comprehensive income and expense
2016
£’000
2015
£’000
1,411
(20,623)
6,609
1,137
(5,200)
(16,666)
242
(11,350)
–
4,327
(2,200)
(8,981)
C.36. Other payables (non-current)
The deferred consideration in the previous year of £589,000 was in respect of investments in subsidiaries, which was payable
between one and two years. All outstanding deferred consideration is now shown within other payables (current).
C.37. Share capital
Allotted, called-up and fully paid 72,788,543 ordinary shares of 20p each
2016
£’000
14,558
2015
£’000
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.
C.38. Related parties
During the year, related parties, these being Renishaw Diagnostics Limited, Renishaw Mayfield SARL, Renishaw Mayfield S.A. and the
Group’s associates (see note 10), had the following transactions and balances with the Company:
Purchased goods and services from the Company during the year
Sold goods and services to the Company during the year
Paid dividends to the Company during the year
Amounts owed to the Company at the year end
Amounts owed by the Company at the year end
Loans owed to the Company at the year end
2016
£’000
1,049
3,963
160
264
689
16,932
2015
£’000
1,513
3,145
110
525
297
12,653
All transactions were on an arm’s length basis. There were no bad debts written off during the year (2015: £nil).
C.39. Capital commitments
Capital commitments at the end of the year, for which no provision has been made in the financial statements, were:
Authorised and committed
2016
£’000
1,620
2015
£’000
6,328
C.40. Explanation of transition to FRS 101
As stated in note C.25, these are the Company’s first financial statements prepared in accordance with FRS 101.
The accounting policies set out in note C.25 have been applied in preparing the financial statements for the year ended 30th June
2016, the comparative information presented in these financial statements for the year ended 30th June 2015 and in the preparation
of an opening FRS 101 balance sheet at 1st July 2014.
In preparing its FRS 101 balance sheet, the Company has adjusted amounts reported previously in financial statements prepared in
accordance with its previous basis of accounting (UK GAAP). An explanation of how the transition from UK GAAP to FRS 101 has
affected the Company’s financial position and financial performance is set out in the following table and the accompanying notes:
GovernanceShareholder informationStrategic reportFinancial statements 132
Notes to the Company financial statements (continued)
C.40. Explanation of transition to FRS 101 (continued)
At 1st July 2014
Effect of
transition to
FRS 101
£’000
At 30th June 2015
FRS 101
£’000
UK GAAP
£’000
Effect of
transition to
FRS 101
£’000
notes
UK GAAP
£’000
Assets
Property, plant and equipment
Intangible assets
Investments in subsidiaries
Investments in associates
Deferred tax assets
Derivatives
Total non-current assets
Current assets
Inventories
Trade receivables
Other receivables
Derivatives
Pension scheme cash escrow account
Cash and cash equivalents
Total current assets
Current liabilities
Trade payables
Current tax
Provisions
Derivatives
Other payables
Total current liabilities
Net current assets
Non-current liabilities
Employee benefits
Deferred tax liabilities
Derivatives
Other payables
Total non-current liabilities
(i)
(ii)
(iii)
(iv)
(iv)
(iv)
(iv)
(iv)
(v)
(vi)
(iv)
(iv)
98,567
–
316,772
704
–
–
416,043
37,567
139,111
5,250
–
9,541
27,706
219,175
13,938
2,100
948
–
110,314
127,300
(2,988)
30,805
–
–
7,455
18,644
53,916
–
(31,992)
–
13,348
–
–
(18,644)
–
–
–
–
–
–
95,579
30,805
316,772
704
7,455
18,644
469,959
37,567
107,119
5,250
13,348
9,541
27,706
200,531
13,938
2,100
948
–
110,314
127,300
120,492
–
319,257
1,184
–
–
440,933
49,740
142,095
5,465
–
14,731
57,395
269,426
14,623
5,337
1,294
–
59,320
80,574
(3,033)
33,684
–
–
9,172
10,504
50,327
–
(25,393)
–
14,889
–
–
(10,504)
–
–
–
764
(764)
–
FRS 101
£’000
117,459
33,684
319,257
1,184
9,172
10,504
491,260
49,740
116,702
5,465
14,889
14,731
57,395
258,922
14,623
5,337
1,294
764
58,556
80,574
91,875
(18,644)
73,231
188,852
(10,504)
178,348
23,421
8,169
–
900
32,490
13,855
7,375
17
(17)
21,230
37,276
15,544
17
883
53,720
28,528
7,247
–
3,754
39,529
17,332
7,764
3,165
(3,165)
25,096
45,860
15,011
3,165
589
64,625
Total assets less total liabilities
475,428
14,042
489,470
590,256
14,727
604,983
Equity
Share capital
Share premium
Cash flow hedging reserve
Retained earnings
Total equity
14,558
42
25,580
435,248
475,428
–
–
–
14,042
14,042
14,558
42
25,580
449,290
489,470
(vii)
14,558
42
17,171
558,485
590,256
–
–
–
14,727
14,727
14,558
42
17,171
573,212
604,983
Financial statementsRenishaw plc Annual report and accounts 2016 133
C.40. Explanation of transition to FRS 101 (continued)
Notes to the table of adjustments:
(i) Property, plant and equipment
Under IFRS, software assets, with a net book value of £2,988,000 at 1st July 2014 and £3,033,000 at 30th June 2015, which were
classified as tangible fixed assets under UK GAAP, have been re-classified as intangible assets.
(ii) Intangible assets
Under UK GAAP, all research and development costs were charged to the profit and loss account in the year it which they were
incurred. Under IFRS, certain expenditure on development activities has been capitalised as intangible assets. The amount
capitalised, net of accumulated amortisation, was £27,817,000 at 1st July 2014 and £30,651,000 at 30th June 2015.
(iii) Deferred tax asset
The deferred tax asset under IFRS comprises deferred tax on the defined pension scheme liability of £7,455,000 at 1st July 2014 and
£9,172,000 at 30th June 2015.
(iv) Derivatives
Under UK GAAP, derivatives, comprising the fair value of outstanding forward contracts, were included in debtors and creditors, either
within one year or due after more than one year (see also note 12). Under IFRS these amounts have been re-classified into separate
lines on the face of the balance sheet.
(v) Employee benefits
Under UK GAAP, the deficit on the Company’s defined benefit pension scheme was shown net of deferred tax. Under IFRS, the
net amount of £23,421,000 has been increased by £5,855,000 at 1st July 2014 to be shown gross, as required by IFRS. At 30th
June 2015, the net amount of £28,528,000 was increased by £7,132,000. Also, under IFRIC 14, the pension scheme liability was
increased by £8,000,000, with a deferred tax asset of £1,600,000, at 1st July 2014 and increased by £10,200,000, with a deferred
tax asset of £2,040,000, at 30th June 2015 (see note 13).
(vi) Deferred tax liability
The adjustments to the deferred tax liability under IFRS comprise:
(a) £5,565,000 at 1st July 2014 and £6,130,000 at 30th June 2015, in respect of the capitalised development costs noted in (ii)
above; and
(b) £1,810,000 at 1st July 2014 and £1,634,000 at 30th June 2015 in respect of property on which industrial buildings allowances
were previously claimed, which was excluded under UK GAAP.
Also, the deferred tax liability has been adjusted for the re-allocation of a deferred tax asset as noted in (iii) above.
(vii) Retained earnings
Under IFRS, retained earnings have been adjusted as follows:
Capitalised development costs, net of deferred tax
Inclusion of deferred tax for industrial buildings allowance
IFRIC 14 adjustment to pension scheme deficit
Total adjustment to retained earnings
1st July 2014
£’000
22,252
(1,810)
(6,400)
14,042
30th June 2015
£’000
24,521
(1,634)
(8,160)
14,727
GovernanceShareholder informationStrategic reportFinancial statements 134
10 year financial record
Results
2016
£’000
2015
£’000
note
2014
£’000
note
2013
£’000
2012
£’000
note
2011
£’000
note
2010
£’000
note
2009
£’000
note
2008
£’000
note
2007
£’000
Overseas revenue
413,390 469,221 331,682 326,213 313,007 273,989 170,957 159,988 189,137 169,094
UK and Ireland revenue
23,208
25,499
23,816
20,668
18,885
14,761
10,650
11,259
12,020
11,789
Total revenue
Operating profit
Profit before tax
Taxation
436,598 494,720 355,498 346,881 331,892 288,750 181,607 171,247 201,157 180,883
79,513 143,924
70,388
79,071
83,188
79,286
28,095
5,991
37,335
29,729
80,036 144,196
70,106
79,193
86,046
80,410
28,725
8,843
41,715
32,672
11,465
22,850
10,720
15,046
17,008
16,345
5,745
2,105
8,309
6,532
Profit for the year
68,571 121,346
59,386
64,147
69,038
64,065
22,980
6,738
33,406
26,140
Capital employed
Share capital
Share premium
Reserves
Total equity
Statistics
Overseas revenue
as a percentage of
total revenue
Adjusted earnings
per share
2016
£’000
2015
£’000
2014
£’000
2013
£’000
2012
£’000
2011
£’000
2010
£’000
2009
£’000
2008
£’000
2007
£’000
14,558
14,558
14,558
14,558
14,558
14,558
14,558
14,558
14,558
14,558
42
42
42
42
42
42
42
42
42
42
366,785 413,918 336,163 262,119 227,799 187,118 144,021 129,162 151,725 153,400
381,385 428,518 350,763 276,719 242,399 201,718 158,621 143,762 166,325 168,000
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
94.7% 94.8% 93.3% 94.0% 94.3% 94.9% 94.1% 93.4% 94.0% 93.5%
94.9p
167.5p
82.3p
41.2p
88.9p
40.0p
95.6p
38.5p
88.5p
35.0p
32.3p
17.6p
9.6p
45.9p
35.9p
7.76p
25.39p
22.87p
Proposed dividend
48.0p
46.5p
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).
Shareholder informationRenishaw plc Annual report and accounts 2016 135
Shareholder information
Ordinary shares
The Company has one class of ordinary 20p shares listed
on the London Stock Exchange under code RSW, ISIN
number GB0007323586.
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:
Registrars and transfer office
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
Telephone: 0371 384 2169 (UK callers)
+44 121 415 7047 (international callers)
Website: www.shareview.co.uk
Calls are charged at the standard geographic rate. Calls outside
the UK will be charged at the applicable international rate.
Lines open 8:30am to 5:30pm (UK time), Monday to Friday
(excluding English and Welsh public holidays).
AGM
The AGM is held at the Company’s offices and is open for
attendance by all shareholders. The 2016 AGM will be held
on Thursday 13th October at the Company’s headquarters at
New Mills, Wotton-under-Edge, Gloucestershire GL12 8JR at
12 noon. The Notice of meeting is set out in a separate circular
to shareholders. Shareholders holding shares in the Company
through a nominee service should arrange to be appointed
as a corporate representative or a proxy in respect of their
shareholding in order to attend and vote at the meeting.
Financial reports
The Annual report, together with copies of previous financial
reports, is available at www.renishaw.com. The interim results
and the preliminary announcement of the full year’s results are
published on our website promptly after they have been released
through a Regulatory Information Service.
Financial calendar
Annual general meeting
13th October 2016
Half year
31st December 2016
Half year results
January 2017
Trading update
May 2017
Final dividend
Ex-div date 15th September 2016
Record date 16th September 2016
Payment date 17th October 2016
Interim dividend (provisional)
Ex-div date 9th March 2017
Record date 10th March 2017
Payment date 10th April 2017
GovernanceShareholder informationStrategic reportFinancial statements 136
Shareholder notes
Registration details and Company Secretary
Company Secretary and registered office
Norma Tang
New Mills
Wotton-under-Edge
Gloucestershire
GL12 8JR
Registered number: 1106260
England and Wales
Telephone: +44 (0)1453 524524
Facsimile: +44 (0)1453 524401
email: companysecretary@renishaw.com
For the latest investor information and news,
visit www.renishaw.com/investor
Auditor and corporate advisors
Auditor
KPMG LLP
Solicitors
Norton Rose Fulbright LLP
Burges Salmon LLP
Stockbrokers
UBS
Principal bankers
Lloyds Bank plc
Share fraud
Renishaw has received reports that our shareholders have
received unsolicited calls from overseas firms offering to
purchase their shares for a price in excess of the current market
price in order to mount a hostile takeover bid. Please be aware
that this is likely to be a scam, with the intention of obtaining
payment from shareholders of a bond or legal fee in order
to secure the share transaction, which never materialises, or
obtaining an option to purchase shares with no fixed transfer
date. There are other types of share fraud or “boiler room scams”
and therefore if you receive any unsolicited investment advice the
Financial Conduct Authority (FCA) advises the following:
• make sure you get the correct name of the person and
organisation and make a record of any other information
they give;
• check that they are properly authorised by the FCA before
getting involved by visiting www.fca.org.uk/register and
contacting the firm using the details on the register;
• the FCA also maintains a list of unauthorised overseas firms
who are targeting or have targeted UK investors and any
approach from such firms should be reported to the FCA so
that the information can be kept updated;
• report the matter to the FCA on their consumer helpline
0800 111 6768 or using the share fraud reporting form available
at www.the-fca.org.uk/consumers/report-scam-unauthorised-
firm; and
• you could also contact the police via the national fraud
reporting centre Action Fraud on 0300 123 2040 or
email@actionfraud.org.uk. Action Fraud will be particularly
interested if you sent money to a bank account or other type
of money transfer.
Shareholder profile
Shareholdings
1 – 5,000
5,001 – 25,000
25,001 – 50,000
50,001 – 100,000
8
%
2.5
2.9
1.7
4.5
1 2
3
4
5
100,001 – 500,000 14.8
7
6
1
2
3
4
5
6
500,001 – 1,000,000
7 1,000,001 – 3,000,000
8.3
7.9
8 more than 3,000,000 57.4
3
Shareholdings
1 Directors
2 Individuals
3 Institutions
%
53.1
1.6
45.3
2
1
Shareholder informationRenishaw plc Annual report and accounts 2016 Design and production by Radley Yeldar | ry.com
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Renishaw plc
New Mills, Wotton-under-Edge,
Gloucestershire GL12 8JR
United Kingdom
T +44 (0) 1453 524524
F +44 (0) 1453 524401
E uk@renishaw.com
For more information visit:
www.renishaw.com