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Annual Report and Accounts 2018
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 our expanding global
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 more than 4,800 skilled and motivated
people, we are at the leading edge of
delivering innovative solutions globally.
Financial highlights
Revenue
£611.5m
(2017: £536.8m)
Adjusted* profit before tax
£145.1m
(2017: £109.1m)
Statutory profit before tax
£155.2m
(2017: £117.1m)
Dividend per share
60.0p
(2017: 52.0p)
Adjusted* earnings per share
170.5p
(2017: 132.4p)
Statutory earnings per share
181.8p
(2017: 141.3p)
* Note 24, Alternative performance measures, defines
how adjusted profit before tax and adjusted earnings
per share are calculated.
For more information visit:
www.renishaw.com
All dates within this document refer to financial years
unless stated otherwise.
Contents
Strategic report
Introduction
0
1
Financial highlights
2 Renishaw at a glance
4
Chairman’s statement
6 Chief Executive’s review
10 Our business model
12 Our strategy
15 Key performance indicators
16 Our markets
18 Performance – financial review
22 Delivering global solutions
24 Metrology
28 Healthcare
32 Risk and risk management
34 Principal risks and uncertainties
38 Corporate social responsibility
Governance
44
Directors’ corporate
governance report
46
48 Executive Board
49
Board of directors
International Sales and
Marketing Board
55 Nomination Committee report
56 Audit Committee report
60
72
Directors’ remuneration report
Other statutory and
regulatory disclosures
75 Directors’ responsibilities
76
Independent auditor’s report
Financial statements
84 Contents to the Financial statements
85 Consolidated income statement
Consolidated statement of
86
comprehensive income and expense
Consolidated balance sheet
Consolidated statement of changes
in equity
87
88
89 Consolidated statement of cash flow
90
Notes (forming part of the
financial statements)
114 Company balance sheet
115 Company statement of changes
in equity
116 Notes to the Company
financial statements
Shareholder information
126 10 year financial record
127 Shareholder information
1
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual report and accounts 2018
Renishaw at a glance
Renishaw is a global, high-precision metrology and healthcare technology
group. We market our products through our subsidiaries in 36 countries
and 80 locations.
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. We are a world leader in the field of additive
manufacturing (also referred to as metal 3D printing) and
the only UK business that designs and makes industrial
machines which ‘print’ parts from metal powder.
Where we operate
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.
UK and Ireland
17%
Continental Europe
6%
94%
Locations
24
Metrology revenue
£144.4m
Healthcare revenue
£9.8m
Other regions
Locations
7
Metrology revenue
£16.8m
Healthcare revenue
£2.6m
13%
87%
83%
Locations
14
Metrology revenue
£25.5m
Healthcare revenue
£5.0m
Far East, including
Australasia
4%
96%
Locations
26
Metrology revenue
£269.5m
Healthcare revenue
£11.3m
North, South and
Central America
6%
94%
Locations
9
Metrology revenue
£119.6m
Healthcare revenue
£7.0m
2
Strategic reportRenishaw plc Annual report and accounts 2018
Our core markets
Aerospace
• New aircraft production
Automotive
• Continuing investment
to meet growing
global demand for
civil air transport
in manufacturing
capacity to meet growing
global demand
• New fuel-efficient
• Improved fuel efficiency
engines with complex
parts requiring
faster measurement
• Improvements to fuel
efficiency by minimising
airframe weight.
requires tighter tolerances
on powertrain components
• Cost efficiencies and
automated processes
required throughout the
supply chain.
Consumer products
• Ever shorter product life
cycles require flexible
manufacturing systems
• New generations of
electronic devices
demand precision
manufacturing systems
for form and function.
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.
Agriculture
• Increasing global demand
for food products from
developing nations
Construction
• Major infrastructure
projects driving heavy
equipment sales
Healthcare
• Neurological disorders
require highly precise
surgical therapies
• Increasing global demand
• Skills shortages requiring
• Growing demand for
for biofuels
• Greater investment in
machinery for intensive
farming capabilities and
Smart Farming.
more automation in
equipment manufacturers.
cosmetic dentistry with
superior aesthetics
• Growing demand for
patient-specific implants.
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.
2018 in numbers
Revenue
£611.5m
Adjusted* profit before tax
£145.1m
* Note 24, Alternative performance measures,
defines how adjusted profit before tax is calculated.
Statutory profit before tax
£155.2m
Total dividend for the year
60.0p
Number of employees
at 30th June 2018
4,862
Patents – continual innovation
in new technologies
1,800+
3
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual report and accounts 2018 Chairman’s statement
The Group is again reporting a very
strong year with record revenue of
£611.5m (2017: £536.8m) and record
adjusted profit before tax of £145.1m
(2017: £109.1m), an increase of 33%.
On a statutory basis, profit before tax
rose by 33% to £155.2m.
Introduction
I am pleased to report our 2018
annual results. We achieved a record
turnover for the second successive
year of £611.5m (2017: £536.8m)
with revenue growth of 18% at
constant exchange rates. We are
also reporting a record adjusted*
profit before tax of £145.1m
(2017: £109.1m), an increase of 33%.
Our total shareholder return (TSR)
during the year was 48%, ranking
Renishaw 18th in the FTSE 250.
During the year, I took the decision to hand over my Chief
Executive responsibilities. The Board and I were delighted to
appoint Will Lee as Chief Executive from 1st February 2018.
Will has demonstrated significant leadership capabilities
in his time at Renishaw having joined in 1996 and having
been appointed to the Board as Sales and Marketing
Director in 2016. We have confidence that Will can inspire
the next generation to build on Renishaw’s heritage.
The Board has prepared and agreed written statements
of the key responsibilities of the Chief Executive and the
Executive Chairman and they are available on our website
at www.renishaw.com/corporategovernance.
Other Board changes
Kath Durrant is stepping down from the Board with effect
from 31st July 2018. Kath, who was appointed to the Board
in 2015 and is Chair of the Remuneration Committee,
has made a considerable contribution to the Board and
Renishaw and I would like to thank her and wish her well for
the future with her senior executive role with Dublin based
CRH plc.
We are pleased to announce the appointment of Catherine
Glickman as an independent non-executive director with
effect from 1st August 2018. Catherine will be a member
of the Audit and Nomination Committees and Chair of the
Remuneration Committee. She is an independent non-
executive director and chair of the remuneration committee
at Marston’s plc. She is also a non-executive director at
TheWorks.co.uk plc where she is chair of its remuneration
committee and a member of its audit and nomination
committees. Catherine brings extensive experience with her
strong HR background, having previously been Group HR
Director at Genus plc and Tesco plc, and will be a valuable
addition to the Company’s resources at Board level and
particularly as chair of the Remuneration Committee.
Sir David McMurtry, Executive Chairman
4
Strategic reportRenishaw plc Annual report and accounts 2018 In February 2018, we further strengthened our Executive
Board with the appointment of Gareth Hankins, Director,
Group Manufacturing Services Division, and Mark Moloney,
Director and General Manager, Renishaw (Ireland) DAC.
Both have over thirty years’ experience with Renishaw
focused on our significant investments in manufacturing
processes to support increased volumes and developing
capabilities for specific product lines.
Innovation
Throughout Renishaw’s history, innovation has been
at the heart of our business, from the generation of
new technologies to new manufacturing processes.
As announced in January, having stepped down as
Chief Executive, I will now focus on Group innovation
and product strategy, supporting our engineering teams.
During the year, we continued to invest in developing future
technologies, with total engineering costs of £83.6m (before
net capitalised development costs and the R&D tax credit),
amounting to 14% of total revenue.
Employees, diversity and corporate
governance
On behalf of the Board, I would like to thank all our
employees for their professionalism and dedication during
the year.
The Board is committed to the highest standards of
corporate governance to protect our business and its
long-term success. We note the newly published Corporate
Governance Code 2018 and will consider how to address
the changes that it has introduced in the coming year.
Further details are provided in the Directors’ corporate
governance report on pages 44 to 54. This culture is
embedded in our Group Business Code and other policies.
We are also focused on gender diversity at all levels and
published our Gender Pay Gap report on the Group’s
website (see page 39 for further details). We recognise this
industry still has much work to do in this area and we will
continue to build upon our education outreach programmes.
Investor communications
Our fifth investor day was held on 10th May 2018, for
existing and potential investors. This event included
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.
Dividend
A final dividend of 46.0p net per share will be paid on
23rd October 2018, to shareholders on the register on
21st September 2018, giving a total dividend of 60.0p for
the year, an increase of 15.0% over last year’s 52.0p.
RenAM 500Q
A key focus for innovation is additive manufacturing (AM)
where in recent years we have filed the highest number
of patent applications. During the year we launched
the RenAM 500Q four laser system, which significantly
improves the productivity of the most commonly used
machine platform size.
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 2018 and, whilst noting ongoing uncertainty
surrounding Brexit and currency exchange rate volatility,
your directors remain confident in the long-term prospects
for the Group due to our innovative product base, extensive
global sales and marketing presence and relevance to
high-value manufacturing. At this early stage in the year,
we anticipate growth in both revenue and profit in the
current financial year.
Sir David McMurtry
Executive Chairman
26th July 2018
* Note 24, Alternative performance measures, defines how adjusted profit before
tax, adjusted earnings per share, adjusted operating profit and revenue at constant
exchange rates are calculated.
5
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual report and accounts 2018 Chief Executive’s review
Under Sir David’s leadership
Renishaw has thrived. My role now
is to build on this heritage and
inspire the next generation to meet
the opportunities and challenges
of the changing global business
environment.
I am delighted to have been asked
to take over as Chief Executive of
Renishaw and lead the Company
into its next chapter.
Having joined the Company 22 years ago as a graduate,
I have had the opportunity to experience a range of R&D,
commercial and management roles within the organisation.
I have also been fortunate to work closely with Sir David
for many years, most recently in my role as Group Sales
and Marketing Director. I look forward to continuing to work
closely together. Under Sir David’s leadership Renishaw has
thrived. My role is to build on this heritage and inspire the
next generation to meet the opportunities and challenges
of the changing global business environment.
Performance overview
As Sir David has already outlined (see page 4), this is a
record year for turnover and adjusted operating profit for
the Group. Having discontinued the activities of Renishaw
Diagnostics Limited and the spatial measurement business
in 2017, this year we have focused on developing the
product range and customer solutions within the metrology
and healthcare segments.
Revenue
We achieved record revenue for the year ended 30th June
2018 of £611.5m, compared with £536.8m for last year,
an increase of 14%. There was revenue growth of 18% at
constant exchange rates. The geographical analysis of
revenue is as follows:
Far East, including
Australasia
Continental Europe
North, South and
Central America
UK and Ireland
Other regions
2018
£m
2017
£m
Change
%
Constant
fx change
%
280.8
248.9
+13
+19
154.2
126.6
129.9
113.6
30.5
19.4
27.6
16.8
+19
+11
+11
+15
+14
+17
+19
+11
+16
+18
Total Group revenue
611.5
536.8
Will Lee, Chief Executive
6
Strategic reportRenishaw plc Annual report and accounts 2018 Profit and earnings per share
The Group’s adjusted profit before tax for the year was
£145.1m, an increase of 33% compared with £109.1m last
year. Adjusted* earnings per share on continuing activities
was 170.5p compared with 132.4p last year.
Statutory profit before tax for the year was £155.2m
compared with £117.1m last year. Statutory earnings per
share on continuing activities was 181.8p compared with
141.3p last year.
This year’s tax charge on continuing operations amounts
to £22.9m (2017: £14.3m) representing a tax rate of 14.7%
(2017: 12.2%). The 2017 tax charge benefited from a
reduction in the UK deferred tax rate to 17% from 2020
and a prior year credit of £3.0m.
Revenue £m
£611.5m
+14%
Dividend per share pence
5
.
1
1
8 6
.
6
3
5
60.0p
+15%
7
.
4
9
4
2
.
7
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4
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5
5
3
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.
0
6
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8
4
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6
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14
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14
15 16 17
18
Adjusted* profit before tax £m
Adjusted* earnings per share pence
£145.1m
+33%
2
.
4
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1
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5
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170.5p
+29%
5
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14
15 16 17
18
14
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16
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18
Statutory profit before tax £m
Statutory earnings per share pence
£155.2m
+33%
2
.
5
5
1
1
.
7
1
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181.8p
+29%
2
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7
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual report and accounts 2018 Chief Executive’s review continued
Healthcare
Revenue from our healthcare business for the year was
£35.7m, an increase of 7% over the £33.4m last year.
We experienced growth in all our product lines.
There was an adjusted* operating profit of £0.3m, compared
with a loss of £7.2m last year. We restructured the
neurological and medical dental businesses during the last
year and are delighted to have moved this business sector
into profit.
Healthcare also saw continued investment in R&D, with total
engineering costs in this business segment of £6.5m (before
net capitalised development costs and the R&D tax credit)
compared with £9.2m in 2017.
During the year the USA’s Food and Drug Administration
(FDA) cleared the combined use of the neuromate®
stereotactic robot with neuroinspire™ planning software.
In Sweden and Finland, the first patients in a new clinical
study were implanted with a novel drug delivery system,
developed by Renishaw. This is a joint clinical study with
Herantis Pharma to investigate the treatment of Parkinson’s
disease using Cerebral Dopamine Neurotrophic Factor
(CDNF). The medical dental product line has experienced
growth resulting from a continued focus on sales of additive
manufacturing technologies into the healthcare market.
Strategy and markets
Our strategy is fundamentally based on long-term
investments in patented and innovative products and
processes, high-quality manufacturing, and the provision of
excellent local support to our customers in all our markets
around the globe. This strategy is consistent across all
the product lines and market sectors in which we operate
(for more information see page 12).
Renishaw has moved in recent years from primarily being
a supplier of products to capital equipment manufacturers,
to becoming much more focused on understanding and
solving our global clients’ problems and delivering a full
solution directly to end-users. This is helping to build
brand loyalty and opening-up new revenue opportunities
(see pages 16 and 17 for more information).
At the same time, we are seeing external market growth
drivers – including global skills shortages, rising energy
costs, a focus on reducing emissions and waste, population
growth and rising life expectancy – that are creating positive
opportunities for our business.
We are increasingly spreading risk through the
diversification of our applications for product lines,
our customer base and our routes to market.
Metrology
Revenue from our metrology business for the year was
£575.8m, an increase of 14% compared with £503.4m last
year. We have experienced revenue growth in all product
lines and territories. The geographical analysis of revenue is
set out below.
Far East, including
Australasia
Continental Europe
North, South and
Central America
UK and Ireland
Other regions
2018
£m
2017
£m
269.5
237.9
Change
%
+13
144.4
119.7
25.5
16.7
121.5
106.9
23.2
13.9
+19
+12
+10
+21
+14
Total metrology revenue
575.8
503.4
There was strong growth in our measurement and
automation, co-ordinate measuring machine, machine tool
and additive manufacturing product lines.
Adjusted* operating profit for our metrology business was
£142.8m (2017: £115.9m).
We have continued to invest in research and development
(R&D), with total engineering costs in this business segment
of £77.1m (before net capitalised development costs and
the R&D tax credit) compared with £68.8m in 2017.
A number of new products were launched during the year.
The additive manufacturing product line introduced the
RenAM 500Q four laser additive manufacturing system,
InfiniAM Spectral software for AM process monitoring
and InfiniAM Central software for remote monitoring
of AM builds. The RenAM 500Q significantly improves
the productivity of the most commonly used machine
platform size.
The machine tool product line launched an enhanced
version of the NC4 non-contact tool setting system, the
MP250 high-accuracy probe for grinding machines and
SupaScan v3 with SPRINT scanning technology, which
gives users a surface condition monitoring capability. A new
larger version of the EquatorTM gauging system, the Equator
500, was launched by our measurement and automation
product line.
The encoder product line launched the QUANTiCTM super-
compact, digital all-in-one incremental open optical encoder
and the RESOLUTETM FS (functional safety) encoder.
8
Strategic reportRenishaw plc Annual report and accounts 2018 Our principal markets
Aerospace
Agriculture
Automotive
Construction
Consumer
products
Healthcare
Power
generation
Resource
exploration
Engineering opportunities for corporate
social responsibility
As a socially responsible business, we recognise the
importance of operating in a way that delivers long-term
sustainable value for all stakeholders. This year we have:
increased investment in developing the skills of our
employees; assisted in supporting local organisations
through charitable donations; reached more than 8,000
children with our education outreach programmes and
donated over 13,000 hours of paid time to educational
and other local organisations; recruited a record number
of graduates and apprentices on our training schemes;
reduced our CO2 emissions by 24%; and reduced our
accident frequency rate, all of which has been delivered
whilst achieving strong organic growth. We have also
introduced a new Key Performance Indicator (KPI) for
greenhouse gases (GHG). Further information on our KPIs
and GHG performance can be found on pages 15, 42
and 43.
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 R&D activities.
At the end of the year Renishaw Mexico moved to a
new purpose-built facility in the city of Apodaca, which is
home to the Mexican manufacturing operations of many
international companies.
Working capital
Group inventory increased from £87.7m at the start of the
year to £110.6m reflecting increased trading levels and
our expanded additive manufacturing product range.
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. Trade debtors increased from
£137.5m to £154.6m, with debtor days outstanding at the
end of the current year at 69 days (2017: 73 days).
Net cash balances at 30th June 2018 were £103.8m,
compared with £51.9m at 30th June 2017. Additionally,
there is an escrow account of £10.4m (2017: £12.9m)
relating to the provision of security to the UK defined benefit
pension scheme.
Our people
Our workforce at the end of June 2018 was 4,862
(2017: 4,530) an increase of 7%. During the year, 122
apprentices and graduates were taken on as part of our
ongoing commitment to train and develop skilled resource
for the Group in the future. We also took on 105 new paid
industrial and summer placements in the year.
I would like to express my thanks to all employees for their
invaluable contribution to the success of the Group during
the year.
This year saw the completion of our new facility in Apodaca,
Mexico, the refurbishment of our office in Italy and the
purchase of two properties in Exeter and Edinburgh to
facilitate expansion of our UK R&D function.
Will Lee
Chief Executive
26th July 2018
Capital expenditure on property, plant and equipment for
the year was £34.9m (2017: £42.6m), of which £10.0m
(2017: £24.2m) was spent on property and £24.9m
(2017: £18.4m) on plant and equipment.
* Note 24, Alternative performance measures, defines how adjusted profit before
tax, adjusted earnings per share, adjusted operating profit and revenue at constant
exchange rates are calculated.
9
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual report and accounts 2018 Our business model
We identify customer needs and then apply innovative engineering
to deliver successful solutions.
We have a simple business model…
1. Customer needs
All areas of our
organisation seek to
work in partnership with
customers to understand
and solve their current
and anticipated real-life
problems.
We aim to provide
solutions that drive
efficiency, improve
performance and
reduce costs.
2. Innovative engineering
3. Successful solutions
Renishaw’s strategy of
investment in R&D and
engineering skills enables
us to take a longer-term
view of the viability of new
technologies.
We are actively expanding
our significant portfolio
of innovative and patented
products.
We are a highly vertically-
integrated company,
which helps us to deliver
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.
For more see pages 14 and 16 to 17
For more see pages 13 and 24 to 31
For more see pages 14 and 22 to 23
Our key performance indicators are shown on page 15.
Information on the risks associated with our business and how
we manage them is contained on pages 34 to 37.
10
Strategic reportRenishaw plc Annual report and accounts 2018 …generating value for a wide range of stakeholders
Our customers
• 27 new patent applications filed and 95 previously filed
patents granted during the year
Increase in new product
R&D spend
10%
Sales and marketing spend
£121m
• We opened three new offices in the year in Mexico,
China and Poland
• We continue to enhance customer support through
investment in training and demonstration facilities as
well as showrooms.
Our shareholders
• We have a strong balance sheet (see page 18)
• Shareholders’ funds grew by 24% in the year
• Our total assets grew by 18% in the year
• We have a progressive dividend policy and paid a total
dividend for the year of 60.0p.
Our people
• Our lost working time injuries rate during the period was
0.7% against an industry average of 1.94% per million
hours worked
• Our Group staff turnover was 8%
• 5% of employees are apprentices, graduates or
sponsored students on structured programmes.
Our suppliers
• We employ more than 4,800 people across the Group
Money invested in training
Growth in dividend
per share
15%
Total shareholder return (TSR)
over the past five years
277%
Number of people on
recognised training
programmes
£2.3m
399
• We are signatories to the Prompt Payment Code
Average payment days
• We work with nearly 3,000 suppliers across 38 countries
• More than 80% of our tier one suppliers have been
assessed for the risk of modern slavery.
46
Global communities
• £182,000 donated to more than 280 projects during
Charitable donations
the year
• Our educational outreach work is supported by over
175 STEM Ambassadors
• Across the Group we support a number of care
homes, orphanages, social organisations, hospitals,
festivals, sports clubs, schools, educational and
environmental projects
• We have engaged with more than 8,000 students
through our education outreach programmes in the 2017
calendar year.
£182k
Tier one suppliers assessed
for the risk of modern slavery
>80%
Paid hours donated within
this reporting period
13,044
11
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual report and accounts 2018 Our strategy
Our strategy focuses on the key elements
that keep our business model running.
Continual research
creating strong
market positions
with innovative
products
Supplementing
the business via
niche investments
and acquisitions
6
2
1
Efficient,
high-quality
manufacturing
3
People
5
4
Focus on
delivering
solutions
Global
customer
support
12
Strategic reportRenishaw plc Annual report and accounts 2018 Examples of what we’ve achieved over the past year:
1. People
Our team in Sweden, where a joint clinical study is
investigating Parkinson’s disease using a drug delivery
system developed by Renishaw
Some of our female STEM Ambassadors who supported
a record number of education outreach activities during
the year
• HR were restructured to support and partner with the business including an increased Training and Development
team, allowing us to have greater focus on people development
• We expanded our recruitment team and implemented a new on-boarding and induction system
• We have invested a record amount of money into training this year and have a record number of people on
recognised training programmes
• We increased our focus on attracting more women into the engineering sector including programmes for girls of
primary school age and more activities to support International Women in Engineering Day
• 140 apprentices in training during the year and we recruited 60 people for our graduate programme
• Our four full-time education outreach staff, supported by over 175 STEM Ambassadors, engaged with a record 8,000
students during calendar year 2017.
2. Continual research and innovative products
3. Efficient, high-quality manufacturing
During the year we spent £84m on R&D and engineering
to drive innovation in our product lines
A line of CNC machine tools at our Miskin facility in
South Wales
• A new easy to install encoder family for linear axes
offers exceptionally wide installation tolerances and
axis speeds of up to 24 m/s
• A newly augmented suite of on-machine apps allow
probe routines to be swiftly and simply created,
executed and reviewed, helping manufacturing
organisations to minimise cycle times and
maximise productivity
• A new larger version of the Equator gauging system,
the Equator 500, enables the gauging of larger parts.
• Although our manufacturing output has increased
by around 24% this year, through our energy
management and investment in renewable
technologies, we have achieved a 37% decrease in
GHG emissions from our manufacturing sites
• Within manufacturing, we continued to invest in
people and resources to meet the output requirements
demanded by growth in turnover and to improve our
Cost of Sales performance for improved profitability
• We have invested in increased machining functionality at
Miskin to support the additive manufacturing product line
and to manufacture large mechanical components.
13
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual report and accounts 2018 Our strategy continued
Examples of what we’ve achieved over the past year:
4. Global customer support
6. Supplementing the business via niche acquisitions
We refurbished our premises in Turin, Italy (pictured) to
provide a high-quality demonstration and training facility
for our Italian customers
• A new office was completed in the city of Apodaca,
Mexico, which will help us to better serve the growing
base of customers across multiple industrial sectors
• New facility opened in Baoshan near Shanghai,
to enable us to work more closely with Chinese
customers on their development projects
• We have launched a dedicated AM Guide information
hub on our website to educate customers about
the possibilities of additive manufacturing and its
business impact.
5. Focus on delivering solutions
We continue to invest in Detroit-based Renishaw
Advanced Consulting and Engineering, Inc., which we
acquired in 2014 to help support sales of CMM and
gauging products in the USA. During the year, we formally
opened a new 20,000 sq ft facility
• We continue to evaluate acquisitions as a means
to expand our product portfolio, quicken market
penetration and gain access to new patents,
technologies and customers.
Renishaw stand at EMO 2017, where we highlighted a
range of integrated metrology solutions
• Beijing Institute of Technology (BIT), China, has used
Renishaw’s XL-80 laser interferometer to develop a
high precision instrument capable of simultaneously
and reliably measuring all the key dimensional
parameters of a spherical lens
• The US Food and Drug Administration (FDA) has
recently cleared the use of Renishaw’s neuromate®
Gen III surgical robot with the neuroinspire™ surgical
planning software in the USA
• A Danish research institute is using a Raman
spectroscopy system, from Renishaw, to help its clients
understand and reduce the amount of microplastics in
the environment.
14
Strategic reportRenishaw plc Annual report and accounts 2018 Strategic report
Key performance indicators
The main performance measures monitored by the Board are:
Financial KPIs
Revenue £m
.
5
1
1
8 6
6
3
5
.
.
7
4
9
4
.
2
7
2
4
.
5
5
5
3
14
15
16
17
18
Total engineering costs
including R&D £m
6
.
3
4 8
.
7
7
0
.
8
7
1
.
6
6
3
.
3
6
8
.
8
6
8
.
8
2 6
.
3
6
8
.
6
5
3
.
3
5
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.
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.
Non-financial KPIs
Employee turnover %
12.0%
11.0%
10.0%
8.0%
7.7%1
5.7%
5.0%
8.0%
3.2%
We continue to train, develop
and reward our employees
so that we retain skilled and
effective teams. Our aim is to
maintain our employee turnover
rate below the UK average
for the manufacturing and
production sector.
1 Excludes discontinued operations.
2 Data not available at time
of publishing.
14
15
16
17
182
Renishaw
UK Average
Number of apprentices in training We believe we need to provide
0
4
1 1
3
1
0
2
1
4
1
5 1
0
1
14
15
16
17
18
Included in the Consolidated income statement
Gross expenditure
14
15
16
17
18
Adjusted earnings per share pence
Training
.
5
7
6
1
.
5
0
7
1
.
4
2
3
1
.
4
0
0
1
.
3
.
3
5
3
2
8
14
14
15
15
16
16
17
17
18
18
Statutory earnings per
share pence
8
.
1
8
1
.
3
1
4
1
5
.
7
6
1
.
4
8
1
1
.
8
1
7
14
15
16
17
18
Dividend per share pence
0
.
0
6
0
.
2
5
0
.
8
4
5
.
6
2 4
.
1
4
14
15
16
17
18
0
4
8
6
0
4
0
7
8
0
1
5
0
1
6
4
6
7
0
0
1
8
4
5
4
0
0
1
7
5
5
6
5
0
1
14
15
16
17
18
Health and safety
1
.
2
1
.
2
1
.
2
9
1
.
9
.
1
New
apprenticeships
New graduates
New placements
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.
8
.
0
5
.
0
3
.
0
.
4
2 0
0
.
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.
Renishaw
Industry average
14
15
16
17
18
Greenhouse gas emissions
’000 tC02e
21.7 20.9
22.4
18.3
20.9
21.7
16.6 17.0
4.4
14
3.7
15
3.8
16
3.6
17
X
X
24.8
6.5
3.9
18
Scope 3
Scope 2
Scope 1
We understand our business
activities have an impact on the
environment and are working
hard to minimise this effect.
We have reduced our GHG
emissions through investment
in on-site generation, energy
efficiency projects and the
purchasing of 49% of our
electricity from 100% certifiable
renewable generation sources.
15
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.
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, graduate roles
and student placements we offer.
Total lost working time injuries
per million 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.
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual report and accounts 2018 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.
In the past Sir David McMurtry, Executive Chairman, has
said, “We are confident that there are not many modern-day
planes, trains or automobiles in the world that have not been
touched in some way by Renishaw products.”
On the page opposite we have listed our principal markets
and the specific key drivers of growth within those markets
for our products.
There are also more generic market growth drivers that are
positive for our business:
• Global skills shortages – increased investments in
automation, robotics 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.
• Global competitiveness – increased focus on costs
demands increased speed of operation and reduced
scrap/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.
The experience gained by dealing direct with the users
of our products on a global basis and gaining a deeper
understanding of their problems is helping to inform the
development of new products and services.
Today, many of our product lines including measurement
and automation, calibration, 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 products enable customers to maximise the potential
of their capital equipment; the REVO-2 measuring system
for CMMs allows a range of inspection applications on
a single machine, including dimensional and surface
finish measurement.
16
Strategic reportRenishaw plc Annual report and accounts 2018 Aerospace
Consumer products
Aircraft are highly complex structures and key assemblies
from engines and wings to control systems, control surfaces
(e.g. flaps and rudders) and landing gear, rely on Renishaw
products for process control and post-process inspection
during their manufacture. Our products are applied
throughout the supply chain in many application areas,
including maintenance, repair and overhaul (MRO) and
in materials research, where our additive manufacturing
technologies are, for example, being used to produce
lightweight components through lattice structures and
part consolidation. Key drivers include the requirement for
41,000 new aircraft by 2036 to meet growing global demand
for civil air transport (source: 2017 Boeing Global Market
Forecast), new fuel-efficient engines with more complex
parts that require faster measurement, and the requirement
to improve fuel efficiency by minimising airframe weight.
Agriculture
The majority of key components on high-end agricultural
equipment are subject to process control using Renishaw
products, whilst our encoders can be found on satellites
assisting with Smart Farming techniques. 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.
Automotive
We operate throughout the automotive supply chain.
The majority of key components on domestic and
commercial vehicles are subject to process control using
Renishaw products. Key drivers include continuing
investment in manufacturing capacity to meet growing
global demand, improved fuel efficiency requiring ever
tighter tolerances on powertrain components, plus cost
efficiencies and automated processes required throughout
the supply chain. We are also benefiting from increasing
demand for sensors and dashboard digital displays.
Construction
From heavy earthmoving equipment to mineral analysis,
Renishaw’s products are used in a diverse range of
construction industry applications. These include the
manufacture of large high-value components such as
chassis where scrap is too costly to accept, the production
of power plants to deliver improved reliability and reduced
emissions, and materials identification of geological
samples using Raman spectroscopy. Key market drivers
include major infrastructure projects that increase the
demand for heavy equipment and skills shortages
within the sector that is requiring more automation within
equipment manufacturers.
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. Consumer products
and electronics continue to change at a rapid pace, with
ever shorter lifecycles driven by fashion and functional
requirements. Advances in technology, including more
sophisticated hardware and sleeker physical designs,
require precision manufacturing systems with multiple
process control techniques to produce the high standard
of fit and finish required for products such as mobile
phones, computers and tablets. The higher demand for flat
panel displays in consumer products, from watches and
smartphones to digital cameras and hand-held gaming
systems, has also boosted our motion control products.
Healthcare
Our technologies are being applied to an ever-increasing
number of applications within healthcare, including
brain surgery, reconstructive surgery and dentistry.
Life expectancy is increasing in both developed and
developing markets leading to an increase of neurological
disorders which require fast and precise surgical therapies
to reduce waiting times. There is also a drive for more
economical treatments, more patient-specific treatments,
more cosmetic dentistry with superior aesthetics and safer
procedures with reduced human errors.
Power generation
From fossil fuels to renewable energy, Renishaw products
are at the heart of associated manufacturing processes
and are used to control the production of key componentry
including power transmission systems, bearings, generators
and pumps. We are also helping drive renewables
development by reducing component lead times and
helping to bring new components and technology to market
faster. Key drivers include the manufacture of components
for wind turbines and solar panels, an increasing focus
on maximising the efficiency of machinery used in power
generation and increasing research into energy storage,
especially in relation to electric vehicles.
Resource exploration
Equipment for oil and gas exploration has to be
manufactured to stringent safety requirements, requiring
accurate, cost-effective and traceable processes.
Renishaw products give manufacturers this capability,
whether using our calibration systems to check and verify
the dimensional accuracy of large, high-value CNC machine
tools, or using probe systems for setting operations and
in-process verification.
The growth in the global population and increased
urbanisation is driving the long-term demand for fossil fuels
and therefore for the exploration of new sources or more
research into optimal extraction from existing sites.
17
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual report and accounts 2018 Performance – financial review
We have achieved record revenue
and Adjusted profit before tax. We
continually look to the long-term
future of the Group.
Revenue
We achieved a record turnover for the second successive
year with revenue for the year of £611.5m, compared
with £536.8m last year, a growth of 14%. We experienced
revenue growth for the year of 18% 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 £575.8m,
compared with £503.4m last year, an increase of 14%.
Revenue in our healthcare business segment increased by
7% from £33.4m last year to £35.7m.
A geographical analysis of our metrology and healthcare
businesses is shown on page 2.
2018
revenue
at actual
exchange
rates
£m
280.8
154.2
126.6
30.5
19.4
611.5
2017
revenue
at actual
exchange
rates
£m
Underlying
growth at
constant
exchange
rates %
248.9
129.9
113.6
27.6
16.8
536.8
+19
+17
+19
+11
+16
+18
Change
from
2017
%
+13
+19
+11
+11
+15
+14
Allen Roberts, Group Finance Director
Highlights
For the second successive year, we have achieved record
revenue, amounting to £611.5m. Adjusted profit before tax
of £145.1m is also a record and represents growth of 33%
compared with the prior year. Statutory profit before tax was
£155.2m. We have a strong balance sheet with total equity
growing by £104.8m to £548.6m, with net cash balances
of £103.8m (2017: £51.9m). The Board is proposing a 15%
increase in dividends for the year.
Revenue analysis by region
Far East, including Australasia
Continental Europe
North, South and Central America
UK and Ireland
Other regions
Total Group revenue
18
Strategic reportRenishaw plc Annual report and accounts 2018 Alternative performance measures
In 2017, the Board 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 are the basis by which
the Board evaluates the Group’s performance as they better
represent the underlying trading of the Group. The table
below shows the details of the adjustments between
statutory profit before tax and adjusted profit before tax.
See note 24 for further details.
Research and development
Gross expenditure on engineering costs, including
R&D on new products, was £83.6m (2017: £78.0m).
The capitalisation of development costs (net of amortisation
charges) amounted to £2.1m (2017: £2.7m). The R&D tax
credit in 2018 amounted to £4.1m compared with £6.7m
in 2017 which included enhanced claims in respect of
prior years. The net charge in the Consolidated income
statement amounted to £77.4m compared with £68.8m in
2017. The gross charge amounts to 14% of Group revenue
(2017:15%).
2018
£m
145.1
2017
£m
109.1
Between the business segments gross expenditure on
engineering costs was £77.1m (2017: £68.8m) in the
metrology segment and £6.5m (2017: £9.2m) in our
healthcare segment.
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
5.3
4.8
11.6
(3.6)
Statutory profit before tax
155.2
117.1
Profit and tax
The adjusted profit before tax amounted to £145.1m,
an increase of 33% compared with £109.1m in 2017.
Statutory profit before tax was £155.2m compared with
£117.1m in the previous year. In our metrology business,
adjusted operating profit was £142.8m, compared with
£115.9m last year. I am pleased to report an adjusted
operating profit of £0.3m in our healthcare business
compared with a loss of £7.2m last year.
The overall effective rate of tax on continuing operations
was 14.7% (2017: 12.2%). 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 19.00% (2017: 19.75%) and
a UK patent box benefit amounting to £5.7m. The 2017
tax charge benefited from a reduction in the UK deferred
tax rate to 17% from 2020 and a prior year credit of £3.0m.
Note 7 provides further analysis of the effective tax rate.
Earnings per share and dividend
Adjusted earnings per share from continuing operations is
170.5p, an increase of 29% compared with 132.4p last year.
Statutory earnings per share from continuing operations is
181.8p, compared with 141.3p last year.
In line with the Group’s progressive dividend policy, a
final dividend of 46.0p net per share (2017: 39.5p) results
in a total dividend for the year of 60.0p, an increase of
15.0% over the 52.0p in 2017. Dividend cover is 2.8 times
(2017: 2.5 times) on an adjusted basis.
New product R&D expenditure amounted to £59.1m, which
compares with £53.5m spent last year. There have been a
number of new product releases in both our metrology and
healthcare business segments as detailed in our business
sector performance reviews, and a number of new product
introductions are anticipated during the 2019 financial year.
Group headcount
Group headcount has increased from 4,530 at 30th June
2017 to 4,862 at 30th June 2018, with the average for the
year of 4,639, compared with 4,395 last year. The increase
during the year of 332 comprised additional employees of
165 in the UK and 167 overseas. The increase in the UK
included 57 apprentices and 65 graduates, and, in addition,
we are funding the further education of 186 employees in
engineering, software and commercial/business disciplines.
Labour costs, the most significant cost for the Group,
increased by 7% to £226.8m (2017: £211.6m) reflecting an
annual pay increase, the incremental cost of the employees
recruited in both 2017 and 2018 and an increase in the
employee bonus provision. Also, the directors’ bonus
increased this year from £1.7m in 2017 to £2.9m.
19
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual report and accounts 2018
Performance – financial review continued
Consolidated balance sheet
The Group’s shareholders’ funds at the end of the year
were £548.6m, compared with £443.8m at 30th June 2017.
Reserves benefited from our trading results, with a retained
profit after tax of £132.9m and were reduced by dividends
paid of £38.9m.
Additions to property, plant and equipment totalled £34.9m,
of which £10.0m was spent on property and £24.9m on
plant and machinery and IT equipment and infrastructure.
The main additions were:
• in the UK, acquisition of additional premises in Edinburgh
and Exeter;
• in Mexico, completion of our new premises in Apodaca;
• in Italy, refurbishment of our existing premises; and
• in Germany, completion of our bespoke Solutions Centre.
Capital expenditure £m
£34.9m
-18%
53.0
6
.
5
3
48.4
5
.
7
2
39.2
9
.
7
1
3
.
1
2
9
.
0
2
4
.
7
1
42.6
4
.
8
1
2
.
4
2
34.9
0
.
0
1
9
.
4
2
Plant and vehicles
Land and buildings
14
15
16
17 18
Within working capital, inventories increased to £110.6m
from £87.7m at the beginning of the year reflecting our
increased trading levels and our expanded additive
manufacturing products range amongst other strategic
inventory increases. We continue to focus on inventory
management whilst remaining committed to our policy
of holding sufficient finished goods to ensure customer
delivery performance, given our short order book. This year
we have seen finished goods and work in progress increase
by £27.2m.
Trade debtors increased from £137.5m to £154.6m
reflecting record revenue in the final quarter. Debtor days
were 69 at the end of the year, compared with 73 at the end
of last year.
Working capital £m
(excluding cash and derivatives)
£201.8m
+12%
% of revenue
8
.
1
0
2
5
.
2
8
1
8
.
0
8
1
6
.
0
3
1
1
.
0
2
1
41.8%
33.8%
33.7% 33.0%
26.4%
15
14
16
17
18
20
£m
210.0
180.0
150.0
120.0
90.0
60.0
51.9
30.0
0
h B/fd
et c
N
s
a
Net cash balances have more than doubled over the
year with balances at 30th June 2018 of £103.8m
(2017: £51.9m). 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 £10.4m (2017: £12.9m).
21.0
132.9
18.9
2.9
34.9
2.4
14.6
103.8
38.9
h C/fd
s
a
C
aid
s p
d
n
e
Divid
D
&
d R
pitalis
e
a
C
s
w
cro
m e
sfer fro
n
Tra
x
fit after ta
Pro
aid
x p
Ta
s
m
h ite
s
a
n c
o
N
d
n
e
p
pital s
a
C
s
d
e
e
c
al pro
s
o
p
Dis
Increase
Decrease
Total
Pensions
At the end of the year, the Group’s defined benefit pension
schemes, now closed for future accrual, showed a deficit
of £67.4m, compared with a deficit of £66.8m at 30th June
2017. Defined benefit pension schemes’ assets at
30th June 2018 increased to £172.8m from £170.7m at
30th June 2017, representing investment performance
during the year net of £12.9m benefit payments including
transfers. Pension fund liabilities increased from £237.5m
to £240.2m. For the UK defined benefit pension scheme,
a guide to the sensitivity of the value of the respective
liabilities is as follows:
Valuation sensitivity
Variation
UK –
discount rate
UK –
future inflation
UK – mortality
UK –
early retirement
Increase/
decrease by
0.5%
Increase/
decrease by
0.5%
Increased life
by one year
One year
earlier than
assumed
Approximate effect
on liabilities
-£20.0m/+£23.1m
+£16.4m/-£17.2m
+£7.8m
+£6.2m
Strategic reportRenishaw plc Annual report and accounts 2018 The Group uses 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.
The policy to hedge net overseas assets using foreign
currency borrowings was ended in December 2017.
See note 16 for an analysis of cash balances 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 R&D 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
26th July 2018
The current recovery plan in relation to the 2015 UK defined
benefit pension scheme deficit was agreed between the
Company and the trustees of the scheme in June 2016 and
funds to self-sufficiency over the period to 2031; the pension
fund has a charge over the cash escrow account (currently
£10.4m) and certain UK properties valued during 2015 and
2016 at £62.3m as financial security for this recovery plan
period and the Company has since made contributions to
the scheme in line with the plan. The Company, trustees
and their respective advisors concluded that the 2016
agreement was in the best interest of the scheme members.
The agreement was subject to approval by The Pensions
Regulator (TPR) and was submitted to TPR in July 2016.
TPR’s October 2017 response to the recovery plan
submission questioned whether the 2015 recovery plan
provides greater security than the 2012 recovery plan which
funded to technical provisions only but required an earlier
cash injection. Both the Company and the trustees have
held discussions with TPR to detail how each party satisfied
itself that the 2016 recovery plan was preferred and to seek
terms acceptable to all parties.
The Company and the trustees continue to engage with
TPR. In the meantime, the Company and the trustees are
complying with the terms of the current (2016) agreement.
If the 2016 agreement terminates, the parties may be
required to revert to the 2012 recovery plan. In this event
the Company would be required to make a contribution to
the scheme of approximately £45m adjusted for Company
deficit repair contributions and the potential investment
return had the contribution been invested in October 2016,
and agree a new recovery plan with the trustees.
The next triennial valuation will be undertaken at 30th
September 2018.
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.
21
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual report and accounts 2018 Delivering global solutions
Across the world, manufacturers
in a diverse range of industries rely
on our products to manufacture
highly accurate and reliable
machinery, maximise process
efficiency, significantly reduce
the time taken to produce and
inspect components, and carry
out groundbreaking research.
We consistently exceed the
specifications of customers with
Renishaw’s encoders. We try to
offer a best-in-class experience to
our customers and attribute part
of our continuing success to the
technology advancements that
companies like Renishaw offer.
William Land
Chief Technology Officer
Aerotech, USA
Howard Salt, USA
Developing encoders which
hold the key to ultra-accurate
motion control
Aerotech supplies high-precision positioning
tables, stages and systems used in a variety of
high-performance applications including industrial
robots, semiconductor equipment, medical
component laser machining and micromachining.
A large portion of its business is custom designed
motion systems requiring high precision and high
throughput. One major concern and big influence
on measurement performance is the distance
between the measuring feedback device and the
point of measurement. The compact Renishaw
RLE laser interferometer encoder allows Aerotech
to close the distance to the point of measurement,
greatly minimising measurement uncertainty on
precision machines www.renishaw.com/aerotech.
22
Strategic reportRenishaw plc Annual report and accounts 2018 Roberto Rivetti, Italy
The relationship with Renishaw
has been really good. What
we like most is the wide range
of options and the ability to
customise every component.
Luca Marchionni
Chief Technology Officer
PAL Robotics, Spain
Victor Escobar, Spain
Integrating magnetic
encoders to achieve balance
REEM-C is PAL Robotics’ full-size biped humanoid
robotics research platform which provides a
fully customisable basis for research into areas
such as navigation, machine vision, human-robot
interaction, artificial intelligence, grasping, walking
and speech recognition. The robot has fully
articulated joints capable of performing a range of
complex movements. Balance control is vital for
stable biped robot walking and outputs from RLS
magnetic encoders on each joint enable estimation
of robot posture and generation of position, speed
and acceleration references that every joint should
follow. The encoders provide a
flexible position measurement
solution and can meet
stringent space and
performance requirements
www.renishaw.com/palrobotics.
50% faster turbine
blade inspection
Checking critical dimensions of complex turbine
and aero-engine blades can be difficult and time
consuming, especially where 100% inspection
is required. After retrofitting existing CMMs with
Renishaw PH20 5-axis probe head and MODUSTM
software, inspection cycle times at Europea
Microfusioni Aerospaziali have been reduced by
up to 50% www.renishaw.com/ema.
Francesco Tivegna, China
Raman spectroscopy –
an advanced technique
for gemstone analysis
Counterfeiting has become increasingly common
as demand for gemstones has risen. It can
be exceptionally challenging to identify the
authentic gems, even for the most experienced
gemmologist. As the technologies used for
creating counterfeits increase in complexity,
so must the methods used to identify them.
For almost two decades The National Gemstone
Testing Center (NGTC), the authoritative
gemstone testing facility in China, have been
using Renishaw’s high-performance confocal
Raman microscopes to perform non-destructive
identification and characterisation of gemstones,
such as diamond and jade. The spectrometers
can certify gem authenticity and determine
whether gems are natural, synthetic or treated
www.renishaw.com/ngtc.
23
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual report and accounts 2018 Metrology – business sector
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.
The product range includes:
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.
Co-ordinate measuring machine (CMM)
products
Sensors, software and control systems for three-dimensional
CMMs, including touch-trigger and scanning probes,
automated probe changers, motorised indexing probe
heads and 5-axis measurement systems, which enable the
highly accurate measurement of manufactured components
and finished assemblies.
Machine tool probe systems
Sensors and software for computer numerically controlled
(CNC) metal cutting machine tools that allow the automation
of setting and on-machine measurement operations,
leading to more productivity from existing machines and
reductions in scrap and rework. These include laser tool
setters, contact tool setters, tool breakage detectors, touch
probes, contact scanning systems and high-accuracy
inspection probes.
Styli for probe systems
Precision styli that attach to probe sensors for CMMs,
machine tools and EquatorTM gauging systems to ensure
that accurate measurement data is acquired at the point
of contact.
Performance testing products
Calibration and testing products to determine the positioning
accuracy of a wide range of industrial and scientific
machinery to international standards, including a laser
interferometer, rotary axis calibrator, wireless telescoping
ballbar and software for data capture and analysis.
Our key markets include aerospace,
automotive, construction, consumer
products and power generation.
Aerospace
We offer expertise in controlling the manufacture
of specialist components. We specialise in
performance, MRO, safety and innovative
materials. For further information visit
www.renishaw.com/aerospace.
Automotive
We have decades of experience in helping
manufacturers improve their efficiency and
performance, bringing new components to
market faster than ever before. We specialise
in new processes, automation, efficiency and
performance. For further information visit
www.renishaw.com/automotive.
Construction
From construction and agriculture to rail
and heavy plant, we work across all the
heavy industries. For further information visit
www.renishaw.com/heavy-industry.
Consumer products
From consumer electronic devices to
high-precision components, we support
improvements in manufacturing capabilities
that cater to the demands of more
sophisticated hardware, sleeker physical
design and the requirement for ever-shorter
life cycles. For further information visit
www.renishaw.com/electronics.
Power generation
We work across the entire energy sector.
For further information visit
www.renishaw.com/energy.
24
Strategic reportRenishaw plc Annual report and accounts 2018 Gauging
The Equator gauging system enables process control by
delivering highly repeatable, thermally insensitive, versatile
and flexible 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, the
Equator gauge 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.
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.
Metrology in numbers 2018
Revenue
£575.8m
+14%
(2017: £503.4m)
Adjusted operating profit
£142.8m
+23%
(2017: £115.9m)
Percentage of Group revenue
94%
(2017: 94%)
Equator 500
The new Equator 500 gauging system enables larger parts
to be inspected on the shopfloor and for the manufacturing
process to be automatically adjusted based on the results of
inspection data.
25
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual report and accounts 2018 Metrology – performance
Performance
It was a very good year for our metrology
business with record revenue and profits,
and all lines seeing growth compared to
the previous year. There was strong growth
in our measurement and automation,
CMM, machine tool and AM product lines.
The measurement and automation product 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 demand
for the gauging of larger parts, the Equator 500 system
was launched in spring 2018, giving a working volume
of 500 mm in diameter and up to 400 mm in height and
supporting workpiece and fixturing with a total weight
limit of 100 kg. Typical automotive applications include
transmission and engine casings, conrods and differential
housings, suspension castings, valves and pumps.
There is growing interest in AM as a production technology,
where its ability to produce complex geometries and
lightweight components is proving attractive to many
industry sectors. Renishaw is being increasingly seen
as a technology leader in this field as a result of our new
hardware and software products that were launched during
the year (see Key developments).
The position encoders line and our joint venture 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 display
(FPD) 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 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 and we are also
seeing more research into humanoid robots (see page 23).
Market conditions
We continue to see a very favourable environment for many
of our metrology lines, especially the position encoders line
due to ongoing significant investments in FPD manufacture
in the Far East and the increasing use of sensors in the
automotive sector. FPDs are widely used in consumer
electronics including tablets, laptops and smartphones,
and are increasingly used within the automotive sector
especially for digital dashboard displays. Encoders are
required for manufacturing machinery throughout the FPD
production process, from glass trimming and OLED printing
to photolithography and inspection.
General market drivers for position encoders are size,
accuracy, speed and ease of use, and we continue to
benefit from a combination of the right products to meet
these demands, backed up by an excellent reputation for
customer service.
26
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. Key sectors such as aerospace, automotive
and energy require Renishaw systems to meet their need for
ever tighter production tolerances and cost controls.
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 and robotics to
offset the need for highly-skilled machine operators and
demanding user interfaces and software that are easier
to operate. Manufacturers are also faced with a relentless
drive to reduce costs, shorten lead times, meet the need
for increased complexity and closer tolerances in product
design, and supply into markets where shorter product
lifecycles 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.
Another key driver across our metrology businesses is
the need to meet ever-shorter lead times, especially in the
consumer electronics sector. Our ongoing investments in
manufacturing capacity have given us a very competitive
agile capability that allows us to quickly respond to
such demands.
A key sector for Renishaw continues to be the civil aviation
market. The Airbus and Boeing Global Market Forecasts
in 2017 saw the need for between 35,000 and 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 large rise in middle-
income families in developing markets such as China, India
and the Middle East. Renishaw products are heavily used in
the aerospace sector for high-levels of process control and
part inspection to meet stringent safety standards.
Strategy for growth
We continue to position Renishaw as a solutions provider.
Our measurement and automation, calibration, AM, 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.
We are focused on the long term and a key focus is on
developing technologies that provide patented products
and methods which support our product strategies, with
£77.1m (before net capitalised development costs and the
R&D tax credit) expenditure on R&D and engineering during
the year. The current technology focus continues to be on
products that help our customers to improve measurement
performance, increase speed of operation, increase
measurement capability and are easier to use.
Strategic reportRenishaw plc Annual report and accounts 2018 Key developments
In addition to new products already mentioned we
introduced other metrology products, most notably within
our AM line where at the formnext exhibition in November
we introduced several important products including the
RenAM 500Q system with four lasers, each of which
can address the whole bed of the machine to improve
productivity up to four times without increasing platform size;
InfiniAM Spectral process monitoring which allows real-time
analysis of laser energy input and melt-pool emissions; and
InfiniAM Central for remote monitoring of AM manufacturing
facilities, including system status and productivity levels.
A special high temperature (HT) version of the AM 400 was
also introduced that allows the build plate to be pre-heated
to reduce residual stresses during production, allowing the
processing of more challenging geometries and a wider
range of materials.
Also launched during the year was SupaScan v3 with
SPRINT scanning technology which allows surface condition
monitoring on a machine tool, an enhanced version of the
high-accuracy MP250 probe for grinding machines that
allows the probe to be configured to suit the application
requirements, and the new QUANTiCTM family of incremental
all-in-one encoders which combine interpolation and digital
signal processing inside the readhead and also offer ease
of installation with our widest ever set-up tolerances.
Outlook
Growth in the world’s middle classes, with increasing
disposable income, is 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
all our metrology product lines to help drive efficiencies,
reduce waste, increase automation and aid product
measurement traceability.
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.
These include: integrated process control solutions for
automated manufacturing processes; the development
of AM systems with faster processing capability and
improved process control for large-scale manufacturing;
miniaturised high-resolution position feedback systems
that support the manufacture of high-precision electronics;
simplified software, including apps, for machine tool and
CMM probing, calibration and gauging; and a multi-sensor
capability for CMMs.
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. Our exhibition stands
and our in-house demonstration facilities increasingly
focus on the levels of integration that we can bring to a
manufacturing environment, especially for companies
looking to bring connectivity and the intelligent use of data
within their manufacturing processes. We also utilise our
existing technologies across different product lines to speed
development times; for example, our MODUS™ metrology
software platform, initially created for CMM applications, is
also used with our Equator gauging systems where it allows
CAD-driven programming and the gauging of complex
profiles. Our optical position encoders are used on the
Z-axis of our new range of RenAM 500 AM systems and the
REVO®-2 measuring head for CMMs.
Our encoders are required
for manufacturing machinery
throughout the flat panel
display production
process, from
glass trimming and
OLED printing to
photolithography
and inspection.
Jean-Marc Meffre, Far East
27
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual report and accounts 2018 Healthcare – business sector
Our healthcare products are
designed to improve medical
research and surgical procedures.
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.
Our technologies are being applied to
an ever increasing number of applications
within healthcare, including brain surgery,
reconstructive surgery and dentistry.
Our key markets are dental, neurological
and craniomaxillofacial products as well as
Raman spectroscopy. For further information
visit www.renishaw.com/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.
The product range includes:
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 traumas.
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.
Dental scanners
3D contact scanners and non-contact optical scanners used
for digitising of dental preparations and the measurement
of implant locations for tooth-supported frameworks and
custom abutments.
Dental computer-aided design (CAD) software
Dental CAD software that allows set-up of scanning routines
and enables laboratory staff to design abutments and
structures for crowns and bridges, including powerful
anatomic design functions.
Dental structures manufacturing service
A central manufacturing service that can handle CAD
files from a wide variety of dental CAD systems to
produce structures for crowns, bridges and abutments
in cobalt chrome.
Neurosurgical planning software
Software that allows advanced planning of targets and
trajectories for stereotactic neurosurgery.
Neurosurgical implants
Implantable devices that allow surgeons to verify expected
DBS electrode position relative to targeted anatomy using
magnetic resonance imaging (MRI) for the treatment
of Parkinson’s disease, other movement disorders and
neuropathic pain.
28
Strategic reportRenishaw plc Annual report and accounts 2018 Healthcare in numbers 2018
Revenue
£35.7m
+7%
(2017: £33.4m)
Adjusted operating profit
£0.3m
(2017: loss of £7.2m)
Percentage of Group revenue
6%
(2017: 6%)
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.
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.
RA802
Our Raman instrumentation meets the high-performance
requirements of a wide range of research applications.
The RA802 pharmaceutical analyser speeds up the analysis of
tablet composition and structure to enable users to formulate
tablets more efficiently.
29
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual report and accounts 2018 Healthcare – performance
Performance
There was growth from all our healthcare
product lines (spectroscopy, neurological
and medical dental) with strong growth in
the neurosurgical product line.
The medical dental product line experienced growth from
focusing on the sale of Renishaw AM machines configured
for medical and dental applications. Through the Healthcare
Centre of Excellence at the Miskin site, it collaborates with
healthcare organisations to prove the potential for AM in
medical applications. During the year, this included the
first chest prosthesis to be manufactured and implanted
into a patient in Britain at Morriston Hospital, Wales, and
an implant for a dog that replaced hard tissue lost due to
tumour removal.
There was another 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.
The issue of pollution caused by plastics has gained
significant global coverage over the past year, including
microplastics which have been identified within the
food chain and water supplies. In Denmark, the Danish
Technological Institute (DTI) is using a Renishaw inVia
Raman spectroscopy system to help its clients understand
and reduce the amount of microplastics in the environment.
DTI uses a range of advanced features of the inVia
microscope to produce a comprehensive set of data on
the number, size, shape, and chemical composition of
the particles in waste water. It is expanding its research
to also look at microplastics below 20 µm in size, rubber
contamination from vehicle tyres in sewers and microplastic
reduction at other local waste water sources, such
as laundries.
There is an increasing use of our technology within medical
research. For example, in the UK, we have collaborated
with scientists at the John Radcliffe Hospital, Oxford to
investigate the capability of Raman spectroscopy to classify
gliomas, in terms of their genetic subtypes, using different
pathological preparations. This work was presented at the
recent Cancer Research UK Brain Tumour Conference
and showed that Raman spectroscopy has the potential to
provide a non-invasive and non-destructive tool to probe the
unique molecular vibrations of tissue samples, allowing for
rapid sample analysis to aid in clinical decision-making.
We are seeing more
neurosurgeons carrying out
stereoelectroencephalography
(SEEG) procedures with
the assistance of a
Renishaw neuromate
stereotactic robot in
the treatment
of epilepsy.
Rupert Jones, UK
During the year, the neurological product line achieved
key sales of the neuromate® stereotactic robotic systems.
The Walton Centre in Liverpool is the only NHS Trust in
the UK dedicated to neuroscience and the staff includes
many leaders in their areas of expertise. During the
year, neurosurgeons at the Centre carried out their first
stereoelectroencephalography (SEEG) procedures with
the assistance of a Renishaw neuromate stereotactic robot.
SEEG is a procedure used in the treatment of epilepsy;
multiple intracerebral electrodes are inserted into the brain
to gather data and map brain activity to identify which
region of the brain is acting as a source for the epileptic
seizures. Once the epileptogenic region has been identified
neurosurgeons can follow up with a tailored resection to
remove the problematic tissue.
Consultant neurosurgeons Prof. Paul Eldridge and Mr
Jibril Osman-Farah, commented: “Since there are multiple
trajectories to be both planned and executed it is highly
suited to a robotic system fulfilling the requirement for a
repetitive stereotyped activity. Without the robot it becomes
impractical to consider such a series of multiple electrodes
in a reasonable length of time for the procedure.”
Outside the UK, a neuromate robot was installed in the
USA at the Boston Children’s Hospital (BCH), which hosts a
National Association of Epilepsy Centers (NAEC) accredited
Level 4 Epilepsy Center. The team will integrate the robot
into their SEEG procedures and Dr. Scellig Stone, Director
of Stereotactic and Functional Neurosurgery at BCH,
commented: “The addition of the neuromate system to our
workflow promises to significantly increase the efficiency
of our stereotactic surgeries, lower the risk for human
error in targeting, and complements other neurosurgical
technologies that together allow us to stay at the cutting
edge of paediatric neurosurgical therapies.”
30
Strategic reportRenishaw plc Annual report and accounts 2018 Key developments
In the autumn of 2017, the US Food and Drug Administration
(FDA) cleared the latest version of neuroinspire™
stereotactic neurosurgery planning standalone software for
sale in the USA. This software fuses MRI and CT datasets
into a 3D volume, enabling neurosurgeons to streamline
complex neurosurgical procedures by identifying and
outlining regions of interest, and determining the best
available approach to the target. Thorough planning
in the pre-operative stage can minimise the chance of
hitting key anatomy during the procedure, and improve
patient outcomes.
Neurosurgeons using neuroinspire can create plans based
on procedure type, with planning tools tailored to the
task in hand. Users can choose to work on a Deep Brain
Stimulation (DBS) to reduce the symptoms of Parkinson’s
disease, a Stereoelectroencephalography (SEEG) to identify
the area of the brain responsible for epileptic seizures or a
biopsy to assist with the diagnosis of a brain tumour.
Towards the end of the year the FDA then cleared for use
Renishaw’s neuromate surgical robot with neuroinspire
surgical planning software. Both were previously cleared
for use separately in the USA, but not in combination.
Before obtaining this latest clearance, surgical plans
generated using neuroinspire could be manually transferred
onto a traditional stereotactic frame. With this latest
clearance, neurosurgeons across America can now export
surgical plans from neuroinspire directly to the neuromate
robot, allowing patients to benefit from improved procedures
for Parkinson’s disease, epilepsy and brain tumours.
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.
Following the previous year’s announcement of a phase
I-II clinical trial with Herantis Pharma to investigate the
treatment of Parkinson’s disease using Cerebral Dopamine
Neurotrophic Factor (CDNF), the first patients in Sweden
and Finland were implanted with a novel drug delivery
system, developed by Renishaw. CDNF aims to relieve
the symptoms of Parkinson’s disease by protecting and
regenerating dopamine-producing neurons.
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.
Whilst academic research funding has been reduced in
some areas of the world due to global economic conditions,
the worldwide demand for Raman products is growing
due to research in key areas such as nanomaterials,
biomedical and green energy. We are also seeing increased
investment in research in developing nations and a growing
acceptance of the benefits of Raman spectroscopy
within industrial applications. Our high-end spectroscopy
products, which offer ease-of-use, are well placed to service
these growth areas
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 focus is to develop technologies that provide
patented products and methods, we invested
£6.5m (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 product
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.
31
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual report and accounts 2018 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.
Activities during the year
The executive risk 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.
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 significant
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 management framework – information and feedback flow
t
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Board
Audit Committee
Executive Board
Executive risk committee and Brexit steering group
Top-down review
Group risk register
Bottom-up review
ISM Board
(Group operating companies)
Other operational
management
G
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s
32
Strategic reportRenishaw plc Annual report and accounts 2018
Cyber threats
In relation to the continuing cyber security threat, we
have trained several senior IT managers to a high level
and rolled out further company-wide training. We have
further strengthened our IT systems’ resilience in key
areas as well as the monitoring of emerging threats.
Considerable resource has been allocated to ensure we
meet the requirements of the General Data Protection
Regulation that came into force in May 2018.
Ethical business practices
Our Group Business Code reminds employees about the
importance of ‘doing the right thing’ in all our activities.
We also have an Anti-Bribery Policy and a Whistleblowing
Policy facilitated by a confidential global telephone service
run by Safecall, which together with employee training
in these areas is a fundamental part of our programme
to establish guidelines and promote a culture of ethical
business across the globe. Training continues to be
refreshed and refined to suit the risk profile in the business
and is reviewed by an anti-bribery working group several
times per year, which facilitates evaluating risk in this area.
We have so far trained 2,090 employees on our anti-bribery
training module. Key messages were also reinforced at
our Subsidiary Conference in March 2018. Any calls to our
whistleblowing line are rigorously followed up.
As reported last year, 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, World Check. We have
an Intermediary Due Diligence Policy together with a
specific e-learning course, which explains to employees
our requirements and the process to follow.
Viability statement
for more information see page 37
Key focus areas for the 2018 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
General Data Protection Regulation.
• Four meetings of the executive risk committee.
• Recruitment of a new General Counsel &
Company Secretary.
• Consideration of the risks related to Brexit.
• Evaluation of and protection against cyber
security threats.
• Anti-bribery due diligence enhancements.
Risk likelihood and impact before mitigation
The diagram to the right shows the Board’s
analysis of the principal risks affecting the
Group, before mitigation.
h
g
H
i
1 Current trading levels and order book
2 Research and development
3 Supply chain management
4 Regulatory legislation for
healthcare products
5 Defined benefit pension schemes
6 Exchange rate fluctuations
7 Cyber security threats
Further descriptions and associated
mitigations are shown on pages 34 to 36.
t
c
a
p
m
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s
R
i
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o
L
Low
1
6
2
3
7
4
5
Likelihood of risk
High
33
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual report and accounts 2018
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.
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 44. Currency fluctuations,
trading arrangements, employment issues and other risks
that become apparent over time will be monitored by the
Board, the executive risk committee and the Brexit steering
group, and mitigation put in place where possible.
Strategic priorities (see pages 12-14 for more information)
1 People
2 Continued research
3 Efficient high-quality manufacturing
4 Global customer support
5 Focus on delivering solutions
6 Niche acquisitions and investments
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
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.
2 Research and development
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
Year-on-year
change
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.
Mitigation
• Patent and intellectual property generation is
Year-on-year
change
core to new product developments.
• R&D programmes are regularly reviewed
against milestones and, when necessary,
projects are cancelled.
• Medium to long-term R&D strategies are
monitored regularly by both the Board and
the 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 as much as possible that
they will meet the needs of the market.
• Market developments are closely monitored.
• Enhanced collaboration and knowledge-
sharing between R&D teams.
34
Strategic reportRenishaw plc Annual report and accounts 2018
3 Supply chain management
Customer deliveries may
be threatened by a failure
in the supply chain.
Potential impact
Inability to meet customer
deliveries could result in loss of
revenue and profit.
Related strategic priorities:
3
Mitigation
• Production facilities are maintained with fire
Year-on-year
change
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.
4 Regulatory legislation for healthcare products
The expansion of the
Group’s healthcare
business involves a
significantly increased
requirement to obtain
regulatory approval
prior to the sale of
these products.
Related strategic priorities:
2
5
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.
Year-on-year
change
• The Group has experience of healthcare
regulatory matters at Board level.
• Healthcare operations in the 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.
5 Defined benefit pension schemes
Potential impact
Volatility in investment returns
and actuarial assumptions
can significantly affect the
defined benefit pension scheme
deficit, impacting on future
funding requirements.
Investment returns and
actuarial valuations of the
defined benefit pension
fund liabilities are subject
to economic and social
factors that are outside
the control of the Group.
Related strategic priorities:
1
Mitigation
• The investment strategy is managed by the
Year-on-year
change
pension scheme trustees who operate in line
with a statement of investment principles and
take appropriate independent professional
advice when necessary.
• A new recovery plan was agreed with the
Trustees in June 2016 for the 2015 actuarial
valuation based on funding to self-sufficiency.
Discussions with The Pension Regulator
are ongoing in relation to the timing of the
scheme funding.
Increased
Decreased
No change
S
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35
Financial statementsShareholder informationRenishaw plc Annual report and accounts 2018
Principal risks and uncertainties continued
6 Exchange rate fluctuations
Fluctuating foreign
exchange rates may
affect the results of
the Group.
Related strategic priorities:
None
Potential impact
With 95% of revenue generated
outside 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
Year-on-year
change
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.
• There is a monthly board review of currency
rates and hedging position.
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.
Related strategic priorities:
2
3
4
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.
Mitigation
• There is substantial resilience and back-up
Year-on-year
change
built 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 are rolled out as required
to all employees on all cyber risks.
• The Group has put considerable resource
into ensuring compliance with the General
Data Protection Regulation and is well placed
to handle any Subject Access Requests
that arise.
36
Strategic reportRenishaw plc Annual report and accounts 2018
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 34 to 36, was robust. In making the assessment,
severe but plausible scenarios have been considered that
estimate the potential impact of the principal risks on the
financial forecasts over the assessment period.
In accordance with provision C.2.2 of the 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
Going concern for more information see page 53
For further explanation of our approach to risk
management and internal control see pages 32 and 33
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 2021, 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, gives management and the Board sufficient,
realistic visibility of 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 2021. 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 latter part of the
assessment period and that future outcomes cannot be
guaranteed or predicted with any certainty.
37
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual report and accounts 2018 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.
Allen Roberts, Group Finance Director
Strategy update
Our CSR programmes all operate under the overarching
principles set out in our Group Business Code (the Code),
which can be found at www.renishaw.com/businesscode.
The Code sets out the principles to which our business
operates. We also communicate the Code to our suppliers
and expect them to work to the spirit of the Code. The Code
is split into five areas; Business Ethics, Employment, Health
and Safety, Environmental and Management Systems,
which are all managed by further policies.
2018 CSR targets and progress
The Annual report contains the information required for
compliance with the Companies, Partnerships and Groups
(and Non-Financial Reporting) Regulations 2016. The Non-
Financial Information Statement comprises information
found on pages 10 to 15 (business model), pages 32 to 36
(risks, anti-corruption and anti-bribery matters), and pages
38 to 43 (environmental matters, the Company’s employees,
social matters, respect for human rights).
Energy consumption
GHG emissions
CO
Target
Progress
Target
Progress
• Decrease reliance on fossil
fuel derived energy.
• 49% (2017: 0%) of electricity
purchased is from certified
renewable sources.
• 3.7% of total global
electricity consumption is
from on-site generation.
• 3% reduction in GHG
• 70% reduction of GHG
emissions (tCO2e) per million
pounds turnover compared
to 2017.
emissions from purchased
electricity (market based).
• 19% decrease in GHG
emissions from heating
oil consumption.
For more see pages
42 and 43
• New solar array
commissioned in India.
For more see pages
42 and 43
1,521,391 kWh
of electricity generated this year
(26% increase from last year).
40,707,226 kWh
of electricity consumed this year
(4.8% increase from last year).
64%
Decrease in market based GHG
emissions (tCO2e) per £m turnover
compared to 2017.
24%
Decrease in total absolute GHG
emissions (market based), 6%
increase using location based.
Waste management
Target
Progress
• 5% reduction of
waste to landfill from
global operations.
For more see page 43
26% or 33 tonnes
increase of waste to landfill from
our global operations.
• Just over 2,750 tonnes
of waste from our global
operations was diverted
from landfill.
• Waste Champions team
has been set up to increase
employee engagement and
reduce waste arising.
94%
of all waste diverted from landfill.
People
Target
• 5% of our employees as
apprentices, graduates
or sponsored students on
structured programmes.
Progress
• 399 people across the
Group are on recognised
training programmes.
• A record 227 apprentices,
graduates and placements
starting this summer.
For more see page 39
5%
of our employees are apprentices,
graduates or sponsored students
on structured programmes.
£2.3m
invested in employee training
across the Group in this
reporting period.
38
Strategic reportRenishaw plc Annual report and accounts 2018 Group Business Code
Diversity and Inclusion Policy
Whistleblowing Policy
Anti-Bribery Policy
Environmental Policy
Waste Policy
Anti-Slavery Policy
Employee Handbook
Health and Safety Policy
5, 33, 38, 39, 44
5, 39, 45, 55
33, 39, 57
33, 39, 44, 57
42
42, 43
39
39
40
People
Renishaw’s people are central to the success of our
business and, over the past 45 years, our innovative,
hard-working and loyal employees have helped to make
Renishaw a highly successful, globally respected company.
We have policies and commitments around the way that we
treat our people and adhere to an open and equal status
culture, believing strongly that equality and fairness are
critical to the success of our organisation.
We continue to promote and celebrate equality, diversity
and fairness across the Group, undertaking initiatives to
develop and support our cultural improvement. We seek
to increase diversity at all levels of the organisation, with a
particular focus on gender diversity.
To help achieve these aims, Renishaw has been actively
involved for a number of years in education outreach
projects, particularly those intended to engage young
people in science, technology, engineering and maths
(STEM) subjects.
Renishaw’s UK-based education outreach team continues to
work with primary and secondary schools, as well as higher
educational establishments, to encourage young people of
all backgrounds to learn about engineering, discover what
engineers do every day, and to encourage them to choose
engineering as a career.
To allow us to support these education outreach activities
across our key regions, we offer STEM outreach training
to all our new graduates and second-year apprentices.
We now have over 175 trained ambassadors involved in
STEM activities, of whom around one-third are women.
Our female-only STEM outreach events were attended by
over 500 students in 2017. These efforts are already starting
to have an impact on our recruitment, as shown by the
improved gender diversity of our apprentice and graduate
intakes in recent years.
Our remuneration practices are designed to reward
and recognise skills, experience and achievement, and
to be free of gender bias ensuring that employees are
remunerated fairly for the work that they do.
Our global e-learning platform supports our training and
compliance initiatives in areas such as Whistleblowing, Anti-
Bribery and Renishaw’s Group Business Code.
Percentage of female graduates and apprentices
31%
28%
16%
17%
24%
20%
8%
6%
12%
11%
14
15
16
17
18
% female graduates
% female apprentices
Human rights, equality and diversity
As a global company, Renishaw enjoys the advantages
of a diverse workforce. With over 20 different nationalities
represented within our senior management group, we
benefit from the variety of expertise that they bring to the
business. On 30th June 2018, we employed 4,862 people
across the Group, an increase of 7% since last year.
Of these, 3,728 (77%) are men and 1,134 (23%) are women.
There are nine directors on the Board, consisting of seven
men and two women. The senior management group is
made up of 52 people, of which 51 (98%) are men and 1
(2%) is a woman. 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.
We believe that equality and fairness are critical to the
success of our organisation. As such we have several
policies, including our Anti-Slavery Policy and our
Employee Handbook, in place to ensure we foster a
workplace that is open and fair to all. We have published
our annual statements pursuant to the Modern Slavery
Act and the Gender Pay Gap reporting requirements at
www.renishaw.com.
We are introducing a comprehensive Diversity and
Inclusion Policy across the Group that, together with the
implementation of management development training, will
highlight and help remove unconscious bias in respect of
recruitment, promotion and reward.
39
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual report and accounts 2018 Corporate social responsibility continued
Health and safety (H&S)
We continue to develop our health and safety management
system and we are bringing more sites in line with our health
and safety strategy. The overarching policy, HS201, details
Renishaw’s H&S management structure and processes,
in line with industry best practice. The outcome of these
policies is a clear and consistent approach to H&S that is
used throughout the Group.
In order to provide due diligence, each division is internally
audited against HS201 annually, with the Group H&S team
being audited by the Group Quality and Compliance team.
The total number of accidents for the period was 233
(2017: 234) against a year-end headcount of 4,862
(2017: 4,530). This equates to an Accident Frequency
Rate of 26.22 per million hours worked (2017: 30.79).
There were three reportable accidents under the UK
RIDDOR reporting requirements: two musculoskeletal
injuries and one leg fracture. This equates to a lost time
injury rate of 0.37 per million hours worked compared
with a UK manufacturing average for RIDDOR reportable
accidents of 2.10 per million hours worked.
The main area of H&S risk with regards to business
operations continues to lie with AM and its associated
processes. These are tightly controlled and managed
via training, policy and procedures, with the wider AM
industry generally accepting Renishaw as one of the safest
producers of AM machinery in operation.
Charity
In the UK, the employee-led Renishaw Charities
Committee (RCC) was formed in the 1980s to distribute
funds to charitable and voluntary organisations in its
local communities and support the individual fundraising
efforts of all UK employees. It has a particular focus on
assisting activities 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.
A separate fund is administered by the RCC, which donates
monies to aid the victims of global disasters.
During the year, the RCC made donations to 269 diverse
organisations totalling £108,000 (2017: £98,000). The RCC
also fully matches funds raised by employees for UK
national fundraising events such as Children in Need
and Red Nose Day and supports individual employee
fundraising activities.
Significant donations of £2,000 or more were made
during the year to support nine organisations, including
Thornbury Oasis, a new supported housing project for
formerly homeless people, Ruskin Mill in Nailsworth,
which is a specialist provider of education to learners with
complex needs, a new pony for St James City Farm and
Riding School in Gloucester, and a new 3.0 Tesla MRI
scanner for Cobalt Health based at Cheltenham Hospital
which allows high-definition specialist neurology and
musculoskeletal imaging.
40
£10,000
A charitable donation of £10,000 was made towards the
costs of a new 3.0 Tesla MRI scanner at Cheltenham
Hospital in the UK, which allows high-definition specialist
neurology and musculoskeletal imaging.
Globally, Renishaw is highly supportive of communities
local to its operations. In the USA, we continue to support
VetPowered LLC with technical assistance and the provision
of metrology equipment. This organisation offers machining,
fabrication, and maintenance and repair services to
industry through a highly-trained veteran and wounded
warrior workforce.
During the year, our subsidiary in India supported,
through donations of more than £70,200, various care
homes, orphanages and social organisations working in
sectors including education, healthcare, child welfare,
and environmental protection. This included continuing
its support of Gurukulam, a residential school which
provides education integrated with vocational training to
350 disadvantaged students in Pune. Renishaw India also
donated an oxygen support system and 40 Fowler beds to
the Pulmonary Ward of the Sassoon Hospital which treats
economically disadvantaged patients, and also assisted the
hospital with water purifiers, solar power plants and repairs
to infrastructure.
Community
We recognise the positive contribution that can be made
to our local communities on a global basis through varied
interactions with politicians, 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.
To ensure a strong pipeline of future talent for Renishaw
and the wider engineering community, 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.
Strategic reportRenishaw plc Annual report and accounts 2018 Across the Group we continue to host tour groups and give
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, by
sponsoring award schemes and 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.
We are also a member of various industry research centres
across the globe, including Canada Makes (Canada),
PräziGen (Germany), Light Alliance (Germany), BazMod
(Germany), Global 3D Printing Hub (Spain), IAM 3D HUB
(Spain), The Manufacturing Technology Centre (UK) and the
Advanced Manufacturing Research Centre (UK).
To further our aim of establishing awareness of Renishaw as
a significant and engaged employer, we continue to support
a wide range of festivals, sports clubs and organisations
in the west of England and South Wales. During the year
this included gifting our hot air balloon for tethered rides for
wheelchair passengers at the National Star College’s 50th
anniversary event and the sponsorship of the Lechlade
Music Festival.
The sport of rugby has an especially high profile in South
Wales and the west of England. Recognising the similar
cultural challenges of attracting women into rugby and
engineering, during the year we became shirt sponsors
of both the Gloucester-Hartpury and Scarlets women’s
rugby teams. We continue to sponsor Samson Lee
(Scarlets and Wales), Ben Morgan (Gloucester) and
Tomos Williams (Cardiff Blues and Wales). During the year
we also sponsored South Korean international footballer
Ki Sung-yueng and the Gloucestershire County Cricket
Club’s 2nd XI.
We are a technical and financial sponsor of numerous
university student racing teams, where we utilise our AM
expertise to supply key components. This includes teams
in Italy, Australia, the UK and Germany. During the year the
Cardiff Racing team was crowned the first ever UK winners
of the European Formula Student competition, utilising
Renishaw’s metal AM technology in its car.
Education
We work hard to inspire and motivate young people of all
genders, ethnicity and backgrounds to study STEM subjects
and consider engineering as a career. Our aim is to become
a key educational resource for the hands-on learning of
design, fabrication, manufacturing and engineering skills,
helping to support schools with the national curriculum at a
time of resource shortages.
In the calendar year 2017, we engaged with around 8,000
students through our various outreach programmes in South
Wales and Gloucestershire/Bristol, managed by four full-time
outreach staff and supported by our STEM Ambassadors.
With only 11% of the UK’s engineering workforce being
female, we are encouraging more girls to consider
engineering as a career. During the year we worked with
Brownies groups who earned ‘Renishaw engineering’
badges, we hosted activities for all of the Year 7 students
from Stroud High School for Girls and we hosted a Girls
only Rugby/Engineering camp with Gloucester Rugby.
We also gifted 800 of the new ‘Little Miss Inventor’ books
to all primary schools within our key catchment areas and
arranged for some of our female STEM ambassadors to
read these in selected schools during the week leading up
to International Women in Engineering Day.
The Fabrication Development Centre (FDC), our dedicated
education centre located at the Miskin site, was formally
opened in March 2018; in calendar year 2017 it hosted 500
primary school pupils and 1,170 secondary school students,
and with increasing interest from schools. Total numbers in
2018 are expected to be around 3,500 students.
We continued to expand our range of workshops available
to schools, all of which are now bookable through the
dedicated education outreach section of the corporate
website, that was launched in autumn 2017.
In the USA, we are continuing to increase our focus on
supporting education initiatives that will improve the
available talent for our own skills requirements and that of
our customers. During the 2018 Innovation Fest held at
Renishaw Inc’s headquarters in Illinois, we hosted local
robotics teams and other young people to introduce them
to a vast array of manufacturing technologies and try some
hands-on activities. A new partnership has been formed
with the Connecticut Center for Advanced Technology,
which creates and implements bold ideas for applied
technologies, energy solutions, STEM education, career
development and export and cyber compliance.
Renishaw is working hard to encourage more girls into an
engineering career. This starts at a young age, including
Brownies groups such as the 1st Llanharan Brownies
in South Wales who all earned special ‘Renishaw
engineering’ badges.
41
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual report and accounts 2018 Corporate social responsibility continued
Environment
Our environmental management activities are controlled
by our Group Business Code which is supported by our
Environmental and Waste policies. There are a variety
of other policies and management controls as deemed
appropriate dependant on the material impact to our
business activities and the environment.
This year we have extended our Carbon Trust Standard
certification for carbon to include all our UK locations and
our manufacturing and assembly locations in Ireland and
India. Through these efforts we now have 70% and 62%
of our global energy consumption and greenhouse gas
(GHG) emissions respectively, within the scope of this
certification. This standard is independent confirmation that
we have genuinely measured, managed, and reduced our
GHG emissions.
Within this reporting period we have achieved an absolute
reduction in our total GHG emissions of 24% (using market
based calculations) and our normalised statutory emissions
have decreased by 18% (location based calculations)
and 64% (market based calculations). Renishaw is legally
obliged to report on Scope 1 and 2 emissions (as defined
by the Greenhouse Gas Protocol). However, through
analysis, it is clear that our Scope 3 emissions amount to
a significant proportion of our carbon footprint. The details
of our GHG emissions for this year are shown in the
table opposite.
To calculate our GHG emissions we have used the GHG
Protocol Corporate Accounting and Reporting Standard
(revised addition), data gathered for our Carbon Reduction
Commitment 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.
840,000 kWh
840,000 kWh of generating capacity has been installed
at our assembly plant in Pune, India, which amounts to
around 42% of the site’s electricity consumption.
42
Scope 1
Gas consumption
Owned transport
Generator diesel
Heating oil
20183
20171
2016
1,052.20
886.30
771.82
2,386.11 2,241.78
2,492.30
33.24
28.67
26.38
188.00
231.48
234.00
Fugitive emissions
206.42
266.00
305.73
Total Scope 1 (tCO2e)
3,865.97
3,654.23 3,830.24
Scope 2
Location based
Purchased heat
Electricity
13.40
4.50
19.88
14,114.40 15,746.08 17,003.42
Total Scope 2 (tCO2e)
14,127.80 15,750.57 17,023.30
Total statutory GHG
emissions2 (tCO2e)
Normalised statutory GHG
emissions2 by revenue
(tCO2e/£m)
17,993.77 19,404.80 20,853.54
29.43
36.15
48.81
Scope 3
Business travel
3,638.61
2,638.79 4,717.04
Product distribution
13,519.21 11,048.65 9,534.18
Raw material purchase
2,022.38
1,517.53
1,260.40
Post and communications
857.33
773.11
774.00
WTT and T&D total6
4,809.99
4,964.78 5,352.59
Total significant Scope 3
(tCO2e)
24,847.52 20,942.86 21,638.21
Total GHG emissions4 (tCO2e) 42,841.29 40,347.66 42,491.75
Normalised total GHG
emissions4 by revenue
(tCO2e/£m)
Further information
Scope 1 out of scope
(biofuel blend)
Scope 2 market based
70.06
75.16
99.47
57.08
55.68
60.85
Electricity
6,452.89 21,659.34 20,853.54
Total Scope 2 (tCO2e)5
6,466.30 21,663.84 20,873.43
Scope 3 out of scope
(biofuel blend)
18.15
29.33
29.49
1 2017 figures have been restated due to improvements in our methodology, updated
GHG conversion factors and replacing the calculation used for the June 2017 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 85% 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.
Strategic reportRenishaw plc Annual report and accounts 2018 For our Scope 1 and 2 emissions, less than 1% of the data
is based on estimates from averaged data sets.
Global waste totals (tonnes)
During this reporting period we commissioned our first
overseas solar array, this was installed at our manufacturing
facility in Pune. It has a potential generating capacity of
840,000 kWh per annum, which amounts to around 42%
reduction of the site’s energy demand.
During this year we have completed an energy saving
project on our production machinery, which now puts it into
an energy saving mode when not in use. This project has
the potential to reduce our energy demand by around
900,000 kWh per annum.
As part of our continued efforts to reduce the environmental
impact of our business activities, we changed our UK half-
hourly electricity contract to a certified 100% renewable
supply contract. This means that just over 49% of all
electricity purchased across the Group is now from a
renewable source.
As we have moved to renewable electricity for many of our
UK sites we are able to report a 70% decrease of GHG
emissions from our electricity consumption, when calculated
using the market based method. During the year we have
also self-generated around 3.7% of our electricity demand
with our four solar arrays.
Whilst our production has increased over the past four
years, our electricity demand has stayed fairly even; this is
due to the investment we have made in energy efficiency
and on-site generation. We intend to continue to roll out
our high standards of insulation, double or triple glazing
and low energy lighting, coupled with on-site generation
where suitable. We believe that our results show that careful
investment in appropriate technologies works, reducing cost
and risk to the business.
We are pleased to report that our 2016 and 2017 GHG
emissions figures have been independently verified by
thinkstep ltd and they have found no material evidence
to suggest it is not accurate. The methodology was also
verified as being compliant with the GHG Protocol Corporate
Accounting and Reporting Standard (revised addition).
94%
94% of the Group’s waste is diverted away from landfill.
By placing clearly signposted bins in the places where
waste streams are generated, we have been able to
effectively manage our waste segregation at source.
Landfilled
Reused
Composted
Incinerated
Recycled
2018
2017
20161
162.93
129.52
146.07
0.00
0.00
0.96
71.76
27.50
23.28
240.70
310.60
431.02
2,437.67 2,151.00 2,216.71
Total non-landfilled
2,750.12 2,489.10 2,671.97
Percentage of waste sent to landfill
5.92%
5.20%
5.47%
Total waste
2,913.06 2,618.62 2,818.04
1 Includes US data for the first time which accounts for 87.2 tonnes of landfill waste in 2016.
18
17
16
2,913.06
2,618.62
2,818.04
Recycled
Reused
Composted
Incinerated
Landfilled
Waste management
Our waste strategy, as defined in our Waste Policy, which
we commenced in February 2014, has been further
developed and this year we have assigned people across
all our UK manufacturing sites as Waste Champions.
This team is enabling increased employee engagement
and has been tasked with the oversight of reducing waste
and increasing recycling. Our strategy continued to drive
our efforts throughout the year, resulting in a further 2,750
tonnes of waste being diverted from landfill. Just under 87%
of all waste generated this year originated from our UK sites
which continue to maintain their certification to the Carbon
Trust Waste Standard. These sites are recognised by the
Carbon Trust for their efforts in moving waste away from
landfill as a disposal choice, towards recovery, recycling,
and reuse.
This year our target was 5% reduction of waste to landfill
from our global operations. Despite our efforts to achieve
our target, we have had an increase of around 33 tonnes
(26% increase) of waste to landfill. This is due to increased
accuracy in our data capture, increased manufacturing,
some refurbishment work and an increase of one waste
stream that we are currently only able to dispose of to
landfill. Our Waste Champions team is working on finding
alternative routes for this waste stream and others that
are difficult to recycle; they are also investigating projects
to cut waste at source. We are still reusing, recycling, or
recovering more than 94% (2017: 95%) of our waste around
the world.
Allen Roberts
Group Finance Director
This Strategic report was approved by the Board on 26th
July 2018 and signed on its behalf by
Sir David McMurtry
Executive Chairman
43
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual report and accounts 2018
Directors’ corporate governance report
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
Introduction
The Board continues to be committed to the highest
standards of corporate governance in order to protect our
business and its long-term success.
During the year, we paid particular attention to succession
planning for the Board and Executive Board as a result of Sir
David McMurtry’s decision to hand over his Chief Executive
responsibilities. Will Lee took over as Chief Executive
with effect from 1st February 2018, having demonstrated
significant leadership capabilities in his time at Renishaw.
Will has been with Renishaw since 1996 and was originally
appointed to the Board as Group Sales and Marketing
Director in 2016. The Board is confident that Will can inspire
the next generation to build on Renishaw’s heritage.
A description of the key roles and responsibilities of the
Executive Chairman and myself in relation to corporate
governance can be found in the description of the
Executive Chairman’s role at
www.renishaw.com/corporategovernance.
Kath Durrant is stepping down as an independent
non-executive director effective 31st July 2018 and
Catherine Glickman will be appointed as an independent
non-executive director on 1st August 2018. With her
extensive experience as a Group HR Director, Catherine
will be a valuable addition to the Company’s resources at
Board level.
The full business implications of Brexit remain uncertain but
it is possible 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. The executive risk committee, along with the
Brexit steering group which was formed during the year,
will be monitoring developments closely to assess required
actions as the exit and trading negotiations become clearer
later in 2018.
Cyber security continued to be a key focus for the Board
this year, with regular updates being provided and new
initiatives and investment being undertaken in order to
mitigate cyber threats.
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/businesscode. In 2018, we have
continued to closely monitor operational risks in key regions
and are implementing additional compliance policies in
certain areas. We held a Group Subsidiary Conference
at our UK HQ in March 2018 where compliance, legal
and finance training was provided to key subsidiary
management to reinforce e-learning courses.
The Annual remuneration report for 2018 starting on
page 67 sets out the details of directors’ compensation
throughout this financial year, which will be subject to the
normal advisory vote at the AGM after a year of excellent
business performance. Our Remuneration Policy 2017
remains unchanged.
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.
Our executive risk committee conducted a thorough
review of our principal risks together with mitigation plans.
The Board also considered the viability statement in the
context of risk and the viability statement is contained on
page 37.
The Board has been updated on progress with our
General Data Protection Regulation compliance and the
new Reporting on Payment Practices and Performance
Regulations 2017.
Another key activity this year was the internal Board
effectiveness review. I am pleased that this internal
evaluation of the Board and our Committees confirmed
that the Board is collegiate, transparent and effective.
A summary of the findings and recommendations are set
out on pages 52 and 53 of this Report. The next external
evaluation is set for 2019, in accordance with the UK
Corporate Governance Code (Governance Code).
44
GovernanceRenishaw plc Annual report and accounts 2018 As a Group we are committed to gender diversity at Board
and all levels and this will remain an important focus area.
We published our Gender Pay Gap report on the Group’s
website, www.renishaw.com/genderpaygap.
Disclosure of information under
Listing Rule 9.8.4R
The information that fulfils the reporting requirements under
this rule can be found in the pages identified below.
Details of how we interact with our stakeholders,
including the communities in which we operate, and our
environmental impact, are set out in the Corporate social
responsibility section on pages 38 to 43.
The Board has been updated on corporate governance
reform developments and will be focused on these as the
new requirements become clear.
Scope of disclosures
This corporate governance report has been prepared in
accordance with the 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
Chief Executive’s review, pages 4 to 5 and 6 to 9 and the
Strategic report. Segmental information by geographical
market is given in note 2 to the Financial statements.
The UK Listing Authority’s Disclosure Guidance 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 44 to
54 and 72 to 74 form the Directors’ report.
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.
Section Topic
Interest capitalised
Publication of unaudited financial
information
Details of long-term incentive
schemes
Location
Not applicable
Not applicable
Not applicable
Waiver of emoluments by a director Not applicable
Waiver of future emoluments by
a director
Non pre-emptive issues of equity
for cash
As item (7), in relation to major
subsidiary undertakings
Parent participation in a placing
by a listed subsidiary
Not applicable
Not applicable
Not applicable
Not applicable
(1)
(2)
(4)
(5)
(6)
(7)
(8)
(9)
(10) Contracts of significance
Not applicable
(11)
Provision of services by a controlling
shareholder
Directors’
remuneration
report pages
60–71
(12)
(13)
(14)
Shareholder waivers of dividends
Not applicable
Shareholder waivers of future
dividends
Agreements with controlling
shareholders
Not applicable
Other statutory
and regulatory
disclosures
pages 72–74
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.
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.
45
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual report and accounts 2018 Board of directors
Committees
A Audit Committee
R Remuneration Committee
N Nomination Committee
* Denotes Chair of committee
1 | Sir David McMurtry
N*
2 | John Deer
3 | William Lee
4 | Allen Roberts
5 | Geoff McFarland
6 | Carol Chesney
A* R N
7 | Kath Durrant (until 31st July 2018)
R* N
8 | Sir David Grant
A R N
9 | John Jeans
A R N
10 | Mark Noble
46
GovernanceRenishaw plc Annual report and accounts 2018 1 | Sir David McMurtry CBE, RDI, FRS, FREng, CEng, FIMechE
Executive Chairman
• 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.
• As an executive, responsible for Group technology.
2 | 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.
3 | William Lee
Chief Executive
• Joined the Renishaw graduate scheme in 1996.
• Holds a degree in physics from the University of Oxford and an MBA from
the University of Bath.
• Became Director and General Manager for the Laser and Calibration
Products Division in 2007 and subsequently Director and General
Manager of the Machine Tool Products Division in 2014.
• Appointed to the new role of Director of Group Sales and Marketing in
December 2015.
• Appointed to the Executive Board in 2015 and to the Board as Group
Sales and Marketing Director in August 2016.
• Appointed Chief Executive, taking over from Sir David McMurtry, in
February 2018.
• Responsible for the product divisions, overseas sales subsidiaries and
human resources.
4 | 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 and Wotton Travel Ltd.
• Responsible for the metrology regulatory and quality assurance function.
• Reports to the Board on corporate social responsibility matters.
5 | Geoff McFarland BEng, DEng, MInstP, FREng
Group Engineering Director
• Joined Renishaw after working for Motorola in 1994 as part of the
Edinburgh based R&D team. Became the Director and General Manager
of the CMM Products Division in 1999.
• Appointed to the Board of Renishaw plc in 2002.
• Responsible for Group engineering and Group IP, patents, R&D and the
Additive Manufacturing Products Division.
• Member of the Institute of Physics, a visiting professor at the University of
Bath, and an honorary professor at Heriot-Watt University.
• Elected to the Royal Academy of Engineering in 2017.
• Appointed non-executive director at Cambridge Mechatronics Ltd in
March 2018.
6 | Carol Chesney FCA
Independent Non-executive Director
• Appointed to the Board of Renishaw plc in 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.
• Appointed non-executive director of Hunting plc in April 2018 and
Biffa plc in July 2018.
7 | Kath Durrant (stepping down from the Board 31st July 2018)
Independent Non-executive Director
• Appointed to the Board of Renishaw plc in January 2015.
• Currently Chief Human Resources Officer for CRH plc.
• Previously the Group HR Director at both Ferguson plc and
Rolls-Royce plc.
• Held a variety of senior positions at AstraZeneca plc, including Vice
President, HR and Communications for its research and development
division.
8 | Sir David Grant CBE, PhD, FREng, FLSW, CEng, FIET
Senior Independent Director
• Appointed to the Board of Renishaw plc in April 2012.
• Currently non-executive director of both IQE plc and the Defence
Science and Technology Laboratory, and Chair of the National Physical
Laboratory.
• Chair of STEMNET from December 2011 until August 2016 when it
merged with STEM Learning.
• 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.
9 | John Jeans CBE, CEng
Independent Non-executive Director
• Appointed to the Board of Renishaw plc in April 2013.
• Currently chair of Edinburgh Molecular Imaging Ltd and the Scottish
government’s Digital Health & Care Institute at the University of
Strathclyde.
• Non-executive director of Prometic Life Sciences Inc. and Prometic
Pharma SMT Limited.
• Serves on several government bodies including the Ministerial Committee
on Medical Technologies.
• Leads Innovate UK’s Knowledge Transfer Network’s (KTN) Health Board.
• Previously chair of Innovate UK’s Stratified Medicine Steering Group, UK
Biocentre Ltd and Imanova Ltd.
• Advisor to the Prime Minister at the Office of Life Sciences for a period of
four years ending June 2018.
10 | Mark Noble
General Counsel & Company Secretary
• Joined Renishaw on 8th January 2018 as General Counsel &
Acting Company Secretary. On 24th July 2018 appointed as
Company Secretary.
• Previously held a number of positions at National Grid plc including
Deputy General Counsel and Head of Secretariat.
• Prior to that in private practice at Eversheds and SGH Martineau.
Appointed after year end
11 | Catherine Glickman
Independent Non-executive Director
• Appointed to the Board of Renishaw plc on 1st August 2018.
• Currently non-executive director at Marston’s plc where she is chair of
its remuneration committee, and TheWorks.co.uk plc where she is chair
of its remuneration committee and a member of its audit and nomination
committees.
• Retired as Group HR Director at Genus plc in February 2018, having
previously held the same title at Tesco plc.
• Led retail management development and customer service training
at Tesco plc, during a period of significant expansion in the UK and
overseas.
• Worked closely with the remuneration committees at Genus and Tesco,
developing reward structures that aligned leadership motivation with
Group strategy.
• Previously held positions at Somerfield plc and The Boots Company plc.
47
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual report and accounts 2018 Executive Board
6 | Leo Somerville
7 | Dave Wallace
8 | Gareth Hankins
9 | Mark Moloney
48
1 | William Lee (chair)
Chief Executive See page 47 for biography
2 | Sir David McMurtry CBE, RDI, FRS, FREng, CEng, FIMechE
Executive Chairman See page 47 for biography
3 | John Deer
Deputy Chairman See page 47 for biography
4 | Allen Roberts FCA
Group Finance Director See page 47 for biography
5 | Geoff McFarland BEng, DEng, MInstP, FREng
Group Engineering Director See page 47 for biography
6 | Leo Somerville
President, Renishaw Americas
• 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 Americas in April 2018.
7 | Dave Wallace
Director and General Manager, CMM Products Division
• Joined Renishaw in 1989 through Renishaw’s sponsored student scheme.
• Holds a degree from the University of Oxford in Engineering and Management
Science.
• 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 Division in 2002.
• Appointed to the Executive Board in 2008.
• Given Board responsibility for the Styli and Fixturing Products Division in 2014.
8 | Gareth Hankins FIET
Director, Group Manufacturing Services Division
• Joined Renishaw in 1988 as an apprentice.
• Undertook various roles in engineering, production and operations
management prior to being appointed to his current position.
• Appointed to the role of Director, Group Manufacturing Services Division in
2006.
• Appointed as an Honorary Visiting Professor at Cardiff University School of
Engineering in 2013.
• Appointed to the Executive Board in February 2018.
9 | Mark Moloney
Director and General Manager, Renishaw (Ireland) DAC
• Joined Renishaw in 1988 at its manufacturing plant in Dublin.
• Primary responsibilities over the last 30 years have been to increase
manufacturing capabilities and resources in Ireland, to establish, direct and
expand manufacturing facilities in Pune, India, and oversee the manufacture
of the neuromate robot in France.
• Director of Renishaw Metrology Systems Ltd in Pune, India.
• Appointed to the Executive Board in February 2018.
Further information on the Executive Board can be found on page
50. Members 1-5 above of the Executive Board are plc Board
executive directors.
GovernanceRenishaw plc Annual report and accounts 2018 International Sales and Marketing Board (ISMB)
4 | Sean Hymas
5 | Rainer Lotz
6 | Clive Martell
7 | Jean-Marc Meffre
8 | Rydian Pountney
1 | William Lee (chair)
Chief Executive See page 47 for biography
2 | John Deer
Deputy Chairman See page 47 for biography
3 | Allen Roberts FCA
Group Finance Director See page 47 for biography
4 | Sean Hymas
President and Representative Director, Renishaw KK
• Joined Renishaw in 1989 following a year’s placement between 1987
and 1988.
• Over 25 years’ experience of international sales, channel management
and business development.
• Transferred to Renishaw KK in 2008 to further develop sales and new
market sectors in Japan.
• Appointed President of Renishaw KK and to the International Sales and
Marketing Board in 2012.
5 | 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.
6 | 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.
7 | Jean-Marc Meffre
Managing Director, Renishaw APAC & EMEA
• Joined Renishaw in 1988 as Managing Director of Renishaw France.
• Holds a master’s degree in Economics and Marketing.
• In 1997, appointed Managing Director for all the operations in the Far East
(excluding Japan).
• Appointed as a member of the International Sales and Marketing Board
in 2008.
• In April 2018, appointed President for the APAC and EMEA regions.
8 | Rhydian Pountney
Managing Director, Renishaw UK & ROW
• Joined Renishaw in 1979.
• Appointed as a member of the International Sales and Marketing Board
in 2008.
• Over 30 years’ experience in sales and marketing. Responsible for 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.
Further information on the ISMB can be found on page 50.
49
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual report and accounts 2018 Directors’ corporate governance report continued
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
Chief Executive and includes the executive directors and
senior managers as noted on page 48. The Executive Board
usually meets for one day 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 Chief Executive and
includes the Deputy Chairman, the Group Finance Director,
the managing 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 32 to 33.
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
46 to 47 (Kath Durrant will be stepping down, effective from
31st July 2018). Full biographical details are available at
www.renishaw.com. Will Lee was appointed by the Board
as Chief Executive with effect from 1st February 2018, and
along with all other directors, will be retiring and putting
themselves up for re-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
2018, 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 51.
The Board has three formally constituted committees – the
Audit Committee, the Remuneration Committee and the
Nomination Committee.
Leadership framework
Board
Executive Board
Audit Committee
Nomination
Committee
Remuneration
Committee
International Sales and Marketing Board, executive risk committee,
Brexit steering group, divisions and subsidiary undertakings
50
GovernanceRenishaw plc Annual report and accounts 2018 Scheduled Board and committee meetings
in the period
July 2017
August 2017
A
R
R
B
A
R
September 2017
October 2017
B
B
November 2017
December 2017
R
B
January 2018
A
B
N
February 2018
R
B
March 2018
B
N
R
April 2018
May 2018
B
N
June 2018
R
B
N
Key
A Audit Committee (3)
R Remuneration Committee (7)
N Nomination Committee (4)
B Board (9)
High-level summary of
subjects discussed by the
Board during the year:
Strategy
• Business strategy and organisation
• Reviewing potential acquisitions/
disposals
• Review of investment in HiETA
Technologies Ltd
• Products and technology
• Key business relationships
Risk
• Group’s risk analysis
• Patent litigation
• Tax risk register and updates
• Group quality
• Cyber security
• Brexit
Governance
• Appointment of Chief Executive
• Legal updates
• Gender pay gap
• GDPR
• Board evaluation
• Committee terms of reference
• Controlling shareholder agreement
• Export control
• 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
51
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual report and accounts 2018
Directors’ corporate governance report continued
Division of responsibilities – the Chairman and
Chief Executive
Throughout the year, the Board considered that there
was 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 Group’s business segments and review
management actions.
Will Lee was appointed by the Board as Chief Executive
with effect from 1st February 2018 in place of Sir David
McMurtry. Sir David McMurtry retained his Executive
Chairman role. As a result of this appointment, the roles of
Chairman and Chief Executive are no longer combined.
Following Will Lee’s appointment as Chief Executive, the
Board has prepared and agreed written statements of the
key responsibilities of the Chief Executive and the Executive
Chairman. These are available on the Company’s website at
www.renishaw.com/corporategovernance.
Sir David McMurtry has held the position of Executive
Chairman of the Company since it listed in 1983. There has
been a voting agreement in place between Sir David
McMurtry and John Deer since 1983, further details of which
are set out in the Other statutory and regulatory disclosures
on page 72.
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 Executive Chairman, the
Chief Executive or the Group Finance Director fail to resolve
any concerns shareholders may have. The independent
non-executive directors meet with the Executive Chairman
without the other executive directors present, and the
independent non-executive directors led by the Senior
Independent Director also meet without the executive
directors or Executive Chairman present, in each case to
discuss performance, corporate governance, succession
planning 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. The Board considers
that all the non-executive directors demonstrate commitment
to their roles and are able to dedicate sufficient time to their
duties at the Company. Their skills and experience are
summarised in their biographies on page 47.
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 is set out in the Nomination
Committee report on page 55 where the Board’s
commitment to diversity is also affirmed.
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 Executive 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.
Conflicts of interest
The Board has a conflicts of interest policy, putting in
place procedures for the disclosure and review of any
conflicts and potential conflicts, and authorisation by the
Board (if considered appropriate). Authorisations granted
and the terms of such are reviewed on an annual basis.
New disclosures are made where applicable.
Development
Directors are offered the opportunity to attend formal
training courses to update their knowledge of their duties
as directors. Guidance notes, papers and presentations on
changes to law and regulations are provided as appropriate.
Non-executive directors are invited to attend internal
conferences, which provide information to the Group on
new product development and marketing initiatives, as well
as our investor days. Business presentations are given at
board meetings to provide updates on, and opportunities to
discuss, products and business strategies.
An induction pack is provided to new appointees to the
Board, and the induction programme (together with the
continuing development programme) includes site visits and
briefings by senior managers, attendance at internal senior
management conferences and external trade shows, as well
as foreign subsidiary visits, as applicable.
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 General Counsel Company Secretary
advises the Board on all governance matters. All directors
have access to the General Counsel 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 General Counsel Company Secretary is a matter
reserved for the Board.
Evaluation
The Board, its committees and each director are subject to
an annual evaluation of their performance. The format of the
evaluation varies each year.
For the financial year ending 30th June 2018, an
internal evaluation process was undertaken. The main
recommendations from 2018 are a continuing Board focus
on key business initiatives, and succession, talent and
diversity across the Group.
52
GovernanceRenishaw plc Annual report and accounts 2018
In 2016, Equity Communications Limited undertook
interviews with the directors, discussing a list of subjects
agreed by the Board. The next externally facilitated
evaluation will be in 2019, as required by the Governance
Code. Equity Communications Limited has no other
connection with the Company.
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 32 to 33.
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, which has been in place
during the year, is regularly reviewed and accords with
the FRC Guidance on Risk Management, Internal Control
and Related Financial and Business Reporting. The Board
confirms that necessary action has been or is being taken
to remedy any significant failings or weaknesses identified
from its review.
D. Remuneration
The Directors’ remuneration report explains how the
Company applies the Governance Code principles
relating to remuneration and includes a description of the
membership and activities of the Remuneration Committee.
Re-election
In accordance with the Governance Code all the directors
(with the exception of Kath Durrant) 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
Audit Committee
A description of the membership and activities of the Audit
Committee is set out in the Audit Committee report on pages
56 to 57.
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 75 and the Independent
auditor’s report on pages 76 to 87.
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 position and 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.
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.
53
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual report and accounts 2018 Directors’ corporate governance report continued
E. Relations with shareholders
Engagement with shareholders
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 are circulated to the Board.
The Board holds 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 are given by
members of the Board and senior management, as well as
tours covering the Group’s activities. This year, 108 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.
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 a Regulatory Information Service (RIS) and on
the Company’s website following the meeting.
The Board notes that the shareholder vote on the re-election
of Sir David McMurtry as a director of the Company at the
AGM in 2017 received 21.13% votes against the resolution.
The Company’s overall approach to engagement with
shareholders, and the opportunities for interacting with the
Board are set out earlier in this section. The Board takes the
views of shareholders seriously and, both following the AGM
and subsequently, has considered and discussed the vote.
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 matters (an explanation
relating to non-compliance is given in sections A and E of
the report above):
• the combined role of Chairman and Chief Executive
(provision A.2.1) (up to 1st February 2018); and
• an explanation of the actions the Board intends to take to
understand the reasons behind a significant vote against
a resolution at a general meeting (provision E.2.2).
Board attendance record
The table below sets out attendance at the scheduled
meetings of the Board and committees during the year.
Director
Sir David McMurtry
John Deer
Will Lee
Allen Roberts
Geoff McFarland
Carol Chesney
Kath Durrant
Sir David Grant
John Jeans
Board
9(9)
8(9)1
9(9)
9(9)
9(9)
9(9)
7(9)2
9(9)
9(9)
Audit
Committee
Remuneration
Committee
Nomination
Committee
–
–
–
–
–
3(3)
–
3(3)
3(3)
–
–
–
–
–
7(7)
7(7)
7(7)
7(7)
4(4)
–
–
–
–
4(4)
4(4)
4(4)
4(4)
1 John Deer was absent for the Board meeting on 6th December 2017 due to illness.
2 Kath Durrant was absent for the Board meetings on 27th September 2017 due to unforeseen circumstances and 8th June 2018 due to a prior commitment.
Sir David Grant
Senior Independent Director
26th July 2018
54
GovernanceRenishaw plc Annual report and accounts 2018 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, 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,
succession planning for the Board and senior
executives and nominating candidates for appointment
to the Board and for 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. With the exception
of Sir David McMurtry, all members of this Committee
are independent non-executive directors. Details of
attendance at meetings are shown on page 54 of the
Directors’ corporate governance report and the terms
of reference are published on the Company’s website.
Boardroom diversity
Our aim is for the Board to consist of individuals with diverse
skills and experience that can add value to our Board work
and debates. We also recognise that diversity of gender, age,
ethnicity, industry knowledge and education are important.
Female representation on the Board is currently at 22%.
Whilst the Board continues to believe that it is not appropriate
to set out any specific targets that may require positive
discrimination for the appointment of women to the Board,
it supports the aspiration on gender diversity in the Hampton-
Alexander review and the Committee considers gender
diversity when making appointment recommendations.
New Board appointments are subject to the Company’s
Equality, Diversity and Inclusion Policy, which was adopted
in the period, formalising our commitment to diversity at all
levels, including the Board. The Committee’s procedures
require it to first evaluate the balance of skills, knowledge,
experience and diversity on the Board. The Committee
agrees a role specification for Board appointments and if the
position is not to be fulfilled internally, appoints recruitment
consultants to produce a long-list of diverse candidates for
the Committee’s consideration.
Following this, the Committee will consider candidates on
merit and against objective criteria, with due regard for the
benefits of diversity on the Board.
Activities during the year
The Committee met four times during the year with the
main issue considered and recommended to the Board
being the appointment of Will Lee as Chief Executive with
effect from 1st February 2018, after an internal appointment
process. This followed the decision by Sir David McMurtry
that he wished to step down as Chief Executive, and is part
of the Company’s long-term succession plans. Will joined
Renishaw in 1996 and following roles as Director and
General Manager of the Laser and Calibration Products
Division and Director and General Manager of the Machine
Tool Products Division, was appointed to the Board as
Group Sales and Marketing Director in 2016. The Committee
and the Board were unanimous in recommending him as the
outstanding candidate for the role of Chief Executive.
During the year, the Committee also considered
independent non-executive director succession planning,
the appointment to the Executive Board of Gareth Hankins
and Mark Moloney and the recruitment of Mark Noble as
General Counsel & Company Secretary.
As part of the Board’s succession planning, a search
consultancy, Stonehaven International, was engaged
to seek appropriate candidates for appointment as
an additional independent non-executive director.
The Committee received a long list of potential candidates
and prioritised candidates for interview. The shortlist for
interviews was to include candidates having the required
skills and experience and, where possible, at least one-
third to be female candidates with diversity of ethnicity
and background. The Committee recommended the
appointment of Catherine Glickman, as an independent
non-executive director through this process. On 25th July,
following approval by the Board, we announced Catherine’s
appointment with effect from 1st August, with Kath Durrant
stepping down from 31st July. Stonehaven International has
no other connection with the Company.
Sir David McMurtry
Chair of the Nomination Committee
26th July 2018
Employees, diversity and policies
for more information see pages 39 and 40
Senior management diversity for more information see page 39
55
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual report and accounts 2018 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 2018 we also
monitored the various changes to the Corporate
Governance Code, agreed the content of the
viability statement and reviewed the work
undertaken, and disclosures made, in relation
to the financial impact of IFRS 15 ‘Revenue
from Contracts with Customers’.
Carol Chesney, 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 Governance 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 final and half year financial
statements before submission to the Board and its
compliance with statutory requirements. The Audit
Committee monitors the integrity of the Group’s Financial
statements and announcements relating to financial
Member
Financial experience
Company and position
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 terms of reference of Internal
Audit are routinely reviewed with the next review to be
undertaken in 2018/19.
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.
Sector
Technology
Chartered accountant
Company Secretary of Halma plc
Non-executive director and audit committee chair of Hunting plc
Manufacturing
Non-executive director and audit committee chair of Biffa plc
Support Services
Worked at Arthur Andersen
for 7 years
Previously group financial
controller at Halma plc
Previously group accountant
at English China Clays plc
Senior independent director of IQE plc
Director of Defence Science and Technology Laboratory
Chair of National Physical Laboratory
Previously worked for Dowty Group
Previously group technical director of GEC plc
Previously vice-president of the Royal Academy of Engineering
Chair of Edinburgh Molecular Imaging
Technology
Technology
Metrology
Manufacturing
Engineering
Engineering
Biotechnology
Non-executive director of Prometic Life Sciences Inc and Prometic
Pharma SMT Limited
Biopharmaceuticals
Previously chair of GE Healthcare Limited
Previously chair of UK Biocentre Limited
Previously chair of Imanova Limited
Healthcare
Healthcare
Imaging services
Carol
Chesney
Sir David
Grant
John
Jeans
56
GovernanceRenishaw plc Annual report and accounts 2018 Governance
The Committee meets at least three times a year with the Chief Executive (first meeting July 2018), the Group Finance
Director, the Head of Group Finance, the Group Financial Accountant, the Group Internal Audit Manager, the General
Counsel & Company Secretary and the external auditor in attendance. After each meeting, the Committee holds separate
discussions with the external auditor and with the Group Internal Audit Manager respectively without the executives.
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. The Committee Chair provides feedback on significant matters
considered during meetings to the Board after each Committee meeting. A fourth meeting has been scheduled for autumn
each year from 2018/19 onwards.
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:
Financial statements
and reports
Risk management and
internal controls
• reviewed the effectiveness of the
Group’s risk management and
internal controls and disclosures
made in the 2018 Annual report;
• reviewed the 2018 Annual report
and the 2018 Interim report.
The Committee received a report
from the external auditor on the
audit of the 2018 Annual report;
• reviewed critical accounting
judgements and estimation
uncertainties in the Financial
statements, being the
capitalisation of development
costs, the classification of
discontinued activities, the
carrying value of inventory, the
assumptions used to determine
the defined benefit pension
schemes’ liabilities and the
amortisation and impairment of
intangible assets;
• reviewed the effectiveness of
the Group’s hedging policy and
its application;
• 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;
• monitored the effectiveness
of the Group’s internal
controls and fraud risk;
• reviewed and agreed the
content of the viability
statement (see page
37) and the process
undertaken, including an
assessment of the stress
testing performed, in order
to approve both it and the
going concern statement
(see page 53);
• received updates on
compliance with the
Group’s anti-bribery and
corruption policy;
• reviewed the accounting
• monitored the effectiveness
and disclosures in relation to
the Group’s defined benefit
pension schemes;
of the Group’s global
whistle-blowing and serious
misconduct policy; and
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;
• considered the
resource levels
available to the internal
audit function; and
• reviewed the
effectiveness of the
internal audit process
through discussion
with the Group Finance
Director, the Head
of Group Finance
and members of the
Audit Committee.
External auditor and
non-audit work
• managed the relationship
with the external auditor;
• reviewed, considered
and agreed the scope
and methodology of
the 2018 audit work to
be undertaken by the
external auditor;
• evaluated the
independence and
objectivity of the
external auditor;
• agreed the terms of
engagement and
approved the fees to be
paid to the external auditor
for the audit of the 2018
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
• reconfirmed the non-audit
services policy.
• review of the Group’s
published tax strategy.
• reviewed the effective tax rate
in the Financial statements
and provision for uncertain
tax positions;
• reviewed the approach the
external auditor took in respect of
management override of controls;
• evaluated the controls in place
to ensure the Group’s revenue
recognition policy has been
correctly applied; and
• reviewed the work undertaken,
and disclosures made, in relation
to the financial impact of IFRS
15 ‘Revenue from Contracts
with Customers’.
57
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual report and accounts 2018 Audit Committee report continued
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 treatment of forward
exchange contracts for hedging purposes and the
judgements made in relation to the Group’s defined benefit
pension schemes’ liabilities were the two significant issues
relating to the financial statements.
In 2017, it was identified that certain of the Group’s hedging
instruments did not comply with IAS 39 and therefore could
not be treated as qualifying hedging instruments. At the start
of the current year, the Committee received confirmation
that all new hedging instruments entered into by the Group
would be IAS 39 compliant. The Committee confirmed by
way of discussions with management that the required
hedging documentation is in place, including prospective
and retrospective effectiveness testing. The Committee
satisfied itself that the work undertaken by management was
appropriate and agreed with the conclusions reached and
accounting entries and disclosures made. The Committee
also reviewed the ongoing use of the adjusted profit before
tax alternative performance measure, which excludes the
profit/loss arising on hedging instruments entered into in
previous years that do not qualify for hedge accounting, and
concluded that this alternative performance measure should
be retained in order to provide stakeholders with a better
measure of underlying performance; one which is consistent
with management’s own assessment of performance.
The Committee then reviewed the judgements made in
relation to the Group’s defined benefit pension schemes’
liabilities, with particular focus on the discount rate, inflation
rate and mortality assumptions along with an assessment
of the appropriateness of the application of IFRIC 14.
The Committee also considered the disclosures in respect of
the ongoing discussions between the Company, the trustees
of the UK pension scheme and The Pensions Regulator in
relation to the 2016 recovery plan. The Committee made
enquiries of management to understand the process
undertaken for determining the appropriate actuarial
assumptions and to understand the basis for the application
of IFRIC 14, which was underpinned by an external legal
review of the trust deed. The Committee satisfied itself that
the judgements reached by management were appropriate.
The Committee discussed these issues with the external
auditor and was satisfied that its conclusions were
consistent with those of the external auditor.
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.
This is the second financial year that the Annual report and
accounts have been audited by Ernst & Young LLP following
their appointment at the AGM in October 2016. The contract
for external audit will be put out to tender at least every
10 years.
The Committee has monitored the 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, the Group Internal Audit Manager 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;
• 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.
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 2018, the external auditor has provided £567 of non-
audit work in relation to 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.
58
GovernanceRenishaw plc Annual report and accounts 2018 Risk management and internal controls
The Committee monitors the effectiveness of the Group’s
internal controls and risk management processes,
with support from Internal Audit and the executive risk
committee, which allows it to maintain a good understanding
of the business performance and key areas of judgement
and decision making within the Group.
The Internal Audit team report and follow up on control
and operational weaknesses, and support management in
making improvements where required. Further, an Annual
Declaration of compliance with internal controls and
processes is completed by senior management from each
subsidiary company.
Internal Audit began using data analytics techniques during
the current year and will be further increasing their use
from the start of the 2018/19 financial year, thus increasing
the work undertaken in the year and complementing the
regular subsidiary visits. The Committee determined that
the Internal Audit function is effective following the review
detailed in the key issues and activities section of this report.
Following a period of strong growth, the Committee
commissioned a review of the Group Internal Control
Manual last year to ensure that Renishaw’s policies exceed
best practice for an organisation of Renishaw’s size
and structure. The review is largely complete and in the
process of being communicated to subsidiaries. The Audit
Committee continue to monitor the progress of the roll out of
the Group Internal Control Manual.
During the year, the Committee commissioned a review
of the Company’s procedures in relation to training and
development of its employees, in particular in the areas of
risk management and compliance, to include a review of
the Company’s procedures to avoid bribery related to the
activities of the Group. Following the review, a separate
Training and Development team has been formed, allowing
them to focus solely on this area.
Details of risk management and internal controls are set out
on pages 32, 33 and 53.
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:
• overall management of the report was the responsibility
of the Group Finance Director and the General Counsel
& Company Secretary who instigated a comprehensive
review of the disclosures and then assigned specific
ownership and responsibility for the individual sections;
• during the compilation period, regular meetings were
held with key contributors from Group Finance, Group
Secretariat, CSR and Corporate Communications,
all of whom are 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 first of the Committee’s meetings in July 2018, the
Committee reviewed an initial draft of the Annual report,
during which it probed and tested certain disclosures;
• at the second of the Committee’s meetings in July
2018, 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 2018 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 53.
Carol Chesney
Chair of the Audit Committee
26th July 2018
59
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual report and accounts 2018 Directors’ remuneration report
We are again reporting a very strong year with
record revenue of £611.5m and record adjusted
profit before tax of £145.1m, an increase of 33%.
On a statutory basis, profit before tax also rose by
33% to £155.2m.
Kath Durrant, Chair of the Remuneration Committee
Remuneration Committee role
and composition
The Remuneration Committee is responsible for
deciding the Company’s framework for executive
remuneration, determining the remuneration for each
of the executive directors, reviewing and approving
remuneration for other direct reports to the Chief
Executive, and overseeing remuneration policy across
the Company. A key aim of the Committee is to help
attract, retain and motivate talented executives by
ensuring competitive remuneration and motivating
incentives. The incentives are linked to the overall
performance of the Group and, in turn, to the interests
of all shareholders.
The Committee reviews executive directors’
remuneration annually in the context of the Group’s
performance. It also reviews the remuneration structure
and packages for the next level of senior leaders to
ensure they are competitive and fair, and that there is
appropriate progression for those identified as potential
successors to the Board and executive team.
All members of the Committee are independent non-
executive directors: Kath Durrant (Committee Chair),
Sir David Grant, Carol Chesney and John Jeans.
The terms of reference for the Committee are published
on the Company’s website. Executive directors may
attend meetings of the Committee by invitation for
parts of the agenda, as appropriate, and 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 2018.
This report complies with the requirements for reporting on
directors’ pay introduced in October 2013 and is split into
the following three sections:
1. this introductory statement;
2. the remuneration policy (pages 62 to 65) as approved by
shareholders at the 2017 AGM; and
3. the annual report on remuneration (pages 66 to 71),
setting out information on directors’ remuneration during
the year ended 30th June 2018, and how our policy will
be implemented in the year ending 30th June 2019.
This part of the report will be submitted to an advisory
vote at the 2018 AGM.
This remuneration report has been prepared in accordance
with Part 3 of the Large and Medium sized Companies and
Groups (Accounts and Reports) (Amendment) Regulations
2013, 9.8.8R of the Listing Rules and the UK Corporate
Governance Code.
Context for remuneration at Renishaw
The Committee welcomes the high level of shareholder
support at the 2017 AGM for our revised remuneration
policy. In addition to a number of minor changes, we
introduced a new deferred equity incentive plan, alongside
minimum shareholding requirements for all executive
directors. Both of these elements are designed to
increase the level of alignment with shareholder interests.
The Committee has agreed with Sir David McMurtry
and John Deer that they will not participate in this new
plan. The year ended 30th June 2018 was the first year
during which this new policy applied and the Committee
will continue to keep the remuneration policy and its
implementation under review in the context of shareholder
feedback, the evolving governance landscape, and our
need to continue to attract, motivate and retain the talent
required to underpin Renishaw’s continued growth and long-
term shareholder value creation.
60
GovernanceRenishaw plc Annual report and accounts 2018 Key remuneration discussions during the year
Appointments
As detailed elsewhere in this Annual report, during the
year Renishaw announced the appointment of Will Lee as
Chief Executive, with Sir David McMurtry focusing on his
role as Executive Chairman with additional responsibilities
for Group innovation and product strategy. The Committee
carefully considered the implications of these role changes
on remuneration, taking in to account market relativities,
the specific nature of the roles at Renishaw and the way
in which value is created from both of these roles. As a
consequence, it was determined that Will Lee’s new salary
be initially set at £550,000 from 1st February 2018, to reflect
his promotion to Chief Executive. This decision is in line with
our policy of preferring the salary of new appointees to be
brought gradually up to the market median level over time,
subject to the demonstrated performance of the individual
in the role over that period. It is the Committee’s intention
therefore to consider future increases to Will’s salary in line
with this policy and, if appropriate, to award increases to
move his pay closer to a more market competitive position
over time. This may involve a salary increase above the
average salary increase for the UK employee population as
a whole. In order to further strengthen the alignment of Will’s
interests with those of shareholders, the Committee also
decided to increase his shareholding requirement to 200%
of salary. The Committee expects this level of shareholding
to be built up over time. In addition, a modest change to
Will’s pension contribution was authorised to correct an
anomaly and align him with the other non-founder executive
directors. All other aspects of Will’s remuneration package
remain unchanged.
The Committee also considered Sir David’s remuneration
and decided that his remuneration should remain
unchanged. This decision reflects the substantial value he
contributes to the Group in terms of innovation and product
strategy, his extensive market knowledge and his executive
chairmanship of the Board.
It was also determined that Sir David’s and Will’s
remuneration will next be reviewed in 2019.
Performance and reward
We believe that our remuneration arrangements, while
different in certain respects from those adopted by other
listed companies, are effective, closely aligned with
performance and appropriately reinforce the actions and
behaviours needed to continue to create long-term value
for all our shareholders. In setting targets the Committee
considers both the opportunities and risks associated
with the Company’s annual business plan and the Board’s
discussions regarding long-term strategy and its ambitions
for the business. Consequently, at the start of the year,
stretching targets were set that required:
• c.10% profit growth to be achieved for threshold
bonus payout;
• c.24% profit growth for an on-target cash bonus payout;
and
• c.28% profit growth to warrant the start of payment under
the additional deferred annual equity incentive plan.
As set out earlier in this Annual report, Renishaw
performance in FY2018 was very strong. Adjusted profit
before tax – a KPI of our business performance and the
measure used in our executive incentives – grew by 33%
to £145.1m. Renishaw’s total shareholder return (TSR)
continued to outpace the FTSE 250. Over the year to
30th June 2018, TSR was 48% (compared to a TSR of 11%
for the FTSE 250); over the last five years, Renishaw’s TSR
of 277% outperformed the FTSE 250 by 17% per annum.
In this context, the Committee believes the payments under
the annual cash bonus (100% of maximum, equating to
100% of salary for executive directors) and, for the first time
in FY2018, the deferred annual equity incentive plan (85.1%
of maximum, or 42.5% of salary) appropriately reflects
Renishaw’s performance over the year.
Workforce considerations
The Committee reviews and discusses with the Chief
Executive the remuneration arrangements and management
decisions regarding base pay and bonuses for all staff at
the next levels of management.
The Committee also considers the base pay and
bonus arrangements for all other staff in Renishaw.
Shareholders will note that a base pay budget of 4.4%
was made available for application (on a performance and
market-related basis) across the workforce. Those executive
directors in receipt of an annual base pay increase this year
received 2.7%.
Additionally, the Committee has provided active support
and advice to the Chief Executive as he considers the
remuneration policy and practice for the workforce globally.
Review of the Remuneration Committee’s
activities
The Committee met seven times during the year. Its main
activities included:
• implementing the deferred equity incentive plan;
• setting targets for the annual bonus and deferred equity
incentive plan at the start of the year, with reference to the
Company’s budgets and forecasts (as disclosed later in
this report);
• reviewing remuneration arrangements across the Group;
• reviewing director salaries and approving bonuses for
the year;
• approving Sir David McMurtry’s expenses;
• reviewing the salaries of Will Lee and Sir David McMurtry
following the changes in their respective roles and
responsibilities; and
• reviewing gender pay gap reporting.
On behalf of Renishaw and the Remuneration Committee,
I would like to thank you for your continued support and
feedback. The Committee looks forward to meeting as
many of you as possible at the forthcoming AGM, and
hope that we can count on your support for this year’s
remuneration report.
Kath Durrant
Chair of the Remuneration Committee
26th July 2018
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Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual report and accounts 2018 Directors’ remuneration report continued
Remuneration policy
This section of the Directors’ remuneration report sets out the 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. This policy remains
unchanged from that published in last year’s Directors’ remuneration report and approved by shareholders at the 2017 AGM,
save for minor changes to aid clarity and improve transparency, including updated performance scenario charts, to reflect
FY2019 remuneration and additional disclosure under the section titled ‘Statement of consideration of shareholder views’.
Total
remuneration
policy
Total
remuneration
Purpose and
relevance to strategy
To attract, motivate and
retain talented executive
directors to support
delivery of Renishaw’s
strategy and maximise
long-term shareholder
value.
Operation
Maximum
Performance measures
Executive director
remuneration is designed
to be simple, conservative,
and aligned with
shareholder interests.
A cap on total
remuneration at upper
quartile of the relevant
market for the position in
question, will apply.
Described below
in relation to each
constituent element of
remuneration.
Our total remuneration policy comprises the following constituent elements:
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.
Continued good
performance
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.
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.
62
GovernanceRenishaw plc Annual report and accounts 2018 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;
• life assurance;
Excluding accommodation
and relocation costs,
benefits are capped
at £50,000 per annum.
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 cash
bonus
To incentivise and reward
execution of the Group’s
objectives.
• long-term disability cover;
• home telephone costs.
If, on the appointment of
a new executive director,
relocation is required to the
director’s place of work, the
necessary relocation support
may be provided.
100% of salary
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.
Deferred
annual equity
incentive plan
To incentivise and
reward outperformance
beyond the annual bonus
maximum, and encourage
executive director share
ownership.
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
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 cash
bonus above.
63
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual report and accounts 2018 Directors’ remuneration report continued
Element of
remuneration
Purpose and
relevance to strategy
Operation
Maximum
Performance measures
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.
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.
Will Lee and Geoff McFarland
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 is 15% of
base salary.
Not applicable
Not applicable
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
64
GovernanceRenishaw plc Annual report and accounts 2018 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 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
.
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 2017, the binding vote on the
remuneration policy received proxy votes of 98.94% in
favour and the advisory vote on the Directors’ remuneration
report received proxy votes of 99.60% in favour.
.
65
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual report and accounts 2018 Directors’ remuneration report continued
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 2019. Note that deferred equity incentive plan awards granted in a year will not normally vest until the third
anniversary of the date of grant, and the projected value excludes the impact of share price movement.
2
0
4
,
1
0
0
7
7
2
2
,
1
5
2
5
2
0
7
2
0
7
2
0
7
2
0
7
i
n
M
t
e
g
r
a
T
x
a
M
Sir David
McMurtry
7
7
4
,
1
5
7
2
0
5
5
5
6
0
,
1
3
1
4
2
5
6
2
5
6
2
5
6
2
5
6
i
n
M
t
e
g
r
a
T
x
a
M
6
8
7
8
2
3
8
5
4
t
e
g
r
a
T
8
5
4
8
5
4
i
n
M
5
9
8
7
3
4
8
5
4
x
a
M
5
0
1
,
1
5
0
2
9
0
4
1
9
4
x
a
M
8
9
7
7
0
3
1
9
4
t
e
g
r
a
T
1
9
4
1
9
4
i
n
M
3
0
1
,
1
5
0
2
9
0
4
9
8
4
x
a
M
6
9
7
7
0
3
9
8
4
t
e
g
r
a
T
9
8
4
9
8
4
i
n
M
John Deer
Will Lee
Allen Roberts
Geoff McFarland
Minimum remuneration
Annual cash bonus
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.
Not applicable
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.
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 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.
66
GovernanceRenishaw plc Annual report and accounts 2018 Annual remuneration report
This section of the report sets out the remuneration of the directors in the year ended 30th June 2018 and also contains
details of how we intend to implement the policy for the forthcoming financial year. The information on pages 67 to 71 has
been audited where required under the regulations and is indicated as audited where applicable.
Single total figure table (audited)
Sir David McMurtry
John Deer
Will Lee1
Allen Roberts
Geoff McFarland
Carol Chesney
Kath Durrant
Sir David Grant
John Jeans
Salary/fees
Benefits
Bonus2
Pension
Total
2018
£’000
700
425
461
398
398
52
52
52
52
2017
£’000
681
411
313
385
385
50
50
50
50
2018
£’000
2017
£’000
2018
£’000
2
21
19
21
19
0
0
0
1
2
20
18
20
19
2
1
0
3
700
425
658
567
567
n/a
n/a
n/a
n/a
2017
£’000
524
316
242
296
296
n/a
n/a
n/a
n/a
2018
£’000
2017
£’000
2018
£’000
2017
£’000
n/a
n/a
61
60
60
n/a
n/a
n/a
n/a
n/a
n/a
43
58
58
n/a
n/a
n/a
n/a
1,402
1,207
871
1,199
1,046
1,044
52
52
52
53
747
616
759
758
52
51
50
53
1 Will Lee was appointed to the Board on 1st August 2016, and promoted to the role of Chief Executive with effect from 1st February 2018. His remuneration shown in the table above
in relation to 2017 reflects the part-year from the date of his appointment to the Board to 30th June 2017. His remuneration in relation to 2018 reflects the change to his remuneration
on promotion to Chief Executive with effect from 1st February 2018, as set out in the Annual statement from the Chair of the Remuneration Committee at the start of this Directors’
remuneration report.
2 For 2018, the value of the bonus includes both the value of the annual cash bonus and the face value of shares to be awarded under the deferred annual equity incentive in respect of the
year ended 30th June 2018. Deferred shares will normally vest on the third anniversary of grant, subject to continued employment.
Benefits
Sir David McMurtry
John Deer
Will Lee
Allen Roberts
Geoff McFarland
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
n/a
19
19
19
19
2
2
<1
2
<1
Incentive outcomes for FY2018
Under the remuneration policy approved at the 2017 AGM, executive directors are eligible for an annual cash bonus of up
to 100% of base salary in FY2018. In addition, executive directors who are participants in the new deferred annual equity
incentive plan are eligible for an award over shares with a face value of up to 50% of base salary if the annual cash bonus
maximum performance level is exceeded.
For FY2018, the annual cash bonus and deferred annual equity incentive plan were based on a single financial measure,
being the Group’s adjusted profit before tax; no non-financial measures were included.
The Committee established targets for the annual cash bonus and deferred annual equity incentive plan taking into
account the profit growth expectations for the business, other financial parameters and strategic objectives to be achieved.
The targets for the deferred annual equity incentive plan start at the maximum performance level for the annual cash bonus,
as set out overleaf:
67
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual report and accounts 2018 Directors’ remuneration report continued
Annual cash bonus and deferred annual equity incentive plan
)
y
r
a
a
s
l
f
o
%
(
t
u
o
y
a
P
150%
100%
75%
0%
Stretch
£140m
On-target
£135m
Maximum
£150m
Shares
Deferred
annual equity
incentive
Cash
Annual
cash
bonus
Threshold
£120m
Threshold
On-target
Stretch
Maximum
Group adjusted profit before tax
The outcome of the annual cash bonus and deferred annual equity incentive plan for FY2018 was determined by Renishaw’s
adjusted profit before tax (before the cost of the executive directors’ annual bonus). For FY2018, adjusted profit before tax
calculated on this basis was £148.5m. This outcome was between the Stretch and Maximum levels of performance set for
FY2018, and resulted in a payment level of 100% of salary for the annual cash bonus plan. This level of performance also
results in a grant of share awards over 42.5% of salary under the deferred annual equity incentive plan, which will be made
later in 2018 and details of which will be disclosed in next year’s Annual report on remuneration. Sir David McMurtry and John
Deer participate in the annual cash bonus plan, but the Committee has agreed with both of them that they will not participate
in the deferred annual equity incentive plan.
Total pension entitlements
Will Lee and Geoff McFarland are members of the Company’s closed defined benefit scheme. The normal retirement age is
65. On death, pension benefits would pass to that member’s dependants.
Since the closure of the defined benefit scheme, contributions have been made to a defined contribution scheme or paid
in cash.
At 30th June 2018:
Will Lee
Geoff McFarland
Payments to past directors
No payments were made to past directors during the year.
Loss of office payments
There were no loss of office payments during the year.
Value of defined benefit
pension entitlement
Pension contributions
£8,942 per annum
Paid in cash
£29,819 per annum
Paid in cash
Performance graph
The graph below shows the Company’s total shareholder return (TSR) performance, compared with the FTSE 250 index,
which the Committee believes 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.
Renishaw
FTSE 250
2010
2011
2012
2013
2014
2015
2016
2017
2018
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
2009
68
GovernanceRenishaw plc Annual report and accounts 2018
Chief Executive total remuneration
The table below sets out information relating to the remuneration of the Chief Executive for each of the years in question:
Year
Will Lee
(from 1st February 2018)
Single figure of total remuneration (£‘000)
Annual bonus payout
(includes annual cash bonus and deferred
equity incentive) % of maximum
Long-term incentive vesting
% of maximum
Sir David McMurtry
(until 31st January 2018)
2018
2017
2016
2015
2014
2013
2012
2011
2010
594
95%
n/a
Single figure of total remuneration (£‘000)
818
1,207
668
1,298
100%
77%
0% 100%
632
0%
663
10%
969
1,066
69% 100%
472
0%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Annual bonus payout
% of maximum
Long-term incentive vesting
% of maximum
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 other than Geoff McFarland, who was appointed to the board of Cambridge Mechatronics
Limited with effect from 14th March 2018 and receives a fee of £25,000 per annum which he retains.
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
approved by the shareholders at the AGM in 2017 includes a minimum shareholding guideline for executive directors. As at
30th June 2018 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:
Number of ordinary
shares of 20p each
beneficially owned
(as at 30th June 2018)
26,377,291
12,233,040
1,000
5,165
2,000
500
198
-
440
Unvested and
subject to continued
employment
(awarded under
the deferred equity
incentive plan)
Minimum
shareholding
guideline
Current
shareholding1
Minimum
shareholding
guideline met
n/a
n/a
-
-
-
n/a
n/a
n/a
n/a
0.5x salary
1,997x salary
0.5x salary
1,526x salary
2x salary
0.5x salary
0.5x salary
0.10x salary
0.69x salary
0.27x salary
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Yes
Yes
Building
Yes
Building
n/a
n/a
n/a
n/a
Sir David McMurtry
John Deer
Will Lee
Allen Roberts
Geoff McFarland
Carol Chesney
Kath Durrant
Sir David Grant
John Jeans
1 Current shareholdings for comparison with the shareholding requirements for executive directors are calculated based on salary as at 30th June 2018 and by reference to the closing
share price on that date (5,300p).
There were no share-based payments made during the year. Executive directors, excluding Sir David McMurtry and John
Deer, were eligible to receive an award under the deferred equity incentive plan for performance over the year under review.
The details of these awards – which at the date of this Annual remuneration report have yet to be granted – will be reflected in
the above table in next year’s Annual remuneration report.
69
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual report and accounts 2018 Directors’ remuneration report continued
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 2017 to 2018:
Salary
Benefits
Annual bonus
2018
£’000
6381
2
735
2017
£’000
681
2
524
Chief Executive
% change
UK employees (average)
% change
-6
-232
+40
+5.0
+2.4
+32.5
1 Represents the salary received by Sir David McMurtry in relation to this role (£700,000 per annum for the period to 31st January 2018), and by Will Lee for the period from 1st February
2018 (£550,000 per annum).
2 Reflects differences in the benefits received by Will Lee and Sir David McMurtry, rather than changes in the cost of those benefits year-on-year. The value shown for 2018 excludes the car
allowance received by Will Lee (Sir David McMurtry does not receive a car allowance).
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 62.4% 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
2018
£’000
226,809
38,942
2017
£’000
211,572
34,939
change
%
+7.2
+11.5
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
Executive directors
Base salary
The Committee determined the salaries for Sir David McMurtry and Will Lee for the year ending 30th June 2019 would
be unchanged. Salaries for each of the other executive directors, John Deer, Allen Roberts and Geoff McFarland, will be
increased by 2.7%. This is at a rate that is less than the average for the UK workforce, being 4.4%. The salaries will be as
follows from 1st July 2018:
Sir David McMurtry
John Deer
Will Lee
Allen Roberts
Geoff McFarland
Annual cash bonus
1st July 2018
£’000
30th June 2018
£’000
700
437
550
409
409
700
425
550
398
398
As set out in the remuneration policy, the maximum bonus opportunity for the year ending 30th June 2019 will continue to
be 100% of salary for executive directors. The bonus for the year ending 30th June 2019 will be based on financial targets.
The bonus scheme targets have been set based on the appropriate part of the policy as set out in the remuneration policy
table, and will be disclosed in next year’s Annual remuneration report.
Deferred annual equity incentive
For the 2019 financial year, non-founder executive directors will again be eligible for an award of up to 50% of salary under
the deferred annual equity incentive, subject to stretching targets (in excess of the level required for the annual cash 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.
70
GovernanceRenishaw plc Annual report and accounts 2018 Non-executive directors
The fee paid to each of the non-executive directors has been increased to £55,000 per annum for the year ending 30th June
2019 (£51,600 for the year ending 30th June 2018). No additional fees are paid, for example, for chairing Board committees.
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 Committee for this purpose were:
Kath Durrant
Carol Chesney
Sir David Grant
John Jeans
Mercer Kepler assisted the Committee in reviewing and benchmarking the executive 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 and expenses paid to
Mercer Kepler for advice received in the year were £37,880. 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 undertaken 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. Executive directors may attend meetings of the Committee by
invitation for parts of the agenda, as appropriate, and independent advisers are used as required.
Statement of voting at general meeting
At the AGM held on 20th October 2017, votes cast in respect of the Directors’ remuneration policy were as follows:
Resolution
Approval of
remuneration policy
Votes for
% for
Votes against
% against
Total votes cast
Votes withheld
60,902,216
98.94%
654,533
1.06%
61,556,749
1,187,755
The votes cast in respect of the Directors’ remuneration report at the same meeting were as follows:
Resolution
Approval of
remuneration report
Votes for
% for
Votes against
% against
Total votes cast
Votes withheld
61,697,021
99.60%
250,317
0.40%
61,947,338
797,166
This report was approved by the Board and has been signed on its behalf by:
Kath Durrant
Chair of the Remuneration Committee
26th July 2018
71
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual report and accounts 2018 Other statutory and regulatory disclosures
Sir David McMurtry, as one party, and John 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 M E Deer agree that (i) John Deer and Mrs
M E 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 2018 for
a further period of five years and will terminate on the earlier
of 25th May 2023 or the deaths of both Sir David McMurtry
and John Deer.
The rules on appointment, reappointment and retirement
by rotation of the directors and their powers are set out in
the Company’s Articles of Association. There are no powers
given to the directors that are regarded as unusual.
Directors’ and officers’ indemnity insurance
Subject to the provisions of the Companies Act 2006,
the Company’s Articles of Association provide for the
directors and officers of the Company to be appropriately
indemnified. The Company maintains insurance for its
directors and officers in respect of their acts and omissions
during the performance of their duties.
Share capital and change of control
Details of the Company’s share capital, including rights
and obligations, is given in note 19 to the Financial
statements. The Company is not a party to any significant
agreements that might terminate upon a change of control
of the Company.
A shareholder authority for the purchase by the Company
of a maximum of 10% of its own shares was in existence
during the 2018 financial year. However, the Company did
not purchase any of its own shares during that time.
Auditor
A resolution to reappoint 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.
Review of the business
A review of the business and likely future developments
is given in the Chairman’s statement, Chief Executive’s
review and the other sections of the Strategic report.
Segmental information by geographical market is given in
note 2 to the Financial statements.
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: Austria, Czech Republic, Denmark, Finland,
France, Germany, Hungary, Italy, Netherlands, Poland,
Spain, Sweden and Switzerland;
• Americas: Brazil, Canada, Mexico and USA;
• Far East: Australia, China, Hong Kong, Japan, Malaysia,
Singapore, South Korea and Taiwan; and
• other regions: India, Israel, Russia and Turkey.
There are also representative offices in Indonesia, Slovakia,
Thailand and Vietnam and a joint venture in Slovenia, RLS
Merilna tehnika d.o.o. (RLS).
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 £33,482,730 or
46.0p per share (2017: £28,751,474 or 39.5p per share)
which, together with the interim dividend of £10,190,396 or
14.0p per share (2017: £9,098,568 or 12.5p) makes a total
amount of dividends for the year of £43,673,126 or 60.0p
per share, compared to £37,850,042 or 52.0p per share for
the previous year.
Directors and their interests
The directors at the end of the year together with their
interests in the share capital of the Company (with the
equivalent number of voting rights), as notified to the
Company are listed on page 69.
All the interests were beneficially held with the exception
of 2,434,411 shares (2017: 2,434,411 shares) which were
non-beneficially held by John Deer but in respect of which
he has voting rights.
There has been no change in the holdings shown on
page 69 in the period 1st July 2018 to 26th July 2018.
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 18th October 2018. Details of directors who offer
themselves up for re-election or election, as the case may
be, are shown on pages 46 to 47 and full biographical
details are available at www.renishaw.com.
72
GovernanceRenishaw plc Annual report and accounts 2018 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 appointment of Catherine
Glickman and the ability to make market purchases of its
own ordinary shares, up to a total of 10% of the issued
share capital.
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.
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
Guidance 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 2018. It should be noted
that these holdings are likely to have changed since
being notified to the Company. However, notification of
any change is not required until an applicable threshold
is crossed.
Substantial shareholdings
Baillie Gifford & Co
BlackRock, Inc.
Capital Research and
Management Company
% of issued
share capital
Number of
shares
5.25% 3,846,993
4.92% 3,578,133
4.76% 3,465,730
Standard Life Investments Limited
4.99% 3,631,612
Research and development
The Group has a continuing commitment to a high level of
R&D. The expenditure involved is directed towards the R&D
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 R&D is contained in the Performance –
financial review section of the Strategic report.
Employment policies are designed to provide equal
opportunities irrespective of race, religion, gender, 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
38 to 43.
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.
Events after the balance sheet date
There have been no material events affecting the Company
since the year end.
Financial risk management, objectives
and policies
Descriptions of the use of financial instruments and the
Group’s financial risk management objectives and policies,
and exposure to market risk, including credit and liquidity
risk, can be found in note 20 to the Consolidated financial
statements on pages 108 to 111.
73
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual report and accounts 2018 Other statutory and regulatory disclosures continued
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 existing remuneration policy, if approved at
the AGM.
Greenhouse gas emissions
The disclosures concerning greenhouse gas emissions
required by law are set out in the Corporate social
responsibility report on page 42.
Signed on behalf of the Board.
Mark Noble
General Counsel & Company Secretary
26th July 2018
Renishaw plc
Registered number 01106260
England and Wales
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 (Executive Chairman 36.23% shareholder) is
a controlling shareholder. John Deer (Deputy Chairman,
together with his wife, 16.80%) is also a controlling
shareholder by virtue of a long-standing voting agreement
between John Deer (and his wife) and 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 a relationship agreement
infringes upon their rights as shareholders and their track
record demonstrates that they act in the best interests of
the Company.
As a result of there being no relationship agreement in
place, the Listing Rules provide that certain enhanced
oversight measures will apply to the Company.
This means that, unless and to the extent that the FCA
agrees otherwise, all transactions with the controlling
shareholders must be approved by the Company’s
shareholders (excluding the controlling shareholders)
in accordance with the related party transaction
requirements of the Listing Rules, and none of the normal
exemptions apply.
74
GovernanceRenishaw plc Annual report and accounts 2018 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.
We consider the Annual report and accounts, taken as a
whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess
the Group’s position and performance, business model
and strategy.
Signed on behalf of the Board.
Allen Roberts
Group Finance Director
26th July 2018
Directors’ responsibilities
The directors are responsible for preparing the Annual
report and the Group and 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 comply 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.
75
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual report and accounts 2018 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 parent 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.
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 34 to
36 that describe the principal risks and explain how they
are being managed or mitigated;
• the directors’ confirmation set out on page 34 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 53 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 page 37 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.
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 30 June 2018 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; 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:
Group
Parent company
Consolidated balance
sheet as at 30 June 2018
Balance sheet as at 30
June 2018
Statement of changes in
equity for the year then
ended
Related notes C1 to C40
to the financial statements
including a summary of
significant accounting
policies
Consolidated income
statement for the year
then ended
Consolidated statement
of comprehensive income
and expense for the year
then ended
Consolidated statement of
changes in equity for the
year then ended
Consolidated statement
of cash flows for the year
then ended
Related notes 1 to 24 to
the financial statements,
including a summary of
significant accounting
policies
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, including FRS 101 “Reduced Disclosure
Framework” (United Kingdom Generally Accepted
Accounting Practice).
76
GovernanceRenishaw plc Annual report and accounts 2018 Overview of our audit approach
Key audit matters
• Revenue recognition due to susceptibility to management override through inappropriate
manual journals.
• Assessment of hedging activities in accordance with IAS 39.
• Accounting for the liabilities associated with defined benefit pension schemes.
Audit scope
• We performed an audit of the complete financial information of eight components and audit
procedures on specific balances for a further five components.
• The components where we performed full or specific audit procedures accounted for 95% of
Profit before tax, 89% of Revenue and 88% of Total assets.
Materiality
• Overall Group materiality of £6.5m which represents 4.2% of Group profit before tax for both
continuing and discontinued operations.
Key audit matters
Key audit matters are those matters that, in our professional judgment, 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.
Based on the audit
procedures performed
manual entries were
appropriate, including
post close adjustments
during the consolidation
process.
Our journal entry
testing procedures did
not identify instances
of inappropriate
management override
in the recognition of
revenue across the
Group.
Revenue recognition due to the
susceptibility to management
override through inappropriate
manual entries.
Refer to the Audit Committee Report
(page 57); Accounting policies (page
92); and Note 2 of the Consolidated
Financial Statements (pages 95 to 96).
We consider that the vast majority
of Renishaw’s revenue transactions
reported under existing IFRS guidance
are routine, non-complex, and systems
driven, with no judgement applied over
the recorded amount.
However, the accounting for revenues
is susceptible to management override
through the recording of manual
topside journal entries either in the
underlying ledgers or 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
manual journals posted.
We performed walkthroughs of the consolidation
process at various month ends throughout the year,
including the interim and year end to assess the design
and implementation of key controls over the manual
consolidation process.
For a number of reporting units, which covered 35% of
total revenue, as part of our overall revenue recognition
testing we used data analysis tools on 100% of revenue
transactions in the year to test the correlation of revenue
to cash receipts to verify the occurrence of revenue. We
tested non-correlating entries with detailed testing of a
sample of sales transactions to ensure that revenue had
been appropriately recognised.
For those in-scope locations where we did not use data
analysis tools we performed more focused journal entry
testing on manual journal entries to revenue.
Other audit procedures specifically designed to address
the risk of management override included using data
extracted from the accounting system to test the
appropriateness of journal entries impacting revenue,
as well as other adjustments made in the preparation of
the financial statements, with a focus on selecting and
testing manual journals.
For all full and specific scope locations we
independently verified the results of the consolidated
entities used in the manual consolidation 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% of
performance materiality and obtained evidence to verify
the validity and accuracy of the journals being posted.
We performed full and specific scope audit procedures
over this risk area in nine locations, which covered
89% of the Group’s revenue, of which the Primary Team
performed the procedures in three locations which
covered 35% of the Group’s revenue.
77
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual report and accounts 2018 Key observations
communicated to the
Audit Committee
Based on the audit
procedures performed
we confirmed that the
group’s assessment
of hedging activities
for the year ended
30 June 2018 and
the disclosures within
Note 20 were in
accordance with the
requirements of IAS 39,
Financial Instruments:
Recognition and
Measurement.
Independent auditor’s report
to the members of Renishaw plc continued
Risk
Our response to the risk
Assessment of hedging activities
in accordance with IAS 39 (£19.4m,
FY17: £31.0m).
We gained an understanding of the key controls and
processes in place to assess the hedging effectiveness
of forward currency contracts.
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. Through the
involvement of our treasury specialists we reviewed a
sample, spanning all banks and counterparties that
Renishaw has deals with, of the terms and conditions
of the different categories of forward currency
contracts open at the year end and determined
whether hedge accounting was permissible under
IAS 39.
• using our treasury specialists to evaluate
management’s documentation and assessment
of hedge effectiveness for a sample of hedge
effectiveness model types.
• ensuring that the financial statement disclosures were
in accordance with accounting standards.
Refer to the Audit Committee Report
(page 58); Accounting policies (page
92); and Note 20 of the Consolidated
Financial Statements (pages 108 to 111).
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 income statement.
Given the complexity of hedge
accounting, the criteria for hedge
effectiveness documentation under the
provisions of IAS 39 and the material
differences identified during our FY17
audit which impacted the FY16 results
we continued to focus on this area.
78
GovernanceRenishaw plc Annual report and accounts 2018 Key observations
communicated to the
Audit Committee
Based on the audit
procedures performed
we are satisfied that
the closing liability is
materially correct and
that in combination
the judgements made
in relation to the
underlying actuarial
assumptions are
appropriate.
We are satisfied that
the disclosure in Note
14 is aligned with the
requirements of IAS 19.
Risk
Our response to the risk
Accounting for the liabilities
associated with defined benefit
pension schemes (£240.2m,
FY17: £237.5m).
Refer to the Audit Committee Report
(page 58); Accounting policies (page
94); and Note 14 of the Consolidated
Financial Statements (pages 104 to
106).
A defined benefit pension liability
of £240.2m has been recorded on
the balance sheet at 30 June 2018
in respect of Group schemes. As a
result of the quantum of this liability,
the level of judgement involved in
calculating the closing liability, and the
fact that relatively small movements in
assumptions can result in a material
impact to the financial statements
there is an increased risk of material
misstatement.
Whilst management utilises the services
of third party actuarial advisors to
determine their key assumptions,
there is a risk that the discount
rate, rate of inflation and mortality
assumptions used in the calculation
are inappropriate.
We understood and walked through management’s
process and methodology for calculating the pension
liability to gain an understanding of the design and
implementation of key control.
We evaluated the competence and objectivity of
management’s external actuarial experts.
We obtained the IAS 19 actuarial valuations for
the UK and Irish Pension Schemes as prepared
by management’s experts and considered the
reasonableness and consistency of the methodology
used to calculate the pension liabilities through
involvement of our actuarial specialists.
We used our internal actuarial specialists to assess
and challenge the appropriateness of the significant
assumptions used in determining the defined benefit
pension liabilities including the discount rate, RPI and
CPI inflation assumptions and mortality assumptions.
Specifically, we ensured these fell within an acceptable
range on benchmarking these against our internally
accepted actuarial assumptions.
We assessed the appropriateness and adequacy of the
disclosures in respect of the defined pension liability in
Note 14 of the annual report.
We have omitted the following areas in the auditor’s report that were included in the prior year: revenue recognition as a
result of inappropriate cut off via manipulation of timing of revenue recognition, the valuation of the Group’s forward currency
derivatives, and the carrying value of goodwill. Whilst we determined that these were areas of increased risk for our audit
they were not assessed as being areas subject to significant Management judgement or areas where there were significant
findings in our audit.
79
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual report and accounts 2018 Independent auditor’s report
to the members of Renishaw plc continued
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.
Profit before tax
Revenue
94% Full
scope components
1% Specific
scope components
5% Other procedures
In assessing the risk of material misstatement to the Group’s
financial statements, and to ensure we had adequate
quantitative coverage of significant accounts in the
financial statements, of the 50 reporting components of the
Group, we selected 13 components covering entities in
China, France, Germany, Hong Kong, India, Ireland, Italy,
Japan, South Korea, United Kingdom and United States of
America, which represent the principal business units within
the Group.
Of the 13 components selected, we performed an audit
of the complete financial information of eight components
(“full scope components”) which were selected based
on their size or risk characteristics. For the remaining
five 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.
The reporting components where we performed audit
procedures accounted for 95% (2017: 94%) of the Group’s
Profit before tax, 89% (2017: 92%) of the Group’s Revenue
and 88% (2017: 90%) of the Group’s Total assets. For the
current year, the full scope components contributed
94% (2017: 93%) of the Group’s Profit before tax, 87%
(2017: 87%) of the Group’s Revenue and 83% (2017: 81%)
of the Group’s Total assets. The specific scope components
contributed 1% (2017: 1%) of the Group’s Profit before tax,
2% (2017: 5%) of the Group’s Revenue and 5% (2017: 9%)
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 significant accounts tested for the Group.
Of the remaining 37 components that together represent 5%
of the Group’s Profit before tax, none are individually greater
than 5% of the Group’s Profit before tax. For a sample
of these components, we performed other procedures,
including analytical review to respond to any potential risks
of material misstatement to the Group’s financial statements.
The charts opposite illustrate the coverage obtained from
the work performed by our audit teams.
rotation to line up
Total assets
87% Full
scope components
2% Specific
scope components
11% Other procedures
83% Full
scope components
5% Specific
scope components
12% Other procedures
Changes from the prior year
There were the following changes in scope from the prior
year to ensure that we performed sufficient work to be able
to give an opinion on the financial statements as a whole
taking into account the structure of the Group and company
and the level of activity of each group company within
the year: Renishaw UK Sales Limited, a new fully active
business unit, was designated as a full scope component
for the current year audit, Renishaw SAS and itp GmbH
were designated as specific scope components for the
current year audit, review scope in the prior year, while the
scope for Renishaw Mexico was reduced from specific
scope in the prior year to review scope in the current year,
and Renishaw Iberica and Renishaw Shanghai Management
Limited were not scoped in in the current year, both were
specific scope in the prior year.
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, or by component auditors from other
EY global network firms operating under our instruction.
Of the eight full scope components, audit procedures were
performed on three of these directly by the primary audit
team, and of the five specific scope components audit
procedures were performed on three of these directly by
the primary audit team. For the remaining five full scope
components and two specific scope components, where the
80
GovernanceRenishaw plc Annual report and accounts 2018 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.
During the current year’s audit cycle, visits were undertaken
by the primary audit team to the component teams in Ireland
and the United States of America. These visits involved
discussing the audit approach with the component teams,
discussing key risk areas, meeting with local management,
and attending planning meetings. The primary team
interacted regularly with the component teams where
appropriate during various 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 £6.5 million
(2017: £4.7 million), which is 4.2% (2017: 4.6%) 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.
We determined materiality for the Parent Company to be
£2.5 million (2017: £2.8 million), which is 3.0% of Profit
before tax and dividends received, (2017: 5.0% of Profit
before tax, dividends received and other one-off items).
We believe that Profit before tax and dividends received
provides us with a consistent year-on-year basis for
determining materiality.
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%
(2017: 75%) of our planning materiality, namely £4.875m
(2017: £3.5m). We have set performance materiality at this
percentage due to the past history of few misstatements
in routine non-complex areas 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 £0.3m to £3m (2017: £0.5m to £2.3m).
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 £0.325m
(2017: £0.235m), 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 74, including the
Strategic Report, set out on pages 1 to 43, Governance,
set out on pages 44 to 74, and Shareholder information,
set out on pages 126 to 128, 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, 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:
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Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual report and accounts 2018 Independent auditor’s report
to the members of Renishaw plc continued
Responsibilities of directors
As explained more fully in the directors’ responsibilities
statement set out on page 75, 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.
• Fair, balanced and understandable set out on page 53
– 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
• Audit committee reporting set out on pages 56 to 59
– 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 54
– 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.
In preparing the financial statements, the directors are
responsible for assessing the group and parent 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 the directors
either intend to liquidate the group or the parent company
or to cease operations, or have 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.
Explanation as to what extent the audit was
considered capable of detecting irregularities,
including 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.
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 are those that
relate to the reporting framework (IFRS, IFRS 101 and the
Companies Act 2006, the Financial Reporting Council
(FRC) and the 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 London
Stock Exchange, the Bribery Act 2010, Occupational
Health and Safety Regulations, the Data Protection Act,
and export controls.
82
GovernanceRenishaw plc Annual report and accounts 2018 Other matters we are required to address
• We were appointed by the company at its annual general
meeting on 13 October 2016 to audit the financial
statements for the year ended 30 June 2017 and
subsequent financial periods.
• The period of total uninterrupted engagement including
previous renewals and reappointments is two years,
covering the years ended 30 June 2017 to 30 June 2018.
• The non-audit services prohibited by the FRC’s Ethical
Standard were not provided to the group or the parent
company and we remain independent of the group and
the parent company in conducting the audit.
• The audit opinion is consistent with the additional report to
the audit committee.
Use of our report
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.
Paul Mapleston]
(Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
Bristol
26 July 2018
• We understood how Renishaw plc is complying with
those frameworks by reading internal policies and
codes of conduct and assessing the entity level control
environment, including the level of oversight of those
charged with governance. We made enquires of the
Group’s legal counsel and internal audit of known
instances of non-compliance or suspected non-
compliance with laws and regulations. We corroborated
our enquiries through review of correspondence with
regulatory bodies. We designed our audit procedures to
identify non-compliance with such laws and regulations
identified in the paragraph above. As well as enquiry
and attendance at meetings, our procedures involved a
review of board meetings and other committee minutes
to identify any non-compliance with laws and regulations.
Our procedures also involved journal entry testing, with a
focus on journals meeting our defined risk criteria based
on our understanding of the business.
• 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, 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, and by making
enquiries of senior management, including the Group
Finance Director, Group Internal Audit Manager and Audit
Committee Chair. We planned our audit to identify risks of
management override, tested higher risk journal entries
and performed audit procedures to address the potential
for management bias, particularly over areas involving
significant estimation. Further discussion of our approach
to address the identified risks of management override are
set out in the key audit matters section of our report.
• Based on this understanding we designed our audit
procedures to identify non-compliance with such laws and
regulations. Our procedures involved making enquiries
of key management and legal counsel, reviewing key
policies, inspecting correspondence with regulators and
reading key management meeting minutes. We also
completed procedures to conclude on the compliance
of significant disclosures in the Annual Report and
Accounts with the requirements of the relevant accounting
standards, UK legislation and the UK Corporate
Governance Code.
• We communicated regularly with component teams,
management and legal counsel in order to identify and
communicate any instances of non-compliance with laws
and regulations.
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.
Notes:
1. The maintenance and integrity of the Renishaw plc web site 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
web site.
2. Legislation in the United Kingdom governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.
83
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual report and accounts 2018 Contents
Introduction
The directors are responsible for preparing the Annual report and the Group and Company financial statements in accordance
with applicable law and regulations. The full statement of Directors’ responsibilities can be found on page 75.
The Independent auditor’s report to the members of Renishaw plc (starting on page 76) provides more detail about how our
auditors have planned and conducted their audit, as well as their views on significant matters they have noted and that were
discussed by the Audit Committee.
The Notes (forming part of the financial statements) provide additional information required by statute, accounting standards or
other regulations to assist in a more detailed understanding of the primary financial statements. The basis of preparation section
(see note 1) provides details of accounting policies that apply to transactions and balances in general.
Company financial statements
Primary statements
114 Company balance sheet
115 Company statement of changes in equity
Notes to the Company financial statements
116 C.25. Accounting policies
118 C.26. Property, plant and equipment
118 C.27. Intangible assets
119 C.28. Investments in subsidiaries
119 C.29. Investments in associates and joint ventures
119 C.30. Deferred tax
119 C.31. Inventory
120 C.32. Trade receivables
120 C.33. Provisions
120 C.34. Other payables
120 C.35. Employee benefits
121 C.36. Share capital
122 C.37. Related parties
122 C.38. Capital commitments
122 C.39. Subsidiary undertakings
125 C.40. Associated undertakings and joint ventures
Consolidated financial statements
Primary statements
85 Consolidated income statement
86
Consolidated statement of comprehensive income
and expense
Consolidated balance sheet
Consolidated statement of changes in equity
87
88
89 Consolidated statement of cash flow
Notes (forming part of the financial statements)
90 1. Accounting policies
95 2. Segmental analysis
96 3. Personnel expenses
97 4. Financial income and expenses
97 5. Profit before tax
97 6. Earnings per share
97 7. Income tax expense
98 8. Discontinued operations
99 9. Property, plant and equipment
100 10. Intangible assets
102 11. Investments in associates and joint ventures
103 12. Deferred tax assets and liabilities
103 13. Derivatives
104 14. Employee benefits
106 15. Inventories
107 16. Cash and cash equivalents
107 17. Provisions
107 18. Other payables
107 19. Share capital and reserves
108 20. Financial instruments
111 21. Leases
112 22. Capital commitments
112 23. Related parties
112 24. Alternative performance measures
84
Financial statementsRenishaw plc Annual report and accounts 2018 Consolidated income statement
for the year ended 30th June 2018
from continuing operations
Revenue
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Gains/(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
Profit/(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)
Earnings/(losses) per share from discontinued operations (basic and diluted)
Earnings per share from continuing and discontinued operations (basic and diluted)
notes
2
2018
£’000
2017
£’000
611,507
536,807
(284,889)
(251,384)
326,618
285,423
(121,352)
(56,911)
4,834
(112,691)
(52,376)
(3,601)
153,189
116,755
653
(1,587)
2,970
766
(2,256)
1,836
155,225
117,101
(22,870)
(14,343)
132,355
102,758
582
(13,931)
132,937
88,827
132,924
13
132,937
pence
60.0
53.5
181.8
0.8
182.6
88,955
(128)
88,827
pence
52.0
48.0
141.3
(19.1)
122.2
4
4
5
7
8
19
19
6
6
All discontinued operations relate to operations discontinued as at June 2017. See note 8 ‘Discontinued operations’ for
further details.
85
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual report and accounts 2018 Consolidated statement of comprehensive income and expense
for the year ended 30th June 2018
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 pension scheme liabilities
Deferred tax on remeasurement of defined benefit pension 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
2018
£’000
132,937
2017
£’000
88,827
14
19
19
19
(3,813)
783
(3,030)
2,107
48
14,470
(2,810)
13,815
(1,608)
(835)
(2,443)
3,889
173
8,495
(1,573)
10,984
10,785
8,541
143,722
97,368
143,709
13
143,722
97,496
(128)
97,368
86
Financial statementsRenishaw plc Annual report and accounts 2018 Consolidated balance sheet
at 30th June 2018
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
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
9
10
11
11,20
12
13
15
20
20
13
14
16,20
17
13
18
14
12
13
19
19
19
19
2018
£’000
2017*
£’000
232,557
54,511
9,822
4,207
27,428
9,578
338,103
110,563
154,587
730
21,988
1,368
10,413
103,847
403,496
25,232
9,256
3,453
22,478
47,979
108,398
228,050
54,507
7,311
3,080
25,437
3,546
321,931
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
295,098
220,307
67,378
188
17,041
84,607
66,787
166
31,471
98,424
548,594
443,814
14,558
42
12,665
(19,389)
541,755
(460)
549,171
(577)
548,594
14,558
42
10,510
(31,049)
450,803
(460)
444,404
(590)
443,814
*2017 deferred tax has been reclassified between assets and liabilities to reflect the right of offset, see note 12.
These financial statements were approved by the Board of directors on 26th July 2018 and were signed on its behalf by:
Sir David McMurtry
Directors
Allen Roberts
87
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual report and accounts 2018 Consolidated statement of changes in equity
for the year ended 30th June 2018
Year ended 30th June 2017
Balance at 1st July 2016
Profit/(loss) for the year
Other comprehensive income
and expense (net of tax)
Remeasurement of defined benefit
scheme 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
Share
premium
£’000
42
Currency
translation
reserve
£’000
6,448
Cash flow
hedging
reserve
£’000
Retained
earnings
£’000
(37,971) 401,930
Other
reserve
£’000
(460)
Non-
controlling
interest
£’000
Total
£’000
(3,162) 381,385
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
88,955
–
(128)
88,827
–
3,889
173
–
–
–
–
6,922
(2,443)
–
–
–
4,062
6,922
(2,443)
4,062
6,922
86,512
–
–
–
–
–
–
–
–
–
–
–
(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
Year ended 30th June 2018
Profit for the year
Other comprehensive income
and expense (net of tax)
Remeasurement of defined benefit
scheme 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
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
132,924
–
2,107
48
–
–
–
–
11,660
(3,030)
–
–
–
2,155
11,660
(3,030)
2,155
11,660
129,894
–
–
–
–
–
–
–
13
132,937
–
–
–
–
–
(3,030)
2,107
48
11,660
10,785
13
143,722
Dividends paid
Balance at 30th June 2018
–
14,558
–
42
–
12,665
–
(38,942)
(19,389) 541,755
–
(460)
–
(38,942)
(577) 548,594
More details of share capital and reserves are given in note 19.
88
Financial statementsRenishaw plc Annual report and accounts 2018 Consolidated statement of cash flow
for the year ended 30th June 2018
Cash flows from operating activities
Profit for the year
Adjustments for:
Amortisation of development costs
Amortisation of other intangibles
Impairment of goodwill
Depreciation
Loss on sale of property, plant and equipment
Gains 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 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
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 pension scheme escrow account
Cash flows from investing activities
Financing activities
Interest paid
Dividends paid
Cash flows from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at the end of the year
notes
2018
£’000
2017
£’000
132,937
88,827
10
10
9
11
4
4
7
17
10
4
11
4
19
16
12,483
2,142
1,559
26,140
37
(10,143)
(2,970)
(653)
1,587
22,870
53,052
(22,866)
(25,921)
17,770
493
(30,524)
(4,471)
(18,882)
132,112
(34,852)
(14,602)
(1,700)
2,889
–
653
507
2,437
(44,668)
(338)
(38,942)
(39,280)
48,164
51,942
3,741
103,847
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
89
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual report and accounts 2018 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.
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 2017 and 2018 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 product to product.
(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 independent actuaries. Details of the estimates and judgements in respect of the current year
are given in note 14. Based on a review of the terms of the UK scheme trust deed, management has concluded that there are no
likely circumstances which would result in the Company having an unconditional right to a refund in the event of a fund surplus.
(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
90
Financial statementsRenishaw plc Annual report and accounts 2018 1. Accounting policies (continued)
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
reasonably predicted.
(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 to or has rights
to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.
In assessing control, the Group takes into consideration potential voting rights that are exercisable. The acquisition date is the
date on which control is transferred to the acquirer. The financial statements of subsidiaries are included in the consolidated
financial statements from the date that control commences until the date that control ceases. Losses applicable to the non-
controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling
interests to have a deficit balance.
Application of the equity method to associates and joint ventures – Associates and joint ventures are accounted for using the
equity method (equity accounted investees) and are initially recognised at cost. The Group’s investment includes goodwill
identified on acquisition, net of any accumulated impairment losses. The consolidated financial statements include the Group’s
share of the total comprehensive income and equity movements of equity accounted investees, from the date that significant
influence commences until the date that significant influence ceases. When the Group’s share of losses exceeds its interest in
an equity accounted investee, the Group’s carrying amount is reduced to nil and recognition of further losses is discontinued
except to the extent that the Group has incurred legal obligations or made payments on behalf of an investee.
Transactions eliminated on consolidation – Intragroup balances and transactions, and any unrealised income and expenses
arising from intragroup transactions, are eliminated. Unrealised gains arising from transactions with equity accounted investees
are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the
same way as unrealised gains, but only to the extent that there is no evidence of impairment.
New, revised or changes to existing accounting standards
The following accounting standards have been issued but are not yet effective for the Group and have not been applied in these
financial statements:
IFRS 15 ‘Revenue from Contracts with Customers’ is effective for accounting periods beginning on or after 1st January 2018
and therefore the Annual report and accounts for the year ended 30th June 2019 will be the first Annual report published in
accordance with IFRS 15. Based on our assessment explained below that the impact of IFRS 15 on the Group’s results and net
assets is not material, the Group intends to adopt a modified retrospective transition, such that the primary statements for the
year ended 30th June 2018 will not be restated but instead a cumulative catch-up adjustment will be made to retained earnings,
with disclosure made on a financial statement line basis as to how this adjustment has arisen. The half year results for the period
to 31st December 2018 will also be prepared in accordance with IFRS 15.
In assessing that the impact of IFRS 15 is not material, the Group has reviewed the following:
– Individually-significant contracts by value
– Customers with cumulatively-significant contracts
– Variable consideration arrangements
– Warranty arrangements, analysing such arrangements between assurance-type warranties already accounted for under
IAS 37 and ‘service-type’ warranties as defined by IFRS 15, to which revenue should be attributed to and deferred over the
service period
– Sale of software licences and maintenance
Whilst the impact of IFRS 15 is not considered to be material with regards to the Group’s revenue or net assets, the new
Standard will increase the quantitative and qualitative disclosures in the notes to the financial statements. IFRS 15 also requires
certain costs relating to the fulfilment of contracts with customers to be recognised as an asset, and whilst such costs are
incurred in parts of the business, the resulting contract assets are not expected to be material.
IFRS 9 ‘Financial Instruments’ is also effective for accounting periods beginning on or after 1st January 2018 and therefore the
Annual report and accounts for the year ended 30th June 2019 will be the first Annual report published in accordance with
IFRS 9. The Standard introduces new requirements for the classification and measurement of financial assets, impairment of
financial assets and hedge accounting. The classification and measurement and impairment requirements will be applied
retrospectively from 1st July 2018 without the restatement of comparative periods, and accordingly an adjustment to opening
reserves will be made.
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Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual report and accounts 2018 Notes continued
1. Accounting policies (continued)
The Group has undertaken an assessment of the impact of the new Standard had it applied to the year ended 30th June 2018
and has concluded that for the classification and measurement requirements, there would have been no material changes
arising from IFRS 9. For the new impairment requirements, the Group will be required to recognise an ‘expected credit loss’ for
trade receivables under the Standard’s ‘simplified approach’ and the impact assessment has concluded that this would also
not be material to the Group. The introduction of IFRS 9 is not expected to impact hedge accounting in the Group’s financial
statements because the Group uses foreign currency contracts to hedge the forward rate.
IFRS 16 Leases is effective for accounting periods beginning on or after 1st January 2019. Where the Group acts as a lessee,
the new Standard will eliminate the classification of leases as either operating or finance leases and instead the Group will
recognise a right-to-use asset and a lease liability for all leases (except for low-value assets and leases under 12 months),
similar to the accounting for finance leases under IAS 17. The standard is not expected to have a material effect on the profit in
any year.
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 at 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 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.
Fair value measurements
The Group measures financial instruments such as forward exchange contracts at fair value at each balance sheet date in
accordance with IAS 39. Fair value, as defined by IFRS 13, is the price that would be received to sell an asset or paid to transfer
a liability in an orderly transaction between market participants at the measurement date. Note 20, Financial instruments,
provides detail on the IFRS 13 Fair value hierarchy.
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 expense 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 within revenue in the same period as the hedged item.
Hedge accounting is discontinued when the hedging instrument expires or no longer qualifies for hedge accounting. At that
time, any cumulative gain or loss on the hedging instrument previously recognised in equity is retained in equity until the hedged
transaction occurs. If the hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in
equity is then transferred to the Consolidated income statement.
Changes in fair value of foreign currency derivatives, which are ineffective or do not meet the criteria for hedge accounting
in IAS 39 ‘Financial instruments: recognition and measurement’, are recognised in the Consolidated income statement within
gains/losses from the fair value of financial instruments.
92
Financial statementsRenishaw plc Annual report and accounts 2018 1. Accounting policies (continued)
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.
Other financial instruments
Long-term loans to associates and joint ventures are initially recognised at fair value and are subsequently held at amortised
cost. Trade and other current receivables are initially recognised at fair value and are subsequently held at amortised cost
less any provision for bad and doubtful debts. Trade and other current payables are initially recognised at fair value and are
subsequently held at amortised cost.
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.
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.
93
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual report and accounts 2018 Notes continued
1. Accounting policies (continued)
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 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 actual cost on a first-in, first-out (FIFO) basis and net realisable value.
In respect of work in progress and finished goods, cost includes all production overheads and the attributable proportion
of indirect overhead expenses that are required to bring inventories to their present location and condition. Overheads are
absorbed into inventories on the basis of normal capacity or on actual hours if higher.
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).
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 at fair value 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. To the extent that contributions payable will not be
available as a refund after they are paid into the plan, a liability is recognised at the point the obligation arises, which is the point
at which the minimum funding guarantee is agreed. 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 members. For defined contribution schemes, the amount charged to the
Consolidated income statement represents the contributions payable to the schemes in respect of the accounting period.
Accruals are made for holiday pay, based on a calculation of the number of days holiday earned during the year, but not yet
taken and also for the annual performance bonus.
94
Financial statementsRenishaw plc Annual report and accounts 2018 1. Accounting policies (continued)
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 details of the financial and liquidity positions are also given. 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.
Government grants
Government grants, comprising R&D tax credits, are recognised in the Consolidated income statement as a deduction
against expenditure.
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.
2. Segmental analysis
The Group 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 bases are similar. More details of the Group’s products and
services are given in the Strategic report.
Year ended 30th June 2018
Revenue
Depreciation and amortisation
Operating profit before gains from fair value of financial instruments
Share of profits from associates and joint ventures
Net financial expense
Gains from the fair value of financial instruments
Profit before tax
Year ended 30th June 2017
Revenue
Depreciation and amortisation
Operating profit/(loss) before losses 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
575,839
38,690
147,841
2,970
–
–
–
Metrology
£’000
503,378
32,983
126,830
1,836
–
–
–
Healthcare
£’000
35,668
2,075
514
–
–
–
–
Healthcare
£’000
33,429
3,831
(6,474)
–
–
–
–
Total
£’000
611,507
40,765
148,355
2,970
(934)
4,834
155,225
Total
£’000
536,807
36,814
120,356
1,836
(1,490)
(3,601)
117,101
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.
95
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual report and accounts 2018 Notes continued
2. Segmental analysis (continued)
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
2018
£’000
280,759
154,179
126,638
30,566
19,365
611,507
2017
£’000
248,905
129,941
113,577
27,595
16,789
536,807
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
2018
£’000
150,183
108,118
64,394
60,855
2017
£’000
134,984
95,927
56,403
52,166
There was no revenue from transactions with a single external customer which amounted to more than 10% of the Group’s
total revenue.
The following table shows the analysis of non-current assets, excluding deferred tax and derivatives, by geographical region:
UK
Overseas
Total non-current assets
2018
£’000
183,874
117,223
301,097
2017
£’000
183,102
109,846
292,948
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 pension schemes
Total payroll costs
The average number of persons employed by the Group during the year was:
UK
Overseas
Average number of employees
2018
£’000
183,873
21,809
21,127
226,809
2018
Number
2,934
1,705
4,639
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.
2018
£’000
5,589
180
5,769
2017
£’000
171,993
19,341
20,238
211,572
2017
Number
2,842
1,553
4,395
2017
£’000
4,223
165
4,388
96
Financial statementsRenishaw plc Annual report and accounts 2018 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
5. Profit before tax
Included in the profit before tax are the following costs/(income):
Depreciation of property, plant and equipment
Amortisation of intangible assets
Research and development expenditure
Research and development tax credit
Impairment of goodwill
Loss on sale of property, plant and equipment
Foreign currency losses
Auditor:
Audit of these financial statements
Audit of subsidiary undertakings pursuant to legislation
Audit assurance
All other non-audit fees
2018
£’000
653
2018
£’000
1,249
338
1,587
2018
£’000
26,140
14,625
59,127
(4,149)
1,559
37
604
212
253
4
1
2017
£’000
766
2017
£’000
1,560
696
2,256
2017
£’000
22,098
14,945
53,544
(6,692)
−
1,917
301
177
230
5
15
notes
(a)
(a)
(b)
(b)
(c)
(c)
(c)
(c)
(c)
(c)
(c)
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 £132,342,000
(2017: £102,886,000) and on 72,788,543 shares, being the number of shares in issue during both years. Basic and diluted
earnings and losses per share from discontinued operations are calculated on profits of £582,000 (2017: £13,931,000 loss)
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 temporary differences
Prior year adjustments
Recognition of previously unrecognised tax losses
Effect on deferred tax for changes in tax rates
Tax charge on profit
Total tax charge:
Income tax expense reported in the Consolidated income statement
Tax attributable to discontinued operations
2018
£’000
10,806
(411)
16,142
26,537
(2,548)
(665)
(1,855)
1,401
(3,667)
22,870
2018
£’000
22,870
80
22,950
2017
£’000
6,418
610
12,997
20,025
(1,589)
(3,647)
−
(446)
(5,682)
14,343
2017
£’000
14,343
(1,211)
13,132
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Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual report and accounts 2018 Notes continued
7. Income tax expense (continued)
The tax for the year is lower (2017: lower) than the UK standard rate of corporation tax of 19% (2017: 19.75%).
The differences are explained as follows:
Profit before tax from continuing operations
Profit/(loss) before tax from discontinued operations
Total profit before tax
Tax at 19% (2017: 19.75%)
Effects of:
Different tax rates applicable in overseas subsidiaries
UK patent box
Expenses not deductible for tax purposes
Companies with unrelieved tax losses
Share of profits of associates and joint ventures
Items with no tax effect
Prior year adjustments
Effect on deferred tax for change in tax rates
Recognition of previously unrecognised tax losses
Recognition of previously unrecognised deductible temporary differences
Other differences
Tax charge on profit
Effective tax rate
2018
£’000
155,225
662
155,887
29,619
(849)
(5,678)
672
448
(534)
195
(283)
1,401
(1,855)
(767)
581
22,950
14.7%
2017
£’000
117,101
(15,142)
101,959
20,137
(1,886)
(4,025)
310
1,960
(363)
589
(3,037)
(446)
–
–
(107)
13,132
12.9%
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. The UK 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 is not 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.
Deferred tax assets and liabilities have been calculated at the rate expected to be applicable when the relevant item reverses.
A reduction in the UK rate of corporation tax to 17% (from 1st April 2020) has previously been substantively enacted, and on
22nd December 2017, the United States enacted the Tax Cuts and Jobs Act. This legislation reduced the headline rate of
federal income tax in the United States to 21% (from 35%) from 1st January 2018. These changes have resulted in a reduction in
deferred tax assets due to tax rate changes of £1,401,000. This is offset by a credit due to recognition of deferred tax assets in
respect of prior year losses of £1,855,000, resulting in a combined net reduction in the ETR of 0.3%.
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
Profit/(loss) before tax
Tax (charge)/credit
Profit/(loss) for the year from discontinued operations
Cash flow
Profit/(loss) for the year
Adjustments for operating activities
Cash flows from/(used in) operating activities
Cash flows from investing activities
Net increase/(decrease) in cash and cash equivalents from discontinued operations
2018
£’000
4,326
(3,664)
–
662
(80)
582
2018
£’000
582
(250)
332
–
332
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)
98
Financial statementsRenishaw plc Annual report and accounts 2018 9. Property, plant and equipment
Year ended 30th June 2018
Cost
At 1st July 2017
Additions
Transfers
Disposals
Currency adjustment
At 30th June 2018
Depreciation
At 1st July 2017
Charge for the year
Released on disposals
Currency adjustment
At 30th June 2018
Net book value
At 30th June 2018
At 30th June 2017
Freehold
land and
buildings
£’000
165,661
4,516
6,340
(1,115)
(1,246)
174,156
Plant and
equipment
£’000
201,022
21,853
2,204
(6,580)
(481)
218,018
28,462
3,181
(644)
(223)
30,776
121,611
21,545
(4,320)
(260)
138,576
Motor
vehicles
£’000
Assets in the
course of
construction
£’000
9,893
1,361
–
(1,409)
(109)
9,736
6,675
1,414
(1,213)
(75)
6,801
8,222
7,122
(8,544)
–
–
6,800
–
–
–
–
–
Total
£’000
384,798
34,852
–
(9,104)
(1,836)
408,710
156,748
26,140
(6,177)
(558)
176,153
143,380
137,199
79,442
79,411
2,935
3,218
6,800
8,222
232,557
228,050
At 30th June 2018, properties with a net book value of £66,759,000 (2017: £66,606,000) were subject to a fixed charge to
secure the UK defined benefit pension scheme liabilities.
Additions to assets in the course of construction of £7,122,000 (2017: £21,910,000) comprise £3,034,000 (2017: £17,972,000)
for freehold land and buildings and £4,088,000 (2017: £3,938,000) for 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
9,600
1,118
−
(1,067)
242
9,893
5,996
1,489
(960)
150
6,675
Assets in the
course of
construction
£’000
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
99
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual report and accounts 2018 Notes continued
10. Intangible assets
Year ended 30th June 2018
Cost
At 1st July 2017
Additions
Currency adjustment
At 30th June 2018
Amortisation
At 1st July 2017
Charge for the year
Impairments
Currency adjustment
At 30th June 2018
Net book value
At 30th June 2018
At 30th June 2017
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
Goodwill on
consolidation
£’000
Other
intangible
assets
£’000
Internally
generated
development
costs
£’000
Software
licences and
intellectual
property
£’000
Total
£’000
19,919
–
(156)
19,763
6,661
–
1,559
–
8,220
11,647
104
44
11,795
11,187
69
–
–
11,256
117,349
14,602
–
131,951
23,066
1,596
(4)
24,658
171,981
16,302
(116)
188,167
81,327
12,483
–
–
93,810
18,299
2,073
–
(2)
20,370
117,474
14,625
1,559
(2)
133,656
11,543
13,258
539
460
38,141
36,022
4,288
4,767
54,511
54,507
Goodwill on
consolidation
£’000
Other
intangible
assets
£’000
Internally
generated
development
costs
£’000
Software
licences and
intellectual
property
£’000
21,268
−
(1,784)
435
19,919
−
−
8,445
(1,784)
−
6,661
11,249
300
−
98
11,647
10,939
198
−
−
50
11,187
101,463
15,886
−
−
117,349
67,682
13,645
−
−
−
81,327
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
13,258
21,268
460
310
36,022
33,781
4,767
5,896
54,507
61,255
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 Renishaw Metrology Fixturing Solutions, LLC is expected to be subject to tax relief.
The goodwill impairment of £1,559,000 relates to the carrying value from the acquisition of Renishaw Software Limited, reported
within the metrology segment. Following the value in use calculation, using a discount rate of 12%, the carrying value has been
impaired to £nil.
100
Financial statementsRenishaw plc Annual report and accounts 2018 10. Intangible assets (continued)
The analysis of acquired goodwill on consolidation is:
itp GmbH
Renishaw Mayfield S.A.
Renishaw Metrology Fixturing Solutions, LLC
Renishaw Software Limited
Other smaller acquisitions
Total acquired goodwill
2018
£’000
3,065
1,725
5,247
–
1,506
11,543
2017
£’000
3,038
1,823
5,327
1,559
1,511
13,258
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.
Rates applied to key assumptions
The rates applied to 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
Renishaw Metrology Fixturing Solutions, LLC
Renishaw Mayfield S.A.
Forecast cash flows and future growth rates
itp GmbH
Renishaw Software Limited
Renishaw Metrology Fixturing Solutions, LLC
Renishaw Mayfield S.A.
2018
Discount rate
12%
12%
12%
15%
2017
Discount rate
12%
12%
12%
15%
2018
Basis of forecast
5% growth rate
5% growth rate
5 year business plan
5 year business plan
2017
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:
Renishaw Metrology Fixturing Solutions, LLC
2018
Average revenue
growth
20%
2017
Average revenue
growth
14%
These business plans are recognised as key inputs to the impairment calculation. They are monitored by management regularly
and updated for expected variances in future performance.
Sensitivity to key assumptions
Management have performed sensitivity analysis on the key assumptions detailed above.
Discount rate
An increase of 5% in the discount rate would not result in an impairment on any of the CGUs. Management believe the likelihood
of any increase in discount rates above 5% to be remote.
101
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual report and accounts 2018 Notes continued
10. Intangible assets (continued)
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 35% for Renishaw Metrology Fixturing Solutions, 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:
RLS Merilna tehnika d.o.o.
Metrology Software Products Limited
HiETA Technologies Limited (31st December)
For the nature of the activities, see note C.40.
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
Country of
incorporation and principal
place of business
Slovenia
England & Wales
England & Wales
Ownership
2018
%
50.0
50.0
24.9
Ownership
2017
%
50.0
50.0
24.9
2018
£’000
7,311
(507)
2,970
48
–
9,822
2017
£’000
5,658
(356)
1,836
173
−
7,311
The Group has recognised its share of losses in its associate in its share of profits of associates and joint ventures reported
above to the extent of its interest in the associate.
Summarised aggregated financial information for associates and joint ventures:
Assets
Liabilities
Net assets/(liabilities)
Group’s share of net assets/(liabilities)
Revenue
Profit/(loss) for the year
Other comprehensive income and expense
Total comprehensive income and expense for the year
Group’s share of profit/(loss) for the year
Group’s share of other comprehensive income and expense
Group’s share of total comprehensive income and expense for the year
Joint ventures
Associate
2018
£’000
23,567
4,722
18,845
9,423
23,414
6,442
96
6,538
3,221
48
3,269
2017
£’000
18,024
4,774
13,250
6,625
17,458
4,232
346
4,578
2,116
173
2,289
2018
£’000
2,114
5,720
(3,606)
(868)
816
(1,655)
–
(1,655)
(251)
–
(251)
2017
£’000
1,243
3,196
(1,953)
(486)
222
(1,124)
–
(1,124)
(280)
–
(280)
102
Financial statementsRenishaw plc Annual report and accounts 2018 12. Deferred tax assets and liabilities
Balances at the end of the year were:
Property, plant and equipment
Intangible assets
Intragroup trading (inventory)
Intragroup trading (fixed assets)
Defined benefit pension schemes
Derivatives
Tax losses
Other
Balance at the end of the year
Assets
£’000
184
17
17,394
2,322
11,233
5,410
1,855
1,330
39,745
2018
Liabilities
£’000
(8,896)
(3,456)
–
–
(138)
–
–
(15)
(12,505)
Net
£’000
(8,712)
(3,439)
17,394
2,322
11,095
5,410
1,855
1,315
27,240
Assets
£’000
−
−
16,016
939
11,024
10,146
−
561
38,686
The movements in the deferred tax balance during the year were:
Balance at the beginning of the year
Reallocation to current tax
Reallocation from current tax
Movements in the Consolidated income statement
Movement in relation to the cash flow hedging reserve
Movement in relation to the defined benefit 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)
Intragroup trading (fixed assets)
Defined benefit pension schemes
Tax losses
Other
Total movement for the year
2017
Liabilities
£’000
(8,908)
(4,330)
−
−
−
−
−
(177)
(13,415)
2018
£’000
25,271
–
329
3,667
(2,810)
783
(2,027)
27,240
2018
£’000
196
891
1,378
1,383
(712)
1,855
(1,324)
3,667
Net
£’000
(8,908)
(4,330)
16,016
939
11,024
10,146
−
384
25,271
2017
£’000
18,997
3,000
−
5,682
(1,573)
(835)
(2,408)
25,271
2017
£’000
(2,368)
3,731
2,562
939
(669)
−
1,487
5,682
Deferred tax assets have not been recognised in respect of tax losses carried forward of £21,809,000 (2017: £22,147,000),
of which approximately half are time limited, due to uncertainty over their offset against future taxable profits and therefore
their recoverability.
Deferred tax assets and liabilities are offset where there is a legally enforceable right of offset and there is an intention to net
settle the balances. After taking these offsets into account, the net position of £27,240,000 asset (2017: £25,271,000 asset) is
presented as a £27,428,000 deferred tax asset (2017: £25,437,000 asset) and a £188,000 deferred tax liability (2017: £166,000
liability) in the Group’s consolidated balance sheet. Where deferred tax assets are recognised, the directors are of the opinion,
based on recent and forecast trading, that the level of profits in current and future years make it more likely than not that these
assets will be recovered.
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
2018
£’000
6,562
4,384
10,946
2017
£’000
2,083
1,463
3,546
103
Renishaw plc Annual report and accounts 2018Strategic reportShareholder informationGovernanceFinancial statements Notes continued
13. Derivatives (continued)
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
2018
£’000
1,368
9,578
10,946
2018
£’000
38,436
1,083
39,519
2018
£’000
22,478
17,041
39,519
2017
£’000
−
3,546
3,546
2017
£’000
41,560
15,172
56,732
2017
£’000
25,261
31,471
56,732
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 members. The major
scheme, which covers qualifying UK-based employees, is of the defined benefit type. This scheme, along with the Ireland and
USA defined benefit pension 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 latest full actuarial valuation of the UK defined benefit pension scheme was carried out as at 30th September 2015 and
updated to 30th June 2018 by a qualified independent actuary. The mortality assumption used for 2018 is S2PMA and S2PFA
tables, CMI (core) 2017 model with long-term improvements of 1% per annum. Major assumptions used by the actuary for the
UK and Ireland schemes were:
30th June 2018
30th June 2017
30th June 2016
Rate of increase in pension payments
Discount rate
Inflation rate (RPI)
Inflation rate (CPI)
Retirement age
UK scheme Ireland scheme
2.0%
1.9%
2.0%
–
65
3.3%
2.8%
3.4%
2.4%
64
UK scheme
3.3%
2.7%
3.4%
2.4%
64
Ireland scheme
1.6%
2.2%
1.6%
–
65
UK scheme
3.2%
3.2%
3.3%
2.3%
64
Ireland scheme
1.5%
2.0%
1.5%
–
65
The assets and liabilities in the defined benefit pension schemes were:
Market value of assets:
Equities, analysed as:
AQUILA LIFE GBL DEV FUNDAMENTAL S1UK scheme
AQ LFE CCY HEDG WRLD EX-UK EQ S1UK scheme
VANGUARD GLOBAL STOCK INDEX FUNDIreland scheme
AQUILA LIFE UK EQUITY INDEX FD S1UK scheme
Multi-asset funds, analysed as:
BLACKROCK DYNAMIC ALL FD CLS X ACCUK scheme
GLOBAL ABSOLUTE RETURN STRATEGIES FUNDIreland scheme
Bonds
Cash and other
Actuarial value of liabilities
Deficit in the schemes
Deferred tax thereon
30th June
2018
£’000
107,982
50,832
45,475
7,007
4,668
50,559
48,389
2,170
13,433
868
172,842
(240,220)
(67,378)
11,096
% of
total
assets
30th June
2017
£’000
% of
total
assets
62
29
26
4
3
29
28
1
8
1
100
–
–
–
108,600
52,091
44,879
6,391
5,239
48,684
46,440
2,244
13,264
160
170,708
(237,495)
(66,787)
11,024
64
31
26
4
3
29
28
1
7
–
100
–
–
–
All equities have quoted prices in active markets in the UK, North America, Europe, Asia Pacific, Japan and emerging markets.
104
Financial statementsRenishaw plc Annual report and accounts 2018 14. Employee benefits (continued)
Note C.35 gives the analysis of the UK defined benefit pension scheme. For the other schemes, the market value of
assets at the end of the year was £21,065,000 (2017: £20,386,000) and the actuarial value of liabilities was £27,564,000
(2017: £24,312,000).
The weighted average duration of the defined benefit obligation is around 24 years.
The total pension cost of the Group for the year was £21,127,000 (2017: £20,238,000), of which £180,000 (2017: £165,000)
related to directors and £5,983,000 (2017: £6,292,000) related to overseas schemes.
For a sensitivity analysis of certain elements of the UK defined benefit pension scheme, see the Performance – 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.
For the UK scheme, whilst the trustees have the ultimate power to set the investment strategy, the current strategy has been set
following agreement with the Company and the Company is consulted on significant investment changes. The main investment
objective is to ensure members’ accrued benefits can be paid as they fall due. Currently, the scheme is considered to be
relatively immature and the focus of the investment strategy is growth. The strategy is to hold 64% of the assets in equities; 35%
in Diversified Growth Funds; and 1% in index-linked gilts. The actual allocations measured at fair value may vary from this due to
market price movements and intervals between rebalancing the portfolio.
The movements in the schemes’ assets and liabilities were:
Year ended 30th June 2018
Balance at the beginning of the year
Contributions paid
Interest on pension schemes
Remeasurement gain/(loss)
Benefits paid
Balance at the end of the year
Year ended 30th June 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
170,708
4,471
4,573
5,979
(12,889)
172,842
Assets
£’000
149,227
4,204
4,681
19,028
(6,432)
170,708
Liabilities
£’000
(237,495)
–
(5,822)
(9,792)
12,889
(240,220)
Liabilities
£’000
(217,050)
–
(6,241)
(20,636)
6,432
(237,495)
Total
£’000
(66,787)
4,471
(1,249)
(3,813)
–
(67,378)
Total
£’000
(67,823)
4,204
(1,560)
(1,608)
–
(66,787)
The analysis of the amount recognised in the Consolidated statement of comprehensive income and expense was:
Actuarial gain/(loss) 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
2018
£’000
2017
£’000
1,533
556
2,601
6,797
(15,300)
(3,813)
1,797
(25,471)
4,127
18,739
(800)
(1,608)
The cumulative amount of actuarial gains and losses recognised in the Consolidated statement of comprehensive income and
expense was a loss of £111,077,000 (2017: loss of £107,264,000).
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
2018
years
21.8
23.7
22.8
24.9
2017
years
21.9
23.7
23.0
25.0
105
Renishaw plc Annual report and accounts 2018Strategic reportShareholder informationGovernanceFinancial statements Notes continued
14. Employee benefits (continued)
An agreement was entered into in 2016 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 £10,413,000 at the end of the year (2017: £12,850,000). The funds will be released back to the Company from the escrow
account over a period of five 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.
The Company, trustees and their respective advisors concluded that the 2016 agreement was in the best interests of the
scheme members. The agreement was subject to approval by tPR (the regulator) and was submitted to the regulator in July
2016. The regulator’s October 2017 response to the recovery plan submission questioned whether the 2015 recovery plan
provides greater security than the 2012 recovery plan which funded to technical provisions only but required an earlier cash
injection. Both the Company and the trustees have held discussions with the regulator to detail how each party satisfied itself
that the 2016 agreement was preferred and to seek terms acceptable to all parties. The Company and the trustees continue to
engage with the regulator. In the meantime the Company and the trustees are complying with the terms of the 2016 agreement.
If this agreement terminates the parties may be required to revert to the 2012 recovery plan. In this event the Company would
be required to make a contribution to the scheme of approximately £45m, adjusted for company deficit repair contributions and
the potential investment return had the contribution been invested in October 2016, and agree a new recovery plan with the
trustees. The next triennial valuation will be undertaken at 30th September 2018.
The present value of projected future contributions under the 2016 agreement relating to the UK defined benefit scheme at
30th June 2018 was £60,900,000 (2017: £62,900,000) which exceeded 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 £31,500,000 (2017: £16,200,000), to
represent the maximum discounted liability as at 30th June 2018. The IAS 19 deficit reduced in the year primarily due to the
return on scheme assets exceeding the 2017 discount rate and the effect of the 0.1% increase in the discount rate compared
to 2017.
The IAS 19 deficit of the UK scheme is £29,400,000 at 30th June 2018, compared with the net present value of projected
future contributions under the 2016 agreement of £60,900,000 and compared with the deficit of £100,700,000 from the last
actuarial valuation in September 2015. The latest actuarial report prepared in September 2017 shows a deficit of £107,600,000.
The September 2015 actuarial valuation and September 2017 update are based on funding to self-sufficiency and use prudent
assumptions. IAS 19 requires best estimate assumptions to be used, resulting in the IAS 19 deficit being lower than the
actuarial deficit.
Under the Ireland defined benefit pension scheme deficit funding plan, a property owned by Renishaw (Ireland) Designated
Activity Company is subject to a registered fixed charge to secure the Ireland defined benefit pension scheme’s deficit.
No scheme assets are directly invested in the Group’s own equity.
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
2018
£’000
28,094
29,193
53,276
110,563
2017
£’000
32,477
19,705
35,515
87,697
During the year, the amount of inventories recognised as an expense in the Consolidated income statement was £187,834,000
(2017: £167,395,000) and the amount of write-down of inventories recognised as an expense in the Consolidated income
statement was £6,995,000 (2017: £6,466,000). At the end of the year, the gross cost of inventories which had provisions held
against them totalled £14,126,000 (2017: £15,413,000).
106
Financial statementsRenishaw plc Annual report and accounts 2018 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
Balance at the end of the year
2018
£’000
63,417
40,430
103,847
2017
£’000
46,492
5,450
51,942
The UK defined benefit pension scheme cash escrow account is shown separately within current assets. £35,000,000 of the
Group short-term deposits balance is held in the Company, maturing on 15th October 2018.
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
2018
£’000
2,960
2,775
(2,282)
493
3,453
2017
£’000
2,375
2,195
(1,610)
585
2,960
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
2018
£’000
7,297
40,682
47,979
2017
£’000
7,642
29,662
37,304
Other creditors and accruals include increases in the Group bonus payable, deferred income and pension contributions
payable. The Group’s exposure to currency and liquidity risk related to trade and other payables is disclosed in note 20.
19. Share capital and reserves
Share capital
Allotted, called-up and fully paid 72,788,543 ordinary shares of 20p each
2018
£’000
14,558
2017
£’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 expense and accumulated in equity, on account of them being classified as hedging
instruments. The policy to hedge net overseas assets was ended in December 2017. Movements in the currency translation
reserve after this date therefore only arise from translation of financial statements of foreign operations.
107
Renishaw plc Annual report and accounts 2018Strategic reportShareholder informationGovernanceFinancial statements Notes continued
19. Share capital and reserves (continued)
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 and joint ventures
Balance at the end of the year
Cash flow hedging reserve
2018
£’000
10,510
4,008
(1,901)
2,107
48
12,665
2017
£’000
6,448
4,848
(959)
3,889
173
10,510
The cash flow hedging reserve, for both the Group and the Company, comprises all foreign exchange differences arising
from the valuation of forward exchange contracts which are effective hedges and mature after the year end. These are valued
on a mark-to-market basis, are accounted for in Other comprehensive income and expense and accumulated in equity, and
are recycled through the Consolidated income statement and Company income statement when the hedged item affects the
income statement. The forward contracts mature over the next three and a half years.
Movements during the year were:
Balance at the beginning of the year
Losses on contract maturity recognised in revenue during the year
(Gains)/losses transferred to the Consolidated income statement during the year
Deferred tax transferred to the Consolidated income statement
Revaluations during the year
Deferred tax movement
Balance at the end of the year
Dividends paid
Dividends paid comprised:
2017 final dividend paid of 39.5p per share (2016: 35.5p)
Interim dividend paid of 14.0p per share (2017: 12.5p)
Total dividends paid
2018
£’000
(31,049)
14,598
(4,834)
1,927
2,779
(2,810)
(19,389)
2018
£’000
28,752
10,190
38,942
2017
£’000
(37,971)
13,358
3,601
1,525
(9,989)
(1,573)
(31,049)
2017
£’000
25,840
9,099
34,939
A final dividend in respect of the current financial year of £33,482,729 (2017: £28,751,474) at the rate of 46.0p net per share
(2017: 39.5p) is proposed to be paid on 23rd October 2018 to shareholders on the register on 20th September 2018.
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 profit/(loss) for the year
Balance at the end of the year
2018
£’000
(590)
–
13
(577)
2017
£’000
(3,162)
2,700
(128)
(590)
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.
108
Financial statementsRenishaw plc Annual report and accounts 2018 20. Financial instruments (continued)
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 are level 1 where instruments are quoted on an active market, level 2 where the assumptions used
to arrive at fair value have comparable market data and level 3 where the assumptions used to arrive at fair value do not have
comparable market data.
Credit risk
The Group’s liquid funds are substantially held with banks with high credit ratings and the credit risk relating to these
funds is therefore limited. The Group carries a credit risk relating to non-payment of trade receivables by its customers.
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)
2018
£’000
7,917
76,139
25,944
20,463
24,124
154,587
2017
£’000
8,122
41,751
22,784
16,343
48,507
137,507
2018
£’000
11,466
1,034
3,540
691
5,257
21,988
2017
£’000
8,464
745
3,117
386
3,195
15,907
2018
£’000
67,649
7,693
10,005
4,516
13,984
103,847
2017
£’000
142,493
(45,149)
(37,744)
(16,366)
8,708
51,942
The above trade receivables, other receivables and cash are predominately held in the functional currency of the relevant
entity, with the exception of £123,000 and £5,243,000 of Euro-denominated trade receivables being held in the Company and
Renishaw UK Sales Limited respectively, along with some foreign currency cash balances which are of a short-term nature.
The ageing of trade receivables past due, but not impaired, at the end of the year was:
Past due 0–1 month
Past due 1–2 months
Past due more than 2 months
Balance at the end of the year
Movements in the provision for impairment of trade receivables during the year were:
Balance at the beginning of the year
Changes in amounts provided
Amounts utilised
Balance at the end of the year
2018
£’000
21,620
6,111
6,388
34,119
2018
£’000
3,115
525
(339)
3,301
2017
£’000
16,836
7,746
5,577
30,159
2017
£’000
2,921
452
(258)
3,115
The maximum exposure to credit risk is £300,413,000, 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. A significant proportion of net cash is affected by interest rates that 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 £500,000.
The market value of forward exchange contracts is determined by reference to market data.
109
Renishaw plc Annual report and accounts 2018Strategic reportShareholder informationGovernanceFinancial statements Notes continued
20. Financial instruments (continued)
The contractual maturities of financial liabilities at the year end were:
Contractual cash flows
Year ended 30th June 2018
Trade payables
Other payables
Forward exchange contracts
Year ended 30th June 2017
Trade payables
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
Carrying amount
£’000
25,232
47,979
39,519
112,730
Carrying amount
£’000
19,544
33,972
56,732
110,248
Up to 1 year
£’000
25,232
47,979
22,478
95,689
Up to 1 year
£’000
19,544
33,972
25,261
78,777
1–2 years
£’000
–
–
10,490
10,490
1–2 years
£’000
–
–
22,114
22,114
2018
£’000
232
11,240
11,472
2–5 years
£’000
–
–
6,551
6,551
2–5 years
£’000
–
–
9,357
9,357
2017
£’000
907
6,062
6,969
The £4,207,000 Long-term loans to associates and joint ventures shown in non-current assets, comprises a £3,101,000 loan to
an associate and a £1,106,000 loan to a joint venture, which is receivable between 2 and 5 years.
Market risk
As noted in the Strategic report under Principal risks and uncertainties, the Group operates in a number of foreign currencies
with the majority of sales being made in these currencies, but with most manufacturing being undertaken in the UK, Ireland
and India.
Exchange rates and sensitivity analysis
The Group has hedged a significant proportion of its forecasted US Dollar, Euro and Japanese Yen revenues and hence the
impact on the Group’s results resulting from fluctuations in these exchange rates against Sterling is lessened.
The following are the exchange rates which have been applicable during the financial year.
Currency
US Dollar
Euro
Japanese Yen
Average US Dollar forward contract rates
Average Euro forward contract rates
Average Japanese Yen forward contract rates
2018
Year end
exchange
rate
1.32
1.13
146
Average
exchange
rate
1.35
1.13
149
1.50
1.22
150
2017
Year end
exchange
rate
1.30
1.14
146
Average
exchange
rate
1.27
1.16
139
1.50
1.16
151
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 £23,164,000 (2017: loss £43,040,000).
The nominal amounts of foreign currencies relating to these forward contracts are, in Sterling terms:
US Dollar
Euro
Japanese Yen
2018
£’000
578,421
163,283
99,328
2017
£’000
394,858
136,903
89,782
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 Performance –
financial review section of the Strategic report.
110
Financial statementsRenishaw plc Annual report and accounts 2018 20. Financial instruments (continued)
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 other equity by £30,900,000, £8,400,000 and
£4,600,000 respectively.
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 is supported by
a sound capital position. The Group may adjust dividend payments due to changes in economic and market conditions which
affect, or are anticipated to affect, Group results.
21. Leases
Leases as lessee
The Group acts as lessee for land and buildings and vehicles in certain subsidiaries and recognises payments as an expense
in the Consolidated income statement. The total of future minimum lease payments payable under non-cancellable operating
leases were:
Due in less than one year
Due between one and five years
Due in more than five years
Total future minimum lease payments payable
Payments recognised in Consolidated
income statement
Leases as lessor
2018
2017
Leasehold property
£’000
Vehicles
£’000
Leasehold property
£’000
3,363
4,929
4,019
12,311
1,329
2,988
354
4,671
3,375
4,994
3,518
11,887
2018
2017
Leasehold property
£’000
Vehicles
£’000
Leasehold property
£’000
3,799
1,409
3,456
Vehicles
£’000
971
2,683
628
4,282
Vehicles
£’000
1,093
The Group acts as lessor for Renishaw manufactured plant and equipment on both an operating and finance lease basis.
Operating leases
Where the Group retains the risks and rewards of ownership of leased assets, it continues to recognise the leased asset in fixed
assets, while the lease payments made during the term of the operating lease are recognised in revenue (2018: £1,365,000,
2017: £611,000). Operating leases are on one to five year terms. The total of future minimum lease payments receivable under
non-cancellable operating leases were:
Receivable in less than one year
Receivable between one and five years
Receivable in more than five years
Total future minimum lease payments receivable
Finance leases
2018
£’000
1,406
1,383
–
2,789
2017
£’000
387
791
277
1,455
Where the Group transfers the risks and rewards of ownership of leased assets to a third party, the Group recognises a
receivable in the amount of the net investment in the lease in Trade receivables. The lease receivable is subsequently reduced
by the principal received, while an interest component is recognised as financial income in the Consolidated income statement.
Standard contract terms are up to four years and there is a nominal residual value receivable at the end of the contract. The total
future lease payments are split between the principal and interest amounts below:
Receivable in less than one year
Receivable between one and five years
Total future minimum lease payments receivable
Gross
investment
£’000
979
2,115
3,094
2018
Interest
£’000
91
196
287
Net
investment
£’000
Gross
investment
£’000
888
1,919
2,807
345
497
842
2017
Interest
£’000
24
35
59
Net
investment
£’000
321
462
783
111
Renishaw plc Annual report and accounts 2018Strategic reportShareholder informationGovernanceFinancial statements Notes continued
22. Capital commitments
Capital commitments at the end of the year, for which no provision has been made in the Financial statements, were:
Authorised and committed
2018
£’000
10,855
2017
£’000
6,812
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
2018
£’000
1,500
19,077
507
432
324
6,278
2017
£’000
852
12,450
310
220
294
4,966
Loans owed to the Group at the year end include £1,750,000 (2017: £1,842,000) owed by joint ventures and £4,694,000
(2017: £3,124,000) owed by associates. Of the loan to the associate party, £2,400,000 relates to a working capital loan
agreement set up in March 2017 and extended by £500,000 in March 2018. £475,000 of the working capital loan is ring fenced
for fixed asset capital expenditure. Interest is charged at 3.5% until 31st December 2019 and at 3% above the Bank of England
rate thereafter. The loan is repayable on three month notice with a repayment date no earlier than 31st December 2019.
There were no bad debts relating to related parties written off during the year (2017: £nil).
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 forward contract losses
Adjustment to restate current year at previous year exchange rates
Revenue at constant exchange rates
Year on year revenue growth at constant exchange rates
2018
£’000
611,507
14,598
21,520
647,625
17.7%
2017
£’000
536,807
13,358
–
550,165
–
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 gains or 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.
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 (gains)/losses from the fair value of financial instruments
Adjusted profit before tax
2018
£’000
155,225
(5,310)
(4,834)
145,081
2017
£’000
117,101
(11,623)
3,601
109,079
112
Financial statementsRenishaw plc Annual report and accounts 2018 24. Alternative performance measures (continued)
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 (gains)/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 (gains)/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 profit/(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 profit/(loss)
2018
pence
181.8
(5.9)
(5.4)
170.5
2018
£’000
153,189
(5,310)
(4,834)
143,045
2017
pence
141.3
(12.9)
4.0
132.4
2017
£’000
116,755
(11,623)
3,601
108,733
2018
£’000
147,841
2017
£’000
126,830
(5,066)
142,775
(10,921)
115,909
2018
£’000
514
(244)
270
2017
£’000
(6,474)
(702)
(7,176)
113
Renishaw plc Annual report and accounts 2018Strategic reportShareholder informationGovernanceFinancial statements Company balance sheet
at 30th June 2018
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
Current tax
Provisions
Derivatives
Other payables
Total current liabilities
Net current assets
Non-current liabilities
Employee benefits
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.26
C.27
C.28
C.29
C.30
13
C.31
C.32
13
14
C.33
13
C.34
C.35
13
C.36
19
2018
£’000
2017*
£’000
135,430
41,398
290,362
1,468
4,360
4,848
9,578
487,444
57,011
204,843
–
11,018
1,368
10,413
64,856
349,509
16,041
3,000
2,900
22,478
69,721
114,140
235,369
60,879
17,041
77,920
136,082
39,487
294,357
1,468
3,080
8,796
3,546
486,816
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
31,471
94,332
644,893
482,999
14,558
42
(19,389)
649,682
644,893
14,558
42
(31,049)
499,448
482,999
*2017 deferred tax has been reclassified between assets and liabilities to reflect the right of offset, see note C.30.
The Company reported a profit for the financial year ended 30th June 2018 of £189,430,000 (2017: £22,165,000).
These financial statements were approved by the Board of directors on 26th July 2018 and were signed on its behalf by:
Sir David McMurtry
Directors
Allen Roberts
114
Financial statementsRenishaw plc Annual report and accounts 2018 Company statement of changes in equity
for the year ended 30th June 2018
Year ended 30th June 2017
Balance at 1st July 2016
Profit for the year
Other comprehensive income and expense (net of tax)
Remeasurement of defined benefit pension scheme liabilities
Changes in fair value of cash flow hedges
Total other comprehensive income and expense
Total comprehensive income and expense
Dividends paid
Balance at 30th June 2017
Year ended 30th June 2018
Profit for the year
Other comprehensive income and expense (net of tax)
Remeasurement of defined benefit pension scheme liabilities
Changes in fair value of cash flow hedges
Total other comprehensive income and expense
Total comprehensive income and expense
Share
capital
£’000
14,558
Share
premium
£’000
42
Cash flow
hedging
reserve
£’000
Retained
earnings
£’000
(37,971) 515,538
Total
£’000
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
–
14,558
–
42
–
(34,939)
(31,049) 499,448
(34,939)
482,999
–
–
–
–
–
–
–
–
–
–
–
189,430
189,430
–
11,660
11,660
(254)
–
(254)
(254)
11,660
11,406
11,660
189,176
200,836
Dividends paid
Balance at 30th June 2018
–
14,558
–
42
–
(38,942)
(19,389) 649,682
(38,942)
644,893
115
Renishaw plc Annual report and accounts 2018Strategic reportShareholder informationGovernanceFinancial statements Notes to the Company financial statements
C.25. Accounting policies
The following accounting policies have been applied consistently in dealing with items which are considered material in relation
to the financial statements of the Company.
Basis of preparation
The financial statements were prepared in accordance with Financial Reporting Standard 101 ‘Reduced Disclosure Framework’
(FRS 101). 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 financial statements have been prepared on the historical cost basis, except for the fair value 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 actual cost on a FIFO basis 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.
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.
116
Financial statementsRenishaw plc Annual report and accounts 2018 C.25. Accounting policies (continued)
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 at fair value 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. Where a guarantee is in place in relation to a pension scheme deficit, liabilities are reported
in accordance with IFRIC 14. To the extent that contributions payable will not be available as a refund after they are paid into
the plan, a liability is recognised at the point the obligation arises, which is the point at which the minimum funding guarantee
is agreed.
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.
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 at fair value, being the estimated amount that the Company
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. The ineffective part of any gain or loss is recognised in the income
statement immediately.
Other financial instruments
Long term loans to associates and joint ventures are initially recognised at fair value and are subsequently held at amortised
cost. Trade and other current receivables are initially recognised at fair value and are subsequently held at amortised cost
less any provision for bad and doubtful debts. Trade and other current payables are initially recognised at fair value and are
subsequently held at amortised cost.
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.
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.
117
Renishaw plc Annual report and accounts 2018Strategic reportShareholder informationGovernanceFinancial statements Notes to the Company financial statements continued
C.26. Property, plant and equipment
Freehold
land and
buildings
£’000
Plant and
equipment
£’000
Motor
vehicles
£’000
Assets in the
course of
construction
£’000
Year ended 30th June 2018
Cost
At 1st July 2017
Additions
Transfers
Disposals
At 30th June 2018
Depreciation
At 1st July 2017
Charge for the year
Released on disposals
At 30th June 2018
Net book value
At 30th June 2018
At 30th June 2017
86,906
4,241
374
–
91,521
15,242
1,615
–
16,857
74,664
71,664
160,138
8,152
2,203
(4,894)
165,599
99,495
13,585
(3,199)
109,881
55,718
60,643
4,549
620
–
(500)
4,669
3,029
709
(440)
3,298
1,371
1,520
Total
£’000
253,848
17,012
–
(5,394)
265,466
117,766
15,909
(3,639)
130,036
2,255
3,999
(2,577)
–
3,677
–
–
–
–
3,677
2,255
135,430
136,082
At 30th June 2018, properties with a net book value of £66,759,000 (2017: £66,606,000) 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:
2018
£’000
306
3,693
3,999
2017
£’000
2,117
3,938
6,055
Internally
generated
development
costs
£’000
Software
licences and
intellectual
property
£’000
117,349
14,602
131,951
81,327
12,483
93,810
38,141
36,022
17,663
890
18,553
14,198
1,098
15,296
3,257
3,465
Goodwill
£’000
9,305
–
9,305
9,305
–
9,305
–
−
Total
£’000
144,317
15,492
159,809
104,830
13,581
118,411
41,398
39,487
Freehold land and buildings
Plant and equipment
C.27. Intangible assets
Year ended 30th June 2018
Cost
At 1st July 2017
Additions
At 30th June 2018
Depreciation
At 1st July 2017
Charge for the year
At 30th June 2018
Net book value
At 30th June 2018
At 30th June 2017
118
Financial statementsRenishaw plc Annual report and accounts 2018 C.28. 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.39.
C.29. 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 and joint ventures are given in note C.40.
C.30. Deferred tax
Balances at the end of the year were:
2018
£’000
294,357
(3,995)
290,362
2017
£’000
304,353
(9,996)
294,357
2018
£’000
1,468
–
1,468
2017
£’000
1,468
−
1,468
Property, plant and equipment
Intangible assets
Defined benefit pension scheme
Derivatives
Other
Balance at the end of the year
Assets
£’000
–
–
10,349
5,410
277
16,036
2018
Liabilities
£’000
(8,037)
(3,151)
–
–
–
(11,188)
Net
£’000
(8,037)
(3,151)
10,349
5,410
277
4,848
Assets
£’000
–
–
10,686
10,146
73
20,905
2017
Liabilities
£’000
(8,186)
(3,923)
–
–
–
(12,109)
Net
£’000
(8,186)
(3,923)
10,686
10,146
73
8,796
Deferred tax assets and liabilities are offset where there is a legally enforceable right of offset and there is an intention to net
settle the balances. After taking these offsets into account, the net position of £4,848,000 asset (2017: £8,796,000 asset) is
presented as a £4,848,000 deferred tax asset (2017: £8,796,000 asset) in the Company’s balance sheet. Where deferred tax
assets are recognised, the directors are of the opinion, based on recent and forecast trading, that the level of profits in current
and future years make it more likely than not that these assets will be recovered.
Movements during the year were:
Balance at the beginning of the year
Movements during the year
Balance at the end of the year
C.31. Inventory
An analysis of inventory at the end of the year was:
Raw materials
Work in progress
Finished goods
Balance at the end of the year
2018
£’000
8,796
(3,948)
4,848
2018
£’000
14,276
28,251
14,484
57,011
2017
£’000
13,051
(4,255)
8,796
2017
£’000
21,750
18,672
11,284
51,706
119
Renishaw plc Annual report and accounts 2018Strategic reportShareholder informationGovernanceFinancial statements Notes to the Company financial statements continued
C.32. Trade receivables
An analysis of trade receivables at the end of the year was:
Trade receivables
Amounts owed by Group undertakings
Amounts owed by associated undertakings and joint ventures
Balance at the end of the year
C.33. Provisions
Provisions comprised:
Warranty provision
Movements during the year were:
Balance at the beginning of the year
Created in the year
Utilised in the year
Balance at the end of the year
2018
£’000
461
202,464
1,918
204,843
2017
£’000
14,186
155,103
2,106
171,395
2018
£’000
2,900
2018
£’000
2,390
2,792
(2,282)
510
2,900
2017
£’000
2,390
2017
£’000
1,787
2,180
(1,577)
603
2,390
The warranty provision has been calculated on the basis of historical return-in-warranty information and other quality reports. It is
expected that most of this expenditure will be incurred in the next financial year and all expenditure will be incurred within three
years of the balance sheet date.
C.34. Other payables
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 and joint ventures
Other taxes and social security
Other creditors
Balance at the end of the year
2018
£’000
49,016
95
3,129
17,481
69,721
2017
£’000
118,934
92
3,020
14,957
137,003
Other creditors and accruals include increases in bonuses payable, deferred income and pension contributions payable.
C.35. Employee benefits
The Company operated a defined benefit pension scheme, which, at 5th 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 £14,907,000 (2017: £13,644,000), of which £180,000 (2017: £165,000)
related to directors. The latest full actuarial valuation of the scheme was carried out at 30th September 2015 and updated to
30th June 2018 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 2018
3.3%
2.8%
3.4%
2.4%
64
30th June 2017
3.3%
2.7%
3.4%
2.4%
64
30th June 2016
3.2%
3.2%
3.3%
2.3%
64
The mortality assumption adopted for 2018 is S2PMA and S2PFA tables, CMI (core) 2017 model with long-term improvements of
1% per annum.
120
Financial statementsRenishaw plc Annual report and accounts 2018 C.35. Employee benefits (continued)
The assets and liabilities in the scheme were:
Market value of assets:
Equities (analysed in note 14)
Multi-asset fund
Bonds
Cash and other
Actuarial value of liabilities
Deficit in the scheme
Deferred tax thereon
The movements in the scheme were:
Year ended 30th June 2018
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 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
30th June
2018
£’000
% of
total
assets
30th June
2017
£’000
% of
total
assets
100,975
48,389
1,577
836
151,777
(212,656)
(60,879)
10,349
66
32
1
1
100
102,208
46,440
1,545
129
150,322
– (213,183)
(62,861)
–
10,686
–
68
31
1
–
100
–
–
–
Assets
£’000
150,322
3,557
3,938
6,476
(12,516)
151,777
Assets
£’000
131,581
3,261
4,163
17,557
(6,240)
150,322
Liabilities
£’000
(213,183)
–
(5,150)
(6,839)
12,516
(212,656)
Liabilities
£’000
(193,702)
–
(5,606)
(20,115)
6,240
(213,183)
Total
£’000
(62,861)
3,557
(1,212)
(363)
–
(60,879)
Total
£’000
(62,121)
3,261
(1,443)
(2,558)
–
(62,861)
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.36. Share capital
Allotted, called-up and fully paid 72,788,543 ordinary shares of 20p each
2018
£’000
2017
£’000
1,417
4,442
2,602
6,476
(15,300)
(363)
1,579
(25,021)
4,127
17,557
(800)
(2,558)
2018
£’000
14,558
2017
£’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.
121
Renishaw plc Annual report and accounts 2018Strategic reportShareholder informationGovernanceFinancial statements Notes to the Company financial statements continued
C.37. Related parties
During the year, related parties, these being 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
2018
£’000
630
3,446
200
0
95
2017
£’000
852
2,958
160
220
92
6,278
4,966
All transactions were on an arm’s length basis. There were no bad debts relating to related parties written off during the year
(2017: £nil).
C.38. 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
2018
£’000
3,464
2017
£’000
1,129
C.39. Subsidiary undertakings
The following are the subsidiary undertakings of Renishaw plc as at 30th June 2018, 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 72, 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
Owned by Renishaw plc
MTT Investments LimitedD
Renishaw Advanced Materials LimitedD
Renishaw International LimitedH
Renishaw Medical LimitedD
Renishaw PT LimitedD
Renishaw Software LimitedD
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 MTT Investments Limited
122
New Mills, Wotton-under-Edge, Gloucestershire, GL12 8JR
United Kingdom
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
Financial statementsRenishaw plc Annual report and accounts 2018 C.39. Subsidiary undertakings (continued)
Company
MTT Technologies Limited
Owned by MTT Technologies Limited
MTT Technologies srlD
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.^
Registered Office
New Mills, Wotton-under-Edge, Gloucestershire, GL12 8JR
United Kingdom
Piazza Virgilio, 4, 20123 Milano
Italy
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
c/o Lyskær 3CD, Lyskær 3, 2730, Herlev
Denmark
Nikkelstraat 3, 4823 AE, Breda
Netherlands
Karl-Benz Straße 12, 72124, Pliezhausen
Germany
C T Corporation System (Chicago), 208 South LaSalle Street, Suite
814, Chicago, Illinois, 60604
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
123
Renishaw plc Annual report and accounts 2018Strategic reportShareholder informationGovernanceFinancial statements Notes to the Company financial statements continued
C.39. Subsidiary undertakings (continued)
Company
Registered Office
Renishaw Metrology Systems Limited*
Renishaw México, S. de R.L. de C.V.
Renishaw Oceania Pty Limited
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 (Malaysia) Sdn. Bhd.
Renishaw (Shanghai) Management Company Limited^
Renishaw (Shanghai) Trading Company Limited^
Renishaw (Singapore) Pte Limited
Renishaw (Taiwan) Inc.
Owned by Renishaw, Inc.
S.No.283, Hissa no.2, S.No.284, Hissa no.2 & 3A, Raisoni Industrial
Estate,Village Mann, Taluka Mulshi, Pune, 411057
India
Iridium 5004, Parque Industrial Milenium, Apodaca, Nuevo León,
66600
Mexico
c/o KPMG, Tower Two, Collins Square, 727 Collins Street,
Docklands VIC 3008
Australia
c/o WaBuCo Oy, Energiakuja 3, Helsinki, 00180
Finland
c/o 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
c/o C T Corporation System (Chicago), 208 South LaSalle Street,
Suite 814, Chicago, Illinois, 60604
United States
Upper Penthouse, Wisma RKT, 2, Jalan Raja Abdullah, Chow Kit,
50300 Kuala Lumpur, Wilayah Persekutuan
Malaysia
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.
c/o The Corporation Company, 40600 Ann Arbor Road East, Suite
201, Plymouth, Michigan, 48170
United States
124
Financial statementsRenishaw plc Annual report and accounts 2018 C.39. Subsidiary undertakings (continued)
Company
Registered Office
Owned by Renishaw R&R, Inc.
Renishaw Metrology Fixturing Solutions, LLC^
c/o The Corporation Company, 40600 Ann Arbor Road East, Suite
201, Plymouth, Michigan, 48170
United States
Owned by Renishaw (Ireland) Designated Activity Company
Renishaw Mayfield S.A.
Owned by Renishaw Mayfield S.A.
Renishaw Mayfield SARL
Owned by Renishaw Medical Limited
Renishaw Medical AM Solutions LimitedD
Renishaw Neuro Solutions LimitedD
Rue des Vignerons 1A, 1110, Morges
Switzerland
31 Rue Ampère, 69680, Chassieu
France
New Mills, Wotton-under-Edge, Gloucestershire, GL12 8JR
United Kingdom
C.40. Associated undertakings and joint ventures
The following are the associated undertakings and joint ventures of Renishaw plc at 30th June 2018. The country in which each
entity has its registered/principal office is its domicile and country of incorporation. The accounting year end for each associate
undertaking and joint venture 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 and joint ventures are those of the Company, as set out in the Other statutory and regulatory disclosures on
page 72.
† Ordinary-A shares
^ 31st December year-end
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
6F Greensfield Court, Alnwick, Northumberland, NE66 2DE
United Kingdom
Poslovna cona Žeje pri Komendi, Pod vrbami 2, Komenda,
1218
Slovenia
125
Renishaw plc Annual report and accounts 2018Strategic reportShareholder informationGovernanceFinancial statements
10 year financial record
Results
note
2018
£’000
note
2017
£’000
note
2016
£’000
2015
£’000
note
2014
£’000
note
2013
£’000
2012
£’000
note
2011
£’000
note
2010
£’000
note
2009
£’000
Overseas revenue
580,940 509,212 404,472 469,221 331,682 326,213 313,007 273,989 170,957 159,988
UK and Ireland revenue
30,567
27,595
22,752
25,499
23,816
20,668
18,885
14,761
10,650
11,259
Total revenue
Operating profit
Profit before tax
Taxation
611,507 536,807 427,224 494,720 355,498 346,881 331,892 288,750 181,607 171,247
143,045 108,733
86,952 143,924
70,388
79,071
83,188
79,286
28,095
145,081 109,079
87,475 144,196
70,106
79,193
86,046
80,410
28,725
20,942
12,819
14,880
22,850
10,720
15,046
17,008
16,345
5,745
Profit for the year
124,139
96,260
72,595 121,346
59,386
64,147
69,038
64,065
22,980
5,991
8,843
2,105
6,738
Capital employed
Share capital
Share premium
Reserves
Total equity
Statistics
Overseas revenue
as a percentage of
total revenue
Adjusted earnings
per share
2018
£’000
2017
£’000
2016
£’000
2015
£’000
2014
£’000
2013
£’000
2012
£’000
2011
£’000
2010
£’000
2009
£’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
533,994 429,214 366,785 413,918 336,163 262,119 227,799 187,118 144,021 129,162
548,594 443,814 381,385 428,518 350,763 276,719 242,399 201,718 158,621 143,762
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
95.0% 94.9% 94.7% 94.8% 93.3% 94.0% 94.3% 94.9% 94.1% 93.4%
170.5p
132.4p
100.4p
167.5p
Proposed dividend
60.0p
52.0p
48.0p
46.5p
Note
82.3p
41.2p
88.9p
40.0p
95.6p
38.5p
88.5p
35.0p
32.3p
17.6p
9.6p
7.76p
The results and adjusted earnings per share for the years 2009 to 2011, 2013, 2014, 2016, 2017 and 2018 exclude the exceptional items. These were: 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), 2017 (£8.0m pre tax gain) and 2018 (£10.1m
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.
126
Shareholder informationRenishaw plc Annual report and accounts 2018 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:
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 are open from 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 2018 AGM
will be held on Thursday 18th October 2018 at the
Company’s headquarters at New Mills, Wotton-under-
Edge, Gloucestershire, GL12 8JR at 12 noon. The Notice
of meeting is set out in a separate circular to shareholders.
Shareholders holding shares in the Company through
a nominee service should arrange to be appointed as
a corporate representative or a proxy in respect of their
shareholding in order to attend and vote at the meeting.
Financial reports
The Annual report and accounts and copies of previous
financial reports are available at www.renishaw.com/investor.
The half year 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
18th October 2018
Half year
31st December 2018
Half year results
January 2019
Trading update
May 2019
Final dividend
Ex-div date 20th September 2018
Record date 21st September 2018
Payment date 23rd October 2018
Interim dividend (provisional)
Ex-div date 7th March 2019
Record date 8th March 2019
Payment date 8th April 2019
Registration details and Company Secretary
Company Secretary
Mark Noble
Registered office
New Mills
Wotton-under-Edge
Gloucestershire
GL12 8JR
Telephone: +44 (0)1453 524524
Email: companysecretary@renishaw.com
Website: www.renishaw.com/investor
Registered number
01106260 (England and Wales)
Auditor and corporate advisors
Auditor
Ernst & Young LLP
Solicitors
Norton Rose Fulbright LLP
Burges Salmon LLP
Stockbrokers
UBS
Principal bankers
Lloyds Bank plc
127
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual report and accounts 2018
Shareholder information continued
Share fraud
Renishaw has received reports that our shareholders have
received unsolicited calls from overseas firms offering to
purchase their shares for a price in excess of the current
market price in order to mount a hostile takeover bid.
Please be aware that this is likely to be a scam, with the
intention of obtaining payment from shareholders of a bond
or legal fee in order to secure the share transaction, which
never materialises, or obtaining an option to purchase
shares with no fixed transfer date. There are other types
of share fraud or “boiler room scams” and therefore if you
receive any unsolicited investment advice the Financial
Conduct Authority (FCA) advises the following:
• make sure you get the correct name of the person and
organisation and make a record of any other information
they give;
• check that they are properly authorised by the FCA before
getting involved by visiting www.fca.org.uk/register and
contacting the firm using the details on the register;
• the FCA also maintains a list of unauthorised overseas
firms who are targeting or have targeted UK investors and
any approach from such firms should be reported to the
FCA so that the information can be kept updated;
• report the matter to the FCA on their consumer helpline
0800 111 6768 or using the share fraud reporting form
available at www.the-fca.org.uk/consumers/report-scam-
unauthorised-firm; and
• you could also contact the police via the national fraud
reporting centre Action Fraud on 0300 123 2040 or their
online fraud reporting tool at www.actionfraud.police.uk/
report_fraud. Action Fraud will be particularly interested
if you sent money to a bank account or other type of
money transfer.
Shareholder profile
Shareholdings
1 – 5,000
5,001 – 25,000
25,001 – 50,000
50,001 – 100,000
%
1.6
2.7
2.4
4.8
8
100,001 – 500,000 13.3
500,001 – 1,000,000
8.2
1
2
3
4
5
6
7 1,000,001 – 3,000,000 17.5
8 more than 3,000,000 49.6
Shareholdings
1 Directors
2 Individuals
3 Institutions
%
53.1
1.3
45.6
3
1 2 3
4
5
6
7
2
1
128
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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
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