Renishaw plc
Annual Report and
Accounts 2017
Renishaw plc Annual report and accounts 2017
Strategic report
Introduction
Renishaw is a world-leading metrology company.
With our highly experienced team we are
confidently driving our future growth through
innovative and patented products and processes,
efficient high-quality manufacturing, and the ability
to provide local support in a growing number of
geographies and markets. 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 4,530 skilled and motivated
people, we continue to be at the leading edge
of technological innovation.
28
Our business sectors – Metrology
Our business sectors – Healthcare
Strategic report
01
Introduction
02 At a glance
04 Chairman’s statement
09 Our business model
10 Our markets
12
14 The aerospace market
16 The automotive market
18
20 The healthcare market
22 Our strategy
23 Key performance indicators
24 Our strategy in action
Our strategy in action
26
– Industrial metrology
Our strategy in action
– Focus on delivering solutions
Our strategy in action
– Strong market presence
Our strategy in action
– Efficient high-quality manufacturing
Our strategy in action – Continual research
creating strong market positions with
innovative products
36 Performance – Overview
38 Performance – Metrology
40 The consumer products market
42 The agriculture market
44 Performance – Healthcare
46 Performance – Financial review
50 Risk and risk management
52 Principal risks and uncertainties
54 Corporate social responsibility
56 Our strategy in action – People
64 The power generation market
30
34
32
International Sales and Marketing Board
Directors’ corporate governance report
Governance
Introduction
66
68
Board of directors
70 Executive Board
71
72
78 Nomination Committee report
79 Audit Committee report
83
94
97 Directors’ responsibilities
98
Independent auditor’s report
Directors’ remuneration report
Other statutory and regulatory disclosures
Financial statements
106 Consolidated income statement
107 Consolidated statement of comprehensive
income and expense
108 Consolidated balance sheet
109 Consolidated statement of changes
in equity
110 Consolidated statement of cash flow
111 Notes (forming part of the
financial statements)
135 Company balance sheet
136 Company statement of changes in equity
137 Notes to the Company financial statements
Shareholder information
148 10 year financial record
149 Shareholder information
151 Shareholder notes
For more information visit:
www.renishaw.com
All dates within this document refer to
financial years unless stated otherwise.
01
GovernanceFinancial statementsShareholder informationStrategic report Strategic report
At a glance
The Group has 77 locations in 35
countries from where we distribute and
support products for our global customer
base, with 95% of sales outside the UK.
USA
new 133,000 sq ft
facility near Chicago is now
complete and has been occupied.
2017 in numbers
£536.8m
Revenue
£109.1m
Adjusted profit before tax
£117.1m
Statutory profit before tax
52.0p
Total dividend
for the year
4,530
Number of employees
as at 30th June 2017
1,600+
Patents – continual innovation
in new technologies
Who we are
Renishaw is a world-leading metrology
company operating in two key business
areas, metrology and healthcare.
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,
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.
02
Mexico
nearing completion of a new
building that will provide
space for expansion.
North and
South America
Locations
11
Metrology revenue (£m)
£106.9m
Healthcare revenue (£m)
£6.7m
94%
6%
Renishaw plc Annual report and accounts 2017 Turkey
new subsidiary company
established.
Taiwan
new 11,800 sq ft
office in Taiwan now
formally opened.
Spain
relocated to a new facility
three times the size of the
former building.
Canada
new Additive Manufacturing
Solutions Centre.
UK and Ireland
Locations
13
Continental Europe
Locations
Other regions
Locations
20
9
Far East
Locations
24
Metrology revenue (£m)
Metrology revenue (£m)
Metrology revenue (£m)
Metrology revenue (£m)
£23.2m
£121.5m
£13.9m
£237.9m
Healthcare revenue (£m)
Healthcare revenue (£m)
Healthcare revenue (£m)
Healthcare revenue (£m)
£4.4m
£8.5m
£2.8m
£11.0m
84%
16%
93%
7%
83%
17%
96%
4%
03
GovernanceFinancial statementsShareholder informationStrategic report Strategic report
Chairman’s
statement
I am pleased to report our 2017
annual results with record revenue
for the year ended 30th June 2017
of £536.8m compared to a
restated £427.2m for last year.
The Group’s adjusted profit before
tax for the year was £109.1m.
Sir David McMurtry
Chairman and Chief Executive
2017 performance
Revenue (£m)
Adjusted profit before tax (£m)
Adjusted earnings per share
(pence)
Dividend per share (pence)
Statutory profit before tax (£m)
Statutory earnings per share
(pence)
2017
Restated
2016
Change
536.8
427.2
+26%
109.1
87.5
+25%
132.4
100.4
+32%
52.0
117.1
48.0
61.7
+8%
+90%
141.3
71.8
+97%
04
Renishaw plc Annual report and accounts 2017
D New XM-60 multi-axis calibrator.
Performance overview
I am pleased to report our 2017 annual
results. We achieved a record turnover
of £536.8m with an underlying revenue
growth of 14% at constant exchange
rates*. We report an adjusted profit
before tax of £109.1m* and a statutory
profit before tax of £117.1m, an
increase of 25% on an adjusted basis.
Our total shareholder return during the
year was 67%, ranking Renishaw in
the top 25 in both the FTSE 250 and
FTSE 350.
Renishaw is a long-term business
and we remain committed to strategic
investments and R&D. In addition,
over the past year, we have focused
on underperforming business areas
resulting in our discontinuing the
activities of Renishaw Diagnostics
Limited and the spatial measurement
business. In spite of the potential
headwinds brought about by the
uncertainty of Brexit, we remain
confident of future growth due
to our innovative product base,
extensive global sales and marketing
presence, and relevance to high-
value manufacturing.
Financial highlights
Revenue £m
£536.8m
536.8
494.7
427.2
355.5
346.9
2017
2016
2015
2014
2013
Dividend per share
pence
52.0p
46.5
52.0
48.0
41.2
40.0
Revenue
We achieved record turnover with
revenue for the year ended 30th June
2017 of £536.8m, compared with
a restated £427.2m for last year, an
increase of 26%. There was underlying
revenue growth of 14% with the
balance arising from exchange rate
movements compared to the prior year.
The geographical analysis of revenue is
as follows:
Far East
Europe
Americas
UK
Other regions
2017
£m
248.9
129.9
113.6
27.6
16.8
Restated
2016
£m
193.3
110.3
88.0
22.8
12.8
Total group revenue
536.8
427.2
Change
%
+29%
+18%
+29%
+21%
+31%
+26%
Constant fx
change
%
+14%
+12%
+13%
+21%
+30%
+14%
Profit and earnings per share
During the year, it was established
that certain foreign currency forward
contracts used as hedging instruments
for future incoming currency cash flows
did not qualify for hedge accounting.
This has resulted in the prior year profit
before tax being restated and as a
consequence the Board has introduced
an alternative performance measure,
adjusted profit before tax, to report
the profitability on the basis that all
forward contracts are accounted for as
effective hedges. This measure will be
Adjusted profit(1)
before tax £m
£109.1m
144.2
109.1
87.5
79.2
70.1
2017
2016
2015
2014
2013
Adjusted earnings(1)
per share pence
132.4p
167.5
132.4
100.4
82.3
88.9
the basis by which the Board evaluates
the Group’s performance as it better
represents the underlying trading of the
Group. The consolidated net assets
and cash balances were not impacted
by the prior year adjustment and the
future cash flows remain unchanged.
The Group’s adjusted profit before
tax for the year was £109.1m*, an
increase of 25% compared to £87.5m
last year. Adjusted earnings per share
on continuing activities were 132.4p
compared to 100.4p last year.
Statutory profit
before tax £m
£117.1m
144.2
117.1
96.4
82.1
61.7
2017
2016
2015
2014
2013
Statutory earnings
per share pence
141.3p
167.5
141.3
2017
2016
2015
2014
2013
2017
2016
2015
2014
2013
(1) note 24, Alternative performance measures, defines how adjusted profit before tax and adjusted earnings per share are calculated.
118.4
92.9
71.8
2017
2016
2015
2014
2013
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GovernanceFinancial statementsShareholder informationStrategic report Strategic report
Chairman’s
statement
continued
Statutory profit before tax for the year
was £117.1m compared to a restated
£61.7m last year. Statutory earnings
per share on continuing activities were
141.3p compared to 71.8p last year.
This year’s tax charge on continuing
operations amounts to £14.3m (2016
restated: £10.0m) representing a
tax rate of 12.2% (2016 restated:
16.2%). The tax rate has benefited
from the continued phasing in of the
patent box tax regime and a reduction
in the UK tax rate applied when
calculating certain deferred tax assets
and liabilities.
Metrology
Revenue from our metrology business
for the year was £503.4m compared
with a restated £398.9m last year.
We have experienced revenue growth
in all product lines and territories.
The geographical analysis of revenue
is set out below:
Far East
Europe
Americas
UK
Other regions
Total group revenue
There was strong growth in our
encoder, measurement and
automation, calibration and
coordinate measuring machine (CMM)
product lines.
Adjusted operating profit for our
metrology business was £115.9m
(2016 restated: £90.0m).
We have continued to invest in
research and development, with total
engineering costs in this business
segment of £68.8m (before net
capitalised development costs and the
R&D tax credit) compared to a restated
2016 of £60.9m, with a number of new
product launches during the year.
In our CMM product line, we
launched a new, improved surface
finish measurement probe for use
with our REVO® 5-axis measurement
system. The laser calibration product
line launched the XM-60 multi-axis
calibrator. Designed for the machine
tool market, it is a highly accurate
laser system used to capture multiple
machine errors in a single set-up. In our
encoder product line, we launched
the VIONiC™ series, a new range of
ultra-high accuracy, super-compact
all-in-one digital incremental encoders.
2017
£m
237.9
121.5
106.9
23.2
13.9
Restated
2016
£m
185.6
101.3
83.3
18.1
10.6
503.4
398.9
Change
%
+28%
+20%
+28%
+29%
+31%
+26%
The machine tool product line
introduced the new SPRINT™ system
with SupaScan, bringing the benefits
of scanning technology to the mass
market. Our additive manufacturing
(AM) product line introduced the
RenAM 500M machine and opened an
additional two AM solutions centres in
Germany and the USA.
Healthcare
Revenue from our healthcare business
for the year was £33.4m, an increase
of 18% over the £28.4m last year.
We experienced growth in all our
product lines.
Healthcare also saw continued
investment in research and
development, with total engineering
costs in this business segment
of £9.2m (before net capitalised
development costs and the R&D tax
credit) compared to a restated 2016 of
£7.9m.
In our spectroscopy product line, we
introduced the RA802 pharmaceutical
analyser, designed exclusively for the
pharmaceutical industry, enabling users
to formulate tablets more efficiently
by speeding up the analysis of tablet
composition and structure.
The neurological product line continued
to make sales of our stereotactic robot
and associated neuroinspire planning
software, with further sales in the UK,
USA and Canada.
The medical dental product line has
experienced good growth resulting
from a continued focus on sales of
additive manufacturing technologies
into the healthcare market.
D SFP2 surface measurement probe
inspecting a crankshaft.
D RA802 pharmaceutical analyser is a
compact benchtop Raman imaging
system, designed exclusively for the
pharmaceutical industry.
06
D Demonstration area at the new headquarters of Renishaw, Inc.
Renishaw plc Annual report and accounts 2017 There was an adjusted operating loss
of £7.2m, compared with a restated
loss of £3.1m last year. We remain
focused on moving this business
sector into profit, where we have
implemented a number of initiatives
and are restructuring the neurological
and medical dental businesses.
Discontinued activities
As reported in our October 2016
trading update, the Board decided to
discontinue operations at Renishaw
Diagnostics Limited (RDL), resulting
in the closure of the business.
Subsequently, certain assets of the
business have been sold.
The RDL business has been accounted
for as a discontinued activity, with
comparative figures for the previous
year being restated accordingly.
The loss after tax of £3.3m accounted
for as a discontinued activity comprises
the running costs for RDL, including
cessation costs and impairment write
offs for assets and goodwill, less
amounts received. The loss after tax for
the prior year was £2.5m.
In June 2017, after an extensive review
of the spatial measurement business,
the Board decided to discontinue
this line of business. Including a
goodwill impairment charge of £6.7m
and provisions for the cessation of
the trade, there was a net loss in
this business for the year of £10.6m
(2016: £1.5m).
outstanding at the end of the current
year at 73 days (2016: 70 days).
Net cash balances at 30th June 2017
were £51.9m, compared with £21.3m
at 30th June 2016. Additionally, there
is an escrow account of £12.9m
(2016: £15.3m) relating to the provision
of security to the UK defined benefit
pension scheme.
Directors and employees
Now that Will Lee has settled into his
role as Group Sales and Marketing
Director since his appointment earlier in
the year, he will take over responsibility
from John Deer for chairing the
International Sales & Marketing Board
from the start of the new financial year.
The directors would like to express
their thanks to all employees for their
invaluable support and contribution
during the year.
Investor communications
Our fourth investor day was held
on 11th May 2017, for existing and
potential new investors. This event
involves presentations on group
strategy, business segments and
product lines as well as tours
covering the Group’s activities and an
opportunity to meet the Board and
senior management. There was also a
Q&A session with the Board. The event
was very well attended, and provided
shareholders with another opportunity,
in addition to the AGM, half-year and
full-year webcasts, to learn more about
Renishaw’s business and strategy.
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.
This year saw the completion of
our new USA headquarters near
Chicago and the sale of the previous
premises. New facilities have also
been completed in Detroit (USA)
with expansion and refurbishment in
Spain, Sweden, Hungary, Germany
and France. We also converted our
representative office in Turkey into a
trading subsidiary to facilitate solution
selling in the territory.
Our workforce at the end of June 2017
was 4,530, an increase of 244 in the
year, of which 91 were apprentices
and graduates taken on as part of our
on-going commitment to train and
develop skilled resource for the Group
in the future.
Capital expenditure on property,
plant and equipment for the year was
£42.6m, of which £24.2m was spent
on property and £18.4m on plant
and equipment.
Working capital
Group inventory decreased from
£95.0m at the start of the year
to £87.7m. We continue to focus
on working capital management
whilst remaining committed to 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 £114.9m
to £137.5m, with debtor days
D Carwyn Jones, First Minister of Wales,
opened the Healthcare Centre of
Excellence at Miskin.
D VIONiC digital all-in-one
incremental encoder.
D Official opening of Renishaw (Taiwan) Inc.’s new office performed by senior Renishaw
managers, government officials and representatives from Taiwanese industry.
07
GovernanceFinancial statementsShareholder informationStrategic report Strategic report
Chairman’s
statement
continued
Outlook
The Group is in a strong financial
position and 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. We have experienced strong
growth in 2017 and whilst noting
ongoing uncertainty surrounding Brexit
and currency exchange rate volatility,
your directors remain confident in the
long-term prospects for the Group and
at this early stage in the year anticipate
growth in both revenue and profits in
the current financial year.
Dividend
A final dividend of 39.5p net per share
will be paid on 25th October 2017,
to shareholders on the register on
22nd September 2017, giving a total
dividend of 52.0p for the year, an
increase of 8.3% over last year’s 48.0p.
Sir David McMurtry
Chairman and Chief Executive
27th July 2017
08
*Previous year figures have been restated for the following:
1. The results of Renishaw Diagnostics Limited and the spatial measurement
business have been excluded, as these businesses have been reclassified as
discontinued activities.
2. The R&D tax credit, previously accounted for within the income tax expense line, has
been reclassified to cost of sales, thereby showing it as part of the profit before tax.
This reclassification increased the profit before tax by £2.4m for the year ended 30th
June 2016.
3. It has been established that certain foreign currency forward contracts used as
hedging instruments for future incoming currency cash flows did not qualify for
hedge accounting as they did not meet the hedge effectiveness criteria set out in
the International Accounting Standard IAS 39 ‘Financial Instruments: Recognition
and Measurement’. To ensure technical compliance with this standard it has been
necessary to restate the 2016 financial statements resulting in a £25.8m reduction to
the profit before tax for that year and a corresponding increase in other comprehensive
income. The consolidated net assets and cash balances were not impacted by the
prior year adjustment and the future cash flows remain unchanged.
Alternative performance measures
Alternative performance measures are – Revenue at constant exchange rates, Adjusted
profit before tax, Adjusted earnings per share and Adjusted operating profit.
Revenue at constant exchange rates is defined as revenue recalculated using the same
rates as were applicable to the previous year and excluding forward contract gains
and losses.
Revenue at constant exchange rates
Statutory revenue as reported
Adjustment for exchange rate movements and forward
contract gains and losses
Revenue at constant exchange rates
2017
£m
536.8
(52.0)
484.8
2016
£m
427.2
(2.6)
424.6
Adjusted profit before tax, Adjusted earnings per share and Adjusted operating profit
are after excluding gains and losses in fair value from forward currency contracts which
did not qualify for hedge accounting. The amounts shown below as reported in revenue
represent the amount by which revenue would change had all the derivatives qualified as
eligible for hedge accounting.
Adjusted profit before tax
Statutory profit before tax
Fair value gains and losses on financial instruments not
effective for cash flow hedging:
- reported within revenue
- reported as losses in the fair value of financial
instruments
Adjusted profit before tax
2017
£m
117.1
(11.6)
3.6
109.1
2016
£m
61.7
2.4
23.4
87.5
Adjusted earnings per share and adjusted operating profit are calculated using the same
adjustments. The Board have used these alternative performance measures as they
consider them to be a more relevant and reliable assessment of the performance of the
group (see note 24).
Renishaw plc Annual report and accounts 2017 Strategic report
Our business model
We identify customer needs and then
apply innovative engineering to deliver
successful solutions.
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.
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.
We provide solutions that drive
efficiency and reduce costs.
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 25% 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 50 to 53.
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GovernanceFinancial statementsShareholder informationStrategic report Strategic report
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.”
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
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
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 40–41
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 64–65
10
Renishaw plc Annual report and accounts 2017 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 rework.
• 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 product 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.
Agriculture
Increasing global demand
for food products from
developing nations.
Increasing global demand
for biofuels.
Greater investment in
machinery for intensive
farming capabilities and
‘Smart Farming’
See pages 42–43
Construction
Major infrastructure
projects driving heavy
equipment sales.
Skills shortages requiring
more automation
in equipment
manufacturers.
Healthcare
Neurological disorders
require highly precise
surgical therapies.
Growing demand for
cosmetic dentistry with
superior aesthetics.
Growing demand for
patient-specific implants.
See pages 20–21
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.
11
GovernanceFinancial statementsShareholder informationStrategic report Strategic report
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.
12
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.
D Machine tool scanning probe system.
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.
D Five-axis measurement system
for CMMs.
Renishaw plc Annual report and accounts 2017 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.
D Reduced build volume accessory for
additive manufacturing systems.
Vacuum casting
Vacuum casting machines from
entry-level to high capacity, for rapid
prototyping and production of polymer
end-use parts.
Metrology revenue +26%
£503.4m
Metrology adjusted operating
profit +29%
£115.9m
Percentage of group revenue
94%
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.
D Laser calibration system testing
multi-axis machine tool.
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 IPC (intelligent
process control) software, Equator
provides the functionality to fully
automate tool offset updates in CNC
manufacturing processes.
Fixtures
Modular and custom fixtures used to
hold parts securely for dimensional
inspection on CMM, vision and
gauging systems.
D Fixturing system for Equator gauge.
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Aerospace
The aerospace sector continues
to be a key market. The need for
41,000 new commercial aircraft by
2036 is forecast to meet growing
demands and the replacement of
aircraft within the current commercial
fleet. Renishaw products are used
heavily in the aerospace sector and
the drive to ‘lightweight’ components
is generating strong interest in
additive manufacturing.
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.
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.
.
s
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e
t
s
y
S
E
A
B
©
D Eurofighter Typhoon in flight.
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.
Ballbar diagnostics aid
airframe manufacture
The manufacture of airframe
components for modern aircraft
demands precision and consistency.
BAE Systems, the global defence,
aerospace and security company,
produces vital airframe components for
the Eurofighter Typhoon which is flown
by various air forces around the world.
Without periodic checking and
maintenance, CNC machine tools can
lose positioning accuracy and introduce
errors over time. BAE Systems
machines complex high-value airframe
components, and turned to a wireless
ballbar system to provide the machine
tool diagnostics data it needed to
maximise quality and productivity.
Identifying a problem with a machine
tool after components have been
machined can be costly. In the case
of BAE Systems’s airframes, a high
14
Renishaw plc Annual report and accounts 2017
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.
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.
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.
percentage of components are
machined from titanium. This high-
strength, lightweight metal, which
is resistant to high temperature
and corrosion, is high in value and
increasingly scarce, with stocks
required to be reserved up to a year
in advance.
Utilising Renishaw’s QC20-W wireless
ballbar, the company initiated a
site-wide preventative maintenance
programme to check 60 CNC machine
tools on a defined weekly, monthly and
annual basis.
Through detailed interpretation of the
QC20-W’s diagnostic data trends
across all machine tools, BAE Systems
established a dependable go/no-go
error margin benchmark, against which
all machines’ performance could be
quickly checked. Any circularity error
in CNC machine positional accuracy
greater than 30 microns would demand
immediate investigation.
The efficiency with which ballbar-
trained machine tool operators
could run diagnostic checks using
the QC20-W meant they could be
completed between part production
runs with little adverse effect on
machine tool throughput.
Machine tool error diagnosis at BAE
Systems has become virtually instant.
Unacceptable machine tool down-
times – the result of lengthy and
expensive investigations and repairs –
have been drastically reduced, and the
machine builder is no longer depended
upon as the sole source of technical
insight and support.
With the help of Renishaw
ballbar diagnostics BAE Systems
has benefitted from significant
improvements in workshop productivity
and QA compliance.
D BAE Systems employee,
Jim Walsh, with Renishaw
QC20-W ballbar.
D The Renishaw QC20-W
wireless ballbar for machine
tool performance diagnosis.
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Automotive
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.
Perfect fit castings for Ricardo
Tridan Engineering, based in Clacton-
on-Sea, UK, is using Renishaw
RMP600 and OMP60 machine tool
probes to align complex castings
as part of a motorsport machining
contract for Ricardo. For the first batch
of parts, a project that would normally
have taken around two months, was
compressed into a 17-day turnaround
time without any compromise in
the quality standards demanded by
the client.
“Ricardo Performance Products were
having problems in the testing of a
rear axle for a rally car that we had
manufactured on previous occasions,”
explained Paul Coupland, Machine
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.
D Renishaw OMP60 inspecting machined Ricardo casting
at Tridan Engineering Ltd.
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.
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.
16
Renishaw plc Annual report and accounts 2017 Shop Manager at Tridan. “The
issue was one of design/strength,
so they needed a new ‘beefed-up’
axle to test. A project like this would
normally take 8-10 weeks as we
would arrange meetings with the
customer, offer design-for-manufacture
recommendations to help remove cost,
prepare tooling and so on.
Accuracy is the main reason we use
Renishaw technology. I don’t think we
could do half of what we do without
their probes. As a company they are
very supportive, although to be honest
we’ve never had to call on their service
department – the products simply don’t
go wrong.”
Tremec Mexico reduces
shop floor gauging time of
Daimler parts by 85% with
Equator™ gauges
At the Tremec Queretaro plant, near
Mexico City, transmission systems are
produced for Daimler, Volvo, GM, John
Deere and agriculture and construction
equipment manufacturer CNH.
Tremec decided that its manufacturing
process could be improved
considerably, since the process control
of parts was taking far too long. With a
new Daimler gear project, it decided to
use Renishaw Equator gauges to take
a different approach during grinding
and green gear turning. These cells
produce 550 to 600 gears daily and
with the Equator system, inspection
time per unit has reduced from
around 20 minutes to just two and a
half minutes.
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.
Suspension and
braking components
Systems that 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.
D Paul Coupland, Machine
Shop Manager at Tridan,
displaying the final part
for Ricardo.
D The Equator system has
made it easy for Tremec
to gauge every controlled
feature of gears on the
shop floor.
Wheels
Alloy wheel manufacture requires
highly productive precision
machining that can adapt to
the variation inherent in forging
processes. On-machine probing
systems ensure productivity
through automated process control.
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GovernanceFinancial statementsShareholder informationStrategic report Strategic report
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,
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.
L Ms Sasha Burn, Consultant Paediatric
Neurosurgeon at Alder Hey Children’s
Hospital, Liverpool, UK - user of
Renishaw’s neuroinspire™ planning
software and neuromate® stereotactic
robot in the hospital’s Children’s
Epilepsy Surgery Service centre.
The product range includes
the following:
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.
D Titanium craniomaxillofacial implants.
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.
D Neuromate stereotactic robot.
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.
D Blue light dental scanner and
CAD software.
18
Renishaw plc Annual report and accounts 2017
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 cobalt chrome, and
abutments in cobalt chrome.
Healthcare revenue (+18%)
£33.4m
Healthcare adjusted operating loss
£7.2m
D Additively manufactured dental structures.
Neurosurgical planning
software
Software that allows advanced
planning of targets and trajectories for
stereotactic neurosurgery.
Percentage of group revenue
6%
D Neuroinspire neurosurgical
planning software.
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
Research-grade inVia Raman
microscope for the non-destructive
chemical analysis and imaging of
materials used by scientists and
engineers worldwide. Its high-
speed, high-quality results and
upgradeability are valued in fields as
diverse as nanotechnology, biology
and pharmaceuticals.
D inVia Qontor confocal
Raman microscope.
Hybrid Raman systems
Hybrid systems that 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
RA800 benchtop platform, which
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.
Pharmaceutical analysis
RA802 pharmaceutical analyser, a
compact benchtop Raman imaging
system designed exclusively for the
pharmaceutical industry. It enables
users to formulate tablets more
efficiently by speeding up the analysis
of tablet composition and structure.
19
GovernanceFinancial statementsShareholder informationStrategic report Strategic report
Healthcare
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
product lines are well placed to deliver on
these requirements.
D Surgical team at Birmingham Children’s Hospital using
the neuromate stereotactic robot.
Our technologies are being applied to an
ever increasing number of applications
within healthcare, including brain surgery,
reconstructive surgery and dentistry.
This illustration highlights areas in which
Renishaw products are making a real
difference to patient outcomes.
Renishaw neuromate®
robot and neuroinspire™
software installed at
King’s College Hospital,
London and Birmingham
Children’s Hospital
A neuromate stereotactic robot system
and neuroinspire surgical planning
software have been installed at one of
London’s largest and busiest teaching
hospitals, King’s College Hospital, and
at Birmingham Children’s Hospital.
Both hospitals are using the system for
SEEG cases for epilepsy.
Mr Richard Selway, consultant
neurosurgeon at King’s College
Hospital said, “We are delighted to
be able to offer robot-assisted brain
surgery to our patients at King’s.
The increased precision and efficiency
of the machine allows fantastic
accuracy when targeting the most
sensitive areas of the brain. It is likely
to revolutionise certain aspects of
surgery, particularly for children with
severe epilepsy or in the surgery of
brain tumours.”
Mr Richard Walsh, consultant
neurosurgeon at Birmingham Children’s
Hospital said, “All the electrodes are in
excellent positions. No post-operative
problems on the scan. Using the
robot certainly made the procedure
easier, faster and more straightforward
for me.”
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.
Blood storage
Raman spectroscopy is being used
to investigate the chemical changes
that occur in red blood cells during
storage in bags, which could
eventually be used as a quality
check prior to transfusion.
20
Renishaw plc Annual report and accounts 2017 Guangdong Medical University
is developing a method
for non-invasive prostate
cancer screening
New research at the Guangdong
Medical University suggests a laser-
based approach could be the latest
breakthrough in prostate cancer
detection. The proposed non-invasive
blood test uses a combination of two
techniques: surface-enhanced Raman
scattering and a new mathematical
analysis technique called support
vector machine – together, these
techniques can produce an accuracy
up to 98.1%. Professor Shaoxin Li,
the study leader at the University
commented, “Compared to traditional
screening methods, this method has
the advantage of being non-invasive,
highly sensitive and very simple
for prostate cancer screening.
It is important to improve the survival
of patients by early diagnosis
and treatment.
Currently, there are many diagnostic
methods available—including B-mode
ultrasound, CT scan, biopsy and
histopathology assessment—but these
techniques have various limitations.
“We selected the inVia as a potential
methodology to be used in prostate
cancer screening, when coupled with
our support vector machine, because
it offers continuous scanning from
50 to 4000 wavenumbers and its
high sensitivity makes it suitable for
biological tissue measurement.”
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.
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.
D Mr Richard Walsh, consultant
neurosurgeon at Birmingham
Children’s Hospital, has now
carried out two SEEG cases for
epilepsy, since the installation
of the neuroinspire planning
software and the neuromate
stereotactic robot.
D Surface-enhanced Raman
scattering (SERS) spectra
of serum sample for prostate
cancer detection.
Orthopaedic implants
Metal 3D printing machines
enable the production of
patient-specific custom
implants in bio-compatible
materials, and with surfaces
that aid osseointegration.
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GovernanceFinancial statementsShareholder informationStrategic report Strategic report
Our strategy
What drives our success
Renishaw fundamentally believes
that success comes from patented
and innovative products and
processes, high-quality manufacturing,
and the ability to provide local
customer support in all its markets
around the globe.
Sir David McMurtry
Chairman and Chief Executive
8
Supplementing
the business via
niche acquisitions
2
Continual research
creating strong market
positions with
innovative
products
1
People
3
Efficient, high-quality
manufacturing
7
Consistent organic
growth
4
Global customer
support
6
Strong market
presence and focus on
emerging markets
5
Focus on
delivering solutions
22
Renishaw plc Annual report and accounts 2017 Strategic report
Key performance indicators
The main performance measures monitored by the Board are:
Financial KPIs
Revenue £m
536.8
494.7
427.2
355.5
346.9
2017
2016
2015
2014
2013
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
Employee turnover %
Renishaw employee
turnover compared
to the bar chart
showing the UK
average.
10.7%
10.0%
7.7%1
5.7%
20172
2016
8.0%
8.0%
5.0%
2015
5.5%
2013
3.2%
2014
1 Excludes discontinued operations.
2 Data not available at time
of publishing.
We continue to train,
develop and reward
our employees so that
we retain skilled and
effective teams. Our aim
is to maintain our UK
employee turnover rate
below the UK average for
the manufacturing and
production sector.
Total engineering costs
including research and
development £m
78.0
Included in the
Consolidated
income statement
Gross
66.1
expenditure
63.3
63.2
68.8
68.8
56.8
53.3
51.8
48.7
2017
2016
2015
2014
2013
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 15% of
Group revenue, and has
also been accelerating new
product development in
certain areas.
Number of apprentices
in training
131
120
114
105
71
2017
2016
2015
2014
2013
We believe we need to
provide many options for
career entry for young
people. 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
Statutory earnings
per share pence
Dividend per share
pence
167.5
132.4
100.4
82.3
88.9
167.5
141.3
52.0
48.0
46.5
118.4
92.9
71.8
41.2
40.0
2017
2016
2015
2014
2013
2017
2016
2015
2014
2013
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 adjusted earnings per share. Note 24, Alternative
performance measures, defines how adjusted earnings
per share is calculated and why the Board has adopted
this measure.
2017
2016
2015
2014
2013
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.
Training
Health and safety
0.08
0.05
0.02
2017
2016
0.03
0.03
2015
2014
2013
Total lost working time injuries
per 100,000 hours worked.
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.
New apprenticeships
New graduates
New placements
46
76
40
70
100
105
48
45
100
40
68
108
2017
2016
2015
2014
24
55
94
2013
Number of new placements
and members of the graduate
and apprenticeship schemes
(on a calendar year basis).
Our strategy is to grow
organically, developing
students and taking on
apprentices and graduates
forms a key element of this
strategy. Depending on
economic conditions,
we propose to increase
year-on-year the number
of new apprenticeships,
graduates and student
placements we take on.
23
GovernanceFinancial statementsShareholder informationStrategic report Strategic report
Our strategy
in action
24
People
Our people are central to the success
of our business. Our innovative,
hard-working and loyal employees
make Renishaw the business that it
is. A significant number of our people
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, apprentices and
experienced professionals to further
develop talent. We continue to protect
the future skillset of the organisation
through training and promoting people
from within, where possible.
Efficient high-quality
manufacturing
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 32–33
Strong market presence
and focus on emerging
markets
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.
For further information see pages 56–58
Continual research creating
strong market positions with
innovative products
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 30–31
For further information see pages 34–35
Renishaw plc Annual report and accounts 2017 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 work closely
with HiETA Technologies Limited,
a UK company in which we have
an investment that specialises 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.
We are also strengthening our acquisitions
process and have considered various
potential opportunities during the year.
Consistent organic
growth
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 further invested in the
Group’s long-term business growth
which this year focused on our
continued recruitment and training of
skilled people, our global marketing
and distribution infrastructure,
enhancing our ability to demonstrate
our products and their applications,
the infrastructure to support our
additive manufacturing business,
and our manufacturing capabilities.
Our Spanish subsidiary and two
of our American subsidiaries have
relocated to larger premises and a
further office has been established
in California. This has allowed for
the recruitment of extra sales and
technical support staff. In November
2016 our first North American Additive
Manufacturing Solutions Centre
(AMSC) in Canada was formally
opened. Ongoing investments in
manufacturing capacity and processes
have given us an agile capability and
increasing awareness of the benefits to
be gained by adopting Industry 4.0 and
Smart Factory philosophies to meet the
demands of a record order book and
quickly respond to short lead times.
Focus on delivering
solutions
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 28–29
Global customer support
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.
Progress
Our worldwide service offering is
growing so we can support our
customers throughout the product life-
cycle. With the growth of our training
facilities, technical support personnel,
test and solution centres we can offer
personal local support to the customer.
25
GovernanceFinancial statementsShareholder informationStrategic report Strategic report
Our strategy in action –
Industrial metrology
Intelligent process control for
Industry 4.0
Intelligent machining processes are a
critical element in future manufacturing
technology. With the widely publicised
‘Industry 4.0’ and ‘Made in China
2025’ initiatives combined with
the ‘Industrial internet of things’,
manufacturers are faced with
an unparalleled opportunity.
Manufacturers driven by the
goals of Industry 4.0 are
increasingly recognising the
importance of applying
Renishaw technology throughout
advanced manufacturing. The
breadth of technologies and
experience Renishaw provides
during the entire manufacturing
process is unique.
Geoff McFarland
Group Engineering Director
26
Renishaw plc Annual report and accounts 2017 Industry 4.0 is the current trend of
automation and data exchange in
manufacturing technologies to create
what are known as ‘smart factories’.
The ability to monitor key process
inputs, analyse data and continuously
improve manufacturing processes
will facilitate increased productivity
and higher accuracy, whilst reducing
the dependency on skilled engineers.
This, in turn, enables highly effective
automated manufacturing systems
to be implemented successfully.
Renishaw not only provides
technologies and applications that
deliver some of the benefits of
Industry 4.0, data generated by
Renishaw devices can also be used
in conjunction with other process
information from machines, cutting
tools and other probes within predictive
analytics systems for intelligent process
optimisation and control.
Productive
manufacturing processes
Simply measuring the final output
of a manufacturing process using
‘tailgate’ inspection is not enough
and, more often, too late to control
all the variability in a manufacturing
process. It is critical that checks and
measurements are also made before,
during and immediately after machining
to control both common-cause and
special-cause variation.
The process control framework
developed by Renishaw within our own
factories has allowed us to minimise
manufacturing costs and significantly
reduce the skill levels required to
support production. This has been
achieved through a combination of
integrated process control using our
own products and application of
factory automation. This approach is
applicable to many industries using
CNC machine tools. Moreover, the
benefits we have experienced at
Renishaw align closely with the goals
of Industry 4.0.
Manufacturers driven by a focus
on Industry 4.0 are increasingly
recognising the importance of applying
Renishaw technology throughout
advanced manufacturing. The breadth
of technologies and experience
Renishaw provides during the entire
manufacturing process is unique.
In the future, measurements provided
by Renishaw devices will be used in
conjunction with other data sources
within a manufacturing process to
allow real-time feedback for process
optimisation, proactive adjustment and
increased intelligence.
Data availability
Manufacturers can only make the most
of their collected data if they have the
means of using it when required. Today,
most machine tools are equipped with
a networking capability and have more
accessible software architectures,
making it simpler to facilitate
communication between systems.
As integrating sensors (including
probes) and programming automated
intelligent systems becomes easier,
more manufacturers will be able to
exploit the benefits of Industry 4.0.
The data collected through
in-process measurement throughout
the manufacturing process can also
be used for continuous improvement.
It allows manufacturers to understand
what causes adverse effects during
manufacturing and consider the
key variables when designing and
developing new processes.
From consumer electronics to
aerospace components, products
have shorter life cycles than ever
before. Manufacturers must develop
new products and processes more
quickly to remain competitive.
Intelligent processes allow high
productivity and high-quality output
despite the reduced process
development window.
Additive manufacturing
The advent of metal additive
manufacturing (AM) for serialised
production, as opposed to prototyping,
will bring further benefits for intelligent
manufacturing. From medical implants
to critical aerospace applications,
customers are increasingly demanding
more specialised parts to save weight
or space, dramatically improve
product performance and simplify
assembly operations.
AM is allowing manufacturers more
design freedom and the ability to
produce prototype products more
rapidly from which performance data
can be quickly acquired to inform final
design and manufacturing parameters.
We will increasingly see a combination
of both additive and subtractive
technologies to gain the benefits of
both processes, all led by data driven
intelligence at every stage of the
manufacturing process.
D Data collection with in-process
D Automated intelligent processes allow high productivity and high-quality output.
measurement.
27
GovernanceFinancial statementsShareholder informationStrategic report Strategic report
Our strategy in action –
Focus on delivering
solutions
Land Rover BAR
understood the potential
of additive manufacturing
to save weight and
improve the efficiency of
its hydraulic system.
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28
Race to innovate: How
Renishaw helped Land Rover
BAR in its attempt to win the
America’s Cup
Renishaw is part of Land Rover BAR’s
Technical Innovation Group which aims
to bring together the best of British
engineering to help win the America’s
Cup. The oldest international trophy
in world sport dating from 1851, it is
the world’s premier sailing challenge
(described as being like ‘Formula 1
on water’) and has never been won
by Britain.
Land Rover BAR made it to the
semi-finals of the 35th edition of the
America’s Cup, held this summer in
Bermuda, with Renishaw’s AM and
position encoder technology helping
the first-time challenger to produce a
boat that competed well against much
more established teams.
America’s Cup Class (ACC) racing
yachts use an innovative rigid wingsail.
With the aerodynamics of an aeroplane
wing, instead of lift, this vertical wing
provides thrust and is efficient enough
to propel the vessel up to four times
faster than the speed of the wind
driving it forward. The wingsail used
by the Land Rover BAR race-yacht
‘Rita’ (code-name: R1) has an area
of 103 m2 and is 23.5 m high, which
is comparable to a wing of a Boeing
737 aeroplane. Clearly, there are many
difficult engineering challenges involved
in designing and building a huge
functional wing with numerous moving
parts, whilst ensuring sufficient strength
and minimal weight.
Each hull on R1 features a T-shaped
rudder and retractable board that
bends beyond 90 degrees to create a
hydrofoil. Once the boat speed reaches
around 16 knots (18 mph) it starts
foiling. The flow over the hydrofoils
creates sufficient lift to ‘fly’ and both
hulls rise clear of the water, reducing
drag and increasing speed.
Race to innovate: metal AM
manifolds improve power flow
On the R1, the control surfaces are
all driven by hydraulic actuators.
Hydraulic pressure is provided by
the sweat and toil of the crew’s four
‘grinders’, who turn specialised
hand-cranks. There are no batteries
(except to provide electrical power
for computers and sensors), the
four grinders act as a human
engine to generate all the hydraulic
energy required.
Renishaw plc Annual report and accounts 2017
Land Rover BAR understood the
potential of additive manufacturing
to save weight and improve the
efficiency of its hydraulic system and
worked with Renishaw engineers, who
contributed by highlighting the manifold
components which would most benefit
from being manufactured using metal
AM technology, by collaborating and
advising on iterations, then producing
the necessary parts.
The structure of these manifolds, which
have multiple passageways, helps
improve the flow of hydraulic fluid from
one part of the boat to another, and
are lighter than conventional manifolds.
This streamlining helps the grinders
conserve energy whilst still allowing the
boat to perform at the optimal level.
Traditionally, hydraulic block manifolds
are manufactured from an aluminium
alloy or stainless steel billet which
has been cut and machined to size.
This is followed by drilling at 90-degree
angles to create the flow pathways.
Specialised tooling is often needed due
to the complex drilling that is required.
Passages require blanking plugs to
properly direct flow through the system.
The nature of the traditional
manufacturing process results in abrupt
angled junctions which slow down the
flow of hydraulic fluid, often leading
to a loss of power. By using additive
manufacturing technology, you can
design in and build smooth rounded
corners which promote the flow of fluid
and improve efficiency. Another benefit
is the significant weight saving against
a traditional block manifold where
material must be cut away, leaving
surplus non-essential weight and an
over-specification wall thickness.
Additive manufacturing builds up parts
layer by layer, applying material only
where it is required, leading to a much
lighter part. The wall thickness of the
manifold can be adjusted so that it is
fit for function and all manifolds used
on the boat are customised and built
in titanium to be both lightweight
and strong.
Whilst the actual parts produced
by Renishaw for R1 remain highly
confidential, the manifolds designed
in CAD software by Land Rover BAR
were sent to Renishaw, where they
were prepared for production using its
QuantAM software. The build file was
then sent to a Renishaw AM system,
which produced the complex parts
by melting successive layers of metal
powder using a high-powered laser.
R1 is an incredibly advanced racing
catamaran that pushes the boundaries
of what technology can provide and it
truly was a ‘race to innovate’ to turn
around the optimum parts, in time for
the America’s Cup. The challenge was
immense with many design changes,
demanding timescales and rapid
production of parts running up to a
fixed race day, but the ability of additive
manufacturing to produce many
iterations rapidly was a major benefit to
the collaborative process.
Race to innovate: digital
position feedback
As mentioned earlier, the
control surfaces on R1 are all
driven by hydraulic actuators.
During development, Land Rover BAR
realised that precision knowledge
of their sail wing settings could be
compromised by the tenuous link
between the hydraulic actuators
and the control surfaces or flaps.
These linkages are ropes with a
high degree of compliance, so the
position of each actuator is often
only an approximate measure of the
actual flap angle. They again asked
Renishaw to collaborate in designing
a robust solution.
A team of Renishaw’s encoder
products specialists rose to the
challenge and designed a bespoke
magnetic encoder solution,
based around technology from
Renishaw’s associate company
RLS. The LinACE™ product is an
extremely robust absolute linear
cylindrical encoder system designed
for integration into hydraulic, pneumatic
and electromechanical actuators as
a feedback element for position or
velocity closed-loop applications.
Due to the extreme conditions faced
at sea, with high-speed winds and
salt spray, magnetic encoders were
deemed to be the only viable option,
as open optical encoders would
face real challenges due to the
requirement to maintain a clear optical
path between readhead and scale.
Magnetic encoders can be fully sealed
to give much greater contamination
resistance and due to space limitations
surrounding the highly loaded wing
ribs, the use of LinACE modules meant
that the Renishaw team could design a
new encoder that minimised the size of
hole needed within the wing rib.
The new design of position encoders
were installed on the control surfaces
of both the wing flaps and the port
and starboard rudders, with numerous
changes made to ruggedise the
LinACE encoder and make it durable
enough for life at sea.
Position feedback from the encoders
is used in real-time on the boat by the
wing trimmer, allowing the boat to race
with more precision, whilst enabling the
capture of high-quality performance
data that can be analysed to improve
general efficiencies and accuracies.
With both additive manufacturing
and encoders, Renishaw worked
within the short timescales and high
specifications requested by Land Rover
BAR, to deliver world-class solutions.
D LinACE™ encoder from RLS repackaged
D Metal 3D-printed hydraulic system parts made by Renishaw for Land Rover BAR.
into a waterproof enclosure.
29
GovernanceFinancial statementsShareholder informationStrategic report Strategic report
Our strategy in action –
Strong market presence
Will Lee, Group Sales and Marketing
Director, was asked to talk about
Renishaw’s approach to developing its
global network of service and support
operations – here is a summary of
his thoughts:
Our products have often
been unique and disruptive,
offering new ways of solving
our customers’ problems, so it
has been important to work
closely with them to educate
and train their engineers.
Will Lee
Group Sales and Marketing Director
30
Renishaw plc Annual report and accounts 2017 Q. Why does Renishaw
have such a strong
global presence?
Q. What is the process for
opening new offices?
A. We start by determining which
A. We exported our products from
very early on in the Company’s
history, so exporting is very natural
to us. Our co-founder John Deer
was very clear from the start that
we needed to give excellent support
to our customers and if we did
that, then sales would follow as we
would become a trusted supplier.
We have always been prepared to
invest in our support capabilities and
initially our overseas operations in
markets such as the USA, Japan
and Germany, were only set up for
service and support – it was only
later that they started to focus on
sales and marketing activities. It is
also true that throughout our history
we have been prepared to invest
early where there is the potential for
long-term growth.
Q. Why is a local presence so
important for Renishaw?
A. Our products have often been
unique and disruptive, offering new
ways of solving our customers’
problems, so it has been important
to work closely with them to train
their engineers. Although machinery
and the application of our products
may be common across the globe,
business practices, local customs,
levels of technical expertise and
of course language, are very
different, so employing local
people is a necessity to be taken
seriously. There are also the simple
practicalities of having Renishaw
people easily accessible to provide
fast engineering support and
answer queries.
Our model is therefore to use the
strength of our UK operations
for product development, but to
decentralise decision-making to our
subsidiary network, allow our local
offices to make fast decisions and
also to tailor sales and marketing
messages, and customer solutions,
to their specific needs.
new markets offer the best growth
potential and then what type of
infrastructure we require to achieve
our medium-term aims. Our current
focus is to build capabilities within
larger regional offices which
can then support smaller offices
within their geographic region, so
demonstration and training facilities
may not be initially required.
Where we do decide to invest in
a new country office we prefer to
be optimistic about the long-term
potential and ‘over invest’, as from
years of experience we have learnt
how difficult it can be to have to
move/expand offices too soon after
first opening.
Q. What is your current focus
in relation to Renishaw’s
subsidiary network?
A. Given our more solutions-based
focus and increasing market
requirements to work on projects
with much greater levels of product
integration, the requirements to
service our customers is changing.
This is driving the need for more
skilled applications engineers and
a greater investment to upskill
our employees.
To meet these demands we are
developing more of a regional
approach to customer service and
the wider sharing of resources
across individual markets.
France and Taiwan, whilst we have
also opened a new local office in
California, and opened a series of
Additive Manufacturing Solutions
Centres in India, Canada and
Germany. However, we do continue
to monitor opportunities to enter
new markets with growth potential.
Q. Despite having offices in
35 countries Renishaw still
use distributors in those
countries – why is that?
A. When we first enter a market, our
existing distributors in that market
are very important to help educate
our staff and make introductions
to key customers. The changing
nature of those relationships over
time will depend on many local
factors, including the strength of
each distributor, but typically we
may focus on key accounts and the
distributors will service end-users
and smaller accounts. We may
also use specialist distributors to
handle certain products outside
the core metrology products, for
example, Raman spectrometers
and position encoders.
Generally, we like the flexibility
that distributors give us, especially
given that we simply do not have
the resources to tackle all business
opportunities ourselves. What is
also true is that having a local office
and local relationships with
distributors is key to ensuring that
those distributors remain motivated
to act in the best interests
of Renishaw.
Q. Are there plans to open any
Q. How do you manage your
new offices?
travel schedule?
A. Our main focus currently is
upgrading existing country
offices so that they are better
equipped to service our customer
base and to best promote our
industrial metrology offering and
new products, especially additive
manufacturing. For example, we
have recently improved, or moved
to new facilities, in Italy, Spain,
A. Travel is critical to understanding
developing business opportunities,
new products we need to develop to
meet varying customer challenges,
and also importantly to meet and
motivate our own employees.
D Open Day at Renishaw Hungary’s
D Tata Motors visited the Additive Manufacturing Solutions Centre at Renishaw’s facility
new facility.
in Pune, India.
31
GovernanceFinancial statementsShareholder informationStrategic report
Strategic report
Our strategy in action –
Efficient high-quality
manufacturing
John Deer
Deputy Chairman
D Gareth Hankins, Director, Group
Manufacturing Services Division and
Director, Renishaw (Ireland) DAC, with
responsibility for UK manufacturing
operations and manufacturing at itp GmbH.
D Mark Moloney, Director and General
Manager, Renishaw (Ireland) DAC and
Director, Group Manufacturing Services
Division, with additional responsibility for
manufacturing in India and Lyon, France.
32
Renishaw plc Annual report and accounts 2017
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 additive manufacturing
businesses. Investment has
continued in the improvement of key
manufacturing processes associated
with increased volumes and developing
capability for specific product lines
such as AM.
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 organic growth
and efficiency improvements for core
product lines, and the development of
the AM business.
Over many years, we have strived to
ensure 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.
D Renishaw’s machine shop at the Miskin
facility in South Wales.
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 90,000 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 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 2017 has
been £37m.
D The PCB assembly facility at Miskin
includes technology capable of placing
40,000 components per hour.
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 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, including implementing
dual sourcing strategies and
reviewing our contractual terms with
suppliers to ensure continuity of
supply. Processes have also been
implemented and enhanced within our
supply chains to ensure compliance
with our Group Business Code, and
the UK anti-bribery and modern
slavery legislation.
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 each manufacturing 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 56–58).
Progress at a glance
During the last year, investment
in manufacturing facilities and
equipment has continued to
ensure that future requirements
can be satisfied in a highly efficient
and cost-effective manner.
The factory floor space at the
Miskin facility, refurbished during
2016, provides substantial
capacity for future growth of the
business. In addition, outline
planning permission exists for
further development and capacity
to be provided at that facility.
Substantial capital investments
and process development activities
have continued to provide both
in-house piece part manufacturing
capabilities and new assembly
processes to support current
and new products within the
AM business.
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.
A team dedicated to packaging
design has been established
with the remit of optimising the
materials, labour and logistics
costs associated with our
products, which is increasingly
important given the global
distribution network of the Group.
33
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Strategic report
Our strategy in action –
Continual research
creating strong
market positions with
innovative products
34
Renishaw plc Annual report and accounts 2017
ATOM™ – miniaturising
innovation in the
encoder business
Modern high-volume production
processes, such as semiconductor
manufacturing, demand production-line
machines with ever smaller footprints
to maximise productivity while also
continually improving accuracy and
throughput. This results in growing
demand for smaller and lighter position
sensors. These position sensors, often
referred to as encoders, comprise
a readhead (an optical movement
sensor) paired with a scale (an
accurately marked ruler). The readhead
measures position by directly sensing
the regularly-spaced scale markings.
A smaller readhead allows installation
in tight spaces and a lower mass
also reduces inertia to enable higher
accelerations of the moving parts of
the machine.
The ATOM miniature optical encoder
was launched in 2014 and is
Renishaw’s smallest incremental
encoder product. It remains one
of the most compact optical
encoder solutions on the market.
ATOM is the only miniature encoder to
use Renishaw’s unique optics engine
with patented filtering technology,
which imparts several advantages
when compared with other types of
miniature encoder, including better dirt
immunity, lower cyclic error (improved
accuracy) and higher resolution.
One of the greatest technical
challenges in the design of ATOM was
shrinking the optics of pre-existing
compact encoders, such as the
TONiC™ series. ATOM readheads
occupy less than half the volume of the
TONiC equivalent.
Advanced manufacturing
ATOM readheads are too small to easily
build by hand and so ATOM is the first
Renishaw readhead to be assembled
with an automated process, which
also decreases process variability,
leading to lower production costs
and more consistent product quality.
An automated assembly process
provides significant flexibility of capacity
that allows the rate of production to
be readily increased from low to high.
Multiple readheads can pass through
the assembly process simultaneously.
The ATOM readhead is designed such
that fine alignment and assembly
operations are performed from one
side of the product only and robot arms
Richard Toller, Technical Manager for
Renishaw’s CMM Products Division,
explains: “The ATOM encoder
provides a level of plug-and-play
convenience that simply didn’t exist
before. The ease of installation and
alignment coupled with excellent
technical support allowed the REVO-2
design team to fully meet the design
specification whilst reducing overall
production cycle time.”
To summarise, ATOM helps to
streamline the REVO-2 manufacturing
process, while still providing
exceptional metrology performance.
ATOM is designed to support
manufacturing and servicing operations
with streamlined installation and robust
calibration procedures, in addition
to Renishaw’s unrivalled technical
support. The effects on the REVO-2
production process are reduced
process cycle times, higher unit yields,
greater efficiency and lower production
costs. REVO and ATOM are leading
metrology products that are now
combined in the powerful REVO-2.
The readheads are connected, via
an analogue filter and analogue-to-
digital converter (ADC), to REVO-2’s
electronics. ATOM, with its highly
automated manufacturing that
minimises process variability to
assure the best quality and the shortest
lead times, was chosen by REVO-2’s
design team as the most cost-
effective solution.
In this application, ATOM offers
leading-edge accuracy and speed
that enable excellent servo-loop gain
levels for outstanding position holding
and accurate surface scanning of
parts/components. The ATOM system
was also chosen for several design
features including:
• its mechanical simplicity and optical
disc alignment method using a
microscope camera system for
improved installed accuracy;
• ease of setup in conjunction with
REVO-2’s electronics, allowing both
incremental signal calibration and
auto-phasing of reference marks
without oscilloscopes or external
equipment; and
• availability of chrome-on-glass rotary
scale, with highly accurate scale
markings enables REVO-2 to achieve
a resolution of 0.002 arc seconds,
delivering high precision over the full
operating temperature range.
D Renishaw’s new REVO-2 measuring
head incorporates ATOM incremental
rotary encoders.
are used for component/subassembly
transfer between each process stage.
This is a largely unmanned assembly
system with no human observers
so continuous process checking
is essential.
All parts must first be correctly
orientated by means of bowl-
feeders and shaped feed-chutes.
Automatic part identification is
achieved by various means such as
RFID (Radio-Frequency Identification)
tags and advanced image processing
techniques. Furthermore, a Renishaw
TP20 touch-trigger probe is used
to calibrate the scale and readhead
body datum positions during the
assembly process. Correct alignment
of the optical components within
the readhead is achieved by a
combination of optical checking and
output feedback from the encoder
sensor itself.
ATOM and the REVO-2
One of the first commercial applications
of ATOM was in a new metrology
product developed at Renishaw.
The REVO system is one of Renishaw’s
flagship products and enables CMM
users to perform 5-axis measurement
on a 3-axis CMM. It measures
thousands of points per second and
operates at speeds up to 500 mm/s.
As the head is much lighter and
more dynamic than the CMM, it can
quickly follow changes in the part
geometry without introducing harmful
dynamic errors.
REVO-2 is an improved version that
builds upon the successful REVO
system with enhanced power and
communications capability to carry the
latest REVO probes such as the RVP
vision measurement probe.
The original REVO product featured a
custom-designed encoder with a fine
pitch 12 micron phase scale developed
before highly accurate miniature
encoders had been brought to market.
REVO-2 incorporates Renishaw’s latest
ATOM incremental rotary encoder with
RCDM rotary (angle) glass scales on
both of its axes (yaw and pitch). It is the
first product to have the ATOM encoder
designed-in at the concept stage.
Each 20 micron-pitch RCDM glass
disc (Ø68 mm diameter) is face-read
by a dual-readhead setup which helps
to optimise REVO-2 performance by
eliminating rotational eccentricity error.
D Some of the ATOM design team next to the product’s automated assembly cell.
35
GovernanceFinancial statementsShareholder informationStrategic report Strategic report
Performance – Overview
It was a very good year for Renishaw
with record revenue for the Group and
strong growth in both revenue and
profit compared to the previous year.
Investment for long-term business growth
continued, including the recruitment
and training of skilled people, new
product development, manufacturing
capacity and global marketing and
distribution infrastructure.
Review of 2017
This was a record year for revenue
and whilst there was a boost from
currency due to the Sterling weakening
following the UK vote to leave the
EU, there was still underlying growth
at constant exchange rates of 14%.
All product lines experienced growth,
including strong growth for the position
encoder line, which benefited from
strong investments in the electronics
sector in the Far East. This provided
us with the confidence to continue our
ongoing investments for the long-term
sustainability of the Group, including
global marketing and distribution
infrastructure, the recruitment and
training of skilled employees and
new product development and
manufacturing capacity.
The year saw continuing high levels of
capital investment in the development
and refurbishment of property. The new
133,000 sq ft headquarters facility for
Renishaw, Inc. was completed and is
occupied, allowing us to consolidate
operations from two existing sites,
including the 37,500 sq ft
former headquarters building which
was sold for US$3.2m. The new
building at West Dundee, Illinois, is
much better aligned to our ‘solutions
provider’ strategy with excellent
customer demonstration and training
facilities. In the USA we also completed
a new 20,000 sq ft building in Detroit,
Michigan, for Renishaw Advanced
Consulting and Engineering, Inc., a
business that we acquired in 2014 to
help support sales of CMM products
and Equator gauging systems in the
USA. A small office has also been
established in California to support
customers within the electronics sector.
D Renishaw products, such as the SPRINT scanning system, are meeting market
needs for ever-tighter production tolerances.
D Renishaw Additive Manufacturing
Solutions Centres provide a secure
development environment.
36
Renishaw plc Annual report and accounts 2017 During the year, refurbishment of
existing premises in Italy, France (Paris)
and Sweden was completed, whilst in
Spain, our subsidiary for the Spanish
and Portuguese markets relocated
to a new facility close to Barcelona,
which has given them three times
the space of their former building.
As well as a new showroom which
follows the highly successful template
of the Renishaw Innovation Centre,
the new Spanish office includes an
additive manufacturing lab which
includes material development facilities
and post-processing equipment for
3D-printed metal parts. The ongoing
investment in infrastructure to support
our additive manufacturing business
also saw the formal opening of our first
North American Additive Manufacturing
Solutions Centre (AMSC) in November
2016. Based in Kitchener, Canada
and close to our existing office, it is
one of a global network that is being
established to increase the adoption of
AM 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.
D Demonstration area at new facility near
Barcelona, Spain.
In Mexico, work is nearing completion
of a new building that will provide
expansion space for sales and
marketing operations. In October
2016, a new 11,800 sq ft office in
Taiwan was formally opened, allowing
enhanced commercial and technical
support to customers through
product showrooms, training and
demonstration facilities.
In the UK, we continued to expand
our manufacturing facilities, with
further expenditure on plant and
equipment to enable the Group to
meet the demands of a record order
book. Following refurbishment, the
Old Town site in Wotton-under-Edge is
now being used as an R&D facility for
metrology product development, whilst
at the Miskin site in South Wales, the
Healthcare Centre of Excellence was
formally opened by the First Minister of
Wales in September 2016.
We continued to invest in our global
IT infrastructure to support all the new
and refurbished facilities, including
ongoing investments in regional data
centres to improve performance across
our subsidiary network.
The skills agenda continues to be a
major topic of conversation amongst
engineering and science-based
businesses, with strong competition
for the best talent that will ensure
the future success of the business.
We continue to work hard regionally
and nationally to promote engineering
as a desirable career and Renishaw
as a desirable employer (see CSR
report pages 54–63 on Education and
Community). With such a competitive
environment for skilled people, we were
very pleased to again be recognised
for our graduate recruitment by
The JobCrowd (a UK graduate job
review website). We received a Highly
Commended Award for the benefits
package offered to graduates, rated
second behind winner Volkswagen
UK. We have a planned intake of
45 graduates and 48 apprentices
this summer, whilst our in-house
academy delivered 3,050 training
days (2016: 6,500), with the reduction
primarily due to changes to our
graduate induction and apprenticeship
programmes, which meant that less
time was spent with the academy in
favour of more ‘on-the job’ training.
During the year there were various
awards for Renishaw including the
prestigious Company of the Year award
presented at the 2016 NMI awards
(NMI is the UK trade association
representing the electronic systems,
microelectronics and semiconductor
communities). There were also
awards for products, including the
XM-60 multi-axis calibrator winning
the German MM Award for Innovation
in the Measuring Systems category
and a TASIA (The Analytical Scientist
Innovation Award) 2016 award for our
LiveTrack™ focus-tracking technology
for Raman imaging.
Market conditions
As reported last year, we were already
seeing a favourable environment for
our position encoders line due to
new investments in LED manufacture
and the semiconductor sector.
These investments have continued
this year and have been boosted
by a major investment cycle in flat
panel display (FPD) manufacture in
the Far East, where a combination
of the right products, backed up by
our excellent reputation for customer
service, including delivery and
engineering support, has enabled
us to win significant business in this
sector. With ever-shorter lead times
demanded by this market, our ongoing
investments in manufacturing capacity
have given us an agile capability
that allows us to quickly respond to
such demands.
As well as strong trade in the Far East
electronics sector, on a global basis
we are continuing to see ongoing
investment in production systems
and processes, including automation,
aided by an increasing awareness of
the benefits to be gained by adopting
Industry 4.0 and Smart Factory
philosophies (see pages 26–27).
Key sectors such as aerospace,
automotive and energy require
Renishaw systems to meet their need
for ever tighter production tolerances
and cost controls.
Strategy
To meet our key strategic aims, we
continued to make investments,
which this year included focusing on
enhancing our ability to demonstrate
our products and their applications,
the infrastructure to support our
additive manufacturing business, our
manufacturing capabilities to meet the
strong growth in business, and our
continuing drive to develop a strong
market presence in both established
and emerging markets.
We continued to invest heavily in R&D
to create strong market positions
through technology leadership,
with £78.0m (before net capitalised
development costs and the R&D
tax credit) expenditure on R&D and
engineering during the year. We filed 27
new patent applications and there were
74 previously filed applications granted
this year.
Another important aspect of our
strategy is to utilise our existing
technologies across different product
lines; for example, the Z-axis on
our new RenAM 500M additive
manufacturing system, and the
new REVO-2 measuring head (see
page 35) all incorporate our optical
encoders. Our MODUS™ metrology
software platform, initially created for
CMM applications, is also increasingly
being applied across our metrology
lines, and during the year, a new
group was created to focus on its
future development.
During the year we established a
new subsidiary in Turkey to expand
our marketing, sales, service and
distribution infrastructure in this
growing economy.
37
GovernanceFinancial statementsShareholder informationStrategic report Strategic report
Performance – Metrology
v The new Trigger Logic™
app simplifies the process
of configuring a Renishaw
machine tool probe.
Performance
As already reported, there was strong
growth for our position encoder line,
but all other metrology lines also grew,
with strong growth also achieved in
our measurement and automation,
calibration and co-ordinate measuring
machine product lines. The calibration
line includes fibre-optic laser encoders,
which are the finest resolution and
highest accuracy position feedback
systems offered by Renishaw. With a
sub-nanometre (less than one billionth
of a metre) resolution capability at
velocities of up to two metres per
second for an axis length of up to four
metres, these encoders have this year
benefited from growth in applications
within the semiconductor industry.
The measurement automation
products line, currently focused on the
Equator™ gauging system, continues
to see high levels of global success
in the automotive, electronics and
aerospace sectors, with integration
within automation cells continuing
to be a notable trend. To meet the
growing demand for the latter, new
IPC (intelligent process control)
software was launched during the
year which allows Equator systems to
be fully integrated into manufacturing
processes, either connected to one
or multiple machine tools, or within
fully automated manufacturing cells.
The software allows tool offsets to
be automatically updated after parts
have been machined and inspected,
ensuring that the process is kept within
control limits.
The position encoders line and our
associate company RLS, continue
to derive particular benefit from the
ongoing global drive towards industrial
automation which aims to increase
capacity and flexibility, whilst reducing
manufacturing lead times and costs.
This sector, like LED and flat panel
manufacture, requires rapid, reliable
and accurate measurement of position
between moving parts. The market
for industrial robots is also growing,
with the introduction of smart factory
concepts seeing the expansion of
new robotic applications into light
industries, such as 3C product
assembly (computing, communication
and consumer) and other automatic
production lines, where robots with
high precision and high flexibility are
required. The use of collaborative
robots (‘cobots’) is increasing, working
closely with people to help finish
production tasks through simple, fast
programming or even self-learning
processes. Denmark-based Universal
Robots is a market leader in this field
and their multi-axis collaborative robots
use RLS AksIM magnetic absolute
rotary encoders for position feedback.
Investment continues in 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) and
the previously mentioned Additive
Manufacturing Solutions Centres.
38
During the year there were some
notable AM collaborative projects
announced, particularly in the
aerospace sector. In the UK, Renishaw
is contributing its expertise to a
project called WINDY (Wing Design
Methodology Validation), being led
by Airbus in the UK, to develop
an innovative way of designing
and manufacturing aircraft wings.
Airbus is creating an AM facility at
its Filton, UK site, which includes a
new Renishaw RenAM 500M system,
whilst in Spain the same system has
also been installed at the Centre for
Advanced Aerospace Technologies
(CATEC) in Seville, which focuses
its activity on the promotion of R&D
activities within the aerospace sector
in Andalusia, actively developing new
technologies and the transfer of best
practices. Renishaw is working with
CATEC and other organisations in a
Spanish Government funded project
called Futuralve. Led by ITP, the aero
engines and turbines manufacturer,
the project’s objective is to create
advanced material and manufacturing
technologies for a new generation of
high-speed turbines for the aerospace
sector. With increasing interest from the
aerospace industry, Renishaw attended
the Paris Air Show for the first time.
Outside Europe, Rapid Advanced
Manufacturing (RAM3D) has opened
a new facility in New Zealand, the
biggest Australasian centre for metal
3D printing, where it is collaborating
with Renishaw and using several of
our AM250 additive manufacturing
systems to help companies from a
range of sectors, including aerospace,
defence and consumer products, to
explore the benefits of AM. In China, an
agreement was signed with FalconTech
Co, Ltd. to become an additive
manufacturing solutions centre partner
and distributor for our AM technology.
Under the partnership, FalconTech,
which is focused on the rapid
manufacturing of high-performance
components for sectors including
aerospace, biomedical and marine,
will set up an AM centre in Wuxi and
purchase 10 RenAM 500M systems by
October 2018.
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,
Renishaw plc Annual report and accounts 2017 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 market. The 2017
Boeing Global Market Forecast sees
the need for 41,000 new aircraft by
2036 to meet growing demands
and the replacement of aircraft
within the current commercial fleet.
Growth is seen as being due to the
rise in middle-income travellers in
developing markets such as China and
India, and Boeing believes that over
this period, Asia will need more than
16,000 new aircraft (39% of global
demand). Renishaw products are used
heavily in the aerospace sector and
the drive to “lightweight” components
is generating strong interest in
additive manufacturing.
Strategy for growth
A key focus is on developing
technologies that provide patented
products and methods which
support our product strategies,
with £68.8m (before net capitalised
development costs and the R&D
tax credit) expenditure on R&D
and engineering during the year.
The current technology focus is on
products that help our customers
to increase measurement capability,
improve measurement performance,
increase speed of operation and are
more user-friendly. These include
simplified software, including apps,
for machine tool and CMM probing,
calibration and gauging; multi-probe
capability for CMMs; miniaturised
high-resolution position feedback
systems that support the manufacture
of high-precision electronics; the
development of AM systems with faster
processing capability and improved
process control for large-scale
manufacturing; and integrated process
control solutions for automated
manufacturing processes.
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 automation,
calibration, additive manufacturing,
and 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 users
of CMMs, including the upgrades of
measuring machines already installed.
For example, our new SFP2 surface
finish probe offers a solution for the
surface measurement of parts on the
same machine used for dimensional
measurement, reducing inspection
times, part handling and floor
space requirements.
Our wide portfolio of products gives us
key advantages when competing for
high-value orders, and both AM sales
and automation projects are often with
existing customers who understand
Renishaw’s holistic approach to
manufacturing and the complementary
products that can assist their part
production. For example, as well as
AM technology, the Futuralve project
mentioned earlier is also benefiting
from our REVO five-axis measurement
system and SPRINT on-machine
contact scanning technology for
machine tools.
Key developments
In addition to new products already
mentioned we introduced other
metrology products, most notably
the XM-60 multi-axis laser calibrator
which allows the measurement of a
machine tool’s six degrees of freedom
along a linear axis in a single set-up.
It is significantly simpler and faster to
use than other laser measurement
techniques. Within our encoder
products line we launched the VIONiC
family of highly compact, ultra-high
accuracy ‘all-in-one’ position encoders
which combine interpolation and digital
signal processing inside the readhead,
therefore eliminating the requirement for
additional external interfaces. For users
of manual CMMs we introduced a
MODUS 2 upgrade kit which combines
a Renishaw controller, software
and position encoder technologies
to give users a more sophisticated
measurement capability. We will launch
a large number of new products
at the EMO Hannover exhibition in
September 2017.
We have introduced at trade exhibitions
a new machining cell concept with
integrated process control which
demonstrates how complementary
technologies from Renishaw, including
gauging and machine tool probing, can
contribute to high levels of productivity
and manufacturing capability.
Outlook
The 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 product lines, whilst
we remain confident that there
will be increased adoption of AM
technologies by many of our existing
customer groups.
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). 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.
D The Equator™ gauge is now offered with IPC software, providing the functionality to
fully automate tool offset updates in CNC manufacturing processes.
39
GovernanceFinancial statementsShareholder informationStrategic report Strategic report
Consumer products
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.
D Titanium watch cases manufactured for Holthinrichs Watches
using Renishaw additive manufacturing systems.
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.
40
Making time for luxury watches
Michiel Holthinrichs, the founder of
Holthinrichs Watches, is working with
a Renishaw Additive Manufacturing
Solutions Centre (AMSC) to build up
his knowledge about the potential of
metal AM and to speed up the overall
manufacturing time for his high-end,
limited-edition watches. His first design
‘Ornament 1’ combines traditional
watchmaking elements, including a
Swiss movement with manual winding
and a design inspired by classic
watches of the 1950s, with metal 3D
printing used to produce the case,
crown and buckle.
Michiel first worked with a reputable
3D printing bureau in Belgium to 3D
print prototypes and the first stainless
steel ‘Ornament 1’ watch on its
Renishaw AM250 system. He noted,
however, that customers seemed to
be less concerned by the method of
manufacture, but rather more by the
details in the design which could not be
achieved by traditional manufacturing
and highlights the capability of
Renishaw’s high-performance AM
systems to produce highly precise and
fine detail features.
Now that Michiel has proved
‘Ornament 1’ can be produced, he is
working with an AMSC to investigate
how reproducible it is, to streamline the
labour-intensive finishing process and
to offer an alternative material. His plan
is to develop a core range of classic
style watches that are high-end and
have a strong element of personality,
but which could be completely
customised like bespoke jewellery.
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.
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.
Renishaw plc Annual report and accounts 2017 From marble slabs to
machine tools
Focusing initially on designing and
building machinery to process natural
stone, the Italian company Breton
S.p.A soon moved to producing
complete systems for the manufacture
of composite stone. This proved to be
the backbone of its growing business
for many years. The 1980s saw
Breton begin building CNC machinery
for processing marble, granite and
composite stone slabs, this also
included the arrival of the company’s
first five-axis systems.
A decade down the line and Breton
began to diversify its expertise into
the production of high-speed CNC
machining centres for the metal-
cutting industry.
Switching from processing stone
materials to metals demands a
significant increase in precision, and
using Renishaw’s laser interferometers,
rotary axis calibrators and ballbars all
Breton’s machines undergo calibration
routines which guarantee their optimum
operation. As a result, Breton’s CNC
machining centres are now seen
as being among the world’s most
advanced in the sector.
D Breton employee using
XL-80 laser interferometer to
calibrate a CNC machine.
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.
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.
D Luxury watch from
Holthinrichs Watches
featuring a 3D-printed metal
case, crown and buckle.
Watches/jewellery
Additive manufacturing is allowing
the cost-effective customisation
of complex luxury watches and
jewellery, including the ability to add
personalised designs/messages
during the manufacturing process.
41
GovernanceFinancial statementsShareholder informationStrategic report Lamborghini is a brand that symbolises
Italian passion in the world of
supercars, but it also has a strong
following in the agricultural world, due
to a range of high-performance tractors
produced by SAME DEUTZ-FAHR.
At its headquarters and main factory in
Treviglio, near Milan, Italy, the company
improved manufacturing efficiency
by retrofitting Renishaw TRS2 tool
recognition systems on four Mazak
flexible manufacturing system (FMS)
cells, which produce transmission and
gearbox components. All these parts
require a large number of threaded
holes and some 70% of machining
time is therefore devoted to drilling and
tapping, with tools varying in size from
M5 to M18 which break frequently;
undetected this would lead to scrap
and wasted machining time.
As machining cycles are fully
automated, a tool monitoring system
had previously been introduced in order
to minimise scrap; however, it was
taking an unacceptable 21 seconds
to check each tool. With 34 tool
checks required per finished
component, this was resulting in
significant non-productive time.
Agricultural analysis
Raman spectroscopy is increasingly
being used for research within various
fields of agriculture such as fruit
and vegetables, crops, meat and
dairy products.
Strategic report
Agriculture
The sector is being driven by
increasing global demand for food
products from developing nations,
as well as increasing global demand
for biofuels. This is requiring greater
investment in machinery for intensive
farming capabilities and new
technology to bring greater efficiencies
to deliver ‘precision agriculture’ –
making use of satellites to monitor
crop condition and direct machinery
for optimal performance, including
the distribution of seed, fertilisers
and pesticides.
D Lamborghini tractors are known globally for their
bold style, performance and design.
The majority of key components
on high-end agricultural equipment
are subject to process control using
Renishaw products. This illustration of
a typical tractor highlights a few key
applications for our products.
42
Renishaw plc Annual report and accounts 2017 This led to the decision by SAME
DEUTZ-FAHR to retrofit the Renishaw
TRS2 tool recognition units which
offered fast and reliable tool inspection,
reducing the time to check each tool
to just 7 seconds, a 67% reduction on
the previous method and an average
reduction of component cycle time of
7.5 minutes – some 6% of cycle time.
If a tool breakage is detected by the
Renishaw system an alarm sounds and
the machining program is stopped.
Any logic could be employed at this
stage, for example, another identical
‘sister tool’ could be used instead
and machining could continue, but
the engineers at SAME DEUTZ-FAHR
prefer to stop the process for an
operator to check the part and make
sure that no more damage occurs.
The company’s manufacturing
engineering specialist involved with
the project reports that the decision
to invest in the TRS2 tool recognition
systems and the subsequent cycle
time savings has been extremely
successful. “After a detailed analysis,
based on the cost to run machines, we
know this equates to a saving of more
than €150k in the first year. This is
because most of the non-productive
machine time taken to check tools
has now been released to machine
components. We have paid back the
initial investment in the TRS2s in a
matter of just 5 months.”
Smart farming
Modern agriculture is making use
of satellites, equipped with position
encoders, to monitor crop condition,
forecast crop yields and direct
machinery for optimal performance,
including the distribution of seed,
fertilisers and pesticides.
Precision parts for powerplants
High-precision manufacturing
uses advanced scanning probe
systems to control quality, enabling
powerplants to deliver enhanced
performance, higher reliability and
reduced emissions.
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.
D The TRS2 tool recognition
system is used to check all
tools prone to breakage,
with at least 34 checks per
machined component.
D Renishaw technology is
aiding the manufacturing
efficiency of SAME DEUTZ-
FAHR tractors.
Manufacture of large
high-value components
Wireless probing technology is used
to control and automate the machining
of chassis and other components for
agricultural plant where scrap is too
costly to accept.
43
GovernanceFinancial statementsShareholder informationStrategic report Strategic report
Performance – Healthcare
D Complex reconstructive facial surgery is using Renishaw additive manufacturing systems
to produce replacement jaw sections and teeth.
Performance
There was growth from all our
healthcare product lines (spectroscopy,
neurological and medical dental).
In spectroscopy the market has
responded very well to our award-
winning InVia Qontor system helping
the product line to achieve growth.
During the year the neurological
products line achieved key strategic
sales of the neuromate® stereotactic
robotic system and neuroinspire™
surgical planning software. Alder Hey
Children’s Hospital and Birmingham
Children’s Hospital (BCH), are
two of the UK’s four national
Children’s Epilepsy Surgery Service
(CESS) centres and both reported
successful uses of the systems for
stereoelectroencephalography (SEEG)
cases for epilepsy, where intracerebral
electrodes are implanted to measure
electrical signals and identify which
region of the brain is acting as a source
for the epileptic seizures. Mr Richard
Walsh, consultant neurosurgeon at
BCH, reported after the first procedure
that “using the robot certainly made
the procedure easier, faster and
more straightforward for me.” One of
London’s largest and busiest teaching
hospitals, King’s College Hospital, also
reported its first successful SEEG
case (see page 20). Outside the UK,
a neuromate robot was installed
in Canada for the first time at the
London Health Sciences Centre
(LHSC) in Ontario, with the first
assisted neurosurgical procedure also
a SEEG case. The team at LHSC is
led by neurosurgeon Dr David Steven
who said, “It (the robot) is already
noticeably faster and more accurate
than the previous system. In addition,
it allows us to plan trajectories
previously impossible with a standard
frame, making surgery safer and
more accurate.”
The medical dental products line
experienced good growth from
focusing on the sale of Renishaw AM
machines configured for medical and
dental applications. It ensures that it is
able to demonstrate its knowledge of
the technical challenges faced by those
applications by manufacturing medical
and dental parts at Renishaw facilities.
The medical dental products line
has seen good progress in the
supply of additively manufactured
LaserImplants™, which are
craniomaxillofacial patient-specific
implants (PSIs) and associated cutting
guides that support reconstructive
surgery, typically resulting from head
or neck trauma, birth defects or
cancer treatment.
During the year a collaboration was
announced with PDR, the International
Centre for Design and Research,
based in Cardiff, Wales, which seeks
to pioneer new design methods that
will bring engineering levels of precision
to complex surgical procedures.
44
Renishaw’s expertise in technologies
such as metal additive manufacturing
will be harnessed through PDR’s
experience in research and design
of medical devices. Renishaw and
PDR have already collaborated on
other projects, including the Innovate
UK and EPSRC funded Additive-
manufacture for Design-led Efficient
Patient Treatment (ADEPT) project,
which won a Collaborate to Innovate
award and has resulted in the release
of Renishaw’s new ADEPT software
(see below).
In Canada, Renishaw is contributing
to a new medical centre called
ADEISS (Additive DEsign In Surgical
Solutions) based at the Western
University campus in London, Ontario.
The result of a partnership between
the university, the London Medical
Network and Renishaw, the centre will
focus on the research, development
and commercialisation of additively
manufactured medical devices and
surgical instruments. The Renishaw
contribution is CAD3 million of
in-kind support.
There was also a good year of sales
for 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), LaserRPD™ partial dentures
and LinkAbutments™. The majority
of manufacture of medical dental AM
products takes place in the Healthcare
Centre of Excellence, based at Miskin,
which operates under an ISO13485
quality management system.
Our Raman instrumentation meets the
high-performance requirements of a
wide range of research applications,
including life sciences, mineral
research, graphene and other 2D
materials, pharmaceuticals and
advanced materials for the green
energy market. However, there is
an increasing use of our technology
within medical research, for example
in Canada, the University of British
Columbia in Vancouver is leading the
way in the use of Raman spectroscopy
as a tool for monitoring biochemical
changes and inter-donor variability in
stored red blood cell units. In China,
the Guangdong Medical University is
developing a method for non-invasive
prostate cancer screening (see page 21).
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
Renishaw plc Annual report and accounts 2017 interest in Raman, including hybrid
combinations 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 product
lines are well placed to deliver on
these requirements.
Global economic conditions continue
to limit the availability of academic
research funding in certain markets,
while remaining strong in others.
Key research areas, including 2D
and 3D materials, green energy,
pharmaceutics and biomedical
research, continue to attract funding
and our spectroscopy products are
well placed to service these sectors.
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 £9.2m (before net capitalised
development costs and the R&D tax
credit) of expenditure on R&D and
engineering during the year.
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 use our
own AM machines in the manufacture
of dental structures and medical
implants to demonstrate the suitability
of AM for this purpose, whilst also
taking advantage of our knowledge
of subtractive machining in the hybrid
manufacture of LinkAbutments.
We actively seek out partnerships that
will assist research and our routes to
market, and we consider acquiring
businesses and/or technologies that
we feel are complementary to our
existing healthcare products.
Key developments
During the year, a €6m Horizon 2020
grant was announced to support
Phase 1-2 clinical trials for Renishaw’s
novel drug delivery system, to be used
in combination with Herantis Pharma
plc’s drug candidate CDNF, for the
treatment of Parkinson’s disease.
CDNF aims to relieve the symptoms
of Parkinson’s disease by protecting
and regenerating dopamine producing
neurons. The study has been approved
by the Medicines Agency of Sweden
and Finland and a total of 18 patients
with Parkinson’s disease are being
recruited. Other applications for the
Renishaw drug delivery system are also
being progressed including its use for
treating children with brain tumours
by delivering therapies directly into the
area affected by the tumour.
The neurosurgical line launched
neurolocate™, a frameless patient
registration module designed for use
with the neuromate stereotactic robot
and mounted on the robot arm during
intraoperative X-Ray/CT scans.
The spectroscopy line launched the
RA802 pharmaceutical analyser,
which is a compact benchtop Raman
imaging system designed specifically
for the pharmaceutical industry.
Using Renishaw’s award-winning
LiveTrack™ focus tracking technology,
tablet samples with uneven, curved
or rough surfaces can be quickly
analysed for composition and structure
without sample preparation, meaning
that tablets can be formulated more
efficiently. The RA802 won the best
measurement laboratory equipment
award at Eurolab 2017 show in
Poland. The new Centrus CCD
detector was also introduced for
high-speed Raman analysis; giving
outstanding performance, even at
speeds of over 1,800 spectra per
second, it dramatically reduces
measurement times and is available
on inVia microscopes and the RA802
pharmaceutical analyser.
During the year the medical dental
products line introduced two new
software products – QuantAM Dental
increases automation in the production
of dental products, especially using
additive manufacturing, whilst ADEPT
is a software package that streamlines
the design and manufacture of
craniomaxillofacial patient-specific
implants.
Outlook
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 well-placed
to supply neurosurgeons with the
products and techniques to support
such procedures.
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.
The market for Raman spectroscopy
continues to grow in fields such as
nanotechnology, advanced materials,
pharmaceutical, life sciences and
medical research.
D David Steven and his team at London Health Sciences Centre, Ontario, with their newly
installed neuromate stereotactic robot.
45
GovernanceFinancial statementsShareholder informationStrategic report Strategic report
Performance –
Financial review
This year we have achieved record
revenue amounting to £536.8m and
a 25% increase in adjusted profit
before tax to £109.1m. Statutory profit
before tax was £117.1m. We have a
strong balance sheet with total equity
growing by £59.9m to £444.4m,
with net cash balances of £51.9m
(2016: £21.3m). The Board is
proposing an 8.3% increase
in dividends for the year.
Allen Roberts
Group Finance Director
Financial highlights
Working capital £m
(excluding cash
and derivatives)
180.8
182.5
130.6
120.1
103.6
33.8%
26.4%
2015
2014
29.9%
2013
41.8%
33.7%
2017
2016
Capital expenditure £m
53.0
48.4
27.5
39.2
17.9
42.6
35.6
18.4
24.2
28.0
20.9
17.4
21.1
21.3
2017
2016
2015
2014
6.9
2013
46
% of revenue
Plant and vehicles
Land and buildings
Renishaw plc Annual report and accounts 2017 Revenue
We achieved a record turnover with
revenue for the year of £536.8m,
compared with a restated £427.2m last
year, a growth of 26%. We experienced
an underlying revenue growth
for the year of 14% at constant
exchange rates.
Revenue by region
The table below shows the analysis of
group revenue by geographical market.
In our metrology business segment,
revenue was £503.4m, compared
with a restated £398.9m last year.
Revenue in our healthcare business
segment increased from £28.4m last
year to £33.4m.
A geographical analysis of our metrology
and healthcare businesses is shown in
the Strategic report.
Profit and tax
The adjusted profit before tax
amounted to £109.1m, an increase of
25% compared to a restated £87.5m
in 2016. Statutory profit before tax
was £117.1m compared to a restated
£61.7m in the previous year. In our
metrology business, adjusted operating
profit was £115.9m, compared with a
restated £90.0m last year and in our
healthcare business we recorded an
operating loss of £7.2m, compared
with a restated loss of £3.1m last year.
The overall effective rate of tax on
continuing operations was 12.2%
(2016 restated: 16.2%). 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 19.75% (2016: 20%), a
UK patent box benefit amounting to
£4.0m, a reduction in the deferred tax
rate to 17% from 2020 and a prior year
credit of £3.0m.
Earnings per share
and dividend
Adjusted earnings per share from
continuing operations is 132.4p, an
increase of 32% compared with 100.4p
last year.
Statutory earnings per share from
continuing operations is 141.3p,
compared with 71.8p last year.
In line with the Group’s progressive
dividend policy, a final dividend of
39.5p net per share (2016: 35.5p)
results in a total dividend for the year
of 52.0p, an increase of 8.3% over
the 48.0p in 2016. Dividend cover
is 2.5 times (2016: 2.1 times) on an
adjusted basis.
Revenue analysis by region
2017
revenue
at actual
exchange
rates
£’000
Restated 2016
revenue
at actual
exchange
rates
£’000
Change
from
2016
%
Underlying
growth at
constant
exchange
rates %
Far East, including Australasia
248,905
+29% 193,274
Continental Europe
129,941
+18% 110,315
North, South and Central America
113,577
UK and Ireland
Other regions
27,595
16,789
+29%
+21%
+31%
88,029
22,752
12,854
Total group revenue
536,807
+26% 427,224
+14%
+12%
+13%
+21%
+30%
+14%
Research and development
Gross expenditure on engineering
costs, including research and
development on new products, was
£78.0m (2016 restated: £68.8m).
The capitalisation of development costs
(net of amortisation charges) amounted
to £2.7m (2016: £3.1m). The R&D tax
credit in 2017 amounted to £6.5m
compared to £2.4m in 2016. The net
charge in the Consolidated income
statement amounted to £68.8m
compared to a restated £63.3m in
2016. The gross charge amounts to
15% of group revenue (2016:16%).
Between the business segments
gross expenditure on engineering
costs was £68.8m (2016 restated:
£60.9m) in the metrology segment and
£9.2m (2016 restated: £7.9m) in our
healthcare segment.
New product research and
development expenditure amounted
to £53.5m, which compares with
£44.4m 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 2018
financial year.
Group headcount
Group headcount has increased from
4,286 at 30th June 2016 to 4,530
at 30th June 2017, with the average
for the year of 4,395, compared with
4,192 last year. The increase during
the year of 244 comprised additional
employees of 98 in the UK and 146
overseas. The increase in the UK
included 46 apprentices and 45
graduates, and, in addition, we are
funding the further education of 103
employees in engineering, software and
commercial/business disciplines.
Labour costs, the most significant cost
for the Group, increased by 15% to
£211.6m (2016: £183.8m) reflecting
an annual pay increase, exchange rate
movement, the incremental cost of the
employees recruited in both 2016 and
2017 and an increase in the employee
bonus provision. Also, there was a
directors’ bonus this year of £1.7m
(2016: £nil).
47
GovernanceFinancial statementsShareholder informationStrategic report Strategic report
Performance –
Financial review
continued
Consolidated balance sheet
The Group’s shareholders’ funds at the end of the year were £443.8m, compared with £381.4m at 30th June 2016.
Reserves benefited from our trading results, with a retained profit after tax of £88.8m and were reduced by dividends paid of £34.9m.
Additions to property, plant and equipment totalled £42.6m, of which £24.2m was spent on property and £18.4m on plant and
machinery and IT equipment and infrastructure.
The main property additions were:
• in the USA, completion of our new headquarters, near Chicago and a new building in Detroit;
• in Spain, fit out of premises purchased last year;
• in Sweden, refurbishment of our existing premises;
• in Germany, refurbishment of our existing premises; and
• in France, refurbishment of our existing premises.
Within working capital, inventories decreased to £87.7m from £95.0m at the beginning of the year reflecting our continued
focus on working capital management whilst remaining committed to 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 £114.9m to £137.5m. This increased amount reflects a stronger final quarter’s revenue compared
with the previous year, which has also contributed to the increase in debtor days to 73 at the end of the year, compared with 70
at the end of last year.
Net cash balances have grown over the year with balances at 30th June 2017 of £51.9m (2016: £21.3m). The cash flow bridge
below shows the significant items that reconcile opening to closing cash balances. There is also the pension scheme escrow
account of £12.9m (2016: £15.3m).
Cash flow bridge
50.1
Increase
Decrease
Total
88.8
(23.8)
6.5
(42.6)
2.4
(15.9)
51.9
(34.9)
£m
160.0
140.0
120.0
100.0
80.0
60.0
40.0
20.0
0
21.3
N et cash B/fd
Profit after tax
N on cash ite m s
Tax paid
C apital spend
Disposal proceeds
C apitalised R & D
Transfer fro m escro w
Dividends paid
C ash C/fd
At the end of the year, the Group’s defined benefit pension schemes, now closed for future accrual, showed a deficit of £66.8m,
compared with a deficit of £67.8m at 30th June 2016. Defined benefit pension scheme assets at 30th June 2017 increased to
£170.7m from £149.2m at 30th June 2016, representing investment performance during the year. Pension fund liabilities increased
from £217.0m to £237.5m, reflecting changes in the underlying assumptions applied, in particular the reduction in the discount
rate used for the UK pension scheme. Under the 2015 recovery plan the liabilities are calculated on the basis of funding to self-
sufficiency. The recovery plan provides for charges over certain UK properties to the value of £66.6m and the escrow account.
For the UK defined benefit pension scheme, a guide to the sensitivity of the value of the respective liabilities is as follows:
Valuation sensitivity
UK – discount rate
UK – future inflation
UK – mortality
UK – early retirement
48
Variation
Approximate effect on liabilities
Increase/decrease by 0.5%
Increase/decrease by 0.5%
Increased life by one year
One year earlier than assumed
-£21.3m/+£24.8m
+£17.7m/-£18.3m
+£7.4m
+£6.4m
Renishaw plc Annual report and accounts 2017 Restatements and alternative performance measures
Restatements to the 2016 results have arisen from the following items:
• the R&D tax credit previously reported in the tax charge has been reclassified and is now reported in cost of sales and
credited against the group’s R&D expenditure in line with international accounting standards;
• the allocation of profits between continuing and discontinued operations; and
• the impact of certain foreign currency forward contracts used as hedging instruments for future incoming currency cash
flows that did not meet the criteria for hedge accounting under IAS 39 which has resulted in the prior year profit before tax
being reduced by £25.8m, with a corresponding credit in the other comprehensive income. This year an £8m gain has been
recorded in statutory profit before tax as a result of this accounting treatment. There was no impact on the group net assets,
cash balances or future cash flows.
The Board has introduced alternative performance measures (adjusted profit before tax, adjusted operating profit and
adjusted earnings per share) to report the results on the basis that all forward contracts are accounted for as effective
hedges. These measures will be the basis by which the Board evaluates the Group’s performance as they better represent the
underlying trading of the Group. The tables below show the effects of the restatements on the previous year’s results and the
details of the adjustments between statutory profit before tax and adjusted profit before tax. See note 24 for further details.
2016 reported profit
R&D tax credit
Discontinued operations
Adjusted restated 2016 profit before tax
Adjusted profit before tax
Fair value gains and losses on financial instruments not eligible for hedge accounting:
- reported in revenue
- reported in losses from the fair value of financial instruments
Statutory profit before tax
2016
£m
80.1
2.4
5.0
87.5
2016
restated
£m
87.5
(2.4)
(23.4)
61.7
2017
£m
109.1
11.6
(3.6)
117.1
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 following information 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. The Group does not speculate with derivative financial instruments.
See note 20 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 2017
49
GovernanceFinancial statementsShareholder informationStrategic report Strategic report
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 below. 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 process, which is closely
aligned with the Group’s strategy in
order to enhance the Group’s approach
to risk generally.
Risk management framework – information and feedback flow
Board
Audit Committee
Executive Board
t
i
d
u
a
l
a
n
r
e
t
n
i
d
n
a
r
o
t
i
d
u
a
l
a
n
r
e
t
x
E
Top-down review
Group risk register
Bottom-up review
ISM Board
(Group operating companies)
Other operational
management
50
i
G
r
o
u
p
b
u
s
n
e
s
s
c
o
d
e
a
n
d
o
t
h
e
r
p
o
l
i
i
c
e
s
Risk CommitteeRenishaw plc Annual report and accounts 2017
Activities during the year
A new executive risk committee was
formed in 2016 creating greater linkage
across our review and assessment of
risk. The committee met four times in
the period and conducted a thorough
review of our principal risks as well as
the relevant mitigation plans for each.
The overall effectiveness of the Group’s
risk management and mitigation
processes is reviewed regularly
by the Executive Board and the
Audit Committee.
During the year a new Group Audit
Manager was recruited. The internal
audit team operates independently,
reporting to the Audit Committee.
Scheduled visits to Group companies
were held and documented, with
an executive summary provided
to the Audit Committee and any
shortcomings acted upon promptly.
Process enhancements are worked
upon by this team. All operating
companies are required annually
to complete self-certification
questionnaires regarding compliance
with Group policies, procedures
and requirements.
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.
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
7 Cyber security threats
Further descriptions and associated
mitigations are shown on pages 52–53.
Key focus areas for the
2017 financial year
• A robust assessment of the
principal risks facing the Group,
including those that would
threaten its business model,
future performance, solvency
or liquidity.
• Implementation of measures
in response to the Modern
Slavery Act.
• Implementation of an executive
risk committee, four meetings
held in the period.
• Implementation of a groupwide
whistleblowing policy.
• Recruitment of a new Group
Audit Manager.
• Consideration of the risks related
to Brexit.
• Evaluation of and protection
against cyber security threats.
• Anti-bribery due
diligence enhancements.
Cyber threats
In relation to the continuing threat
from cyber security, we have provided
employees with online training and
further strengthened our IT systems’
resilience as well as the monitoring
of threats.
Other key developments
New enhanced due diligence
procedures have been implemented for
routinely screening new and existing
agents and distributors, utilising
the services of a market-leading
screening service. We have rolled out
refresher e-learning training on our
Group Business Code (which sets
out the ethical standards expected of
employees and our business partners)
and also on anti-bribery.
A groupwide whistleblowing policy was
implemented this year which involved
the appointment of an independent
third party provider to operate a
confidential reporting line, enabling
people to raise concerns in confidence
if they feel the standard internal
processes are not appropriate.
Going concern
for more information see page 75
Viability statement
for more information see pages 75–76
For further explanation of our approach
to risk management and internal control
see page 76
h
g
H
i
t
c
a
p
m
k
s
R
i
i
1
6
2
7
3
4
5
w
o
L
Low
Likelihood of risk
High
51
GovernanceFinancial statementsShareholder informationStrategic report
Strategic report
Principal risks and
uncertainties
Our performance is subject to a number of risks,
the principal risks and factors impacting on them
are set out in the table below.
Increased
Decreased
No change
The Board has conducted a
robust assessment of the principal
risks facing the business. The full
business implications of Brexit remain
uncertain, which will be the case
for some time. The Board is
closely monitoring the situation as
it develops. Further commentary
on Brexit is provided on page 67.
Currency fluctuations, trading
arrangements, employment issues and
other risks that become apparent over
time, will be monitored by the Board and
mitigation put in place where possible.
The cyber security threat risk has
been included for the first time this
year, to demonstrate how the Group
is addressing this increasing and
challenging threat.
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:
2
4
5
6
8
* No change.
Potential impact
Global market conditions continue to
highlight risks to growth and demand
that 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.
Mitigation
• The Group is expanding and diversifying its
product range in order to maintain a world-
leading position in its sales of metrology products.
Targeted 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.
2 Research and development
Year-on-year change
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.
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:
2
5
7
* No change.
3 Supply chain management
Customer deliveries may
be threatened by a failure
in the supply chain.
Related strategic priorities:
3
Potential impact
Inability to meet customer deliveries
could result in loss of revenue
and profit.
* No change.
52
Mitigation
• Patent and intellectual property generation is core
Year-on-year change
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
• 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.
• The Group has the 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.
Year-on-year change
Renishaw plc Annual report and accounts 2017
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:
2
5
6
* No change.
Potential impact
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.
Mitigation
• Specialist legal and regulatory employees are in
place to support the healthcare business.
• The Group has 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.
Year-on-year change
5 Defined benefit pension schemes
Investment returns and
actuarial valuations of the
defined benefit pension
fund liabilities are subject to
economic and social factors
that are outside of the
control of the Group.
Related strategic priorities:
Potential impact
Volatility in investment returns
and actuarial assumptions
can significantly affect the
defined benefit pension scheme
deficit, impacting on future
funding requirements.
Mitigation
• 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.
Year-on-year change
1
* Strong performance of fund assets during the
year in addition to contributions made in line
with the recovery plan.
6 Exchange rate fluctuations
Fluctuating foreign exchange
rates may affect the results
of the Group.
Related strategic priorities:
6
7
* No change.
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.
Mitigation
• The Group enters into forward contracts in
order to hedge varying proportions of forecast
US Dollar, Euro and Japanese Yen revenue.
Forward contracts which are ineffective for
accounting purposes provide the protection
against rate changes that management intended
when entering the contracts.
• The Group uses currency borrowings to hedge
the foreign currency denominated assets held in
the Group’s balance sheet.
• There is a monthly board review of currency rates
and hedging position.
Year-on-year change
7 Cyber security threats
For the Group to operate
effectively it requires
continuous access to timely
and reliable information at
all times. We seek to ensure
continuous availability,
security and operation
of information systems.
Cyber threats continue
to increase.
Related strategic priorities:
2 3 4 7
Potential impact
Reduced service to customers due
to lack of reliable management
information putting the Group at a
competitive disadvantage.
Delay or impact on decision making
through lack of availability of sound
data or disruption in/denial of service.
Loss of commercially sensitive and/
or personal information leading to
implications including reputational
damage, claims or fines.
Theft of commercial or sensitive
information/data or fraud causing
loss and disruption.
* Increased vigilance against
evolving threats.
* Explanation of change in risk.
Mitigation
• There is substantial resilience and back-up built
Year-on-year change
into group systems.
• An IT security committee exists, comprising IT
and business leadership.
• Cyber risk and security is a regular topic for
board discussion.
• External penetration testing is utilised on an
appropriate basis.
• The Group operates central IT policies in all
aspects of information security.
• Regular monitoring of all group systems takes
place with regular reporting and analysis.
• Operating systems are continuously updated and
refreshed in line with current threats.
• The Group employs a number of physical, logical
and control measures to protect its information
and systems.
• E-learning courses covering certain cyber threats
were rolled out to all employees group wide
during the year as well as management training.
Our business model – for more information see page 9
Our strategy – for more information see page 22 onwards
53
GovernanceFinancial statementsShareholder informationStrategic report
Strategic report
Corporate social
responsibility
At Renishaw, CSR means focusing
on material impacts that affect us
and relevant stakeholders, so that
we concentrate on subjects we are
best placed to influence or control.
This enables us to support the
sustainable growth of our business,
whilst maintaining its longevity and
prosperity, in an ethical and socially
conscious manner.
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 have a
duty of care to our people, and the
communities in which we operate,
and we seek 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 can reduce risks in our
supply chain and have a positive
impact on society. Our sustainability
efforts are focused 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
2017 CSR targets and progress
Target:
Waste management:
5% reduction of waste to landfill
from global operations
For more information see page 63
Target:
Energy consumption:
Decrease reliance on fossil fuel
derived energy
For more information see pages 61–62
Progress:
• Just over 2,330 tonnes
of waste from our global
operations was diverted
from landfill.
10%
reduction of waste to landfill
from our global operations.
95%
of all waste diverted
from landfill.
Progress:
• We generated 2.98%
of our global demand
of electricity within
this period.
• We have added more
low energy lighting
systems, reducing our
demand by a further
1.2m kWh.
1,187,118 kWh
of electricity generated
this year.
2,126,237 kWh
of electricity generated to date.
54
Renishaw plc Annual report and accounts 2017 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 review of the Group Business Code
(the Business Code) was performed
to ensure it still upholds the standards
we and our stakeholders expect.
During this review, some parts of
the Business Code were updated to
reflect our new approach to mitigating
modern slavery within our supply
chains. To ensure all our people
are aware of the high standards we
expect of them, the updated Business
Code has been sent out to all 4,530
employees worldwide.
Implementation of our modern slavery
and human trafficking strategy is
proceeding as planned. We have
begun a process of engaging with our
tier 1 suppliers to ascertain the extent
of their efforts to mitigate modern
slavery. This process is underway in
our main UK purchasing group and our
local purchasing teams in India and
China. Further details are contained
within our modern slavery statement
found at www.renishaw.com.
A strict non-discrimination policy is
embedded in the Business Code,
which states the minimum standards
expected within the Group and from
our representatives. The Business
Code requires that our employees
have the right to non-discriminatory
treatment and equal opportunities,
to work in a safe and secure working
environment, and to receive a
fair wage.
During the year, we have also
developed a new bullying and
harassment training course which
has been rolled out across the Group.
It explains how to identify bullying and
harassment in the workplace, and
how to manage any situations that
may arise. This course is the latest in a
series of modules aimed at developing
our employees and empowering them
to operate in accordance with the
Business Code.
To avoid any form of discrimination
during the recruitment process, we
have strict guidelines to ensure proper
consideration is given to applications
from all genders, ethnic backgrounds
and those with disabilities. We work
closely with employees who become
disabled to ensure they have every
opportunity to continue in their
employment with Renishaw.
We continue to use the Business
Code and other policies to set
expectations with potential suppliers.
The full Business Code can be found at
www.renishaw.com.
D LED lighting has reduced energy demand for lighting in the UK by around 80% (image of
assembly area at Miskin).
Target:
GHG emissions:
3% reduction in GHG tCO2e per million
pounds turnover compared to 2016.
For more information see page 62
Progress:
• 11% reduction of
GHG emissions from
owned transport.
• 12% increase
in Scope 3
GHG emissions.
16%
decrease in GHG tCO2e
emissions per £m turnover
compared to 2016.
7%
increase in absolute
GHG emissions.
Target:
People:
5% of our employees as apprentices,
graduates or sponsored students on
structured programmes.
For more information see pages 56–58
5%
of our employees are
apprentices, graduates
or sponsored students on
structured programmes.
Progress:
• 4,530 people employed,
an increase of 5.7%
since last year.
• Over 230 people across
the Group on structured
apprenticeship and
graduate programmes.
• Just under £1.9m
invested in training
this year.
55
GovernanceFinancial statementsShareholder informationStrategic report Strategic report
Our strategy in action –
People
Tom Silvey, like many of our
apprentices, has gone on to study
a part-time engineering degree
alongside his work as a CNC
Applications Engineer at Renishaw.
Tom completed his degree in 2016
with first-class honours and has since
received the Frederic Barnes Waldron
Award from the UK Institution of
Mechanical Engineers.
56
Renishaw plc Annual report and accounts 2017
People
Diversity
As a global company, Renishaw
enjoys the advantages of a diverse
workforce. We benefit from the
range of experience and cultural
understanding that comes from
diversity in the workplace. With over
20 different nationalities represented
within our senior management group,
we benefit from the variety of expertise
they bring to the business. On 30th
June 2017, we employed 4,530 people
across the Group, an increase of 5%
since last year. Of these, 3,496 (77%)
are male and 1,034 (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 58 people, of
which 56 (97%) are male and two (3%)
are female. Renishaw regards its senior
management group to be the Executive
Board, the heads of each product
line, sales territory, and manufacturing
organisation that report directly into the
Executive Board, and the directors of
Renishaw’s subsidiary undertakings.
Communication and
participation
Operating out of 77 locations around
the world has necessitated a culture
of clear and open communication
between sites, functions and
management teams across the
business. To facilitate this, we operate
a flat structure that allows our people to
openly voice their ideas and concerns.
We are committed to conducting our
business with honesty and integrity
and promoting a culture of openness
and accountability. To help with this a
groupwide whistleblowing policy was
introduced this year for our people
to raise concerns about suspected
wrongdoing. The policy covers
all Renishaw employees, officers,
consultants, contractors, casual
workers, agency workers, suppliers,
customers and third parties who
provide services for or on behalf of
Renishaw. People are reassured their
concerns will be taken seriously and
investigated as appropriate, and that
their confidentiality will be respected
without fear of reprisals. We hope that
in many cases an employee will be
able to raise any concerns internally.
However, it is recognised there will be
times when it is not appropriate, or a
person will not be comfortable, raising
a concern internally. An independent
third-party provider, Safecall, has been
appointed to operate a confidential
reporting line enabling people to raise
concerns in confidence and, if they
wish, anonymously.
4,530
people employed across
the Group
£1.9m
invested in training
programmes
100
students joined Renishaw
for paid placements
We continue to use our suggestion
scheme, which we have recently
relaunched on a new online platform,
to encourage our people to share
ideas that can improve business
processes and their employment
experience. The suitability of these
ideas is assessed by a committee of
employees, and then transferred to
the appropriate area of the business
for detailed consideration. Ideas that
are implemented and provide benefits
to the business can earn a financial
reward for the originator. We also hold
regular communication meetings,
where a member of the Board presents
updates on each area of the business
with an open-floor Q&A session.
The Board presents our annual and
half-yearly financial results to all
employees in person at our larger
locations in the UK and via video-
conference to smaller sites.
Training and development
We recognise that our highly skilled
people are the key to success within
our organisation; ensuring that they are
fully trained in their fields is critical to
achieving that success. As such, we
place a large emphasis on ensuring
that our training programmes work
effectively for our people and business
needs. This year, we invested a further
£1.9m in training. We firmly believe
that work experience, as well as
studying, is essential to the success
of our employees. To ensure this is
possible, we offer the opportunity for
our graduates and apprentices to
take part in funded studies at HNC,
HND and degree levels alongside their
regular working lives. Tom Silvey, an
award-winning apprentice and BEng
graduate, said the following about his
experience “When Renishaw presented
me with the opportunity to work
alongside my studies, I knew this was
the best fit for me. The Company not
only funded my degree, but also gave
me all the time I needed to complete
university projects.”
Our continued investment in training
is currently funding the development
of 131 apprentices, 57 graduates
on our graduate training programme
and further career development
for employees right across the
business. We are also currently
funding the further education of 103
of our people across the Company in
engineering, software and commercial/
business disciplines.
Our online training platform, MySkills,
was launched in May 2015 and
continues to be successful. Our people
from around the world participate
in the programmes it offers, which
are organised to give them control
of their own development plans with
the support of their line manager.
It offers a broad range of courses (in
various languages) focused on equal
opportunities and diversity, technical
skills, leadership/management
development, induction, soft skills,
career development, health and
safety, anti-bribery and corporate
social responsibility.
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.
Technical training is vital to maintain
our ability to provide excellent technical
support, and since the inception of
the Academy, it has provided a wide
range of training programmes from
“Face-to-Face Communication” and
“Fundamentals of Manufacturing” to
using and programming the machines
and products we make. Access to the
Academy continues to be rolled out to
more of our locations across the globe,
with our highly skilled trainers being
able to offer face-to-face and online
training. We also offer the experience
gained from our internal training to
customers in several key markets, with
courses held at customer sites or our
own locations.
D Graduates from the 2016 intake
undergoing practical training.
D A key focus is ensuring that our employees have the necessary skills to offer a high level
of training and support to customers.
57
GovernanceFinancial statementsShareholder informationStrategic report Strategic report
Corporate social
responsibility
continued
D Renishaw sponsors the TransFIORmers
Moto2™ GP team.
D Wales international Samson Lee (right)
visits Miskin.
To give potential future employees the
ability to receive practical training and
experience alongside their academic
studies, we offer paid placements
each year for a broad range of
students. This year we have given 100
(2016: 100) students the opportunity
to work at Renishaw, 40 of whom
stay for a full year-long placement.
There are 131 manufacturing, technical
and software apprentices currently in
training (2016: 120), with four (2016: 4)
in our German subsidiary, and the rest
at various UK locations. We have a
further 48 new apprentices joining us
in September 2017 (2016: 46) and 45
new graduates starting this summer
(2016: 76).
Health and safety
We continue to 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 all
injuries, as many have the potential to
have been more serious. All injuries
are recorded, enabling us to manage
treatment and investigate all incidents
effectively with the aim of implementing
appropriate control measures to
prevent reoccurrence.
The total number of accidents for the
period was 234 (2016: 296) against
a year-end headcount of 4,530
(2016: 4,286). This equates to an
accident frequency rate of 30.79 per
million hours worked (2016: 40.99).
Our online incident reporting system
continues to be used effectively,
encouraging employees to report all
incidents regardless of severity, and
enables us to record trends more
effectively. We currently do not see any
overall trends with the data we capture,
except that most of our incidents are
minor cuts.
There were two reportable accidents
under the UK RIDDOR reporting
requirements: one severe cut to a
finger and one head injury leading
to concussion. These resulted in a
total lost time of 244 hours, or 42.5
days. This equates to a frequency
rate of 0.25 per million hours worked
compared with a UK manufacturing
average for RIDDOR reportable
accidents of 1.94.
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 many 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
on-site visits from two occupational
physicians who are available for our
employees as required. These doctors
also act as senior advisors to our
Group Health and Safety and HR
functions to ensure that best practice
in occupational health is observed.
A total of 122 (2016: 113) 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 vital 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.
Across the Group we continue to
host tour groups and have given
talks to a range of organisations
including primary and secondary
schools, universities and colleges,
business clubs and societies.
We actively support the business
community regionally, nationally and
internationally, through membership
of trade and lobbying associations
such as the Additive Manufacturing
Users Group (USA), the European
Society for Precision Engineering &
Nanotechnology, SAE International, the
Confederation of British Industry (CBI),
the Dental Laboratories Association
(UK), the Association of British
Healthcare Industries, Verein Deutscher
Werkzeugmaschinenfabriken
e.V. (Germany), UCIMU-SISTEMI
PER PRODURRE (Italy) and the
UK’s Manufacturing Technologies
Association (MTA) where two senior
managers are Board members.
Rhydian Pountney, a member of the
International Sales and Marketing
Board (see page 71) is also co-chair
58
Renishaw plc Annual report and accounts 2017 of the Advanced Engineering Working
Group of the annual India-UK Joint
Economic and Trade Committee
(JETCO).
We are also a member of various
industry research centres across
the globe, some of these include
Canada Makes (Canada), PräziGen
(Germany), Light Alliance (Germany),
BazMod (Germany), The Manufacturing
Technology Centre (UK) and the
Advanced Manufacturing Research
Centre (UK).
We continue to sponsor and help
judge a range of regional and national
business award programmes that
help encourage and recognise
business and individual excellence.
Rainer Lotz, Managing Director
of Renishaw GmbH is a Board
Member of Germany’s MX Awards,
whilst Head of Communications,
Chris Pockett, helps judge the main
apprenticeship, education and
business 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 this included
sponsorship of new music at the
Colston Hall’s Lantern venue in Bristol,
Stroud Young Photographer of the Year
and Gloucester Tall Ships Festival.
The sport of rugby has an especially
high profile in South Wales and the
west of England, and we currently
sponsor Samson Lee (Scarlets and
Wales) and Ben Morgan (Gloucester),
and for season 2017-2018, we have
agreed sponsorship with Cardiff
Blues, including on-ground signage
and sponsorship of Tomos Williams,
a promising young scrum-half who
was named in the Wales squad in
June 2017. We sponsor Swansea
City footballer Ki Sung-Yeung, who
plays internationally for South Korea,
plus Gloucestershire County Cricket’s
Tom Smith.
We are a technical sponsor to
numerous student racing teams, where
we utilise our additive manufacturing
expertise to supply key components.
In Italy, the Unibo Motorsport team,
based at Università di Bologna,
competes in the Formula Student
single-seater car competition, whilst
at Politecnico di Torino we sponsor
the 2 Wheels Polito team, which has
built a motorcycle that competes in the
MotoStudent competition. In Germany,
we have also supplied additively
manufactured wheel carriers for the
Formula Student GreenTeam.
Our sponsorship of the French
Moto2™ GP motorcycle team
TransFIORmers also includes
the supply of unique additively
manufactured titanium wishbone and
steering column components.
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 all 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 the disabled
and the bereaved. Donations are also
made to organisations located close
to other UK sites. A separate fund
is administered by the RCC, which
donates monies to aid the victims of
global disasters.
During the year, the RCC received
fewer funding requests but still made
donations to 230 diverse organisations
totalling £98,000 (2016: £102,000).
Beneficiaries included medical research
groups, junior sports clubs, cubs
and brownies groups, sea cadets,
hospice care organisations, disability
sports and support groups, primary,
secondary and special needs schools,
counselling and carers support groups,
animal sanctuaries and senior citizen
groups. The RCC also fully matches
funds raised by employees for UK
national fundraising events such as
Children in Need and Red Nose Day
and also supports individual employee
fundraising activities.
During the year, significant donations
of £2,000 or more were made by the
RCC to support seven organisations
in Gloucestershire, including a new
memorial garden for St Mary’s Church
in Kingswood, a community library
in Berkeley, further development of
the Wotton-under-Edge community
swimming pool, a new launch
vehicle for the Severn Area Rescue
Association’s lifeboat, and a new
centre at the Milestone special school
in Gloucester that, when opened, will
offer state-of-the-art facilities including
a large hydrotherapy pool with therapy
and sensory equipment, plus an all
ability play and sports area.
Globally, Renishaw is highly supportive
of its local communities. In the USA
we have started a partnership with
VetPowered LLC, an organisation
offering machining, fabrication and
maintenance and repair services
to industry through a highly-trained
veteran and wounded warrior work
force. It provides profits and resources
to Workshop for Warriors, a non-
profit school that prepares veterans
and wounded warriors for advanced
manufacturing careers through training,
certification and job placement.
Renishaw, Inc. has donated machine
tool calibration equipment to
VetPowered and runs free-of-charge
training to enable them to increase
their machine maintenance and
repair portfolio. Following successful
completion, the aim is to then train the
veterans in machine tool retrofits to
enable them to earn further revenue to
support their very important cause.
During the year, our subsidiary in India
supported Gurukulam, a school of 350
disadvantaged students in Pune.
The children are often from travelling
families who do not have the stability
or financial means to send them to
mainstream schools and the school
provides education integrated with
vocational training, as well as shelter
and three meals per day, which is free
of charge to the children and their
families. Gurukulam faces many
financial challenges, one of which is
the cost of fuel (wood and LPG) used
for cooking. Renishaw therefore gave
a significant donation for the installation
of a concentrated solar thermal
technology based steam cooking
system, which harnesses the power
of the sun to generate steam and hot
water, providing an efficient and
environmentally friendly system with
no fuel costs.
D A charitable donation was given to the
Severn Area Rescue Association.
D Mr Girish Prabhune (2nd from right),
founder of Gurukulam School, with
Renishaw staff.
59
GovernanceFinancial statementsShareholder informationStrategic report Strategic report
Corporate social
responsibility
continued
D Southville Primary School, winner of the
Super Science competition.
D Renishaw, Inc. staff at a ‘girls into
automotive engineering’ event.
Education
Renishaw’s UK-based education
outreach team continues to work with
primary and secondary schools, and
higher educational establishments,
to encourage young people of all
genders, ethnicity and backgrounds
to learn about engineering, discover
what engineers do every day and to
encourage them to choose engineering
as a career. The team has designed
more workshops to be delivered either
at schools, or at Renishaw’s sites in
Gloucestershire and South Wales,
that are curriculum-linked to add value
and context to learning in maths,
physics, computer science, and design
and technology.
Renishaw believes that making things,
and understanding how products are
designed and made, is important in
influencing young people to consider
a career in engineering. We have
therefore developed (with support from
the Welsh Government) a Fabrication
Development Centre (FDC) on our
manufacturing site at Miskin in South
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 we will raise the profile
of engineering and encourage more
students, especially girls, to choose
science, technology, engineering
and maths (STEM) subjects. This will
encourage more young people to take
up apprenticeships, jobs or further
education career pathways in high-
value engineering.
Since it opened last May, we have
welcomed over 600 pupils and
students to the FDC where they
have participated in design and build
projects, and Renishaw workshops
in a state-of-the-art facility that
inspires them to think about an
engineering career.
We continue to build relationships and
raise our profile in the regions where
we have the highest recruitment needs.
In Bristol, we again partnered with the
Bristol Post newspaper to run a ‘Super
Science’ competition that offers one
Bristol region school the chance to
win £10,000 towards anything in the
name of science education. The 2016
winning school was Southville Primary,
which intended to buy key science
equipment such as magnets, circuits,
microscopes and thermometers, and
hold workshops with local scientists.
To allow us to support education
outreach activities across our key
regions, we offer STEM ambassador
training to all our new graduates and
second-year apprentices. We now have
over 130 ambassadors in the Company
and each must carry out one STEM
activity per year, which helps to sustain
and grow our multiple initiatives with
schools and universities, including talks
and lectures, career fairs, after school
clubs and STEM projects. One of our
STEM ambassadors recently received
a letter from a parent whose daughter
had attended a talk on working as an
engineer at Renishaw. “My daughter
had never been committed to school,
but after the Renishaw engineer’s talk
she amazed us! She suddenly knew
that she wanted to be developing new
technology with Renishaw, and the
last parent’s evening was a delight to
experience.” Such feedback validates
our continuing commitment to
schools engagement.
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
ongoing research projects, PhD and
undergraduate projects with several
universities, and often give lectures,
employability talks and attend career
fairs to raise our profile.
The task of developing more engineers
is not something that we can do alone
and therefore we continue to work
with leading industry organisations
and engineering peers to advise
government on national policy that
will benefit the sector. For example,
we are members of the Royal Academy
of Engineering’s Diversity and Inclusion
Leadership Group that has been set up
to help remove barriers and encourage
more women and other under-
represented groups into engineering.
We are also a key contributor, both in
time and money, to Festomane (Festival
of Manufacturing and Engineering),
which is held each year in Stroud
district, where our Gloucestershire sites
are located. The festival has grown
in popularity and Renishaw hosted
an ‘Engineer your Future’ event this
year where both students and parents
attended workshops and talks to find
out the opportunities for young people
in engineering and manufacturing.
Influencers such as teachers and
parents are key groups that we focus
on to change perceptions.
60
Renishaw plc Annual report and accounts 2017 We also have strong partnerships with
other STEM-focused organisations
including the Greenpower Education
Trust, Aerospace Bristol, Bristol Music
Trust and the SS Great Britain Trust.
The new Aerospace Bristol museum,
which features a hangar for the
Concorde aircraft to be built, opens
in Autumn 2017 and a key aim is to
advance learning, skills and training
particularly in science, technology,
engineering and design. A Renishaw
Equator gauging system will form part
of the museum’s exhibits focused on
current aerospace technology, and
we will use the dedicated education
facilities to deliver some of our
outreach programmes.
Our Spanish subsidiary continues to
support the SpainSkills entry in the
global WorldSkills competition through
sponsorship, the loan of equipment
and supplying engineers to assist the
entrants in the successful completion
of the engineering sections of
this challenge.
In the USA, we are also developing
a new programme that creates
partnerships with educational
establishments such as technical
colleges and universities.
These partnerships create regional
Renishaw bases to support our
customers whilst helping to develop
training and curriculum for the
next generation of engineers and
manufacturing staff. A pilot partnership
with Greenville Technical College
Center for Manufacturing Innovation,
South Carolina, is up and running
covering a variety of our product lines
with two Renishaw staff based at the
facility to support the partnership.
As part of this pilot, staff from
Renishaw, Inc. attended an event at
the college to encourage girls into
automotive engineering, organised by
the Southern Automotive Women’s
Forum. Around 150 middle-school and
high-school girls attended from the
Greenville area who took part in hands-
on STEM-based activities, toured
the facilities and heard Renishaw UK
STEM ambassador, Lucy Ackland,
talk about her career journey and
the many opportunities within the
engineering sector.
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.
By analysing our GHG emissions we
can see that our greatest impact is
from the purchase of electricity and
its associated Scope 3 emissions,
which is responsible for just over 50%
of our global GHG emissions. This is
followed by our product distribution
and business travel, at around 25%
and 17% respectively.
To combat this, we have in previous
years invested in solar arrays.
During this year, we have generated
2.98% (2016: 3.45%) of our global
energy needs, and are looking for more
ways to invest effectively in reducing
our future energy demands. As well
as our investment in solar arrays, we
have invested just under £1m this
year in energy-saving technologies
to increase the efficiency and lower
the energy demand of our building
stock. These projects have included
the installation of triple glazing, LED
light fixtures and insulation in several of
our buildings.
We have installed new LED lighting in
the UK which has reduced our energy
demand for lighting by around 80%,
and aim to continue to apply these
technologies at new locations where
appropriate. In the USA, we have
recently constructed a new building
for Renishaw, Inc. where carpets
with a 43% pre-consumer recycled
content were used. We also reduced
the amount of parking enabling us to
increase the amount of green space
on the site to around 3,200 m2, thus
removing the need to transport and
lay around 1,600 m3 of tarmac and
1,500 tonnes of stone. The roof was
also upgraded to white thermoplastic
polyolefin (TPO) offering two advantages.
Firstly, it is a lighter roofing system
which allows for the building structure
to utilise less steel, and secondly, a
white TPO roof provides a reduction
to the roof heat island effect, as
recognised by the LEED® energy
and environmental design standard.
LED lighting has been installed
throughout the building which reduces
our annual energy demand around
100,000 kWh compared to traditional
ballast tube lighting.
In Germany and the UK we are looking
at ways we can reduce the impact of
our pool car fleets, and are looking at
fuel types and car sizes to increase
the fuel efficiencies and overall impact
of the vehicles. At our new building in
the USA we have installed two electric
vehicle charging points.
We have also investigated energy in
production and developed a project
to analyse downtime on our machine
tools, which significantly contributes to
our energy demands. Machine tools
are designed to always be left in
standby mode, which uses only slightly
less energy. This project has enabled
us to reduce the power required when
the machines are not in use, and from
the work we have carried out to date,
we have reduced our energy demand
from these machines by just over
806,000 kWh per annum.
We continue to look at ways to
reduce our reliance on business travel
and to install state-of-the art video-
conferencing facilities at our locations.
Our people are encouraged to use
these facilities and other technologies
rather than travel if possible. We are
also working with our logistics partners
to measure the GHG emissions of the
work they perform on our behalf and
will work with them to manage this as
effectively as possible.
This year our total GHG emissions
have increased by 7% but our statutory
emissions have increased by just 2%.
We continue to increase coverage of
our scope 3 emissions data and expect
to show increases in the data reported
as this progresses. We have continued
to increase our business over this
period and have importantly seen our
statutory GHG emissions normalised
by revenue fall by 19% and our total
GHG emissions normalized by revenue
fall by 16%.
At our sites across the globe we
house 4,530 people, with sites
ranging in size from two people, to
our UK headquarters, which houses
1,411 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.
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.
61
GovernanceFinancial statementsShareholder informationStrategic report Strategic report
Corporate social
responsibility
continued
62
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 21,245.15
(2016: 21,192.39; 2015: 20,659.07)
tCO2e. Our significant Scope 3
emissions (voluntary disclosure)
Scope 1
Gas Consumption
Owned Transport
Generator Diesel
Heating Oil
Fugitive Emissions
Total Scope 1 (tCO2e)
Scope 2
Location Based
Purchased Heat
Electricity
Total Scope 2 (tCO2e)
was 24,232.49 (2016: 21,638.21;
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.
2015
20161
20173
962.30
2,293.66
124.31
41.09
262.79
3,684.15
771.82
2,492.30
26.38
234.00
305.73
3,830.23
1,003.62
2,230.50
28.03
244.67
266.00
3,772.82
5.44
16,963.50
16,968.94
19.88
17,003.42
17,023.30
4.59
17,467.75
17,472.34
Total Statutory GHG emissions2 (tCO2e)
20,653.09
20,853.53
21,245.16
Normalised Statutory GHG emissions2
by revenue (tCO2e/£m)
41.75
48.81
39.58
Scope 3
Business travel
Product distribution
Raw material purchase
Post and communications
WTT and T&D total6
Total significant Scope 3 (tCO2e)
4,030.00
11,482.33
1,088.41
598.66
5,203.68
22,403.08
4,717.04
9,534.18
1,260.40
774.00
5,352.59
21,638.21
5,397.60
11,048.65
1,517.53
773.11
5,495.61
24,232.49
Total GHG emissions (tCO2e)
43,056.17
42,491.74
45,477.66
Normalised total GHG emissions4
by revenue (tCO2e/£m)
Further information
Scope 1 Out of scope (biofuel blend)
Scope 2 Market Based
Electricity
Total Scope 2 (tCO2e)5
87.03
99.47
83.63
59.58
60.85
59.13
16,963.50
16,968.94
21,375.05
21,394.93
21,659.34
21,663.93
Scope 3 Out of scope (biofuel blend)
38.97
29.49
31.72
1 2016 figures have been restated due to improvements in our methodology, updated GHG conversion factors and replacing
the calculation used for the June 2016 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 factors are used in their place. Currently 87% of 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.
Renishaw plc Annual report and accounts 2017 Waste management
Our waste 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 2,330 tonnes
of waste being diverted from landfill.
Approximately 64% of all waste
generated this year originated from
our UK sites where we sent less than
0.5% of waste to landfill, these sites
continue to maintain their certification
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 reuse.
Last year, we set a target of 5% for
the reduction of waste to landfill in
our global operations. We have had a
decrease from our global operations of
10%. We are still reusing, recycling or
recovering around 95% of our waste
around the world.
Product compliance
We have prepared for the Restriction
of the use of Hazardous Substances
Regulations (RoHS), which requires
most of our products to be compliant
in July 2017. 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 many 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 worked 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.
Any issues we consider to be against
the spirit of the Business Code are
monitored, and we work with suppliers
where issues are identified.
D Electric car charging point at the new
headquarters building for Renishaw, Inc.
2,818.04
2,463.10
Landfilled
Re-used
Composted
Incinerated
Recycled
2,328.42
Global waste totals (tonnes)
Landfilled
Re-used
Composted
Incinerated
Recycled
Total non-landfilled
2015
82.15
12.96
2.64
20161
2017
146.07
132.24
0.96
23.28
0.00
2.80
394.71
431.02
330.11
1,835.96
2,216.71
1,997.94
2,246.27
2,671.97
2,330.86
Percentage of waste sent to landfill
3.53%
5.18%
5.37%
Total waste
2,328.42
2,818.04
2,463.10
1 Includes US data for the first time which accounts for 87.2 tonnes of landfill waste in 2016.
2017
2016
2015
This Strategic report was approved by the Board on 27th July 2017 and
signed on its behalf by
Sir David McMurtry
Chairman and Chief Executive
63
GovernanceFinancial statementsShareholder informationStrategic report Strategic report
Power generation
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.
Caltech working to solve the
world’s energy problems with
the help of inVia
The California Institute of Technology
(Caltech) is on a mission to find new
and effective ways to produce solar
fuels using only sunlight, water and
carbon dioxide. A focus of this is
investigating photocatalysis and light
capture. Dr David A. Boyd is using
Raman spectroscopy to accelerate the
discovery and in-depth understanding
of photocatalysts and photoactive
materials for the solar-driven CO2
reduction reactions.
Dr Boyd uses a Renishaw custom-
designed inVia Raman microscope,
installed at the Joint Centre for Artificial
Photosynthesis (JCAP). JCAP is one of
the US Department of Energy’s Energy
D Dr David Boyd of Caltech uses a Renishaw inVia Raman
microscope to research solar fuels.
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 applications within the power
generation sector.
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.
Photovoltaic panel testing
Analysis of chemical deposits on thin
film layers using Raman spectroscopy
enables quality control and assurance
for solar panel production.
64
Renishaw plc Annual report and accounts 2017 Innovation Hubs and is led by a team
from Caltech. The High Throughput
Experimentation (HTE) group aims
to accelerate the identification of
semiconductor materials, with
appropriate band energetics, for
efficient photoelectrocatalysis of solar
fuel reactions.
Dr Boyd said, “The inVia system is a
natural fit to assist in the identification
and characterisation of metal oxide
catalysts. Given our sample sizes and
the need to differentiate a number of
possible material phases, we require
large area mapping and advanced
analysis capabilities. The Renishaw
Empty Modelling tools have been
especially invaluable.”
Dr Boyd and his colleagues have
recently published a paper on
this work in the RSC Journal of
Materials Chemistry A, ‘Solar Fuels
Photoanodes Prepared by Inkjet
Printing of Copper Vanadates.’ This
paper describes the processing and
characterisation of these exciting new
materials that address the demanding
requirements needed to perform the
photoelectrocatalysis oxygen evolution
reaction. A key element of this work is
Raman imaging, with associated data
processing and visualisation, which has
enabled phase mapping of the array
of compositions. This has led to the
identification of promising photoanodes
for solar fuel applications.
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.
D The RESOLUTE™ absolute
encoder is increasingly being
used on manufacturing
equipment for solar panels.
Large part manufacture
Equipment has to be manufactured
to stringent safety requirements,
requiring accurate and traceable
processes. Calibration systems
are used to check and verify the
dimensional accuracy of high-value
CNC machine tools.
Wind turbines
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.
65
GovernanceFinancial statementsShareholder informationStrategic report Governance
Corporate governance
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
66
Renishaw plc Annual report and accounts 2017
Introduction
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 focus area for 2017 has been the
proposed changes to the Company’s
remuneration policy, which is covered in
more detail in the Remuneration report
beginning on page 83. In line with the
Companies Act 2006, Renishaw will
be submitting its new remuneration
policy for shareholder approval at
the 2017 AGM. The Remuneration
Committee has reviewed the existing
policy, which was supported by 86%
of voting shareholders when put to the
AGM in 2014. Our proposed changes
are outlined on pages 86 to 88.
In reviewing the policy we have:
• taken into account feedback from
the shareholder community;
• considered changes in market
practice since 2014; and
• reviewed developments in
remuneration governance, including
the commentary from many
stakeholders and observers on the
issue of executive pay.
The Annual report on remuneration
2017 starting on page 90 sets out
the details of directors’ compensation
throughout this financial year, which will
be subject to the normal advisory vote
at the AGM.
During the period, we have continued
the implementation of new policies
and procedures commenced last
year following the introduction of the
Market Abuse Regulation, by amending
the Group’s Share Dealing Code
and insider list process and training
employees in order to comply with the
stricter rules on the management and
disclosure of inside information.
We have worked closely with Ernst
& Young LLP in their first year as our
new auditors, following shareholder
approval of their appointment at the
2016 AGM.
Senior management has also held four
meetings of our new risk committee
formed last year, in order to conduct
a thorough review of our principal
risks together with mitigation plans.
The Board also considered the viability
statement requirement, now in its
second year, in the context of risk and
the viability statement is contained on
pages 75 to 76.
The Brexit referendum had taken place
only one month prior to the date of our
report last year, and the full business
implications of the decision to leave the
EU were uncertain. The nature of the
exit remains uncertain, but it is clear
that changes will need to be made in
aspects of the Group’s operations.
However, with a strong direct presence
in the EU, Renishaw is well placed to
respond to changes in future trading
arrangements between the UK and
the EU and the risk committee will be
monitoring developments closely to
assess required actions as the exit and
trading negotiations become clearer.
Other areas that have received
particular attention include a review
of our insurance provider for property
and liability cover, via a tender
process that led to the appointment
of new insurers. We also launched a
global whistleblowing facility, which
is externally facilitated by Safecall,
a leading provider of confidential
whistleblowing lines, in order to give
employees additional options should
they wish to raise a serious concern.
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 2017,
we have continued to closely monitor
operational risks in key regions and are
implementing additional compliance
policies in certain areas. In the period
we entered into a contract with a
market leading provider, allowing us to
routinely screen new intermediaries.
This has been rolled out to the Group,
via updated e-learning packages
on anti-bribery as well as senior
management briefings. Training on our
Group Business Code, which sets out
the ethical standards we require, was
also refreshed globally.
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
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.
Scope of disclosures
This corporate governance report
has been prepared in accordance
with the UK Corporate Governance
Code 2016 (Governance Code).
The Governance 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
Governance 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 66 to 77 and 94 to 96 form the
Directors’ report (Directors’ report).
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’ remuneration report and other strategic and regulatory disclosures on
the pages identified below, as applicable.
Section Topic
(1)
(2)
(4)
(5)
(6)
(7)
(8)
Location
Not applicable
Interest capitalised
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
(9)
(10)
(11)
(12)
(13)
(14)
Not applicable
Directors’ remuneration report
pages 83–93
Not applicable
Not applicable
Other statutory and regulatory
disclosures pages 94–96
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 63 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.
67
GovernanceFinancial statementsShareholder informationStrategic report Governance
Board of directors
Sir David McMurtry
CBE, RDI, FRS, FREng, CEng, FIMechE
Chairman and Chief Executive
• 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.
N*
John Deer
Deputy Chairman
• Trained as a mechanical engineer and
worked for Rolls-Royce plc, Bristol, for
14 years.
• Co-founded Renishaw with Sir David
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.
Allen Roberts
FCA
Group Finance Director
• Qualified as a chartered accountant in 1972
and is a Fellow of the Institute of Chartered
Accountants in England and Wales.
• Joined Renishaw in 1979 and appointed to
the Board of Renishaw plc in 1980.
• Heads group finance, business systems,
human resources and Wotton Travel Ltd.
• Responsible for the metrology regulatory
and quality assurance function.
• Reports to the Board on corporate social
responsibility matters.
Geoff McFarland
William Lee
Group Engineering Director
• 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.
• Responsible for group engineering and
group IP and the additive manufacturing
products line.
Group Sales and
Marketing Director
• Joined Renishaw in 1996.
• 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.
• Holds an MBA from Bath University.
• Appointed to the Executive Board in 2015.
• Appointed to the Board as Group Sales and
Marketing Director in August 2016.
• Chair of the overseas marketing subsidiaries.
68
Renishaw plc Annual report and accounts 2017 Carol Chesney
FCA
Non-executive director
• Appointed to the Board of Renishaw plc in
A* R N
October 2012.
• Chartered accountant who worked at Arthur
Andersen for seven years in audit services.
• Currently Company Secretary of Halma plc,
having also been Group Financial Controller.
• Worked as Group Accountant at English
China Clays plc where she was responsible
for transactions.
Kath Durrant
R* N
Non-executive director
• Appointed to the Board of Renishaw plc in
January 2015.
• Currently Group HR Director for Ferguson
plc (formerly known as Wolseley plc) and a
member of its Executive Committee.
• Previously the Group HR Director at Rolls-
Royce plc.
• Held a variety of senior positions at
AstraZeneca plc, including Vice President,
HR and Communications for its research
and development division.
Sir David Grant
CBE, FREng, FLSW, CEng, FIET
Senior Independent Director
• Appointed to the Board of Renishaw plc
A R N
in April 2012.
• Currently Senior Independent Director
of IQE plc, non-executive director of
the Defence Science and Technology
Laboratory, chair of STEMNET which at the
time of writing is in the process of merging
with STEM Learning, and chair of the
National Physical Laboratory.
• 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.
• Received a knighthood in the Queen’s
Birthday Honours 2016 for his contributions
to engineering, technology and education.
John Jeans
CBE, CEng
Non-executive director
• Appointed to the Board of Renishaw plc in
A R N
April 2013.
• Currently chair of Imanova, Edinburgh
Molecular Imaging and the Scottish
government’s Digital Health and Care Institute.
• Non-executive director of ProMetic Life
Sciences Inc. and ProMetic Pharmaceuticals
Small Molecule Therapeutics Ltd.
• 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.
• Previously chair of UK BioCentre Ltd.
• Appointed advisor to the Prime Minister at
the Office of Life Sciences in June 2014.
Committees
A Audit Committee
R Remuneration Committee
N Nomination Committee
* Denotes Chair of committee
69
GovernanceFinancial statementsShareholder informationStrategic report Governance
Executive Board
Sir David McMurtry
CBE, RDI, FRS, FREng, CEng,
FIMechE
Chairman and Chief
Executive
See page 68 for biography
John Deer
Deputy Chairman
See page 68 for biography
Allen Roberts
Group Finance Director
See page 68 for biography
Geoff McFarland
Group Engineering
Director
See page 68 for biography
Will Lee
Group Sales and
Marketing Director
See page 68 for biography
Leo Somerville
President, Renishaw
North America
• Joined Renishaw in 1984.
• 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.
Dave Wallace
Director and General
Manager, CMM
Products
• 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.
70
Renishaw plc Annual report and accounts 2017 Governance
International Sales and
Marketing Board
Rainer Lotz
Managing Director,
Renishaw D-A-CH
• Joined Renishaw in 2006.
• Over 20 years’ experience in
related positions.
• Responsible for Renishaw’s
operations in Germany, Austria
and Switzerland.
• Appointed as a member of
the International Sales and
Marketing Board in 2008.
Sean Hymas
President and
Representative
Director, Renishaw KK
• Joined Renishaw in 1989
following a year’s sandwich
placement between 1987
and 1988.
• Over 25 years’ experience of
international sales, marketing
and product management.
• Moved to Japan in 2008
to further drive sales and
marketing at Renishaw KK.
• Appointed President of
Renishaw KK and to the
International Sales and
Marketing Board in 2012.
Jean-Marc Meffre
Managing Director,
Renishaw Far East &
Southern Europe
• Joined Renishaw in 1988 as
Managing Director of Renishaw
France.
Rhydian Pountney
Managing Director,
Renishaw UK & ROW
• Joined Renishaw in 1979.
• Appointed as a member of
the International Sales and
Marketing Board in 2008.
• Holds a master’s degree in
Economics and Marketing.
• Responsible for all the
operations in the Far East
(except Japan), Australasia
and Southern Europe.
• Appointed as a member of
the International Sales and
Marketing Board in 2008.
• Over 30 years’ experience
in sales and marketing.
Responsible for sales in the UK
and 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.
Clive Martell
Head of Global Additive
Manufacturing
• 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 the transition
from AIM listed company to a
division of Autodesk.
• Appointed as a member of
the International Sales and
Marketing Board in 2015.
• Represents Renishaw on the
steering group for the UK
National Strategy for Additive
Manufacturing.
John Deer
Deputy Chairman
See page 68 for biography
Allen Roberts
Group Finance Director
See page 68 for biography
Will Lee
Group Sales and
Marketing Director
See page 68 for biography
Leo Somerville
President, Renishaw
North America
See page 70 for biography
71
GovernanceFinancial statementsShareholder informationStrategic report Governance
Directors’ corporate
governance report
Board
Executive
Board
Audit
Committee
Nomination
Committee
Remuneration
Committee
International Sales and Marketing Board, risk committee, 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
68 to 69 (Ben Taylor retired on 31st
July 2016). 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.
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 2017, the Board met for
nine scheduled 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 is set out on
page 73.
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 70. 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 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 50 to 51.
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.
72
Renishaw plc Annual report and accounts 2017 Scheduled Board and committee
meetings in the period
July 2016
August 2016
R
B
A
A
R
September 2016
October 2016
B
R
B
November 2016
December 2016
N
R
B
January 2017
February 2017
B
A
B
March 2017
April 2017
N
B
N
R
May 2017
June 2017
B
R
B
R
Key
A Audit Committee (3)
R Remuneration Committee (7)
N Nomination Committee (3)
B Board (9)
High-level summary of subjects
discussed by the Board during
the year:
Strategy
• Business strategy and organisation
• Reviewing potential acquisitions/disposals
• Closure of Renishaw Diagnostics Limited and
sale of assets
• Cessation of spatial measurement business
and sale of assets
• Review of investment in Hieta
Technologies Limited
• Products and technology
• Key business relationships
Risk
• Group’s risk analysis
• Patent litigation
• Tax risk register and updates
• Group quality
• Cyber security
Governance
• Legal updates
• Market Abuse Regulation
• Board evaluation
• Committee terms of reference
• Controlling shareholder agreement
• Export control
• Appointment of new auditor
• Appointment of new director
• Whistleblowing policy
• Review of internal controls
• Government proposals on corporate
governance changes
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
• Investor day
HR
• Succession planning/executive
management structure
• Pensions
• Remuneration policy
• Salary reviews
• Bonus
• Health and safety system and updates
• Changes to maternity benefits
73
GovernanceFinancial statementsShareholder informationStrategic report Governance
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 Governance 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 94.
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) which at the date of
this report is in the process of merging
with STEM Learning, 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). 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.
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 2017).
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 was
also from March 2016 to May 2017,
interim Chair of the Scottish Medical
Device Hub and, since May 2017,
is the Chair of the Scottish Digital
Health & Care Institute 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 2017).
74
Renishaw plc Annual report and accounts 2017 The Governance 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 78.
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. During the year,
specific training was given to the
Board by Herbert Smith Freehills
on the directors’ and controlling
shareholders’ obligations in case of
any offer approach. 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.
This year, non-executive directors
met with regional management at
Renishaw, Inc. in the USA. This has
facilitated a deeper understanding
of the Group, leadership team and
Renishaw’s products and markets.
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.
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.
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 feedback
report was discussed early in this
financial year, focussing on effective
board presentations, succession
planning and people development.
Equity Communications Limited has no
other connection with the Company.
For 2017, an internal evaluation
process was undertaken and the
results will be discussed early in the
2018 financial year.
Re-election
In accordance with the Governance
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 97
and the Independent auditor’s report
on pages 98 to 105.
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 a period of at least
12 months from the date of approval of
the financial statements. 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 52 to 53,
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.
75
GovernanceFinancial statementsShareholder informationStrategic report Governance
Directors’ corporate
governance report
continued
In accordance with provision C.2.2
of the Governance 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 2020, 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.
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 2020. 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, but 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 including an executive risk
committee as explained on pages
50 to 51.
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 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 79 to 82.
D. Remuneration
The Directors’ remuneration report
explains how the Company applies the
Governance Code principles relating
to remuneration.
76
Renishaw plc Annual report and accounts 2017 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, 97 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.
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 are 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 Governance 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 (Governance Code
provision A.2.1).
Sir David Grant
Senior Independent Director
27th July 2017
Board attendance record
Meetings
The following table sets out attendance at the scheduled meetings of the Board and committees during the year.
Director
Sir David McMurtry
D J Deer
B R Taylor
A C G Roberts
G McFarland
W E Lee
C T Chesney
K L Durrant
Sir David Grant
Board
9 (9)
9 (9)
1 (1)2
9 (9)
8 (9)1
8 (8)
9 (9)
9 (9)
9 (9)
D J Jeans
1 Geoff McFarland was absent for the meeting on 28th September 2016 due to illness.
9 (9)
2 Ben Taylor attended his last Board meeting on 25th July 2016 before retirement.
Audit
Committee
Remuneration
Committee
–
–
–
–
–
–
3 (3)
–
3 (3)
3 (3)
–
–
–
–
–
–
7 (7)
7 (7)
7 (7)
7 (7)
Nomination
Committee
3 (3)
–
–
–
–
–
3 (3)
3 (3)
3 (3)
3 (3)
77
GovernanceFinancial statementsShareholder informationStrategic report Governance
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 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 and the
role of Company Secretary.
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 three times
during the year to discuss executive
management succession planning and
to decide the recruitment process for
the replacement of Norma Tang as
Company Secretary, who gave notice
of resignation in March. A recruitment
consultant, Demeter Limited, was
engaged to seek appropriate
candidates for appointment to the dual
role of general counsel and company
secretary. The recruitment process is
continuing. Demeter Limited has no
other connection with the Company.
It was agreed that Will Lee will take
over responsibility for chairing the
International Sales and Marketing
Board from the start of the 2018
financial year.
In relation to non-executive positions,
the four non-executive directors
were all appointed within the last five
years and the Board considers that
they are working effectively together
in supporting the Board and the
Company. Consequently there were
no further appointments or changes
considered necessary during the year.
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 McMurtry
Chair of the Nomination Committee
27th July 2017
78
Renishaw plc Annual report and accounts 2017 Governance
Audit Committee report
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 2017 we also monitored the various
changes to the Code, agreed the content of the viability
statement and monitored the transition activities of the
new external auditor, Ernst & Young LLP.
Carol Chesney
Non-executive director
Chair of the Audit Committee
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 members of the Audit Committee have competence in the sectors in which the Company operates as set out below.
The terms of reference are available on the Company’s website.
Financial experience
Chartered accountant
Worked at Arthur Andersen
for 7 years
Previously Group Financial
Controller at Halma plc
Member
Carol
Chesney
Sir David
Grant
John
Jeans
Company and position
Company Secretary at Halma plc
Sector experience
Senior Independent Director of IQE plc
Director of Dstl
Chair of NPL
Previously worked for Dowty Group
Previously Group Technical Director of GEC plc
Previously Vice-President of the Royal Academy of Engineering
Chair of Imanova
Chair of UK Biocentre
Chair of Edinburgh Molecular Imaging
Non-executive director of ProMetic SMT
Member of the Ministerial Committee on Medical Technologies
Advisor to the Prime Minister at the Office of Life Sciences
Previously worked for Smith & Nephew
Previously President of Dravon Medical (Smith & Nephew)
Sector
Technology
Technology
Technology
Metrology
Manufacturing
Engineering
Engineering
Imaging services
Healthcare
Biotechnology
Biopharmaceuticals
Biotechnology
Medical technology
Medical equipment
Medical equipment
Previously Senior Vice President of Zimmer (Bristol-Myers Squibb)
Healthcare
Previously President at Ortho Clinical Diagnostics International (Johnson & Johnson) Medical diagnostics
Previously Chairman at GE Healthcare Ltd
Healthcare
Governance
The committee meets at least three times a year with the Group Finance Director, the Head of Group Finance, the Group Financial
Controller, the Group Audit Manager, the Company Secretary and the external auditor in attendance. After each meeting, the
committee holds discussions with the external auditor without the executives present. These executives work closely with the chair
of the committee to ensure that transparency is maintained in both meeting papers and communications between meetings with the
other committee members, providing additional practical industry experience to aid discussions in and around meetings.
79
GovernanceFinancial statementsShareholder informationStrategic report Governance
Audit Committee
report continued
Key issues and activities
In addition to reviewing the financial reporting of the Company, the committee also spends a significant amount of time
reviewing the effectiveness of the Group’s internal control processes and its internal and external audit activities.
The principal activities in the year were:
Internal audit
• evaluated the scope of
work to be undertaken
by the internal audit
function;
• reviewed progress
on recommendations
brought forward
and considered
recommendations
arising during the year;
and
• considered the resource
levels available to the
internal audit function
and approved the
appointment of the new
dedicated Group Audit
Manager.
Risk management
• reviewed the output from the
Group’s risk review process
to identify, evaluate and
mitigate risks and considered
whether changes in risk
profile were complete and
adequately addressed;
• reviewed and agreed the
content of the viability
statement and the process
undertaken to approve both
it and the going concern
statement (see pages 75
to 76);
• received updates on
compliance with the Group’s
anti-bribery and corruption
policy; and
• reviewed the Company’s
new global whistle-blowing
and serious misconduct
policy which was approved
by the Board during the year.
External auditor and
non-audit work
• monitored the transition
activities of the new external
auditor, Ernst & Young LLP;
• reviewed, considered and
agreed the scope and
methodology of the 2017
audit work to be undertaken
by the external auditor;
• evaluated the independence
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
2017 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 the non-audit
services policy.
Financial statements
and reports
• reviewed the effectiveness of the
Group’s risk management and
internal controls and disclosures
made in the 2017 Annual report;
• reviewed the 2017 Annual report,
the 2017 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 2017 Annual report;
• reviewed critical accounting
judgements and estimation
uncertainties in the accounts, being
the carrying value of goodwill,
capitalisation of internally generated
development costs, the carrying
value of inventory, amortisation and
impairment of intangible assets,
the classification of discontinued
activities and the assumptions used
to determine the defined benefit
pension scheme liabilities;
• reviewed the accounting and
disclosures in relation to the
Group’s defined benefit pension
schemes;
• reviewed the effective tax rate in
the accounts and provision for
uncertain tax positions;
• reviewed the effectiveness of the
Group’s hedging policy and its
application;
• reviewed the approach the
external auditor took in respect of
management override of controls;
and
• evaluated the controls in place to
ensure the Company’s revenue
recognition policy has been
consistently applied.
80
Renishaw plc Annual report and accounts 2017 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.
As reported last year, a tender process
for the appointment of the external
auditor was undertaken in 2016.
Following a recommendation from the
committee to the Board, Ernst & Young
LLP were formally appointed at the
AGM in October 2016. The committee
has monitored the transition activities
and audit approach undertaken by
Ernst & Young LLP by way of updates
provided at Audit Committee meetings
and further routine discussions
between the committee chair, company
finance representatives and the senior
representatives of Ernst & Young LLP.
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 (conducted by KPMG LLP);
• the proposed audit plan including
the identification of risks specific
to the Group, audit scope and
materiality thresholds;
• the delivery of the audit in line with
the plan;
• the communication of matters arising
during the audit to the committee;
• meetings with the external auditor
without management being present;
• the independence and objectivity of
the auditor; and
• feedback from executive management.
The contract for external audit will
be put out to tender at least every
ten years.
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.
The non-audit services policy reflects
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.
For 2017, the external auditor has
provided £20,000 of non-audit work
including a piece of work linked
to the Audit Committee’s review
of banking payments referred to
below, and a piece of assurance
work in India required under that
country’s legislation.
An analysis of fees paid to Ernst &
Young LLP is included in note 5 to the
group financial statements.
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.
During the year a new Group Audit
Manager was appointed, with
the incumbent transferring to the
role of Head of Group Finance.
The reorganisation allows for the
internal audit function to be fully
independent of the day to day
operations of the finance function.
Internal audit is planning to expand its
use of data analytical tools to enhance
the focus of audit tests. The Committee
determined the effectiveness of the
internal audit function as detailed in the
key issues and activities section above.
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. For the current
year the committee concluded that
the carrying value of goodwill and
the treatment of forward exchange
contracts for hedging purposes were
the two significant issues relating to the
financial statements
The committee first 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 the only
impairment provisions required were for
the goodwill arising on consolidation
of Renishaw Diagnostics Limited and
Measurement Devices Limited (relating
to the spatial measurement business),
both of which have been classified
as discontinued operations and the
goodwill provided for in full.
The committee then examined the
Group’s technical compliance with
IAS 39 given the hedging instruments
utilised. A thorough assessment of the
opening and closing positions indicated
that certain of the Group’s open
contracts did not qualify for hedge
accounting. The committee satisfied
itself that the fair values of the hedging
instruments were not misstated in
terms of the opening and closing
Consolidated balance sheets, however
a restatement of the prior year profit,
with a corresponding increase to other
comprehensive income was required to
ensure compliance with IAS 39.
As the Group originally intended that
these contracts be qualifying hedging
instruments, the committee considered
the adoption of an alternative
performance measure for profit which
excludes the profit/loss arising on this
restatement and the unwinding of the
open contracts in this and future years.
As such, the adjusted profit before tax
disclosure has been adopted to provide
stakeholders with a better measure of
underlying performance.
The committee discussed these
issues with the external auditor and
was satisfied that its conclusions
were consistent with those of the
external auditor.
81
GovernanceFinancial statementsShareholder informationStrategic report Fair, balanced and
understandable report
and accounts
One of the key governance
requirements is for the Annual report to
be fair, balanced and understandable
and that it provides the shareholders
with sufficient information to assess
the Company’s performance, business
model and strategy. 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.
The processes adopted in relation
to the Annual report included
the following:
• specific ownership and responsibility
for the individual sections was
allocated and documented;
• during the compilation period,
regular meetings were held with
members of Group Finance, Group
Secretariat, CSR and Corporate
Communications, all primary authors
of the Annual report. These meetings
ensured that there was appropriate
linkage between the various sections
of the report and that reporting
was balanced;
• an extensive review was undertaken
to ensure factual accuracy;
• a qualitative review of the entire
Annual report was undertaken to
ensure that it promotes consistency
and balance between the
component elements;
• at the committee’s first meeting in
July 2017, the committee reviewed
an initial draft of the Annual report,
during which it probed and tested
certain disclosures;
• at the committee’s second meeting
in July 2017, the committee
challenged the fair, balanced and
understandable assessment and
examined whether appropriate
balance and equal prominence
had been given to favourable and
unfavourable events; and
• following review and comment by
both the committee and the Board,
the Annual report was subject to final
approval by the Board.
The committee was satisfied with the
process undertaken in preparing the
Annual report. Following discussions at
its July 2017 meetings, the committee
advised the Board that the Annual
report, taken as a whole, is fair,
balanced and understandable and
provides the information necessary
for shareholders to assess the
performance, strategy and business
model of the Company.
The directors’ statement on a fair,
balanced and understandable Annual
report is set out on page 75.
Carol Chesney
Chair of the Audit Committee
27th July 2017
Governance
Audit Committee
report continued
Following a period of strong growth,
the committee commissioned a review
of the Group Internal Control manual to
ensure that Renishaw’s policies exceed
best practice for an organisation of
Renishaw’s size and structure; this
review will also reflect the management
comments that the new external
auditors raise. The review will be
completed during 2017/18.
Like many public and private sector
organisations, the Company is a
potential target for external banking-
related frauds, similar to those widely
reported in the press. Consequently,
the committee reviewed the controls
applied to electronic and manual
payments during the year to ensure
they were sufficiently robust.
The committee is satisfied that
increased awareness of such frauds,
internal audit’s focus on this area and
the controls around bank payments
are adequate to detect such a fraud
although the Company recognises
the increasing sophistication of such
attempts and is directing additional
resources to support its efforts in the
wider cyber arena.
In the previous year, the committee
reviewed the policy by which
employees of the Company may, in
confidence, raise matters of concern,
including possible improprieties
in financial reporting or other
matters. In line with the committee’s
recommendation, the Board enhanced
the policy in February 2017 by
implementing an external reporting line.
The committee also monitors the
effectiveness of the Company’s
procedures to avoid any bribery related
to the activities of the Group.
Details of risk management and internal
controls are set out on pages 50 to 51
and 76.
82
Renishaw plc Annual report and accounts 2017 Governance
Directors’ remuneration report
We achieved a record turnover of £536.8m with
underlying revenue growth of 14%. Adjusted profit
before tax was £109.1m, and statutory profit before
tax was £117.1m, an increase of 25% on an adjusted
basis. Our total shareholder return during the year
was 67%, ranking Renishaw in the top 25 in both
the FTSE 250 and FTSE 350.
Kath Durrant
Non-executive director
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 aim is to motivate
and retain executive directors by
rewarding them with competitive
salary, benefit packages and
incentives. The incentives 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 it is competitive and
fair, and that there is appropriate
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 attend
meetings of the committee by
invitation for parts of the agenda as
appropriate. Independent advisers
are used as required.
Statement from the Chair of
the Remuneration Committee
Introduction
On behalf of the Board, I am pleased
to present the Directors’ remuneration
report for 2017.
The report complies with the
requirements for reporting on directors’
pay introduced in October 2013 and is
split into the following three sections:
1. this statement from me as the Chair
of the Remuneration Committee;
2. the remuneration policy (pages 86
to 89) which is to be put before
the shareholders at the AGM on
20th October 2017 and which is
intended to apply for a three-year
period from that date; and
3. the annual report on remuneration
(pages 90 to 93), setting
out information on directors’
remuneration paid during the year
ended 30th June 2017, and how
our policy will be implemented in
the year ending 30th June 2018.
Review of the Remuneration
Committee’s activities
The committee met seven times during
the year in order to:
• set targets at the start of the year
for the annual bonus, with reference
to the Company’s budgets and
forecasts. The targets reflected the
committee’s expectations for profit
growth and its desire to reinforce
the importance of the cash position
following several years of strategic
capital investment. Targets and
associated bonus scheme rules were
communicated to executive directors
at the start of the financial year.
These targets are disclosed later in
this report;
• consider Will Lee’s remuneration,
following his appointment to the
Board as Group Sales and Marketing
Director, following Ben Taylor’s
retirement at the end of July 2016.
Will’s initial remuneration was set
below our target market position
for the role (and significantly below
Ben’s package), with a base salary
of £325,000 but with the expectation
that it would increase substantially,
subject to performance, once he
became established in the position.
Shareholders will note that as a result
of Will’s excellent performance in
the role this year that the Committee
has awarded Will a substantial salary
increase to take his salary to around
that of the other non-founding
executive directors – a base salary
of £398,000;
• appoint Mercer Kepler as
independent professional
remuneration advisers;
• approve director salary increases
and bonuses, and the Chairman and
Chief Executive’s expenses; and
• conduct a detailed review of
the Company’s remuneration
policy, further details of which are
provided below.
83
GovernanceFinancial statementsShareholder informationStrategic report Governance
Directors’ remuneration
report continued
Review of the remuneration
policy
Three years ago at our 2014 AGM
shareholders approved a new three-
year remuneration policy for Renishaw,
with 86% of votes in favour. At the
2015 and 2016 AGMs shareholders
supported the implementation of our
policy with 98% in favour. This year
we are seeking approval of a new
remuneration policy that is designed to
operate over the next three years.
We have reviewed our policy taking
into account:
• the strategic opportunities and
operational challenges the Company
may face in the next few years;
• the external corporate
governance environment;
• commentary from advisory bodies;
and
• the views of our shareholders,
including the majority shareholders.
This year we have operated with the
support of independent professional
remuneration advisors. Giving due
consideration to all these inputs,
applying our own experience, and
assessing the needs of Renishaw,
the committee concluded that some
changes should be made to the
present policy. In May 2017 we wrote
to all our shareholders outlining our
proposals and inviting feedback.
Where feedback was received this
was also taken into account by
the committee.
In summary, the proposed changes to
the policy include:
• introduction of a new deferred
annual equity incentive plan, with
a maximum opportunity of 50% of
salary. This deferred annual equity
incentive will only be earned for
performance beyond the level at
which the maximum annual bonus
is payable. Any award made under
the deferred annual equity incentive
will be delivered in Renishaw shares
that normally vest on the third
anniversary of grant, subject to
continued employment;
• introduction of a minimum
shareholding requirement for
executive directors of 50% of salary;
and
• clarification in the recruitment
policy of the flexibility available to
the committee to buy out awards
forfeited by external appointees,
if necessary, to secure the
right individual.
In considering these proposed
policy changes the committee
considered the following areas to be
of particular importance:
(1) Performance
Renishaw is well placed to continue
its long term growth trajectory, based
on its continued commitment to
innovation and product development.
The Company, whilst retaining
significant capability in the UK,
continues to successfully expand
its sales, marketing, applications
engineering and distribution presence
around the world. Its global reach and
relevance to high-value manufacturing
mitigates to some extent the potential
headwinds posed by Brexit uncertainty.
We expect Renishaw to continue
to be positioned to perform well.
Stretching performance targets
are therefore at the heart of our
remuneration approach for executive
directors and leaders supporting
them. Target setting takes place in a
strategic context, and seeks to reflect
our expectation that Renishaw will
continue to grow substantially over the
long term, but also takes into account
the opportunities and challenges
that can affect businesses with short
order books.
In the past year, performance in the
core metrology businesses has been
strong, innovation in these businesses
continues apace and relationships
with high-value manufacturers and
organisations in their supply chain
continue to deepen.
Proposed changes to the remuneration
policy include the introduction of an
additional opportunity for executive
directors to earn a deferred annual
equity incentive award in the event
that performance exceeds the annual
bonus maximum performance target.
Any deferred annual equity incentive
award would be earned only for
additional performance beyond the
current maximum performance level,
and would be capped at 50% of salary.
The decision to propose deferred
shares and a longer term element to
remuneration is intended to help align
non-founder executive directors with
long-term shareholder interests, and
help smooth remuneration through
business cycles.
(2) Succession
Under the leadership of Sir David
McMurtry and John Deer the Company
has developed into a formidable global
force in the science and application of
advanced metrology solutions. A key
role of the Remuneration Committee is
to help the Board ensure that we are
capable of attracting, developing and
retaining the next generation of leaders.
In developing the proposed new
remuneration policy the committee has
taken into account the potential need
for the Company to attract and retain
leadership talent during the life of the
next policy.
The Company has strong internal
candidates for promotion and
succession to the Board, and the
proposed changes to the policy
provide additional flexibility in the event
that it is necessary to recruit externally.
The proposals provide the flexibility to
compensate new recruits (if necessary)
for incentive awards they may have
to forfeit on joining Renishaw. In such
an event the fair value of any buyout
award would not exceed the fair value
of the awards being replaced, taking
into account vesting and performance
criteria. Awards would as far as
possible be replaced on a like-for-
like basis.
84
Renishaw plc Annual report and accounts 2017 The committee is therefore proposing
to introduce a longer term element
in the form of the deferred annual
equity incentive plan, alongside a
new requirement for all executive
directors to build up and maintain a
minimum shareholding. In this way,
we believe that the new remuneration
policy will help align executives’
remuneration more closely with
Company performance and the long-
term interests of all shareholders.
It will also help address the impact
of the absence of an LTIP on the
overall competitiveness of the
package. The initial level of minimum
shareholding required will be 1×
the maximum opportunity available
under the new deferred annual equity
incentive plan, broadly in line with
the ratio of minimum shareholding
requirements and share-based
incentive opportunities at other FTSE
250 companies.
The committee has also proposed a
change in the policy to place a cap
on total remuneration which we hope
will provide additional assurance
to shareholders.
The details of the proposed
remuneration policy are contained in
the following pages. The committee
and the Board recommend this policy
to shareholders, and hope we can
count on your support.
Kath Durrant
Chair of the Remuneration Committee
27th July 2017
The committee has also taken a
decision that where appointments
are made, salaries may be set at
a level that subsequently requires
staged increases to the package,
rather than the more typical large
single increase on appointment.
This enables us to ensure that new
appointees demonstrate they can fully
perform in their new role before they
can move to the median package for
the role. This approach may require
the committee to subsequently
apply a higher percentage increase
to the individual’s salary than the
average percentage increase across
the workforce.
(3) The views of our shareholders
An unprecedented level of commentary
regarding executive pay has been
seen over the past year in the UK
media. Institutional shareholders
and their governance departments,
advisory bodies, the government and
other political parties have offered
their perspectives. Renishaw’s
peers, international competitors, our
customers and employees have their
views too. The committee is mindful of
all these views and opinions and has
sought to steer a path that ensures
that the remuneration policy can
be supported by a majority of the
institutional and private shareholders,
as well as by our majority shareholders
– and is in the best long-term interests
of the Company.
Historically, feedback from proxy
advisors and some institutional
shareholders has questioned the
absence of a long term incentive for our
executives. The committee therefore
explored a range of alternatives to best
address this concern. Renishaw is a
long-term business, and its leadership
has invested significantly in R&D over
many decades. The culture of the
business is imbued with a long-term
perspective and a desire to innovate.
In reviewing alternatives for a long-
term incentive, the committee was
necessarily cognisant of the views of
the Company’s majority shareholders
who concur with the commentary in
the recent BEIS Select Committee
report that traditional LTIPs are not
necessarily right for all companies.
85
GovernanceFinancial statementsShareholder informationStrategic report Governance
Directors’ remuneration
report continued
Remuneration policy
This section of the Directors’ remuneration report sets out the proposed directors’ remuneration policy of the Company.
Executive directors’ policy table
Set out below is a table describing each component of the remuneration package for executive directors. Other than the
introduction of the deferred annual equity incentive opportunity for performance levels beyond the present annual bonus
maximum performance target, and the introduction of minimum shareholding guidelines, the changes to the policy are minor
and intended to aid clarity and improve transparency.
Total
remuneration
policy
Total
remuneration
Purpose and
relevance to strategy
Operation
Executive director remuneration
is designed to be simple,
conservative, and aligned with
shareholder interests.
To attract, motivate
and retain talented
executive directors
to support delivery of
Renishaw’s strategy
and maximise long-
term shareholder
value.
Maximum
A cap on total remuneration
at upper quartile of the
relevant market for the
position in question, will
apply.
Performance measures
Described below
in relation to each
constituent element
of remuneration.
Our total remuneration policy comprises the following constituent elements:
Element
of remuneration
Purpose and
relevance to strategy
Operation
Maximum
Performance measures
Base salary
To provide a
competitive
remuneration
package to motivate
and retain executive
directors of the
required quality to
help the Group meet
its objectives to
deliver the Group’s
strategy.
Renishaw aims to pay base
salaries between median and
upper quartile, reflecting that its
variable pay opportunities remain
significantly below market.
Executive director salaries are
benchmarked against equivalent
positions for relevant industrial
sectors based on factors such as
sector, size and location.
Base salaries are reviewed annually
taking into account the average
increase across the Group, and
specifically the UK where executive
directors are located in the UK.
Continued good
performance
Salaries are set to deliver
total remuneration in
accordance with the policy
defined above.
Base salary increases
will normally be capped
at the level of salary
increases for the broader
workforce, unless the
committee in its absolute
discretion determines
that a higher increase
is appropriate. Example
circumstances include:
to reflect a significant
change in a director’s role
or responsibilities, or if
(in shareholders’ interests)
a director was intentionally
appointed on a below-
market total remuneration
opportunity initially and their
subsequent performance in
the role warrants an above-
average salary increase.
The rationale for any
above-average increase will
be disclosed in the relevant
Annual remuneration report.
86
Renishaw plc Annual report and accounts 2017 Element
of remuneration
Purpose and
relevance to strategy
Operation
Maximum
Performance measures
Benefits provided on an ongoing
basis include:
• a car or car allowance;
• private medical insurance;
Excluding accommodation
and relocation costs,
benefits are capped at
£50k p.a.
Not applicable.
Benefits
To provide market-
competitive benefits
to motivate and retain
executive directors
and to support them
to give maximum
attention to their role.
Annual short-
term bonus
To incentivise and
reward execution
of the Group’s
objectives.
• life assurance;
• long-term disability cover;
• home telephone costs.
If, on the recruitment of a new
executive director, relocation is
required to the director’s place of
work, the necessary relocation
support may be provided.
The committee sets Group
performance targets, including a
threshold below which no bonus
is earned increasing from zero on
a straight-line basis to a target
at which 75% of salary would be
earned, and to a cap at which a
maximum 100% of salary could be
earned.
Part or all of any bonus paid may
be subject to repayment in the
event of any material financial
misstatement, error in calculation or
misconduct.
100% of salary
Deferred
annual equity
incentive plan
As per the annual
short-term bonus
above.
50% of salary
If performance exceeds the level at
which a maximum annual short-
term bonus is earned, incremental
profit growth beyond this level may
be rewarded through a deferred
annual equity incentive. Any such
award is deferred in shares for a
period of three years.
Dividends may accrue on deferred
shares over the deferral period
and, if so, will be paid as additional
shares (or a cash equivalent) on
vesting.
Part or all of any deferred annual
equity award may be subject to
repayment in the event of any
material financial misstatement,
error in calculation or misconduct.
Based on Group
performance, primarily
measured by profit
before tax (the key
measure of Group
performance used
by shareholders
and by the Board).
The committee may
introduce other
metrics (financial and
non-financial) to reflect
the Group’s priorities,
or make adjustments
to appropriately
reflect underlying
performance, provided
that the bonus will
always be subject to
achievement of the
threshold financial
performance.
Targets will be set
around the Group’s
internal strategic plan.
Any non-financial
metrics shall not
form more than 25%
of the overall bonus
opportunity.
As per the annual
short-term bonus
above.
87
GovernanceFinancial statementsShareholder informationStrategic report Governance
Directors’ remuneration
report continued
Element
of remuneration
Purpose and
relevance to strategy
Operation
Maximum
Performance measures
Pension
To provide a
competitive pension
as appropriate to
motivate and retain
executive directors of
the required quality
to meet the Group’s
objectives
Minimum
shareholding
guideline
Supports the
alignment of
executive and
shareholder interests
Each of Allen Roberts and Geoff
McFarland receives a payment of
15% of salary, being the amount that
would otherwise be contributed to a
pension scheme on their behalf.
Will Lee is entitled to an annual
pension contribution of 15% of
salary to the Company’s defined
contribution scheme, but, as agreed
by the committee, most of this is
taken as a salary supplement, with
the level of pension contribution
dependent on the value of his
pension pot from time to time and
the annual allowance.
For any new executive director,
annual contributions of 15% of salary
would be made to the Company’s
defined contribution scheme or all or
part as an allowance paid in lieu, as
agreed by the committee.
Geoff McFarland and Will Lee are
deferred members of the Company’s
defined benefit scheme which closed
for future accruals on 5th April 2007.
Sir David McMurtry and John Deer
receive no pension contribution or
allowance in lieu.
Executive directors are expected to
build up and maintain a level of share
ownership of at least 50% of base
salary.
50% of any net vested share awards
(after sales to meet tax liabilities)
must be retained until the minimum
shareholding guideline is met.
Not applicable
The maximum contribution
to the defined contribution
scheme, or, where
applicable, additional
salary payment in lieu of
contributions will be 15% of
base salary
Not applicable
Not applicable
Approach to recruitment
remuneration
When agreeing the remuneration
package for a new executive director,
the committee will apply the policy
for the existing executive directors
to ensure a reasonably consistent
approach, except as set out below.
For an external hire, base salary will be
set in line with the factors set out in the
policy table, taking into account the
individual’s experience and the amount
required to attract the individual to join
the Company. The committee may also
consider paying compensation to new
hires who forfeit any award under the
variable remuneration arrangements
with a previous employer. Any such
buyout awards would have a fair value
no higher than that of the awards being
replaced, and would be structured as
far as possible to replicate the awards
being forfeited, in terms of vesting
horizons and performance linkage.
Where a new executive director is
required to relocate from their home
location to take up their role, the
committee may provide reasonable
relocation assistance and other
appropriate allowances if business
needs require it.
When an internal appointment is
made, any pre-existing obligations
will be honoured and payment will be
permitted under the policy.
Committee discretion in
exceptional circumstances
The committee retains discretion in
exceptional circumstances to offer
a long-term incentive to support
Renishaw in securing the best
executive director candidate if the
committee considers it to be in
shareholders’ best interests to do so.
Any use of this discretion would be
limited by our internal policy for the
aggregate of all incentive opportunities
(as a percentage of salary) not to
exceed market median, and for an
individual executive director’s total
remuneration not to exceed upper
quartile. Any use of this discretion
would be accompanied by a full
rationale in the relevant Annual
remuneration report.
88
Renishaw plc Annual report and accounts 2017 Service contracts and policy on
payment for loss of office
The executive directors’ service
contracts require 12 months’ notice of
termination by either party. There are no
obligations in any executive director’s
service contract or non-executive
director’s letter of appointment which
would require the Company to pay a
specific amount of compensation for
loss of office.
The executive directors’ service
contracts reflect the Company’s policy
regarding notice periods. No payment
will be made for a termination by the
Company for a breach by the executive
director of his or her service contract.
In other cases, payment in lieu of notice
will be considered up to the 12 months’
notice period to cover base salary,
benefits and pension contributions.
If additional compensation is required
to be considered, such as on a
settlement agreement, the committee
will consider all relevant commercial
factors affecting the specific case.
Statement of consideration
of employment conditions
elsewhere in the Group
The committee takes into account
the pay and employment conditions
of the Group in the country in which
the executive director resides, and
is satisfied that the approach taken
is fair and reasonable based on
market conditions and practice and
the best interests of shareholders.
When considering the annual salary
review, the average base salary
increase awarded to employees
provides a guide when determining
the salaries of the executive directors
(located in the same country).
The Company does not specifically
consult with employees on its executive
director remuneration policy.
Statement of consideration of
shareholder views
The committee has taken into account
feedback provided by external
shareholders when drawing up the
remuneration policy. At the AGM
in 2016, the advisory vote on the
Directors’ remuneration report received
proxy votes of 97.97% in favour. At the
AGM in 2014, the binding vote on the
remuneration policy received proxy
votes of 86.42% in favour. The main
feedback related to the absence of a
long-term share incentive, which the
committee has sought to address
through the proposed introduction
of the deferred annual equity
incentive plan.
Illustrations of application of remuneration policy
The bar charts set out below for each executive director show: firstly, the minimum remuneration payable in respect of salary, benefits
and pension; secondly, the remuneration payable if performance is in line with the Company’s expectations; and thirdly, the remuneration
payable if the maximum bonus and deferred annual equity incentive is payable for the financial year ending 30th June 2018.
1,752
525
1,227
525
702
Target
702
702
Min
525
702
Max
1,083
319
319
445
Max
764
319
445
Target
445
445
Min
1,076
299
299
478
777
299
478
Max
Target
478
478
Min
1,076
299
299
478
777
299
478
Max
Target
478
478
Min
1,076
299
299
478
777
299
478
Max
Target
478
478
Min
Sir David McMurtry
John Deer
Allen Roberts
Geoff McFarland
Will Lee
Minimum remuneration
Bonus for target profit before tax
Additional maximum bonus including deferred
annual equity incentive
All figures £’000
Non-executive directors’ policy table
The remuneration of the non-executive directors is determined by the executive directors and consists of a board fee only.
There is no entitlement to any additional fees nor any 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
Maximum
Performance measures
Board fees
To provide a
competitive fee to
attract and retain
non-executive
directors of the
required quality to
meet the Group’s
objectives.
All non-executive directors are paid the
same fee, irrespective of membership of, or
their chairing of, board committees.
The fees are reviewed annually with
reference to fees payable to non-executive
directors of companies of a similar size and
complexity.
Reasonable expenses that are incurred by
directors in undertaking their duties as a
director are reimbursed
The maximum
aggregate non-
executive director
fees payable
are set by the
Company’s Articles of
Association, currently
an aggregate of
£300,000 per annum.
Not applicable.
The non-executive directors are appointed for an initial three-year period subject to annual performance review and re-election
at AGMs, unless terminated earlier by either party on one month’s written notice. Appointments will not normally continue
beyond nine years in office.
89
GovernanceFinancial statementsShareholder informationStrategic report Governance
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 2017 and also contains details
of how we intend to implement the policy for the forthcoming financial year. The information on pages 90 to 93 has been
audited where required under the regulations and is indicated as audited where applicable.
Single total figure table (audited)
Sir David McMurtry
D J Deer
A C G Roberts
G McFarland
B R Taylor1
W E Lee2
C T Chesney
K L Durrant
Sir David Grant
D J Jeans
Salary/fees
Benefits
Bonus
Pension
Total
2017
£’000
681
411
385
385
87
313
50
50
50
50
2016
£’000
666
402
377
377
463
n/a
44
44
44
44
2017
£’000
2016
£’000
2017
£’000
2016
£’000
2
20
20
19
2
18
2
1
0
3
2
20
19
18
22
n/a
n/a
n/a
n/a
n/a
524
316
296
296
n/a
242
n/a
n/a
n/a
n/a
0
0
0
0
0
n/a
n/a
n/a
n/a
n/a
2017
£’000
n/a
n/a
58
58
6
43
n/a
n/a
n/a
n/a
2016
£’000
n/a
n/a
57
57
70
n/a
n/a
n/a
n/a
n/a
2017
£’000
1,207
747
759
758
95
616
52
51
50
53
2016
£’000
668
422
453
452
555
n/a
44
44
44
44
1 Ben Taylor retired from the Board on 31st July 2016.
2 Will Lee was appointed to the Board on 1st August 2016. His remuneration shown in the table above reflects the part-year from this date to 30th June 2017.
Benefits
Car
allowance
£’000
Private medical cover applies to all executive directors and home telephone costs,
insurance on personal cars and M4 bridge toll fees apply to some directors
£’000
Sir David McMurtry
D J Deer
A C G Roberts
G McFarland
B R Taylor1
W E Lee2
n/a
18
18
18
2
18
2
2
2
1
0
0
1 Ben Taylor retired from the Board on 31st July 2016. 2 Will Lee was appointed to the Board on 1st August 2016.
Bonus
The committee establishes bonus targets taking into account the strategic growth expectations of the business, other financial
parameters and strategic objectives that are required to be achieved. This year two financial measures were targeted, no non-
financial measures were used.
Under the current policy executive directors may earn up to 100% of base pay as a bonus. For the year in question, the bonus
was determined by two elements:
1. Group profit growth (85% of the total opportunity)
This was based on how far the Group’s Adjusted Profit Before
Tax (APBT) performance in 2017 exceeded the APBT for 2016
(£87.5m).
Adjusted profit before tax for the present year grew by 25%
to £109.1m, and resulted in a payment level of 73% for this
element of the bonus scheme (worth 62% of salary).
FY2017 annual bonus – APBT payout profile
l
)
t
n
e
m
e
e
T
B
P
A
f
o
%
(
t
u
o
y
a
P
100%
75%
50%
25%
0%
Maximum
£115.0m
On-Target
£109.8m
Threshold
£87.5m
Threshold On-Target Max
Group Adjusted Profit Before Tax
90
Renishaw plc Annual report and accounts 2017
2. Group cash generation (15% of the total opportunity)
Given the uncertain macroeconomic environment at the start of
the year, and a reducing level of cash reserves the committee
decided it was prudent to set a target for cash balances to
be improved.
The cash balance at the end of the year was £51.9m compared
to net £21.3m at the end of the previous year, resulting in a
payment level of 100% for this element of the bonus scheme
(worth 15% of salary).
As a result of performance against the APBT and cash targets
set for the 2017 bonus, executive directors received a bonus
worth 77% of salary.
FY2017 annual bonus – cash payout profile
)
t
n
e
m
e
e
h
s
a
c
l
f
o
%
(
t
u
o
y
a
P
100%
75%
50%
25%
0%
Maximum
£36.7m
Threshold
£21.3m
Threshold
Max
Group Cash balance
Total pension entitlements
G McFarland and W E Lee are members of the Company’s closed defined benefit scheme. The normal retirement age is 65.
On death, pension benefits would pass to dependants.
Since the closure of the DB scheme, contributions have been made to a defined contribution scheme.
At 30th June 2017:
G McFarland
W E Lee
Value of DB pension entitlement
£28,933 per annum
£8,677 per annum
Pension contributions
Paid in cash
£7,117 pension contribution and the
balance paid in cash
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.
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, as Renishaw is a constituent of this index.
TSR performance has been rebased to 100 at 30th June 2009.
1,500
1,000
900
800
700
600
500
400
300
200
100
0
Renishaw
FTSE mid 250
2009
2010
2011
2012
2013
2014
2015
2016
2017
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:
Year
2017
2016
2015
2014
2013
2012
2011
2010
Single figure of
total remuneration (£‘000)
1,207
668
1,298
632
663
969
1,066
472
Annual bonus payout
against maximum opportunity %
77%
0%
100%
0%
10%
69%
100%
0%
Long-term incentive vesting
rates against maximum opportunity %
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
91
GovernanceFinancial statementsShareholder informationStrategic report
Governance
Directors’ remuneration
report continued
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
During the year, none of the directors were required to own shares in the Company, although the remuneration policy proposed
for approval by the shareholders at the AGM in 2017 includes a minimum shareholding guideline. As at 30th June 2017 the
share interests (including the interests of connected persons) of the directors who have served on the Board at any time during
the year are:
Sir David McMurtry
D J Deer
A C G Roberts
G McFarland
B R Taylor1
W E Lee2
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
5,165
2,000
147
600
500
–
–
–
1 Ben Taylor retired from the Board on 31st July 2016
2 Will Lee was appointed to the Board on 1st August 2016
There were no share-based payments made or share schemes in place during the year.
Percentage change in remuneration of the Chief Executive
The following table sets out the percentage change in the Chief Executive’s remuneration compared to the percentage change
in average remuneration of UK employees from 2016 to 2017:
Salary
Benefits
Annual bonus
2017
£’000
681
2
524
2016
£’000
666
2
0
Chief Executive
% change
+2.25%
0%
n/a
UK employees (average)
% change
+3.75%
+8.9%
+21%
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:
Employee remuneration
Shareholder dividends paid
2017
£’000
211,572
34,939
2016
£’000
183,769
33,847
change
%
+15.1%
+3.2%
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
Base salary
The executive directors’ salaries, except for Will Lee, will be increased at a rate less than the average for the UK workforce,
(which was 3.46%) and the salaries will be as follows from 1st July 2017:
Sir David McMurtry
D J Deer
A C G Roberts
G McFarland
W E Lee
92
30th June 2017
£’000
681
411
385
385
325
1st July 2017
£’000
700
425
398
398
398
Renishaw plc Annual report and accounts 2017 Will Lee was promoted to Group Sales
and Marketing Director early in the
financial year. This was a significant
promotion from his previous role
and, in line with our approach to
ensuring merit-based pay, his salary
on appointment was set below market
median with the intent to keep this
under review once he had established
himself in the new role and had the
opportunity to prove his capabilities.
His performance since appointment
has been assessed by the Board as
excellent, with his leadership of the
global sales and marketing organisation
being particularly strong, and his
contribution to the Board providing
deep insight to key decisions. As noted
in the Chairman’s statement, Will Lee
will take over responsibility for chairing
the International Sales and Marketing
Board from the start of the new
financial year. As a result, his salary will
be increased to a competitive level, by
22.46% for the 2018 financial year.
Annual bonus
As set out in the policy, the maximum
bonus opportunity for the year ending
30th June 2018 will continue to be
100% of salary for executive directors.
The bonus for the year ending 30th
June 2018 will be based on financial
targets. The bonus scheme targets
have been set based on the policy
as set out in the policy table, and will
be disclosed in next year’s Annual
remuneration report.
Deferred annual equity incentive
For the 2018 financial year, executive
directors will be eligible for an award
of up to 50% of salary under the
new deferred annual equity incentive,
subject to stretching targets (in
excess of the level required for the
annual bonus to pay out in full) being
achieved. Any award under this
plan will be delivered in Renishaw
shares that normally vest on the
third anniversary of grant, subject
to continued employment over that
period. The targets set in relation to
the deferred annual equity incentive
will be disclosed in next year’s Annual
remuneration report.
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:
K L Durrant
C T Chesney
Sir David Grant
D J Jeans
Mercer Kepler assisted the committee
in reviewing and benchmarking the
director and senior management
remuneration arrangements.
Mercer Kepler is a founder member of
the Remuneration Consultants Group
and, as such, voluntarily operates
under the code of conduct in relation
to executive remuneration consulting
in the UK. Total professional fees
paid to Mercer Kepler during the year
were £46,300. Mercer Kepler was
appointed by the committee and have
not advised the Company on any other
matters. During the year, the actuarial
advisory division of Mercer Limited
(Mercer Kepler’s parent company)
provided advice to the trustees of the
Company’s UK defined benefit pension
scheme and in relation to the defined
contribution scheme. This work is
entirely separate from the work done
by Mercer Kepler for the committee.
The committee is of the opinion that
the advice received from Mercer Kepler
is objective and independent.
The Company Secretary acts as
secretary to the committee.
Statement of voting at general meeting
At the annual general meeting held on 13th October 2016, 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
60,194,113
97.97%
1,249,698
2.03%
61,443,811
137,302
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
The Company is required to provide in this report any reasons known to it for a significant percentage of votes against either the
Directors’ remuneration report or the remuneration policy and any actions taken in response. The Company deems a significant
percentage of votes against as being more than 20%. No commentary is therefore necessary in respect of the voting on either
of the above resolutions.
This 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 2017
93
GovernanceFinancial statementsShareholder informationStrategic report Governance
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.
Directors and their interests
The directors at the end of the year
are listed on page 92 together with
their interests in the share capital of
the Company (with the equivalent
number of voting rights), as notified to
the Company.
The principal activities of the Company
are the design, manufacture, sale,
distribution and service of metrology
and healthcare products and solutions
outlined on page 2 of the Strategic
report. 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, Turkey
and Israel.
There are also representative offices
in 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
for RLS.
Further information is available
on the Company’s website:
www.renishaw.com.
Dividends
The directors propose a final dividend
of £28,751,474 or 39.5p per share
(2016: £25,839,932 or 35.5p per
share) which, together with the interim
dividend of £9,098,568 or 12.5p per
share (2016: £9,098,568 or 12.5p)
makes a total amount of dividends for
the year of £37,850,042 or 52.0p per
share, compared to £34,938,500 or
48.0p per share for the previous year.
All the interests were beneficially held
with the exception of 2,434,411 shares
(2016: 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 92 in the
period 1st July 2017 to 27th July 2017.
In accordance with the provisions of
the Governance Code all directors
will retire and, being eligible, offer
themselves for re-election at the Annual
General Meeting (AGM) to be held on
20th October 2017. Details of directors
who offer themselves up for re-election
or election, as the case may be, are
shown on pages 68 and 69 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.
94
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 2017
financial year. However, the Company
did not purchase any of its own shares
during that time.
Auditor
A resolution to re-appoint Ernst &
Young LLP as the 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.
Renishaw plc Annual report and accounts 2017 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 approval
of a new forward-looking Directors’
remuneration policy intended to
continue for the next three years.
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.
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 2017.
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.
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, 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 54 to 63.
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 that may
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.
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.
95
GovernanceFinancial statementsShareholder informationStrategic report Greenhouse gas emissions
The disclosures concerning
greenhouse gas emissions required by
law are set out in the Corporate social
responsibility report on page 62.
Signed on behalf of the Board.
Norma Tang
Company Secretary
27th July 2017
Renishaw plc
Registered number 1106260
England and Wales
Governance
Other statutory and
regulatory disclosures
continued
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 has 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. This guidance continues
to apply in respect of remuneration
awarded under the new remuneration
policy, if approved at the AGM.
96
Renishaw plc Annual report and accounts 2017 We consider 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
position and performance, business
model and strategy.
Signed on behalf of the Board.
Allen Roberts
Group Finance Director
27th July 2017
Governance
Directors’ responsibilities
The directors are responsible for
preparing the Annual report and the
group and the company financial
statements in accordance with
applicable law and regulations.
Company law requires the Directors
to prepare group and company
financial statements for each financial
year. Under that law the directors
have prepared the group financial
statements in accordance with
International Financial Reporting
Standards (IFRSs) as adopted by
the European Union (EU) and have
prepared the 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 the company and of
their profit or loss for that period.
In preparing each of the group and
company financial statements, the
directors are required to:
• select suitable accounting policies
and then apply them consistently;
• make judgements and accounting
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, subject to any
material departures disclosed and
explained in the financial statements;
• for the company financial
statements, state whether applicable
UK Accounting Standards have been
followed, subject to any material
departures disclosed and explained
in the company financial statements;
and
• prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the
group and the company will continue
in business.
The directors are responsible for
keeping adequate accounting records
that are sufficient to show and explain
the Company’s transactions and
disclose with reasonable accuracy
at any time the financial position
of the Group and the Company;
and enable them to ensure that the
financial statements comply with the
Companies Act 2006. They are also
responsible for taking such steps
as are reasonably open to them to
safeguard the assets of the Group and
the Company 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 Group and of the Company and
the undertakings; and
• the Strategic report and the
Directors’ report include a fair review
of the development and performance
of the business during the year and
the position of the Company and the
Group at the year end, together with
a description of the principal risks
and uncertainties that they face.
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GovernanceFinancial statementsShareholder informationStrategic report Independent auditor’s report
to the members of Renishaw plc
Opinion
In our opinion:
• Renishaw plc’s group financial
statements and parent company
financial statements (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 2017 and of the Group’s
profit for the year then ended;
• the group financial statements
have been properly prepared in
accordance with IFRSs as adopted
by the European Union;
• the parent company financial
statements have been properly
prepared in accordance with United
Kingdom Generally Accepted
Accounting Practice, 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.
We have audited the financial
statements of Renishaw plc
which comprise:
The financial reporting framework that
has been applied in the preparation
of the group financial statements
is applicable law and International
Financial Reporting Standards (IFRSs)
as adopted by the European Union.
The financial reporting framework that
has been applied in the preparation
of the parent company financial
statements is applicable law and
United Kingdom Accounting Standards
(United Kingdom Generally Accepted
Accounting Practice), including FRS
101 ‘Reduced Disclosure Framework’.
Basis for opinion
We conducted our audit in accordance
with International Standards on
Auditing (UK) (ISAs (UK)) and applicable
law. Our responsibilities under those
standards are further described in the
Auditor’s responsibilities for the audit of
the financial statements section of our
report below. We are independent of
the Group and Company in accordance
with the ethical requirements that are
relevant to our audit of the financial
statements in the UK, including the
FRC’s Ethical Standard as applied
to listed public interest entities, and
we have fulfilled our other ethical
responsibilities in accordance with
these requirements.
We believe that the audit evidence
we have obtained is sufficient and
appropriate to provide a basis for
our opinion.
Group
Parent company
Consolidated balance sheet as at
30th June 2017
Balance sheet as at 30th June 2017
Consolidated income statement for the
year then ended
Statement of changes in equity for
the year then ended
Related notes C.26 to C.42 to the
financial statements including a
summary of significant accounting
policies
Consolidated statement of
comprehensive income and expense
for the year then ended
Consolidated statement of changes in
equity for the year then ended
Consolidated cash flow statement for
the year then ended
Related notes 1 to 25 to the financial
statements, including a summary of
significant accounting policies
Conclusions relating to
principal risks, going concern
and viability statement
We have nothing to report in respect of
the following information in the annual
report, in relation to which the ISAs
(UK) require us to report to you whether
we have anything material to add or
draw attention to:
• the disclosures in the annual report,
set out on pages 52 to 53, that
describe the principal risks and
explain how they are being managed
or mitigated;
• the directors’ confirmation, set out
on page 52, in the Annual report
that they have carried out a robust
assessment of the principal risks
facing the entity, including those
that would threaten its business
model, future performance, solvency
or liquidity;
• the directors’ statement, set
out on page 75, in the financial
statements about whether they
considered it appropriate to
adopt the going concern basis of
accounting in preparing them, and
their identification of any material
uncertainties to the entity’s ability to
continue to do so over a period of at
least twelve months from the date of
approval of the financial statements;
• whether the directors’ statement
in relation to going concern
required under the Listing Rules
in accordance with Listing Rule
9.8.6R(3) is materially inconsistent
with our knowledge obtained in the
audit; or
• the directors’ explanation, set out
on pages 75 to 76, in the Annual
report as to how they have assessed
the prospects of the entity, over
what period they have done so and
why they consider that period to be
appropriate, and their statement as
to whether they have a reasonable
expectation that the entity will be
able to continue in operation and
meet its liabilities as they fall due
over the period of their assessment,
including any related disclosures
drawing attention to any necessary
qualifications or assumptions.
98
Renishaw plc Annual report and accounts 2017 Overview of our audit approach
Key audit matters
Audit scope
Materiality
•
•
•
Revenue recognition as a result of inappropriate cut off via manipulation of timing of
revenue recognition.
Susceptibility to management override through the posting of manual topside
adjustments during the consolidation process.
The valuation of the Group’s forward currency derivatives and assessment of
hedging activities.
• Carrying value of goodwill.
•
•
•
We performed an audit of the complete financial information of seven components
and audit procedures on specific balances for a further six components.
The components where we performed full or specific audit procedures accounted
for 94% of Profit before tax, 92% of Revenue and 90% of Total Assets.
Overall Group materiality of £4.7m which represents 4.6% of Group Profit before
tax for both continuing and discontinued operations.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not
due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy;
the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in
the context of our audit of the financial statements as a whole, and in our opinion thereon, and we do not provide a separate
opinion on these matters.
Key observations communicated to the
Audit Committee
Based on our procedures we are
satisfied that the revenue cut-off
was appropriate.
Risk
Our response to the risk
Revenue recognition.
Revenue recognition as a result of
inappropriate cut off via manipulation
of timing of revenue recognition,
continuing revenue of £536.8m (2016:
£427.2m) and discontinued revenue of
£7.2m (2016: £7.0m).
As described in note 1 of the
consolidated financial statements,
where certain products require
installation, part of the revenue may
be deferred until the installation is
complete. Furthermore, 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. No
revenue should be recognised if there
are significant uncertainties regarding
recovery of the consideration due,
or the possible return of goods. This
results in the potential for management
manipulation of the timing of revenue
recognition.
Refer also to page 80 (Audit Committee
report).
We identified and assessed the design of key
controls to validate that revenue recognition
was appropriate and applied in accordance
with the Group’s accounting policies.
We performed cut off procedures by testing
items from revenue recognised during the
year and subsequent to year end to gain
assurance over the completeness and
existence of deferred revenue balances at
year end.
We tested credit notes issued after the
balance sheet date to assess appropriate
revenue recognition in the period.
We looked for and tested journal entries
within normal business processes relating to
revenue transactions close to the year end
to ensure they were valid, by agreeing the
journals to originating documentation.
We performed testing on revenue recorded
through journal entries outside of normal
business processes to establish whether a
service had been provided in the financial
year to support the revenue recognised.
We performed other substantive,
transactional testing and analytical
procedures to validate that revenue
transactions had been appropriately recorded
in the Consolidated income statement at the
right time.
The above work was performed at all full
scope and specific scope locations with third
party revenue streams.
We ensured that the financial statement
disclosures were in accordance with
accounting standards.
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GovernanceFinancial statementsShareholder informationStrategic report Independent auditor’s report
to the members of Renishaw plc
continued
Risk
Our response to the risk
Management override
Susceptibility to management override
during the post-close consolidation
adjustments process.
We consider that management is in a
position to perpetrate fraud through the
manipulation of top-side journal entries
during the consolidation process.
We focused on this area due to the
manual nature of the consolidation
process and the non-routine
judgemental nature of some of the
journals posted.
The valuation of the Group’s
forward currency derivatives and
assessment of hedging activities
Refer to the Audit Committee report
(page 80 to 81) and notes 1, 13 and
25 of the Consolidated Financial
Statements.
As described in note 1 of the
consolidated financial statements
the Group uses derivative financial
instruments to manage risks arising from
changes in foreign currency exchange
rates relating to forecast sales.
The Group designates certain derivatives
as hedges of a particular risk associated
with a recognised asset or liability or
a highly probable forecast transaction
(cash flow hedge). Hedge accounting
is discontinued when the hedging
instrument expires or is sold, terminated
or exercised, or no longer qualifies for
hedge accounting.
Changes in the fair value of foreign
currency derivatives which are ineffective
or do not meet the criteria for hedge
accounting in IAS 39 are recognised in
the Consolidated income statement.
We focused on this area due to the
complexity of some of the derivatives
entered into, and the magnitude of the
carrying value of the derivative assets
and liabilities on the balance sheet,
being £3.5m and £56.7m respectively
(2016: £0.9m and £70.6m).
We performed walkthroughs of the
consolidation process at various month ends
throughout the year, including the interim and
year end to assess the design effectiveness of
the underlying consolidation process.
For all full and specific scope locations we
independently verified the results of the
consolidated entities by agreeing the results
included in the consolidation directly to the
results audited by the component audit teams.
For a sample of the remaining entities we
verified the results of the consolidated entities
to the underlying source data.
We selected all consolidation journals
exceeding 15% performance materiality and
obtained evidence to verify the validity and
accuracy of the journals being posted.
We obtained direct external confirmation of
the valuation for each of the forward currency
contracts held and agreed these to the fair
values of the derivatives recorded by the
Group.
We ensured that the requirements of IAS
39 Financial Instruments: Recognition and
Measurement (IAS 39) were met by:
•
•
•
•
•
ensuring the appropriateness of the
methodology used by management
to hedge account. We reviewed the
terms and conditions of all the different
categories of forward currency contracts
open at the year end and determined
whether hedge accounting was
permissible under IAS 39;
challenging management’s assessment
of whether hedge accounting was
permissible under IAS 39 for forward
currency contracts open at the previous
year end;
using EY specialists to test a sample of
valuations to ensure that the fair values of
the forward currency derivatives had been
reasonably calculated;
using EY specialists to evaluate
management’s documentation and
assessment of hedge effectiveness; and
ensuring that the financial statement
disclosures were in accordance with
accounting standards.
Key observations communicated to the
Audit Committee
We found no evidence of
management override in the
post-close consolidation
adjustments.
As at 30th June 2016 certain
forward foreign currency open
contracts were treated as
qualifying for hedge accounting
when they did not meet the hedge
effectiveness criteria. This has
resulted in a prior year restatement,
being a £25.8m reduction to
profit (excluding tax impact)
and a £25.8m increase in Other
Comprehensive Income (excluding
tax impact). We have confirmed
that the disclosures in note 25
were in accordance with the
requirements of IAS 8, Accounting
Policies, Changes in Accounting
Estimates and Errors.
We confirmed that the valuation
of the Group’s forward currency
derivatives, the assessment of
hedging activities for the year
ended 30th June 2017 and the
disclosures within notes 13 and
25 were in accordance with the
requirements of IAS 39, Financial
Instruments: Recognition and
Measurement.
100
Renishaw plc Annual report and accounts 2017 Key observations communicated to the
Audit Committee
Based on the results of our work,
we agree with management’s
conclusion that an impairment of
goodwill at a CGU level is required
in the current year, amounting
to £8.4m, disclosed within
discontinued operations.
We confirmed that the disclosures
within note 10 were in accordance
with the requirements of IAS 36,
Impairment of Assets.
Risk
Our response to the risk
Carrying value of goodwill
Refer to the Audit Committee report
(page 80 and 81); and notes 1 and 10 of
the Consolidated Financial Statements.
We focused on this area due the
size of the goodwill balance of
£13.3m (2016: £21.3m) and because
(i) significant levels of goodwill have
arisen from Renishaw plc acquisitions
in recent years, (ii) management’s
assessment of value in use of the
Group’s cash-generating units (CGUs)
involves judgement about the future
results of the business and discount
rates applied to future cash flow
forecasts, (iii) 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 and (iv) a
number of these acquisitions are still in
the research and development stage
which makes forecasting inherently more
judgemental.
We challenged management’s assumptions
used in its impairment models for assessing
the recoverability of the carrying value of
goodwill. We focused on the appropriateness
of CGU identification, methodology applied to
estimate recoverable values, discount rates
and forecast cash flows. Specifically:
•
•
•
•
•
•
we validated that the changes in CGUs
identified were consistent with changes in
the business and reflect the lowest level at
which management monitors goodwill in
accordance with the requirements of IAS
36, Impairment of Assets (IAS 36);
we tested the methodology applied
in the value in use calculation as
compared to the requirements of IAS
36 and the mathematical accuracy of
management’s model;
we inspected the cash flow forecasts
used in the valuation to ensure that they
were consistent with information approved
by the Board and reviewed the historical
accuracy of management’s forecasts by
comparing to actual performance;
we challenged management on its cash
flow forecasts and the growth rates for
the year ended 30th June 2018 and
beyond by considering evidence available
to support these assumptions, their
consistency with findings from other areas
of our audit and by performing sensitivity
analyses;
the discount rates and long term growth
rates applied within the model were
assessed by an EY business valuation
specialist, including comparison to
economic and industry forecasts,
where appropriate;
for certain CGUs with lower headroom,
we performed sensitivity analyses by stress
testing key assumptions in the model with
downside scenarios to understand the
parameters that, should they arise, could
lead to a different conclusion in respect of
the carrying value of goodwill; and
•
we considered the appropriateness of the
related disclosures provided in note 10 of
the Group financial statements.
The entire goodwill balance was subject to
full scope audit procedures by the primary
audit team.
In the prior year the risks of material misstatement were identified as Carrying Value of Inventory and Carrying Value of Goodwill.
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GovernanceFinancial statementsShareholder informationStrategic report Independent auditor’s report
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continued
The reporting components where
we performed audit procedures
accounted for 94% (2016: 83%) of
the Group’s Profit before tax, 92%
(2016: 90%) of the Group’s Revenue
and 90% (2016: 78%) of the Group’s
Total Assets.
For the current year, the seven full
scope components contributed
93% (2016: 83%) of the Group’s
Profit before tax. The full scope
Profit before tax coverage of 93%
represents six full scope components
having a positive contribution of 98%
offset by one full scope component
having a negative contribution of 5%.
The full scope entities contributed 87%
(2016: 83%) of the Group’s Revenue
and 81% (2016: 78%) of the Group’s
Total Assets.
The specific scope components
contributed 1% (2016: 0%) of
the Group’s Profit before tax, 5%
(2016:0%) of the Group’s Revenue
and 9% (2016: 0%) of the Group’s
Total Assets. The audit scope of these
components may not have included
testing of all significant accounts of the
component but will have contributed to
the coverage of accounts significant to
the consolidated Group.
Of the remaining 34 components that
together represent 6% of the Group’s
Profit before tax, none are individually
greater than 5% of the Group’s Profit
before tax. For these components, we
performed other procedures, including
analytical review to respond to any
potential risks of material misstatement
to the Group financial statements.
The following charts illustrate the
coverage obtained from the work
performed by our audit.
An overview of the scope of
our audit
Tailoring the scope
Our assessment of audit risk, our
evaluation of materiality and our
allocation of performance materiality
determine our audit scope for each
entity within the Group. Taken together,
this enables us to form an opinion on
the consolidated financial statements.
We take into account size, risk profile,
the organisation of the group and
effectiveness of group-wide controls,
changes in the business environment
and other factors such as recent
Internal audit results when assessing
the level of work to be performed at
each entity.
In assessing the risk of material
misstatement to the Group financial
statements, and to ensure we had
adequate quantitative coverage of
significant accounts in the financial
statements, of the 47 reporting
components of the Group, we selected
13 components covering entities within
China, Germany, Hong Kong, India,
Ireland, Italy, Japan, Mexico, Spain,
South Korea, UK and USA, which
represent the principal business units
within the Group.
Of the 13 components selected, we
performed an audit of the complete
financial information of seven
components (“full scope components”)
which were selected based on their
size or risk characteristics. For the
remaining six components (“specific
scope components”), we performed
audit procedures on specific accounts
within that component that we
considered had the potential for the
greatest impact on the significant
accounts in the financial statements
either because of the size of these
accounts or their risk profile.
For the remaining components,
audit procedures were undertaken
to respond to any potential risks of
material misstatement to the Group
financial statements.
Profit before tax
Revenue
Total assets
93% full
scope
components
1% Specific
scope
components
6% Other
procedures
87% full
scope
components
5% Specific
scope
components
8% Other
procedures
81% full
scope
components
9% Specific
scope
components
10% Other
procedures
Changes from the prior year
We have increased the scope of
components in China, India, Italy,
Mexico, South Korea and Spain to
specific scope.
Involvement with component
teams
In establishing our overall approach
to the Group audit, we determined
the type of work that needed to be
undertaken at each of the components
by us, as the primary audit engagement
team, (primary audit team), or by
component auditors from other EY
global network firms operating under
our instruction. Of the seven full scope
components, all audit procedures were
performed on two of these directly
by the primary audit team, and of the
six specific scope components, all
audit procedures were performed on
four of these directly by the primary
audit team. The primary audit team
performed all the audit procedures
on two full scope components, one
located in the UK and one located
102
Renishaw plc Annual report and accounts 2017 in the USA, and four specific scope
components located in Italy, Spain,
Mexico and China respectively. For the
remaining five full scope components
and two specific scope components,
where the work was performed by
component auditors, we determined
the appropriate level of involvement to
enable us to determine that sufficient
audit evidence had been obtained as a
basis for our opinion on the Group as
a whole.
At the start of the audit a meeting was
held with representatives from all full
scope component teams. In addition,
during the current year’s audit cycle,
visits were undertaken by the Senior
Statutory Auditor, or his designate, to
the component teams in Germany,
India, Ireland and the USA. These visits
involved discussing the audit approach
with the component team, discussing
key risk areas, meeting with local
management, and attending planning
meetings. The primary audit team
interacted regularly with the component
teams during all stages of the audit,
reviewed key working papers,
attended all closing meetings via
video conferencing facilities and were
responsible for the scope and direction
of the audit process. This, together with
the additional procedures performed
at Group level, gave us appropriate
evidence for our opinion on the Group
financial statements.
Our application of materiality
We apply the concept of materiality
in planning and performing the audit,
in evaluating the effect of identified
misstatements on the audit and in
forming our audit opinion.
Materiality
The magnitude of an omission or
misstatement that, individually or in
the aggregate, could reasonably be
expected to influence the economic
decisions of the users of the financial
statements. Materiality provides a basis
for determining the nature and extent
of our audit procedures.
We determined materiality for
the Group to be £4.7 million
(2016: £4 million), which is 4.6%
(2016: 5 %) of Group Profit before
tax for continuing and discontinued
operations. We believe that Group
Profit before tax for continuing and
discontinued operations provides us
with a consistent year-on-year basis
for determining materiality and is a
generally accepted auditing benchmark
for listed entities.
Performance materiality
The application of materiality at the
individual account or balance level.
It is set at an amount to reduce to an
appropriately low level the probability
that the aggregate of uncorrected
and undetected misstatements
exceeds materiality.
On the basis of our risk assessments,
together with our assessment of the
Group’s overall control environment,
our judgement was that performance
materiality was 75% (2016: 75%) of
our planning materiality, namely £3.5m
(2016: £3m). We have set performance
materiality at this percentage due to
the past history of few misstatements
indicating a lower risk of misstatement
in the financial statements.
Audit work at component locations
for the purpose of obtaining
audit coverage over significant
financial statement accounts is
undertaken based on a percentage
of total performance materiality.
The performance materiality set
for each component is based on
the relative scale and risk of the
component to the Group as a whole
and our assessment of the risk of
misstatement at that component. In the
current year, the range of performance
materiality allocated to components
was £0.5m to £2.3m (2016: £2m).
Reporting threshold
An amount below which identified
misstatements are considered as being
clearly trivial.
We agreed with the Audit Committee
that we would report to them all
uncorrected audit differences in excess
of £0.235m (2016: £0.2m), which is set
at 5% of planning materiality, as well as
differences below that threshold that,
in our view, warranted reporting on
qualitative grounds.
We evaluate any uncorrected
misstatements against both the
quantitative measures of materiality
discussed above and in light of other
relevant qualitative considerations in
forming our opinion.
Other information
The other information comprises the
information included in the Annual
report set out on pages 1 to 96,
including the Strategic Report, set out
on pages 1 to 65, Governance, set out
on pages 66 to 96, and Shareholder
information, set out on pages 148 to
150, other than the financial statements
and our auditor’s report thereon.
The directors are responsible for the
other information.
Our opinion on the financial statements
does not cover the other information
and, accordingly, except to the extent
otherwise explicitly stated in this
report, we do not express any form of
assurance conclusion thereon.
In connection with our audit of the
financial statements, our responsibility
is to read the other information and, in
doing so, consider whether the other
information is materially inconsistent
with the financial statements or our
knowledge obtained in the audit or
otherwise appears to be materially
misstated. If we identify such material
inconsistencies or apparent material
misstatements, we are required
to determine whether there is a
material misstatement in the financial
statements or a material misstatement
of the other information. If, based
on the work we have performed,
we conclude that there is a material
misstatement of the other information,
we are required to report that
fact. We have nothing to report in
this regard.
In this context, we also have nothing to
report in regard to our responsibility to
specifically address the following items
in the other information and to report
as uncorrected material misstatements
of the other information where we
conclude that those items meet the
following conditions:
•
Fair, balanced and
understandable set out on
page 75 – the statement given by
the directors that they consider
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, is materially
inconsistent with our knowledge
obtained in the audit; or
103
GovernanceFinancial statementsShareholder informationStrategic report Independent auditor’s report
to the members of Renishaw plc
continued
•
•
Audit Committee reporting
set out on pages 79 to 82 – the
section describing the work of
the Audit Committee does not
appropriately address matters
communicated by us to the audit
committee; or
Directors’ statement of
compliance with the UK
Corporate Governance Code
set out on page 77 – the parts of
the directors’ statement required
under the Listing Rules relating to
the company’s compliance with the
UK Corporate Governance Code
containing provisions specified for
review by the auditor in accordance
with Listing Rule 9.8.10R(2) do
not properly disclose a departure
from a relevant provision of the UK
Corporate Governance Code.
Opinions on other matters
prescribed by the Companies
Act 2006
In our opinion, the part of the Directors’
remuneration report to be audited has
been properly prepared in accordance
with the Companies Act 2006.
In our opinion, based on the work
undertaken in the course of the audit:
•
•
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; and
the Strategic report and the
Directors’ report have been
prepared in accordance with
applicable legal requirements.
Matters on which we are
required to report by exception
In the light of the knowledge and
understanding of the Group and the
parent company and its environment
obtained in the course of the audit,
we have not identified material
misstatements in the Strategic report or
the Directors’ report.
We have nothing to report in respect
of the following matters in relation
to which the Companies Act 2006
requires us 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.
Responsibilities of directors
As explained more fully in the Directors’
responsibilities statement set out on
page 97, the directors are responsible
for the preparation of the financial
statements and for being satisfied that
they give a true and fair view, and for
such internal control as the directors
determine is necessary to enable the
preparation of financial statements that
are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements,
the directors are responsible for
assessing the Group and Company’s
ability to continue as a going concern,
disclosing, as applicable, matters
related to going concern and using
the going concern basis of accounting
unless management either intends to
liquidate the Group or the Company or
to cease operations, or has no realistic
alternative but to do so.
Auditor’s responsibilities
for the audit of the
financial statements
Our objectives are to obtain reasonable
assurance about whether the financial
statements as a whole are free from
material misstatement, whether due to
fraud or error, and to issue an auditor’s
report that includes our opinion.
Reasonable assurance is a high level
of assurance, but is not a guarantee
that an audit conducted in accordance
with ISAs (UK) will always detect a
material misstatement when it exists.
Misstatements can arise from fraud
or error and are considered material
if, individually or in the aggregate,
they could reasonably be expected
to influence the economic decisions
of users taken on the basis of these
financial statements.
This report is made solely to the
Company’s members, as a body, in
accordance with Chapter 3 of Part 16
of the Companies Act 2006. Our audit
work has been undertaken so that we
might state to the Company’s members
those matters we are required to state
to them in an auditor’s report and for
no other purpose. To the fullest extent
permitted by law, we do not accept or
assume responsibility to anyone other
than the company and the Company’s
members as a body, for our audit work,
for this report, or for the opinions we
have formed.
Explanation of the extent
to which our audit can
detect fraud
The objectives of our audit, in respect
to fraud, are: to identify and assess
the risks of material misstatement of
the financial statements due to fraud;
to obtain sufficient appropriate audit
evidence regarding the assessed
risks of material misstatement due
to fraud, through designing and
implementing appropriate responses;
and to respond appropriately to fraud
or suspected fraud identified during
the audit. However, the primary
responsibility for the prevention and
detection of fraud rests with both those
charged with governance of the entity
and management.
104
Renishaw plc Annual report and accounts 2017 Our approach was as follows:
•
•
•
•
We obtained an understanding
of the legal and regulatory
frameworks that are applicable to
the Group and determined that
the most significant frameworks
which are directly relevant to
specific assertions in the financial
statements are those that relate to
the reporting framework (IFRS, FRS
101 and the Companies Act 2006
and UK Corporate Governance
Code) and the relevant tax
compliance regulations in the UK
and overseas jurisdictions in which
the Group operates as referred to in
the ‘Tailoring the Scope’ paragraph
above. In addition, we concluded
that there are certain significant
laws and regulations which may
have an effect on the determination
of the amounts and disclosures
in the financial statements being
the Listing Rules of the UK Listing
Authority, the Bribery Act 2010,
Occupational Health and Safety
Regulations, the Data Protection
Act 1998, and export controls.
We understood how the Group
complies with these legal and
regulatory frameworks through
our assessment of the Group’s
approach to governance,
demonstrated by the Board’s
approval of the Group’s governance
framework and the Board’s review
of the Group’s risk management
and internal control processes.
As a result of the Board’s review
of the Group’s risk management
and internal control framework
an executive risk committee was
established which in turn formed
working groups to focus on anti-
bribery, information and cyber
security, and data protection.
The Group’s anti-corruption
culture is embedded in Renishaw’s
Group Business Code and Anti-
Bribery Policy.
We assessed the susceptibility of
the Group’s financial statements
to material misstatement,
including how fraud might occur
by: considering the programs
and controls that the Group has
established to address risks
identified by the entity, or that
otherwise prevent, deter and detect
fraud; how senior management
monitor those programs and
controls, and evaluating conditions
in the context of incentive/pressure
to commit fraud, considering the
opportunity to commit fraud and
the potential rationalisation of the
fraudulent act.
Based on this understanding we
designed our audit procedures to
identify non-compliance with such
laws and regulations identified in the
paragraphs above. Our procedures
involved: journal entry testing, with
a focus on manual consolidation
journals and journals indicating
large or unusual transactions
based on our understanding of the
business; inquiries of legal counsel,
executive management, internal
audit, divisional heads and all full
and specific component finance
managers; and focused testing, as
referred to in the Key Audit Matters
section above.
Notes:
1. The maintenance and integrity of
the Renishaw plc website is the
responsibility of the directors; the
work carried out by the auditors
does not involve consideration of
these matters and, accordingly, the
auditors accept no responsibility
for any changes that may have
occurred to the financial statements
since they were initially presented
on the website.
2. Legislation in the UK governing the
preparation and dissemination of
financial statements may differ from
legislation in other jurisdictions.
A further description of our
responsibilities for the audit of the
financial statements is located on
the Financial Reporting Council’s
website at https://www.frc.org.uk/
auditorsresponsibilities. This description
forms part of our auditor’s report.
Other matters we are required
to address
•
Following the recommendation
of the Audit Committee, we were
appointed as auditors by the Board
of Directors of Renishaw plc and
signed an engagement letter on
11th November 2016. We were
appointed by the Company at the
AGM on 13th October 2016 to
audit the financial statements for
the year ending 30th June 2017
and subsequent financial periods.
The period of total uninterrupted
engagement including previous
renewals and reappointments is
one year, covering the year ending
30th June 2017.
•
The non-audit services prohibited
by the FRC’s Ethical Standard
were not provided to the Group
or the Company and we remain
independent of the Group and the
Company in conducting the audit.
•
The audit opinion is consistent
with the additional report to the
Audit Committee.
Paul Mapleston
(Senior statutory auditor)
for and on behalf of Ernst & Young LLP,
Statutory Auditor
Bristol
27th July 2017
105
GovernanceFinancial statementsShareholder informationStrategic report Consolidated income statement
for the year ended 30th June 2017
from continuing operations
Revenue
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Losses from the fair value of financial instruments
Operating profit
Financial income
Financial expenses
Share of profits of associates and joint ventures
Profit before tax
Income tax expense
Profit for the year from continuing operations
Loss for the year from discontinued operations
Profit for the year
Profit attributable to:
Equity shareholders of the parent company
Non-controlling interest
Profit for the year
Dividend per share arising in respect of the year
Dividend per share paid in the year
Earnings per share from continuing operations (basic and diluted)
Losses per share from discontinued operations (basic and diluted)
notes
2
2017
£’000
536,807
Restated*
2016
£’000
427,224
(251,384)
(208,565)
285,423
218,659
(112,691)
(52,376)
(3,601)
(93,843)
(40,200)
(23,436)
116,755
61,180
766
(2,256)
1,836
872
(1,800)
1,451
117,101
61,703
(14,343)
(9,983)
102,758
51,720
(13,931)
(4,024)
88,827
47,696
88,955
(128)
88,827
pence
52.0
48.0
141.3
(19.1)
48,220
(524)
47,696
pence
48.0
46.5
71.8
(5.6)
4
4
5
7
8
19
19
6
6
* Certain amounts shown here do not correspond to the 2016 consolidated financial statements and reflect adjustments detailed in notes 1 and 25.
106
Financial statementsRenishaw plc Annual report and accounts 2017 Financial statements
Consolidated statement of comprehensive income and expense
for the year ended 30th June 2017
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:
Exchange differences in translation of foreign operations
Comprehensive income and expense of associates and joint ventures
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
2017
£’000
88,827
Restated*
2016
£’000
47,696
14
19
19
19
(1,608)
(835)
(2,443)
3,889
173
8,495
(1,573)
10,984
(20,868)
3,480
(17,388)
8,409
753
(65,396)
12,640
(43,594)
8,541
(60,982)
97,368
(13,286)
97,496
(128)
97,368
(12,762)
(524)
(13,286)
*Certain amounts shown here do not correspond to the 2016 consolidated financial statements and reflect adjustments detailed in notes 1 and 25.
107
GovernanceFinancial statementsShareholder informationStrategic report Consolidated balance sheet
at 30th June 2017
Assets
Property, plant and equipment
Intangible assets
Investments in associates and joint ventures
Long-term loans to associates and joint ventures
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
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
2017
£’000
Restated*
2016
£’000
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
228,050
54,507
7,311
3,080
39,115
3,546
335,609
87,697
137,507
2,276
15,907
–
12,850
51,942
308,179
19,544
–
2,803
2,960
25,261
37,304
87,872
220,307
199,957
66,787
13,844
31,471
112,102
67,823
21,999
50,652
140,474
443,814
381,385
14,558
42
10,510
(31,049)
450,803
(460)
444,404
(590)
443,814
14,558
42
6,448
(37,971)
401,930
(460)
384,547
(3,162)
381,385
9
10
11
20
12
13
15
20
20
13
14
16,20
16,20
17
13
18
14
12
13
19
19
19
19
*Certain amounts shown here do not correspond to the 2016 consolidated financial statements and reflect adjustments detailed in notes 1 and 25.
These financial statements were approved by the Board of directors on 27th July 2017 and were signed on its behalf by:
Sir David McMurtry
Directors
A C G Roberts
108
Financial statementsRenishaw plc Annual report and accounts 2017 Financial statements
Consolidated statement of changes in equity
for the year ended 30th June 2017
Year ended 30th June 2016 (restated*)
Balance at 1st July 2015 as reported
Restatement
Balance at 1st July 2015 restated
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 and joint ventures
Changes in fair value of cash flow hedges
Total other comprehensive income
and expense
Total comprehensive income
and expense
Share
capital
£’000
14,558
–
14,558
Share
premium
£’000
42
–
42
Currency
translation
reserve
£’000
(2,714)
–
(2,714)
Cash flow
hedging
reserve
£’000
17,171
(2,386)
14,785
Retained
earnings
£’000
402,559
2,386
404,945
Other
reserve
£’000
(460)
–
(460)
Non-
controlling
interest
£’000
Total
£’000
(2,638) 428,518
–
(2,638) 428,518
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
48,220
–
8,409
753
–
–
–
–
(52,756)
(17,388)
–
–
–
9,162
(52,756)
(17,388)
9,162
(52,756)
30,832
–
–
–
–
–
–
–
(524)
47,696
–
–
–
–
–
(17,388)
8,409
753
(52,756)
(60,982)
(524)
(13,286)
Dividends paid
Balance at 30th June 2016
–
14,558
–
42
–
6,448
–
(33,847)
(37,971) 401,930
–
(460)
–
(33,847)
(3,162) 381,385
Year ended 30th June 2017
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 and joint ventures
Changes in fair value of cash flow hedges
Total other comprehensive income
and expense
Total comprehensive income
and expense
−
−
−
−
−
−
−
–
–
–
–
–
–
–
–
–
88,955
–
3,889
173
–
–
–
–
6,922
(2,443)
–
–
–
4,062
6,922
(2,443)
4,062
6,922
86,512
–
–
–
–
–
–
–
(128)
88,827
–
–
–
–
–
(2,443)
3,889
173
6,922
8,541
(128)
97,368
Acquisition of non-controlling interest
Dividends paid
Balance at 30th June 2017
−
−
14,558
−
–
42
−
–
10,510
−
–
(2,700)
(34,939)
(31,049) 450,803
−
–
(460)
2,700
–
−
(34,939)
(590) 443,814
*Certain amounts shown here do not correspond to the 2016 consolidated financial statements and reflect adjustments detailed in notes 1 and 25.
More details of share capital and reserves are given in note 19.
109
GovernanceFinancial statementsShareholder informationStrategic report Consolidated statement of cash flow
for the year ended 30th June 2017
Cash flows from operating activities
Profit for the year
Adjustments for:
Amortisation of development costs
Amortisation of other intangibles
Depreciation
Loss on sale of property, plant and equipment
(Gains)/losses from the fair value of financial instruments
Share of profits from associates and joint ventures
Financial income
Financial expenses
Tax expense
Decrease/(increase) in inventories
Increase in trade and other receivables
Increase/(decrease) 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, associates and joint ventures
Sale of property, plant and equipment
Sale of property, plant and equipment relating to discontinued activities
Interest received
Dividends received from associates and joint ventures
Payments from/(to) pension scheme escrow account (net)
Cash flows from investing activities
Financing activities
Interest paid
Dividends paid
Cash flows from financing activities
Net increase/(decrease) 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
2017
£’000
Restated*
2016
£’000
88,827
47,696
10
10
9
11
4
4
7
17
10
4
11
4
19
16
13,645
10,230
22,192
2,085
(8,022)
(1,836)
(766)
2,256
13,132
52,916
7,262
(21,062)
14,699
585
1,484
(4,204)
(23,768)
115,255
(42,637)
(15,886)
(754)
–
5,526
960
766
356
2,429
(49,240)
(696)
(34,939)
(35,635)
30,380
21,303
259
51,942
9,116
2,313
18,258
166
25,772
(1,451)
(872)
1,800
8,988
64,090
(17,286)
(2,951)
(12,439)
660
(32,016)
(2,708)
(21,883)
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
*Certain amounts shown here do not correspond to the 2016 consolidated financial statements and reflect adjustments detailed in notes 1 and 25.
110
Financial statementsRenishaw plc Annual report and accounts 2017 Financial statements
Notes (forming part of the financial statements)
1. Accounting policies
Basis of preparation
Renishaw plc (the Company) is a company incorporated in the UK. The group financial statements consolidate those of the Company
and its subsidiaries (together referred to as the Group) and equity account the Group’s interest in associates and joint ventures.
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 consolidated financial statements are
presented in Sterling, which is the Company’s functional currency and the Group’s presentational currency, and all values are rounded
to the nearest thousand (£’000).
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these group
financial statements. Judgements made by the directors, in the application of these accounting policies, that have a significant effect
on the financial statements and estimates with a significant risk of material adjustment in the next year are noted below.
The Group identified a number of prior period adjustments during the year, resulting in a restatement of the comparative period in the
2017 financial statements, as detailed in note 25. A third balance sheet has not been presented as the movements are identified in
the Consolidated statement of changes in equity.
Renishaw GmbH, Pliezhausen, Germany has chosen to exercise the right under section 264 – sub-section 3 of the German
Commercial Code (HGB) on exemption and preparation. The consolidated financial statements of the Group include the financial
statements of Renishaw GmbH, Pliezhausen, Germany.
Basis of accounting
The financial statements have been prepared under the historical cost convention, subject to fair value items referred to in the
derivative financial instruments note below. The accounting policies set out below have been consistently applied in preparing both
the 2016 and 2017 financial statements.
Critical accounting judgements and estimation uncertainties
The preparation of financial statements in conformity with adopted IFRS requires management to make judgements, estimates and
assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates
and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under
the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions
are reviewed on an ongoing basis.
The areas of key estimation uncertainty and critical accounting judgement that have a significant risk of causing a material adjustment
to the carrying amount of assets and liabilities in the next financial year are listed below:
Critical accounting judgements
(i) 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.
(ii) Discontinued activities
The closure of certain lines of business have been treated as discontinued operations on the basis that the directors are of the opinion
that the underlying performance of the business is better reflected by classifying these items as discontinued.
Key sources of estimation uncertainty
(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. For most inventory lines, provisions are based on the excess levels held compared to a maximum three year outlook.
Where strategic purchases of critical components have been made, an outlook beyond three years is considered where appropriate.
The sensitivities around estimates vary significantly from line to line.
111
GovernanceFinancial statementsShareholder informationStrategic report Notes continued
1. Accounting policies (continued)
Critical accounting judgements and estimation uncertainties (continued)
(ii) 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 14.
(iii) 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.
Capitalised development costs are written off over five years, the period over which demand forecasts can be predicted with
more certainty.
(iv) Impairment of goodwill
Determining whether goodwill is impaired requires an estimation of the value in use of cash-generating units (CGUs) to which goodwill
has been allocated. The value in use calculation involves an estimation of the future cash flows of CGUs and also the selection of
appropriate discount rates, which involves judgement, to calculate present values (see note 10).
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.
Application of the equity method to associates and joint ventures – Associates and joint ventures are accounted for using the equity
method (equity accounted investees) and are initially recognised at cost. The Group’s investment includes goodwill identified on
acquisition, net of any accumulated impairment losses. The consolidated financial statements include the Group’s share of the total
comprehensive income and equity movements of equity accounted investees, from the date that significant influence commences
until the date that significant influence ceases. When the Group’s share of losses exceeds its interest in an equity accounted investee,
the Group’s carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has
incurred legal obligations or made payments on behalf of an investee.
Transactions eliminated on consolidation – 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.
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.
112
Financial statementsRenishaw plc Annual report and accounts 2017 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.
Foreign currencies
Consolidation - 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 in
other comprehensive income and accumulated in equity.
Transactions and balances - Monetary assets and liabilities denominated in foreign currencies are reported at the rates prevailing
at the time, with any gain or loss arising from subsequent exchange rate movements being included as an exchange gain or loss
in the Consolidated income statement. Foreign currency differences arising from transactions are recognised in the Consolidated
income statement.
Hedging of net investments in foreign operations - Gains and losses arising on currency borrowings used to hedge the foreign
currency exposure on the net assets of the foreign operations are recognised in other comprehensive income and expense and
accumulated in equity, to the extent that hedge accounting criteria are met and are included in the Consolidated statement of
comprehensive income and expense. Any ineffective portion is recognised immediately in the Consolidated income statement.
The effectiveness of the hedging is tested monthly.
Foreign currency derivative cash flow hedges
Foreign currency derivatives are used to manage risks arising from changes in foreign currency rates relating to overseas sales.
The Group does not enter into derivatives for speculative purposes. Foreign currency derivatives are stated at their fair value being
the estimated amount that the Group would pay or receive to terminate them at the balance sheet date based on prevailing foreign
currency rates.
Changes in the fair value of foreign currency derivatives which are designated and effective as hedges of future cash flows are
recognised in other comprehensive income and in the currency hedging reserve, and subsequently transferred to the carrying amount
of the hedged item or the Consolidated income statement. Realised gains or losses on cash flow hedges are therefore recognised in
the Consolidated income statement in the same period as the hedged item.
Hedge accounting is discontinued when the hedging instrument expires or no longer qualifies for hedge accounting. At that time, any
cumulative gain or loss on the hedging instrument previously recognised in equity is retained in equity until the hedged transaction
occurs. If the hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is then
transferred to the Consolidated income statement.
Changes in fair value of foreign currency derivatives which are ineffective or do not meet the criteria for hedge accounting in IAS 39
‘Financial instruments: recognition and measurement’ are recognised in the Consolidated income statement.
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.
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.
113
GovernanceFinancial statementsShareholder informationStrategic report 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 2 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 50 years, Plant and equipment 3 to 25 years, Vehicles 3 to 4 years.
Impairment on non-current assets
All non-current assets are tested for impairment whenever there is an indication that their carrying value may be impaired.
An impairment loss is recognised in the Consolidated income statement to the extent that an asset’s carrying value exceeds its
recoverable amount, which represents the higher of the asset’s net realisable value and its value in use. An asset’s value in use
represents the present value of the future cash flows expected to be derived from the asset or from the cash-generating unit to which
it relates. The present value is calculated using a discount rate that reflects the current market assessment of the time value of money
and the risks specific to the asset concerned.
Goodwill and capitalised research and development costs are subject to an annual impairment test.
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 that are required to bring
inventories to their present location and condition. Overheads are absorbed into inventories on the basis of normal capacity or on
actual hours if higher.
Warranty provisions
The Group provides a warranty from the date of purchase, except for those products that are installed by the Group where the
warranty starts from the date of completion of the installation. This is typically for a 12-month period, although up to three years is
given for a small number of products. A warranty provision is included in the financial statements, which is calculated on the basis of
historical returns and internal quality reports.
Discontinued activities
Where a line of the Group’s business is treated as a discontinued operation, the financial statements have been re-presented and
restated where required as if operations discontinued during the current year had been discontinued from the start of the comparative
year. Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as a profit
or loss after tax from discontinued operations in the Consolidated income statement.
Alternative performance measures
The financial statements are prepared in accordance with adopted IFRS and applied in accordance with the provisions of the
Companies Act 2006. In measuring our performance, the financial measures that we use include those which have been derived from
our reported results in order to eliminate factors which distort year-on-year comparisons.
These are considered non-GAAP financial measures. We believe this information, along with comparable GAAP measurements, is
useful to investors in providing a basis for measuring our operational performance. Our management uses these financial measures,
along with the most directly comparable GAAP financial measures, in evaluating our performance (see note 24).
114
Financial statementsRenishaw plc Annual report and accounts 2017 1. Accounting policies (continued)
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.
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 a period of at least 12 months from the date of approval of the financial statements. Accordingly,
they continue to adopt the going concern basis in preparing the Annual report and accounts.
Taxation
Tax on the profit for the year comprises current and deferred tax. Tax is recognised in the Consolidated income statement except
to the extent that it relates to items recognised directly in other comprehensive income, in which case it is recognised in the
Consolidated statement of comprehensive income and expense. Current tax is the expected tax payable on the taxable income
for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in
previous years.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition
of goodwill, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business
combination and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable
future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of
assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. 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.
Government grants
Government grants, comprising R&D tax credits are recognised in the Consolidated income statement as a deduction
against expenditure.
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.
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.
115
GovernanceFinancial statementsShareholder informationStrategic report 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 profit before interest, tax and discontinued operations. Within the operating segment
of metrology, there are multiple product offerings with similar economic characteristics, and where the nature of the products and
production processes and their customer base are similar. More details of the Group’s products and services are given in the
Strategic report.
Year ended 30th June 2017
Revenue
Depreciation and amortisation
Operating profit/(loss) before loss from fair value of financial instruments
Share of profits from associates and joint ventures
Net financial expense
Losses from the fair value of financial instruments
Profit before tax
Year ended 30th June 2016 (restated)
Revenue
Depreciation and amortisation
Operating profit/(loss) before loss from fair value of financial instruments
Share of profits from associates and joint ventures
Net financial expense
Losses from the fair value of financial instruments
Profit before tax
Metrology
£’000
503,378
32,983
126,830
1,836
–
–
–
Metrology
£’000
398,853
26,234
87,717
1,451
–
–
–
Healthcare
£’000
33,429
3,831
(6,474)
–
–
–
–
Healthcare
£’000
28,371
3,003
(3,101)
–
–
–
–
There is no allocation of assets and liabilities to operating segments. Depreciation is included within certain other overhead
expenditure which is allocated to segments on the basis of the level of activity.
The 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
2017
£’000
248,905
129,941
113,577
27,595
16,789
536,807
Total
£’000
536,807
36,814
120,356
1,836
(1,490)
(3,601)
117,101
Total
£’000
427,224
29,237
84,616
1,451
(928)
(23,436)
61,703
Restated
2016
£’000
193,274
110,315
88,029
22,752
12,854
427,224
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
Germany
Japan
116
2017
£’000
134,984
95,927
56,403
52,166
Restated
2016
£’000
106,457
77,856
48,205
49,318
Financial statementsRenishaw plc Annual report and accounts 2017 2. Segmental analysis (continued)
There was no revenue from transactions with a single external customer which amounted to more than 10% of the Group’s
total revenue.
The following table shows the analysis of non-current assets by geographical region:
United Kingdom
Overseas
Total non-current assets
2017
£’000
183,102
109,846
292,948
2016
£’000
190,396
90,434
280,830
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
2017
£’000
171,993
19,341
20,238
211,572
2017
Number
2,842
1,553
4,395
2016
£’000
148,852
16,856
18,061
183,769
2016
Number
2,755
1,437
4,192
Key management personnel have been assessed to be the directors of the Company. The total remuneration of the directors was:
Short-term employee benefits
Post-employment benefits
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 14)
Bank interest payable
Total financial expenses
2017
£’000
4,223
165
4,388
2017
£’000
766
2017
£’000
1,560
696
2,256
2016
£’000
2,542
184
2,726
2016
£’000
872
2016
£’000
1,569
231
1,800
117
GovernanceFinancial statementsShareholder informationStrategic report 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
Research and development tax credit
Loss on sale of property, plant and equipment
Foreign currency losses/(gains)
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)
(b)
(c)
(c)
(c)
(c)
(c)
(c)
(c)
(c)
(c)
(c)
2017
£’000
22,098
14,945
53,544
(6,692)
1,917
301
177
230
5
−
−
−
−
15
2016
£’000
17,951
11,349
44,431
(2,420)
166
(642)
169
195
13
30
103
20
264
46
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. Earnings per share
Basic and diluted earnings per share from continuing operations are calculated on earnings of £102,886,000 (2016: £52,244,000)
and on 72,788,543 shares, being the number of shares in issue during both years. Basic and diluted losses per share from
discontinued operations are calculated on losses of £13,931,000 (2016: £4,024,000) 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.
7. 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
Prior year adjustments
Effect on deferred tax for changes in the UK tax rate
Tax charge on profit
2017
£’000
6,418
610
12,997
20,025
(1,589)
(3,647)
(446)
(5,682)
14,343
2016
£’000
6,804
860
7,651
15,315
(4,403)
−
(929)
(5,332)
9,983
Phased reductions in the UK rate of corporation tax to 19% from 1st April 2017 and 17% from 1st April 2020 have been substantively
enacted. Deferred tax assets and liabilities have been calculated based on the rate expected to be applicable when the relevant
item reverses.
Total tax charge:
Income tax expense reported in the Consolidated income statement
Tax attributable to discontinued operations
2017
£’000
14,343
(1,211)
13,132
2016
£’000
9,983
(995)
8,988
118
Financial statementsRenishaw plc Annual report and accounts 2017 7. Income tax expense (continued)
The tax for the year is lower (2016: lower) than the weighted average of the UK standard rate of corporation tax of 19.75% (2016: 20%).
The differences are explained as follows:
Profit before tax from continuing operations
Loss before tax from discontinued operations
Total profit before tax
Tax at 19.75% (2016: 20%)
Effects of:
Different tax rates applicable in overseas subsidiaries
UK 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
Other differences
Tax charge on profit
Effective tax rate
2017
£’000
117,101
(15,142)
101,959
20,137
(1,886)
(4,025)
310
1,960
226
(3,037)
(446)
(107)
13,132
12.9%
Restated
2016
£’000
61,703
(5,019)
56,684
11,337
(2,653)
(423)
266
461
(290)
860
(929)
359
8,988
15.9%
The current year patent box benefit of £4.0m is significantly higher than the prior year as a result of favourable exchange rate
movements. Prior year adjustments totalling a credit of £3.0m arose primarily from the correction of a deferred tax liability held in
respect of the currency translation reserve.
The Group’s future effective tax rate (ETR) will mainly depend on the geographic mix of profits and whether there are any changes
to tax legislation in the Group’s most significant countries of operations. Phased reductions in the UK rate of corporation tax to
19% (from 1st April 2017) and 17% (from 1st April 2020) have been substantively enacted which is expected to impact the ETR in
due course. Tax rate reductions are being considered in a number of countries where the Group operates. The patent box benefit
has a significant impact on the ETR and is unpredictable due to factors such as currency rate movements and the level of capital
allowances claimed in any given year. The Group does not expect the future tax rate to be materially impacted by the changes
to the international tax landscape resulting from the package of measures developed under the OECD base erosion and profit
shifting project.
8. Discontinued operations
In October 2016, the Group decided to discontinue operations at Renishaw Diagnostics Limited (healthcare segment) and in June
2017, to discontinue the spatial measurements business (metrology segment), on the basis of continued losses. Certain assets of the
business were sold. Financial information relating to the discontinued operations is set out below:
Revenue
Expenses
Goodwill impairment
Loss before tax
Tax credit
Loss for the year from discontinued operations
Cash flow
Loss for the year
Adjustments for operating activities
Cash flows used in operating activities
Cash flows from investing activities
Net decrease in cash and cash equivalents from discontinued operations
2017
£’000
7,217
(13,914)
(8,445)
(15,142)
1,211
(13,931)
2017
£’000
(13,931)
12,155
(1,776)
420
(1,356)
2016
£’000
7,038
(12,057)
–
(5,019)
995
(4,024)
2016
£’000
(4,024)
(635)
(4,659)
168
(4,491)
119
GovernanceFinancial statementsShareholder informationStrategic report Notes continued
9. Property, plant and equipment
Year ended 30th June 2017
Cost
At 1st July 2016
Additions
Transfers
Disposals
Currency adjustment
At 30th June 2017
Depreciation
At 1st July 2016
Charge for the year
Released on disposals
Currency adjustment
At 30th June 2017
Net book value
At 30th June 2017
At 30th June 2016
Freehold
land and
buildings
£’000
142,665
6,273
23,050
(8,267)
1,940
165,661
Plant and
equipment
£’000
187,048
13,336
5,524
(6,489)
1,603
201,022
27,241
2,976
(2,292)
537
28,462
107,045
17,727
(4,000)
839
121,611
Motor
vehicles
£’000
Assets in the
course of
construction
£’000
9,600
1,118
−
(1,067)
242
9,893
5,996
1,489
(960)
150
6,675
14,886
21,910
(28,574)
−
−
8,222
−
−
−
−
−
Total
£’000
354,199
42,637
−
(15,823)
3,785
384,798
140,282
22,192
(7,252)
1,526
156,748
137,199
115,424
79,411
80,003
3,218
3,604
8,222
14,886
228,050
213,917
At 30th June 2017, properties with a net book value of £66,606,000 (2016: £66,485,000) were subject to a fixed charge to secure
the UK defined benefit pension scheme liabilities.
Additions to assets in the course of construction of £21,910,000 (2016: £23,194,000) comprise £17,972,000 (2016: £12,938,000)
for freehold land and buildings and £3,938,000 (2016: £10,256,000) for plant and equipment.
Freehold
land and
buildings
£’000
127,097
4,462
2,141
(1,020)
9,985
142,665
22,608
2,915
(621)
2,339
27,241
Plant and
equipment
£’000
145,642
23,865
14,042
(2,162)
5,661
187,048
91,393
14,283
(1,831)
3,200
107,045
Motor
vehicles
£’000
8,575
1,475
−
(1,190)
740
9,600
5,596
1,060
(1,129)
469
5,996
Assets in the
course of
construction
£’000
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
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
120
Financial statementsRenishaw plc Annual report and accounts 2017 10. Intangible assets
Year ended 30th June 2017
Cost
At 1st July 2016
Additions
Disposals
Currency adjustment
At 30th June 2017
Amortisation
At 1st July 2016
Charge for the year
Impairments
Released on disposal
Currency adjustment
At 30th June 2017
Net book value
At 30th June 2017
At 30th June 2016
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
Goodwill on
consolidation
£’000
Other
intangible
assets
£’000
Internally
generated
development
costs
£’000
Software
licences
£’000
22,587
454
−
25
23,066
16,691
1,587
−
−
21
18,299
Total
£’000
156,567
16,640
(1,784)
558
171,981
95,312
15,430
8,445
(1,784)
71
117,474
11,249
300
−
98
11,647
10,939
198
−
−
50
11,187
101,463
15,886
−
−
117,349
67,682
13,645
−
−
−
81,327
460
310
36,022
33,781
4,767
5,896
54,507
61,255
Internally
generated
development
costs
£’000
89,475
12,246
–
(258)
–
101,463
58,824
9,116
(258)
–
67,682
Software licences
In use
£’000
In the course
of acquisition
£’000
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
−
(1,784)
435
19,919
−
−
8,445
(1,784)
−
6,661
13,258
21,268
Other
intangible
assets
£’000
10,655
44
–
–
550
11,249
9,914
617
–
408
10,939
Goodwill on
consolidation
£’000
19,736
–
–
–
1,532
21,268
–
–
–
–
–
21,268
19,736
310
741
33,781
30,651
5,896
6,511
–
25
61,255
57,664
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 following table, only the goodwill relating
to the acquisition of R&R Fixtures, LLC is expected to be subject to tax relief.
121
GovernanceFinancial statementsShareholder informationStrategic report Notes continued
10. Intangible assets (continued)
The analysis of acquired goodwill on consolidation is:
itp GmbH
Renishaw Mayfield S.A.
R&R Fixtures, LLC
Renishaw Software Limited
Other smaller acquisitions
Renishaw Diagnostics Limited (92.4%)
Measurement Devices Limited
Total acquired goodwill
2017
£’000
3,038
1,823
5,327
1,559
1,511
−
−
13,258
2016
£’000
2,886
1,738
5,168
1,559
1,472
1,784
6,661
21,268
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 over
the five years, which are set out below. The cash flows beyond this forecast are extrapolated to perpetuity using a nil growth rate on a
prudent basis, to reflect the uncertainties over forecasting 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:
itp GmbH
Renishaw Software Limited
R&R Fixtures, LLC
Renishaw Mayfield S.A.
Forecast cash flows and future growth rates
itp GmbH
Renishaw Software Limited
R&R Fixtures, LLC
Renishaw Mayfield S.A.
2017
Discount rate
12%
12%
12%
15%
2016
Discount rate
12%
12%
12%
15%
2017
Basis of forecast
5% growth rate
5% growth rate
5 year business plan
5 year business plan
2016
Basis of forecast
5% growth rate
5% growth rate
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, given that the cost bases of the businesses can be flexed in line with revenue performance.
The average growth rates included in the significant CGUs’ business plans are as follows:
R&R Fixtures, LLC
2017
Average revenue
growth
14%
2016
Average revenue
growth
13%
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.
122
Financial statementsRenishaw plc Annual report and accounts 2017 10. Intangible assets (continued)
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 44% for R&R Fixtures, LLC. Management deem the likelihood of this reduction to
be remote.
11. Investments in associates and joint ventures
The Group’s investments in associates and joint ventures (all investments being in the ordinary share capital of the associate and joint
ventures), whose accounting years end on 30th June, except where noted otherwise, were:
Country of
incorporation and principal
place of business
Slovenia
England & Wales
England & Wales
Ownership
2017
%
50.0
50.0
24.9
Ownership
2016
%
50.0
50.0
24.9
RLS merilna tehnika d.o.o.
Metrology Software Products Limited
HiETA Technologies Limited (31st December)
For the nature of the activities, see note C.42.
Movements during the year were:
Balance at the beginning of the year
Dividends received
Share of profits of associates and joint ventures
Other comprehensive income and expense
Additions
Balance at the end of the year
Summarised aggregated financial information for associates and joint ventures:
Revenue
Share of profits/(loss) for the year
Assets
Liabilities
12. Deferred tax assets and liabilities
Balances at the end of the year were:
Property, plant and equipment
Intangible assets
Intragroup trading (inventory)
Pension schemes
Derivatives
Other
Balance at the end of the year
Assets
£’000
−
−
16,016
11,024
10,146
1,929
39,115
2017
Liabilities
£’000
(9,337)
(4,330)
−
−
−
(177)
(13,844)
Joint ventures
Associate
2017
£’000
8,729
2,116
9,012
2,387
Net
£’000
(9,337)
(4,330)
16,016
11,024
10,146
1,752
25,271
2016
£’000
6,244
1,595
6,540
1,850
Assets
£’000
–
–
13,454
12,529
13,244
1,769
40,996
2017
£’000
55
(280)
310
796
2016
Liabilities
£’000
(6,969)
(8,061)
–
–
–
(6,969)
(21,999)
2017
£’000
5,658
(356)
1,836
173
−
7,311
2016
£’000
3,480
(310)
1,451
753
284
5,658
2016
£’000
38
(144)
413
645
Net
£’000
(6,969)
(8,061)
13,454
12,529
13,244
(5,200)
18,997
123
GovernanceFinancial statementsShareholder informationStrategic report Notes continued
12. Deferred tax assets and liabilities (continued)
The movements in the deferred tax balance during the year were:
Balance at the beginning of the year
Reallocation to current tax
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
2017
£’000
18,997
3,000
5,682
(1,573)
(835)
(2,408)
25,271
2017
£’000
(2,368)
3,731
2,562
(669)
2,426
5,682
2016
£’000
(2,455)
−
5,332
12,640
3,480
16,120
18,997
2016
£’000
(1,380)
(44)
4,217
(349)
2,888
5,332
No deferred tax asset has been recognised in respect of tax losses carried forward of £22,147,000 (2016: £16,393,000) 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.
13. Derivatives
For both the Group and the Company:
Derivatives comprising the fair value of outstanding forward contracts with positive fair values were:
Derivatives designated as hedging instruments
Derivatives not designated as hedging instruments
Total derivatives with positive fair values
Total current
Total non-current
Total derivatives with positive fair values
Derivatives comprising the fair value of outstanding forward contracts with negative fair values were:
Derivatives designated as hedging instruments
Derivatives not designated as hedging instruments
Total derivatives with negative fair values
Total current
Total non-current
Total derivatives with negative fair values
124
2017
£’000
2,083
1,463
3,546
2017
£’000
−
3,546
3,546
2017
£’000
41,560
15,172
56,732
2017
£’000
25,261
31,471
56,732
2016
£’000
579
356
935
2016
£’000
859
76
935
2016
£’000
49,079
21,560
70,639
2016
£’000
19,987
50,652
70,639
Financial statementsRenishaw plc Annual report and accounts 2017 14. 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 £20,238,000 (2016: £18,061,000), of which £165,000 (2016: £184,000) related
to directors and £6,292,000 (2016: £4,854,000) 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 2017 by a qualified independent actuary. The mortality assumption used for 2017 is S2PMA and S2PFA tables, CMI (core)
2016 model with long-term improvements of 1% 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 2017
30th June 2016
30th June 2015
UK scheme Ireland scheme
1.6%
2.2%
1.6%
–
65
3.3%
2.7%
3.4%
2.4%
64
UK scheme
3.2%
3.2%
3.3%
2.3%
64
Ireland scheme
1.5%
2.0%
1.5%
–
65
UK scheme
3.4%
4.0%
3.6%
2.6%
64
Ireland scheme
1.6%
3.0%
1.6%
–
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
2017
£’000
% of
total
assets
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
169,433
1,275
170,708
(237,495)
(66,787)
11,024
99
1
100
–
–
–
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
–
–
–
All equities have quoted prices in active markets in the UK, North America, Europe, Asia-Pacific, Japan and emerging markets.
Note C.36 gives the analysis of the UK defined benefit pension scheme. For the other schemes, the market value of assets at the end
of the year was £20,386,000 (2016: £17,646,000) and the actuarial value of liabilities was £24,312,000 (2016: £23,348,000).
The weighted average duration of the defined benefit obligation is around 24 years.
For a sensitivity analysis of certain elements of the UK defined benefit pension scheme, see the Financial review section of
the Strategic report. It is expected that contributions to defined benefit schemes for the next financial year will be at a similar level to
the current year.
The movements in the schemes’ assets and liabilities were:
Year ended 30th June 2017
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
149,227
4,204
4,681
19,028
(6,432)
170,708
Liabilities
£’000
(217,050)
–
(6,241)
(20,636)
6,432
(237,495)
Total
£’000
(67,823)
4,204
(1,560)
(1,608)
–
(66,787)
125
GovernanceFinancial statementsShareholder informationStrategic report Notes continued
14. Employee benefits (continued)
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
Assets
£’000
140,499
2,708
5,552
3,166
(2,698)
149,227
Liabilities
£’000
(188,593)
–
(7,121)
(24,034)
2,698
(217,050)
Total
£’000
(48,094)
2,708
(1,569)
(20,868)
–
(67,823)
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
2017
£’000
2016
£’000
1,797
(25,471)
4,127
18,739
(800)
(1,608)
1,523
(24,828)
6,968
669
(5,200)
(20,868)
The cumulative amount of actuarial gains and losses recognised in the Consolidated statement of comprehensive income and
expense was a loss of £107,264,000 (2016: loss of £105,656,000).
The life expectancies implied by the mortality assumption at age 65 are:
Male currently aged 65
Female currently aged 65
Male currently aged 45
Female currently aged 45
2017
years
21.9
23.7
23.0
25.0
2016
years
21.9
23.9
23.2
25.2
An agreement has been entered into with the trustees of the UK defined benefit pension scheme in relation to deficit funding plans
which supersede all 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
£12,850,000 at the end of the year (2016: £15,279,000). 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 £16,200,000, to represent the maximum discounted liability as at 30th June 2017 (2016: £15,400,000).
126
Financial statementsRenishaw plc Annual report and accounts 2017 15. 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
2017
£’000
32,477
19,705
35,515
87,697
2016
£’000
35,932
26,225
32,802
94,959
During the year, the amount of inventories recognised as an expense in the Consolidated income statement was £167,395,000
(2016: £135,718,000) and the amount of write-down of inventories recognised as an expense in the Consolidated income statement
was £6,466,000 (2016: £2,454,000). At the end of the year, the gross cost of inventories which had provisions held against them
totalled £15,413,000 (2016: £10,134,000).
16. 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
2017
£’000
46,492
5,450
−
51,942
2016
£’000
26,416
4,862
(9,975)
21,303
The UK defined benefit pension scheme cash escrow account is shown separately within current assets. Overdrafts are shown
separately within current liabilities.
17. 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
2017
£’000
2,375
2,195
(1,610)
585
2,960
2016
£’000
1,715
1,878
(1,218)
660
2,375
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.
18. Other payables
Balances at the end of the year were:
Payroll taxes and social security
Other creditors and accruals
Total other payables
2017
£’000
7,642
29,662
37,304
2016
£’000
6,304
12,041
18,345
Other creditors and accruals include increases in the group bonus provision, provisions for deferred income and pension fund
accruals. The Group’s exposure to currency and liquidity risk related to trade and other payables is disclosed in note 20.
127
GovernanceFinancial statementsShareholder informationStrategic report Notes continued
19. Share capital and reserves
Share capital
Allotted, called-up and fully paid 72,788,543 ordinary shares of 20p each
2017
£’000
14,558
2016
£’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 in other
comprehensive income and accumulated in equity on account of them being classified as hedging instruments.
Movements during the year were:
Balance at the beginning of the year
Gain on net assets of foreign currency operations
Loss 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
Cash flow hedging reserve
2017
£’000
6,448
4,848
(959)
3,889
173
10,510
2016
£’000
(2,714)
28,778
(20,369)
8,409
753
6,448
The cash flow hedging reserve, for both the Group and the Company, comprises all foreign exchange differences arising from
the valuation of forward exchange contracts which are effective hedges and mature after the year end. These are valued on a
mark-to-market basis, are accounted for in other comprehensive income and accumulated 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
Movements during the year
Deferred tax movement
Balance at the end of the year
Dividends paid
Dividends paid comprised:
2016 final dividend paid of 35.5p per share (2015: 34.0p)
Interim dividend paid of 12.5p per share (2016: 12.5p)
Total dividends paid
2017
£’000
(37,971)
8,495
(1,573)
(31,049)
2017
£’000
25,840
9,099
34,939
Restated
2016
£’000
14,785
(65,396)
12,640
(37,971)
2016
£’000
24,748
9,099
33,847
A final dividend in respect of the current financial year of £28,751,474 (2016: £25,839,932) at the rate of 39.5p net per share
(2016: 35.5p) is proposed to be paid on 25th October 2017 to shareholders on the register on 22nd September 2017.
128
Financial statementsRenishaw plc Annual report and accounts 2017 19. Share capital and reserves (continued)
Non-controlling interest
Movements during the year were:
Balance at the beginning of the year
Acquisition of remaining shareholding in Renishaw Mayfield S.A.
Share of loss for the year
Balance at the end of the year
2017
£’000
(3,162)
2,700
(128)
(590)
2016
£’000
(2,638)
−
(524)
(3,162)
The non-controlling interest represents the minority shareholdings in Renishaw Diagnostics Limited – 7.6%.
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.
Credit risk
The Group’s liquid funds are substantially held with banks with high credit ratings and the credit risk relating to these funds is therefore
limited. The Group carries a credit risk relating to non-payment of trade receivables by its customers. 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)
2017
£’000
8,122
41,751
22,784
16,343
48,507
137,507
2016
£’000
6,520
37,183
20,757
15,195
35,290
114,945
2017
£’000
11,544
745
3,117
386
3,195
18,987
2016
£’000
12,819
667
2,504
391
2,606
18,987
2017
£’000
142,493
(45,149)
(37,744)
(16,366)
8,708
51,942
2016
£’000
102,149
(34,733)
(37,823)
(17,946)
9,656
21,303
The above trade receivables, other receivables and cash are predominately held in the functional currency of the relevant entity, with
the exception of £5,324,000 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
2017
£’000
16,836
7,746
5,577
30,159
2016
£’000
16,033
5,345
6,998
28,376
129
GovernanceFinancial statementsShareholder informationStrategic report Notes continued
20. Financial instruments (continued)
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
2017
£’000
2,921
452
(258)
3,115
2016
£’000
2,964
919
(962)
2,921
The maximum exposure to credit risk is £221,286,000, comprising the Group’s trade and other receivables, cash and cash
equivalents and derivative assets.
Liquidity risk
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 £400,000.
The market value of forward exchange contracts is determined by reference to market data.
The contractual maturities of financial liabilities at the year end were:
Contractual cash flows
Year ended 30th June 2017
Trade payables
Other payables
Forward exchange contracts
Year ended 30th June 2016
Trade payables
Overdraft
Other payables
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
Carrying amount
£’000
19,544
33,972
56,732
110,248
Carrying amount
£’000
22,379
9,975
18,345
70,639
121,338
Up to 1 year
£’000
19,544
33,972
25,261
78,777
Up to 1 year
£’000
22,379
9,975
18,345
19,987
70,686
1–2 years
£’000
–
–
22,114
22,114
1–2 years
£’000
–
–
–
22,801
22,801
2017
£’000
907
6,062
6,969
2–5 years
£’000
–
–
9,357
9,357
2–5 years
£’000
–
–
–
27,851
27,851
2016
£’000
76
–
76
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.
130
Financial statementsRenishaw plc Annual report and accounts 2017 20. Financial instruments (continued)
The following are the exchange rates which have been applicable during the financial year.
Currency
US Dollar
Euro
Japanese Yen
Average US Dollar forward contract rates
Average Euro forward contract rates
Average Japanese Yen forward contract rates
2017
Year end
exchange
rate
1.30
1.14
146
Average
exchange
rate
1.27
1.16
139
1.50
1.16
151
2016
Year end
exchange
rate
1.34
1.20
137
Average
exchange
rate
1.47
1.33
171
1.58
1.23
125
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 £43,040,000 (2016: loss £56,460,000).
The nominal amounts of foreign currencies relating to these forward contracts are, in Sterling terms:
US Dollar
Euro
Japanese Yen
2017
£’000
394,858
136,903
89,782
2016
£’000
354,416
132,013
81,581
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.
For the Group’s foreign currency denominated monetary assets and liabilities at the balance sheet date, if Sterling appreciated by 5%
against the US Dollar, Euro and Japanese Yen, this would increase profit before taxation and other equity by the following amounts:
US Dollar
Euro
Japanese Yen
Profit
£’000
5,415
3,181
494
Other equity
£’000
5,646
948
1,809
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
74,532
59,323
24,042
Currency
borrowing
£’000
49,975
42,880
19,998
Base borrowing
interest rate
%
0%
0%
1.25%
The currency borrowings are short-term, with floating interest rates. For the net assets of the overseas subsidiaries not hedged, a 5%
change in exchange rates will affect reserves by approximately £6,100,000.
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.
131
GovernanceFinancial statementsShareholder informationStrategic report Notes continued
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
2017
£’000
3,375
4,994
8,369
2017
£’000
3,456
2016
£’000
3,165
6,239
9,404
2016
£’000
2,651
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
2017
£’000
6,812
2016
£’000
17,783
23. Related parties
Associates, joint ventures 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 (2016: £nil).
2017
£’000
852
12,450
310
220
294
4,966
2016
£’000
640
8,573
310
264
411
4,366
24. Alternative performance measures
Alternative performance measures are - Revenue at constant exchange rates, Adjusted profit before tax, Adjusted earnings per share
and Adjusted operating profit.
Revenue at constant exchange rates is defined as revenue recalculated using the same rates as were applicable to the previous year
and excluding forward contract gains and losses.
Revenue at constant exchange rates
Statutory revenue as reported
Adjustment for exchange rate movements and forward contract gains and losses
Revenue at constant exchange rates
2017
£’000
536,807
(51,978)
484,829
2016
£’000
427,224
(2,614)
424,610
Adjusted profit before tax, Adjusted earnings per share and Adjusted operating profit - These measures are defined as the profit
before tax, earnings per share and operating profit after excluding gains and losses in fair value from the forward currency contracts
which did not qualify for hedge accounting.
The losses from fair value of financial instruments not effective for cash flow hedging have been excluded from statutory profit before
tax, statutory earnings per share and statutory operating profit in arriving at adjusted profit before tax, adjusted earnings per share and
adjusted operating profit to reflect the Board’s intent that the instruments would provide effective hedges.
The Board consider these alternative performance measures to be more relevant and reliable in evaluating the Group’s performance.
132
Financial statementsRenishaw plc Annual report and accounts 2017 24. Alternative performance measures (continued)
The amounts shown below as reported in revenue represent the amount by which revenue would change had all the derivatives
qualified as eligible for hedge accounting.
Adjusted profit before tax:
Statutory profit before tax
Fair value gains and losses on financial instruments not eligible for hedge accounting:
- reported in revenue
- reported in losses from the fair value of financial instruments
Adjusted profit before tax
Adjusted earnings per share:
Statutory earnings per share
Fair value gains and losses on financial instruments not eligible for hedge accounting:
- reported in revenue
- reported in losses from the fair value of financial instruments
Adjusted earnings per share
Adjusted operating profit:
Statutory operating profit
Fair value gains and losses on financial instruments not eligible for hedge accounting:
- reported in revenue
- reported in losses from the fair value of financial instruments
Adjusted operating profit
Adjustments to the segmental operating profit:
Metrology
Operating profit before loss from fair value of financial instruments
Fair value gains and losses on financial instruments not eligible for hedge accounting:
- reported in revenue
Adjusted metrology operating profit
Healthcare
Operating loss before loss from fair value of financial instruments
Fair value gains and losses on financial instruments not eligible for hedge accounting:
- reported in revenue
Adjusted healthcare operating loss
25. Restatement of previous year
The previous year’s results have been restated for the following:
2017
£’000
117,101
(11,623)
3,601
109,079
2017
pence
141.3
(12.9)
4.0
132.4
2017
£’000
116,755
(11,623)
3,601
108,733
2017
£’000
126,830
(10,921)
115,909
2017
£’000
(6,474)
(702)
(7,176)
2016
£’000
61,703
2,336
23,436
87,475
2016
pence
71.8
2.6
26.0
100.4
2016
£’000
61,180
2,336
23,436
86,952
2016
£’000
87,717
2,293
90,010
2016
£’000
(3,101)
43
(3,058)
Certain foreign currency forward contracts used as hedging instruments did not qualify for hedge accounting as they did not
meet the hedge effectiveness criteria set out in the International Accounting Standard IAS39 ‘Financial Instruments: Recognition
and Measurement. To ensure technical compliance with this standard it has been deemed necessary to restate the 2016
financial statements resulting in a £25.8m reduction to the profit before tax for that year and a corresponding increase in other
comprehensive income.
In October 2016, the Board decided to discontinue operations at Renishaw Diagnostics Limited (RDL), resulting in the closure of the
business. The RDL business has been accounted for as a discontinued activity, with comparative figures for the previous year being
restated accordingly. In June 2017, after an extensive review of the spatial measurements business, the Board decided to discontinue
this line of business. This business has also been accounted for as a discontinued activity, with comparative figures for the previous
year being restated accordingly.
The R&D tax credit, previously accounted for within the Income tax expense line has been reclassified to be part of cost of sales,
thereby showing it as part of the profit before tax.
133
GovernanceFinancial statementsShareholder informationStrategic report Notes continued
25. Restatement of previous year (continued)
The previous year has been restated for the following:
Consolidated income statement
Revenue
Cost of sales
Gross profit
Distribution costs
Administration costs
Loss from the fair value of financial instruments
Operating profit
Finance income and expenses
Share of profits of associates and joint ventures
Profit before tax
Income tax expense
Profit for the year from continuing operations
Loss for the year from continuing operations
Profit for the year
Earnings per share on continuing activities (pence)
Previously
reported
£’000
Discontinued
activities
£’000
R&D
tax credit
£’000
Forward
contracts
£’000
Restated
total
£’000
436,598
(218,308)
218,290
(97,808)
(40,969)
−
79,513
(928)
1,451
80,036
(11,465)
68,571
−
68,571
94.9
(7,038)
7,323
285
3,965
769
−
5,019
−
−
5,019
(995)
4,024
(4,024)
−
5.6
−
2,420
2,420
−
−
−
2,420
−
−
2,420
(2,420)
−
−
−
−
(2,336)
−
(2,336)
−
−
(23,436)
(25,772)
−
−
(25,772)
4,897
(20,875)
−
(20,875)
(28.7)
427,224
(208,565)
218,659
(93,843)
(40,200)
(23,436)
61,180
(928)
1,451
61,703
(9,983)
51,720
(4,024)
47,696
71.8
Consolidated statement of comprehensive income and expense - restated lines
Profit for the year
Effective portion of changes in fair value of cash flow hedges
Tax on effective portion of changes in fair value of cash flow
hedges
68,571
(65,396)
12,640
There are no changes to the total comprehensive income and expense.
Consolidated statement of cash flow - restated lines
Profit for the year
Losses in the fair value of financial instruments
Tax expense
Income taxes paid
There are no changes to the total cash flow.
68,571
−
11,465
(19,463)
Balance sheet
The changes to reserves were:
Balance at 1st July 2015 as reported
Restatement of opening cash flow hedging reserve (a)
Profit for the year as reported
Remeasurement of defined benefit pension liability as reported
Changes in the fair value of financial instruments as reported
Adjustment to the fair value of financial instruments (b)
Dividends paid as reported
Restated balance at 30th June 2016
Balance at 30th June 2016 as reported
Adjustments (a) and (b) above
Restated balances at 30th June 2016
134
−
−
−
−
−
−
−
−
−
−
(20,875)
25,772
47,696
(91,168)
(4,897)
17,537
−
−
2,420
(2,420)
(20,875)
25,772
(4,897)
−
47,696
25,772
8,988
(21,883)
Currency
hedging
reserve
£’000
17,171
(2,386)
−
−
(73,631)
20,875
−
(37,971)
(56,460)
18,489
(37,971)
Retained
earnings
£’000
402,559
2,386
69,095
(17,388)
−
(20,875)
(33,847)
401,930
420,419
(18,489)
401,930
Financial statementsRenishaw plc Annual report and accounts 2017 Financial statements
Company balance sheet
at 30th June 2017
Assets
Property, plant and equipment
Intangible assets
Investments in subsidiaries
Investments in associates and joint ventures
Long-term loans to associates and joint ventures
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
Total non-current liabilities
Total assets less total liabilities
Equity
Share capital
Share premium
Cash flow hedging reserve
Retained earnings
Total equity
notes
C.27
C.28
C.29
C.30
C.31
13
C.32
C.33
13
14
C.34
13
C.35
C.36
C.31
13
C.37
19
2017
£’000
136,082
39,487
294,357
1,468
3,080
20,905
3,546
498,925
51,706
171,395
1,817
6,091
–
12,850
23,273
267,132
11,963
–
–
2,390
25,261
137,003
176,617
90,515
62,861
12,109
31,471
106,441
Restated*
2016
£’000
137,677
46,786
304,353
1,468
–
25,102
76
515,462
60,051
146,994
–
8,053
859
15,279
1,921
233,157
16,955
10,735
762
1,787
19,987
81,402
131,628
101,529
62,121
12,051
50,652
124,824
482,999
492,167
14,558
42
(31,049)
499,448
482,999
14,558
42
(37,971)
515,538
492,167
*Certain amounts shown here do not correspond to the 2016 financial statements and reflect adjustments detailed in notes C.26 and C.40.
The Company reported a profit for the financial year ended 30th June 2017 of £22,165,000 (2016: loss £12,259,000).
These financial statements were approved by the Board of directors on 27th July 2017 and were signed on its behalf by:
Sir David McMurtry
Directors
A C G Roberts
135
GovernanceFinancial statementsShareholder informationStrategic report Company statement of changes in equity
for the year ended 30th June 2017
Year ended 30th June 2016 (Restated)
Balance at 1st July 2015 as reported
Restatement
Balance at 1st July 2015 restated
Loss 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 2016
Year ended 30th June 2017
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
–
14,558
Share
premium
£’000
42
–
42
Cash flow
hedging
reserve
£’000
17,171
(2,386)
14,785
Retained
earnings
£’000
573,212
2,386
575,598
Total
£’000
604,983
–
604,983
–
–
–
–
–
–
–
–
–
–
–
(12,259)
(12,259)
–
(52,756)
(52,756)
(13,954)
–
(13,954)
(13,954)
(52,756)
(66,710)
(52,756)
(26,213)
(78,969)
–
14,558
–
42
–
(33,847)
(37,971) 515,538
(33,847)
492,167
–
–
–
–
–
–
–
–
–
–
–
22,165
22,165
–
6,922
6,922
(3,316)
–
(3,316)
(3,316)
6,922
3,606
6,922
18,849
25,771
Dividends paid
Balance at 30th June 2017
14,558
42
(34,939)
(31,049) 499,448
(34,939)
482,999
136
Financial statementsRenishaw plc Annual report and accounts 2017 Financial statements
Notes to the Company financial statements
C.26. 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). 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.
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 IFRSs.
– Disclosures in respect of the compensation of key management personnel.
As the consolidated financial statements of the Company 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 Company identified a number of prior year adjustments during the year, resulting in a restatement of the comparative year in the
2017 financial statements, as detailed in note C.40.
The financial statements have been prepared on the historical cost basis, except for the revaluation of financial instruments.
Historical cost is 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.
137
GovernanceFinancial statementsShareholder informationStrategic report Notes to the Company financial statements continued
C.26. 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 probable 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.
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 are installed by the Company 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 a period of at least 12 months from the date of approval of the financial statements. Accordingly,
they continue to adopt the going concern basis in preparing the Annual report and accounts.
138
Financial statementsRenishaw plc Annual report and accounts 2017 C.27. Property, plant and equipment
Year ended 30th June 2017
Cost
At 1st July 2016
Additions
Transfers
Disposals
At 30th June 2017
Depreciation
At 1st July 2016
Charge for the year
Released on disposals
At 30th June 2017
Net book value
At 30th June 2017
At 30th June 2016
Freehold
land and
buildings
£’000
82,177
107
4,622
−
86,906
13,722
1,520
-
15,242
71,664
68,455
Plant and
equipment
£’000
148,679
7,256
5,524
(1,321)
160,138
87,482
13,099
(1,086)
99,495
60,643
61,197
Motor
vehicles
£’000
Assets in the
course of
construction
£’000
Total
£’000
241,634
13,964
−
(1,750)
253,848
103,957
15,312
(1,503)
117,766
6,346
6,055
(10,146)
−
2,255
−
−
−
−
2,255
6,346
136,082
137,677
4,432
546
−
(429)
4,549
2,753
693
(417)
3,029
1,520
1,679
At 30th June 2017, properties with a net book value of £66,606,000 (2016: £66,485,000) were subject to a fixed charge to secure
the UK defined benefit pension scheme liabilities. See note 14 for additional information.
Additions to assets in the course of construction comprise:
Freehold land and buildings
Plant and equipment
C.28. Intangible assets
Year ended 30th June 2017
Cost
At 1st July 2016
Additions
At 30th June 2017
Depreciation
At 1st July 2016
Charge for the year
At 30th June 2017
Net book value
At 30th June 2017
At 30th June 2016
2017
£’000
2,117
3,938
6,055
2016
£’000
4,398
10,305
14,703
Internally
generated
development
costs
£’000
Software
licences and
intellectual
property
£’000
101,463
15,886
117,349
67,682
13,645
81,327
36,022
33,781
16,920
743
17,663
13,220
978
14,198
3,465
3,700
Goodwill
£’000
9,305
−
9,305
−
9,305
9,305
−
9,305
Total
£’000
127,688
16,629
144,317
80,902
23,928
104,830
39,487
46,786
139
GovernanceFinancial statementsShareholder informationStrategic report Notes to the Company financial statements continued
C.29. Investments in subsidiaries
Balance at the beginning of the year
Impairment
Balance at the end of the year
Details of the Company’s subsidiaries are given in note C.41.
C.30. Investments in associates and joint ventures
Movements during the year were:
Balance at the beginning of the year
Additions
Balance at the end of the year
Details of the Company’s associates are given in note C.42.
C.31. Deferred tax
Balances at the end of the year were:
Property, plant and equipment
Intangible assets
Pension scheme
Derivatives
Balance at the end of the year
Movements during the year were:
Assets
£’000
-
-
10,686
10,219
20,905
2017
Liabilities
£’000
(8,186)
(3,923)
-
-
(12,109)
Net
£’000
(8,186)
(3,923)
10,686
10,219
8,796
Assets
£’000
–
–
11,803
13,299
25,102
Balance at the beginning of the year
Movements during the year
Balance at the end of the year
C.32. 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.33. 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
140
2017
£’000
304,353
(9,996)
294,357
Restated
2016
£’000
305,282
(929)
304,353
2017
£’000
1,468
−
1,468
2016
£’000
1,184
284
1,468
2016
Liabilities
£’000
(5,633)
(6,418)
–
–
(12,051)
2017
£’000
13,051
(4,255)
8,796
2017
£’000
21,750
18,672
11,284
51,706
2017
£’000
14,186
155,103
2,106
171,395
Net
£’000
(5,633)
(6,418)
11,803
13,299
13,051
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
Financial statementsRenishaw plc Annual report and accounts 2017 C.34. 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
2017
£’000
2,390
2017
£’000
1,787
2,180
(1,577)
603
2,390
2016
£’000
1,787
2016
£’000
1,294
1,338
(845)
493
1,787
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.35. Other payables
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
2017
£’000
118,934
92
3,020
14,957
137,003
2016
£’000
77,621
209
2,736
836
81,402
C.36. Employee benefits
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 14
regarding details of charges relating to the UK defined benefit pension scheme liabilities.
The total pension cost of the Company for the year was £13,644,000 (2016: £12,915,000), of which £165,000 (2016: £184,000)
related to directors. The latest full actuarial valuation of the scheme was carried out at September 2015 and updated to 30th June
2017 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 2017
3.3%
2.7%
3.4%
2.4%
64
30th June 2016
3.2%
3.2%
3.3%
2.3%
64
30th June 2015
3.4%
4.0%
3.6%
2.6%
64
The mortality assumption adopted for 2017 is S2PMA and S2PFA tables, CMI (core) 2016 model with long-term improvements of 1%
per annum.
141
GovernanceFinancial statementsShareholder informationStrategic report Financial statements
Notes to the Company financial statements continued
C.36. Employee benefits (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
2017
£’000
% of
total
assets
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
150,193
129
150,322
(213,183)
(62,861)
10,686
100
–
100
–
–
–
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
–
–
–
The movements in the scheme were:
Year ended 30th June 2017
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 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
Assets
£’000
131,581
3,261
4,163
17,557
(6,240)
150,322
Assets
£’000
126,089
1,796
5,030
1,137
(2,471)
131,581
Liabilities
£’000
(193,702)
–
(5,606)
(20,115)
6,240
(213,183)
Liabilities
£’000
(171,949)
–
(6,421)
(17,803)
2,471
(193,702)
Total
£’000
(62,121)
3,261
(1,443)
(2,558)
–
(62,861)
Total
£’000
(45,860)
1,796
(1,391)
(16,666)
–
(62,121)
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.
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
C.37. Share capital
Allotted, called-up and fully paid 72,788,543 ordinary shares of 20p each
2017
£’000
2016
£’000
1,579
(25,021)
4,127
17,557
(800)
(2,558)
1,411
(20,623)
6,609
1,137
(5,200)
(16,666)
2017
£’000
14,558
2016
£’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.
142
Renishaw plc Annual report and accounts 2017 C.38. Related parties
During the year, related parties, these being Renishaw Diagnostics Limited and the Group’s associates and joint ventures
(see note 11), 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
2017
£’000
852
2,958
160
220
92
4,966
2016
£’000
1,049
3,963
160
264
689
16,932
All transactions were on an arm’s length basis. There were no bad debts written off during the year (2016: £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
C.40. Restatement of previous year
The previous year’s results have been restated for the following:
2017
£’000
1,129
2016
£’000
1,620
(a) Certain foreign currency forward contracts used as hedging instruments did not qualify for hedge accounting. To ensure technical
compliance with IAS 39 - ‘Financial Instruments: Recognition and Measurement’ it has been deemed necessary to restate the
2016 financial statements resulting in a £25.8m reduction to the profit before tax for that year and a corresponding increase in other
comprehensive income.
The changes to reserves were:
Balance at 1st July 2015 as reported
Restatement of opening cash flow hedging reserve
Profit for the year as reported in 2016
Adjustments to the fair value of financial instruments
Changes in fair value of financial instruments as reported in 2016
Remeasurement of defined benefit pension liability as reported in 2016
Dividends paid as reported in 2016
Restated balance at 30th June 2016
Currency hedging
reserve
£’000
Retained
reserves
£’000
17,171
(2,386)
–
20,875
(73,631)
–
–
(37,971)
573,212
2,386
8,616
(20,875)
–
(13,954)
(33,847)
515,538
(b) The opening balance at 1st July 2015 for investments in subsidiaries has been decreased by £4.7m to correct an investment in
a subsidiary which should have been an investment in that subsidiary by Renishaw International Limited instead of Renishaw plc.
The corresponding adjustment is to intercompany creditors within other payables. The opening balance has also decreased by £9.3m
reflecting goodwill on a hive up of the spatial measurement business of Measurement Devices Limited that was not recognised at the
point of hive up in 2013. There is no effect on reserves.
143
GovernanceFinancial statementsShareholder informationStrategic report Notes to the Company financial statements continued
C.41. Subsidiary undertakings
The following are the subsidiary undertakings of Renishaw plc as at 30th June 2017, all of which are wholly-owned and held by a
subsidiary undertaking, unless otherwise stated. The country in which each subsidiary has its registered/principal office is its domicile
and country of incorporation. 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. The principal activities for
all the subsidiary undertakings are those of the Company, as set out in the Other statutory and regulatory disclosures on page 94,
except as indicated below:
D Dormant company
H Holding company
T Travel agency
* 31st March year-end
^ 31st December year-end
† Ordinary-A shares
‡ Ordinary-C shares
Company
Owned by Renishaw plc
MTT Investments LimitedH
Renishaw Advanced Materials LimitedD
Renishaw International LimitedH
Renishaw Neuro Solutions LimitedD
Renishaw PT LimitedD
Renishaw Software Limited
Renishaw Transducer Systems LimitedD
Renishaw UK Sales Limited
Wotton Travel LimitedT
Measurement Devices LimitedD
Renishaw Diagnostics Limited†‡ (92.4%)
Renishaw Tehnicni Inženiring d.o.o.
Owned by Measurement Devices Limited
Thomas Engineering and Construction Limited^D
Owned by MTT Investments Limited
MTT Technologies LimitedD
Owned by MTT Technologies Limited
MTT Technologies srlD
MTT Technologies, Inc.D
144
Registered Office
New Mills, Wotton-under-Edge, Gloucestershire, GL12 8JR
United Kingdom
Renishaw plc
Research Park North, Riccarton, Edinburgh, Scotland, EH14 4AP
United Kingdom
4th Floor, Faculty of Electrical Engineering, University of Ljubljana,
Tržaška cesta 25, Ljubljana, 1000
Slovenia
5612 Hope Drive, Ottawa, Ontario, K4M 1J2
Canada
New Mills, Wotton-under-Edge, Gloucestershire, GL12 8JR
United Kingdom
Piazza Virgilio, 4, 20123 Milano
Italy
Corporation Service Company, 251 Little Falls Drive, Wilmington,
Delaware, 19808
United States
Financial statementsRenishaw plc Annual report and accounts 2017 C.41. Subsidiary undertakings (continued)
Company
Registered Office
Owned by Renishaw International Limited
itp GmbH
OOO Renishaw^
Renishaw (Austria) GmbH
Renishaw (Canada) Limited
Renishaw (Hong Kong) Limited
Renishaw (Ireland) Designated Activity Company
Renishaw (Israel) Limited
Renishaw (Korea) Limited
Renishaw AB
Renishaw AG
Renishaw ApS
Renishaw Benelux BV
Renishaw GmbH
Renishaw Healthcare, Inc.
Renishaw Hungary Kft
Renishaw Ibérica S.A.U.
Renishaw KK
Renishaw Latino Americana Ltda.^
Renishaw Metrology Systems Limited*
Renishaw México, S. de R.L. de C.V.
Rathausstraße 75-79, 66333, Völklingen
Germany
Kantemirovskaya ul., 58, Moskva, 115477
Russia
Industriestraße 9, Top 4.5, 2353, Guntramsdorf
Austria
2196 Dunwin Drive, Mississauga, Ontario, L5L 1C7
Canada
Ever Gain Plaza Tower 2, 28/F, 88 Container Port Road, Kwai Chung
Hong Kong
Swords Business Park, Mountgorry, Swords, County Dublin,
K67 FX67
Ireland
HaTnufa Street 3, Kraytek Building, PO Box 4, Yokne’am Illit,
2069204
Israel
RM#1314, Woolim e-Biz Center, 28 Digital-ro 33-gil, Guro-gu, Seoul,
South Korea
Biskop Henriks väg 2, 176 76, Järfälla
Sweden
Stachelhofstrasse 2, 8854, Siebnen, Schübelbach
Switzerland
Lyskær 3CD, Lyskær 3, 2730, Herlev
Denmark
Nikkelstraat 3, 4823 AE, Breda
Netherlands
Karl-Benz Straße 12, 72124, Pliezhausen
Germany
1001 Wesemann Drive, West Dundee, Illinois, 60118
United States
Gyár utca 2, Budaörs, 2040
Hungary
Gavà Park, Carrer de la Recerca, 7, Gavà, 08850, Barcelona
Spain
4 Chome-29-8 Yotsuya, Shinjuku-ku, Tokyo, 160-0004
Japan
Calçada dos Cravos, 141, Alphaville Comercial, Barueri,
São Paulo, 06453-053
Brazil
S.No.283, Hissa no.2, S.No.284, Hissa no.2 & 3A, Raisoni Industrial
Estate,Village Mann, Taluka Mulshi, Pune, 411057
India
Pedro Ramírez Vázquez 200-2, Parque Corporativo Ucaly,
San Pedro Garza García, Nuevo León, 66269
Mexico
145
GovernanceFinancial statementsShareholder informationStrategic report Notes to the Company financial statements continued
C.41. Subsidiary undertakings (continued)
Company
Registered Office
Renishaw Oceania Pty Limited
KPMG, Tower Two, Collins Square, 727 Collins Street, Docklands
VIC 3008
Australia
Renishaw Oy
Renishaw R&R, Inc.H
Renishaw S.A.S.
Renishaw S.p.A.
Renishaw s.r.o.
Renishaw Sp. z.o.o.
Renishaw Teknoloji Çözümleri LŞ
Renishaw, Inc.
Owned by Renishaw (Hong Kong) Limited
Renishaw (Shanghai) Management Company Limited^
Renishaw (Shanghai) Trading Company Limited^
Renishaw (Singapore) Pte Limited
Renishaw (Taiwan) Inc.
Owned by Renishaw, Inc.
WaBuCo Oy, Energiakuja 3, Helsinki, 00180
Finland
Corporation Trust Company, Corporation Trust Center,
1209 Orange Street, Wilmington, Delaware, 19801
United States
15 Rue Albert Einstein, 77420, Champs-sur-Marne
France
Via dei Prati 5, 10044 Pianezza, Torino
Italy
Olomoucká 1164/85, Brno-Černovice, Brno, 627 00
Czech Republic
ul. Osmańska 12, 02-823, Warszawa
Poland
Sedef Caddesi 3 B, Ataşehir Atatürk Mahallesi, Ataşehir
İstanbul, 34758
Turkey
1001 Wesemann Drive, West Dundee, Illinois, 60118
United States
288 Jiang Chang San Lu, Zhabei Qu, Shanghai, 20436
China
286 Jiang Chang San Lu, Zhabei Qu, Shanghai, 20436
China
988 Toa Payoh North, #06-07/08, 319002
Singapore
2F. No. 2, Jingke 7th Road, Nantun District, Taichung, 40852
Taiwan
Renishaw Advanced Consulting & Engineering, Inc.
1962 Star-Batt Drive, Rochester Hills, Michigan, 48309
United States
Owned by Renishaw R&R, Inc.
R&R Fixtures, LLC^
Owned by Renishaw (Ireland) Designated Activity
Company
Renishaw Mayfield S.A.
Owned by Renishaw Mayfield S.A.
Renishaw Mayfield SARL
1809 Industrial Drive, Grand Haven, Michigan, 49417
United States
Rue des Vignerons 1A, 1110, Morges
Switzerland
31 Rue Ampère, 69680, Chassieu
France
146
Financial statementsRenishaw plc Annual report and accounts 2017 C.42. Associated undertakings
The following are the associated undertakings of Renishaw plc at 30th June 2017. The country in which each subsidiary has its
registered/principal office is its domicile and country of incorporation. 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. The principal activities for all the associate undertakings are those of the Company, as set out in
the Other statutory and regulatory disclosures on page 94.
†Ordinary-A shares
Company
Owned by Renishaw plc
HiETA Technologies Limited† (24.9%)
Metrology Software Products Limited (50%)
Owned by Renishaw International Limited
RLS Merilna tehnika d.o.o. (50%)
Registered Office
Bristol & Bath Science Park, Dirac Crescent, Emersons Green
Bristol, BS16 7FR
United Kingdom
6J Greensfield Court, Alnwick, Northumberland, NE66 2DE
United Kingdom
Poslovna cona Žeje pri Komendi, Pod vrbami 2, Komenda
1218
Slovenia
147
GovernanceFinancial statementsShareholder informationStrategic report 10 year financial record
Results
note
2017
£’000
2016
£’000
2015
£’000
note
2014
£’000
note
2013
£’000
2012
£’000
note
2011
£’000
note
2010
£’000
note
2009
£’000
note
2008
£’000
Overseas revenue
509,212 404,472 469,221 331,682 326,213 313,007 273,989 170,957 159,988 189,137
UK and Ireland revenue 27,595
22,752
25,499
23,816
20,668
18,885
14,761
10,650
11,259
12,020
Total revenue
536,807 427,224 494,720 355,498 346,881 331,892 288,750 181,607 171,247 201,157
Operating profit
108,733
86,952 143,924
70,388
79,071
83,188
79,286
28,095
5,991
37,335
Profit before tax
109,079
87,475 144,196
70,106
79,193
86,046
80,410
28,725
8,843
41,715
Taxation
12,819
14,880
22,850
10,720
15,046
17,008
16,345
5,745
2,105
8,309
Profit for the year
96,260
72,595 121,346
59,386
64,147
69,038
64,065
22,980
6,738
33,406
Capital employed
Share capital
Share premium
Reserves
Total equity
Statistics
Overseas revenue
as a percentage of
total revenue
Adjusted earnings
per share
2017
£’000
2016
£’000
2015
£’000
2014
£’000
2013
£’000
2012
£’000
2011
£’000
2010
£’000
2009
£’000
2008
£’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
429,214 366,785 413,918 336,163 262,119 227,799 187,118 144,021 129,162 151,725
443,814 381,385 428,518 350,763 276,719 242,399 201,718 158,621 143,762 166,325
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
94.9% 94.7% 94.8% 93.3% 94.0% 94.3% 94.9% 94.1% 93.4% 94.0%
Proposed dividend
52.0p
48.0p
46.5p
Note
132.4p
100.4p
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
7.76p
25.39p
The results and adjusted earnings per share for the years 2008 to 2011, 2013, 2014, 2016 and 2017 exclude the exceptional items. These were: 2008 – pension
curtailment credit (£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); 2014 – profit on disposal of shareholding in Delcam plc (£26.3m); and 2016 (£25.8m pre tax loss) and 2017 (£8.0m pre tax
gain) - gains and losses from financial instruments not effective for cash flow hedging. No years prior to 2016 have been adjusted for gains and/or losses from financial
instruments not effective for cash flow hedging.
148
Shareholder informationRenishaw plc Annual report and accounts 2017 Shareholder information
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:
Financial reports
The Annual report and copies
of previous financial reports
are 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
20th October 2017
Half year
31st December 2017
Half year results
January 2018
Trading update
May 2018
Final dividend
Ex-div date 21st September 2017
Record date 22nd September 2017
Payment date 25th October 2017
Interim dividend (provisional)
Ex-div date 8th March 2018
Record date 9th March 2018
Payment date 9th April 2018
Equiniti
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
Telephone: 0371 384 2030 (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 2017 AGM
will be held on Friday 20th October
2017 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.
149
GovernanceFinancial statementsShareholder informationStrategic report Shareholder information continued
• 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.
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;
Registration details and
Company Secretary
Company secretary:
Norma Tang
Registered office:
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
Ernst & Young LLP
Solicitors
Norton Rose Fulbright LLP
Burges Salmon LLP
Stockbrokers
UBS
Principal bankers
Lloyds Bank plc
Shareholder profile
Shareholdings
1 – 5,000
5,001 – 25,000
25,001 – 50,000
50,001 – 100,000
%
1.7
2.5
1.8
4.4
1
2
3
4
5
100,001 – 500,000 15.3
6 500,001 – 1,000,000
6.2
7 1,000,001 – 3,000,000 10.5
8 more than 3,000,000 57.7
Shareholdings
1 Directors
2 Individuals
3 Institutions
%
53.1
1.4
45.5
2
2
150
1 2
1 2
3
3
4
4
5
5
7
7
6
6
8
8
3
3
1
1
Shareholder informationRenishaw plc Annual report and accounts 2017 Shareholder information
Shareholder notes
151
GovernanceFinancial statementsShareholder informationStrategic report Shareholder notes continued
152
Shareholder informationRenishaw plc Annual report and accounts 2017 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