Annual Report 2019
Our business, purpose and value creation
+ Our business
Renishaw is a global, high-precision metrology and healthcare technology group.
Our purpose
To design, develop and deliver solutions and systems that provide unparalleled
precision, control and reliability.
By pursuing our purpose, we can continue to be a worldwide leader in precision
technology: an insatiable innovator, a trusted partner, an inspiring employer and
a responsible business.
How we create value
At Renishaw, we have spent nearly 50 years engineering change. Our unique blend
of pioneering science and product innovation helps customers push the boundaries
of what is possible. From transport to agriculture, electronics to healthcare, our
breakthrough technology transforms product performance and touches billions of lives
around the world.
We work closely with our customers to solve complex challenges and improve products
and processes. Our disruptive thinking and manufacturing excellence help customers
increase innovation, improve quality, expand output and enhance efficiency.
We underpin this with long-term investments in people, innovation and infrastructure.
This nurtures a powerful pipeline of measurement technology and manufacturing
techniques that advance the development of diverse products and address pressing
real-world problems.
We thrive through our collaborative team of 5,000 people. They bring fresh thinking,
relentless rigour and an obsession with quality to every aspect of their work. Their
thirst for innovation and commitment to continuous improvement informs the drive,
determination and energy that mean we keep moving forward, every day.
For more about the value we generate for our stakeholders see page 11
For more about how we engage with our stakeholders see pages 12 to 15
Investing globally
for the long term
For more information visit:
www.renishaw.com
Strategic report
Financial highlights
Revenue
£574.0m
(2018: £611.5m)
Adjusted* profit before tax
£103.9m
(2018: £145.1m)
Statutory profit before tax
£109.9m
(2018: £155.2m)
Total dividend for the year
60.0p
(2018: 60.0p)
Adjusted* earnings per share
119.9p
(2018: 170.5p)
Statutory earnings per share
126.7p
(2018: 181.8p)
We use a number of abbreviations
and trade marks within this document.
For brevity, we do not define or identify
these every time that they are used;
please refer to the glossary on page
146 for this information.
Contents
Strategic report
IFC Our business, purpose and
value creation
Financial highlights
Renishaw at a glance
Chairman’s statement
Chief Executive’s review
1
2
4
6
10 Our business model
12 Our stakeholders
16 Our markets
18 Our strategy
22 Key performance indicators
24 Performance – financial review
28 Global investment
30 Metrology
34 Healthcare
38 Risk and risk management
40 Principal risks and uncertainties
44 Corporate social responsibility
Governance
52
Directors’ corporate governance report
54 Board of Directors
58 Executive Board
59 International Sales and
Marketing Board
65 Nomination Committee report
66 Audit Committee report
70 Directors’ remuneration report
83 Other statutory and
regulatory disclosures
86 Directors’ responsibilities
Independent auditor’s report
87
Financial statements
95 Financial statements contents
96 Consolidated income statement
Consolidated statement of
97
comprehensive income and expense
Consolidated balance sheet
Consolidated statement of changes
in equity
98
99
100 Consolidated statement of cash flow
101 Notes (forming part of the
financial statements)
130 Company balance sheet
131 Company statement of changes
in equity
132 Notes to the Company
financial statements
Shareholder information
142 10-year financial record
143 Additional information
143 Significant charitable donations
143 TCFD statement
144 Greenhouse gas emissions data
145 Independent assurance statement
146 Glossary and Trade marks
147 Shareholder information
* Note 25, Alternative performance measures,
defines how Adjusted profit before tax
is calculated.
Dates within this document refer to financial years
unless otherwise stated.
1
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual Report 2019
Renishaw at a glance
What we do
Renishaw is a global, high-precision
metrology and healthcare technology
group. We market our products
through our subsidiaries in 36
countries and 81 locations.
Metrology products
Where we operate
APAC (Asia Pacific)
Locations
32
7%
93%
Metrology revenue
£223.7m
Healthcare revenue
£16.4m
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 position
measurement and calibration systems allow machine
builders to manufacture highly accurate and reliable
products. We are a world leader in the field of metal
additive manufacturing (3D printing) with machines that
produce parts from metal powder.
Healthcare products
8%
92%
5%
95%
EMEA (Europe,
Middle East and
Africa)
Locations
27
Metrology revenue
£153.0m
Healthcare revenue
£14.2m
Americas
Locations
9
Metrology revenue
£126.6m
Healthcare revenue
£6.0m
Our technologies are helping within applications such as
craniomaxillofacial surgery, dentistry, neurosurgery, and
tissue and biofluid analysis. These include engineering
solutions for stereotactic neurosurgery, analytical
systems that identify and assess biochemical changes
associated with disease formation and progression,
the supply of specially configured metal additive
manufacturing (AM) systems for medical and dental
applications, 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.
13%
87%
UK
Locations
13
Metrology revenue
£29.6m
Healthcare revenue
£4.5m
2
Strategic reportRenishaw plc Annual Report 2019 Our principal markets
2019 in numbers
Revenue
£574.0m
Adjusted* profit before tax
£103.9m
Statutory profit before tax
£109.9m
Total dividend for the year
60.0p
Number of employees at 30 June 2019
5,041
Patents – continual innovation in new technologies
1,970
Aerospace
New aircraft production to meet
growing global demand for civil
air transport
Agriculture
Increasing global demand for
food products due to growing
population and rising incomes
New fuel-efficient engines
with complex parts requiring
faster measurement
Improvements to fuel efficiency
by minimising airframe weight.
Automotive
Increasing investment in
hybrid and electric vehicles
with reduced investment in
internal combustion engines
Improved fuel efficiency
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 and household
appliances demand precision
manufacturing systems for form
and function
5G mobile products require
significant investments in more
complex integrated circuits.
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.
Greater investment in
machinery for intensive
farming capabilities and
new technology to increase
yields and reduce input and
environmental costs
Smart farming techniques and
greater automation.
Construction
Major infrastructure projects
drive heavy equipment sales
Drive to improve efficiency of
large diesel engines used for
vehicles in the sector
Skills shortages requiring
more automation in
equipment manufacturers.
Healthcare
Life expectancy increasing
Neurological disorders require
faster and highly precise
surgical therapies
Growing demand for
cosmetic dentistry with
superior aesthetics
Growing demand for
orthopaedic implants and
patient-specific implants.
Resource
exploration
Global population growth and
urbanisation drive long-term
demand for fossil fuels
Non-renewable resources
require exploration in
demanding terrains or more
research into optimal extraction
from existing sites
Equipment manufactured to
stringent safety requirements
requires accurate, cost-effective
and traceable processes.
See pages 16 and 17, Our markets, for further details.
profit before tax is calculated.
* Note 25, Alternative performance measures, defines how Adjusted
3
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual Report 2019 Chairman’s statement
Sir David McMurtry
Executive Chairman
The Group has faced challenging
market conditions this year resulting
in lower revenue of £574.0m
(2018: £611.5m) and reduced
adjusted profit before tax of £103.9m
(2018: £145.1m), a decrease of 28%.
On a statutory basis, profit before tax
reduced by 29% to £109.9m. While
we saw growth in the Americas and
EMEA, weakness in key sectors in
APAC caused a drag on results.
Introduction
I am pleased to report our 2019 results. We achieved a
turnover for the year of £574.0m (2018: £611.5m) with a
decrease in revenue of 7% at constant exchange rates*,
against a backdrop of challenging economic conditions.
Adjusted* profit before tax amounted to £103.9m
(2018: £145.1m), a decrease of 28%.
Following the appointment of Will Lee as Chief Executive
last year, I have been delighted to see his progress
and strong leadership during the year. He is driving
change in key areas of the business, including a focus
on the skills development of our people, to continue to
improve productivity.
Innovation drives our business, from the generation of new
technologies to new manufacturing processes. In my role as
Executive Chairman, I have enjoyed the opportunity to focus
on Group innovation and product strategy, supporting our
talented engineering teams. This has included our industrial
metrology and AM technologies, where there are exciting
opportunities for future growth.
During the year, we continued to invest in developing
future technologies, with total engineering costs of £97.9m
(before net capitalised development costs and the R&D
(research and development) tax credit), amounting to 17%
of total revenue.
Board changes
On 30 June 2019, Geoff McFarland, Group Engineering
Director, resigned as a Director of the Board for family
reasons. On behalf of the Board, I would like to thank Geoff
for the invaluable contribution he has already made to the
developments that have helped Renishaw grow into the
global technology leader that it is today. I look forward to
continuing to work with him in his new role as Director of
Group Technology, reporting to Will.
As reported last year, Kath Durrant stepped down from
the Board on 31 July 2018. Catherine Glickman joined us
as an Independent Non-executive Director on 1 August
2018, becoming Chair of the Remuneration Committee
and a member of the Audit and Nomination Committees.
Catherine previously held the role of Group HR Director
at Genus plc and Tesco PLC and is making a valuable
contribution as we strengthen our HR processes and
implement a new internal communications and employee
engagement strategy.
People, culture and values
We thrive through our collaborative team of 5,000
people. They bring fresh thinking, deep experience and
an obsession with quality to every aspect of their work.
On behalf of the Board, I would like to thank them all for
their professionalism and dedication during the year.
We have created a culture that aims to allow our employees
to maximise their potential. We work hard to encourage
open communication and innovative thinking and believe
everyone in our business should feel valued and be able
to grow.
4
Strategic reportRenishaw plc Annual Report 2019 Innovation is at the heart of everything that we do and is one
of our core values. We believe our people are fundamental
to our disruptive thinking and manufacturing excellence
which helps our customers to increase their own innovation,
improve quality, expand output and enhance efficiency.
well as demonstrations, opportunities to meet the Board
and senior management, and a question and answer
(Q&A) session with Board members. Following the event,
we conducted a survey with all the attendees to gather
further feedback.
Integrity is another of our core values and is key to the
relationships that we have with our people, customers,
suppliers, communities and other stakeholders. We strive at
all times to be open, honest and consistent.
We are also focused on diversity at all levels. During the
year, we published our second Gender Pay Gap report.
While progress has been made, we and our industry still
have much work to do in this area. Our educational outreach
programmes engage with children from primary school age
onwards to encourage more young people from diverse
gender, ethnic and economic backgrounds into the sector
(see pages 49 and 50 for more information).
Corporate governance
The Board is committed to the highest standards of
corporate governance to protect our business and its long-
term success. The Board has already started to consider
the new 2018 UK Corporate Governance Code and steps
have been taken to start implementing its requirements.
Further details are provided in the Directors’ corporate
governance report on pages 52 to 64.
Investor communications
Our sixth annual investor day on 14 May 2019 was attended
by a record 150 people, with an equal mix of private and
institutional investors. The day included presentations on
Group strategy, industry sectors and key sales regions, as
The event is one of four key touchpoints across the year
where the investment community can learn more about
Renishaw’s business and strategy, with the Annual General
Meeting (AGM) in October, plus live half-year and full-
year webcasts.
UK defined benefit pension scheme
Following further engagement with The Pensions Regulator,
the Company and trustees have agreed the terms of a new
deficit funding plan for the Company’s UK defined benefit
pension scheme. The Company has agreed to pay £8.7m
per annum into the scheme for five years with effect from
1 October 2018. Under the terms of the previous agreement
the Company paid approximately £4m per year.
Dividend
A final dividend of 46.0p net per share will be paid on
31 October 2019, to shareholders on the register at
27 September 2019, giving a total dividend of 60.0p for
the year (2018: 60.0p).
Sir David McMurtry
Executive Chairman
1 August 2019
* Note 25, Alternative performance measures, defines how Adjusted profit
before tax, Adjusted earnings per share, Adjusted operating profit and
Revenue at constant exchange rates are calculated.
+
Developing
solutions
to address real-
world problems
Ellie Edbrooke is a graduate medical engineer in the
neurological applications team at Renishaw and a
member of our Greenpower electric car racing team.
She first became involved with Greenpower, a charity
supported by Renishaw, while at school and this led to
engineering being considered a career choice alongside
her interest in biology.
While studying medical physics at university she met
the Renishaw Greenpower team at the 2015 competition
finals. After learning about our work in healthcare,
she undertook an industrial placement with us before
joining our graduate scheme after finishing her degree.
Today her work includes designing implants that help
deliver drugs to the brain to treat degenerative diseases
such as Parkinson’s.
It’s great to be able to work on
something that can really make
a difference to someone’s life.
5
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual Report 2019 Introduction
As stated last year, my role is to build on the strong heritage
and culture developed by our co-founders, Sir David
McMurtry and John Deer, and inspire our people to meet
the opportunities and challenges of a changing business
environment. During my first full year I have travelled widely
within the Group, spending time with our R&D teams, visiting
our sales regions, attending trade exhibitions, and listening
to what people feel is good about Renishaw and where we
can make improvements. This has given me a clear sense
of where we need to focus to continue to be a technology
world leader that is trusted by our customers and suppliers,
and an employer that inspires its people.
Performance overview
As Sir David has already outlined (see page 4), this was
a challenging year with reduced turnover and Adjusted*
operating profit for the Group. However, outside APAC, our
other regions saw strong growth for some of our product
lines, including the AM and spectroscopy lines. We remain
focused on the long term with a key focus on developing
technologies that provide patented products to support the
strategies for our metrology and healthcare segments.
Revenue
We achieved revenue for the year ended 30 June 2019
of £574.0m, compared with £611.5m last year, against a
backdrop of challenging economic conditions including the
impact of trade tensions between the USA and China, and
ongoing uncertainty surrounding the potential impacts of
Brexit. Aside from APAC, we experienced revenue growth
in all regions as set out below. The lower revenue in the
APAC region is largely a result of a slowdown in demand for
our encoder products, which are used in electronics and
display manufacturing equipment, and for our machine tool
products from large end-user manufacturers of consumer
electronic products, due to weaker smartphone demand
and the resultant over-capacity in the supply chain. We have
not experienced an erosion in our customer base in the
region and we continue to work closely with key customers
to ensure we are in position to meet their requirements when
economic conditions improve.
2018
£m
Change
%
Constant
fx change
%
APAC
EMEA
Americas
UK
2019
£m
240.1
167.2
132.6
34.1
289.2
165.1
126.6
30.6
Total Group revenue
574.0
611.5
-17
-19
1
5
11
-6
2
1
11
-7
Chief Executive’s review
Will Lee
Chief Executive
After completing my first full
year as Chief Executive during
a challenging period, I am
focused on ensuring that we
draw maximum benefit from
our long-term investments
in people, innovation and
infrastructure. The combination
of a strong pipeline of future
product developments, excellent
manufacturing operations and
highly skilled people, gives us
many opportunities to grow our
business, despite the expected
challenging economic conditions,
and to deliver on our purpose.
6
Strategic reportRenishaw plc Annual Report 2019 Revenue £m
Statutory profit before tax £m
Adjusted* profit before tax £m
£574.0m
£109.9m
£103.9m
-6%
7
.
4
9
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.
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15
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15
16 17 18
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16 17 18
19
Dividend per share pence
60.0p
unchanged
0
.
0
6
0
.
0
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0
.
2
5
0
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8
4
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Statutory earnings per share pence
Adjusted* earnings per share pence
126.7p
119.9p
-30%
5
.
7
6
1
8
.
1
7
8
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16 17 18
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19
Profit and earnings per share
The Group’s Adjusted* profit before tax for the year was
£103.9m compared with £145.1m last year. Adjusted*
earnings per share on continuing activities was 119.9p
compared with 170.5p last year.
Statutory profit before tax for the year was £109.9m
compared with £155.2m last year. Statutory earnings per
share on continuing activities was 126.7p compared with
181.8p last year.
This year’s tax charge on continuing operations amounts
to £17.7m (2018: £22.9m) representing a tax rate of 16.1%
(2018: 14.7%). Lower profits in the UK in the current year
resulted in a fall in the patent box benefit of £3.9m relative
to the previous year, which is the principal factor for the
increase in the effective tax rate.
Metrology
Revenue from our metrology business for the year was
£532.9m compared with £575.8m last year. There was
strong growth in our AM product line; good growth in
our measurement and automation line (Equator gauging
systems); and in our fixturing line – reflecting pleasing
progress in our end-user focused solutions business.
We continue to focus on ensuring that our AM systems
satisfy the demands of our customers for the series
production of metal components. As previously mentioned,
we have seen a slowdown in demand for our encoder
products and from large end-user manufacturers of
consumer electronic products, which primarily impacts the
machine tool revenue.
7
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual Report 2019 Chief Executive’s review continued
The geographical analysis of metrology revenue is set
out below.
2018
£m
Change
%
APAC
EMEA
Americas
UK
2019
£m
223.7
153.0
126.6
29.6
276.7
153.9
119.7
25.5
Total metrology revenue
532.9
575.8
-19
-1
6
16
-7
Adjusted* operating profit for our metrology business was
£90.6m (2018: £142.8m).
We continued to invest in R&D, with total engineering costs
of £90.7m (before net capitalised development costs and
the R&D tax credit) compared with £77.1m in 2018.
We launched a range of new products during the year.
The PHS-2 second generation servo positioning head for
co-ordinate measuring machines (CMMs) is used within the
automotive market for body-in-white measurement. We also
introduced new calibration products including the XM-600
calibration system for high-speed dynamic CMM error-
mapping and fault-finding, and the XK10 alignment laser
system for use during the build and alignment of machine
tools, replacing the need for artefacts.
The APCA-45 tool setting probe is designed for the very
harsh environments found in lathes and multi-tasking
machine tools, while the new SupaScan QuickPoint macro
software package allows superfast probing cycles in
machining applications with very short cycle times.
For the motion control market we launched a rotary encoder
for our QUANTiC family of incremental encoders, while for
high-end XY stages that require multiple interferometer
feedback axes, our new multi-axis periscope (RMAP)
enables accurate six degrees of freedom measurements.
Healthcare
Revenue from our healthcare business for the year was
£41.0m, an increase of 15% over the £35.7m last year.
There was strong growth in our spectroscopy and medical
dental product lines.
There was an Adjusted* operating profit of £3.1m, compared
with £0.3m last year, with two years of continuous profit
achieved for the first time.
Healthcare also saw continued investment in R&D, with total
engineering costs in this business segment of £7.2m (before
net capitalised development costs and the R&D tax credit)
compared with £6.5m in 2018.
New products launched during the year include, the RA816
Biological Analyser, a compact benchtop Raman imaging
system designed exclusively for biological and clinical
research, and the new neurolocate 2D module, which
requires just two X-rays to register patient position against
the neuromate robot, also obtained a CE mark.
The results of a pioneering clinical trial for which Renishaw
manufactured a drug delivery device on behalf of North
Bristol NHS Trust, to administer Glial Cell Line-Derived
Neurotrophic Factor (GDNF), were made public in February.
8
The results showed that the drug delivery system performed
effectively and reliably, and a similar device developed by
Renishaw, called neuroinfuse, is now being used in another
clinical trial.
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 customers in all our markets
around the globe. This strategy is consistent across all the
product lines and market sectors in which we operate to
deliver our purpose (for more information see page 18).
Renishaw has moved in recent years, from primarily being
a supplier of products to capital equipment manufacturers,
to working closely with end users to solve their complex
challenges and deliver solutions and systems that transform
their manufacturing capabilities. 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, digitisation,
requirements for more capable products, 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 continue to spread risk through the diversification of our
applications for product lines, our customer base and our
routes to market.
Focused investment for long-term growth
The Group firmly believes in its long-term strategy of
investing for the future, expanding our global marketing
and distribution infrastructure, along with increasing
manufacturing capacity and R&D activities. However, with
the current global economic uncertainties, our focus for the
near-term is on maximising the benefits of the investment we
have made over the past few years.
We are also investing in a new human resources (HR)
system and development programmes for our people, which
we believe, will ultimately boost our productivity.
Capital expenditure on property, plant and equipment and
vehicles for the year was £56.8m (2018: £34.9m), of which
£25.4m (2018: £10.0m) was spent on property and £31.4m
(2018: £24.9m) on plant and equipment and vehicles.
This year saw the commencement of a 94,000 sq ft
extension to the Innovation Centre at our New Mills site,
the purchase of a new property in Nagoya to support
the expansion of our Japanese distribution function,
the purchase of land near São Paulo for the future
development of a distribution facility in Brazil and the
purchase of our existing building in The Netherlands for our
Benelux operation.
Working capital
Group inventory increased from £110.6m at the start of
the year to £129.0m, primarily reflecting the impact of
Brexit contingency preparations and the reduced demand
we experienced in the second half of the financial year.
We continue to focus on working capital management while
Strategic reportRenishaw plc Annual Report 2019 remaining committed to our policy of holding sufficient
finished inventory to ensure customer delivery performance,
given our short order book. Trade receivables decreased
from £154.6m to £123.2m, with debtor days outstanding at
the end of the current year at 73 days (2018: 69 days).
Net cash balances at 30 June 2019 were £106.8m,
compared with £103.8m at 30 June 2018. Additionally,
there is an escrow account of £10.5m (2018: £10.4m)
relating to the provision of security to the UK defined
benefit pension scheme.
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 local organisations through charitable
donations; reached more than 10,000 children with our
educational outreach programmes and donated more than
10,000 hours of paid time to educational and other local
organisations; recruited a record number of apprentices on
our training schemes; reduced our greenhouse gas (GHG)
emissions by 15%; and reduced our accident frequency
rate to 24.67. Further information on our key performance
indicators (KPIs) and GHG performance can be found on
pages 23, 46 and 50.
Our people
Our workforce at the end of June 2019 was 5,041
(2018: 4,862) an increase of 4%. During the year, 119
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 73 new paid
industrial and summer placements in the year.
In January 2019, we carried out an extensive UK employee
engagement survey. The results clearly showed that our
people believe Renishaw makes a positive impact on
society, they have pride in their roles, treat each other with
respect and believe that the business acts in a socially
responsible manner. They also told us we need to focus
more on career development, including progression
opportunities, be clearer on performance assessment and
improve the way we recognise and ensure people feel
valued. This fully validates the HR initiatives we introduced
during the year, including a renewed focus on learning and
development, and leadership and management training.
I would like to express my thanks to all employees for their
invaluable contribution to the success of the Group during
the year.
Brexit
The Board continues to oversee the work of the Brexit
steering group in identifying the key risks arising from
a no-deal Brexit scenario and implementing mitigation
plans. These activities significantly increased in the period
leading up to the original Brexit deadline of March 2019 and
included the following:
• the establishment of a new distribution warehouse in
Ireland which, if required, would significantly reduce the
number of direct shipments between the UK and the EU
post Brexit;
Our principal markets
Aerospace
Consumer products
Agriculture
Healthcare
Automotive
Power generation
Construction
Resource
exploration
• a general increase in inventory of certain components and
finished goods held at our various sites within the EU and
the UK; and
• continued ongoing assessment and updating of other key
issues arising from Brexit and the mitigations against any
possible negative impacts.
The steering group will continue to carefully monitor ongoing
developments in the Brexit process and consider the impact
of these against our current plans as the situation develops
in the coming months.
Outlook
The Group is in a strong financial position, despite a
challenging year, 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. With the ongoing uncertainty surrounding
Brexit, weaker economic indicators, exchange rate volatility
and trade tensions between the USA and China, we
expect market conditions to remain difficult throughout this
financial year.
Your Directors remain confident in the long-term
prospects for the Group due to the high quality of our
people, our innovative product pipeline, extensive global
sales and marketing presence and relevance to high-
value manufacturing.
Will Lee
Chief Executive
1 August 2019
* Note 25, 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 2019 Our business model
We identify customer needs and then apply innovative engineering to deliver
successful solutions. Our purpose supports our business model which is driven
through our strategy.
We have a simple business model…
Customer
needs
Innovative
engineering
Successful
solutions
All areas of our organisation
seek to work in partnership
with customers to
understand and solve their
current and anticipated
real-life problems.
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 aim to provide solutions
that help customers
increase innovation,
improve quality, expand
output and enhance
efficiency.
For more about customers see
pages 16, 17, 20 and 21
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 about innovation see
pages 19 and 30 to 37
For more about solutions see
pages 21, 28 and 29
Our key performance indicators are shown on pages 22 and 23
Information on the risks associated with our business and how we manage them are on pages 40 to 43
10
Strategic reportRenishaw plc Annual Report 2019 …generating value for a wide range of stakeholders
Our customers
• During the year, we opened new facilities in China and Turkey
allowing us to demonstrate our metrology products and
officially opened our new office in Mexico. We continue to
enhance customer support through our ongoing investment
in training and demonstration facilities
• Multiple new products were introduced to aid our customers’
efficiency (see pages 33 and 37).
Our shareholders
Increase in new product
R&D spend
13.4%
Sales and marketing spend
£127m
• We have a strong balance sheet (see page 26)
Dividend paid in the year
TSR over the past five years
• Shareholders’ funds grew by 6.3% in the financial year
• Our total assets grew by 5% in the financial year
• We have a progressive dividend policy and paid a total
dividend in the year of 60.0p.
£43.7m
181%
Our people
• We employ around 5,000 people across the Group
• Our lost working time injuries rate during the period was 0.95
against an industry average of 2.10 per million hours worked
• 96% of UK employees who responded to our engagement
survey would recommend, or have already recommended,
Renishaw as a place to work
• We launched a new worldwide Employee Assistance
Programme which is available to all our employees and
their cohabitants.
Our suppliers
Money invested in training
and development
Number of people in further
education, graduate and
industrial programmes
£2m
397
• We are signatories to the Prompt Payment Code
Average UK payment days
Number of key suppliers
• We have approximately 400 key suppliers who vary in size
and location, with about half being located within a 100-mile
radius of our main manufacturing sites
• More than 80% of our tier one suppliers have been assessed
for the risk of modern slavery.
Global communities
• Across the Group we support a number of care homes,
orphanages, social organisations, hospitals, festivals, sports
clubs, schools, educational and environmental projects
• £260,680 donated to more than 290 organisations during
the year
• Our educational outreach work is supported by nearly
200 STEM ambassadors
• We have engaged with around 10,000 students through our
educational outreach programmes in the 2018 calendar year.
45
c.400
Charitable donations
Paid hours donated within
this reporting period
£260k
10,000+
11
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual Report 2019 Our stakeholders
How we engage with and
respond to our stakeholders
Our rich and varied network of
stakeholder relationships upholds
the values on which Renishaw
was founded.
We have more than 1,800 registered
shareholders, 5,000 colleagues and
supplied nearly 25,000 customer
accounts during the year. We
deal with suppliers in more than
36 countries. These individuals,
businesses and communities are all
integral to our business. We are only
able to achieve our purpose with
their input, cooperation and trust. As
a Board, stakeholder considerations
are embedded throughout our
discussions and decisions.
Like any business, sometimes we
have to take decisions that adversely
affect one or more of these groups
and, in such cases, we always try to
ensure that those affected are treated
fairly. Over the past 46 years, we
have invested in the development of
our stakeholder communities, as part
of our evolving strategy. The following
pages provide an overview of some
of the ways in which we do this.
People
One of Renishaw’s greatest assets is its highly skilled
people. Over the past 18 months, our HR function has
significantly strengthened its resources across the globe.
This means that we are in a much stronger position to
engage and respond to the needs of our growing workforce.
With support and direction from our Chief Executive, we are
continuing to develop an infrastructure that will enable us
to deliver global initiatives, improve engagement with our
employees and ensure that Renishaw is fit for the future by
aligning our people development strategy with the Group’s
strategic aims.
Part of this transition has involved sourcing a new global
HR system and implementation is currently in progress in
the UK with roll out planned to our overseas colleagues
in stages to support global operations. This will facilitate
enhanced capability of our people development, succession
planning and continuous feedback mechanisms.
The benefits of an engaged workforce are well documented.
Catherine Glickman, one of our Independent Non-executive
Directors, will, over the coming year, be providing the Board
with greater visibility of workforce engagement activities
across the Company and of the views of our employees,
which is one of the options set out in the 2018 UK Corporate
Governance Code.
In 2019, we conducted a formal employee engagement
survey in the UK for the first time. Over 74% of our people
participated allowing us to gather their views on a wide
variety of topics and to better understand what matters to
them, as well as prioritise areas for improvement. We aim to
engage with our overseas colleagues later this year to seek
their views.
Analysis of the survey results has provided some clear
themes on what Renishaw does well and highlighted areas
requiring improvement. Concerns regarding lack of clarity
about how performance is assessed are being addressed
with the implementation of a new performance review
process. 96% of UK employees who responded to the
survey would recommend, or have already recommended,
Renishaw as a place to work and nearly 70% feel positively
about the work–life balance.
As we continue to grow, there is greater focus on ensuring
effective communication, engagement and feedback across
the Group. As well as working on a new communications
strategy, our Group Communications team have partnered
with our HR function and the Board to devise a focused
communication plan in relation to the implementation of
many new initiatives.
Our employee newsletter (Probity) has been produced since
1979 and continues to report quarterly on a variety of topics
from our offices around the world.
12
Strategic reportRenishaw plc Annual Report 2019 In February 2019, we launched a new video channel
specifically designed and produced for our employees to
keep them up-to-date on a range of topics from colleagues
worldwide including: leadership communications, employee
achievements, upcoming events, new projects, community
initiatives and general Group news. This platform has also
been used to stream business updates from the Chief
Executive for colleagues who were unable to attend an
update in person.
Channel R, a new internal video channel, specifically designed
and produced for our employees to keep them up-to-date on a
range of topics.
In March 2019, we implemented a global Employee
Assistance Programme to provide specialist guidance and
support to our employees and their immediate families on
issues ranging from everyday matters to more serious
wellbeing problems.
We are actively progressing the development of diversity
and inclusion initiatives to promote representation of those
from different backgrounds and embed diversity across
the Group to improve engagement. A global policy is being
implemented together with further development of a Group
diversity strategy to champion the changes.
Our learning and development team has also expanded
to enable them to support the growth of our apprentice,
graduate and placement programmes to cultivate a pipeline
of talent across the business. This will enable greater focus
on developing core training programmes for all employees
and managers and is being complemented by the
introduction of a new performance review process globally.
Customers
To deliver on our purpose, it is vital that we work closely
with our customers to solve their complex challenges and
help them to increase their own innovation, improve product
quality, expand their production output and enhance their
operational efficiencies.
Our future success depends on us:
• understanding customers’ true needs and using this to
inform future technology innovations;
• obtaining customer feedback on new developments
during testing programmes; and
• working with customers to help us develop our world-
class customer support programmes.
We prefer to do this through direct contact with our
customers, due to the highly technical nature of both their
requirements and our products. The voice of our customers
is then represented at numerous forums including regional
sales and marketing conferences, product line conferences
attended by representatives from the sales regions and
our Group Service conferences. Members of our Board of
Directors, Executive Board and ISMB also regularly meet
with OEM (original equipment manufacturer) customers
and end-users across our key sales regions to receive
feedback on our performance as a supplier and how we
can continue to help them improve their own products and
operational performance.
A key platform for our engagement with current and future
customers is trade exhibitions, which are typically held
over two to six days. Over the duration of these events
there is the opportunity to meet with thousands of people
from multiple industries who visit our stands to talk to us
about their challenges. Enquires from customers and
prospects are recorded and stored digitally in accordance
with our Privacy Notice (which is set out on our website), to
ensure appropriate follow-up by our sales teams after the
exhibitions to continue those conversations.
During the year, we attended more than 140 trade
exhibitions which covered all the industries we supply.
We also held numerous in-house seminars, inauguration
events, and attended conferences and OEM customers’
open houses across the world, the latter providing access to
companies with whom we would not normally deal directly.
We also make increasing use of social media to engage
with our customers, with multiple corporate, subsidiary and
product line accounts across platforms including Twitter,
Facebook, LinkedIn, Instagram and Weibo.
Renishaw graduates and apprentices.
13
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual Report 2019 Shareholders
In 2019, 150 visitors attended the Company’s investor day,
which included presentations on Group strategy, business
segments and product lines by members of the Board
and senior management, as well as Q&A sessions and an
opportunity to ask our Directors, managers and employees
questions during tours, lunch and refreshment breaks.
The AGM takes place at our headquarters and remains one
of the key elements of our shareholder calendar. 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 also offered.
Live webcast presentations of the Group’s full and half-
year results are held and recordings of the presentations
and subsequent Q&A sessions are made available on the
Company’s website.
We also connect with both current and potential new
shareholders on an ongoing basis through a variety of other
channels including the Annual Report and online where an
increasing amount of content is available via our website.
Our stakeholders continued
Suppliers
The supply of goods and services are critical to our overall
success, so we have developed processes and procedures
to ensure all supply chains and supplier relationships are
managed in an effective way. Particular attention is paid to
the initial supplier identification/selection process to ensure
that we have supply chains that are commercially robust
and capable of supplying what we need, when we need
it, and at a cost that is appropriate for business needs.
The ongoing management of supply chains and supplier
relationships are equally as important, so we engage
with all key suppliers on a regular basis through defined
communication and feedback channels.
We have approximately 400 key suppliers who vary in size
and location, with about half being located within a 100-
mile radius of our main manufacturing sites. Many of these
are SMEs (small and medium-sized enterprises). We also
have many suppliers overseas, to support the ongoing
development and management of supply chains and
supplier relationships; we have purchasing staff located in
the UK, Ireland, India, China, the USA and various European
countries. This allows us to have regular and direct
communications with them while addressing challenges
such as culture, time zone and language.
We recognise the need to protect the interests of our
employees, customers and shareholders by ensuring that
our supply chains are as risk-free as possible. We use
a risk management process that regularly assesses
supply chain risk and, where possible, looks to introduce
secondary sources for all key outsourced requirements.
Where this is not possible, bespoke stock policies have
been implemented to allow us to manage any potential
disruption in the supply chain.
We actively involve suppliers in our supplier performance
programme. All suppliers are assessed on a regular basis to
ensure that they meet expectations in the areas of delivery,
quality, corrective actions and commercial response.
Where there are shortcomings, we engage with suppliers
to ensure they are trained in best practice and appropriate
ongoing improvement programmes are in place.
Our purchasing and engineering teams put great emphasis
on ensuring that suppliers have the capability to meet our
high standards of quality by engaging with suppliers as
early as possible. Where necessary, we work closely with
suppliers to ensure that they have the necessary controls
in place to assure the ongoing supply of quality goods
and services by sharing known best practices, and our
knowledge and experience of working within the metrology
and process control manufacturing sector.
We are committed to conducting our business with honesty
and integrity, and suppliers are no exception to this policy.
All suppliers we engage with are required to comply with
our trading terms covering areas such as modern slavery,
sustainability, human rights, anti-bribery, tax evasion,
data protection and dangerous goods.
14
Strategic reportRenishaw plc Annual Report 2019 Communities
As part of our purpose, we aim to be an inspiring employer
and a responsible business. Our core value of integrity
also manifests itself in the relationships we have with our
communities around the world, where we strive to be
open, honest and consistent. We recognise the impact
we have on our local communities. We aim to make a
positive difference and to maintain an open dialogue with
community representatives.
We achieve this through our extensive education outreach
initiatives (see Education on page 49), large work
experience programmes, financial support for charities
and other not-for-profit organisations (see Charity on page
48), support for employee fundraising, the free use of our
facilities for educational and other community events, the
sponsorship of community sports clubs and festivals for
science, music and the arts, engagement with trade and
general business organisations, and through employee
volunteering that we support (see Community on page 48).
As part of our community engagement activities, we
believe it is vital to reach out to those from areas that are
economically and educationally disadvantaged, and
which may have historically been neglected by technology
companies. We are participating in various programmes
with partner organisations who share our values, to help
raise aspirations in these communities.
This includes a new three-year initiative with Cardiff Blues
rugby club’s Community Foundation where 100 pupils
from five secondary schools in South Wales take part in an
eight-week programme each year, participating in a range
of workshops that include team building, goal setting,
communication, leadership, equality in the workplace
and career pathways, and includes a visit to Cardiff
University and our Miskin site. Together we are aiming
to build confidence and show the wide range of career
opportunities available.
To help support victims of the floods in Kerala State, our
people in India raised money and collected donations
to create emergency kits. Our Indian subsidiary also
supported Janakalyan Rakta Pedhi, a blood bank that
supports hospitals in the Pune region, with a solar array
that has reduced their running costs.
While the majority of our education outreach has been
focused on STEM, we also recognise that many young
people are interested in other careers. Within the last
two years, we have created new commercial and IT
apprenticeships and, in July 2019, we held our first
commercial work experience week for 14 students from
the areas close to our UK headquarters.
Employee engagement survey participation
74%
Trade exhibitions attended
140+
Young people who gained work experience
138
Paid hours donated
10,000+
Investor day attendance
150
In August 2018 we held an Engineering Open House event at our
New Mills headquarters site.
15
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual Report 2019 Our markets
We work closely with our customers
across multiple markets to solve
complex challenges and improve
products and processes. We design,
develop and deliver solutions and
systems that provide unparalleled
precision, control and reliability. Our
disruptive thinking and manufacturing
excellence help customers increase
innovation, improve quality, expand
output and enhance efficiency.
Our unique blend of pioneering science and product
innovation produces a powerful pipeline of measurement
technology and manufacturing techniques that helps our
customers in diverse markets push the boundaries of what
is possible. From transport to agriculture, electronics to
healthcare, our breakthrough technology transforms product
performance and touches billions of lives around the world.
We therefore contribute to the development of a wide range
of products (from smartphones to solar panels, jet engines
to dental implants) and help address pressing real-world
problems (such as food security, energy generation and
degenerative diseases).
We help customers make the most of our technology
through expert sales and service support in 36 countries
and 81 locations.
We have listed our principal markets and the specific key
drivers of demand within those markets for our products.
There are also more generic market economic drivers that
impact our business:
• global economic growth – growth in key geographic
markets and the freedom of global trade impact demand
in key sectors that we supply;
• global skills shortages and rising labour costs –
increased investments in automation, robotics and user-
friendly technology;
• industry 4.0/smart factories – demand for more
digitisation and data to inform manufacturing processes;
• rising energy costs – increased demand for products
that maximise output;
• the requirement for more capable products –
increased investments in research and development and
manufacturing capabilities;
• a 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; and
• life expectancy increasing 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.
Our 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 AM, calibration,
measurement and automation, 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.
Aerospace
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 our
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 AM technologies are, for
example, being used to produce lightweight components
through lattice structures and part consolidation. Key drivers
include the expected requirement for 42,700 new aircraft by
2038 to meet growing global demand for civil air transport
(source: 2018 Boeing Global Market Forecast), new
fuel-efficient engines with more complex parts requiring
faster measurement, and the requirement to improve fuel
efficiency by minimising airframe weight. There is also a
growing global market for engine MRO due to the increased
demands on engine performance including operation at
higher temperatures and pressures.
Agriculture
The majority of key components on high-end agricultural
equipment are subject to process control using Renishaw
products, while our encoders can be found on satellites
assisting with Smart Farming techniques. The sector is
being driven by increasing global demand for food products
due to a growing global population with rising disposable
incomes, against a backdrop of climate change. This is
requiring greater investment in machinery for intensive
farming capabilities and new technology to increase yields
and reduce input and environmental costs. This is seeing a
focus on precision agriculture – using satellites to monitor
crop condition and direct machinery for optimal performance
– and more automation to make greater use of smaller areas,
often close to consumption, in which to grow crops.
16
Strategic reportRenishaw plc Annual Report 2019 Automotive
We operate throughout the automotive supply chain.
The majority of key components on domestic and
commercial vehicles are subject to process control using
our products. Key drivers include reduced global demand
for vehicles with internal combustion engines (ICE) due to
greater pressures on emission levels, with a trend towards
hybrid and electric vehicles, and a focus on autonomous
vehicles. This represents both opportunity and risk, with
a mixed global environment for adoption of the newer
technologies. While our products are deeply embedded in
ICE vehicle production processes, which is seeing reduced
capital investment, there is still a drive to make engines
as efficient as possible. There are multiple opportunities
for metrology products, AM and position encoders in
the research and manufacture of new vehicle types,
which will still require precision parts, cost efficiencies
and automated processes throughout the supply chain.
Vehicle design life cycles are also reducing, driving more
flexible manufacturing and measurement requirements
from which we are well placed to benefit. We are also
benefiting from increasing demand for sensors and digital
display dashboards.
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 the investment environment for infrastructure
projects increasing the demand for heavy equipment and
skills shortages within the sector requiring more automation
within equipment manufacturers.
Consumer products
The fast-paced and evolving nature of the consumer
products market demands flexible manufacturing systems
that can adapt to shorter life cycles, 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 life cycles driven by
consumer demand for more capable products, including
brighter screens, longer battery life, smaller size and faster
networks (5G). Precision manufacturing systems with
multiple process control techniques are required to produce
the high standard of fit and finish increasingly required for
home appliances and enclosures on products such as
mobile phones, computers and tablets, where we are seeing
a trend away from metal to glass and ceramic. There is also
increasing use of automation in manufacturing processes
and material handling due to rising labour costs in China
and southeast Asia. The successful introduction
of 5G mobile products will require significant investment to
produce the more complicated integrated circuits required
by this new technology, and our encoder products are
well positioned to benefit from this. Weaker demand for
smartphones and the resultant over-capacity in the supply
chain have impacted demand for our metrology 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 in 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 error, increasing the
demand for medical robots for precision positioning.
Power generation
From fossil fuels to renewable energy, our 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 standards, requiring
accurate, cost-effective and traceable processes.
Our products give manufacturers this capability, whether
using our calibration systems to check and verify the
dimensional accuracy of large, high-value computer
numerically controlled machine tools, or using probe
systems for setting operations and in-process verification.
The growth in the global population and increased
urbanisation are driving the long-term demand for fossil
fuels and the exploration of new sources, or more research
into optimal extraction from existing sites. There is also a
focus on improving the efficiency of large diesel engines
used in transport and resource exploration and extraction,
requiring greater component accuracy.
17
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual Report 2019
Our strategy
Our strategy focuses on key elements that keep our business model running.
People and culture
delivering success through the
strength of our talented and
committed employees
See page 19
Continuous R&D
creating strong market positions
with innovative products
See page 19
High-quality manufacturing
delivering robust and reliable
products tested to our exacting
standards
See page 20
Global customer support
ensuring our customers recognise
Renishaw as a critical part of their
value chain
See page 20
Delivering solutions
understanding our customers’
needs to offer cost-effective,
efficient and easy-to-use solutions
See page 21
1
2
3
4
5
18
Strategic reportRenishaw plc Annual Report 2019
Our strategy in action
1. People and culture
Focusing on people development
Our success is a result of the commitment, skills and
ingenuity of our 5,000 people. They bring fresh thinking
and customer focus to every aspect of their work.
Our core values of innovation and integrity shape our
strong culture. This provides the foundations and required
alignment for us to successfully work towards our strategy,
fulfil our purpose and continue to build a sustainable and
successful Group.
Our focus
With 5,000 employees globally, we are focused on a
new internal communications strategy to ensure effective
communication, engagement and feedback across the
Group. We also have a renewed focus on learning and
development, and leadership and management training,
complemented by a new performance review process.
See the Chairman’s statement on pages 4 and 5
for more information on our values and culture
Examples of what we have achieved in the past year:
• 67 apprentices will be recruited at our Gloucestershire
and South Wales sites in 2019, a record intake in our
40th year of apprenticeship recruitment
2. Continuous R&D
Taking a long-term view
For Renishaw, research and development has always been
at the heart of our business, typically investing between
13% and 18% of revenue annually in R&D and engineering
to maintain leadership in our various technologies.
Patent and intellectual property generation is core to
new product developments and our six in-house patent
attorneys are key members of our development teams.
‘Apply innovation’ is deeply embedded in our culture.
We have continued to protect our core businesses
with exciting new patented technology and process
developments, while also diversifying into new product
and market areas. We also work with key universities to
supplement our core specialities.
We are prepared to take a long-term view with R&D and, as
our Director of Group Technology, Geoff McFarland, says,
“It requires a passionate belief in the ultimate commercial
viability of the technology, and the ability to hold your nerve,
because the length of time from fledgling technology to
commercial launch is regularly underestimated.”
Our focus
The current technology focus continues to be on products
that help our customers to improve measurement
performance, enhance the performance and efficiency
of their products, increase speed of operation, increase
measurement capability and are easier to use.
• We launched our global Wellbeing Programme to
help support our people around the world and help
employees manage their work-life balance
• We conducted a UK-wide engagement survey to
obtain employee feedback about working at Renishaw;
we expect this to be rolled out overseas during the year
• Global HR business partners have been established
to support our different regions, allowing us to have
greater focus on people development
• Nearly 200 STEM ambassadors, including graduates
and apprentices, continue to support our educational
outreach initiatives.
Examples of what we have achieved in the
past year:
• 29 new patent applications filed and 103 previously
filed patents granted during the year
• Designed for biological and clinical research, the new
Renishaw RA816 Biological Analyser (above) was
launched during the year
• The new APCA-45 tool setting probe is for the
very harsh environments found in lathes and multi-
tasking machines
• A new servo positioning head for CMMs is used within
the automotive market for body-in-white measurement
• For high-end XY stages that require multiple
interferometer feedback axes, our new multi-axis
periscope (RMAP) enables accurate six degrees of
freedom measurements.
19
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual Report 2019 Our strategy in action continued
3. High-quality manufacturing
Investment in efficiency and infrastructure
We are a highly vertically-integrated organisation with
significant in-house manufacturing capabilities. With high-
quality manufacturing plants located in the UK, Ireland,
India, Germany, the USA and France, we are able to deliver
exceptionally robust and reliable products to our customers,
which have been tested to our exacting standards.
As a manufacturer operating in a high-mix/low-volume
situation, with a strategy of delivering exceptional
customer service, our approach has been to maintain as
much control as possible of our supply chains. This has
been achieved through a combination of in-house
manufacturing (using in-house automation and our own
products), duplication of critical processes, dual sourcing
and strategic long-term partnerships with our third-party
suppliers. We also have supply chain management teams
based in China, India and Ireland.
Our focus
We strive to ensure our products are designed to optimise
manufacturing capability, whether in relation to our
machining and assembly processes, or that of third-party
suppliers. We invest in people and resources to meet the
output requirements demanded by turnover growth and to
improve our cost of sales performance.
4. Global customer support
An essential part of our customers’ world
We are passionate in the belief that excellent customer
support delivers success. Our customers can be global,
with an order being placed in one country and the product
shipped to the eventual end-user, who could be located
on a different continent. By having ‘local’ global support
through our wholly-owned subsidiary network and long-
term distributors, we are able to assure customers that
whatever their needs, we are able to support and assist
them, resulting in a positive return on their investment.
We are very focused on having a long-term relationship with
our customers. It is not just about a sale but also supporting
and helping our customers develop their processes and
improving the quality of their product output.
We continually review our support policies and create new
services to help our customers in their changing markets.
Our aim is not just to meet customer requirements, it is to
exceed their expectations.
Our focus
Through the life cycle of all our product ranges,
we are focused on providing innovative services to
support changing customer expectations and market
requirements. We are flexible with our approach, and
support customer needs from initial purchase right through
to obsolescence, regardless of global location. We are
continuing to grow our support network.
Examples of what we have achieved in the
past year:
AM assembly at Miskin, South Wales.
• In Ireland we continue developing intelligent
manufacturing systems using smart factory concepts
and in-house developed process control systems,
while displaying real-time data for production
outputs, product yields and process monitoring
• At the Woodchester site we installed the first of
a new generation of in-circuit test platforms to
improve throughput on PCB (printed circuit board)
functionality tests
• In Wales we added to our in-house capabilities
for cutting tool and large part manufacture, and
installed a second automated cell with robot loading
for encoder ring machining.
Examples of what we have achieved in the
past year:
• 150 visitors attended our Manufacturing in
Aerospace open day at our world-class Innovation
Centre in Gloucestershire, UK, where we led
discussions on the future of aerospace and
how manufacturers should prepare to meet the
expectations of this growing industry
• We formally opened our new Additive Manufacturing
Solutions Centre in Pliezhausen, Germany, with two
solutions networking events for customers from key
sectors including: machinery and plant engineering,
automotive and aerospace
• We opened new facilities in Ningbo, China and
Istanbul, Turkey, enabling us to demonstrate our
metrology products to customers in these locations.
We also officially opened our new office in Nuevo
León, Mexico.
20
Strategic reportRenishaw plc Annual Report 2019 5. Delivering solutions
Meeting market demands
Our 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. We aim to
truly understand our customers’ needs, allowing us to offer
a cost-effective, efficient and easy-to-use solution.
This requires our sales force and technical support teams
to be ever more knowledgeable, not just about what our
products do, but also how they can be applied to benefit
our customers’ processes and practices.
Our global network of Additive Manufacturing Solutions
Centres is typical of our differentiated approach. We work
collaboratively with companies that intend to deploy AM
in production, supporting them from conceptual design,
through product and process optimisation, to pre-
Examples of what we have achieved in the
past year:
production scale-up and production deployment. As well
as AM machines and application engineering support,
customers benefit from our expertise in machining,
metrology and finishing operations.
Our focus
We are focused on the levels of integration that we can
bring to our customers’ manufacturing environments,
especially those looking to bring connectivity and the
intelligent use of data within their manufacturing processes.
• Adoption of quad laser AM systems is enabling
Knust-Godwin (USA) to reduce oil and gas customers’
lead times from concept to commercialisation from
24 months to just eight months
• Integrating Renishaw’s RLE10 laser encoder has
dramatically improved the positional accuracy
of Yagishita Giken’s (Japan) multi-core optical
connector inspection machine from 0.1 micron to
0.01 micron resolution
• Senior Aerospace Weston, Lancashire, UK has
used Renishaw’s Equator gauge to cut inspection
times per part by around 75% and introduce more
comprehensive component traceability.
21
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual Report 2019 Key performance indicators
The main performance measures monitored by the Board are:
Financial
Revenue £m
.
5
1
1
6
.
0
4
7
5
.
8
6
3
5
.
7
4
9
4
.
2
7
2
4
15
16
17
18
19
Total engineering costs
including R&D £m
9
.
7
8 9
.
9
8
6
.
3
8
4
.
7
7
0
.
8
8 7
.
8
6
1
.
6
6
3
.
3
6
2
.
3
6
8
.
8
6
15
16
17
18
19
We are focused on growth in
revenue, through increasing our
market and geographic penetration
and continually introducing new
products. We have previously
made a number of acquisitions
which expanded 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 for the development
of new products and processes.
The Group continues to make
significant investment in future
products, with engineering costs
equal to approximately 16% of
Group revenue, and has also
been accelerating new product
development in certain areas.
Included in the Consolidated income
statement
Gross expenditure
Adjusted earnings per
share pence
5
.
0
7
1
4
.
2
3
1
9
.
9
1
1
5
.
7
6
1
4
.
0
0
1
3
.
3
5
15
14
16
15
17
16
18
17
19
18
Statutory earnings per
share pence
8
.
1
8
1
3
.
1
4
1
7
.
6
2
1
5
.
7
6
1
8
.
1
7
15
16
17
18
19
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 25, Alternative
performance measures, defines
how Adjusted earnings per share
is calculated and why the Board
has adopted this measure.
Dividend per share in
respect of the year pence
.
0
0
6
.
0
0
6
.
0
2
5
.
5
6
4
.
0
8
4
We aim to achieve significant
long-term returns to shareholders
by maintaining a progressive
dividend policy, while maintaining
a solid capital base with sufficient
working capital to support the
forecast growth.
15
16
17
18
19
+
Engineering a
charitable success
Project Gromit
Gromitronic is a special animated
Gromit sculpture, created by a young
team of Renishaw apprentices and
graduate engineers.
22
Strategic reportRenishaw plc Annual Report 2019
Non-financial
UK employee turnover %
15.0
14.4
13.2
12.3
10.0
7.71
8.0
5.7
5.0
5.5
Our people are central to our
success, so it is important 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.
UK average data source EEF/
makeuk labour turnover reports
1 Excludes discontinued operations
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.
9
1
.
5
0
.
1
.
2
1
.
2
1
2
.
1
2
.
5
9
0
.
8
.
0
4
0
.
2
0
.
We have had zero fatalities this
year. A breakdown of reportable
accidents is given on page 47.
Our aim is to have zero
fatalities and zero lost working
time injuries.
15
16
17
18
19
Renishaw
UK average
15
16
17
18
19
Renishaw
UK average
Number of apprentices
in training
0
4
1
4
4
1
1
3
1
0
2
1
4
1
1
15
16
17
18
19
Greenhouse gas
emissions ’000 tC02e/£m
8.97
48.86
7.45
34.30
6.81
40.36
50.65
45.29
6.27
10.41
39.01
36.88
6.92
8.25
33.32
15
16
17
18
19
Early careers programme –
apprentices
A significant part of our early
careers programme is our
apprenticeship scheme.
Apprentices play an essential role
within our business and help tackle
the STEM skills gap.
We are committed to continuing
our apprenticeship programme at
a sustainable level.
Minimising our GHG emissions is
an important way in which we can
lower our environmental impact.
Our aim is to have a year-on-year
3% reduction of our normalised
GHG emissions (tCO2e/£m).
Scope 1 – Direct emissions
Scope 2 – Electricity indirect emissions
Scope 3 – Other indirect emissions
Number of new
placements
and graduates
70
76
65
45
105 100
100
105
62
73
Our early careers programme
is an integral part of ensuring
we have the talent pipeline for
the future.
We aim to maintain a sustainable
intake of graduates and
placement students each year.
15
16
17
18
19
Placements
Graduates
For more information on these KPIs:
People see page 45
Early careers programmes see page 45
Health and safety see page 47
Environment see pages 50 and 51
Gromitronic is a special animated Gromit sculpture,
created by a young team of Renishaw apprentices and
graduate engineers.
The sculpture was created for The Grand Appeal’s Gromit
Unleashed 2 trail and was organised by Bristol Children’s
Hospital charity, Wallace & Gromit’s Grand Appeal.
As one of the Trailblazer companies involved, the Renishaw
team was asked to create one of three interactive sculptures
for the trail that represents innovation in engineering and
design. Gromitronic showcases the mechatronic nature of
Renishaw’s products and aims to get children and adults
excited about STEM subjects.
The team that created Gromitronic had the necessary skills
in software, electronics, design engineering and mechanical
engineering to ensure the sculpture would work well during
two months on public display at the M Shed museum in
Bristol. Each member of the team worked on a different
component to make sure it was interactive and interesting
for all ages of visitors. Dozens of Renishaw colleagues
volunteered to attend the trail and talk to members of the
public about our business and the technology used as
part of the Gromitronic display.
The trail and subsequent auction of the sculptures
took place in late summer 2018 and raised £2m for
Bristol Children’s Hospital charity, Wallace & Gromit’s
Grand Appeal.
Renishaw made a substantial donation to the charity
to keep Gromitronic at our New Mills headquarters in
Gloucestershire, where it will be seen by thousands of
people (schools, business and community groups) every
year in our Innovation Centre.
23
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual Report 2019 Performance – financial review
Overview
We have achieved revenue amounting to £574.0m and
Adjusted* profit before tax of £103.9m. Statutory profit
before tax was £109.9m. We have a strong balance sheet
with total equity growing by £34.7m to £583.3m, with net
cash balances of £106.8m (2018: £103.8m). In line with
our progressive dividend policy, the Board is proposing an
unchanged dividend of 60.0p per share this year.
Revenue
We achieved revenue for the year of £574.0m, compared
with £611.5m last year. This fall is largely a result of a
slowdown in demand for our encoder products and from
large end-user manufacturers of consumer electronic
products, primarily driven by economic uncertainty in the
APAC region. The table below shows the analysis of Group
revenue by geographical market.
In our metrology business segment, revenue was £532.9m,
compared with £575.8m last year. Revenue in our healthcare
business segment increased by 15% from £35.7m last year
to £41.0m.
A geographical analysis of our metrology and healthcare
businesses is shown on page 2.
Revenue analysis by region
2019
revenue
at actual
exchange
rates
£m
240.1
167.2
132.6
34.1
574.0
2018
revenue
at actual
exchange
rates
£m
289.2
165.1
126.6
30.6
611.5
Underlying
change at
constant
exchange
rates
%
-19
2
1
11
-7
Change
from
2018
%
-17
1
5
11
-6
APAC
EMEA
Americas
UK
Total Group revenue
Profit and tax
The Adjusted profit before tax amounted to £103.9m
compared with £145.1m in 2018. Statutory profit before tax
was £109.9m compared with £155.2m in the previous year.
In our metrology business, Adjusted operating profit was
£90.6m compared with £142.8m last year. I am pleased to
report further growth in our healthcare business, with an
Adjusted operating profit of £3.1m compared with £0.3m
last year.
The overall effective rate of tax on continuing operations
was 16.1% (2018: 14.7%). 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. Lower profits in the
UK in the current year resulted in a fall in the patent box
benefit to £1.8m (2018: £5.7m) and is the principal factor for
the increase in the overall effective tax rate. Note 8 provides
further analysis of the effective tax rate.
Allen Roberts
Group Finance Director
We have experienced a fall in both
revenue and Adjusted* profit before
tax, largely due to adverse trading
conditions in the APAC region. With a
strong balance sheet, including cash
balances of £106.8m, we remain
confident in the future prospects of
the Group, and continue to invest
and focus on productivity to deliver
long-term growth.
24
Strategic reportRenishaw plc Annual Report 2019 Alternative performance measures
In 2017, the Board introduced APMs (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 Adjusted profit before
tax and statutory profit before tax.
Research and development
Gross expenditure on engineering costs, including R&D
on new products, was £97.9m (2018: £83.6m). The gross
charge amounts to 17% of Group revenue (2018: 14%).
The capitalisation of development costs (net of amortisation
charges) amounted to £2.9m (2018: £2.1m). The R&D tax
credit in 2019 amounted to £5.1m compared with £4.1m in
2018. The net charge in the Consolidated income statement
amounted to £89.8m compared with £77.4m in 2018.
2019
£m
103.9
2018
£m
145.1
Between the business segments gross expenditure on
engineering costs was £90.7m (2018: £77.1m) in the
metrology segment and £7.2m (2018: £6.5m) 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 gains from the fair value
of financial instruments
Statutory profit before tax
5.0
5.3
1.0
109.9
4.8
155.2
See note 25 of the Financial statements for further details on
this and Revenue at constant exchange rates.
Earnings per share and dividend
Adjusted earnings per share from continuing operations is
119.9p compared with 170.5p last year.
Statutory earnings per share from continuing operations is
126.7p compared with 181.8p last year.
A final dividend of 46.0p net per share (2018: 46.0p) results
in a total dividend for the year of 60.0p (2018: 60.0p).
Dividend cover is 2.0 times (2018: 2.8 times) on an
adjusted basis.
Business systems transformation
In recent years, we have made significant progress in
enhancing and simplifying financial reporting processes
and systems, to further improve the analysis of
business performance.
With a focus on increasing productivity and efficiency,
further major system deployments are in progress
for our HR, engineering change management and
marketing activities.
We have recently committed to a new ERP system to
replace our global finance, sales & marketing and CRM
systems. This will deliver many benefits to the business
including enhanced customer support and inventory
management and will provide the infrastructure to support
our growing solution selling activities.
New product R&D expenditure amounted to £67.0m, which
compares with £59.1m 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 segment performance reviews, and a number of
new product introductions are anticipated during the 2020
financial year.
Group headcount
Group headcount has increased from 4,862 at 30 June
2018 to 5,041 at 30 June 2019, with the average for the
year of 4,968 compared with 4,639 last year. The increase
during the year of 179 comprised additional employees of
122 in the UK and 57 overseas. In the UK we took on 119
apprentices and graduates in the year and are also funding
the further education of 117 employees in engineering,
software and commercial/professional disciplines.
Labour costs, the most significant cost for the Group,
increased by 5% to £237.4m (2018: £226.8m) reflecting a
pay increase in July 2018 and the incremental cost of the
employees recruited in both 2018 and 2019, partially offset
by a reduction in bonuses.
25
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual Report 2019 Performance – financial review continued
Consolidated balance sheet
The Group’s shareholders’ funds at the end of the year
were £583.3m, compared with £548.6m at 30 June 2018.
Reserves benefited from our trading results, with a retained
profit after tax of £92.2m and were reduced by dividends
paid of £43.7m.
Additions to property, plant and equipment and vehicles
totalled £56.8m, of which £25.4m was spent on property
and £31.4m on plant and machinery, IT equipment and
infrastructure, and vehicles.
The main additions were:
• in the UK, a 94,000 sq ft extension to our Renishaw
Innovation Centre due for completion in December 2019;
• in The Netherlands, the purchase of our existing facility;
• in Brazil, the purchase of land for the future development
of a new distribution facility; and
• in Japan, the purchase of property in Nagoya to support
the expansion of our distribution function, funded by local
third-party borrowing.
Within working capital, inventories increased to £129.0m
from £110.6m at the beginning of the year primarily
reflecting the impact of Brexit contingency preparations
and the reduced demand we experienced in the second
half of the financial year. We continue to focus on inventory
management while remaining committed to our policy
of holding sufficient finished goods to ensure customer
delivery performance, given our short order book.
Trade receivables decreased from £154.6m to £123.2m
reflecting record revenue in the final quarter of 2018.
Debtor days were 73 at the end of the year, compared with
69 at the end of last year.
Net cash balances at 30 June 2019 were £106.8m
(2018: £103.8m). The cash flow bridge below shows
the significant items that reconcile opening to closing
cash balances.
Capital expenditure £m
£56.8m
+62.8%
53.0
.
6
5
3
48.4
.
5
7
2
.
9
0
2
.
4
7
1
42.6
.
4
8
1
.
2
4
2
34.9
.
9
4
2
.
0
0
1
56.8
4
.
1
3
4
.
5
2
Plant and equipment and vehicles
Land and buildings
15
16
17
18 19
Working capital £m
(excluding cash and derivatives)
£212.6m
+5.4%
% of revenue
6
.
2
1
2
8
.
1
0
2
5
.
2
8
1
8
.
0
8
1
6
.
0
3
1
41.8%
41.8%
37.0%
33.7%
33.0%
26.4%
15
16
17
18
19
£m
300.0
250.0
200.0
150.0
100.0
50.0
0
103.8
h B/fd
s
a
C
Increase
Decrease
Total
26
42.5
30.0
-7.8
92.2
-18.5
-25.2
-6.8
-52.1
-18.1
10.5
106.8
-43.7
x
fit after ta
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pital – in
a
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et c
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In
Strategic reportRenishaw plc Annual Report 2019 Pensions
At the end of the year, the Group’s defined benefit pension
schemes, now closed for future accrual, showed a deficit
of £51.9m compared with a deficit of £67.4m at 30 June
2018. Defined benefit pension schemes’ assets at 30 June
2019 increased to £181.6m from £172.8m at 30 June
2018, representing investment performance during the
year net of £7.2m benefit payments including transfers.
Pension scheme liabilities decreased from £240.2m to
£233.5m. Following further engagement with The Pensions
Regulator, the Company and trustees have agreed the
terms of a new deficit funding plan for the UK defined
benefit pension scheme, based on the triennial valuation
as at 30 September 2018. The Company has agreed to
pay £8.7m per annum into the scheme for five years with
effect from 1 October 2018. Under the terms of the previous
agreement, the Company paid approximately £4.0m
per year.
In line with the previous agreement, the new agreement will
continue until 30 June 2031 and any outstanding deficit will
be paid at that time. The agreement will end sooner if the
actuarial deficit (calculated on a self-sufficiency basis) is
eliminated in the meantime.
On 26 October 2018, the High Court reached a judgement
in relation to Lloyds Banking Group’s defined benefit
pension schemes which concluded that the schemes
should be amended to equalise pension benefits for men
and women as regards guaranteed minimum pension
benefits. The issues determined by the judgement arise in
relation to most other defined benefit pension schemes and
are relevant to the Company’s UK defined benefit pension
scheme. Following discussions between the Company,
the trustees and their respective advisors, we have
estimated incremental liabilities to be £0.8m, which have
been recognised in the Consolidated income statement in
Administrative expenses. The estimate has increased the
scheme’s liabilities by 0.4% and is based on the C2 method
which has been approved by the courts and likely to be the
most commonly used approach. The Company and trustees
along with their respective advisors continue to assess
the most appropriate method to achieve the equalisation
of benefits.
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.
Weekly Group-wide 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. See note 15 for an analysis of cash balances at
the year end.
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.
See note 20 for further details on financial instruments.
Capital allocation strategy
The Board regularly reviews the capital requirements of
the Group, in order to maintain a strong financial position
to protect the business and provide flexibility to fund
future growth.
Our capital allocation approach has been consistently
applied for many years. We are committed to investment
in the R&D of new products, manufacturing processes and
global support infrastructure in order to generate growth
in future returns. This is evidenced in the year with capital
investments and additional R&D spend cited previously.
Actual and forecast returns, along with our strong financial
position, then support our progressive dividend policy,
which aims to increase the dividend per share, while
maintaining a prudent level of dividend cover.
Allen Roberts
Group Finance Director
1 August 2019
27
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual Report 2019 Global investment
The way that we behave and
operate drives our success.
Our continual investment in our
people and infrastructure allows
us to deliver excellence to our
global customer base.
+
Research and development
in Slovenia
Renishaw Slovenia, is an R&D facility located in the
University of Ljubljana, Slovenia, within the Faculty of
Electrical Engineering. It specialises in designing and
supplying integrated circuits and sensor technologies for
existing and future products, meeting the exacting needs
of the precision measurement and healthcare sectors.
Being located within the university has created an
environment that offers enormous potential for research
and development. The faculty also benefits from having
a world-leading company located within its facilities,
helping to mentor and develop aspiring engineers.
In 2019, Renishaw Slovenia was shortlisted in a national
Best Employer Competition and was one of seven
finalists out of 89 entrants to be shortlisted in the small
business category (up to 50 employees). The annual
competition organised by the Dnevnik newspaper,
invited entrants from many different industries with the
finalists assessed on their employee feedback, employee
experience, the business’s role in the local community
and the general success of the business.
Marija Manevska
ASIC Design Engineer –
Slovenia
+
Expansion in Mexico
In 2018, Renishaw México moved to new premises
in Apodaca, Nuevo León, helping to support further
expansion in Mexico’s automotive and aerospace market.
This new facility, with our state-of-the-art customer
demonstration area, enables us to provide further expert
support to customers, for many different product lines at
various stages in their manufacturing processes.
In this new facility, we host workshops, seminars
and industry events, allowing customers to see how
Renishaw can support industry in the region.
Renishaw México has also been recognised as a
‘Great Place to Work’. In 2018, it ranked in the top 100
companies (with fewer than 50 employees) to work for
in Mexico. The certification was awarded by Great Place
to Work, a global organisation that helps businesses to
build a ‘winning workplace culture’.
Alejandro Silva
President – Mexico
Investing globally for the long term
28
Strategic reportRenishaw plc Annual Report 2019 +
People development in APAC
+
High-quality manufacturing
in India
Renishaw delivers exceptional levels of service and
product quality to our customers through superior
manufacturing. We produce a substantial amount
of our products in the UK, but we also operate other
manufacturing sites across the globe, including our
state-of-the-art facility in Pune, India, operated by our
Indian subsidiary.
In 2011, the facility was expanded to its current
60,000 sq ft size and today 200 manufacturing
employees are involved in building parts for a range
of Renishaw products, including: vacuum casting and
AM machines, hand controllers for CMM products, parts
for our Equator gauging system and different types of
cable sub-assemblies and tool setting arms.
New roof-top solar panels were installed at the site in
2017. These panels now generate half the power needed
to run the facility.
Renishaw India also contributes to the local community
through an active CSR programme, where employees
work with local villages, schools, elderly care homes
and hospitals.
We have now appointed Regional HR Heads into our
Americas, EMEA and APAC regions.
In APAC, the HR mission is to support our functional
teams across the region to achieve their business goals,
through strategic people management and development.
Our aim is to continue to build a rounded leadership
capability and to drive alignment with management
values on individual performance evaluation, in a very
diverse region with many cultural differences.
One of our focuses is to promote collaboration in the
region, including training, technical expertise and
knowledge sharing, to build stronger relationships
across APAC.
As HR professionals, we need to be active listeners and
have a clear understanding of business operations,
processes and systems. This will enable us to work
closely with our teams to provide timely and appropriate
HR guidance, and to continue to develop talented
people, to drive our business forward.
Elaine Lam
Head of Human
Resources – APAC
Suhas Cholkar
Director and Head of
Manufacturing Services
Division – India
Investing globally for the long term
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29
Strategic reportRenishaw plc Annual Report 2019
Metrology – business segment
Our key markets include aerospace,
automotive, 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.
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.
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 position measurement
and calibration systems allow machine builders to
manufacture highly accurate and reliable products. We are
a world leader in the field of metal additive manufacturing
(3D printing) with machines that produce parts from
metal powder.
The product range includes:
Additive manufacturing
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, consumer products and mould tooling.
Co-ordinate measuring machine 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 Equator 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.
30
Strategic reportRenishaw plc Annual Report 2019 Gauging
The Equator gauging system enables process control
by delivering highly repeatable, thermally insensitive,
versatile 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 and
automatic transfer systems, 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.
+
Helping to deliver
smart factory
solutions
Metrology in numbers 2019
Revenue
£532.9m
-7%
(2018: £575.8m)
Adjusted operating profit
£90.6m
-37%
(2018: £142.8m)
Percentage of Group revenue
93%
(2018: 94%)
In the face of global skills shortages and rapidly
emerging Industry 4.0 trends, Hartford, a Taiwanese
CNC machine tool manufacturer, undertook to develop
an innovative, easier-to-use human machine interface
(HMI) for its machines. Bruce Lin, Manager of Hartford’s
R&D Intelligent Technology Department explains:
“Our customers are needing to process workpieces of
increasing complexity, however a lack of skilled labour
means they are having to insist on machining centres that
are even simpler to use.”
Hartford, which has supplied 46,000 machines to 65
countries, has developed Hartrol Plus, an intelligent
CNC controller which is as easy to use as a smartphone.
The controller’s HMI visualises data in a way that helps
machine operators make more informed decisions and
solve problems more quickly.
Renishaw’s Set and Inspect on-machine app has been
integrated with the new controller. It is a highly visual
graphical user interface which leads the operator through
every step of on-machine probing processes, eliminating
the need to remember machine code instructions,
reducing data entry errors and programming times, and
increasing processing efficiency by as much as 20%.
31
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual Report 2019 Metrology – performance
There are multiple opportunities in the
research and manufacture of new vehicle
types, with precision parts, cost efficiencies
and automated processes required
throughout the supply chain.
Dave Wallace, Director of Industrial Metrology
Performance
It was a challenging year for our
metrology business, especially the
machine tool and position encoder
product lines which were impacted by
weakness in key markets in the APAC
region. There was however strong
growth in our AM product line, while
our measurement and automation,
and fixturing lines, also experienced
good growth.
The AM line benefited from growth in the market for AM
technologies and the adoption of the RenAM 500Q four-
laser system. Designers and manufacturers are aiming
to enhance product performance and efficiency through
more complex geometries and lightweight components,
to produce products that are inherently more efficient,
and to lower emissions and reduce raw material usage.
The aerospace and medical sectors are currently the most
developed users of the technology, with oil and gas, and
power generation also seeing good levels of adoption.
During the year we supplied multiple RenAM 500Q systems
to Knust-Godwin, a US supplier to the oil and gas sector.
We entered into a partnership with Sandvik Additive
Manufacturing in Sweden to supply multiple systems
and Siemens also invested in our technology for its UK
subsidiary, Materials Solutions.
The measurement and automation product line, currently
focused on the Equator gauging system, continues to see
high levels of global success in the aerospace, automotive
and electronics sectors, with the trend towards integration
within automation cells continuing and greater use of the
Equator system for process control earlier in manufacturing
operations. The trend towards faster design iterations in
the automotive market, from seven-year cycles to as low as
18 months, is beneficial for a flexible gauge versus fixed,
single-application gauges. The Equator gauge is also well
placed for metrology applications with electric vehicle parts
including gears and rotors/stators.
While there were challenges this year for the position
encoders line, our optical encoders and the magnetic
encoders from our joint venture, RLS, are still benefiting
from the ongoing global drive towards industrial automation
which aims to increase capacity and flexibility, while
reducing manufacturing lead times and costs.
32
Market conditions
We have experienced lower demand in some areas caused
by reduced investments in markets such as consumer
electronic products (due to weaker smartphone demand
and the resultant over-capacity in the supply chain), DRAM
(computer memory) production and semiconductors,
which have impacted our position encoder and machine
tool product lines. However, we are still seeing positive
trends for our position encoders, driven by new flat panel
display technology and the demand for 5G mobile products.
The latter requires more complex integrated circuits and
significant investment in manufacturing plants to be
produced in volume. A new trend is for connectivity, where
customers are requiring more real-time data on machine
performance and where encoders are able to give such
feedback, including temperature. Our comprehensive
encoder portfolio, including new diagnostic interfaces, is
well placed to meet these requirements.
Despite what we believe to be a short-term slowdown in the
demand for consumer electronics, we are continuing to see
global investment in production systems and processes,
including automation and robotics, aided by an increasing
awareness of the benefits to be gained by adopting Industry
4.0 and smart factory philosophies, and to tackle global
skills shortages. To offset the need for highly-skilled machine
operators, manufacturers are demanding user interfaces
and software that are easier to operate.
Our metrology lines are also benefiting from the drive to
reduce costs, shorten lead times, meet the need for
increased complexity and closer tolerances in product
design, and supply markets where shorter product life
cycles are compressing times for process development.
A key sector for Renishaw is the civil aviation market, where
our products are heavily used in process control and part
inspection to meet stringent safety standards. In addition
to the expected requirement for 42,700 new aircraft by
2038, there is also a growing global market for engine MRO
due to the increased demands on engine performance
including operation at higher temperatures and pressures.
Our measurement products, including the REVO measuring
head and scanning probes with SPRINT technology, help
deliver the high-accuracy data acquisition and minimised
repair lead times required by the industry in applications
such as turbine blade re-manufacture.
The automotive sector is also very important for our
metrology business and we operate throughout the supply
chain. There are opportunities and risks for our business;
while there is reduced global demand for vehicles with
internal combustion engines (ICE), the trend towards hybrid,
electric vehicles and autonomous vehicles represents
opportunities. Our products are deeply embedded in ICE
production which is seeing reduced capital investment,
yet there is still a drive to make those engines as efficient
as possible, and there are multiple opportunities in the
research and manufacture of new vehicle types, which will
still require precision parts, cost efficiencies and automated
processes throughout the supply chain.
Strategic reportRenishaw plc Annual Report 2019 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, while 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
£90.7m (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, enhance the performance and efficiency
of their products, increase speed of operation, increase
measurement capability and are easier to use.
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. Our larger exhibition
stands and our in-house demonstration facilities focus on
the levels of integration 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 used with our Equator gauging systems, and our optical
position encoders are used on the Z-axis of our RenAM
500 series AM systems and the REVO-2 measuring head
for CMMs.
Key developments
During the year we introduced new products for our CMM
product line including the PHS-2 second generation
servo positioning head which is used by many vehicle
manufacturers for body-in-white measurement, and a new
version of UCCsuite for our UCC CMM controllers which
supports our new XM-600 calibration system for high-speed
dynamic CMM error-mapping and fault-finding. Within our
calibration line, the new XK10 alignment laser system is
used during the build and alignment of machine tools,
replacing the need for artefacts.
We also introduced the QuickLoad rail and plate system for
faster throughput of inspected parts by allowing users to
quickly changeover fixturing plates.
Within our machine tool product line we launched the
APCA-45 tool setting probe for the very harsh environments
found in lathes and multi-tasking machines. Additionally, the
new SupaScan QuickPoint macro allows superfast probing
cycles in machining applications with very short cycle times.
In our position encoder line we released a rotary encoder
for our QUANTiC family of incremental encoders which offer
machine builders ease-of-use for machine set-up due to
exceptionally wide installation and operating tolerances.
For high-end XY stage performance that requires multiple
interferometer feedback axes, our new multi-axis periscope
(RMAP) enables accurate six degrees of freedom
measurements utilising the performance from the Renishaw
RLD10-X3-DI interferometer head.
We now offer a single laser (S) version of the RenAM 500
production series AM platform, having launched the ‘Q’
system with four lasers last year.
Outlook
A detailed analysis of the key markets for our metrology
products can be seen in Our markets (page 16). While there
are current challenges in terms of global economic growth,
especially due to the risks posed by reduced freedom in
global trade, we remain confident that underlying market
drivers will continue to benefit the long-term growth of
our business. Rising global incomes and population will
drive demand in our key markets including civil aviation,
agriculture and power generation (including renewables), all
of which will require products that help drive efficiencies to
maximise valuable resources and minimise waste.
We continue to see a global drive to automate and simplify
manufacturing processes, both to minimise labour costs
and reduce the need for skilled labour, which will especially
benefit our position encoder, measurement and automation,
and machine tool product lines. We also see a continuing
focus on introducing new technologies, such as 5G
communication, and the requirement for more capable
products, requiring fundamental redesigns and new
approaches to manufacturing, benefiting both our AM and
encoder lines.
We are seeing greater use of the Equator system for process control
earlier in manufacturing operations.
33
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual Report 2019 Healthcare – business segment
Our healthcare products are
designed to improve medical
research and surgical procedures.
Life expectancy is increasing in both
developed and developing markets,
meaning key drivers include the
requirement for faster procedures to
reduce waiting times, more economical
treatments, more patient-specific
treatments (e.g. implants) and safer, more
automated 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.
The RA816 Biological Analyser is a compact benchtop
Raman imaging system designed exclusively for biological
and clinical research.
34
Our technologies are helping within applications such as
craniomaxillofacial surgery, dentistry, neurosurgery, and
tissue and biofluid analysis. These include engineering
solutions for stereotactic neurosurgery, analytical systems
that identify and assess biochemical changes associated
with disease formation and progression, the supply of
specially configured metal additive manufacturing systems
for medical and dental applications, 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:
Additive manufacturing
Advanced metal AM systems configured for direct
manufacturing of 3D-printed metallic dental and medical
components. A total solution is offered from systems,
materials, ancillaries and software through to consultancy,
training and support for customers in the healthcare sector.
Craniomaxillofacial custom-made implants
Additively manufactured from titanium, custom-made
craniomaxillofacial implants are structural implants that are
used in the reconstruction of a patient’s head, face or jaw.
These are most commonly required after oncology treatment
or as a result of trauma.
Dental scanners
3D contact scanners and non-contact optical scanners
used for the digitising of dental preparations and the
measurement of implant locations for tooth-supported
frameworks and custom abutments.
Dental computer-aided design 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 robot
A stereotactic robot that provides a platform solution
for a broad range of functional neurosurgical
procedures including deep brain stimulation (DBS),
stereoelectroencephalography (SEEG), neuroendoscopy
and stereotactic biopsies, and is being used within the
context of clinical trials for both neurosurgical disorders and
brain oncology.
Neurosurgical planning software
Software that allows advanced planning of targets and
trajectories for stereotactic neurosurgery.
Neurosurgical implants
Implantable devices that allow surgeons to verify expected
DBS electrode position relative to targeted anatomy using
magnetic resonance imaging (MRI) for the treatment
of Parkinson’s disease, other movement disorders and
neuropathic pain.
Strategic reportRenishaw plc Annual Report 2019 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, photovoltaics, pharmaceuticals
and forensics.
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.
Biological analysis
RA816 Biological Analyser comes in a simple to use,
compact platform that enables biologists and clinicians to
identify and assess biochemical changes associated with
disease formation and progression.
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.
+ Parkinson’s
trial utilises
novel drug
delivery device
Healthcare in numbers 2019
Revenue
£41.0m
+15%
(2018: £35.7m)
Adjusted operating profit
£3.1m
+933%
(2018: £0.3m)
Percentage of Group revenue
7%
(2018: 6%)
Renishaw has built and manufactured a device used in
a ground-breaking clinical trial. The device enabled the
precise delivery of a new drug candidate, GDNF, with
the hope of regenerating dying dopamine brain cells in
people with Parkinson’s disease and thereby improving
their symptoms.
The results of the trial feature in a two-part BBC Two
documentary, The Parkinson’s Drug Trial: A Miracle Cure?
During the trial, 41 patients had the additively
manufactured titanium port embedded into their skull
through which GDNF could be delivered via micro-
catheters to the putamen, a critical region of the brain
for motor function. The device is implanted using the
Renishaw neuromate surgical robot, which positions four
catheters into the brain.
The trial was funded by Parkinson’s UK with support from
the Cure Parkinson’s Trust and in association with the
North Bristol NHS Trust. Results showed the drug delivery
system performed effectively and reliably and a similar
device, developed by Renishaw, called neuroinfuse, is
now being used in another clinical trial for Parkinson’s in
Scandinavia – see www.renishaw.com/drugdelivery.
Image: Chris Marshall/Mint Motion
35
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual Report 2019 Healthcare – performance
The GDNF trial showed that the delivery system
achieved precision administration of drugs into
the brain and offers great potential for future
studies and experimental treatments.
Paul Skinner, General Manager, Neurological Products Division
Performance
It was a good year for our healthcare
business, with strong growth from
the medical dental and spectroscopy
product lines.
The medical dental product line experienced strong growth
due to the sale of Renishaw AM machines configured for
medical and dental applications. These were purchased by
customers supplying the orthopaedic markets, including
spinal implants, craniomaxillofacial implants and medical
tooling, and customers supplying dental structures,
including implant-related products.
In the USA, California-based PrinterPrezz invested in a
RenAM 500M system as part of a one-stop 3D printing
facility for the medical sector, including the manufacture
of medical devices, surgical aids and prosthetics, while
in France, we are collaborating with two companies, 3D
Medlab and Newclip Technics, to develop innovations for
the orthopaedic medical device market. The latter, which
designs, manufactures and markets osteosynthesis implants
for elective surgery or traumatology, has also purchased a
RenAM 500M system.
Through the Healthcare Centre of Excellence at our Miskin
site in South Wales, which operates under an ISO 13485
quality management system, we produce the majority of
our medical dental AM products and also collaborate with
healthcare organisations to prove the potential for AM in
medical applications. During the year, this included working
with Irish Manufacturing Research (IMR) and software
company nTopology to demonstrate the advantages of AM
in the production of spinal implants with lattice structures,
something that cannot be achieved with conventional
manufacturing techniques. Patients with medical conditions
including degenerative disc disease, herniated disc
and osteoporosis can require spinal implants to restore
intervertebral height. An implant with a lattice structure is
lightweight, can be optimised to meet the required loading
conditions and has a greater surface area, which can
aid osseointegration.
The range of research applications using our Raman
instrumentation continues to grow. Pollution caused
by plastics is of rising global concern, especially with
increasing evidence of microplastics being discovered in
the food chain. Raman spectroscopy is an indispensable
tool for the analysis of very small microplastics (less than
20 microns).
Raman spectroscopy is also being used within the food
manufacturing sector, both for research to aid improved
formulations and to detect counterfeit products. The
Manchester Institute of Biotechnology is using an inVia
Raman microscope to detect counterfeit coconut water.
This product has seen a recent boom in popularity and
with only five countries in the world supplying the majority
of coconut water to the Western markets, this surge in
popularity, and the resulting imbalance between supply and
demand, has led to criminal activity in the supply chain.
At the Physics in Food Manufacturing Conference held in
January, we highlighted research to characterise the
distribution of the core ingredients within chocolate, such as
fats and sugars, which could lead to changes in formulation
and production to improve the flavour, feel and stability of
chocolate products.
During the year, the neurological product line achieved
key sales of the neuromate stereotactic robotic systems,
including in key neurological centres across the UK, EU and
North America where there is strong demand to streamline
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.
The neuromate stereotactic robot in use with a neurolocate module
that is mounted to the robot to register a patient’s position using
either computed tomography (CT) or X-ray.
36
Strategic reportRenishaw plc Annual Report 2019 To improve the quality, access and uptake of epilepsy
brain surgery available to children, NHS England set up the
Children’s Epilepsy Surgery Service. At the four centres,
specialists evaluate children with difficult-to-control epilepsy
to see if they would benefit from surgery. Each centre
operates a Renishaw neuromate stereotactic robot to assist
neurosurgeons with SEEG procedures.
Michael Carter, Consultant Paediatric Neurosurgeon
at Bristol Royal Children’s Hospital, commented: “The
neuromate enables high-precision interrogation of
volumes of cerebral tissue, not just the cortical surface.
It is particularly useful when there are no obvious lesions
and where the epileptogenic focus is not clear from scalp
recordings. SEEG using the neuromate has an extremely
favourable safety profile.”
Outside the UK, a neuromate robot was installed in the
University Children’s Hospital in Zurich, which is not only
the largest paediatric clinic in Switzerland, but also one of
the leading centres for paediatric and youth medicine in
Europe. The neuromate robot and neuroinfuse, a novel drug
delivery system developed by Renishaw, are at the heart of
what promises to be part of a groundbreaking international
programme in brain cancer therapy.
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 safer procedures with
reduced human errors. All our healthcare product lines are
well placed to deliver on these requirements.
While academic research funding has been reduced in
some areas of the world, including the USA, due to global
economic conditions, the worldwide demand for Raman
products is still growing due to an increasing acceptance
of the benefits of Raman spectroscopy for industrial
applications and increased investment in research in
developing nations, specifically in Asia. The growth in
research in key areas such as nanomaterials, biomedical
and green energy is also benefiting our business. 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 £7.2m (before
net capitalised development costs and the R&D tax credit)
of expenditure on R&D and engineering during the year.
The regulatory requirements for healthcare products
demand significant investment, but make barriers to entry
high for competitive products.
Our metrology and healthcare businesses are
interconnected and we employ core metrology technologies
and manufacturing expertise to minimise technology
risks. This is illustrated very clearly in our medical dental
product line where, as well as selling our own AM machines
specially configured for healthcare applications, we use
those machines in the manufacture of dental structures and
medical implants to demonstrate the suitability of AM for
this purpose, while 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.
Key developments
During the year we introduced the RA816 Biological
Analyser, a compact benchtop Raman imaging system,
designed exclusively for biological and clinical research.
At the John Ratcliffe Hospital in Oxford, UK, a system is
being used for brain tumour research.
A new frameless patient registration module for the
neuromate stereotactic robot, the neurolocate 2D
module, has obtained a CE mark. It requires just two
X-rays to register patient position against the robot and
complements the neurolocate 3D module, which offers the
same functionality but requires an intraoperative flat panel
computed tomography system. Both neurolocate modules
allow the surgeon to accurately determine the position of the
patient relative to the neuromate robot.
The results of a pioneering clinical trial for which Renishaw
manufactured a drug delivery device on behalf of North
Bristol NHS Trust, to administer GDNF, were made public
in February. The results showed that the drug delivery
system performed effectively and reliably. A similar device
developed by Renishaw, called neuroinfuse, is now being
used in another clinical trial and we are seeing significant
interest in its use for the treatment of brain tumours and
neurodegenerative diseases.
Outlook
The market for Raman spectroscopy continues to grow in
fields such as advanced materials, nanotechnology, life
sciences, pharmaceutical and medical diagnosis, including
research into cancers, infectious diseases and infection.
In developing markets, levels of wealth are increasing at
a national and individual level, which is driving demand
for higher-quality medical treatments, often requiring more
technologically advanced products.
Increased life expectancy on a global basis means greater
incidences of degenerative neurological diseases, which
will require surgical therapies. With appropriate regulatory
approvals and increasing numbers of reference sites, we
are well placed to supply neurosurgeons with the products
and techniques to support such procedures.
37
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual Report 2019 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 authorities 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 through 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 three times in the
period and conducted a thorough review of our principal
risks, relevant mitigation plans for each and considered
emerging risks.
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 executive summaries
provided to Audit Committee meetings and any significant
shortcomings discussed and acted upon promptly.
Process enhancements are facilitated by this team. All
operating companies are required annually to complete
self-certification questionnaires, regarding compliance with
Group policies, procedures and requirements.
Key focus areas during 2018/19
• aligning risk committee membership to reflect changes
across the Group;
• enhancing the yearly risk review calendar and Group
risk information flows, in order to ensure the Board
and other governance bodies obtain regular and
comprehensive updates;
• a robust assessment of the principal risks facing the
Group, including those that would threaten its business
model, future performance, solvency or liquidity;
• consideration of emerging risks;
• consideration of the risks related to Brexit and the trade
and tariff disputes;
• evaluation of and protection against cyber security
threats; and
• consideration of workforce-related risks.
Risk management framework – information and feedback flow
Board
t
i
d
u
a
Audit Committee
Executive Board
l
a
n
r
e
t
n
i
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n
a
r
o
t
i
d
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a
l
a
n
r
e
t
x
E
38
Executive risk committee/Brexit steering group
Top-down review
Group risk register
Bottom-up review
ISMB
(Group operating companies)
Product groups and other
operational management
i
G
r
o
u
p
B
u
s
n
e
s
s
C
o
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e
a
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p
o
l
i
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e
s
Strategic reportRenishaw plc Annual Report 2019
Brexit
As with many other companies across the UK, the
continuing political process has meant the full implications
of Brexit for all aspects of our business still remain uncertain.
In 2018 we formally established a Brexit steering group to
try to evaluate the potential impact of the UK’s departure
from the EU on the Group, make recommendations where
required and implement agreed actions.
As a result, we have put in place measures to attempt to
mitigate potential impacts of a no-deal Brexit as set out
on page 9. Further changes may need to be made in
aspects of the Group’s operations as the situation moves
forward. 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.
Developments will be monitored closely to assess required
actions as the exit and trading negotiations become clearer
in 2019.
Ethical business practices
Our Group Business Code is designed to ensure employees
understand the importance of ‘doing the right thing’ in all our
activities and comply with applicable laws and regulations.
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, are fundamental parts of our programme
to establish guidelines and promote a clear 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 also facilitates the evaluation of risk in
this area.
Risk likelihood and impact before mitigation
The diagram to the right shows the principal risks
affecting the Group, before mitigation.
1 Current trading levels and order book
2 Research and development
3 Supply chain management
4 Regulation of healthcare
5 UK defined benefit pension scheme
6 Exchange rate fluctuations
7 Cyber security threats
8 Workforce (new)
X Movement since 2018
Further descriptions and associated
mitigations are shown on pages 40 to 42
h
g
H
i
t
c
a
p
m
i
k
s
R
i
Any calls to our whistleblowing line are rigorously followed
up. During 2019/20, we will be refreshing our Whistleblowing
Policy and updating our anti-bribery training modules.
We have due diligence procedures for routinely screening
new and existing agents and distributors, utilising the
services of a market-leading screening service, World-
Check One. 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. We have also continued to strengthen our legal
and HR resources globally, which in turn support our
compliance activities.
Cyber security
In relation to the continuing cyber security threat, we
provided specific Company-wide training and invested
in the development of members of our IT security team.
We have further strengthened our IT systems’ resilience in
key areas as well as the monitoring of emerging threats.
Data protection
We have continued to focus on our compliance with the
requirements of the General Data Protection Regulation
as well as other existing and emerging data protection
legislation. This has included ongoing reviews of and
updates to policies and procedures, training and the
appointment of a Group data protection officer.
Viability statement
for more information see page 43
1
1
6
6
3
2
7
8
3
5
4
5
w
o
L
Low
Likelihood of risk
High
Renishaw plc Annual Report 2019
39
Strategic reportGovernanceFinancial statementsShareholder information
Strategic report
Principal risks and uncertainties
Our performance is subject to a number of risks – the principal risks and factors
impacting on them are set out in the table below, together with the links to strategy
and mitigation. The Board has conducted a robust assessment of the principal
risks facing the business.
Strategic priorities (see pages 18 to 21 for more information)
1 People and culture
2 Continuous R&D
3 High-quality manufacturing
4 Global customer support
5 Delivering solutions
1 Current trading levels and order book
Year-on-year change
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
Potential impact
Global market conditions continue
to highlight risks to growth and
demand that can lead to fluctuating
levels of revenue and profit.
The potential impacts include
those arising from Brexit and trade
and tariff disputes, resulting in an
increased risk rating for this year.
Future growth is difficult to predict,
especially with such a short-term
order book. This limited forward
order visibility results in uncertainty
in revenue and profit forecasts.
If the Group does not manage its
cost base and optimise operational
efficiency, this may adversely
impact profitability.
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 AM business activities.
• The Group retains a strong balance sheet and has the ability to flex
manufacturing resource levels and shift patterns.
• The Group has implemented programmes in relation to the
management of costs and with the aim of maximising profitability.
2 Research and development
Year-on-year change
Potential impact
As a Group at the leading edge of
new technology in metrology and
healthcare, there are uncertainties
whether all new R&D programmes
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
Mitigation
• Patent and intellectual property generation are core to new
product developments.
• R&D programmes are regularly reviewed against milestones and,
when necessary, projects are suspended or 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 with 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.
40
Renishaw plc Annual Report 2019 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
Supply chain disruption caused
by a no-deal Brexit with respect to
customs and border clearances
and uncertainty over UK and EU
product approvals, which has
given rise to an increased risk
rating for this year.
Year-on-year change
Mitigation
• Production facilities are maintained with fire and flood risks 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.
• The Group has undertaken a review of the supply chain to identify
key suppliers to ensure they have their own risk management
process in place for a no-deal Brexit.
4 Regulation of healthcare
Year-on-year change
The Group’s healthcare
business involves a
significant increase in
compliance requirements
to obtain regulatory
approval prior to the sale
of these products and
the need to comply with
the relevant legal and
regulatory obligations.
Related strategic priorities:
1 2
5
Potential impact
Regulatory approval can be very
expensive and time-consuming.
This area is also very complex and
there is a risk the correct approvals
are not obtained. Failure to
comply could have reputational
and financial consequences for
the Group.
In a worst case no-deal Brexit
scenario, a UK-based notified body
can no longer CE mark a product
for sale in the EU which would
invalidate our current CE mark.
Mitigation
• Specialist legal and regulatory expertise is in place to support the
healthcare business.
• 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.
• The notified body for approving medical device products has been
changed from BSi UK to the BSi Netherlands ensuring the Group
will be able to keep valid certificates without interruption.
5 UK defined benefit pension scheme
Investment returns and
actuarial valuations of the
defined benefit pension
scheme liabilities are subject
to economic and social
factors that are outside the
control of the Group.
Potential impact
Volatility in investment returns
and actuarial assumptions
can significantly affect the
defined benefit pension scheme
deficit, impacting on future
funding requirements.
Year-on-year change
Mitigation
• The investment strategy is managed by the 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 in June 2019 with the trustees in
relation to the September 2018 actuarial deficit based on funding to
self-sufficiency. This, combined with Company funding during the
year, results in a decrease in the risk rating this year.
Related strategic priorities:
1
41
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual Report 2019 Principal risks and uncertainties continued
6 Exchange rate fluctuations
Year-on-year change
Fluctuating foreign
exchange rates may affect
the results of the Group.
Related strategic priorities:
NONE
Potential impact
With c.94% 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.
The potential impacts are likely to
increase during periods of market
uncertainty such as Brexit and
trade and tariff disputes, which
has given rise to an increased risk
rating this year.
Mitigation
• The Group enters into forward contracts in order to hedge varying
proportions of forecast US Dollar, Euro and Japanese Yen revenue.
Forward contracts which are ineffective for accounting purposes
provide the protection against rate changes that management
intended when entering the contracts.
• Currency rates and hedging position are regularly monitored.
7 Cyber security threats
Year-on-year change
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/or
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 built into Group systems.
• Cyber risk and security is discussed with the Board every
six months.
• 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 continues to focus on compliance with the General
Data Protection Regulation and other existing and emerging
data legislation.
Potential impact
Not filling key roles, having a
significantly changing workforce
or not effectively deploying or
organising the workforce could
lead to delays in new products,
quality issues, reduced sales
levels, poor customer service and
reduced profitability.
8 Workforce
Our people drive the
success of our business.
Inability to identify, attract,
retain, develop and apply
the critical capabilities and
skills needed in appropriate
numbers or to effectively
organise, deploy and
incentivise our people would
threaten the delivery of our
strategic goals.
Related strategic priorities:
1
2
3
4
5
Year-on-year change NEW
Mitigation
• Attracting, rewarding and retaining people with the right skills
globally in a planned and targeted way.
• Developing and enhancing organisational, leadership, technical
and functional capability to deliver global programmes.
• An increased focus on individual development and succession
planning, recognising the changing nature of careers and
expectations at work.
• Incentivising and effectively deploying the critical capabilities,
skills and people needed to deliver our strategic priorities,
including benchmarking.
• Listening to our people and seeking to understand their views
through active leadership and engagement including a new,
regular survey.
• Extensive apprentice, graduate and industrial
placement programmes.
• Commitment to equality, diversity and inclusion.
Increased
Decreased
No change
42
Strategic reportRenishaw plc Annual Report 2019 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 segments and subsidiaries on progress.
The corporate strategy provides the foundations for
monitoring of performance, budgets, risks 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 40 to
42, was robust and included consideration of emerging
risks. 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. The scenario
testing included assessing the impact on cash flows
of falls in the revenue forecasts arising from adverse
economic conditions, a slowdown in global demand
for consumer electronic products and delays in new
product introductions.
In accordance with provision C.2.2 of the 2016 UK
Corporate Governance Code, while the Board has no
reason to believe the Group will not be viable over a
longer period, the period over which the Board considers
it possible to form a reasonable expectation as to the
Group’s longer-term viability, based on the risk and
sensitivity analysis undertaken, is the three-year period
to 30 June 2022, 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
a three-year viability assessment period is appropriate,
as the time frame 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 30 June 2022. 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 which increases for the latter part of the
assessment period and that future outcomes cannot be
guaranteed or predicted with any certainty.
Going concern – for more information see page 63
For further explanation of our approach to risk
management and internal control, see pages 38
and 39
43
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual Report 2019 Corporate social responsibility
The Code underpins everything we do across the global
Group and is split into five areas: business ethics;
employment; health and safety; environmental; and
management systems, which are all managed by further
policies. We communicate the Code to our suppliers and
expect them to work to the spirit of the Code.
In June 2017, the Financial Stability Board released its final
report on the recommendations of the Task Force on Climate-
related Financial Disclosures (TCFD). We recognise climate
change as a significant environmental risk that could cause
disruption to our own operations as well as our supply chain.
This year represents the beginning of our journey to report
in compliance with these recommendations and to ensure
our strategy is aligned with the four themes. We expect to
undertake a materiality assessment within 2019/20 to enable
us to focus our efforts on those areas we are best positioned
to positively impact. Further information can be found in the
additional information section of this report on page 143,
along with our first TCFD disclosure statement.
To reduce our use of single-use plastic in the UK, we have removed
all plastic cups from our coffee vending machines. Each Renishaw
employee has been given a reusable ceramic mug to use at work.
Allen Roberts
Group Finance Director
At Renishaw, we carry out our work with a
strong sense of responsibility to colleagues,
customers and the communities around us.
Underpinning our approach is our Group
Business Code, which sets out our principles
of business conduct.
Progress during the year
Our businesses and CSR programmes all operate under the
principles set out in our Group Business Code (the Code),
which can be found at www.renishaw.com/businesscode.
Non-Financial Reporting Statement: This CSR section of the Annual Report contains a wide range of non-financial information about our people,
environmental, social and ethical matters; ranging from human rights to waste. Our approach to CSR and our Group Business Code are available on
our website www.renishaw.com/CSR and expand on this information. As required under the new non-financial reporting requirements, the table below
sets out where more information on non-financial matters can be found within this Annual Report and also on our website www.renishaw.com. The due
diligence carried out for each policy is contained within each respective policy’s documentation.
Business model
Environmental matters
Our people
Social matters
Human rights
Business strategy
Business model
KPIs
Principal risks and uncertainties
Principal risks and uncertainties: Supply chain
Greenhouse gas emissions
Chief Executive’s review: CSR
KPIs: Greenhouse gas emissions
Energy consumption and waste
TCFD statement
Details of our approach to protecting the environment can be found on our website
Principal risks and uncertainties: Workforce
Chairman’s statement: People, culture and values
Chief Executive’s review: Our people
Our strategy in action: People and culture
Our stakeholders: People
KPIs: UK employee turnover
More details on our people and opportunities are available on our website
Generating value for our stakeholders: Global communities
Our stakeholders: Communities
Health and safety
Charity, community and education
Further details and policies on social matters are available on our website
Human rights, equality and diversity
Details of our policy, as well as our approach to protecting human rights,
can be found on our website
Anti-corruption and
anti-bribery matters
Risk and risk management: Ethical business practices
Our Code of Business Conduct and other related policies can be found on our website
Pages
18
10 – 11
22 – 23
40 – 42
41
144
9
23
46 & 51
143
42
4 – 5
9
19
12 – 13
23
11
15
11, 23 & 47
48 – 50
47
39
44
Strategic reportRenishaw plc Annual Report 2019 We are implementing robust leadership and management
development frameworks. A senior management leadership
development programme, externally facilitated, has started
in the UK and some of our overseas subsidiaries. It aims to
develop a consistent set of management skills and cultural
leadership abilities.
Senior management development programme
Middle
managers
Senior
managers
(Leadership)
1st line
managers
Aspiring
managers
Leading self, leading others, leading the business
We continue to build and grow our own talent pipelines
through our early careers development programmes.
This year we introduced a new commercial apprenticeship
scheme. Combined with our engineering and software
apprenticeship programmes, this means we will be
welcoming a record number of apprentices in summer 2019.
We have also maintained recruitment at a consistent level
on our graduate and placement schemes. We continue to
review and evolve these programmes to fully support our
employees of the future, and enhance their technical and
soft skills, knowledge and behaviours through training and
mentorship. You can find out more about our apprenticeship
schemes at www.renishaw.com/careers.
To help feed the early career programmes, we continue
to invest heavily in our UK-based educational outreach
programme, see more on pages 49 and 50.
For 2019/20, we have introduced a new global appraisal
programme to create a common framework across the
business. This will help managers and their teams to
have regular and open dialogue about performance and
skills development. It will be recorded through our new
HR platform and allow us to globally track and measure
employees’ performance with a view to encouraging and
supporting recognition and development more effectively.
People and culture
Renishaw draws on the diverse cultures and experience
of our international team of around 5,000 people to add
value for customers around the world. In order to maximise
the potential of this diverse pool of talent, we strengthened
our international HR teams by recruiting a Head of Human
Resources for each of our overseas regions – the Americas,
EMEA and APAC. This will enable an aligned global
people strategy with emphasis on talent, development and
engagement. It will help to improve communication and
build our capacity to manage diversity, fairness, gender
parity and commitment to investment in our people across
the globe.
Year-end headcount
4,112
1,387
4,286
1,504
2,725
2,782
4,530
1,650
2,880
4,862
1,817
5,041
1,874
3,045
3,167
15
16
17
18
19
UK
Overseas
In 2018, we made a significant investment in a world-class
HR system. This will enable us to improve global people
management through real-time analytics and, during
2020, we will integrate our worldwide e-learning platform.
This investment will bring great benefit to the Group in areas
such as people development, succession planning and
information sharing.
In early 2019, in the UK, where the majority of our
employees are based, we carried out a new engagement
survey to help us understand what we are doing well, what
we can change for the better and how we should prioritise
areas for improvement going forward. We were delighted
with our response rate of 74%.
The areas where our people feel we are doing well are: our
company ethics, innovation, engagement, empowerment
and quality management. Feedback on our people,
products and technologies was consistently positive.
Feedback from this survey highlighted areas where we need
to focus including: people development, flexible working
and communication. Work to seek to address these areas in
collaboration with our people will continue into 2020.
Our people are core to our continuing success and growth.
While we are ahead of the field in disruptive technologies,
we are conscious that we must also be ahead in how we
recruit, onboard, develop and retain our talented people.
We have a long history of excellent technical skills
development. During 2019, we recruited several learning
and development professionals to help raise our skills
development in non-technical areas.
45
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual Report 2019
Corporate social responsibility continued
2019 CSR targets and progress
Energy consumption
Target
Progress
Future plans
• We aim to reduce our reliance on fossil
• 2.3% year-on-year decrease in total
• we have commissioned a solar array at
fuels by consistently reducing our
energy consumption.
energy consumption;
• 80% (2018: 51%) of electricity consumed is
For more information see pages 50 and 51
from certified renewable sources; and
our new site in Norton Shores, USA with a
potential annual generating capacity of over
184,000 kWh; and
2,570,658 kWh of electricity from
onsite generation this year (2018: 1,566,597).
• 6.4% (2018: 3.8%) of total global electricity
consumption is from on-site generation.
• we are continuing to roll out the installation
of LED lighting across our sites.
CO
GHG emissions
Target
Progress
Future plans
• 3% reduction in GHG emissions (tCO2e)
per million pounds turnover compared
to 2018.
• 44% decrease in market-based GHG
emissions (tCO2e) per £m turnover since
2015 (base year); and
• we are actively looking at opportunities for
wind generation and further solar arrays
across all of our sites; and
For more information see pages 50, 51
and 144.
• our total GHG emissions have decreased
• our site in Pune, India is working towards
by 35% since 2015 (base year).
having net zero operations; and
9% decrease in market-based GHG
emissions (tCO2e) per £m turnover compared
with 2018.
• we are defining a strategy to ensure we
will be able to fulfil our duty to be net zero
by 2050.
People
Target
Progress
Future plans
• 5% of our employees are apprentices,
graduates or sponsored students on
structured programmes.
• 397 people across the Group are in
further education, graduate and industrial
programmes; and
For more information see pages 9, 11 and 23.
• 178 apprentices, graduates and
placements starting this summer.
Over 5% of our employees are on
structured programmes.
• we are implementing new leadership and
management development frameworks;
• a mentoring programme is being
developed for our early careers
programmes; and
• new performance review process being
rolled out across the Group.
Waste management
Target
Progress
Future plans
• 5% reduction of waste to landfill from
global operations.
For more information see page 51.
32% or 52 tonnes
decrease of waste to landfill from our
global operations.
• just over 3,637 tonnes of waste from our
global operations were diverted from
landfill; and
• in the UK, waste training has been carried
• we are starting a project to work with
internal and external suppliers to reduce
waste at source, this should decrease our
total waste; and
out by our waste contractors for our
manufacturing waste champions team,
to increase their knowledge and ability
to find new ways to reduce, reuse and
recycle our operational waste.
• to assist our customers with their ability
to recycle, our packaging development
group are looking at ways to ensure our
packaging is as sustainable as possible.
46
Strategic reportRenishaw plc Annual Report 2019 Gender diversity ratio
Total number of accidents
76% (3,814) Male
22% (1,149) Female
2% (78) Not disclosed
6
9
2
0
3
2
4
3
2
3
3
2
7
0
2
Accident frequency rate
per million hours
9
9
0
4
.
9
5
3
3
.
9
7
0
3
.
2
2
6
2
.
7
6
4
2
.
rotation to line up
Senior management team diversity
15
16
17
18
19
15
16
17
18
19
97% (64) Male
3% (2) Female
Human rights, equality and diversity
As an international company, Renishaw enjoys the
advantages of a diverse workforce, including over 20
different nationalities represented within our senior
management group. We benefit from the variety of expertise
they bring to the business.
On 30 June 2019, we employed 5,041 people across the
Group, an increase of 4% since last year. Of these, 76%
are men and 22% are women. In 2018/19, there were
nine Directors on the Board, consisting of seven men and
two women. The senior management group is made up
of 66 people, of whom 64 (97%) are men and two (3%)
are women. Renishaw defines its senior managers to be
the Executive Board, the heads of each strategic product
group, each product division and each of the three sales
regions, the managing directors of Renishaw’s subsidiary
undertakings, and any other relevant managers who report
to the Executive Board or Chief Executive.
We believe that equality and fairness are critical to the
success of our organisation. We have policies in place,
such as our Equality, Diversity and Inclusion Policy and
our Employee Handbook, to ensure we foster a workplace
that is open and fair to all. We have published our annual
Modern Slavery Act statement and our Gender Pay Gap
reporting at www.renishaw.com.
Unconscious bias training will be rolled out in 2019/20.
It aims to ensure we are supporting our diverse culture and
helping our people be open and fair to everyone. This will
be reinforced throughout our recruitment and management
training programmes.
Health and safety (H&S)
Maintaining a safe working environment for our people,
visitors and customers is the primary aim of our H&S
management system. Our Group H&S policy (HS201)
frames our approach and drives our culture of safety
throughout the Company. It details our 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.
The total number of accidents for the period was 207
(2018: 233) against a year-end headcount of 5,041
(2018: 4,862). This equates to an accident frequency rate
of 24.67 per million hours worked (2018: 26.22).
There were eight reportable accidents under the UK
RIDDOR reporting requirements: four musculoskeletal
injuries; two deep lacerations to hands; and two related to
occupational disease (hand arm vibration and carpal tunnel
syndrome). This equates to a lost time injury rate of 0.95 per
million hours worked compared with a UK manufacturing
average for RIDDOR reportable accidents of 2.10 per million
hours worked.
We continually assess the risks across the Group through
our risk assessment processes and regular auditing, which
have identified additive manufacturing and its associated
processes as our main area of risk. We tightly control and
manage AM risks via training, policies and procedures, with
the wider AM industry generally accepting Renishaw as one
of the safest producers of AM machinery in operation.
In 2018/19, we launched an online H&S management
system within the UK. This has been well received and
provides more accurate data allowing for better statistical
analysis of trends.
During 2019, we introduced an employee assistance
programme. This allows all Renishaw colleagues worldwide
and their immediate family to access telephone and online
support on a range of personal or work-related issues,
including illness, debt, family relationships and mental
health issues, all in complete confidence.
Our annual health screening programme was used by a
record number of people this year in the UK, with planned
roll out globally during 2020.
Stress awareness training for all UK supervisory employees
is underway and will be rolled out to our overseas
subsidiaries in 2020.
An operator loading a carousel within a Renishaw machining facility.
47
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual Report 2019 Corporate social responsibility continued
In 2019/20 the H&S team will concentrate on three
key areas:
Significant donations (of £2,000 or more) were made to
support organisations around the world. These included:
• maintaining best practice: implement a phased
• in the UK: Gloucestershire Arthritis Trust, which
supports local patients and hospitals with treatment for
arthritis; Severn Freewheelers, a volunteer service which
distributes essential medical items and blood between
hospitals; Vale of Berkeley Railway, who are restoring a
part of our cultural heritage;
• in India: Sassoon General Hospital, a local general
hospital in Pune; Jeevan Jyot Mandal, a non-
governmental organisation which supports children with
special educational needs through vocational training;
Chaitanya Mahila Mandal, a women’s shelter which
provides family counselling and legal aid to exploited
women; and
• in Turkey: Maktek Golden Compass CNC Lathe Design
Competition, a competition for students in all the technical
high schools.
We are highly supportive of communities local to Renishaw
operations. In the USA, local employees participated in
the Miles for Manufacturing run, which raises funds for
schools that offer education for manufacturing. They also
banded together at Christmas and donated presents for 75
underprivileged children in the local area.
Our team in Mexico raised money to purchase supplies
for a local orphanage based in the town of one of our local
employees. They also collected donations of clothes for
the residents.
For a full list of organisations who received significant
donations of over £2,000 see page 143.
Community
We recognise the positive contribution that Renishaw can
make to our local communities, through varied interactions
with residents, businesses, schools, governmental bodies
and not-for-profit organisations. This is especially true in
the West of England and South Wales, where we are a
significant employer.
roll-out of a global H&S policy, roll-out of the online
H&S management system globally and improve H&S
communications across the Group;
• continuous improvement: developing a more robust
internal auditing procedure, developing ongoing
wellbeing initiatives, reviewing and updating our H&S
policies and procedures; and
• supporting divisional/subsidiary activities: further
improvements to our safe systems of work for R&D
activities, provide specialist advice as required, continue
to support H&S activities, policies and procedures.
Charity
Our values of innovation and integrity played a large part in
the founding of our Renishaw Charities Committee (RCC) in
the UK and equivalent committees in India and Germany.
These committees focus on distributing funds that Renishaw
makes available to support local charitable and voluntary
organisations. Several of our subsidiaries support charities
in similar ways. Donations are focused on activities that help
enrich the lives of children and adults, from toddler groups
and sports clubs, through to organisations that support
people with disabilities and the bereaved. A separate fund
is administered by the RCC, which donates monies to aid
the victims of global disasters.
In 2018/19, our charity committees and subsidiaries
made donations totalling £260,680 to 290 organisations.
The RCC also fully matched funds raised by employees for
UK national fundraising events such as Children in Need
and Red Nose Day and supported individual employee
fundraising activities.
A charitable donation of £12,000 was made towards
the Disasters Emergency Committee appeal following
the cyclone in south east Africa.
£12,000
+
Charity Committee activities
Our people in India raised money and collected donations
to create emergency kits, containing blankets, clothes,
toiletries, torches, portable gas cooking stoves etc. to help
support victims of the floods in Kerala State.
During this reporting period we also supported Janakalyan
Rakta Pedhi, a blood bank, that supports hospitals in
the Pune region with blood and blood components.
We purchased and installed a 15 kW solar array to reduce
their long-term reliance on fossil fuel derived energy and
reduce their running costs.
48
The 2018 flood in Kerala, India.
Strategic reportRenishaw plc Annual Report 2019 To ensure a strong pipeline of future talent for Renishaw
and the wider engineering community, we communicate
a positive story about the attractive nature of a career in
science, engineering and manufacturing, and how these
industries benefit society.
Across the Group, we continue to host tours and give
talks to a wide range of organisations including business
clubs, primary schools, secondary schools, colleges
and universities. We also host events organised by
other organisations, which in the last year included the
Confederation of British Industry’s Innovation Conference
and a regional heat of Tomorrow’s Engineers EEP Robotics
Challenge for students aged 11 to 14.
We actively support the business community regionally,
nationally and internationally, by sponsoring award
schemes and through active membership of trade and
lobbying associations. Some of these include the Additive
Manufacturing Users Group (USA), the European Society
for Precision Engineering & Nanotechnology, UCIMU-
SISTEMI PER PRODURRE (Italy), Verein Deutscher
Werkzeugmaschinenfabriken e.V. (Germany), SAE
International, the Confederation of British Industry (CBI), the
Dental Laboratories Association (UK), the Association of
British Healthcare Industries, and the UK’s Manufacturing
Technologies Association (MTA), where two of our senior
managers are board members.
We are also a member of various industry research centres
across the globe, including Global 3D Printing Hub (Spain),
IAM 3D HUB (Spain), The Manufacturing Technology Centre
(UK), the Advanced Manufacturing Research Centre (UK),
PräziGen (Germany), BazMod (Germany) and Canada
Makes (Canada).
To improve awareness of Renishaw as a significant and
engaged employer, we support a wide range of arts and
music festivals, sports clubs and organisations in the West
of England and South Wales. During the year, this included
an active role in the Gromit Unleashed 2 sculpture trail
(see pages 22 and 23) raising funds for Bristol Children’s
Hospital, corporate membership of the SS Great Britain
Trust, Bristol Music Trust and Bristol Museums, and the main
sponsor for both Lechlade and Nibley music festivals.
In South Wales and the West of England, rugby has an
especially high profile. We see similar cultural challenges
in attracting women into engineering and rugby, so we are
working with rugby clubs to change perceptions, which
includes girls-only events combining rugby and engineering
activities, and back-of-shirt sponsorship of the Cardiff
Blues and Gloucester-Hartpury women’s rugby teams.
We continue to sponsor Tomos Williams (Cardiff Blues and
Wales), Ben Morgan (Gloucester and England) and Samson
Lee (Scarlets and Wales).
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
Germany, Italy, the UK and Australia. In Germany, we also
became a sponsor and technical partner for the Elisabeth
Brandau (EBE Racing) mountain bike team, supplying
the team with metal AM parts to reduce the weight of the
team’s bikes. Elisabeth is a multiple German mountain bike
champion and a member of the German national team.
Education
Our educational outreach programme is designed to excite,
interest and engage young people of all genders, ethnicities
and backgrounds to study STEM subjects and to consider
engineering as a career.
Our aim is to provide real insight into the vibrant world
of engineering, and careers based on STEM subjects.
To become a key educational resource for the hands-
on learning of design, fabrication, manufacturing and
engineering skills. We also help support schools with the
national curriculum at a time of resource shortages.
In 2018, we engaged with around 10,000 students through
our various outreach programmes in South Wales and
Gloucestershire/Bristol, which are managed by four full-time
outreach staff and supported by our STEM ambassadors.
Our nearly 200 STEM ambassadors have a vital role
in helping to inspire the next generation and in the UK
many of them are apprentices and graduates. All STEM
ambassadors undertake specialist STEM training and
through their outreach work are also able to develop their
own skills.
Renishaw is a sponsor of the Gloucester-Hartpury rugby team which
plays in the top-tier of women’s English rugby union.
Renishaw is a technical partner and sponsor for the Germany-based
Elisabeth Brandau (EBE Racing) mountain bike team.
49
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual Report 2019 Corporate social responsibility continued
In 2018/19, we have partnered with many local
organisations to promote careers in STEM. These included:
the Cheltenham Science Festival, where we ran hands-on
engineering activities for secondary and primary aged
children; EngineeringUK, where we hosted a Robotics
Challenge for schools at our New Mills headquarters;
STEMworks, who delivered 100 workshops to students
aged nine to 11; and Cardiff Blues rugby club, with our
joint ‘Raising Inspirations’ programme, which, over eight
weeks, gives 100 students in South Wales an opportunity to
develop new skills and experience different education and
career opportunities.
The Fabrication Development Centre, our dedicated
education centre located at our Miskin site, continues to
develop relationships with local schools with ever-increasing
interest. To expand our outreach programme, we will be
opening an additional education centre at our New Mills
headquarters in 2019/20, allowing us to support more
schools in the Gloucestershire area.
We are increasing our career support for young people
in our communities, including expanding and enhancing
our work experience programme. We hosted our largest
apprenticeship and graduate information evening in
November 2018, and continue to promote our different
career schemes at school and university careers events.
Outside the UK, we focus on supporting educational
initiatives that will improve the available talent for our own
skills requirements and that of our customers. We attended
the 2018 IMTS Smartforce Student Summit in Chicago and
hosted learning labs to help inspire students to pursue a
career in advanced and manufacturing technologies.
In Germany, we support an initiative founded by VDW
(the German machine tool builders association) which
promotes careers in metalworking to young people.
Our apprentices support educational booths at major
metalworking exhibitions, helping to promote industrial
metrology as a career. In Spain, we are a judge and sponsor
for SpainSkills, a competition for 400 students that promotes
vocational training.
Primary school children enjoying a 3D printing lesson in the
dedicated STEM education centre at Miskin.
50
Environment
We continually try to improve our business and
manufacturing processes through energy saving and
increased efficiencies. As part of our continued drive
for sustainable manufacturing we use our own products
and take advantage of the significant efficiencies in
manufacturing they provide, thus increasing throughput,
reducing energy per manufactured unit and reducing
our waste.
Our Group Business Code frames our approach to
environmental management and drives our culture of
efficiency throughout the Company. It is supported by our
environmental and waste policies, with other underlying
management controls as necessary. The outcome of these
policies is a clear and consistent approach to environmental
management that is used across all our locations.
We aim to improve how we approach our environmental
responsibilities. As part of these efforts we expect to carry
out a materiality assessment to find out which environmental
and social issues are important to our stakeholders.
This year, we have increased our internal communications
around environmental issues with our people, to ensure they
know how sustainability affects their job role.
During 2018/19, we invested in an expanded software
package to enable us to more closely identify and monitor
our greenhouse gas (GHG) emissions worldwide, and report
on a wider array of sustainability initiatives.
We renewed our Carbon Trust Standard certification in the
UK and our manufacturing locations in Ireland and India.
This certification covers 71% and 48% of our global energy
consumption and GHG emissions respectively. It is third-
party confirmation of our work to measure, manage and
reduce our GHG emissions.
In 2018/19, our normalised statutory emissions have
decreased by 37% (location-based calculations) and 15%
(market-based calculations), which is based on an absolute
reduction in our total GHG emissions of 15% (using market-
based calculations). Our statutory emissions are defined
by the Greenhouse Gas Protocol as Scopes 1 and 2.
Scope 1 is the direct emissions coming from our sites and
vehicles, and Scope 2 is indirect emissions coming from the
electricity and heat that we purchase from energy providers.
A significant proportion of our GHG emissions, however,
falls within the definition of Scope 3 emissions. These are
emitted by other organisations on our behalf, for example,
emissions from our freight forwarders when transporting
our products. Through the continual improvement of our
management system and processes, we can report on a
wider array of Scope 3 activities, with a view to expanding
this in the coming years. The details of our GHG emissions
for this year are shown in the charts on page 51 with the
relevant data shown on page 144.
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. The emission factors are taken from
the DEFRA and IPCC libraries and energy suppliers.
Our GHG emissions are based on actual data taken
Strategic reportRenishaw plc Annual Report 2019 Scope 1 and 2 GHG emissions
tCO2e
Total statutory GHG emissions
tCO2e per £m turnover
Group energy consumption
kWh
Energy source
kWh
20.8k
21.6k
16.9k
57.83
47.16
41.75
15.8m
17.5m 17.6m
19.6m
18.6m
48.8m
50.0m 50.6m
34.4m
21.6m
6.3k
4.7k
3.6k
3.8k
3.6k
3.8k
3.9k
16.68
15.17
33.2m 33.3m 34.3m 35.8m 35.3m
32.2m
20.9m
123k
816k
1.21m
15
16
17
18
19
15
16
17
18
19
15
16
17
18
19
15
16
17
18
19
Scope 1
Scope 2
UK
Non-UK
Renewable
Non-renewable
from bills, invoices, meter readings and expense claims
wherever possible.
For our Scope 1 and 2 emissions, less than 2% of the data
is based on estimates from averaged data sets.
We continue to strive to reduce our GHG emissions
and energy consumption worldwide, and are investing
in renewable energy generation. In 2018/19, we have
increased the area of solar panels at New Mills and
Stonehouse, and installed a new solar array at our
Woodchester site. We are installing a solar array at our
new site in Norton Shores, Michigan and investigating
further solar potential at other sites worldwide, as
well as considering hydroelectric and wind energy
generation opportunities.
We continue to install LED lights in all of our UK sites to
improve lighting efficiency, and are embracing the process
of Phase 2 of the Energy Savings Opportunities Scheme
to try and identify further ways to lower our energy use
wherever possible.
In India, we are moving towards carbon neutrality for our
Pune manufacturing site. Our solar array provided 48% of
energy requirements for this site during 2018/19.
We are pleased to report that our 2017/18 GHG emissions
figures have been independently verified by thinkstep
and they have found no material evidence to suggest it
is not accurate. They also verified the methodology we
used as being compliant with the GHG Protocol Corporate
Accounting and Reporting Standard (revised edition).
Waste management
Our waste management strategy successfully diverted a
further 3,637 tonnes of waste from landfill. Just under 87%
of all waste generated in 2018/19 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
and recycling.
Global waste totals (tonnes)
Reused
Recycled
Composted
Incinerated
Total non-landfilled
Landfilled
Percentage of waste
sent to landfill
Total waste
2019
163.20
3,004.34
109.01
360.60
3,637.16
110.75
2018
67.62
2,370.05
71.76
240.70
2,750.12
162.93
2017
0.00
2,151.00
27.50
310.60
2,489.10
129.52
2.96%
3,747.91
5.59%
2,913.06
5.20%
2,618.62
This year our target was a 5% reduction of waste to landfill
from our global operations. We were able to achieve a
32% reduction of waste to landfill during this year. We have
determined that a proportion of our waste that we previously
thought was going to recycling is being reused. We have
diverted more than 97% (2018: 94%) of our waste from
landfill this year.
We are committed to reducing the use of single-use plastic.
In the UK, we no longer have polystyrene cups in our coffee
vending machines, removing 1.5m plastic cups a year from
our sites and 7 tonnes from landfill.
We continue to look at other ways we can reduce the use of
plastic in our offices, supply chain, and product packaging.
At New Mills, we are researching opportunities for closed-
loop recycling of our food and garden waste. This will
enable us to use food and gardening waste to create natural
gas which we will in turn use to power some of our cooking
facilities in our onsite restaurant.
Allen Roberts
Group Finance Director
This Strategic report was approved by the Board on
1 August 2019 and signed on its behalf by
Sir David McMurtry
Executive Chairman
51
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual Report 2019 Directors’ corporate governance report
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.
The Board welcomes and supports the publication of the
2018 UK Corporate Governance Code. We are currently
preparing to report against the revised principles and
provisions next year, while complying this year with the
prevailing code.
We recognise the importance of our stakeholders to the
long-term sustainability of our business. Details of how we
currently engage with our stakeholders are set out on pages
12 to 15. The Board also remains mindful of its obligations
under section 172 of the Companies Act, including in
relation to stakeholders and their interests,
in its decision making.
We have been discussing the most effective methods of
achieving greater Board engagement with our workforce
and building on our existing initiatives, in order to better
understand their views. I am pleased that Catherine
Glickman, one of our Non-executive Directors, will be
providing the Board with greater visibility of workforce
engagement activities across the Company and of the
views of our employees, over the coming year.
As a Group, we are committed to gender equality and
diversity initiatives at Board and all levels, and this will
remain an important matter for the Board to monitor and
continue to improve. We published our latest Gender Pay
Gap report on the Group’s website, www.renishaw.com/
genderpaygap. Employment policies are designed to
provide equal opportunities irrespective of race, religion,
gender, age, socio-economic background, disability or
sexual orientation – see page 84 for more information.
The Board takes seriously its responsibilities for making
sure all employees are aware of their obligations to act with
openness, honesty and transparency. As we continue to
grow, it is vital that we maintain a strong culture which aligns
with our purpose, strategy and values. The Company’s
strong culture from an ethics perspective, is already
embedded in our Group Business Code and Anti-Bribery
Policy which can be found at: www.renishaw.com/
businesscode.
As with many other companies across the UK, the
continuing political process around Brexit has meant the full
implications on all aspects of our business remain uncertain.
However, we continue to closely monitor developments and
take appropriate steps and advice.
The Board continues to review the Group’s risk management
processes, to ensure they are robust in light of Renishaw’s
strategy, market position and the regulatory environment.
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 and emerging
risks, together with mitigation plans. The Board also
considered the viability statement on page 43 in the context
of risk.
Sir David Grant
Senior Independent Director
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.
52
GovernanceRenishaw plc Annual Report 2019 Another important activity this year was the external
evaluation of the Board, Committees and Directors. I am
pleased that this external evaluation confirmed our Board
continues to be transparent and effective. A summary of this
year’s process and principal recommendations is set out on
pages 62 to 63.
Cyber security continued to be a focus for the Board
this year, with regular updates being provided at Board
meetings and new initiatives and investment being
undertaken in order to mitigate cyber threats.
The Annual remuneration report for 2019, starting on
page 78, sets out the details of Directors’ compensation
throughout this financial year, which will be subject to the
normal advisory vote at the AGM. Our 2017 remuneration
policy remains unchanged and we will put a new policy to
shareholders at our 2020 AGM.
Scope of disclosures
This corporate governance report has been prepared in
accordance with the UK Corporate Governance Code
2016 (Governance Code). The Governance Code can be
viewed at: www.frc.org.uk. This report, which incorporates
the reports of the Audit Committee and Nomination
Committee, together with the Directors’ remuneration report,
describes how we have applied the main principles of the
Governance Code.
We report on the operation of our business in the
following ways:
• a review of the Group’s business and likely future
developments is given in the Chairman’s statement,
pages 4 and 5, the Chief Executive’s review, pages 6 to 9
and the other sections of the Strategic report on pages 10
to 51. Segmental information by geographical market is
given in note 2 to the Financial statements;
• the Financial Conduct 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 52
to 82 and 83 to 85 together 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; and
• for the purposes of the Financial Conduct 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.
Disclosure of information under LR 9.8.4R
The information that fulfils the reporting requirements under
this rule can be found on the pages identified below.
Waiver of emoluments by a director Not applicable
Section Topic
(1)
Interest capitalised
(2)
(4)
(5)
(6)
(7)
(8)
(9)
Publication of unaudited financial
information
Details of long-term incentive
schemes
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
(10) Contracts of significance
(11)
Provision of services by a controlling
shareholder
(12)
Shareholder waivers of dividends
(13)
Shareholder waivers of future
dividends
(14)
Agreements with controlling
shareholders
Location
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Directors’
remuneration
report pages
70 to 82
Other statutory
and regulatory
disclosures
page 83
Other statutory
and regulatory
disclosures
page 83
Other statutory
and regulatory
disclosures
page 85
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.
53
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual Report 2019 Board of Directors
Sir David McMurtry
CBE, RDI, FREng, FRS, CEng, FIMechE
John Deer
Executive Chairman
Deputy Chairman
N*
Appointed September 1975
Appointed July 1974
Contribution, skills and experience
Contribution, skills and experience
Will Lee
MA, MBA, FinstP
Chief Executive
Appointed August 2016 as Group Sales
and Marketing Director, February 2018 as
Chief Executive
Contribution, skills and experience
Will has an in-depth understanding of the
Group’s business, products and markets,
having held various senior management
positions, which have included engineering,
operations, and sales and marketing, prior
to his appointment as Chief Executive. Will
was selected as Chief Executive having
demonstrated to the Board the leadership
capabilities, breadth of knowledge and
relationships to continue to develop the
Renishaw business and has a record of
performance execution.
Having held responsibility for manufacturing
and quality for many years, John’s extensive
experience is important in ensuring Renishaw
continues to deliver efficient, high-quality
manufacturing – a key component of
the Company’s strategy. In addition,
having founded the Company with Sir
David McMurtry, John’s commercial and
international experience also brings deep
insight and strategic vision to the Board. John
has been and continues to be instrumental
in the strategic decisions for growing the
business into new markets and territories,
whether organically or by acquisition.
Background
Background
Will joined the Renishaw graduate scheme
in 1996 and became Director and General
Manager for the Laser and Calibration
Products Division in 2007. He holds a degree
in physics from the University of Oxford and
an MBA from the University of Bath. In 2014
he became Director and General Manager
of the Machine Tool Products Division. In
December 2015, he was appointed to the new
role of Director of Group Sales and Marketing
and became a member of the Executive
Board.
In February 2018 Will was appointed Chief
Executive, taking over from Sir David
McMurtry. He is responsible for the product
divisions, overseas sales subsidiaries and
human resources.
External appointments
None
John trained as a mechanical engineer and
worked for Rolls-Royce plc, Bristol, from
1960 to 1974. He was Managing Director
of Renishaw 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 in the USA, Ireland,
Japan, Germany, France and Italy. John
and Sir David McMurtry were members of
the four-man team of Renishaw engineers
honoured with the MacRobert Award in
1987. In 2012, John was awarded the Swan
Medal by the Institute of Physics jointly with
Sir David McMurtry for their roles in founding
Renishaw and leading it to become one
of the world’s principal manufacturers of
metrology equipment. In September 2014
John was awarded an honorary fellowship
at the University of South Wales for his
contribution to UK manufacturing and in
October that year he and Sir David were
jointly honoured with a Lifetime Achievement
Award at Gloucestershire Business Awards.
He was also awarded an honorary doctorate
of engineering by the University of Bristol in
2018 and in 2019 he was made an Honorary
Fellow of the Faculty of General Dental
Practice. In 2019 he was also honoured by
the Manufacturing Technologies Association
for his outstanding contribution to British
engineering. John is responsible for Group
manufacturing and Group quality.
External appointments
None
As co-founder of Renishaw and now through
his responsibilities for Group innovation and
product strategy, Sir David continues to be a
key contributor to the long-term sustainable
success of the Company. His strategic vision,
technical and industry knowledge, gained
from building the Company from inception
with John Deer, mean he is able to provide
a significant contribution to all aspects of
the business alongside his leadership of the
Board.
Background
Sir David was employed by Rolls-Royce plc,
Bristol, for 17 years, latterly holding the
positions of deputy chief designer and
assistant chief of engine design for all Rolls-
Royce engines manufactured at Filton, Bristol.
After inventing the original probe in the early
1970s, Sir David co-founded Renishaw in
1973 with John Deer.
His CBE was awarded for services to
Science and Technology and he was
appointed a Royal Designer for Industry
(RDI) in 1989. He is a visiting professor at
the University of Huddersfield, where he
was awarded an honorary doctorate in
2017, and has been awarded an honorary
Doctorate of Engineering at the University of
Birmingham and honorary degrees of Doctor
of Engineering at Heriot-Watt University, the
University of Bristol and the University of
Bath. He has also been awarded an honorary
fellowship at Cardiff University. Sir David
is a Chartered Engineer, a Fellow of the
Institution of Mechanical Engineers, a Fellow
of the American Society of Manufacturing
Engineers, a Fellow of the Royal Academy
of Engineering, and in 2011 became a
Fellow of The Royal Society. The Institute of
Physics jointly awarded its 2012 Swan Medal
to Sir David and John Deer for their roles in
founding Renishaw and leading it to become
one of the world’s principal manufacturers
of metrology equipment. In 2019 he was
honoured by the Manufacturing Technologies
Association for his outstanding contribution
to British engineering. In addition to his role
as Executive Chairman, Sir David also has
responsibility for Group technology.
External appointments
None
54
GovernanceRenishaw plc Annual Report 2019 Allen Roberts
FCA
Geoff McFarland
BEng, DEng, MInstP, FREng
Group Finance Director
Group Engineering Director
Appointed October 1980
Appointed July 2002
Contribution, skills and experience
Resigned from Board 30 June 2019
Allen has a deep understanding of the
Group’s business, products, relationships
and the sectors in which it operates. Having
led the finance function for many years, the
Board values in particular his management
of the financial risks, reporting and planning
for a Group that has seen significant growth,
as well as his contribution to strategy and
business development. Allen has a strong
record of operational excellence.
Background
Allen qualified as a Chartered Accountant
in 1972 and is a Fellow of the Institute of
Chartered Accountants in England and
Wales. Before joining Renishaw in 1979, he
was employed for 11 years by Peat, Marwick,
Mitchell & Co. Allen heads Group Finance,
Business Systems and Wotton Travel Ltd.
He is also responsible for the metrology
regulatory and quality assurance functions
and corporate social responsibility.
External appointments
None
Background
Geoff holds a degree in computer-aided
mechanical engineering. After working in the
medical device and electronic manufacturing
sectors, Geoff joined Renishaw’s research
facility in Edinburgh in 1994, before moving to
the headquarters in 1999 to become Director
and General Manager of the CMM Products
Division. He heads the Group engineering
function and is also responsible for Group IP,
patents and R&D. He is a visiting professor at
the University of Bath, an honorary professor
at Heriot-Watt University and a member of
the Institute of Physics. In 2017, Geoff was
elected to the Royal Academy of Engineering.
External appointments
Non-executive director of Cambridge
Mechatronics Ltd
Committees
A Audit Committee
N Nomination Committee
R Remuneration Committee
* Chair of Committee
55
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual Report 2019 Board of Directors continued
Sir David Grant
CBE, PhD, FREng, FLSW, CEng, FIET
Senior Independent Director
A N R
Carol Chesney
FCA
Independent Non-executive Director
A* N R
Catherine Glickman
BA
Independent Non-executive Director
A N R*
Appointed April 2012
Appointed October 2012
Appointed August 2018
Contribution, skills and experience
Contribution, skills and experience
Contribution, skills and experience
Carol’s career, both in finance and as a
company secretary in a listed company
environment, has provided her with an
in-depth understanding of corporate
governance, internal controls, compliance,
M&A and pensions. This knowledge and
experience is important to the effectiveness
of the Board. Her extensive financial expertise
and insight make her ideally placed to serve
as Chair of the Audit Committee. Serving as
audit committee chair at a number of other
listed companies also brings a wider industry
perspective.
Background
Carol Chesney is a Chartered Accountant
who worked at Arthur Andersen in audit
services for seven years. Carol held a senior
group finance role at English China Clays plc
before joining Halma plc, where she served
as company secretary for 20 years, having
also been group financial controller. Carol’s
role at Halma included corporate governance,
legal compliance, equity incentives, pensions,
tax, internal audit management, property,
health and safety compliance, environmental
reporting and anti-bribery and corruption
compliance.
External appointments
Non-executive director and audit committee
chair of Hunting plc
Non-executive director and audit committee
chair of Biffa plc
Non-executive director and audit committee
chair of IQE plc
Catherine brings extensive HR, remuneration
and pensions experience to the Board.
Working closely with the remuneration
committees at Genus plc and Tesco PLC,
Catherine developed reward structures that
aligned leadership motivation with group
strategy. This background enables her to
make a particularly valuable contribution
as Chair of the Remuneration Committee.
Catherine’s breadth of human resources
experience in other listed companies and as
a non-executive director is particularly valued
by the Board. Our own HR team are also able
to leverage Catherine’s background.
Background
Catherine Glickman retired as group HR
director at Genus plc in February 2018,
having previously held the same title at
Tesco PLC where she led retail management
development and customer service training
during a period of significant expansion in
the UK and overseas. Prior to this she held
positions at Somerfield plc and The Boots
Company plc. She is a graduate of Durham
University with a BA Hons in English.
External appointments
Non-executive director and remuneration
committee chair of Marston’s PLC
Non-executive director and remuneration
committee chair of TheWorks.co.uk plc
Non-executive director and remuneration
committee chair of RPS Group plc
Sir David has extensive engineering
experience, having held various leadership
positions at international engineering
companies and government-related science
and technology bodies, where he has been
recognised for his contributions to industry.
Sir David’s career experience, initially as a
student apprentice and latterly as a university
vice-chancellor, also brings a unique insight
into how the Company should continue
to recruit talent, increase diversity and
develop its current people, who are central
to the Company’s strategy and long-term
sustainable success. The Board also values
Sir David’s role as Senior Independent
Director.
Background
Sir David was vice-chancellor of Cardiff
University from October 2001 until August
2012, with responsibility for 30,000
students, 6,000 members of staff, and an
annual income of £430m. Prior to that he
held leadership positions at a number of
international engineering companies including
Dowty Group and GEC plc where he was
group technical director. Sir David has
served as a vice-president of the Institution
of Engineering and Technology; and from
2007 to 2012 he was a vice-president of the
Royal Academy of Engineering. He has been
a council member of EPSRC and a governing
board member of Innovate UK. His PhD in
Engineering Science was awarded by the
University of Durham in 1974. In 1997, he was
made a CBE for his contribution to the UK
Foresight Programme. Sir David was elected
a Fellow of the Royal Academy of Engineering
in 1997 and elected an Honorary Fellow of
Wolfson College, Cambridge, in 2000. He
served on the Board of the Defence Science
and Technology Laboratory from 2012 until
2018. He was also chair of STEMNET until
2018. Sir David received a knighthood in
the Queen’s Birthday Honours 2016 for his
contributions to engineering, technology and
education.
External appointments
Non-executive director and nomination
and remuneration chair of IQE plc
Chair of the National Physical Laboratory
56
GovernanceRenishaw plc Annual Report 2019 John Jeans
CBE, CEng
Mark Noble
Independent Non-executive Director
A N R
General Counsel & Company
Secretary
Appointed April 2013
Appointed July 2018
Contribution, skills and experience
Contribution, skills and experience
Mark spent 17 years in the FTSE 100
with National Grid plc in a variety of
senior positions within the group legal
and secretariat team and has substantial
experience of operating in listed
environments, corporate governance,
company law and M&A. He is instrumental
in offering legal and governance advice
and guidance to the Board and senior
management, as well as leading the
Renishaw legal function.
Background
Mark joined Renishaw in January 2018 as
General Counsel and Acting Company
Secretary. He had previously held a number
of positions at National Grid plc, including
deputy group general counsel and head of
company secretariat. Prior to that Mark was
in private practice at Eversheds and SGH
Martineau.
External appointments
None
John has deep healthcare sector knowledge
gained from senior international leadership
positions in global companies including Smith
& Nephew, Bristol Myers Squibb, Johnson
& Johnson and GE’s life science business.
Also, in serving on several government
bodies relating to healthcare, John brings
an invaluable insight to the Board, helping to
grow the Company’s healthcare products and
business for the long term.
Background
John headed the commercial function of
GE’s life science business and was chair
of its UK healthcare company. He chaired
Innovate UK’s stratified medicine steering
group until February 2017. John served as
advisor to the Prime Minister at the Office
of Life Sciences in the medical technology
sector for a period of four years ending June
2018. He has served on several government
bodies including the Ministerial Committee
on Medical Technologies. Previously he was
the deputy chief executive of the Medical
Research Council, chair of Cardiff University,
chair of UK Biocentre Ltd and Imanova Ltd
(an imaging research partnership between
three London universities and the MRC),
a non-executive director of Prometic Life
Sciences Inc. and a director of the University
Employers Association. He was awarded the
CBE for services to Life Sciences, Healthcare
and Science in 2012.
External appointments
Non-executive director of Edinburgh
Molecular Imaging
Chair of the Scottish government’s Digital
Health & Care Institute at the University of
Strathclyde
Chair of the strategic advisory board for the
Singapore Government’s diagnostics hub
Advisor to the Singapore Government
on advanced manufacturing, health and
biomedical science
Leads Innovate UK’s knowledge transfer
network’s (KTN) health board
Committees
A Audit Committee
N Nomination Committee
R Remuneration Committee
* Chair of Committee
57
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual Report 2019 Executive Board
Will Lee (chair)
Chief Executive
See page 54 for biography
Sir David McMurtry
Executive Chairman
See page 54 for biography
John Deer
Deputy Chairman
See page 54 for biography
Allen Roberts
Group Finance Director
See page 55 for biography
Geoff McFarland
Group Engineering Director
See page 55 for biography
The members of the Executive Board listed
above were also plc Board Executive
Directors during 2018/19. Geoff McFarland
resigned from the Board on 30 June 2019 but
remains a member of Executive Board.
Further information on the Executive Board
can be found on page 60.
Leo Somerville
President, Americas
Dave Wallace
Director of Industrial Metrology
Leo joined Renishaw in 1983, transferring to
Renishaw, Inc. shortly afterwards in 1984.
He initially served as Business Manager for
machine tool probing and calibration products
at Renishaw, Inc. Leo later became President
of Renishaw, Inc. in 1993, and subsequently
President, Americas in April 2018.
Leo was appointed as a member of the
International Sales and Marketing Board in
2008 and the Executive Board in 2004.
Dave joined Renishaw in 1989 through
Renishaw's sponsored student scheme. He
holds a degree from the University of Oxford
in Engineering and Management Science.
He has 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. In
2014 Dave was given Board responsibility for
the Styli and Fixturing Products Division. As
part of a Group-wide reorganisation, he was
appointed Director of Industrial Metrology in
December 2018.
Dave was appointed to the Executive Board
in 2008.
Gareth Hankins FIET
Director, Group Manufacturing
Services Division
Mark Moloney
Director and General Manager,
Renishaw (Ireland) DAC
Jean-Marc Meffre
President, EMEA
Gareth joined Renishaw in August 1988
as an apprentice, and was appointed to
the role of Director, Group Manufacturing
Services Division in 2006. He was educated
at Cardiff University where he studied
Manufacturing Systems and Manufacturing
Management. Gareth undertook various roles
in engineering, production and operations
management prior to being appointed to his
current position. His responsibilities include
manufacturing operations, procurement and
facilities management within the UK. Gareth
was appointed Director of Renishaw (Ireland)
DAC in 2011. In 2013 he was appointed
as an Honorary Visiting Professor at Cardiff
University School of Engineering, and was
awarded The Institute of Engineering and
Technology’s Viscount Nuffield Silver Medal
for manufacturing in 2017.
Mark joined Renishaw in 1988 at its
manufacturing plant in Dublin, Ireland. Prior
to this he attended Dublin City University
and worked in a production and inventory
planning management role in a large-scale
multinational company, both in Ireland and
the US, where he also developed bespoke
MRP/ERP systems for manufacturing. His
primary responsibilities over the last 30 years
have been to increase our manufacturing
capabilities and resources in Ireland, which
manufactures a large number of Renishaw’s
products, and to establish, direct and expand
our manufacturing facilities in Pune, India,
as well as oversee the manufacture of our
neuromate robot in France. Mark is the
Director and General Manager of Renishaw
(Ireland) DAC and a Director of Renishaw
Metrology Systems Ltd in Pune, India.
Gareth was appointed to the Executive Board
in February 2018.
Mark was appointed to the Executive Board in
February 2018.
Jean-Marc joined Renishaw in 1988 as
Managing Director of Renishaw France. He
holds a master’s degree in Economics and
Marketing. Jean-Marc moved to Renishaw
Hong Kong in 1997 and was appointed
Managing Director for all the operations in
the Far East (except Japan) and Australasia.
In April 2018 he became President for the
APAC and EMEA regions, handing over
responsibility for APAC in July 2019 to
Andy Buttrey.
Jean-Marc was appointed as a member
of the International Sales and Marketing
Board in 2008 and the Executive Board in
October 2018.
58
GovernanceRenishaw plc Annual Report 2019 International Sales and Marketing Board
Will Lee (chair)
Chief Executive
See page 54 for biography
John Deer
Deputy Chairman
See page 54 for biography
Allen Roberts
Group Finance Director
See page 55 for biography
Leo Somerville
President, Americas
See page 58 for biography
Jean-Marc Meffre
President, EMEA
See page 58 for biography
The first three members of the ISMB listed
above are also plc Board Executive Directors.
Further information on the ISMB can be found
on page 60.
Sean Hymas
President, Renishaw KK
Rainer Lotz
Vice President, EMEA
Sean joined Renishaw in 1989 following a
year’s placement between 1987 and 1988.
He has 30 years’ experience of international
marketing, sales, channel management
and business development. In 2008, Sean
transferred to Renishaw KK to further develop
existing business and open up new market
sectors in Japan. He was later appointed
President of Renishaw KK.
Sean was appointed as a member of the
ISMB in December 2012.
Rainer joined Renishaw in 2006. He has over
20 years’ experience in related positions, and
was responsible for Renishaw’s operations
in Germany, Austria and Switzerland before
becoming Vice President for the wider EMEA
region in December 2018.
Rainer was appointed as a member of the
ISMB in 2008.
Clive Martell
Director of Additive Manufacturing
Rhydian Pountney
Director of Group Commercial
Services
Clive joined Renishaw in 2015. He is
responsible for the strategy and direction
of Renishaw’s additive manufacturing. Clive
started out as a graduate engineer with
Delcam plc, where he progressed to CEO
of the company. He managed the transition
of Delcam from an AIM listed company to a
division of Autodesk, Inc. and has over 30
years’ experience in advanced engineering
and international sales. Clive represents
Renishaw on the steering group for the UK
national strategy for additive manufacturing.
Clive was appointed as a member of the
ISMB in 2015.
Rhydian joined Renishaw in 1979. He has
over 30 years’ experience in sales and
marketing and was responsible for sales in
the UK and 11 overseas operations, including
India and Russia, before being appointed
Director of Group Commercial Services
as part of a Group-wide reorganisation in
December 2018. Rhydian has been the
UK chair of the technology collaboration in
advanced engineering working group of the
UK-India joint economic and trade committee
since 2014 and was appointed as an export
champion by the Department for International
Trade (DIT) in March 2019.
Rhydian was appointed as a member of the
ISMB in 2008.
59
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual Report 2019 Directors’ corporate governance report continued
A. Leadership
The role of the Board
During 2018/19, the Board comprised four Executive and
four Independent Non-executive Directors in addition to
the Executive Chairman. The Directors holding office at the
date of this report (with the exception of Geoff McFarland
who resigned from the Board on 30 June 2019) and
biographical details, are given on pages 54 to 57 including
the specific reasons why their contribution is, and continues
to be, important to the Company’s long-term sustainable
success. The Directors’ biographies are also available at:
www.renishaw.com. All Directors, with the exception of
Geoff McFarland, will be retiring and seeking re-election at
the AGM.
There is a formal schedule of matters specifically
reserved for the Board’s 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 30 June
2019, the Board met for eight scheduled meetings (together
with a separate Board strategy day) 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 by the Board during the year is set out on
page 61.
The Board has three formally constituted Committees – the
Audit Committee, the Remuneration Committee and the
Nomination Committee.
There is an executive management committee, the
Executive Board, which 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 58. 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, 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 (and other senior
management) of the three sales regions and the Director of
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 38 and 39.
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
60
GovernanceRenishaw plc Annual Report 2019 Scheduled Board and Committee meetings
in the year
July 2018
August 2018
A
A
R
B
N
September 2018
October 2018
A
B
B
November 2018
December 2018
R
B
February 2019
January 2019
A
B
March 2019
April 2019
S
B
R
N
May 2019
June 2019
A
B
R
R
B
N
Key
B Board (8)
A Audit Committee (5)
N Nomination Committee (3)
R Remuneration Committee (5)
S Board Strategy Day (1)
High-level summary of
subjects discussed by the
Board during the year
Strategy
• Business and corporate strategy
• Changes in markets and the competitive
landscape
• Divisional five-year plans
• Products, technology and R&D
• Strategic risks
Risk
• Brexit and USA/China trade relations
• Cyber security
• Group’s risk analysis and
process evolution
• Hedging programme
• IT systems upgrades
• Patent litigation
• Data protection
Governance
• 2018 Corporate Governance Code
requirements and legal updates
• Board evaluation
• Business organisation and structure
• Draft Annual Report
• Executive management structure
• Relations with controlling shareholders
• Review of internal controls
Finance
• Dividend policy
• Forecasts, targets, budgets and costs
• Oversight of the preparation and
management of the financial statements
• Tax strategy and updates
• Trading statements
Shareholder engagement
• AGM and other shareholder feedback
• Investor day
• Investor relations policy
People
• Employee satisfaction survey
• Flexible working
• Gender pay gap and diversity policy and
performance
• Health and safety system and updates
• Group reward policy and incentives
• Salary reviews, bonus and pensions
61
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual Report 2019
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.
There are 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 since the Company 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 83.
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 also meet without the
Executive Directors or Executive Chairman present, in each
case to discuss performance, corporate governance and
other matters.
B. Effectiveness
Composition of the Board
All the Non-executive Directors are considered by the Board
to be independent in character and judgement and there
are no relationships or circumstances that are likely to affect
a non-executive director’s judgement. Sir David Grant has
served as an Independent Non-executive Director for over
seven years and Carol Chesney for almost seven years.
As such, the Board considered in particular their continued
independence and concluded that they both continue to
demonstrate independent judgement and character.
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 pages 56 and 57.
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 65 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, to meet with
business units and functions, as well as attending investor
days. Business presentations are given at Board meetings
to provide updates on, and opportunities to discuss,
products and business strategies.
A tailored 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.
Following her appointment, Catherine Glickman’s induction
included a comprehensive set of meetings with Board and
Executive Board members, the Group’s international senior
management and members of the HR team.
Information and support
The Board receives business updates, financial information,
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. 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. The Company maintains liability
insurance for its directors and officers, as disclosed in the
Other statutory and regulatory disclosures.
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 30 June 2019, an external evaluation process
was undertaken by Equity Communications Limited
62
GovernanceRenishaw plc Annual Report 2019 who undertook interviews with each of the Directors
and the General Counsel & Company Secretary, based
on an agenda agreed by the Board. The Board noted
the significant level of change since its last external
evaluation in 2016. The main recommendations from the
2019 evaluation included: a continuing focus on talent
management and succession in key areas; and enhancing
the presentation of business unit activities and progress
against targets to the Board, both at regular Board meetings
and at the Board strategy day. Equity Communications
Limited has no other connection with the Company.
Re-election
In accordance with the Governance Code all the Directors
will retire from the Board at the next AGM and offer
themselves for re-election, with the exception of Geoff
McFarland who, as previously announced, resigned from
the Board on 30 June 2019.
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
66 to 69.
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 86 and the Independent
auditor’s report on pages 87 to 94.
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.
Viability statement
The Board approved the Company’s viability statement on
page 43.
Risk management and internal control
The Board is responsible for the Company’s systems of risk
management and internal control, and for reviewing their
effectiveness. Any system of internal control is designed to
manage rather than eliminate the risk of failure to achieve
business objectives and can only provide reasonable,
but not absolute assurance against material misstatement
or loss.
There are defined lines of responsibility and delegation of
authorities. Established and centrally documented control
procedures also exist, including, for example, approvals of
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 Internal
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 38 and 39.
The Board ensures 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 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 and emerging risks facing the Group, including
those that would threaten its business model, future
performance, solvency or liquidity. The Group’s principal
risks and uncertainties can be found on pages 40 to 42.
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.
63
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual Report 2019 Directors’ corporate governance report continued
E. Relations with shareholders
Engagement with shareholders
We engage with our shareholders in a number of ways.
Open webcasts of presentations of the full and half-year
results are held and recordings of the presentations and the
subsequent question and answer sessions made available
on the Company’s website. Analysts’ and brokers’ reports
are circulated to the Board.
The Board is available for engagement with shareholders
at the AGM and the annual investor day. The investor day
includes presentations by members of the Board and senior
management on Group strategy, business segments and
product lines, as well as tours and demonstrations relating
to the Group’s activities. This year, 150 visitors attended
the day and took part in a formal Q&A session with the
Board as well as having the opportunity to put questions
to the Board and senior management during lunch and
refreshment breaks.
The Board reviews the Company’s investor relations policy
annually. As part of this year’s review, feedback was sought
from all attendees at the annual investor day including
existing and potential institutional shareholders. The results
of this engagement were presented to the Board and a
number of management’s recommendations were approved
to enhance the format and content of future investor days,
with the overall policy remaining unchanged.
The AGM
The AGM takes place at the Company’s headquarters
or one of its 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 (except in 2018 Catherine
Glickman, as detailed later in this section).
Separate resolutions are proposed for each substantially
separate issue, and all resolutions are taken on a poll.
Director
Sir David McMurtry
John Deer
Will Lee
Allen Roberts
Geoff McFarland
Carol Chesney
Catherine Glickman
Sir David Grant
John Jeans
Kath Durrant
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 has considered the votes against resolutions 4,
the re-election of Sir David McMurtry (23.86%) and 5, the re-
election of John Deer (24.00%), at the 2018 AGM. In order
to better understand the reasons for these votes against,
the Board considered the views of shareholders and proxy
advisory firms as to voting and voting recommendations
respectively (where these had been made available to
the Company) and received feedback from the General
Counsel & Company Secretary following engagement with
a number of shareholders on the rationale for their voting.
The Board will continue to engage with shareholders to
understand their views on this and any other significant
matter. The Company’s overall approach to engagement
with shareholders, and the opportunities for interacting with
the Board, are set out earlier in this section.
Board and Committee meeting attendance record
The table below shows the number of scheduled meetings
of the Board and its Committees at which each Director was
present, and, in brackets, the number of meetings they were
eligible to attend during the year.
Compliance statement
The Board considers that it has complied with the provisions
of the Governance Code throughout the year except in
relation to the following matter:
• the chairman should arrange for the chairmen of the audit,
remuneration and nomination committees to be available
to answer questions at the AGM and for all directors to
attend (provision E.2.3).
Catherine Glickman was unable to attend the AGM in 2018
due to travel plans outside the UK that were arranged prior
to her joining the Board.
Board
8(8)
8(8)
8(8)
8(8)
7(8)3
8(8)
6(7)¹
8(8)
8(8)
1(1)2
Audit
Committee
–
–
–
–
–
5(5)
4(5)1
5(5)
5(5)
–
Remuneration
Committee
–
–
–
–
–
5(5)
4(4)
5(5)
5(5)
1(1)
Nomination
Committee
3(3)
–
–
–
–
3(3)
2(2)
3(3)
3(3)
0(1)2
The number in brackets indicates the number of meetings the Director was eligible to attend during the year.
1 Catherine Glickman was absent from the Board meeting and Audit Committee meeting on 18 October 2018 due to travel plans organised in advance of joining
the Board on 1 August 2018.
2 Kath Durrant’s resignation took effect on 31 July 2018, so the Board meeting on 24 July 2018 was her final Board meeting. She was absent for the Nomination
Committee meeting on 24 July 2018.
3 Geoff McFarland was absent from the Board meeting on 13 May 2019 due to pre-arranged travel plans.
Sir David Grant
Senior Independent Director
1 August 2019
64
GovernanceRenishaw plc Annual Report 2019 Nomination Committee report
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, Catherine Glickman,
Sir David Grant and John Jeans. Catherine joined the
Committee on appointment to the Board on 1 August
2018. With the exception of Sir David McMurtry, all of
the members of this Committee are Independent Non-
executive Directors. Details of attendance at meetings
are shown on page 64 of the Directors’ corporate
governance report and the terms of reference are
published on the Company’s website.
Activities during the year
The Committee met three times during the year. The main
issues that were discussed were:
• non-executive succession, in particular the appointment
of Catherine Glickman as an Independent Non-executive
Director and Chair of the Remuneration Committee
following Kath Durrant’s decision to step down.
As outlined in last year’s report, Stonehaven International,
a search consultancy, was engaged to seek appropriate
candidates for appointment as an additional independent
non-executive director and the Committee recommended
Catherine’s appointment. Stonehaven International has no
other connection with the Company;
• the decision by Geoff McFarland to resign from the Board,
his new role, and the change in structure and reporting
lines of Geoff’s responsibilities as a result;
• the appointment of a new General Counsel and Company
Secretary; and
• the senior management structure following the internal
reorganisation and creation of divisional product groups in
December 2018.
Sir David McMurtry
Chair of the Nomination Committee
1 August 2019
Employees, diversity and policies – for more
information see pages 45 and 47
Senior management diversity – for more
information see page 47
65
Sir David McMurtry
Chair of the Nomination Committee
The Nomination Committee has an
important role to play in leading the process
for Board appointments and ensuring the
Board has the right balance of experience,
diversity and skills to support our business
model and strategy.
Boardroom diversity
Our aim is for the Board to consist of individuals with
diverse skills and experience who can add value to our
work. We recognise that diversity of gender, age, ethnicity,
industry knowledge and education are important.
During the year, the proportion of women on the Board was
22% and, following Geoff McFarland’s decision to resign
from the Board from 30 June, is currently at 25%. While the
Board continues to believe it is not appropriate to set 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 2018 and formalised our commitment to diversity at
all levels. The Committee’s procedures require it to first
evaluate the balance of skills, knowledge, experience and
diversity on the Board. It then agrees a role specification
for the proposed appointment 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 and take forward
candidates on merit and against objective criteria, with due
regard for the benefits of diversity on the Board.
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual Report 2019 Audit Committee report
Carol Chesney
Chair of the Audit Committee
The Audit Committee plays a vital role
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 2019,
we also monitored the various changes
to the UK Corporate Governance Code,
agreed the content of the viability statement
and reviewed the Group’s treasury control
environment in order to minimise the risk of
bank payment fraud.
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;
they are available on the Company’s website.
The Audit Committee reviews the Group’s accounting
policies and procedures, its full 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
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 and were refreshed
during 2018/19.
The Audit Committee comprises four Non-executive
Directors: Carol Chesney (Chair), Sir David Grant,
John Jeans and Catherine Glickman (following her
appointment to the Board on 1 August 2018). The
Board is satisfied that at least one member of the
Committee, Carol Chesney, has recent and relevant
financial experience and that collectively, the Committee
has a depth of financial and commercial experience
in various industries, as well as the metrology and
healthcare sectors in which the Group operates. A more
detailed summary of the qualifications, skills and
experience of each Committee member can be found
on pages 56 and 57.
Governance
The Committee meets a minimum of four times a year
with the Chief Executive, the Group Finance Director, the
Head of Group Finance, the Group Financial Accountant,
the General Counsel & Company Secretary (together, the
executives), the Group Internal Audit Manager 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. The 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 Chair of the Committee provides feedback on
significant matters considered during meetings to the Board
after each Committee meeting.
66
GovernanceRenishaw plc Annual Report 2019 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.
External auditor and
non-audit work
• managed the relationship
with the external auditor;
• reviewed, considered
and agreed the scope
and methodology of
the 2019 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 2019
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.
Internal audit
• refreshed the terms
of reference of
Internal Audit;
• evaluated the scope of
work to be undertaken
by the internal audit
function, including
review of the data
analytics testing
undertaken in the year
and approval of the
data analytics testing
plan for 2019/20;
• 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 function
through discussion
with the Group
Finance Director,
the Head of Group
Finance, members of
the Audit Committee
and a questionnaire
completed by a
number of subsidiary
finance teams.
The principal activities in the year were:
Financial statements and reports
• reviewed the effectiveness of the
Group’s risk management and
internal controls and disclosures
made in the 2019 Annual Report;
• reviewed the 2019 Annual Report
and the 2019 Interim Report.
The Committee received a report
from the external auditor on the
audit of the 2019 Annual Report;
• reviewed critical accounting
judgements and estimation
uncertainties in the Annual Report,
being: revenue recognition, the
amortisation and impairment
of intangible assets, the
capitalisation of development
costs, the carrying value of
inventory and the assumptions
used to determine the defined
benefit pension schemes’
liabilities;
• reviewed the effectiveness of
the Group’s hedging policy and
its application;
• reviewed the accounting
and disclosures in relation to
the Group’s defined benefit
pension schemes;
• reviewed the effective tax rate in
the Annual Report 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;
• reviewed the work undertaken,
and disclosures made, in relation
to the financial impact of IFRS 16
‘Lease Accounting’; and
• reviewed the work undertaken to
implement IFRS 15 ‘Revenue from
Contracts with Customers’ and
IFRS 9 ‘Financial Instruments’.
Risk management and
internal controls
• 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 the Group’s
control environment
in relation to our
treasury activities;
• reviewed and monitored
the implementation plan
to ensure the effective roll
out of the updated sections
of the Group Internal
Control Manual;
• reviewed and agreed the
content of the viability
statement (see page
43) 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 63);
• received updates on
compliance with the
Group’s anti-bribery and
corruption policy;
• monitored the
effectiveness of the
Group’s global whistle-
blowing and serious
misconduct policy; and
• reviewed the Group’s
published tax strategy.
67
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual Report 2019 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 (replaced by IFRS 9
from 1 July 2018) and therefore could not be treated as
qualifying hedging instruments. Since 2017 the Committee
has received confirmation that all new hedging instruments
entered into by the Group would be IAS 39/IFRS 9
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 disclosures made in respect of employee pension
benefits. The Committee also considered the terms of
the new recovery plan for the 2018 UK pension scheme
deficit, including the schedule of payments. The Committee
made enquiries of management to understand the process
undertaken for determining the appropriate actuarial
assumptions and to understand the basis on which the
IFRIC 14 adjustment is not required at this year end.
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 recommending
the appointment, reappointment or removal of the external
auditor, which the Board puts to shareholders for approval at
the AGM.
This is the third financial year that the Annual Report
has been audited by Ernst & Young LLP following their
appointment at the AGM in October 2016. There are no
current plans to tender the audit, however 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
senior representatives of Ernst & Young LLP.
When the Committee assesses the effectiveness of the
external auditor 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
tender for non-audit services.
For 2019, the external auditor has provided £8,375 of non-
audit work in relation to a piece of work regarding Wotton
Travel’s annual ATOL/ABTA reporting and a piece of work to
provide a VAT turnover certificate for our Irish subsidiary.
An analysis of fees paid to Ernst & Young LLP is included in
note 5 to the Group financial statements.
.
68
GovernanceRenishaw plc Annual Report 2019 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 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;
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 has expanded its use of data analytics
techniques 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 in 2017 to ensure that Renishaw’s policies exceed
best practice for an organisation of Renishaw’s size and
structure. The review was materially completed in 2018/19,
with updated sections of the Group Internal Control
Manual communicated throughout the Group. The Audit
Committee also reviewed the Group’s control environment
in relation to our bank accounts in order to minimise the risk
of bank payment fraud, and reviewed and monitored the
implementation plan to ensure the effective roll-out of the
Group Internal Control Manual.
Details of risk management and internal controls are set out
on pages 38 and 39.
Fair, balanced and understandable Annual
Report
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 financial statements production process within a
strict timeframe.
• during the compilation period, regular meetings were
held with key contributors from Group Finance, Group
Secretariat, CSR and Group 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 2019, 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
2019, 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 2019 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 63.
Carol Chesney
Chair of the Audit Committee
1 August 2019
69
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual Report 2019 Directors’ remuneration report
Directors’ remuneration report
Statement from the Chair of the
Remuneration Committee
Introduction
On behalf of the Board, I am pleased to present the
Directors’ remuneration report for 2019, my first as a Non-
executive Director of the Company and the Chair of the
Committee. Before my appointment, I spent some time
understanding the development of the remuneration policy
from both the previous Committee Chair and the current
members. The Committee remains of the view, which I
endorse, that although it differs from that of the majority of
listed businesses, our policy supports the Group’s strategy,
is appropriate for the Executive Directors and is aligned with
shareholder interests.
In compliance with the requirements for reporting on
directors’ pay introduced in October 2013 (as amended),
the report is split into the following three sections:
1. this introductory statement;
2. the remuneration policy (pages 73 to 77) as approved by
shareholders at the 2017 AGM; and
3. the Annual report on remuneration (pages 78 to 83),
setting out information on Directors’ remuneration during
the year ended 30 June 2019, and how our policy will be
implemented in the year ending 30 June 2020. This part
of the report will be submitted to an advisory vote at the
2019 AGM.
In addition and for the first time, we have included on page
72 a section that provides an overview of Executive Director
remuneration at Renishaw.
This remuneration report has been prepared in accordance
with 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 2016.
Context for remuneration at Renishaw
2018/19 was the second year of implementation for the
remuneration policy voted on at the 2017 AGM and which
received a high level of support. In summer 2018, we
paid cash bonuses and made the first award of shares to
the three non-founder Executive Directors under the new
deferred equity incentive plan for financial performance
for 2017/18, amounting to 42.5% of salary. Further details
of the value of these awards are set out on page 81.
The Committee continues to keep the remuneration policy
and its implementation under review in the context of
shareholder feedback, the evolving governance landscape,
and Renishaw’s need to continue to attract, motivate and
retain the talent required to underpin continued growth
and long-term shareholder value creation. The Committee
believes that the current policy and its approach to
implementation for the year ending 30 June 2020
remains appropriate. The Committee is mindful of recent
developments in remuneration governance, including the
new UK Corporate Governance Code (published in July
2018), the passing into UK law of new regulations and the
evolving views and voting policies of investors and the
major proxy advisory bodies. The Committee will continue
to consider the implications of these developments for
executive remuneration as part of its review of remuneration
Catherine Glickman
Chair of the Remuneration Committee
The Committee is mindful in its decision
making of the principle of close alignment
between executive remuneration and
Group performance, as well as workforce
remuneration more broadly. We believe the
incentive outcomes for the year under review
– and our approach to implementing the
policy for 2019/20 – appropriately reflect this.
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 senior management, and overseeing remuneration
policy. 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, fair, and that there is appropriate
progression for those identified as potential successors
to the Board and senior leadership team.
All members of the Committee are Independent Non-
executive Directors: Catherine Glickman (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 and independent
advisers are used as required.
70
GovernanceRenishaw plc Annual Report 2019 policy during 2019/20. In advance of putting the
remuneration policy to a binding shareholder vote at the
2020 AGM, we expect to consult with shareholders on our
proposals in early 2020.
Adjusted PBT in 2018/19 was below the very stretching
performance range set at the start of the year; as a result,
there will be no pay out under the annual incentives for any
of the Executive Directors.
Key remuneration discussions during the year
Review of 2018/19
• 2018/19 has been a challenging year with reduced
turnover and adjusted operating profit for the Group.
• The new leadership structure came into effect on
1 February 2018, when Will Lee took over as Chief
Executive. He has made a strong start in the role, taking
operational responsibility for the business and setting
strategic direction. He has instituted organisational
change to align product development to the changing
market dynamics and drive business performance.
He has continued the investment in R&D while being
committed to improved productivity in a business that has
grown rapidly both in the UK and internationally.
• Sir David McMurtry has worked closely with Will Lee,
supporting him during the hand over in this critical
first year for a new chief executive. While Sir David
continues to be involved in all aspects of the business
as Executive Chairman, stepping down as Chief
Executive has released time for him to focus on R&D,
identifying disruptive engineering innovations and
driving the development of next generation products
and technologies.
• Last year, some shareholders queried Sir David
McMurtry’s unchanged salary following the split in his role.
The Committee took the feedback seriously, discussing it
at a number of meetings. The Committee concluded the
full extent of Sir David’s role and the significance of his
contribution had not been fully disclosed. The Committee
is clear that Sir David continues to be a major driver of
innovation and growth in the business and that his salary
is commensurate to the contribution he is making.
• The Committee approved a revised remuneration
package for Geoff McFarland as a result of his decision
to resign from the Board. We are pleased that he will
continue to contribute to the business in his new role as
Director of Group Technology.
• The Committee has also reviewed the new UK Corporate
Governance Code, communications from governance
bodies and feedback from shareholders, in relation
to a number of policy matters, specifically pension
contributions. Although the remuneration policy will not
be formally reviewed until the new financial year, the
Committee has agreed that, for any new appointments
to the Board, any pension award will be in line with the
wider workforce.
Performance and reward
We believe that our policy is appropriate for both the
founder Directors and the appointed Executive Directors.
The Committee considers the opportunities and risks in
the long-term strategy and annual business plan when
developing the policy and setting annual targets. The policy
is simple, designed around an annual bonus rewarding
financial performance paid in cash up to 100% of salary,
and a further 50% settled in shares to the two non-founder
Directors for performance between ‘Stretch’ and ‘Maximum’
targets, thereby building their respective shareholdings.
The Committee discussed annual base pay increases for
the Executive Directors, agreeing that they should receive
an award of 2.1%, in line with the UK consumer price index
(CPI) and consistent with that for eligible employees across
the UK workforce. As a result of the Group’s performance
during 2018/19, the Committee did not consider a higher
award for the Chief Executive for 2019. However, as stated
last year, it reserves the option to adjust Will Lee’s salary
closer to the market over time, which may involve a salary
increase above the average salary increase for the UK
employee population as a whole.
Workforce considerations
The Committee reviews and discusses the remuneration
arrangements and management decisions regarding base
pay, bonuses and benefits for employees at other levels
of management in consultation with the Chief Executive.
The Committee also considers the base pay, bonus and
benefits for all other employees in Renishaw.
A total salary award budget of 3.9% was made available
for the UK workforce, comprising UK CPI and merit
adjustments. Eligible non-UK employees received a country
specific CPI base pay increase and merit adjustments
where appropriate.
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 five times during the year. Its main
activities included:
• 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;
• reviewing the implications for Executive Director
remuneration at Renishaw of the revised UK Corporate
Governance Code (published in July 2018) and recent
developments in remuneration governance;
• reviewing remuneration arrangements across the Group;
• reviewing Executive Director salaries and approving
bonus outcomes for the year;
• approving Sir David McMurtry’s expenses; 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.
Catherine Glickman
Chair of the Remuneration Committee
1 August 2019
71
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual Report 2019 Remuneration at a glance
KPI – Performance snapshot
Adjusted profit before tax
£160m
£120m
77.0%
£80m
£40m
£0m
142.5%*
£145.1m
0%
£109.1m
£103.9m
17
18
19
Adjusted PBT
Bonus payout (% of salary)
* For 2017/18, 142.5% was the total of the awards made to each of the
appointed Executive Directors. The founder Directors received 100%.
Total shareholder return (TSR)
2,000
1,500
1,000
500
0
2009
2010
2011
2012 2013 2014 2015 2016 2017
2019
Financial year ended 30 June
FTSE 250
2018
Renishaw
How is performance reflected in our
incentives?
Adjusted* profit before tax is a key measure of Renishaw’s
financial performance.
In 2018/19 it was our sole measure for both the annual cash
bonus and deferred equity incentive plan.
Our financial performance for 2018/19 has resulted in no
awards being made in relation to the annual cash bonus or
the deferred annual equity incentive plan.
Alignment of Executive Director and shareholder interests
is reinforced by the significant shareholdings of our founder
Directors, and for non-founder Directors through deferred
annual equity plan awards being denominated in shares.
Renishaw’s TSR has outperformed the FTSE 250 index over
the last three and five years. TSR over these periods has
been 103% and 181%, respectively. This compares with
30% and 42% for the FTSE 250 over the same timeframe.
Executive Director remuneration in 2018/19
£’000
Base salary
Taxable benefits
Pension
Annual cash bonus
Deferred equity incentive
Total
Shareholding
(multiple of salary)
Sir David
McMurtry
700
3
n/a
–
n/a
703
John
Deer
437
21
n/a
–
n/a
458
Will
Lee
550
20
83
–
–
653
Allen
Roberts
409
21
61
–
–
491
Geoff
McFarland
409
20
61
–
–
490
1,604x
1,192x
0.22x
0.54x
0.52x
Implementation of Policy in 2019/20
Salary
The Executive Directors
will each receive a salary
increase of 2.1% in line with
that for the UK workforce.
Benefits
The package of benefits
for Executive Directors is
unchanged from 2018/19.
Annual cash bonus
2019/20 awards under
the annual cash bonus
will continue to be
structured in line with the
remuneration policy.
Deferred equity
incentive plan
2019/20 awards under
the plan will continue to
be structured in line with
the remuneration policy.
Awards are deferred into
shares, normally held for
three years.
* Note 25, Alternative performance measures, defines how Adjusted profit before tax is calculated.
72
GovernanceRenishaw plc Annual Report 2019 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
2019/20 remuneration and additional disclosure under the section Statement of consideration of shareholder views.
Total
remuneration
policy
Total
remuneration
Operation
Executive Director
remuneration is designed
to be simple, conservative
and aligned with
shareholder interests.
Maximum
A cap on total
remuneration at upper
quartile of the relevant
market for the position in
question, will apply.
Performance measures
Described below
in relation to each
constituent element of
remuneration.
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.
Our total remuneration policy comprises the following constituent elements:
Operation
Renishaw aims to pay base
salaries between median and
upper quartile, reflecting that its
variable pay opportunities remain
significantly below market.
Element of
remuneration
Base salary
Purpose and
relevance to strategy
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.
Performance measures
Continued good
performance.
Maximum
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.
73
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual Report 2019 Directors’ remuneration report continued
Element of
remuneration
Benefits
Purpose and
relevance to strategy
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.
Operation
Benefits provided on an ongoing
basis include:
• a car or car allowance;
• private medical insurance;
• life assurance;
• long-term disability cover; and
• 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.
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.
Performance measures
Not applicable.
Maximum
Excluding
accommodation and
relocation costs, benefits
are capped at £50,000
per annum.
100% of salary.
Based on Group
performance, primarily
measured by Adjusted
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.
74
GovernanceRenishaw plc Annual Report 2019 Element of
remuneration
Deferred
annual equity
incentive plan
Purpose and
relevance to strategy
To incentivise
and reward
outperformance
beyond the annual
bonus maximum,
and encourage
executive director
share ownership.
Pension
To provide a
competitive
pension as
appropriate to
motivate and
retain executive
directors of the
required quality to
meet the Group’s
objective.
Minimum
shareholding
guideline
Supports the
alignment of
Executive and
shareholder
interests.
Operation
If performance exceeds the level
at which a maximum annual short-
term bonus is earned, incremental
profit growth beyond this level may
be rewarded through a deferred
annual equity incentive. Any such
award is deferred in shares for a
period of three years.
Dividends may accrue on deferred
shares over the deferral period
and, if so, will be paid as additional
shares (or a cash equivalent) on
vesting.
Part or all of any deferred annual
equity award may be subject to
repayment in the event of any
material financial misstatement,
error in calculation or misconduct.
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 up to 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 5 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.
Maximum
50% of salary.
Performance measures
As per the annual cash
bonus above.
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.
75
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual Report 2019 Directors’ remuneration report continued
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.
As described in the Statement from the Chair of the
Remuneration Committee, the pension contribution for
any Executive Director appointed after 1 July 2019 will be
aligned with that available to the wider workforce in the
relevant market.
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. At the AGM in 2018, the advisory vote on the
Directors’ remuneration report received proxy votes of
95.21% in favour.
76
GovernanceRenishaw plc Annual Report 2019 Illustrations of application of remuneration policy
The bar charts set out below for each Executive Director show for the financial year ending 30 June 2020: 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. 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.
3
3
4
,
1
5
1
7
4
5
2
,
1
6
3
5
8
1
7
8
1
7
8
1
7
8
1
7
i
n
M
t
e
g
r
a
T
x
a
M
Sir David
McMurtry
9
0
5
,
1
1
8
2
2
6
5
8
8
0
,
1
2
2
4
6
6
6
6
6
6
6
6
6
6
6
6
i
n
M
t
e
g
r
a
T
x
a
M
8
2
1
,
1
9
0
2
8
1
4
1
0
5
x
a
M
4
1
8
4
1
3
1
0
5
t
e
g
r
a
T
1
0
5
1
0
5
i
n
M
2
0
8
5
3
3
7
6
4
t
e
g
r
a
T
7
6
4
7
6
4
i
n
M
3
1
9
6
4
4
7
6
4
x
a
M
John Deer
Will Lee
Allen Roberts
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 summarising
the approach to fees for the Non-executive Directors of the Company:
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.
Performance measures
Not applicable.
Maximum
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.
Element
of remuneration
Board fees
Purpose and
relevance to strategy
To provide a competitive
fee to attract and retain
non-executive directors
of the required quality
to meet the Group’s
objectives.
Operation
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.
77
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual Report 2019 Directors’ remuneration report continued
Annual remuneration report
This section of the report sets out the remuneration of the directors in the year ended 30 June 2019 and also contains details
of how we intend to implement the policy for the forthcoming financial year. The information on pages 78 to 82 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 McFarland3
Carol Chesney
Catherine Glickman4
Sir David Grant
John Jeans
Kath Durrant5
Salary/fees
Benefits
Bonus2
Pension
Total
2019
£’000
2018
£’000
2019
£’000
2018
£’000
2019
£’000
700
437
550
409
409
55
>50
55
55
5
700
425
461
398
398
52
n/a
52
52
52
3
21
20
21
20
0
>0
0
1
0
2
21
19
21
19
0
n/a
0
1
0
0
0
0
0
0
n/a
n/a
n/a
n/a
n/a
2018
£’000
700
425
658
567
567
n/a
n/a
n/a
n/a
n/a
2019
£’000
2018
£’000
n/a
n/a
83
61
61
n/a
n/a
n/a
n/a
n/a
n/a
n/a
61
60
60
n/a
n/a
n/a
n/a
n/a
2019
£’000
703
458
653
491
490
55
51
55
56
5
2018
£’000
1,402
871
1,199
1,046
1,044
52
n/a
52
53
52
1 Will Lee was appointed to the Board on 1 August 2016, and promoted to the role of Chief Executive with effect from 1 February 2018. His remuneration shown
in the table above in relation to 2018 reflects the change to his remuneration on promotion to Chief Executive with effect from 1 February 2018, as set out in last
year’s Directors’ remuneration report.
2 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 relevant financial year. Deferred shares will normally vest on the third anniversary of grant, subject to continued employment.
3 Geoff McFarland resigned from the Board on 30 June 2019. His remuneration shown in the table above is for the full financial year 2018/19.
4 Catherine Glickman joined the Board on 1 August 2018. Remuneration shown in the table above in relation to 2019 reflects the period from her appointment to
30 June 2019.
5 Kath Durrant stepped down from the Board on 31 July 2018. Remuneration shown in the table above in relation to 2019 reflects the period from 1 July 2018 to
this date.
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
–
19
19
19
19
3
>1
1
>1
1
Incentive outcomes for 2018/19
Under the remuneration policy approved at the 2017 AGM, all Executive Directors were eligible for an annual cash bonus
of up to 100% of base salary in 2018/19. In addition, Executive Directors who are participants in the 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 2018/19, 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 stretching 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 adjusted profit before tax targets for 2018/19 were: threshold – £155m; on-target – £170m; and maximum – £185m.
As the adjusted profit before tax for 2018/19 was below the performance range set by the Committee, no awards were made
for 2019 performance under either the annual cash bonus or the deferred annual equity incentive plan.
78
GovernanceRenishaw plc Annual Report 2019 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 30 June 2019:
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
£’000 per annum
9
31
Pension contributions
Paid in cash
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 30 June 2009.
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
2009
Renishaw
FTSE 250
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
79
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual Report 2019 Directors’ remuneration report continued
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 1 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 31 January 2018)
Single figure of total remuneration
(£‘000)¹
Annual bonus payout
% of maximum
Long-term incentive vesting
% of maximum
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
653
594
0
n/a
95
n/a
818
1,207
668
1,298
632
663
969
1,066
472
100
n/a
77
n/a
0
100
0
n/a
n/a
n/a
10
n/a
69
100
0
n/a
n/a
n/a
1 Represents the total remuneration received by Sir David McMurtry in relation to this role.
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 is a non-executive director of Cambridge Mechatronics
Limited 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
30 June 2019 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 30 June 2019)
26,377,291
12,233,040
2,800
5,165
5,000
1,000
1,350
–
440
198
Unvested and
subject to continued
employment
(awarded under
the deferred equity
incentive plan)
n/a
n/a
3,537
3,051
3,051
n/a
n/a
n/a
n/a
n/a
Minimum
shareholding
guideline
0.5x salary
0.5x salary
2x salary
0.5x salary
0.5x salary
n/a
n/a
n/a
n/a
n/a
Current
shareholding1
1,604x salary
1,192x salary
0.22x salary
0.54x salary
0.52x salary
n/a
n/a
n/a
n/a
n/a
Minimum
shareholding
guideline met
Yes
Yes
Building
Yes
Yes
n/a
n/a
n/a
n/a
n/a
Sir David McMurtry
John Deer
Will Lee
Allen Roberts
Geoff McFarland
Carol Chesney
Catherine Glickman
Sir David Grant
John Jeans
Kath Durrant2
1 Current shareholdings for comparison with the shareholding requirements for Executive Directors are calculated based on salary as at 30 June 2019 and by
reference to the closing share price on 28 June 2019 (4,258p).
2 Correct at 31 July 2018, when Kath Durrant stepped down from the Board.
On 2 August 2018, the Executive Directors, excluding Sir David McMurtry and John Deer, were granted awards of shares
under the deferred equity incentive plan for performance over 2017/18. The details of these awards are summarised opposite
and reflected in the above table.
80
GovernanceRenishaw plc Annual Report 2019 Deferred equity incentive plan awards granted during the year
Executive Director
Will Lee
Allen Roberts
Geoff McFarland
Number of shares
3,537
3,051
3,051
Face value
£’0001
196
169
169
Face value
% of salary²
42.5
42.5
42.5
Vesting date
2 August 2021
2 August 2021
2 August 2021
1 Based on the five-day average share price of 5,549p preceding the award date.
2 Expressed as a percentage of salary at the award date which was 2 August 2018.
In line with our remuneration policy, awards normally vest on the third anniversary of the award date, subject to continued
employment only.
Percentage change in remuneration of the Chief Executive
The following table sets out the percentage change in the Chief Executive’s remuneration compared with the percentage
change in average remuneration of UK employees from 2018 to 2019:
Salary
Benefits
Annual bonus
2019
£’000
550
20
0
2018
£’000
6381
19²
735
Chief Executive
% change
-13.8
+5.3
-100.0
UK employees (average)
% change
+4.6
+1.4
-33.9
1 Represents the salary received by Sir David McMurtry in relation to this role (£700,000 per annum for the period to 31 January 2018), and by Will Lee for the
period from 1 February 2018 (£550,000 per annum).
2 2018 has been restated to include the value of Will Lee’s car allowance (previously excluded to allow a like-for-like comparison with Sir David McMurtry’s benefits
package in 2017).
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 62.8% 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
2019
£’000
237,222
43,672
2018
£’000
226,809
38,942
Change
%
+4.6
+12.1
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 each of the Executive Directors will be increased by 2.1%. This is in line with UK
CPI and consistent with that for eligible employees across the UK workforce. The salaries will be as follows from 1 July 2019:
Sir David McMurtry
John Deer
Will Lee
Allen Roberts
The package of benefits for Executive Directors is unchanged from 2018/19.
Annual cash bonus
1 July 2019
£’000
715
446
562
418
30 June 2019
£’000
700
437
550
409
As set out in the remuneration policy, the maximum bonus opportunity for the year ending 30 June 2020 will continue to be
100% of salary for Executive Directors. Measures will be approved and targets set by the Committee in line with our stated
policy. Further details (including, if awards are made, the targets) will be disclosed in next year’s Annual remuneration report.
Deferred annual equity incentive
For 2019/20, 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. Further details will be disclosed in next year’s Annual
remuneration report as set out in relation to the annual cash bonus above.
81
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual Report 2019 Directors’ remuneration report continued
Non-executive Directors
The fee paid to each of the Non-executive Directors for the year ending 30 June 2020 will be £56,155 (£55,000 for the year
ending 30 June 2019). 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 (until 31 July 2018)
Catherine Glickman (from 1 August 2018)
Carol Chesney
Sir David Grant
John Jeans
Mercer Kepler assisted the Committee in reviewing and benchmarking the Executive Director and senior management
remuneration arrangements, as well as providing other remuneration-related advice to the Committee during the year
under review.
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 £27,690. 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. Executive Directors are not
present for discussions in relation to their own remuneration.
Statement of voting at general meeting
At the AGM held on 20 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
At the AGM held on 18 October 2018, the votes cast in respect of the Directors’ remuneration report were as follows:
Resolution
Approval of
remuneration report
Votes for
% for
Votes against
% against
Total votes cast
Votes withheld
60,347,267
95.21
3,033,049
4.79
63,380,316
251,570
This report was approved by the Board and has been signed on its behalf by:
Catherine Glickman
Chair of the Remuneration Committee
1 August 2019
82
GovernanceRenishaw plc Annual Report 2019 Other statutory and regulatory disclosures
Review of the business
A review of the business and likely future developments is
given in the Chairman’s statement, the 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 provide support to customers in our major markets in
the following regions outside the UK:
• EMEA: Austria, Czech Republic, Denmark, Finland,
France, Germany, Hungary, Israel, Italy, Ireland,
Netherlands, Poland, Romania, Russia, Spain, Sweden,
Switzerland and Turkey;
• Americas: Brazil, Canada, Mexico and USA; and
• APAC: Australia, China, Hong Kong, India, Japan,
Malaysia, Singapore, South Korea and Taiwan.
There are also representative offices in Indonesia, Slovakia,
Thailand and Vietnam and a joint venture in Slovenia, RLS
Merilna tehnika d.o.o. (RLS).
In addition, the Group has a subsidiary in Slovenia which
designs and arranges the procurement of application-
specific integrated circuits for the Group and RLS.
Further information is available on the Company’s website:
www.renishaw.com.
Dividends
The Directors propose a final dividend of £33,482,729 or
46.0p per share (2018: £33,482,729 or 46.0p per share)
which, together with the interim dividend of £10,190,396 or
14.0p per share (2018: £10,190,396 or 14.0p), makes a total
amount of dividends for the year of £43,673,125 or 60.0p
per share, compared with £43,673,125 or 60.0p per share
for the previous year.
As at 30 June 2019, 9,639 shares were held by the
Renishaw plc Employee Benefit Trust (EBT). The shares
held by the EBT may be used to satisfy awards made to
employees under the Company’s employee share plan, the
Renishaw Deferred Annual Equity Incentive Plan. The terms
of the EBT provide that any dividends payable on the shares
held by the EBT are waived.
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 80.
All the interests were beneficially held with the exception
of 2,434,411 shares (2018: 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 80 in the period 1 July 2019 to 1 August 2019.
In accordance with the provisions of the Governance Code
all Directors will retire and, being eligible, offer themselves
for re-election at the AGM to be held on 24 October 2019,
with the exception of Geoff McFarland who resigned on
30 June 2019. Details of Directors who offer themselves
up for re-election are shown on pages 54 to 57 and full
biographical details are available at www.renishaw.com.
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 25 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 21 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 2019 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.
83
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual Report 2019 Other statutory and regulatory disclosures continued
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, among other things, the ability to make market
purchases of its own ordinary shares, up to a total of 10% of
the issued share capital.
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 Company under the
requirements of the Financial Conduct 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 30 June 2019. It should be noted that
these holdings may 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
Standard Life Investments Limited
% of issued
share capital
Number of
shares
5.25% 3,846,993
4.92% 3,578,133
4.76% 3,465,730
4.99% 3,631,612
There have been no changes notified to the Company, in
the holdings shown above, in the period 1 July 2019 to
1 August 2019.
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 AM
systems), CAD and manufacturing systems and 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 on page 25.
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 others.
Employment policies are designed to provide equal
opportunities irrespective of race, religion, gender,
age, socio-economic background, disability or sexual
orientation. Proper consideration is given to applications
for employment from disabled people where suitable for
appropriate vacancies. Employees who become disabled
while 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, retraining 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 CSR activities set out on pages 45 to 47 and in the Our
stakeholders section on pages 12 to 13.
There are no agreements with employees providing for
compensation for any loss of employment that occurs
because of a takeover bid.
Political 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 122 to 125.
84
GovernanceRenishaw plc Annual Report 2019 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 as 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, the FCA will permit a
modification of the enhanced oversight measures so they
will not apply, provided the arrangements remain in the
ordinary course of business and, in the case of salary
reviews and bonuses, provided 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.
Greenhouse gas emissions
The disclosures concerning GHG emissions required by law
are set out in the Corporate social responsibility report on
pages 50 and 51.
Signed on behalf of the Board.
Mark Noble
General Counsel & Company Secretary
1 August 2019
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% shareholder) 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, unless and to the extent 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.
85
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual Report 2019 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.
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 included in the consolidation taken as a
whole; 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, taken as a whole, is fair,
balanced and understandable and provides the information
necessary for shareholders to assess the Group’s and the
Company’s position and performance, business model
and strategy.
Signed on behalf of the Board.
Allen Roberts
Group Finance Director
1 August 2019
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, including FRS 101
‘Reduced Disclosure Framework’, 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.
86
GovernanceRenishaw plc Annual Report 2019 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 2019 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
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.
• 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:
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:
Group
Parent company
Consolidated balance
sheet as at 30 June 2019
Balance sheet as at 30
June 2019
Statement of changes in
equity for the year then
ended
Related notes C27 to C42
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 flow for the year then
ended
Related notes 1 to 26 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).
• the disclosures in the annual report set out on pages 40 to
42 that describe the principal risks and explain how they
are being managed or mitigated;
• the directors’ confirmation set out on pages 38 to 39
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 63 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 43 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.
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Overview of our audit approach
Key audit matters
• Overstatement of revenue due to accelerated recognition of product revenue as a result of
management override of controls.
• Management override of controls over top-side adjustments posted through the consolidation
process to misstate financial performance.
• Assessment of hedge effectiveness of forward currency contracts.
Audit scope
• Valuation of the defined benefit pension liability.
• 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 94% of Profit
before tax, 90% of Revenue and 91% of Total assets.
Materiality
• Overall Group materiality of £5.5m which represents 5.0% of Group profit before tax for both
continuing and discontinued operations.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not
due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy,
the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in
the context of our audit of the financial statements as a whole, and in our opinion thereon, and we do not provide a separate
opinion on these matters.
Key observations
communicated to the
Audit Committee
Based on the audit
procedures performed,
revenue transactions
have been recognised
appropriately.
Our procedures did
not identify instances
of inappropriate
management override
in the recognition of
revenue across the
Group.
Risk
Our response to the risk
Overstatement of revenue due to
accelerated recognition of product
revenue as a result of management
override of controls (£574.0m, 2018:
£611.5m)
Refer to the Audit Committee Report
(page 67); Accounting policies (page
103 and 104); and Note 2 of the
Consolidated Financial Statements
(pages 109 and 110)
There is an incentive to manipulate
timing of revenue recognition
through inappropriate cut-off through
management override.
We performed walkthroughs of the revenue recognition
process for all material revenue streams to assess the
design and implementation of key controls.
For a number of reporting units, which covered 46% of
total revenue, 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 revenue transactions to ensure
that revenue had been appropriately recognised.
For those in-scope locations where we did not use data
analysis tools we performed representative sampling,
tracing revenue transactions recorded throughout the
year to cash receipts.
We selected a sample of revenue transactions recorded
before year end and obtained documentation to verify
that revenue recognition criteria had been met. Our
testing strategy included randomly selecting items
below our standard testing threshold in order to
introduce unpredictability.
We selected a sample of credit notes issued after year-
end and obtained documentation to verify that revenue
adjustments had been recorded when appropriate.
We performed full and specific scope audit procedures
over this risk area in twelve locations, which covered
94% of the Group’s revenue, of which the Primary Team
performed the procedures in three locations which
covered 35% of the Group’s revenue.
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GovernanceRenishaw plc Annual Report 2019 Key observations
communicated to the
Audit Committee
We identified one audit
difference in relation
to the depreciation of
overseas properties,
which was not material
to the accounts,
and we consider the
deprecation charge
and property balances
to be reasonably stated.
Based on the audit
procedures performed,
top-side adjustments
posted through the
consolidation process
are appropriate.
Our procedures did not
identify instances of
management override
of controls over top-
side adjustments
posted through the
consolidation process.
Based on the audit
procedures performed,
we confirmed that the
Group’s assessment
of hedging activities,
including designation
of forward currency
contracts, and
resulting classification
of changes in their
fair value, and the
disclosures within Note
20 were in accordance
with the requirements of
IFRS 9.
Risk
Management override of controls over
top-side adjustments posted through
the consolidation process to misstate
financial performance
Refer to the Audit Committee Report
(page 67); Accounting policies (page
103 and 104)
There are a number of top-side
adjustments posted through the
consolidation process, many of which
are material to the consolidated
financial statements. The calculations
behind these adjustments are manual
in nature, leading to increased risk of
misstatement.
Our response to the risk
We walked through the consolidation process to assess
the design and implementation of key controls over the
manual consolidation process.
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 journals posted through the
consolidation process exceeding 15% of performance
materiality and obtained evidence to verify the validity
and accuracy of the journals being posted.
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 IFRS 9 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
IFRS 9;
• using our treasury specialists to evaluate
management’s documentation and assessment
of hedge effectiveness for a sample of hedge
effectiveness model types; and
• ensuring that the financial statement disclosures were
in accordance with accounting standards.
Assessment of hedge effectiveness of
forward currency contracts (£50.1m,
2018: £28.6m)
Refer to the Audit Committee Report
(pages 67 and 68); Accounting
policies (page 105); and Note 20 of
the Consolidated Financial Statements
(pages 122 to 125)
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 IFRS 9 ‘Financial
Instruments’ are recognised in the
income statement. For those instruments
which are effective and meet the criteria
for hedge accounting, the change
in fair value is recognised in other
comprehensive income.
Given the complexity of hedge
accounting and the criteria for hedge
effectiveness documentation under the
provisions of IFRS 9 we continued to
focus on this area.
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Risk
Valuation of the defined benefit
pension liability (£233.5m, 2018:
£240.2m)
Refer to the Audit Committee Report
(pages 67 and 68); Accounting
policies (page 107); and Note 13 of
the Consolidated Financial Statements
(pages 118 to 120)
A gross defined benefit pension liability
of £233.5m was held at 30 June 2019
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.
Our response to the risk
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 controls.
We evaluated the competence and objectivity of
management’s external actuarial experts.
We obtained the IAS 19 ‘Employee Benefits’ 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 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
by benchmarking these against our independently
calculated actuarial assumptions.
We assessed the appropriateness and adequacy of the
disclosures in respect of the defined benefit pension
liability in Note 13 of the annual report.
Key observations
communicated to the
Audit Committee
All but one of the
actuarial assumptions
fell within our accepted
range. However,
overall based on the
procedures performed
we are satisfied that
the closing liability is
materially correct.
We are satisfied that
the disclosure in Note
13 is aligned with the
requirements of IAS 19.
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GovernanceRenishaw plc Annual Report 2019 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 component 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 component.
In assessing the risk of material misstatement to the Group
financial statements, and to ensure we had adequate
quantitative coverage of significant accounts in the financial
statements, of the 50 reporting components of the Group,
we selected 13 components covering entities in China,
France, Germany, Hong Kong, India, Ireland, Italy, Japan,
South Korea, Spain, the United Kingdom and the 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 94% (2018: 95%) of the Group’s
Profit before tax, 90% (2018: 89%) of the Group’s Revenue
and 91% (2018: 88%) 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 6%
of the Group’s Profit before tax, none are individually greater
than 2% 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 financial statements.
The charts below illustrate the coverage obtained from the
work performed by our audit teams.
Profit before tax
2019
2018
87% Full scope
components
94% Full scope
components
7%
Specific scope
components
1%
Specific scope
components
6% Other
procedures
5% Other
procedures
Revenue
2019
2018
81% Full scope
components
87% Full scope
components
9%
Specific scope
components
2%
Specific scope
components
10% Other
procedures
11% Other
procedures
rotation to line up
rotation to line up
Total assets
2019
2018
85% Full scope
components
83% Full scope
components
6%
Specific scope
components
5%
Specific scope
components
9% Other
procedures
12% Other
procedures
Changes from the prior year
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:
the scope for itp GmbH was reduced from specific scope
in the prior year to review scope in the current year while
Renishaw Ibérica, Renishaw Latino Americana and
Renishaw Oceania were designated as review scope for
the current year, all three were not in 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 (including Renishaw, Inc.
in the USA) 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 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.
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Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual Report 2019 Independent auditor’s report
to the members of Renishaw plc continued
During the current year’s audit cycle, visits were undertaken
by the primary audit team to the component teams in China,
Germany, Hong Kong and Ireland. 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 £5.5 million
(2018: £7.8 million), which is 5.0% (2018: 5.0%) 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 consistent year-
on-year basis for determining materiality and is a generally
accepted auditing benchmark for listed entities and is used
by the board in measuring performance and communicating
to the market.
We determined materiality for the parent company to be
£1.7 million (2018: £3.9 million), which is 5.0% (2018: 5.0%)
of profit before tax and dividends received. We believe that
profit before tax provides us with consistent year-on-year
basis for determining materiality and is a generally accepted
auditing benchmark given that the company generates
revenues of its own.
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%
(2018: 75%) of our planning materiality, namely £4.1m
(2018: £5.9m). We have set performance materiality
at this percentage due to the past history of few
misstatements indicating a lower risk of misstatement in the
financial statements.
Audit work at component locations for the purpose of
obtaining audit coverage over significant financial statement
accounts is undertaken based on a percentage of total
performance materiality. The performance materiality set for
each component is based on the relative scale and risk of
the component to the Group as a whole and our assessment
of the risk of misstatement at that component. In the current
year, the range of performance materiality allocated to
components was £0.3m to £2.5m (2018: £0.3m to £3.0m).
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 £0.3m
(2018: £0.4m), 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 evaluated 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 85, including the
Strategic Report, set out on pages 1 to 51, Governance,
set out on pages 52 to 85, and Shareholder information,
set out on pages 142 to 148, 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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GovernanceRenishaw plc Annual Report 2019 • Fair, balanced and understandable set out on page 63
– 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 66 to 69
– 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 64 – the
parts of the directors’ statement required under the Listing
Rules relating to the company’s compliance with the
UK Corporate Governance Code containing provisions
specified for review by the auditor in accordance with
Listing Rule 9.8.10R(2) do not properly disclose a
departure from a relevant provision of the UK Corporate
Governance Code.
Opinions on other matters prescribed by the
Companies Act 2006
In our opinion, the part of the directors’ remuneration report
to be audited has been properly prepared in accordance
with the Companies Act 2006.
In our opinion, based on the work undertaken in the course
of the audit:
• the information given in the strategic report and the
directors’ report for the financial year for which the
financial statements are prepared is consistent with the
financial statements; and
• the strategic report and the directors’ report have
been prepared in accordance with applicable
legal requirements.
Matters on which we are required to report
by exception
In the light of the knowledge and understanding of the
Group and the parent company and its environment
obtained in the course of the audit, we have not identified
material misstatements in the strategic report or the
directors’ report.
We have nothing to report in respect of the following matters
in relation to which the Companies Act 2006 requires us to
report to you if, in our opinion:
• adequate accounting records have not been kept by the
parent company, or returns adequate for our audit have
not been received from branches not visited by us; or
• the parent company financial statements and the part of
the Directors’ Remuneration Report to be audited are not
in agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by
law are not made; or
• we have not received all the information and explanations
we require for our audit.
Responsibilities of directors
As explained more fully in the directors’ responsibilities
statement set out on page 86, the directors are responsible
for the preparation of the financial statements and for being
satisfied that they give a true and fair view, and for such
internal control as the directors determine is necessary to
enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the Group and 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, FRS 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;
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Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual Report 2019 Independent auditor’s report
to the members of Renishaw plc continued
• 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 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 programmes 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
programmes 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, Head of Group Finance, 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 with the
requirements of the relevant accounting standards, UK
legislation and the UK Corporate Governance Code; and
• 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.
94
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 three years,
covering the years ended 30 June 2017 to 30 June 2019.
• 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
1 August 2019
Notes:
1. The maintenance and integrity of the Renishaw plc website is the
responsibility of the directors; the work carried out by the auditors does not
involve consideration of these matters and, accordingly, the auditors accept
no responsibility for any changes that may have occurred to the financial
statements since they were initially presented on the website.
2. Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation in
other jurisdictions.
GovernanceRenishaw plc Annual Report 2019 Financial statements – 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 86.
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.
Consolidated financial statements
Primary statements
96 Consolidated income statement
97
Consolidated statement of comprehensive income
and expense
Consolidated balance sheet
Consolidated statement of changes in equity
98
99
100 Consolidated statement of cash flow
Notes(formingpartofthefinancialstatements)
101 1. Accounting policies
109 2. Segmental analysis
110 3. Personnel expenses
110 4. Financial income and expenses
111 5. Profit before tax
111 6. Earnings per share
111 7. Discontinued operations
112 8. Income tax expense
113 9. Deferred tax
114 10. Property, plant and equipment
115 11. Intangible assets
117 12. Investments in associates and joint ventures
118 13. Employee benefits
120 14. Share-based payments
120 15. Cash and cash equivalents
121 16. Inventories
121 17. Provisions
121 18. Other payables
121 19. Borrowings
122 20. Financial instruments
125 21. Share capital and reserves
127 22. Leases
127 23. Capital commitments
128 24. Related parties
128 25. Alternative performance measures
129 26. Impact of new accounting policies
Company financial statements
Primary statements
130 Company balance sheet
131 Company statement of changes in equity
NotestotheCompanyfinancialstatements
132 C.27. Accounting policies
134 C.28. Property, plant and equipment
134 C.29. Intangible assets
135 C.30. Investments in subsidiaries
135 C.31. Investments in associates and joint ventures
135 C.32. Deferred tax
135 C.33. Inventories
136 C.34. Trade receivables
136 C.35. Provisions
136 C.36. Other payables
136 C.37. Employee benefits
137 C.38. Share capital
138 C.39. Related parties
138 C.40. Capital commitments
138 C.41. Subsidiary undertakings
141 C.42. Associated undertakings and joint ventures
95
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual Report 2019 Consolidated income statement
for the year ended 30 June 2019
from continuing operations
Revenue
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Gains 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 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
Earningspersharefromcontinuingoperations(basicanddiluted)
Earningspersharefromdiscontinuedoperations(basicanddiluted)
Earningspersharefromcontinuinganddiscontinuedoperations(basicanddiluted)
notes
2
2019
£’000
2018
£’000
573,959
611,507
(289,832)
(284,889)
284,127
326,618
(126,822)
(58,593)
1,081
(121,352)
(56,911)
4,834
20
99,793
153,189
7,238
(902)
3,815
653
(1,587)
2,970
109,944
155,225
(17,712)
(22,870)
92,232
132,355
–
582
92,232
132,937
92,232
–
92,232
132,924
13
132,937
pence
60.0
60.0
126.7
–
126.7
pence
60.0
53.5
181.8
0.8
182.6
4
4
5
8
7
21
21
6
6
All discontinued operations relate to operations discontinued as at 30 June 2017. See note 7 ‘Discontinued operations’ for
further details.
96
Financial statementsRenishaw plc Annual Report 2019 Consolidated statement of comprehensive income and expense
for the year ended 30 June 2019
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 overseas operations
Exchange differences in translation of overseas joint venture
Current tax on translation of net investments in foreign operations
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
2019
£’000
92,232
2018
£’000
132,937
13
21
21
21
10,273
(1,534)
8,739
2,045
72
(205)
(27,573)
4,561
(21,100)
(3,813)
783
(3,030)
2,107
48
–
14,470
(2,810)
13,815
(12,361)
10,785
79,871
143,722
79,871
–
79,871
143,709
13
143,722
97
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual Report 2019 Consolidated balance sheet
at 30 June 2019
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
Contract assets
Short-term loans to associates and joint ventures
Current tax
Other receivables
Derivatives
Pension scheme cash escrow account
Cash and cash equivalents
Total current assets
Current liabilities
Trade payables
Contract liabilities
Current tax
Provisions
Derivatives
Borrowings
Other payables
Total current liabilities
Net current assets
Non-current liabilities
Borrowings
Employee benefits
Deferred tax liabilities
Derivatives
Total non-current liabilities
Total assets less total liabilities
Equity
Share capital
Share premium
Own shares held
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
2019
£’000
2018
£’000
10
11
12
24
9
20
16
20
24
20
20
13
15, 20
20
17
20
19
18
19
13
9
20
21
21
21
21
21
21
263,477
59,056
13,095
750
29,855
1,311
367,544
129,026
123,151
352
6,644
4,553
24,461
2,778
10,490
106,826
408,281
21,513
5,631
4,538
2,846
18,920
1,043
41,065
95,556
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
312,725
295,098
9,356
51,870
539
35,227
96,992
–
67,378
188
17,041
84,607
583,277
548,594
14,558
42
(404)
14,577
(42,401)
597,784
(302)
583,854
(577)
583,277
14,558
42
–
12,665
(19,389)
541,755
(460)
549,171
(577)
548,594
These financial statements were approved by the Board of directors on 1 August 2019 and were signed on its behalf by:
Sir David McMurtry
Allen Roberts
Directors
98
Financial statementsRenishaw plc Annual Report 2019 Consolidated statement of changes in equity
for the year ended 30 June 2019
Share
capital
£’000
14,558
Share
premium
£’000
42
Own
shares
held
£’000
–
Currency
translation
reserve
£’000
Cash flow
hedging
Retained
reserve
earnings
£’000
£’000
10,510 (31,049) 450,803
Other
reserve
£’000
(460)
Non-
controlling
interest
Total
£’000
£’000
(590) 443,814
Year ended 30 June 2018
Balance at 1 July 2017
Profit for the year
Other comprehensive income
and expense(netoftax)
Remeasurement of defined benefit
pension scheme 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
Dividends paid
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Balance at 30 June 2018
Adjustment for IFRS 15
Balance at 1 July 2018 restated
14,558
–
14,558
42
–
42
Year ended 30 June 2019
Profit for the year
Other comprehensive income
and expense(netoftax)
Remeasurement of defined benefit
pension scheme 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-based payments charge
Purchase of own shares
Dividends paid
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
132,924
–
2,107
48
–
–
–
–
11,660
(3,030)
–
–
–
2,155
11,660
(3,030)
2,155
11,660
129,894
–
–
(38,942)
12,665 (19,389) 541,755
(1,270)
12,665 (19,389) 540,485
–
–
–
–
–
–
–
–
–
–
13 132,937
–
–
–
–
–
(3,030)
2,107
48
11,660
10,785
13 143,722
– (38,942)
(460)
–
(460)
(577) 548,594
(1,270)
(577) 547,324
–
–
–
92,232
–
1,840
72
–
–
–
–
(23,012)
8,739
–
–
–
1,912 (23,012)
8,739
1,912 (23,012) 100,971
–
–
–
–
–
–
–
–
(404)
–
–
–
–
–
–
–
–
–
(43,672)
158
–
–
–
92,232
–
–
–
–
–
–
–
–
–
8,739
1,840
72
(23,012)
(12,361)
79,871
158
(404)
(43,672)
Balance at 30 June 2019
14,558
42
(404)
14,577 (42,401) 597,784
(302)
(577) 583,277
More details of share capital and reserves are given in note 21.
99
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual Report 2019 Consolidated statement of cash flow
for the year ended 30 June 2019
Cash flows from operating activities
Profit for the year
Adjustments for:
Amortisation of development costs
Amortisation of other intangibles
Impairment of goodwill
Impairment of property, plant and equipment
Depreciation
Loss on sale of property, plant and equipment
Profit on sale of other intangibles
Remeasurement of defined benefit pension scheme liabilities from GMP equalisation
Gains from the fair value of financial instruments
Share of profits from associates and joint ventures
Financial income
Financial expenses
Share-based payment expense
Tax expense
Increase in inventories
Decrease/(increase) in trade and other receivables
Increase/(decrease) in trade and other payables
Increase/(decrease) 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 other intangibles
Sale of property, plant and equipment
Interest received
Dividends received from associates and joint ventures
Payments (to)/from pension scheme escrow account
Cash flows from investing activities
Financing activities
Interest paid
Increase in borrowings
Repayment of borrowings
Dividends paid
Purchase of own shares
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
100
notes
2019
£’000
2018
£’000
92,232
132,937
11
11
10
10
13
25
12
4
4
14
8
17
13
10
11
4
12
4
19
19
21
21
15
15,144
1,518
–
1,155
22,597
148
(455)
751
(6,081)
(3,815)
(7,238)
902
158
17,712
42,496
(18,463)
30,028
(7,183)
(607)
3,775
(6,831)
(25,183)
106,489
(56,792)
(18,091)
(4,161)
2,000
4,713
1,222
614
(77)
(70,572)
(57)
10,486
(87)
(43,672)
(404)
(33,734)
2,183
103,847
796
106,826
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
Financial statementsRenishaw plc Annual Report 2019 Notes(formingpartofthefinancialstatements)
1. Accounting policies
Basis of preparation
Renishaw plc (the Company) is a company incorporated in England and Wales. The Group financial statements consolidate
those of the Company and its subsidiaries (together referred to as the Group) and equity account the Group’s interest in
associates and joint ventures. The 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.
Critical accounting judgements and estimation uncertainties
The preparation of financial statements in conformity with adopted IFRS requires management to make judgements, estimates
and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses.
The estimates and associated assumptions are based on historical experience and various other factors that are believed
to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying
values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
The areas of key estimation uncertainty and critical accounting judgement that have a significant risk of causing a material
adjustment to the carrying amount of assets and liabilities in the next financial year are summarised below, with further details
included within accounting policies as indicated.
Item
Revenue recognition
Intangibles
Research and development costs
Goodwill and capitalised development costs
Inventory
Defined benefit pension schemes
Taxation
Keyjudgements(J)andestimates(E)
J – Timing of satisfaction of performance obligations
E – Estimates of useful life of intangible assets
J – Whether a project meets appropriate criteria for capitalisation
E – Estimates of future cash flows for impairment testing
E – Determination of net realisable inventory value
E – Valuation of defined benefit pension schemes’ liabilities
E – Estimates of future profits to utilise deferred tax assets
Page
104
106
106
106
107
107
108
New, revised or changes to existing accounting standards
The following accounting standards have been applied for the first time, with effect from 1 July 2018, and have been adopted in
the preparation of these financial statements.
IFRS 15 ‘Revenue from Contracts with Customers’
The Group adopted IFRS 15 on 1 July 2018 using the modified retrospective transition approach, taking advantage of the
practical expedient in IFRS 15 C7 to apply the standard retrospectively only to contracts that were not completed as at
1 July 2018.
IFRS 15 provides a single, principles-based five-step model to be applied to all sales contracts with customers, against which
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 and deferred over the service
period; and
• sale of software licences and maintenance.
The impact on the Group’s results and net assets is not material, with a cumulative catch-up adjustment of £1,270,000 made to
equity at 1 July 2018. This primarily relates to the impact of more revenue being allocated to extended warranties under IFRS 15
than under IAS 18. See note 26 for a comparison between IFRS 15 and IAS 18.
101
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual Report 2019 Notes continued
1.Accountingpolicies(continued)
Consolidated balance sheet extract
Non-current assets
Deferred tax assets
Current liabilities
Contract liabilities
Equity
Retained earnings
– related to Revenue
– related to Income tax expense
IFRS 9 ‘Financial Instruments’
Balances as at
30 June 2018
£’000
IFRS 15
adjustment
£’000
Balances as at
1 July 2018
£’000
27,428
372
27,800
–
1,642
1,642
541,755
–
–
(1,270)
(1,642)
372
540,485
–
–
The Group adopted IFRS 9 on 1 July 2018. The Standard introduced new requirements for the classification and measurement
of financial assets, impairment of financial assets and hedge accounting.
For the classification and measurement requirements, no changes have arisen from IFRS 9, while for the new impairment
requirements, the Group recognises an ‘expected credit loss’ (ECL) for trade receivables under the Standard’s ‘simplified
approach’. IFRS 9 does not impact hedge accounting in the Group’s financial statements because all hedging relationships that
were eligible under IAS 39 remain eligible under IFRS 9 and the change in fair value of foreign currency contracts continues to
hedge movements in the forward currency rate. No adjustments have been made in respect of IFRS 9 to the Group’s opening
reserves at 1 July 2018 as the impairment adjustment calculated from a simple ECL model which considered historic credit loss
rates was not material to the Group.
In addition to IFRS 15 and IFRS 9, the Group has adopted the following IFRS amendments, which have not had a material
impact on amounts reported or disclosures in these financial statements:
– IFRS 2 (amendments) – Classification and Measurement of Share-based Payment Transactions;
– IAS 40 (amendments) – Transfers of Investment Property;
– IAS 28 (amendments) – Investments in Associates and Joint Ventures; and
– IFRIC 22 ‘Foreign Currency Transactions and Advance Consideration’.
The following accounting standards and interpretations have been issued but are not yet effective for the Group and have not
been applied in these financial statements:
– IFRS 16 ‘Leases’;
– IFRS 17 ‘Insurance Contracts’;
– IFRS 9 (amendments) – Prepayment Features with Negative Compensation;
– IAS 28 (amendments) – Long-term Interests in Associates and Joint Ventures;
– IAS 19 (amendments) – Plan Amendment, Curtailment or Settlement;
– IFRS 10 and IAS 28 (amendments) – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture;
– Annual Improvements – Amendments to IFRS 3 Business Combinations, IFRS 11 Joint Arrangements, IAS 12 Income Taxes
and IAS 23 Borrowing Costs; and
– IFRIC 23 ‘Uncertainty over Income Tax Treatments’.
These are not expected to have a material impact on the financial statements of the Group, except in relation to IFRS 16.
IFRS 16 is effective for accounting periods beginning on or after 1 January 2019 and will be adopted by the Group for the
financial year commencing 1 July 2019. Where the Group acts as a lessor, the accounting treatment is substantially unchanged.
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-of-use asset and a lease liability for all leases (except for low-value assets
and leases less than 12 months), similar to the accounting for finance leases under IAS 17.
At 1 July 2019 right-of-use assets and lease liabilities of £13,079,000 are expected to be recognised by the Group under the
new standard, including £11,088,000 relating to properties and £1,880,000 relating to vehicles. Depreciation on the right-of-use
assets will then be charged to the Consolidated income statement on a straight line basis over the lower of the asset’s useful
life or the life of the lease contract, while interest will be accreted to the lease liability across the same period. The aggregate of
depreciation and interest expense will generally result in higher expenses in the earlier periods of a lease, however this is not
expected to be material for the Group. No transition adjustment will be required to opening reserves in 2020.
102
Financial statementsRenishaw plc Annual Report 2019 1.Accountingpolicies(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 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 consider 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.
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.
Alternative performance measures
The financial statements are prepared in accordance with adopted IFRS and applied in accordance with the provisions of
the Companies Act 2006. In measuring our performance, the financial measures that we use include those which have been
derived from our reported results in order to eliminate factors which distort year-on-year comparisons.
These are considered non-GAAP financial measures. We believe this information, along with comparable GAAP measurements,
is useful to stakeholders in providing a basis for measuring our operational performance. The Board use these financial
measures, along with the most directly comparable GAAP financial measures, in evaluating our performance (see note 25).
Revenue
The Group generates revenue from the sale of metrology and healthcare goods, capital equipment and services. These can be
sold both on their own and together as bundled packages.
a) Sale of goods, capital equipment and services
The Group’s contracts with customers consist both of contracts with one performance obligation and contracts with multiple
performance obligations.
For contracts with one performance obligation, revenue is measured at the transaction price, which is typically the contract
value except for customers entitled to volume rebates, and recognised at the point in time when control of the product transfers
to the customer. This point in time is typically when the products are made available for collection by the customer, collected by
the shipping agent, or delivered to the customer, depending upon the shipping terms applied to the specific contract.
Contracts with multiple performance obligations typically exist where, in addition to supplying product, we also supply services
such as user training, servicing and maintenance, and installation services. Where the installation service is simple, does
not include a significant integration service and could be performed by another party then the installation is accounted for
as a separate performance obligation. Where the contracts include multiple performance obligations, the transaction price
is allocated to each performance obligation based on the relative stand-alone selling prices, the assessment of which is
documented in the Key judgement (see page 104). The revenue allocated to each performance obligation is then recognised
when, or as, that performance obligation is satisfied. For installation, this is typically at the point in time in which installation
is complete. For training, this is typically the point in time at which training is delivered. For servicing and maintenance, the
revenue is recognised evenly over the course of the servicing agreement except for ad-hoc servicing and maintenance which is
recognised at the point in time in which the work is undertaken.
103
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual Report 2019 Notes continued
1.Accountingpolicies(continued)
b) Sale of software
The Group provides software licences and software maintenance to customers, sold both on their own and together as a
bundled package with associated products. Where the software licence and/or maintenance is provided as part of a bundled
package then the transaction price is allocated on the same basis as described in a) above.
The Group’s software licences provide a right of use, and therefore revenue from software licences is recognised at the point in
time in which the licence is supplied to the customer. Revenue from software maintenance is recognised evenly over the term of
the maintenance agreement.
c) Programming contracts
Programming is typically a distinct performance obligation and revenue for this work is recognised at a point in time, being when
the completed program is supplied to the customer.
d) Extended warranties
The Group provides standard warranties to customers that address potential latent defects that existed at point of sale and as
required by law (assurance-type warranties). In some contracts, the Group also provides warranties that extend beyond the
standard warranty period and may be sold to the customer (service-type warranties).
Assurance-type warranties continue to be accounted for by the Group under IAS 37 ‘Provisions, Contingent Liabilities and
Contingent Assets’. Service-type warranties are accounted for as separate performance obligations and therefore a portion of
the transaction price is allocated to this element, and then recognised evenly over the period in which the service is provided.
e) Contract fulfilment costs
Contract fulfilment costs are recognised as an asset when they directly relate to a contract, will be used to fulfil one or more
performance obligation in a contract in the future, and are expected to be recoverable. Contract fulfilment costs for the Group
therefore typically relate to contracts in which programming is a distinct performance obligation and the associated labour
costs have been incurred but the program has not yet been provided to the customer. Such assets are amortised to the income
statement when the corresponding performance obligation is fulfilled.
f) Contract balances
Contract assets represent the Group’s right to consideration in exchange for goods and services that have been transferred to a
customer, and mainly includes accrued revenue in respect of goods and services provided to a customer but not yet fully billed.
Contract assets are distinct from receivables, which represent the Group’s right to consideration that is unconditional.
Contract liabilities represent the Group’s obligation to transfer goods or services to a customer for which the Group has either
received consideration or consideration is due from the customer.
g) Disaggregation of revenue
The Group disaggregates revenue from contracts with customers between:
– goods, capital equipment and installation, and aftermarket services;
– reporting segment; and
– geographical location.
Management believe these categories best depict how the nature, amount, timing and uncertainty of the Group’s revenue is
affected by economic factors.
Key judgement – Timing of satisfaction of performance obligations
The majority of the Group’s revenue is recognised at a point in time, and to determine that point an assessment is made as to
when the customer obtains control of promised products or services. This assessment is made primarily by reference to the
shipping terms applied to the specific contract for products that do not require customer acceptance.
Where the contract requires customer acceptance, management assess whether the Group can objectively determine that
the criterion of the testing can be successfully met at the point of transferring the equipment to the customer. Where this
can be objectively determined, customer acceptance testing is considered a formality and does not delay the recognition
of revenue. Where this cannot be objectively determined control of the product is not deemed to have transferred to the
customer and therefore the portion of the transaction price that relates to this performance obligation is not recognised until
the acceptance criteria are met.
For revenue recognised over time, such as servicing contracts, the Group recognises the revenue on a basis that depicts
the Group’s performance in transferring control of the goods or services to the customer, having assessed the nature of
the promised goods or service. The Group applies the relevant output or input method consistently to similar performance
obligations in other contracts.
The point at which control of performance obligations is transferred to customers under IFRS 15 is the same as under IAS 18
for the majority of our contracts with customers.
104
Financial statementsRenishaw plc Annual Report 2019 1.Accountingpolicies(continued)
Foreign currencies
Consolidation – Overseas subsidiaries’ results are translated into Sterling at weighted average exchange rates for the year,
which is effected by translating each overseas subsidiary’s monthly results at exchange rates applicable to each of the
respective months. Assets and liabilities denominated in foreign currencies at the balance sheet date are translated into Sterling
at the foreign exchange rates prevailing at that date. Differences on exchange resulting from the translation of overseas assets
and liabilities are recognised in Other comprehensive income and are accumulated in equity.
Transactions and balances – Monetary assets and liabilities denominated in foreign currencies are reported at the rates
prevailing at the time, with any gain or loss arising from subsequent exchange rate movements being included as an exchange
gain or loss in the Consolidated income statement. Foreign currency differences arising from transactions are recognised in the
Consolidated income statement.
Financial instruments and fair value measurements
The Group measures financial instruments such as forward exchange contracts at fair value at each balance sheet date in
accordance with IFRS 9. Fair value, as defined by IFRS 13 ‘Fair Value Measurement’, is the price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Note 20,
Financial instruments, provides detail on the IFRS 13 fair value hierarchy.
Trade and other current receivables are initially recognised at fair value and are subsequently held at amortised cost less any
provision for bad and doubtful debts and expected credit losses according to IFRS 9. 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 payables are
initially recognised at fair value and are subsequently held at amortised cost.
Foreign currency derivative cash flow hedges
Foreign currency derivatives are used to manage risks arising from changes in foreign currency rates relating to overseas sales
and foreign currency denominated assets and liabilities. The Group does not enter into derivatives for speculative purposes.
Foreign currency derivatives are stated at their fair value, being the estimated amount that the Group would pay or receive to
terminate them at the balance sheet date, based on prevailing foreign currency rates.
Changes in the fair value of foreign currency derivatives which are designated and effective as hedges of future cash flows are
recognised in Other comprehensive income and in the Cash flow hedging reserve, and subsequently transferred to the carrying
amount of the hedged item or the Consolidated income statement. Realised gains or losses on cash flow hedges are therefore
recognised in the Consolidated income statement within revenue in the same period as the hedged item.
Hedge accounting is discontinued when the hedging instrument expires or no longer qualifies for hedge accounting. At that
time, any cumulative gain or loss on the hedging instrument previously recognised in equity is retained in equity until the hedged
transaction occurs. If the hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in
equity is then transferred to the Consolidated income statement.
Changes in fair value of foreign currency derivatives, which are ineffective or do not meet the criteria for hedge accounting in
IFRS 9, are recognised in the Consolidated income statement within Gains/losses from the fair value of financial instruments.
In addition to derivatives held for cash flow hedging purposes, the Group uses short-term derivatives not designated as
hedging instruments to offset gains and losses from exchange rate movements on foreign currency denominated assets and
liabilities. Gains and losses from currency movements on underlying assets and liabilities, realised gains and losses on these
derivatives and fair value gains and losses on outstanding derivatives of this nature are all recognised in Financial income in the
Consolidated income statement. See note 20 for further detail on financial instruments.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and short-term (with an original maturity of less than 12 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.
Pension scheme cash escrow account
The Company holds a pension scheme escrow account as part of the security given for the UK defined benefit pension
scheme. This account is shown within current assets in the Consolidated balance sheet as it may be used to settle pension
scheme liabilities immediately upon enforcement of the charge over the account.
Goodwill and other intangible assets
Costs related to the acquisition, other than those associated with the issue of debt or equity securities, are expensed as
incurred. Deferred consideration relating to acquisitions is subject to discounting to the date of acquisition and subsequently
unwound to the date of the final payment. Goodwill arising on acquisition represents the difference between the cost of the
acquisition and the fair value of the net identifiable assets acquired, net of deferred tax. Identifiable intangibles are those which
can be sold separately or which arise from legal rights regardless of whether those rights are separable.
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.
105
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual Report 2019 Notes continued
1.Accountingpolicies(continued)
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.
Key estimate – Estimates of useful life of intangible assets
The periods of amortisation of intangible assets require judgements to be made on the estimated useful lives of the intangible
assets to determine an appropriate rate of amortisation. Future assessments of impairment may lead to the writing off of
certain amounts of intangible assets and the consequent charge in the Consolidated income statement for the accelerated
amortisation. Capitalised development costs are written off over five years, the period over which demand forecasts can be
reasonably predicted.
Intangible assets – research and development costs
Expenditure on research activities is recognised in the Consolidated income statement as an expense as incurred.
Expenditure on development activities is capitalised if the product or process is technically and commercially feasible and the
Group intends and has the technical ability and sufficient resources to complete development, future economic benefits are
probable and the Group can measure reliably the expenditure attributable to the intangible asset during its development.
Development activities involve a plan or design for the production of new or substantially improved products or processes.
The expenditure capitalised includes the cost of materials, direct labour and an appropriate proportion of overheads.
Other development expenditure is recognised in the Consolidated income statement as an expense as incurred.
Capitalised development expenditure is amortised over five years and is stated at cost less accumulated amortisation and less
accumulated impairment losses. Capitalised development expenditure is removed from the balance sheet ten years after being
fully amortised.
Key judgement – Whether a project meets appropriate criteria for capitalisation
Product development costs are capitalised once a project has reached a certain stage of development and these costs are
subsequently amortised over a five-year period. Judgements are required to assess whether the new product development
has reached the appropriate point for capitalisation of costs to begin. Should a product be subsequently obsoleted, the
accumulated capitalised development costs would need to be immediately written off in the Consolidated income statement.
Intangible assets – software licences
Intangible assets, comprising software licences that are acquired by the Group, are stated at cost less accumulated
amortisation and impairment losses. Amortisation is charged on a straight-line basis over the estimated useful life of the assets.
The useful life of each of these assets is assessed on an individual basis and they range from 2 to 10 years.
Impairment of non-current assets
All non-current assets are tested for impairment whenever there is an indication that their carrying value may be impaired.
An impairment loss is recognised in the Consolidated income statement to the extent that an asset’s carrying value exceeds its
recoverable amount, which represents the higher of the asset’s net realisable value and its value in use. An asset’s value in use
represents the present value of the future cash flows expected to be derived from the asset or from the cash-generating unit
to which it relates. The present value is calculated using a discount rate that reflects the current market assessment of the time
value of money and the risks specific to the asset concerned.
Goodwill and capitalised development costs are subject to an annual impairment test.
Key estimate – Estimates of future cash flows used for impairment testing
Determining whether goodwill is impaired requires an estimation of the value-in-use of cash-generating units (CGUs) to which
goodwill has been allocated. The value-in-use calculation involves an estimation of the future cash flows of CGUs and also
the selection of appropriate discount rates, which involves judgement, to calculate present values (see note 11). Similarly,
determining whether capitalised development costs are impaired requires an estimation of their value-in-use which involves
significant judgement.
106
Financial statementsRenishaw plc Annual Report 2019 1.Accountingpolicies(continued)
Property, plant and equipment
Freehold land is not depreciated. Other assets are stated at cost less accumulated depreciation. Depreciation is provided to
write off the cost of assets less their estimated residual value on a straight-line basis over their estimated useful economic lives
as follows:
Freehold buildings 50 years, Plant and equipment 3 to 25 years, Vehicles 3 to 4 years.
Inventory and work in progress
Inventory and work in progress is valued at the lower of actual cost on a first-in, first-out (FIFO) basis and net realisable value.
In respect of work in progress and finished goods, cost includes all production overheads and the attributable proportion
of indirect overhead expenses that are required to bring inventories to their present location and condition. Overheads are
absorbed into inventories on the basis of normal capacity or on actual hours if higher.
Key estimate – Determination of net realisable inventory value
Determining the net realisable value of inventory requires 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.
Warranty provisions
The Group provides a warranty from the date of purchase, except for those products that are installed by the Group where the
warranty starts from the date of completion of the installation. This is typically for a 12-month period, although up to three years is
given for a small number of products. A warranty provision is included in the Group financial statements, which is calculated on
the basis of historical returns and internal quality reports.
Employee benefits
The Group operates contributory pension schemes, largely for UK, Ireland and USA employees, which were of the defined
benefit type up to 5 April 2007, 31 December 2007 and 30 June 2012 respectively, at which time they ceased any future accrual
for existing members and were closed to new members.
The schemes are administered by trustees who are independent of the Group finances. Investment assets of the defined benefit
schemes are measured at fair value using the bid price of the unitised investments, quoted by the investment manager, at
the reporting date. Pension scheme liabilities are measured using a projected unit method and discounted at the current rate
of return on a high-quality corporate bond of equivalent term and currency to the liability. Remeasurements arising from defined
benefit schemes comprise actuarial gains and losses, the return on scheme assets (excluding interest) and the effect of the
asset ceiling (if any, excluding interest). The Company recognises them immediately in Other comprehensive income and all
other expenses related to defined benefit schemes are included in the Consolidated income statement.
The pension schemes’ surpluses, to the extent that they are considered recoverable, or deficits are recognised in full and
presented on the face of the Consolidated balance sheet under employee benefits. Where a guarantee is in place in relation to
a pension scheme deficit, liabilities are reported in accordance with IFRIC 14 ‘The Limit on a Defined Benefit Asset, Minimum
Funding Requirements and their Interaction’. To the extent that contributions payable will not be available as a refund after they
are paid into the plan, a liability is recognised at the point the obligation arises, which is the point at which the minimum funding
guarantee is agreed. Overseas-based employees are covered by state, defined benefit and private pension schemes in their
countries of residence. Actuarial valuations of overseas pension schemes were not obtained, apart from Ireland and USA,
because of the 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, if applicable.
Key estimate – Valuation of defined benefit pension schemes’ liabilities
Determining the value of the future defined benefit obligation requires judgement in respect of the assumptions used to
calculate liabilities and their present values. These include future mortality, discount rate and inflation. 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 13. 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.
107
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual Report 2019 Notes continued
1.Accountingpolicies(continued)
Share-based payments
The Group provides share-based payment arrangements to certain employees in accordance with the Renishaw plc deferred
annual equity incentive plan (the Plan) (see the Governance section for further detail). The share awards are subject only to
continuing service of the employee and are equity settled. The fair value of the awards at the date of grant, which is estimated
to be equal to the market value, is charged to the Consolidated income statement on a straight-line basis over a three-year
vesting period, with appropriate adjustments made to reflect expected or actual forfeitures. The corresponding credit is to Other
reserve. The Renishaw Employee Benefit Trust (EBT) is responsible for purchasing shares on the open market on behalf of the
Company to satisfy the Plan awards. Own shares held are recognised as an element in equity until they are transferred at the
end of the vesting period, and such shares are excluded from earnings per share calculations.
Government grants
Government grants are recognised in the Consolidated income statement as a deduction against expenditure. Where grants
are received in advance of the related expenses, they are initially recognised in the balance sheet and released to match the
related 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.
Key estimate – Estimates of future profits to support the recognition of deferred tax assets
Deferred tax assets are recognised to the extent it is probable that future taxable profits will be available, against which the
deductible temporary differences can be utilised, based on management’s assumptions relating to the amounts and timing of
future taxable profits.
Estimates of future profitability on an entity basis are required to ascertain whether it is probable that sufficient taxable profits
will arise to support the recognition of deferred tax assets relating to the corresponding entity.
Discontinued activities
Where a line of the Group’s business is treated as a discontinued operation, the financial statements are 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.
108
Financial statementsRenishaw plc Annual Report 2019 2. Segmental analysis
The Group manages its business in two segments, comprising metrology and healthcare products. The results of these are
regularly reviewed by the Board to allocate resources to segments and to assess their performance. 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 30 June 2019
Revenue
Depreciation and amortisation
Operating profit before gains from fair value of financial instruments
Share of profits from associates and joint ventures
Net financial gain
Gains from the fair value of financial instruments
Profit before tax
Year ended 30 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
Metrology
£’000
532,940
37,714
95,345
3,815
–
–
–
Metrology
£’000
575,839
38,690
147,841
2,970
–
–
–
Healthcare
£’000
41,019
2,700
3,367
–
–
–
–
Healthcare
£’000
35,668
2,075
514
–
–
–
–
Total
£’000
573,959
40,414
98,712
3,815
6,336
1,081
109,944
Total
£’000
611,507
40,765
148,355
2,970
(934)
4,834
155,225
There is no allocation of assets and liabilities to operating segments. Depreciation is included within certain other overhead
expenditure which is allocated to segments on the basis of the level of activity.
The following table shows the disaggregation of Group revenue by category:
Goods, capital equipment and installation
Aftermarket services
Total Group revenue
2019
£’000
519,782
54,177
573,959
2018
£’000
564,664
46,843
611,507
Aftermarket services include repairs, maintenance and servicing, programming, training, extended warranties, and software
licences and maintenance.
The analysis of revenue by geographical market was:
APAC
EMEA
Americas
UK
Total Group revenue
2019
£’000
240,115
167,211
132,589
34,044
573,959
2018
£’000
289,177
165,126
126,638
30,566
611,507
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:
USA
China
Japan
Germany
2019
£’000
113,235
111,002
63,650
60,916
2018
£’000
108,118
150,183
60,855
64,394
There was no revenue from transactions with a single external customer which amounted to more than 10% of the Group’s
total revenue.
109
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual Report 2019 Notes continued
2.Segmentalanalysis(continued)
The following table shows the analysis of non-current assets, excluding deferred tax and derivatives, by geographical region:
UK
Overseas
Total non-current assets
2019
£’000
196,214
140,164
336,378
2018
£’000
183,874
117,223
301,097
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
Share-based payment charge
Total payroll costs
The average number of persons employed by the Group during the year was:
UK
Overseas
Average number of employees
2019
£’000
193,035
21,485
22,701
158
237,379
2019
Number
3,126
1,842
4,968
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 Executive Directors of the Company. The total remuneration of the
Directors was:
Short-term employee benefits
Post-employment benefits
Share-based payment charge
Total remuneration of the directors
Full details of Directors’ remuneration are given in the Directors’ remuneration report.
4. Financial income and expenses
Financial income
Currency gains
Fair value gains from 1 month forward currency contracts (note 20)
Interest receivable
Total financial income
Financial expenses
Net interest on pension schemes’ liabilities (note 13)
Bank interest payable
Total financial expenses
2019
£’000
2,590
205
158
2,953
2019
£’000
5,940
76
1,222
7,238
2019
£’000
845
57
902
2018
£’000
5,589
180
–
5,769
2018
£’000
–
–
653
653
2018
£’000
1,249
338
1,587
Currency gains relates to revaluations of foreign currency denominated balances using latest reporting currency exchange
rates. The gains recognised in 2019 largely relate to a depreciation of sterling relative to the US dollar affecting US dollar-
denominated intragroup balances in the Company. In previous reporting periods, such movements were recognised in
Administrative expenses (2018: £604,000 loss).
Certain intragroup balances were reclassified as ‘net investments in foreign operations’ on 3 December 2018, such that
revaluations from currency movements on designated balances after this date accumulate in the Currency translation reserve in
Equity. Additionally, from 1 January 2019, a policy of entering into rolling one month forward currency contracts began, with fair
value gains and losses being recognised in financial income, to offset currency movements on remaining intragroup balances.
See note 20 for further details.
110
Financial statementsRenishaw plc Annual Report 2019 5. Profit before tax
Included in the profit before tax are the following costs/(income):
Depreciation and impairment 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
Profit on sale of other intangibles
Auditor:
Audit of these financial statements
Audit of subsidiary undertakings pursuant to legislation
Other assurance
All other non-audit fees
notes
(a)
(a)
(b)
(b)
(c)
(c)
(c)
(c)
(c)
(c)
(c)
2019
£’000
23,752
16,662
66,965
(5,137)
–
148
(455)
226
329
4
1
2018
£’000
26,140
14,625
59,127
(4,149)
1,559
37
–
199
266
4
1
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 £92,232,000
(2018: £132,342,000) and on 72,778,904 shares (2018: 72,788,543 shares), being the number of shares in issue. The 2019
number of shares excludes 9,639 shares held by the EBT, which were purchased on 10 December 2018.
Basic and diluted earnings and losses per share from discontinued operations for 2018 were calculated on losses of £582,000
and on 72,788,543 shares in issue.
There is no difference between the weighted average earnings per share and the basic and diluted earnings per share.
7. Discontinued operations
In October 2016, the Group decided to discontinue the operations of 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 businesses were sold. Financial information relating to the discontinued operations is set out below:
Revenue
Expenses
Goodwill impairment
Profit before tax
Tax charge
Profit for the year from discontinued operations
Cash flow
Profit for the year
Adjustments for operating activities
Cash flows from operating activities
Cash flows from investing activities
Net increase in cash and cash equivalents from discontinued operations
2019
£’000
–
–
–
–
–
–
2019
£’000
–
–
–
–
–
2018
£’000
4,326
(3,664)
–
662
(80)
582
2018
£’000
582
(250)
332
–
332
111
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual Report 2019 Notes continued
8. 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
2019
£’000
2018
£’000
4,691
(622)
11,980
16,049
2,719
(882)
(55)
(119)
1,663
17,712
2019
£’000
17,712
–
17,712
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
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%
The tax for the year is lower (2018: lower) than the UK standard rate of corporation tax of 19% (2018: 19%).
The differences are explained as follows:
Profit before tax from continuing operations
Profit before tax from discontinued operations
Total profit before tax
Tax at 19% (2018: 19%)
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
2019
£’000
109,944
–
109,944
20,889
(124)
(1,787)
583
231
(631)
(203)
(1,504)
(119)
(55)
–
432
17,712
16.1%
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, trading profits in the Company and
the level of capital allowances claimed in any given year. The fall of £3,891,000 in the patent box benefit is the primary driver for
the increase in the ETR for 2019.
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 1 April 2020) has previously been substantively enacted and will have
further impact on the ETR in future years.
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.
112
Financial statementsRenishaw plc Annual Report 2019 9. Deferred tax
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
–
16,686
2,309
8,526
8,816
3,255
5,927
45,703
2019
Liabilities
£’000
(13,265)
(2,494)
–
–
–
–
–
(628)
(16,387)
Net
£’000
(13,081)
(2,494)
16,686
2,309
8,526
8,816
3,255
5,299
29,316
Assets
£’000
184
17
17,394
2,322
11,233
5,410
1,855
1,330
39,745
The movements in the deferred tax balance during the year were:
Balance at the beginning of the year
IFRS 15 transition adjustment
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
Derivatives
Tax losses
Other
Total movement for the year
2018
Liabilities
£’000
(8,896)
(3,456)
–
–
(138)
–
–
(15)
(12,505)
2019
£’000
27,240
372
340
(1,663)
4,561
(1,534)
3,027
29,316
2019
£’000
(4,369)
945
(708)
(13)
(1,036)
(1,155)
1,400
3,273
(1,663)
Net
£’000
(8,712)
(3,439)
17,394
2,322
11,095
5,410
1,855
1,315
27,240
2018
£’000
25,271
–
329
3,667
(2,810)
783
(2,027)
27,240
2018
£’000
196
891
1,378
1,383
(712)
(1,927)
1,855
603
3,667
A US deferred tax net asset of £6,007,000 is recognised in respect of losses and other temporary differences. The US business
has generated losses in the current and prior period. It is considered likely that the business will generate sufficient future
taxable profits to recognise the deferred tax net asset in full, as product lines which have been introduced in recent years are
expected to contribute greater returns.
Deferred tax assets have not been recognised in respect of tax losses carried forward of £21,028,000 (2018: £21,809,000),
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 £29,316,000 asset (2018: £27,240,000 asset) is
presented as a £29,855,000 deferred tax asset (2018: £27,428,000 asset) and a £539,000 deferred tax liability (2018: £188,000
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.
113
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual Report 2019 Notes continued
10. Property, plant and equipment
Year ended 30 June 2019
Cost
At 1 July 2018
Additions
Transfers
Disposals
Currency adjustment
At 30 June 2019
Depreciation
At 1 July 2018
Charge for the year
Impairment
Released on disposals
Currency adjustment
At 30 June 2019
Net book value
At 30 June 2019
At 30 June 2018
Freehold
land and
buildings
£’000
174,156
19,603
2,846
(1,520)
2,389
197,474
Plant and
equipment
£’000
218,018
27,596
3,886
(6,016)
1,543
245,027
30,776
741
–
(106)
482
31,893
138,576
20,701
1,155
(2,628)
763
158,567
Motor
vehicles
£’000
Assets in the
course of
construction
£’000
9,736
903
–
(1,241)
157
9,555
6,801
1,155
–
(1,182)
103
6,877
6,800
8,690
(6,732)
–
–
8,758
–
–
–
–
–
–
Total
£’000
408,710
56,792
–
(8,777)
4,089
460,814
176,153
22,597
1,155
(3,916)
1,348
197,337
165,581
143,380
86,460
79,442
2,678
2,935
8,758
6,800
263,477
232,557
At 30 June 2019, properties with a net book value of £75,200,000 (2018: £66,759,000) were subject to a fixed charge to secure
the UK defined benefit pension scheme liabilities.
Additions to assets in the course of construction of £8,690,000 (2018: £7,122,000) comprise £5,806,000 (2018: £3,034,000) for
freehold land and buildings and £2,884,000 (2018: £4,088,000) for plant and equipment.
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
9,893
1,361
–
(1,409)
(109)
9,736
6,675
1,414
(1,213)
(75)
6,801
Assets in the
course of
construction
£’000
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
Year ended 30 June 2018
Cost
At 1 July 2017
Additions
Transfers
Disposals
Currency adjustment
At 30 June 2018
Depreciation
At 1 July 2017
Charge for the year
Released on disposals
Currency adjustment
At 30 June 2018
Net book value
At 30 June 2018
At 30 June 2017
114
Financial statementsRenishaw plc Annual Report 2019 11. Intangible assets
Year ended 30 June 2019
Cost
At 1 July 2018
Additions
Disposals
Currency adjustment
At 30 June 2019
Amortisation
At 1 July 2018
Charge for the year
Released on disposal
Currency adjustment
At 30 June 2019
Net book value
At 30 June 2019
At 30 June 2018
Year ended 30 June 2018
Cost
At 1 July 2017
Additions
Currency adjustment
At 30 June 2018
Amortisation
At 1 July 2017
Charge for the year
Impairments
Currency adjustment
At 30 June 2018
Net book value
At 30 June 2018
At 30 June 2017
Goodwill on
consolidation
£’000
Other
intangible
assets
£’000
Internally
generated
development
costs
£’000
Software
licences and
intellectual
property
£’000
19,763
–
–
464
20,227
8,220
–
–
–
8,220
11,795
2,014
–
14
13,823
11,256
18
–
(14)
11,260
131,951
18,091
–
–
150,042
93,810
15,144
–
–
108,954
24,658
2,147
(6,000)
22
20,827
20,370
1,500
(4,455)
14
17,429
Total
£’000
188,167
22,252
(6,000)
500
204,919
133,656
16,662
(4,455)
–
145,863
12,007
11,543
2,563
539
41,088
38,141
3,398
4,288
59,056
54,511
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 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 cash generating units (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 sectors. In the
following table, only the goodwill relating to the acquisition of Renishaw Fixturing Solutions, LLC is expected to be subject to
tax relief.
115
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual Report 2019 Notes continued
11.Intangibleassets(continued)
The analysis of acquired goodwill on consolidation is:
itp GmbH
Renishaw Mayfield S.A.
Renishaw Fixturing Solutions, LLC
Other smaller acquisitions
Total acquired goodwill
2019
£’000
3,092
1,930
5,453
1,532
12,007
2018
£’000
3,065
1,725
5,247
1,506
11,543
The recoverable amounts of acquired goodwill are based on value-in-use calculations. These calculations use cash flow
projections based on either the financial business plans approved by management for the next five financial years, or estimated
growth rates over the five years, which are set out below. The cash flows beyond this forecast are extrapolated to perpetuity
using a nil growth rate on a prudent basis, to reflect the uncertainties over forecasting 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 Fixturing Solutions, LLC
Renishaw Mayfield S.A.
Forecast cash flows and future growth rates
itp GmbH
Renishaw Fixturing Solutions, LLC
Renishaw Mayfield S.A.
2019
Discount rate
12%
12%
15%
2018
Discount rate
12%
12%
15%
2019
Basis of forecast
5% growth rate
5 year business plan
5 year business plan
2018
Basis of forecast
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 Fixturing Solutions, LLC
2019
Average revenue
growth
20%
2018
Average revenue
growth
20%
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 has 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 believes the
likelihood of any increase in discount rates above 5% to be remote.
Forecast cash flows and future growth rates
Given the average revenue growth assumptions included in the five-year business plans, management’s sensitivity analysis
involves a reduction of 10% in the forecast cash flows utilised in those business plans and therefore into perpetuity. For there to
be an impairment there would need to be a reduction of 70% for Renishaw Fixturing Solutions, LLC. Management deems the
likelihood of this reduction to be remote.
116
Financial statementsRenishaw plc Annual Report 2019 12. 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 30 June, except where noted otherwise, were:
RLS Merilna tehnika d.o.o.
Metrology Software Products Limited
HiETA Technologies Limited (31 December)
For the nature of the activities, see note C.41.
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
Balance at the end of the year
Country of
incorporation and principal
place of business
Slovenia
England & Wales
England & Wales
Ownership
2019
%
50.0
50.0
24.9
Ownership
2018
%
50.0
50.0
24.9
2019
£’000
9,822
(614)
3,815
72
13,095
2018
£’000
7,311
(507)
2,970
48
9,822
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
2019
£’000
30,570
(5,180)
25,390
12,695
26,886
7,630
144
7,774
3,815
72
3,887
2018
£’000
23,567
(4,722)
18,845
9,423
23,414
6,442
96
6,538
3,221
48
3,269
2019
£’000
3,083
(8,669)
(5,586)
(1,391)
1,032
(1,980)
–
(1,980)
(493)
–
(493)
2018
£’000
2,114
(5,720)
(3,606)
(898)
816
(1,655)
–
(1,655)
(251)
–
(251)
117
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual Report 2019 Notes continued
13. Employee benefits
The Group operates a number of pension schemes throughout the world. As noted in the accounting policies, actuarial
valuations of foreign pension schemes are not obtained for the most part because of the limited number of 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 total pension cost of the Group for the year was £22,701,000 (2018: £21,127,000), of which £205,000 (2018: £180,000)
related to Directors and £6,440,000 (2018: £5,983,000) related to overseas schemes.
The latest full actuarial valuation of the UK defined benefit pension scheme was carried out as at 30 September 2018 and
updated to 30 June 2019 by a qualified independent actuary. The mortality assumption used for 2019 is S2PMA and S2PFA
tables, CMI (core) 2018 model with long-term improvements of 1% per annum. Major assumptions used by the actuary for the
UK and Ireland schemes were:
30 June 2019
30 June 2018
30 June 2017
Rate of increase in pension payments
Discount rate
Inflation rate (RPI)
Inflation rate (CPI)
Retirement age
UK scheme Ireland scheme
1.5%
1.2%
1.5%
–
65
3.3%
2.3%
3.4%
2.4%
64
UK scheme
3.3%
2.8%
3.4%
2.4%
64
Ireland scheme
2.0%
1.9%
2.0%
–
65
UK scheme
3.3%
2.7%
3.4%
2.4%
64
Ireland scheme
1.6%
2.2%
1.6%
–
65
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
The weighted average duration of the defined benefit obligation is around 24 years.
The assets and liabilities in the defined benefit pension schemes were:
2019
years
21.3
23.2
22.3
24.4
2018
years
21.8
23.7
22.8
24.9
Market value of assets:
Equities
Multi-asset funds
Bonds
Cash and other
Actuarial value of liabilities
Deficit in the schemes
Deferred tax thereon
30 June
2019
£’000
% of
total
assets
30 June
2018
£’000
% of
total
assets
111,209
64,708
3,135
2,536
181,588
(233,458)
(51,870)
8,526
61
36
2
1
100
–
–
–
107,982
61,232
2,759
869
172,842
(240,220)
(67,378)
11,096
62
35
2
1
100
–
–
–
All equities are held in externally-managed funds and primarily relate to UK and US equities. Bonds relate to UK and Eurozone
government-linked securities, again held in externally-managed funds and to which the majority relate to the UK. The fair values
of these equity and fixed income instruments are determined using the bid price of the unitised investments, quoted by the
investment manager, at the reporting date and therefore represent ‘Level 2’ of the fair value hierarchy defined in note 20.
Multi-asset funds are also held in externally-managed funds, with active asset allocation to diversify growth across asset classes
such as equities, bonds and money-market instruments. The fair value of these funds is determined on a comparable basis to
the equity and fixed income funds, and therefore are also ‘Level 2’ assets.
No scheme assets are directly invested in the Group’s own equity.
For the UK scheme, the investment strategy is determined by the trustees and has been set in agreement with the Company.
The main investment objective is to ensure that benefits payable to members are paid as they fall due. Currently, the scheme is
considered to be relatively immature and therefore 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 Company and trustees
are discussing strategies for reducing investment risk as and when appropriate.
118
Financial statementsRenishaw plc Annual Report 2019 13.Employeebenefits(continued)
Note C.37 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 £22,896,000 (2018: £21,065,000) and the actuarial value of liabilities was £30,027,000
(2018: £27,564,000).
The movements in the schemes’ assets and liabilities were:
Year ended 30 June 2019
Balance at the beginning of the year
Contributions paid
Interest on pension schemes
Remeasurement loss from GMP equalisation
Remeasurement gain under IAS 19 and IFRIC 14
Benefits paid
Balance at the end of the year
Year ended 30 June 2018
Balance at the beginning of the year
Contributions paid
Interest on pension schemes
Remeasurement gain/(loss) under IAS 19 and IFRIC 14
Benefits paid
Balance at the end of the year
Assets
£’000
172,842
6,831
4,902
–
4,219
(7,206)
181,588
Assets
£’000
170,708
4,471
4,573
5,979
(12,889)
172,842
Liabilities
£’000
(240,220)
–
(5,747)
(751)
6,054
7,206
(233,458)
Liabilities
£’000
(237,495)
–
(5,822)
(9,792)
12,889
(240,220)
Total
£’000
(67,378)
6,831
(845)
(751)
10,273
–
(51,870)
Total
£’000
(66,787)
4,471
(1,249)
(3,813)
–
(67,378)
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
2019
£’000
2018
£’000
2,937
(22,941)
(4,677)
3,454
31,500
10,273
1,533
556
2,601
6,797
(15,300)
(3,813)
The cumulative amount of actuarial gains and losses recognised in the Consolidated statement of comprehensive income and
expense was a loss of £100,804,000 (2018: loss of £111,077,000).
The total deficit of the Group’s defined benefit pension schemes, on an IAS 19 basis (excluding any adjustments for IFRIC
14), has increased from £35,878,000 at 30 June 2018 to £51,870,000 at 30 June 2019, primarily as a result of a reduction
in the UK scheme discount rate from 2.8% to 2.3%. The latest actuarial report prepared in September 2018 shows a deficit
of £70,700,000, which is based on funding to self sufficiency and uses prudent assumptions. IAS 19 requires best estimate
assumptions to be used, resulting in the IAS 19 deficit being lower than the actuarial deficit.
For the UK defined benefit scheme, a guide to the sensitivity of the value of the respective liabilities is as follows:
UK – discount rate
UK – future inflation
UK – mortality
UK – early retirement
Variation
Increase/decrease by 0.5%
Increase/decrease by 0.5%
Increased life by one year
One year earlier than assumed
Approximate effect on liabilities
-£21.0m/+£24.3m
+£18.1m/-£18.8m
+£9.5m
+£5.9m
Following engagement with The Pensions Regulator, the Company and trustees have agreed the terms of a new deficit funding
plan for the UK defined benefit pension scheme which supersedes all previous arrangements. The Company has agreed to
pay £8,700,000 per annum into the scheme for five years with effect from 1 October 2018. Under the terms of the previous
agreement the Company paid all monthly pensions payments and lump sum payments, and transfer payments up to a limit of
£1,000,000 in each year. Under the new agreement, all such payments will be met by the scheme.
119
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual Report 2019 Notes continued
13.Employeebenefits(continued)
A number of UK properties owned by the Company with a book value of £75,200,000 at 30 June 2019 are subject to registered
fixed charges and will continue to provide security to the scheme under the new plan. The Company also has an escrow bank
account with a balance of £10,490,000 at the end of the year (2018: £10,413,000) which is subject to a registered floating
charge. Under the previous plan, the funds were to be released back to the Company over a period of five years. There is no
scheduled release of funds back to the Company under the new plan.
In the event a subsequent actuarial valuation results in the combined value of the properties and the escrow bank account
exceeding 120% of the actuarial deficit, some of the contingent assets will be released back to the Company. Any remaining
contingent assets will be released from charge when the deficit no longer exists.
In line with the previous agreement, the new agreement will continue until 30 June 2031 and any outstanding deficit paid at that
time. The agreement will end sooner if the actuarial deficit (calculated on a self-sufficiency basis) is eliminated in the meantime.
The charges may be enforced by the trustees if one of the following occurs: (a) the Company does not pay funds into the
scheme in line with the agreed plan; (b) an insolvency event occurs in relation to the Company; or (c) the Company does not
pay any deficit at 30 June 2031.
The value of the guaranteed payments under the new plan is lower than the IAS 19 pension scheme deficit at 30 June 2019
and as such, in accordance with IFRIC 14, no adjustment to the scheme’s liabilities has been necessary. At 30 June 2018, the
increase in liabilities under IFRIC 14 was £31,500,000.
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.
On 26 October 2018, the High Court reached a judgment in relation to Lloyds Banking Group’s defined benefit pension
schemes which concluded that the schemes should be amended to equalise pension benefits for men and women as regards
guaranteed minimum pension benefits. The issues determined by the judgment arise in relation to most other defined benefit
pension schemes and are relevant to the Company’s UK defined benefit pension scheme. Following discussions between the
Company, the trustees and their respective advisors, we have estimated incremental liabilities to be £751,000, which have been
recognised in the Income Statement in Administrative expenses. The estimate has increased the scheme’s liabilities by 0.4%
and is based on the C2 method which has been approved by the courts and likely to be the most commonly used approach.
The Company and trustees along with their respective advisors continue to assess the most appropriate method to achieve the
equalisation of benefits.
14. Share-based payments
Deferred annual equity incentive plan
In accordance with the remuneration policy approved by shareholders at the 2017 AGM, the deferred annual equity incentive
plan (the Plan) was implemented in relation to the financial year ending 30 June 2018. The 20 July 2018 Remuneration
Committee meeting recommended plan rules that were adopted by a resolution of the Board on 24 July 2018. The Committee
also approved the grant of awards under the Plan to the participating Executive Directors.
The number of shares to be awarded is calculated by dividing the relevant amount of annual bonus under the Plan by the
average price of a share during a period determined by the Committee of not more than five dealing days ending with the
dealing day before the award date. These shares must be purchased on the open market and cannot be satisfied by issuance
of new shares or transfer of existing treasury shares.
An employee benefit trust (EBT) has been set up to purchase and hold such shares, until transferring to the employee, which will
normally be on the third anniversary of the award date, subject to continued employment. Malus and clawback provisions can
be operated by the Committee within five years of the award date. During the vesting period, no dividends are payable on the
shares. However, upon vesting, employees will be entitled to additional shares or cash, equivalent to the value of dividends paid
on the awarded shares during this period. See page 81 of the Directors’ corporate governance report for further details of the
Plan awards granted.
The total cost recognised in the 2019 Consolidated income statement in respect of the Plan was £157,523 (2018: nil).
No awards have been made in respect of 2019.
15. Cash and cash equivalents
An analysis of cash and cash equivalents at the end of the year was:
Bank balances and cash in hand
Short-term deposits
Balance at the end of the year
2019
£’000
49,897
56,929
106,826
2018
£’000
63,417
40,430
103,847
The UK defined benefit pension scheme cash escrow account is shown separately within assets. £52,500,000 of the Group
short-term deposits balance is held in the Company, with £12,500,000, £20,000,000 and £20,000,000 maturing on 19 July 2019,
14 October 2019 and 6 April 2020 respectively.
120
Financial statementsRenishaw plc Annual Report 2019 16. 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
2019
£’000
46,102
23,431
59,493
129,026
2018
£’000
28,094
29,193
53,276
110,563
During the year, the amount of inventories recognised as an expense in the Consolidated income statement was £185,344,000
(2018: £187,834,000) and the amount of write-down of inventories recognised as an expense in the Consolidated income
statement was £1,276,000 (2018: £1,711,000). At the end of the year, the gross cost of inventories which had provisions held
against them totalled £14,137,000 (2018: £14,126,000).
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
2019
£’000
3,453
2,236
(2,843)
(607)
2,846
2018
£’000
2,960
2,775
(2,282)
493
3,453
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
2019
£’000
7,333
33,732
41,065
2018
£’000
7,297
40,682
47,979
Other creditors and accruals include decreases in the Group bonuses payable. The Group’s exposure to currency and liquidity
risk related to trade and other payables is disclosed in note 20.
19. Borrowings
Third party borrowings at 30 June 2019 amounted to £10,399,000. This relates to a five year loan entered into on 31 May 2019
by Renishaw KK, with original principal of JPY 1,447,000,000 (£10,486,000).
For the period 31 May 2019 to 31 July 2019, principal of JPY 12,000,000 is repayable each month, with a variable interest rate
of TIBOR +0.32% also paid on monthly accretion. For the period 31 July 2019 to 31 May 2024, principal of JPY 12,000,000 is
repayable each month, with a fixed interest rate of 0.81% also paid on monthly accretion.
The remaining principal at 31 May 2024 of JPY 739,000,000 can either be repaid in full at that time, or extended for another
five years.
Borrowings are held at amortised cost. There is no difference between the book value and fair value of borrowings, which is
estimated by discounting contractual future cash flows, which represents level 2 of the fair value hierarchy defined in note 20.
Movements during the year were:
Balance at the beginning of the year
Additions
Interest
Repayments
Currency
Balance at the end of the year
2019
£’000
–
10,486
3
(90)
–
10,399
2018
£’000
–
–
–
–
–
–
121
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual Report 2019
Notes continued
20. Financial instruments
The Group has exposure to credit risk, liquidity risk and market risk arising from its use of financial instruments. This note
presents information about the Group’s exposure to these risks, along with the Group’s objectives, policies and processes for
measuring and managing the risks.
Fair value
There is no significant difference between the fair value of financial assets and financial liabilities and their carrying value in
the Consolidated balance sheet. All financial assets and liabilities are held at amortised cost, apart from the forward exchange
contracts, which are held at fair value, with changes going through the Consolidated income statement unless subject to
hedge accounting.
The fair values of the forward exchange contracts have been calculated by a third party expert, discounting estimated future
cash flows on the basis of market expectations of future exchange rates, representing level 2 in the IFRS 13 fair value hierarchy.
The IFRS 13 level categorisation relates to the extent the fair value can be determined by reference to comparable market
values. The classifications 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
2019
£’000
10,628
38,724
29,516
18,087
26,196
123,151
2018
£’000
7,917
76,139
25,944
20,463
24,124
154,587
2019
£’000
12,704
935
4,120
740
5,962
24,461
2018
£’000
11,466
1,034
3,540
691
5,257
21,988
2019
£’000
64,919
7,666
7,846
3,966
22,429
106,826
2018
£’000
67,649
7,693
10,005
4,516
13,984
103,847
The above trade receivables, other receivables and cash are predominately held in the functional currency of the relevant entity,
with the exception of £20,262,000 of US Dollar-denominated trade receivables being held in Renishaw (Hong Kong) Limited and
£6,109,000 of Euro-denominated trade receivables being held in Renishaw UK Sales Limited, along with some foreign currency
cash balances which are of a short-term nature.
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
2019
£’000
14,999
4,438
16,486
35,923
2019
£’000
3,301
292
(512)
3,081
2018
£’000
21,620
6,111
6,388
34,119
2018
£’000
3,115
525
(339)
3,301
The above provision includes an element of impairment against the net debtor position using a provision matrix to measure
expected credit losses, according to IFRS 9. The provision rates are based on historic rates of default, being 0.14% of
trade receivables.
122
Financial statementsRenishaw plc Annual Report 2019 20.Financialinstruments(continued)
The maximum exposure to credit risk is £265,171,000, comprising the Group’s trade and other receivables, cash and cash
equivalents and derivative assets.
The maturities of non-current other receivables, being long-term loans to associates and joint ventures and derivatives, at the
year end were:
Receivable between 1 and 2 years
Receivable between 2 and 5 years
Liquidity risk
2019
£’000
1,075
1,485
2,560
2018
£’000
232
11,240
11,472
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. A significant
proportion of net cash is affected by interest rates that are either fixed or floating and based on LIBOR, which can change over
time, affecting the Group’s interest income. Of the net cash subject to floating interest rate charges, an increase of 1% in interest
rates would result in an increase in interest income of approximately £220,000.
The contractual maturities of financial liabilities at the year end were:
Year ended 30 June 2019
Trade payables
Other payables
Borrowings
Forward exchange contracts
Year ended 30 June 2018
Trade payables
Other payables
Borrowings
Forward exchange contracts
Contractual cash flows
Carrying
amount
£’000
21,513
41,065
10,399
54,147
127,124
Effect of
discounting
£’000
–
–
310
–
310
Carrying
amount
£’000
25,232
47,979
–
39,519
112,730
Effect of
discounting
£’000
–
–
–
–
–
Gross
maturities
£’000
21,513
41,065
10,709
54,147
127,434
Gross
maturities
£’000
25,232
47,979
–
39,519
112,730
Up to 1 year
£’000
21,513
41,065
1,120
18,920
82,618
Up to 1 year
£’000
25,232
47,979
–
22,478
95,689
1–2 years
£’000
–
–
1,115
12,626
13,741
1–2 years
£’000
–
–
–
10,490
10,490
2–5 years
£’000
–
–
8,474
22,601
31,075
2–5 years
£’000
–
–
–
6,551
6,551
Borrowings relate to a single loan in Renishaw KK, with a fixed interest rate of 0.81% for the majority of the loan contract.
Interest is payable on accretion each year, along with monthly principal repayments. See note 19 for further detail.
Market risk
As noted in the Strategic report under Principal risks and uncertainties, the Group operates in a number of foreign currencies
with the majority of sales being made in these currencies, but with most manufacturing being undertaken in the UK, Ireland
and India.
The Group enters into US Dollar, Euro and Japanese Yen derivative financial instruments to manage its exposure to foreign
currency risk, including:
i. Forward foreign currency exchange contracts to hedge a significant proportion of the Group’s forecasted US Dollar, Euro and
Japanese Yen revenues over the next three and a half years;
ii. Foreign currency option contracts, entered into alongside the forward contracts above until May 2018 as part of the Group
revenue hedging strategy, are ineffective for cash flow hedging purposes. Note 25, ‘Alternative performance measures’, gives
an adjusted measure of profit before tax to reflect the original intention that these derivatives were entered into for hedging
purposes. The final option contract will mature in November 2021.
iii. One-month forward foreign currency exchange contracts to offset the gains/losses from exchange rate movements arising
from foreign currency denominated intragroup balances of the Company.
123
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual Report 2019 Notes continued
20.Financialinstruments(continued)
For both the Group and the Company, the following table details the fair value of these forward foreign currency derivatives
according to their accounting treatment.
2019
2018
Nominal value
£’000
Fair value
£’000
Nominal value
£’000
Fair value
£’000
Forwardcurrencycontractsinadesignatedcashflowhedge(i)
Non-current derivative assets
Current derivative assets
Current derivative liabilities
Non-current derivative liabilities
Amounts recognised in the Consolidated statement of comprehensive
income and expense
Foreigncurrencyoptionsineffectiveasacashflowhedge(ii)
Non-current derivative assets
Current derivative assets
Current derivative liabilities
Non-current derivative liabilities
Amounts recognised in Gains from the fair value of financial instruments in
the Consolidated income statement
Forwardcurrencycontractsnotinadesignatedcashflowhedge(iii)
Current derivative assets
Current derivative liabilities
36,152
37,060
198,339
671,442
942,993
–
–
–
–
–
–
–
26,671
19,463
46,134
319
340
(18,749)
(34,967)
(53,057)
(27,573)
991
2,365
(104)
(260)
2,992
1,081
73
(67)
6
Amounts recognised in Financial income in the Consolidated income
statement
–
76
241,930
–
197,285
401,817
841,032
–
–
–
–
–
–
–
–
–
–
–
6,562
–
(22,325)
(16,111)
(31,874)
14,470
3,016
1,368
(153)
(930)
3,301
4,834
–
–
–
–
Total forward contracts and options
Non-current derivative assets
Current derivative assets
Current derivative liabilities
Non-current derivative liabilities
36,152
63,731
217,802
671,442
989,126
1,310
2,778
(18,920)
(35,227)
(50,059)
241,930
–
197,285
401,817
841,032
9,578
1,368
(22,478)
(17,041)
(28,573)
The amounts of foreign currencies relating to these forward contracts and options are, in Sterling terms:
US Dollar
Euro
Japanese Yen
2019
2018
Nominal value
£’000
678,323
187,833
122,970
989,126
Fair value
£’000
(43,689)
(3,501)
(2,868)
(50,059)
Nominal value
£’000
578,421
163,283
99,328
841,032
The following are the exchange rates which have been applicable during the financial year:
Currency
US Dollar
Euro
Japanese Yen
124
Average
forward
contract rate
1.39
1.12
139
2019
Year end
exchange
rate
1.27
1.12
138
Average
exchange
rate
1.29
1.13
144
Average
forward
contract rate
1.50
1.22
150
2018
Year end
exchange
rate
1.32
1.13
146
Fair value
£’000
(22,836)
(6,879)
1,142
(28,573)
Average
exchange
rate
1.35
1.13
149
Financial statementsRenishaw plc Annual Report 2019 20.Financialinstruments(continued)
For the Group’s foreign currency forward contracts and options at the balance sheet date, if Sterling appreciated by 5% against
the US Dollar, Euro and Japanese Yen, this would increase pre-tax equity by £39,100,000 and decrease profit before tax by
£300,000.
Hedging
In relation to the forward currency contracts in a designated cash flow hedge, the hedged item is a layer component of forecast
sales transactions. Forecast transactions are deemed highly probable to occur and Group policy is to hedge at least 75%
of net foreign currency exposure for USD, EUR and JPY. The hedged item creates an exposure to receive USD, EUR or JPY,
while the forward contract is to sell USD, EUR or JPY and buy GBP. Therefore, there is a strong economic relationship between
the hedging instrument and the hedged item. The hedge ratio is 100%, such that, by way of example, £10m nominal value
of forward currency contracts are used to hedge £10m of forecast sales. Fair value gains or losses on the forward currency
contracts are offset by foreign currency gain or losses on the translation of USD, EUR and JPY based sales revenue, relative to
the forward rate at the date the forward contracts were arranged. Foreign currency exposures in HKD and USD are aggregated
and only USD forward currency contracts are used to hedge these currency exposures. Sources of hedge ineffectiveness
include: changes in timing of the hedged item; reduction in the amount of the hedged sales considered to be highly probable;
a change in the credit risk of Renishaw or the bank counterparty to the forward contract; and differences in assumptions
used in calculating fair value. For the year-end outstanding cash flow hedges, the change in fair value of the hedged item,
being a £27,573,000 gain, is equal to the change in fair value of the forward currency hedge, being a £27,573,000 loss.
No ineffectiveness has been recognised in the reporting period.
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. Share capital and reserves
Share capital
Allotted, called-up and fully paid 72,788,543 ordinary shares of 20p each
2019
£’000
14,558
2018
£’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.
Dividends paid
Dividends paid comprised:
2018 final dividend paid of 46.0p per share (2017: 39.5p)
Interim dividend paid of 14.0p per share (2018: 14.0p)
Total dividends paid
2019
£’000
33,483
10,189
43,672
2018
£’000
28,752
10,190
38,942
A final dividend in respect of the current financial year of £33,482,729 (2018: £33,482,729) at the rate of 46.0p net per share
(2018: 46.0p) is proposed to be paid on 31 October 2019 to shareholders on the register on 27 September 2019.
Own shares held
The EBT is responsible for purchasing shares on the open market on behalf of the Company to satisfy the Plan awards, see note
15 for further detail on this. Own shares held are recognised as an element in equity until they are transferred at the end of the
vesting period.
Movements during the year were:
Balance at the beginning of the year
Acquisition of own shares
Balance at the end of the year
2019
£’000
–
(404)
(404)
2018
£’000
–
–
–
On 10 December 2018, 9,639 shares were purchased on the open market by the EBT at a price of £41.66, costing a total of
£404,348.
125
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual Report 2019 Notes continued
21.Sharecapitalandreserves(continued)
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 and currency movements
on intragroup loan balances classified as net investments in foreign operations from December 2018 (see note 4).
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 on intragroup loans classified as net investments in foreign operations
Current tax on translation of net investments in foreign operations
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
2019
£’000
12,665
1,218
–
827
(205)
1,840
72
14,577
2018
£’000
10,510
4,008
(1,901)
–
–
2,107
48
12,665
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. See note 20 for further
detail on this. 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.
Movements during the year were:
Balance at the beginning of the year
Losses on contract maturity recognised in revenue during the year
Gains 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
Other reserve
2019
£’000
(19,389)
19,782
–
–
(47,355)
4,561
(42,401)
2018
£’000
(31,049)
14,598
(4,834)
1,927
2,779
(2,810)
(19,389)
The other reserve relates to additional investments in subsidiary undertakings and share-based payments charges according to
IFRS 2 in relation to the Plan.
Movements during the year were:
Balance at the beginning of the year
Share-based payments charge
Balance at the end of the year
Non-controlling interest
Movements during the year were:
Balance at the beginning of the year
Share of profit for the year
Balance at the end of the year
2019
£’000
(460)
158
(302)
2019
£’000
(577)
–
(577)
2018
£’000
(460)
–
(460)
2018
£’000
(590)
13
(577)
The non-controlling interest represents the minority shareholdings in Renishaw Diagnostics Limited – 7.6%.
126
Financial statementsRenishaw plc Annual Report 2019 22. 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
2019
2018
Leasehold property
£’000
Vehicles
£’000
Leasehold property
£’000
3,338
5,211
4,090
12,639
1,442
2,309
–
3,751
3,363
4,929
4,019
12,311
2019
2018
Leasehold property
£’000
Vehicles
£’000
Leasehold property
£’000
3,904
1,536
3,799
Vehicles
£’000
1,329
2,988
354
4,671
Vehicles
£’000
1,409
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
property, plant and equipment, while the lease payments made during the term of the operating lease are recognised in
revenue (2019: £1,231,000 and 2018: £1,365,000). 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
Total future minimum lease payments receivable
Finance leases
2019
£’000
804
700
1,504
2018
£’000
1,406
1,383
2,789
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 five years and there is a nominal residual value receivable at the end of the contract. The total
future lease payments are split between the principal and interest amounts below:
Receivable in less than one year
Receivable between one and five years
Total future minimum lease payments receivable
Gross
investment
£’000
1,348
5,469
6,817
2019
Interest
£’000
118
477
595
Net
investment
£’000
Gross
investment
£’000
1,230
4,992
6,222
979
2,115
3,094
2018
Interest
£’000
91
196
287
Net
investment
£’000
888
1,919
2,807
23. Capital commitments
Authorised and committed capital expenditure at the end of the year, for which no provision has been made in the Financial
statements, were:
Property
Plant and equipment
Other
Total committed capital expenditure
2019
£’000
18,087
3,995
280
22,362
2018
£’000
5,142
5,577
136
10,855
127
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual Report 2019 Notes continued
24. 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
Joint ventures
Associate
2019
£’000
908
21,290
614
167
1,933
1,250
2018
£’000
923
19,069
507
118
324
1,549
2019
£’000
913
1
–
424
–
6,144
2018
£’000
577
8
–
314
–
4,729
Of the loan to the associate party, £3,600,000 relates to a working capital loan agreement set up in March 2017 and extended
by £500,000 in March 2018 and £1,000,000 in January 2019. £475,000 of the working capital loan is ring fenced for fixed asset
capital expenditure. Interest is charged at 3.5% until 31 December 2019 and at 3% above the Bank of England rate thereafter.
The loan is repayable on three months’ notice with a repayment date no earlier than 31 December 2019.
There were no bad debts relating to related parties written off during the year (2018: £nil).
By virtue of their long-standing voting agreement, Sir David McMurtry (Executive Chairman 36.23% shareholder) and John
Deer (Deputy Chairman, together with his wife, 16.80%), are the ultimate controlling party of the Group. See page 83 of the
Governance report for further details in relation to this. The only significant transactions between the Group and these parties are
in relation to their respective remuneration, as detailed on p.78-82 of the Directors’ corporate governance report.
25. Alternative performance measures
APM’s 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
2019
£’000
573,959
19,782
(10,346)
583,395
-6.8%
2018
£’000
611,507
14,598
626,105
Year-on-year revenue growth at constant exchange rates for 2018 was 17.7%.
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 APM’s 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 on financial instruments not eligible for hedge accounting:
– reported in revenue
– reported in gains from the fair value of financial instruments
Adjusted profit before tax
2019
£’000
109,944
(5,001)
(1,081)
103,862
2018
£’000
155,225
(5,310)
(4,834)
145,081
128
Financial statementsRenishaw plc Annual Report 2019 25.Alternativeperformancemeasures(continued)
Adjusted earnings per share:
Statutory earnings per share
Fair value gains on financial instruments not eligible for hedge accounting:
– reported in revenue
– reported in gains from the fair value of financial instruments
Adjusted earnings per share
Adjusted operating profit:
Statutory operating profit
Fair value gains on financial instruments not eligible for hedge accounting:
– reported in revenue
– reported in gains 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 on financial instruments not eligible for hedge accounting:
– reported in revenue
Adjusted metrology operating profit
Healthcare
Operating profit before loss from fair value of financial instruments
Fair value gains on financial instruments not eligible for hedge accounting:
– reported in revenue
Adjusted healthcare operating profit
26. Impact of new accounting policies
Comparison to previous revenue recognition standard
2019
pence
126.7
(5.6)
(1.2)
119.9
2019
£’000
99,793
(5,001)
(1,081)
93,711
2019
£’000
95,345
2018
pence
181.8
(5.9)
(5.4)
170.5
2018
£’000
153,189
(5,310)
(4,834)
143,045
2018
£’000
147,841
(4,745)
90,600
(5,066)
142,775
2019
£’000
3,367
(256)
3,111
2018
£’000
514
(244)
270
As noted earlier in ‘Changes to accounting policies’ the Group now accounts for all volume rebates and early settlement
discounts within Revenue rather than Cost of Sales. This reclassification, together with the net movement in deferred extended
warranties referred to in note 1, accounts for the majority of the difference between the results for the period as reported under
IFRS 15 and how they would have been reported under IAS 18.
Consolidated balance sheet extract
Assets
Deferred tax assets
Contract assets
Liabilities
Contract liabilities
Equity
Retained earnings
related to current year
related to transition adjustment
Consolidated income statement extract
Revenue
Cost of sales
Gross profit
Profit before tax
Income tax expense
Profit for the year from continuing operations
Balance at
30 June 2019
per IFRS 15
£’000
IFRS 15
adjustment
£’000
Balance at
30 June 2019
per IAS 18
£’000
29,855
352
(429)
(352)
29,426
–
5,631
(2,248)
3,383
597,784
573,959
(294,969)
278,990
109,944
(17,712)
92,232
1,467
197
1,270
1,644
(1,390)
254
254
57
197
599,251
575,603
(296,359)
279,244
110,198
(17,655)
92,429
Revenue recognised in 2019 that was included in the contract liability balance at the beginning of the reporting period,
being £1,640,000, was £1,081,000. The remaining balance at 30 June 2019 relates to ongoing extended warranties and
maintenance contracts.
129
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual Report 2019
Company balance sheet
at 30 June 2019
Assets
Property, plant and equipment
Intangible assets
Investments in subsidiaries
Investments in associates and joint ventures
Long-term loans to Group undertakings
Long-term loans to associates and joint ventures
Deferred tax assets
Derivatives
Total non-current assets
Current assets
Inventories
Trade receivables
Short-term loans to Group undertakings
Short-term loans to associates and joint ventures
Current tax
Other receivables
Derivatives
Pension scheme cash escrow account
Cash and cash equivalents
Total current assets
Current liabilities
Trade payables
Short-term loans from Group undertakings
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
Own shares held
Cash flow hedging reserve
Retained earnings
Other reserve
Total equity
notes
C.28
C.29
C.30
C.31
C.32
20
C.33
C.34
20
13
C.35
20
C.36
C.37
20
C.38
21
21
21
2019
£’000
2018
£’000
147,164
47,113
288,548
1,468
21,143
750
5,037
1,311
512,534
68,935
55,979
107,363
6,644
3,797
15,033
2,778
10,490
63,622
334,641
11,383
51,996
–
2,382
18,920
66,284
150,965
183,676
44,739
35,227
79,966
135,430
41,398
290,362
1,468
–
4,360
4,848
9,578
487,444
57,011
78,104
124,821
1,918
–
11,018
1,368
10,413
64,856
349,509
16,041
446
3,000
2,900
22,478
69,275
114,140
235,369
60,879
17,041
77,920
616,244
644,893
14,558
42
(404)
(42,401)
644,291
158
616,244
14,558
42
–
(19,389)
649,682
–
644,893
The Company reported a profit for the financial year ended 30 June 2019 of £28,478,000 (2018: £189,430,000).
These financial statements were approved by the Board of directors on 1 August 2019 and were signed on its behalf by:
Sir David McMurtry
Directors
Allen Roberts
130
Financial statementsRenishaw plc Annual Report 2019 Company statement of changes in equity
for the year ended 30 June 2019
Year ended 30 June 2018
Balance at 30 June 2017
Profit for the year
Othercomprehensiveincomeand expense(netoftax)
Remeasurement of defined benefit pension scheme liabilities
Changes in fair value of cash flow hedges
Totalothercomprehensiveincomeand expense
Totalcomprehensiveincomeand expense
Dividends paid
Balance at 30 June 2018 as reported
Adjustment for IFRS 15
Balance at 1 July 2018 restated
Year ended 30 June 2019
Profit for the year
Othercomprehensiveincomeand expense(netoftax)
Remeasurement of defined benefit pension scheme liabilities
Changes in fair value of cash flow hedges
Totalothercomprehensiveincomeand expense
Totalcomprehensiveincomeand expense
Share
capital
£’000
14,558
Share
premium
£’000
42
Own
shares
held
£’000
–
Cash flow
hedging
reserve
£’000
Retained
earnings
£’000
(31,049) 499,448
Other
reserves
£’000
Total
£’000
– 482,999
–
–
–
–
–
–
14,558
–
14,558
–
–
–
–
–
–
–
–
–
–
–
42
–
42
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
– 189,430
– 189,430
–
11,660
11,660
(254)
–
(254)
11,660 189,176
–
(38,942)
(19,389) 649,682
(88)
(19,389) 649,594
–
–
–
–
–
(254)
11,660
11,406
200,836
(38,942)
–
– 644,893
–
(88)
– 644,805
–
28,478
–
28,478
–
(23,012)
(23,012)
9,891
–
9,891
(23,012)
38,369
–
–
–
–
9,891
(23,012)
(13,121)
15,357
Share-based payments charge
Purchase of own shares
Dividends paid
Balance at 30 June 2019
–
–
–
14,558
–
–
–
42
–
(404)
–
(404)
–
–
–
–
–
(43,672)
(42,401) 644,291
158
–
–
158
(404)
(43,672)
158 616,244
131
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual Report 2019 Notes to the Company financial statements
C.27. 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.
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.
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.
132
Financial statementsRenishaw plc Annual Report 2019 Accountingpolicies(continued)
Taxation
The charge for taxation is based on the Company’s profit for the year. Deferred tax is provided on temporary differences
between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for
taxation purposes.
Deferred tax assets are recognised to the extent that it is regarded as probable that they will be recovered.
Employee benefits
The Company operated a contributory pension scheme, of the defined benefit type up to 5 April 2007, after which this scheme
was closed for future accruals to existing members and was closed to new members. Since 5 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
Loans to associates and joint ventures are initially recognised at fair value and are subsequently held at amortised cost.
Loans to Group undertakings are initially recognised at fair value and are subsequently held at amortised cost using the
effective interest rate method. Where such intercompany loans are repayable on demand the Company determines whether any
impairment provision is required by assessing the company’s ability to repay the loan. Where it is determined that a recipient
company does not have the capacity to repay the loan at the balance sheet date, or the loan is not repayable on demand, an
expected credit loss model is used to calculate the impairment provision required.
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 prevailing 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 prevailing at that date. Foreign exchange differences arising on such translation are recognised in the
income statement.
133
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual Report 2019 Notes to the Company financial statements continued
C.28. 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 30 June 2019
Cost
At 1 July 2018
Additions
Transfers
Disposals
At 30 June 2019
Depreciation
At 1 July 2018
Charge for the year
Released on disposals
At 30 June 2019
Net book value
At 30 June 2019
At 30 June 2018
91,521
4,927
118
(30)
96,536
16,857
1,714
(7)
18,564
77,972
74,664
165,599
14,996
3,304
(573)
183,326
109,881
14,539
(379)
124,041
59,285
55,718
4,669
318
–
(474)
4,513
3,298
520
(454)
3,364
1,149
1,371
Total
£’000
265,466
28,744
–
(1,077)
293,133
130,036
16,773
(840)
145,969
3,677
8,503
(3,422)
–
8,758
–
–
–
–
8,758
3,677
147,164
135,430
At 30 June 2019, properties with a net book value of £75,200,000 (2018: £66,759,000) were subject to a fixed charge to secure
the UK defined benefit pension scheme liabilities. See note 13 for additional information.
Additions to assets in the course of construction comprise:
2019
£’000
5,806
2,697
8,503
2018
£’000
306
3,693
3,999
Internally
generated
development
costs
£’000
Software
licences and
intellectual
property
£’000
Goodwill
£’000
9,305
–
–
9,305
9,305
–
9,305
–
−
131,951
18,349
–
150,300
93,810
15,402
109,212
41,088
38,141
18,553
4,107
(120)
22,660
15,296
1,339
16,635
6,025
3,257
Total
£’000
159,809
22,456
(120)
182,265
118,411
16,741
135,152
47,113
41,398
Freehold land and buildings
Plant and equipment
C.29. Intangible assets
Year ended 30 June 2019
Cost
At 1 July 2018
Additions
Disposals
At 30 June 2019
Depreciation
At 1 July 2018
Charge for the year
At 30 June 2019
Net book value
At 30 June 2019
At 30 June 2018
134
Financial statementsRenishaw plc Annual Report 2019 C.30. Investments in subsidiaries
Balance at the beginning of the year
Additions
Impairment
Balance at the end of the year
Details of the Company’s subsidiaries are given in note C.41.
C.31. 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.42.
C.32. Deferred tax
Balances at the end of the year were:
2019
£’000
290,362
186
(2,000)
288,548
2018
£’000
294,357
–
(3,995)
290,362
2019
£’000
1,468
–
1,468
2018
£’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
–
–
7,606
8,816
280
16,702
2019
Liabilities
£’000
(9,171)
(2,494)
–
–
–
(11,665)
Net
£’000
(9,171)
(2,494)
7,606
8,816
280
5,037
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
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 £5,037,000 asset (2018: £4,848,000 asset) is
presented as a £5,037,000 deferred tax asset (2018: £4,848,000 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.33. 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
2019
£’000
4,848
189
5,037
2019
£’000
25,947
22,652
20,336
68,935
2018
£’000
8,796
(3,948)
4,848
2018
£’000
14,276
28,251
14,484
57,011
135
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual Report 2019 Notes to the Company financial statements continued
C.34. Trade receivables
An analysis of trade receivables at the end of the year was:
Trade receivables
Amounts owed by Group undertakings
Balance at the end of the year
C.35. 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
2019
£’000
400
55,579
55,979
2019
£’000
2,382
2019
£’000
2,900
2,324
(2,842)
(518)
2,382
2018
£’000
461
77,643
78,104
2018
£’000
2,900
2018
£’000
2,390
2,792
(2,282)
510
2,900
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.36. 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 and accruals
Balance at the end of the year
2019
£’000
47,927
177
3,350
14,830
66,284
2018
£’000
48,570
95
3,129
17,481
69,275
Other creditors and accruals include bonuses payable in respect of the year.
C.37. Employee benefits
The Company operated a defined benefit pension scheme, which, at 5 April 2007, ceased any future accrual for current
members and was closed to new members. Employees of the Company are now covered by a defined contribution scheme.
See note 13 regarding details of charges relating to the UK defined benefit pension scheme liabilities.
The total pension cost of the Company for the year was £15,769,000 (2018: £14,907,000), of which £205,000 (2018: £180,000)
related to directors. The latest full actuarial valuation of the scheme was carried out at 30 September 2018 and updated to
30 June 2019 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
30 June 2019
3.3%
2.3%
3.4%
2.4%
64
30 June 2018
3.3%
2.8%
3.4%
2.4%
64
30 June 2017
3.3%
2.7%
3.4%
2.4%
64
The mortality assumption adopted for 2019 is S2PMA and S2PFA tables, CMI (core) 2018 model with long-term improvements of
1% per annum.
The weighted average duration of the defined benefit scheme obligation is around 24 years.
136
Financial statementsRenishaw plc Annual Report 2019 C.37.Employeebenefits(continued)
The assets and liabilities in the scheme were:
Market value of assets:
Equities
Multi-asset fund
Bonds
Cash and other
Actuarial value of liabilities
Deficit in the scheme
Deferred tax thereon
30 June
2019
£’000
% of
total
assets
30 June
2018
£’000
% of
total
assets
104,098
50,337
1,721
2,536
158,692
(203,431)
(44,739)
7,606
65
32
1
2
100
100,975
48,389
1,577
836
151,777
– (212,656)
(60,879)
–
10,349
–
66
32
1
1
100
–
–
–
All equities have quoted prices in active markets in the UK, North America, Europe, Asia-Pacific, Japan and emerging markets.
The movements in the scheme were:
Year ended 30 June 2019
Deficit in scheme at the beginning of the year
Contributions
Interest on pension scheme
Remeasurement loss from GMP equalisation
Remeasurement gain under IAS 19 and IFRIC 14
Benefits paid
Deficit in scheme at the end of the year
Year ended 30 June 2018
Deficit in scheme at the beginning of the year
Contributions
Interest on pension scheme
Remeasurement gain/(loss) under IAS 19 and IFRIC 14
Benefits paid
Deficit in scheme at the end of the year
Assets
£’000
151,777
5,831
4,235
–
3,717
(6,868)
158,692
Assets
£’000
150,322
3,557
3,938
6,476
(12,516)
151,777
Liabilities
£’000
(212,656)
–
(4,987)
(751)
8,095
6,868
(203,431)
Liabilities
£’000
(213,183)
–
(5,150)
(6,839)
12,516
(212,656)
Total
£’000
(60,879)
5,831
(752)
(751)
11,812
–
(44,739)
Total
£’000
(62,861)
3,557
(1,212)
(363)
–
(60,879)
The analysis of the amount recognised in the 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 recognised in the Statement of comprehensive income and expense
C.38. Share capital
Allotted, called-up and fully paid 72,788,543 ordinary shares of 20p each
2019
£’000
2018
£’000
2,515
(20,911)
(5,009)
3,717
31,500
11,812
1,417
4,442
2,602
6,476
(15,300)
(363)
2019
£’000
14,558
2018
£’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.
137
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual Report 2019 Notes to the Company financial statements continued
C.39. Related parties
During the year, related parties, these being the Group’s associates and joint ventures (see note 12), 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 by the Company at the year end
Loans owed to the Company at the year end
Joint ventures
2019
£’000
78
2,808
200
177
1,250
2018
£’000
374
3,438
200
95
1,549
Associate
2019
£’000
–
1
–
–
2018
£’000
256
8
–
–
6,144
4,729
All transactions were on an arm’s length basis. There were no bad debts relating to related parties written off during the year
(2018: £nil).
C.40. 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
2019
£’000
10,213
2018
£’000
3,464
C.41. Subsidiary undertakings
The following are the subsidiary undertakings of Renishaw plc as at 30 June 2019, 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 30 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 83, except as indicated below:
D Dormant company
H Holding company
T Travel agency
* 31 March year end
^ 31 December year end
† Ordinary-A shares
‡ Ordinary-C shares
Company
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.
138
Registered Office
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 2019 C.41.Subsidiaryundertakings(continued)
Company
Registered Office
Owned by MTT Investments Limited
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) DAC
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.^
New Mills, Wotton-under-Edge, Gloucestershire, GL12 8JR
United Kingdom
Piazza Virgilio, 4, 20123 Milano
Italy
Rathausstraße 75-79, 66333, Völklingen
Germany
Kantemirovskaya Ulitsa, 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 Azets Insight A/S, Lyskær 3CD, Lyskær 3, 2730, Herlev
Denmark
Nikkelstraat 3, 4823 AE, Breda
Netherlands
Karl-Benz Straße 12, 72124, Pliezhausen
Germany
c/o 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
139
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual Report 2019 Notes to the Company financial statements continued
C.41.Subsidiaryundertakings(continued)
Company
Registered Office
Renishaw Metrology Systems Limited*
Renishaw México S. de R.L. de C.V.
Renishaw Oceania Pty Limited
Renishaw Oy
Renishaw S.A.S.
Renishaw S.p.A.
Renishaw s.r.o.
Renishaw Sp. z.o.o.
Renishaw Teknoloji Çözümleri LŞ^
Renishaw US Holdings, Inc.H^
Renishaw, Inc.
OwnedbyRenishaw(HongKong)Limited
Renishaw (Malaysia) Sdn. Bhd.
Renishaw (Shanghai) Management Company Limited^
Renishaw (Shanghai) Trading Company Limited^
Renishaw (Singapore) Pte Limited
Renishaw (Taiwan) 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, Apodoca, 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
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
Turgut Özal Blv. No:193, Şerifali Mahallesi, 34775, Dudullu Osb,
Ümraniye, İstanbul
Turkey
c/o Corporation Trust Company, Corporation Trust Center, 1209
Orange Street, Wilmington, Delaware, 19801
United States
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
140
Financial statementsRenishaw plc Annual Report 2019 C.41.Subsidiaryundertakings(continued)
Company
Registered Office
Owned by Renishaw US Holdings, Inc.
Renishaw Fixturing Solutions, LLC^
Renishaw Properties, Inc.
OwnedbyRenishaw(Ireland)DAC
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
c/o The Corporation Company, 40600 Ann Arbor Road East, Suite
201, Plymouth, Michigan, 48170
United States
c/o Corporation Trust Company, Corporation Trust Center, 1209
Orange Street, Wilmington, Delaware, 19801
United States
Rue de Lausanne 43B, 1110, Morges
Switzerland
31 Rue Ampère, 69680, Chassieu
France
New Mills, Wotton-under-Edge, Gloucestershire, GL12 8JR
United Kingdom
C.42. Associated undertakings and joint ventures
The following are the associated undertakings and joint ventures of Renishaw plc at 30 June 2019. 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 30 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 83.
† Ordinary-A shares
^ 31 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
141
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual Report 2019 10 year financial record
Results
note
2019
£’000
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
Overseas revenue
539,915 580,940 509,212 404,472 469,221 331,682 326,213 313,007 273,989 170,957
UK and Ireland revenue
34,044
30,567
27,595
22,752
25,499
23,816
20,668
18,885
14,761
10,650
Total revenue
Operating profit
Profit before tax
Taxation
573,959 611,507 536,807 427,224 494,720 355,498 346,881 331,892 288,750 181,607
93,711 143,045 108,733
86,952 143,924
70,388
79,071
83,188
79,286
28,095
103,862 145,081 109,079
87,475 144,196
70,106
79,193
86,046
80,410
28,725
16,557
20,942
12,819
14,880
22,850
10,720
15,046
17,008
16,345
5,745
Profit for the year
87,305 124,139
96,260
72,595 121,346
59,386
64,147
69,038
64,065
22,980
Capital employed
Share capital
Share premium
Reserves
Total equity
Statistics
Overseas revenue
as a percentage of
total revenue
Adjusted earnings
per share
Proposed dividend
Note
2019
£’000
2018
£’000
2017
£’000
2016
£’000
2015
£’000
2014
£’000
2013
£’000
2012
£’000
2011
£’000
2010
£’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
568,677 533,994 429,214 366,785 413,918 336,163 262,119 227,799 187,118 144,021
583,277 548,594 443,814 381,385 428,518 350,763 276,719 242,399 201,718 158,621
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
94.1% 95.0% 94.9% 94.7% 94.8% 93.3% 94.0% 94.3% 94.9% 94.1%
119.9
60.0p
170.5p
132.4p
100.4p
167.5p
60.0p
52.0p
48.0p
46.5p
82.3p
41.2p
88.9p
40.0p
95.6p
38.5p
88.5p
35.0p
32.3p
17.6p
The results and adjusted earnings per share for the years 2010, 2011, 2013, 2014, 2016, 2017, 2018 and 2019 exclude the exceptional items. These were: 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), 2018 (£10.1m pre tax gain) and 2019 (£6.1m 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.
142
Shareholder informationRenishaw plc Annual Report 2019 Additional information
Organisations which received significant charitable donations over
£2,000 in 2018/19
• Chippenham Town FC, UK
• Maktek Golden Compass CNC Lathe Design Competition,
• Gloucestershire Arthritis Trust, UK
• Rowland Hill Almshouses, UK
• The Grand Appeal (Wrong Trousers Day), UK
• Severn Freewheelers EVS, UK
• Vale of Berkeley Railway Trust, UK
• Wotton Defib Awareness Group, UK
• Children in Need, UK
• Barry Romilly Bowls Club, UK
• Tetbury Hospital Trust, UK
• DEC Cyclone Idai Appeal, UK
• Dorothy House Hospice, UK
• Red Nose Day, UK
• Gloucestershire Eye Therapy Trust, UK Friends of
Paternoster School, Cirencester, UK
Turkey
• Sassoon General Hospital, India
• Jeevan Jyot Mandal, India
• Pune Marathi Granthalay, India
• Zilla Parishad School, Mahalunge, India
• Janakalyan Rakta Pedhi, India
• Indian Herpetological Societies’ Wild Animal Rescue &
Rehabilitation Center, India
• Chaitanya Mahila Mandal, India
• Punarutthan Samarasata Gurukulam, India
• Apala Ghar, India
• Zilla Parishad Shala, India
Task Force on Climate-related Financial Disclosures
Renishaw has publicly committed to implementing the
recommendations of the Task Force on Climate-related
Financial Disclosures (TCFD). We recognise climate
change as the biggest environmental threat the world faces,
and one which could pose challenges to our business
including our supply chain and operations. We believe
that disclosing these climate related risks is an important
step in demonstrating our understanding of these risks and
efforts to mitigate them. In addition to enhancing business
resilience, it also enables us to take advantage of any
opportunities it may offer.
To shape our materiality assessment, we have used risks
and opportunities identified through engagement with
employee focus groups and disclosures identified in the
GRI (Global Reporting Initiative) standards, the Sustainable
Development Goals, the CDP questionnaires and other
credible organisations.
This process will enable us to identify our exposure to
physical climate risks such as rising temperatures, rising
sea levels and extreme weather events. Beyond physical
risks, we are also assessing any risks and opportunities
arising from a transition to a low-carbon world aligned with
the Paris Climate Agreement.
This year represents our first disclosure to address the
TCFD recommendations and we expect this to develop and
evolve over time to reflect our analysis.
Governance
The Board has appointed Allen Roberts, Group Finance
Director, as the Director responsible for CSR. Allen, has in
turn, appointed Ben Goodare, Group CSR Manager who
chairs the CSR Committee. This Committee is responsible
for managing our impacts on climate change, as well as
the risks that climate change may pose to our business.
The Committee meets six times during the year and receives
regular updates on our progress against commitments
and performance.
Strategy
Our CSR committee has overall responsibility for CSR
strategy within our Group. To better understand the climate
related impacts that are material to our business we are
undertaking a materiality assessment in the forthcoming
year. This will enable us to shape our strategic aims for the
short and long term to enable us to mitigate climate risks
and take advantage of opportunities.
The results of our materiality assessment will inform our
short and long term CSR strategy and targets.
Risk management
The identification and management of climate-related
risks follows our established risk management process.
Key elements of the risk management process are set out
on pages 38 and 39.
Metrics and targets
We have reduced the emissions from our operations from
2015/16 levels by 62% to the end of this reporting period,
and are on track to achieve a 100% reduction by 2050.
To help us meet our targets, we have started to move our
purchased electricity to 100% from renewable sources and
have invested heavily in solar PV at sites across the UK
and our Indian manufacturing site. More details on climate
change metrics and targets are disclosed on pages 23, 46
and 50 to 51.
143
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual Report 2019 Additional information continued
Greenhouse gas emissions
Scope 1
Gas consumption
Owned transport
Generator diesel
Heating oil
Fugitive emissions
Out of scope (bio-fuel blend)
Total Scope 1 (tCO2e)
Scope 2e
Location-based
Purchased heat
Electricity
Total Scope 2 (tCO2e)
Market-basedf
Electricity
Total Scope 2 (tCO2e)
2019d
2018a
2017a
2016
2015
774.95
2,641.09
35.66
244.06
276.11
74.70
3,971.87
1,005.51
2,399.93
34.96
188.00
206.42
58.11
3,834.82
886.30
2,241.78
28.67
231.48
266.00
58.12
3,654.23
771.82
2,492.30
26.38
234.00
305.73
60.85
3,830.24
962.30
2,293.66
124.31
41.09
262.79
59.58
3,684.15
5.44
3,911.07
3,916.51
11.74
8,596.25
8,607.99
4.50
15,746.08
15,750.57
19.88
17,003.42
17,023.30
5.44
16,963.50
16,968.94
4,730.23
4,735.67
6,351.83
6,363.57
21,659.34
21,663.84
20,853.54
20,873.43
16,963.50
16,968.94
Total statutory GHG emissionsc (tCO2e) market-
based
Normalised statutory GHG emissionsc by revenue
(tCO2e/£m) market-based
8,707.54
10,198.39
25,318.07
24,703.67
20,653.09
15.17
16.68
47.16
57.83
41.75
Scope 3
Business travel
Product distribution
Raw material purchaseh
Post and communicationsi
WTT and T&D totalg
Out of scope (bio-fuel blend)
Total significant Scope 3 (tCO2e)
Total GHG emissions (tCO2e) market-based
Normalised total GHG emissions by revenue
(tCO2e/£m) market-based
3,835.87
10,544.92
2,265.05
1,088.53
1,392.58
4.21
19,126.95
2,900.77
14,345.65
1,492.79
857.33
2,957.31
9.24
22,553.85
2,638.79
11,048.65
1,517.53
773.11
4,964.78
9.24
20,942.86
4,717.04
9,534.18
1,260.40
774.00
5,352.59
29.49
21,638.21
4,030.00
11,482.33
1,088.41
598.66
5,203.68
38.97
22,403.08
27,834.49
32,752.24
46,260.93
46,341.87
43,056.17
48.49
53.56
86.18
108.48
87.03
a thinkstep was engaged to provide independent limited assurance over the greenhouse gas emissions data from the years 2015/16, 2016/17 and 2017/18.
A limited level of assurance was applied. The verification engagement was performed in accordance with the GHG Protocol Corporate Standard (2004)
verification requirements and ISO 14064-3. thinkstep has issued an unqualified opinion over the selected data. thinkstep’s full assurance statements are available
at: www.renishaw.com/CSR.
b 2017/18 figures have been restated due to improvements in our methodology, updated GHG conversion factors and replacing the calculation used for the June
2018 data last year – see footnote d.
c Statutory emissions are Scope 1 and 2 as required by the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013.
d 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.
e Renishaw uses the market-based method for calculating Scope 2 emissions for our total emissions to account for our efforts in generating and purchasing low-
carbon energy. The location-based method is provided for disclosure only and all intensity, net and gross emissions shown are calculated using scope 2 market-
based method.
f 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 residual
grid mix factors and location-based factors are used in their place.
g Well to Tank and Transmission and Distribution losses total, use location-based conversion factors for calculations.
h Raw material purchase figures are based on metal purchased by weight in the UK and office paper purchased across the UK. We are working on how to
increase the scope of this data to other raw materials.
i This is based on post and communications used within the UK, we are working on how to increase the scope of this data to overseas operations in the future.
144
Shareholder informationRenishaw plc Annual Report 2019 Independent assurance statement
Commentary
• The GHG inventory is based on measured and estimated
activity data. Estimates are calculated and included where
measured data is not available or is not yet available,
following the guidance specified in Renishaw’s carbon
management documentation.
• Certain minor Renishaw emissions sources were excluded
from Renishaw’s reported emissions (e.g. small Renishaw
sales offices). This had no material impact on the overall
Renishaw emissions profile.
Independence
This is the fourth year that thinkstep has undertaken a
verification and provides an opinion statement with regard
to Renishaw’s scope 1 and scope 2 GHG emissions data.
The staff that have undertaken work on this assurance
engagement provide no consultancy services to Renishaw
plc. Our processes are designed to ensure that the work
we undertake with clients is free from bias and conflict
of interest.
Limitations of Assurance Statement
The findings presented here are not intended to be used as
advice or as the basis for any decisions, including, without
limitation, financial or investment decisions.
Greenhouse gas verification statement
thinkstep was commissioned by Renishaw plc to verify its
greenhouse gas (GHG) data, covering the financial year
ended 30 June 2018 (1 July 2017 – 30 June 2018).
The reviewed GHG data includes all scope 1 except
Fugitive Emissions and scope 2 emissions as well as limited
scope 3 emissions.
The corporate carbon footprint considered all of Renishaw’s
material locations around the world. In addition, Renishaw’s
scope 3 emissions data from business travel (air travel,
rail travel and road travel in employee-owned vehicles) was
reviewed. The review considered the greenhouse gases
CO2, CH4, N2O, HFCs, PFCs, SF6, and NF3.
The Renishaw GHG inventory calculation followed the
“Financial Control” approach (organisational boundary).
A limited level of assurance was applied. The verification
engagement was performed in accordance with the
GHG Protocol Corporate Standard (2004) verification
requirements and ISO 14064-3.
Renishaw was assessed against the GHG Protocol
Corporate Standard (2004) reporting requirements (scope
1 and 2 emissions), and the GHG Protocol Corporate Value
Chain (Scope 3) Accounting and Reporting Standard.
Assurance Conclusion
Based on the process and procedures conducted,
there is no evidence that the Renishaw GHG inventory is
not materially correct and is not a fair representation of
Renishaw’s GHG data and information, and has not been
prepared in accordance with the GHG Protocol:
Scope 1 emissions: 3,834.82 tonnes CO2-equivalent
Scope 2 emissions – Location Based: 8,607.99 tonnes
CO2-equivalent
Scope 2 emissions – Market Based: 6,363.57 tonnes
CO2-equivalent
145
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual Report 2019 Additional information continued
Glossary
AGM – Annual General Meeting
AM – additive manufacturing (3D printing)
APAC – Asia Pacific
APMs – alternative performance measures
Brexit – UK exit from the EU
Governance Code – UK Corporate Governance Code 2016
the Code – Group Business Code
Company – Renishaw plc
CAD – computer aided design
CMM – co-ordinate measuring machine
CNC – computer numerically controlled
CPI – consumer price index
CRM – customer relationship management
CSR – corporate social responsibility
EBT – Employee Benefit Trust
EMEA – Europe, Middle East and Africa
EPS – earnings per share
ERP – enterprise resource planning
EU – European Union
EUR – Euro
FCA – Financial Conduct Authority
FRC – Financial Reporting Council
FX – foreign exchange
GBP – Great British Pound or Pound Sterling
GDNF – Glial Cell Line-Derived Neurotrophic Factor
GHG – greenhouse gas
Group – Renishaw plc and its subsidiaries
H&S – health and safety
HKD – Hong Kong Dollar
HR – human resources
IFRS – International Financial Reporting Standards
ISMB – Renishaw’s International Sales and Marketing Board
KPI(s) – key performance indicator(s)
kW – kilowatt – an amount of power equal to 1,000 watts
kWh – kilowatt hour – an amount of energy equivalent to
delivering 1 kW of power for an hour
LIBOR – London inter-bank offered rate
LR – the FCA’s Listing Rules
MRO – maintenance, repair and overhaul
NCI – non-controlling interest
OCI – other comprehensive income
P&L – profit and loss account
PBT – profit before tax
RIS – Regulatory Information Service
R&D – research and development
RCC – Renishaw Charities Committee
RIDDOR – Reporting of Injuries, Diseases and Dangerous
Occurrences Regulations 2013
Scope 1 – Direct GHG emissions occur from sources that
are owned or controlled by the company, for
example, emissions from combustion in owned
or controlled boilers, generators, vehicles, etc.
Scope 2 – GHG emissions from the generation of
purchased electricity consumed by the company.
Scope 3 – Indirect GHG emissions are a consequence of
the activities of the company, but occur from
sources not owned or controlled by the company.
SEEG – stereoelectroencephalography
STEM – science, technology, engineering and mathematics
tCO2e – tonnes of carbon dioxide equivalent
TCFD – Task Force on Climate-related Financial Disclosures
thinkstep – thinkstep ltd.
TIBOR – Tokyo inter-bank offered rate
TPR – The Pensions Regulator
TSR – total shareholder return, calculated as change
in share price, assuming dividends are
immediately reinvested
UK – The United Kingdom of Great Britain and
Northern Ireland
USD/US$ – United States Dollar
Trade marks
The following trade marks, which are registered and owned by Renishaw plc and its subsidiaries, appear throughout this
Annual Report.
Equator™
MODUS™
neuroinfuse™
neurolocate™
neuromate®
QUANTiC™
QuickLoad™
SPRINT™
REVO®
146
Shareholder informationRenishaw plc Annual Report 2019 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 2169 (UK callers)
+44 121 415 7047 (international callers)
Website: www.shareview.co.uk
Calls are charged at the standard geographic rate.
Calls outside the UK will be charged at the applicable
international rate. Lines are open from 8:30am to 5:30pm
(UK time), Monday to Friday (excluding English and Welsh
public holidays).
AGM
The 2019 AGM will be held on Thursday 24 October 2019
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 copies of previous financial reports
are available at www.renishaw.com/investor. The half-
year results and the preliminary announcement of the
full-year results are published on our website promptly
after they have been released through a Regulatory
Information Service.
Financial calendar
Annual General Meeting
24 October 2019
Half year
31 December 2019
Half-year results
January 2020
Trading update
May 2020
Final dividend
Ex-div date 26 September 2019
Record date 27 September 2019
Payment date 31 October 2019
Interim dividend (provisional)
Ex-div date 5 March 2020
Record date 6 March 2020
Payment date 6 April 2020
Registration details and Company Secretary
General Counsel & 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
Corporate broker
UBS
Principal bankers
Lloyds Bank plc
147
Strategic reportGovernanceFinancial statementsShareholder informationRenishaw plc Annual Report 2019
Shareholder information continued
Shareholder profile
Shareholdings
1 1 – 5,000
2 5,001 – 25,000
3 25,001 – 50,000
4 50,001 – 100,000
5 100,001 – 500,000
6 500,001 – 1,000,000
%
1.5
2.5
2.2
3.3
14.1
7.4
7 1,000,001 – 3,000,000 13.5
8 more than 3,000,000
55.4
Shareholdings
1 Directors
2 Individuals
3 Institutions
%
53.1
1.2
45.7
8
3
1 2 3 4
5
6
7
Share fraud
We are aware some of our shareholders have received
unsolicited calls or correspondence, offering to buy or
sell their shares for a price in excess of the current market
price. The callers can be very persuasive and extremely
persistent and often have professional websites and
telephone numbers to support their activities. These callers
will sometimes imply a connection to Renishaw and provide
incorrect or misleading information. Please be aware this is
likely to be a scam – the safest thing to do is hang up.
Dealing with an unauthorised firm means you will not be
eligible for compensation under the Financial Services
Compensation Scheme. 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;
1
• check 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 the information can be kept updated; and
• report the matter to the FCA on their consumer helpline 0800
111 6768 (overseas callers dial +44 207 066 1000) or using
the share fraud reporting form available at www.fca.org.uk/
consumers/report-scam-unauthorised-firm.
If you have already paid money to share fraudsters contact
Action Fraud on 0300 123 2040 (overseas callers dial
+44 300 123 2040) or their online fraud reporting tool at
www.actionfraud.police.uk/reporting-fraud-and-cyber-crime.
Action Fraud will be particularly interested if you sent money
to a bank account or other type of money transfer.
Remember: if it sounds too good to be true it
probably is.
2
148
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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