Fit for
the future
Annual Report 2020
Renishaw is a global, high-precision
metrology and healthcare technology
group. Our purpose is 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.
Financial highlights
Contents
Revenue
£510.2m
(2019: £574.0m)
Adjusted* profit before tax
£48.6m
(2019: £103.9m)
Statutory profit before tax
£3.2m
(2019: £109.9m)
Total dividend for the year
0p
(2019: 60.0p)
Adjusted* earnings per share
51.0p
(2019: 119.9p)
Statutory earnings per share
0.4p
(2019: 126.7p)
Strategic report
01 Financial highlights
02 Renishaw at a glance
04 Chairman’s statement
06 Chief Executive’s review
10 Our business model
12 Our markets
14 Our strategy
16 Key performance indicators
18 Financial review
22 Metrology
24 Healthcare
26 Risk and risk management
29 Principal risks and uncertainties
37 Viability statement
38 Managing our resources and relationships
48 Non-Financial Reporting Statement
49 Section 172 statement
Governance
50 Directors’ corporate governance report
52 Board of Directors
54 Executive Committee
62 Nomination Committee report
65 Audit Committee report
70 Directors’ remuneration report
87 Other statutory and regulatory disclosures
90 Directors’ responsibilities
Independent auditor’s report
91
Financial statements
100 Financial statements contents
101 Consolidated income statement
102 Consolidated statement of comprehensive income and expense
103 Consolidated balance sheet
104 Consolidated statement of changes in equity
105 Consolidated statement of cash flow
106 Notes (forming part of the financial statements)
138 Company balance sheet
139 Company statement of changes in equity
140 Notes to the Company financial statements
Shareholder information
150 10 year financial record
151 Additional information
151 Significant charitable donations
151 Task Force on Climate-related Financial Disclosures statement
152 Greenhouse gas emissions data
153 Independent assurance statement
154 Glossary and trade marks
155 Shareholder information
* Note 25, Alternative performance measures, defines how Adjusted profit
before tax and Adjusted earnings per share are calculated.
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 154 for this
information. Dates within this document refer to financial years unless
otherwise stated.
For more information visit:
www.renishaw.com
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Renishaw at a glance
What we do
We work closely with our customers to
solve complex challenges and improve
products and processes. Our unique
blend of pioneering science and
product innovation helps them push
the boundaries of what is possible,
transforming product performance
and touching billions of lives around
the world.
We underpin this with long-term
investments in people, innovation and
infrastructure. These nurture a powerful
pipeline of measurement technology
and manufacturing techniques that
advance the development of diverse
products and address pressing
real-world problems.
Our people 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.
Countries
Locations
37
79
4,463
1,896
Number of employees at 30 June 2020
Patents – continual innovation in new technologies
2
Metrology products
Our technology solutions help manufacturers to maximise
production output, to significantly reduce the time taken
to produce and inspect components, and to keep their
machines running reliably. In the fields of industrial
automation and motion systems, our 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
Our technologies are used 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.
Strategic reportRenishaw plc Annual Report 2020
Where we operate
APAC
Locations
EMEA
Locations
32
38
Americas
Locations
9
Metrology revenue
Metrology revenue
£213.6m
£152.5m
Metrology revenue
£109.1m
Healthcare revenue
£14.1m
Healthcare revenue
£14.8m
6%
94%
9%
91%
Healthcare revenue
£6.1m
5%
95%
Our principal markets
Aerospace
Significant short-term impacts
on civil aircraft production due
to the pandemic
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.
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.
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.
Construction
Major infrastructure
projects increase heavy
equipment sales
Drive to improve efficiency of
large diesel engines used for
vehicles in the sector
Skills shortages and need
to minimise labour costs
requires more automation by
equipment manufacturers.
Consumer products
Shorter product life
cycles require flexible
manufacturing systems
New generations of electronic
devices and household
appliances demand precision
manufacturing systems for
form and function
Complex integrated circuits
and new designs required for
5G mobile products.
Healthcare
An increase in life expectancy
means greater demand
for healthcare products
and procedures
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.
See pages 12 and 13, Our markets, for further details.
Power generation
Civil nuclear, wind and solar
energy require manufacture of
precision components
Increasing focus on maximising
output from machinery used in
power generation
Increasing research into
energy storage.
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.
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Chairman’s statement
It has been a particularly
challenging year for the
Group due to the global
macroeconomic conditions
and the COVID-19 pandemic.
I am extremely proud of the
commitment our employees
have shown during these
exceptional times. I look forward
to continuing to work on exciting
new products that will help drive
long-term profitable growth.
Sir David McMurtry
Executive Chairman
Introduction
I am pleased to report our 2020 results. Revenue for the
year was £510.2m, 11% lower than the 2019 revenue
of £574.0m (13% lower at constant exchange rates),
against a backdrop of very challenging economic
conditions. Adjusted* profit before tax amounted to £48.6m
(2019: £103.9m), a decrease of 53%.
We have taken some difficult decisions to preserve
cash and protect the longer-term health of the business.
These measures included cancelling the interim dividend,
as well as deciding not to pay a final dividend. We also
undertook a resizing programme, which has regrettably led
to a number of redundancies across the Group.
In my role as Executive Chairman, I continue to focus on
Group innovation and product strategy, supporting our
talented engineering teams. The pandemic has required
us all to develop new approaches and learn new skills.
Since March I have enjoyed collaborating with our engineers
and with other Board members via digital platforms.
During the year, we continued to invest in developing future
technologies, with gross engineering costs of £82.4m
amounting to 16% of total revenue.
4
* 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.
Strategic reportRenishaw plc Annual Report 2020
Board changes
On 29 January 2020, John Deer, Deputy Chairman,
informed the Board that he wished to step back from his
executive responsibilities with immediate effect. He remains
on the Board as Non-executive Deputy Chairman on the
same or similar terms as the other Non-executive Directors.
Although John is spending less time on day-to-day
operational matters, I am delighted that, as the co-founder
of Renishaw, he is continuing to help set the strategic
direction of the Group and provide support and guidance
for Will Lee and his leadership team, and I look forward to
continuing to work with John to achieve further success for
Renishaw. With this change, the Board now comprises two
Executive and five Non-executive Directors in addition to
my role as Executive Chairman.
People, culture and values
In such a challenging environment, our collaborative team
of people has been key to helping the business remain
resilient. The way that our employees around the world have
risen to the challenge of maintaining supply and support to
our customers despite the huge challenges faced has made
me immensely proud. On behalf of the Board, I would like
to thank them all for their professionalism, dedication and
understanding during this most challenging 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.
During the year we have reviewed our values and we are
in the process of consulting with various stakeholders on a
proposal to add to our existing core values of innovation and
integrity. Integrity 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, and this has been especially important
this year due to the number of changes that we have been
required to make within the business and our response to
the pandemic.
Innovation remains at the heart of everything that we do and
has been fundamental to our success over the last 47 years.
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.
The way that our employees around
the world have risen to the challenge of
maintaining supply and support to our
customers despite the huge challenges
faced has made me immensely proud.
We are committed to equality and diversity initiatives at all
levels of the company. During the year, we established a
Diversity and Inclusion Group to help drive improvements
within our business. Our educational outreach programmes
continue to focus on encouraging more young people from
diverse gender, ethnic and economic backgrounds into the
sector (see pages 40 and 45 for more information).
Corporate governance
The Board is committed to high standards of corporate
governance. It has further considered the UK Corporate
Governance Code 2018, which it started to implement
last year, and has put in place a number of governance
enhancements aimed at contributing to the Group’s long-
term sustainable success. Further details are provided in the
Directors’ corporate governance report on pages 50 to 61.
Investor communications
Due to the pandemic, our annual investor day, scheduled
for 12 May 2020, was postponed until later in the year.
We expect this to be an online event because of the
ongoing requirement for social distancing, and the date
will be communicated once confirmed. The event is one of
four key touchpoints across the year where the investment
community can learn more about Renishaw’s business and
strategy, along with the Annual General Meeting (AGM),
normally held in October, plus live half-year and full-
year webcasts.
Dividend
In view of the ongoing macroeconomic uncertainty, the
Board has decided that there will be no final dividend
declared in respect of the year ending 30 June 2020.
The Board will review its position on dividends during the
2021 fiscal year, with the intention of reinstating the dividend
as soon as it is appropriate to do so. This means that there
was no dividend paid for the year (2019: 60.0p).
Sir David McMurtry
Executive Chairman
18 August 2020
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Chief Executive’s review
Despite the significant
challenges currently faced,
there are many exciting new
opportunities to grow our
business and deliver on our
purpose, due to a strong
pipeline of future product
developments, excellent
manufacturing and
commercial operations,
and highly skilled people.
Will Lee
Chief Executive
6
Introduction
This has been a year unlike any that most of us will ever
have encountered. We were facing challenging trading
conditions prior to the pandemic and had already taken
actions to improve productivity and reduce the Group’s
cost base. These included not replacing staff who had left
the business, reductions in direct manufacturing staff in
the UK, Ireland and India, the restructuring of our additive
manufacturing (AM) business, and a business resizing
that required the difficult decision to instigate redundancy
programmes. The overall impact was a total headcount
reduction of 578 during the year.
Since the pandemic started, our number one priority has
been the health and welfare of our employees, their families
and the wider communities in which we operate. It has
also been critical to support our customers and manage
the business impacts to ensure that we can survive this
exceptional period and be well placed to benefit when
global markets recover.
COVID-19 pandemic
From January onwards, we implemented a wide range of
measures to protect against the spread of COVID-19 at
our sites around the world and we continue to monitor the
impact of the pandemic, with our response and mitigation
committee meeting most days since February.
All our manufacturing facilities around the world are open,
although most are operating at lower capacity due to
reductions in staff numbers caused by a combination of
COVID-secure working practices, school closures, shielding
due to health conditions and local operating restrictions.
At many of our other sites we have limited operations, with
many employees continuing to work productively from
home. At all sites we have implemented robust measures to
protect the welfare of our employees and mitigate against
business risk. We have been able to maintain supply to
customers during this challenging period, but this is a
constantly evolving situation and we continue to closely
monitor all aspects of our supply chain and are taking
mitigating actions where necessary.
To closely manage costs and to mitigate against the risk of
redundancies, the majority of our non-manufacturing staff
across the Group have worked reduced hours (in some
cases supported by local Government support schemes).
We have also utilised the UK Government’s Coronavirus Job
Retention Scheme. The members of the Renishaw Board
and many staff across the Group also agreed to have their
salaries reduced during the period that employees were
working reduced hours.
Performance overview
As already outlined by Sir David (see page 4), this was a
very challenging year with reduced revenue and Adjusted*
operating profit for the Group. However, while all regions
experienced a reduction in revenue, our position encoder
product line did achieve good growth due to a recovery
in the semiconductor market. Despite the challenges, we
remain focused on the long term with a key priority being
the development of technologies that provide patented
products to support the strategies for our metrology and
healthcare segments.
Strategic reportRenishaw plc Annual Report 2020
Revenue
We achieved revenue for the year ended 30 June 2020
of £510.2m, compared with £574.0m last year, against a
backdrop of very challenging macroeconomic conditions
including the COVID-19 pandemic, the ongoing uncertainty
caused by the trade tensions between the USA and
China, and weaker demand in the machine tool sector.
We experienced revenue reductions in all regions as set out
below. We continue to work closely with key customers to
ensure we are in position to meet their requirements when
economic conditions improve.
2020
£m
2019
£m
Change
%
Constant
fx change
%
APAC
EMEA
Americas
227.7
240.1
167.3
201.3
115.2
132.6
Total Group revenue
510.2
574.0
-5
-17
-13
-11
-7
-17
-14
-13
Profit and earnings per share
The Group’s Adjusted* profit before tax for the year was
£48.6m compared with £103.9m last year. Adjusted*
earnings per share was 51.0p compared with 119.9p
last year.
Statutory profit before tax for the year was £3.2m compared
with £109.9m last year. Statutory earnings per share was
0.4p compared with 126.7p last year.
This year’s tax charge amounts to £2.9m (2019: £17.7m)
representing a tax rate of 91.0% (2019: 16.1%). For further
details on the tax rate see page 20.
Metrology
Revenue from our metrology business for the year was
£475.2m compared with £532.9m last year. It was a difficult
trading year for most of our metrology lines. The important
machine tool market was impacted by reduced global
demand for new machines, particularly from China, with
weakness in key sectors including aerospace, automotive,
consumer electronics, and oil and gas. This affected many
of our metrology product lines, including our machine tool
probe systems that are primarily installed on new machines
and our calibration products, which saw reduced demand
due to lower sales and utilisation of production machinery.
The AM line continued to benefit from the adoption of our
RenAM 500Q multi-laser system, but demand was impacted
by the global macroeconomic environment. During the year
we undertook a restructure of the AM business including
the closure of our Staffordshire site, a rationalisation of the
product range to focus on the successful RenAM 500Q
platform and a restructure of our AM teams across the
Group, including the simplification of reporting structures.
As previously mentioned, there was, however, good growth
in our position encoder product line, with sales of our optical
and laser encoder products benefiting from a recovery in
the semiconductor market.
Revenue
£510.2m
(2019: £574.0m)
611.5
574.0
536.8
510.2
427.2
Statutory profit before tax
£3.2m
(2019: £109.9m)
Adjusted* profit before tax
£48.6m
(2019: £103.9m)
Dividend per share
0p
(2019: 60.0p)
2016
2017
2018
2019
2020
155.2
117.1
109.9
61.7
2016
2017
2018
2019
2020
3.2
145.1
109.1
103.9
87.5
48.6
2016
2017
2018
2019
2020
60.0
60.0
52.0
48.0
2016
2017
2018
2019
2020
0.0
Statutory earnings per share
0.4p
(2019: 126.7p)
181.8
141.3
126.7
71.8
2016
2017
2018
2019
2020
0.4
Adjusted* earnings per share
51.0p
(2019: 119.9p)
170.5
132.4
119.9
100.4
51.0
2016
2017
2018
2019
2020
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Chief Executive’s review continued
The geographical analysis of metrology revenue is set
out below:
2020
£m
2019
£m
Change
%
APAC
EMEA
Americas
213.6
223.7
152.5
182.6
109.1
126.6
Total metrology revenue
475.2
532.9
-5
-16
-14
-11
Adjusted* operating profit for our metrology business was
£50.3m (2019: £90.6m).
We continued to invest in R&D, with total gross engineering
costs of £75.9m compared with £90.7m in 2019.
We launched a range of new products during the year.
The RFP fringe probe for our REVO measuring head allows
the inspection of freeform surfaces and complex geometry
on co-ordinate measuring machines (CMMs), including
delicate surfaces. Our machine tool product line introduced
the NC4+ Blue system, which features industry-first, blue
laser technology to deliver significant improvements in tool
measurement accuracy, including for very small tools.
It was a busy year for new launches within our position
encoder line, including the addition of new Functional Safety
(FS) certified encoders for use in safety-critical applications,
including medical robots and collaborative robots (cobots).
We also added ATOM DX, our smallest all-in-one digital
incremental encoder which eliminates the need for bulky
interfaces, new robust RKLC and RKLA stainless steel
tape scales for linear and partial arc applications, and
diagnostics tools (interfaces and software) to optimise set-
up and analysis of position encoders.
Healthcare
Revenue from our healthcare business for the year was
£35.0m, a decrease of 15% over the £41.0m last year.
There were reductions in all our healthcare product lines –
medical dental, neurological and spectroscopy.
The pandemic had a marked impact on our healthcare lines
including the postponement of non-essential operations,
which impacted orders for additively manufactured
medical implants and dental structures. The neurological
product line was most impacted, with orders for the
neuromate stereotactic robot delayed and consumable
sales reduced due to elective surgeries being put on hold.
The spectroscopy product line saw some impact from the
pandemic due to delayed shipments, primarily in China.
There was an Adjusted* operating profit of £1.4m,
compared with a profit of £3.1m last year, with three years of
continuous profit now achieved.
Healthcare also saw continued investment in R&D, with total
gross engineering costs in this business segment of £6.5m
compared with £7.2m in 2019.
New Raman spectroscopy products launched during
the year include: the Virsa Raman Analyser, a versatile,
fibre-optic-coupled system designed for reliable, detailed
analysis away from the confines of the laboratory; and the
inVia InSpect system, which is specifically targeted at the
forensic crime laboratory.
In February, the initial results were published of a joint
Phase 1-2 clinical study with Herantis Pharma plc, for the
investigation of cerebral dopamine neurotrophic factor
(CDNF) as a treatment for Parkinson’s disease. The initial
results indicate predictable and accurate placement of our
drug delivery device as well as its positive performance and
safety, allowing us to build towards its CE marking.
Strategy and markets
Our strategy is fundamentally based on long-term
investments in patented and innovative products and
processes, and high-quality manufacturing in all markets
around the globe (which has been a real strength during the
pandemic). This strategy is consistent across all the product
lines and market sectors in which we operate to deliver our
purpose (see page 14 for more information).
Renishaw has moved 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 deepen brand
loyalty and open up new revenue opportunities (see pages
12 and 13 for more information).
Despite the current challenges resulting from the
macroeconomic environment and the pandemic,
we continue to see external market growth drivers –
including global skills shortages, digitisation, requirements
for more capable products, near-shoring and reshoring,
a focus on reducing emissions and waste, population
growth and increasing life expectancy – that are creating
positive opportunities for our business.
We continue to reduce risk through the diversification of
applications for our products, 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 appropriately 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 short term is on maximising the benefits
of the investments we have made over the past few years
and clearly prioritising those projects that will either bring
faster revenue benefits or are strategically important to
the business.
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Strategic reportRenishaw plc Annual Report 2020
We continue to invest in the global roll-out of 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 £38.7m (2019: £56.8m), of which
£24.6m (2019: £25.4m) was spent on property and £14.1m
(2019: £31.4m) on plant and equipment and vehicles.
This year we completed the 94,000 sq ft extension to
the Innovation Centre at our New Mills site (although full
occupation has been delayed to save costs), purchased
land in Pune to provide for future expansion of our Indian
operations, and completed the build of a new design,
manufacturing and demonstration facility in Michigan, USA,
for Renishaw Fixturing Solutions.
Working capital
Group inventory reduced from £129.0m at the start of the
year to £105.5m, primarily reflecting the reduced demand
we experienced during the year. We continue to focus on
working capital management while remaining committed to
our policy of holding sufficient finished inventory to ensure
customer delivery performance, given our short order book.
Trade receivables decreased from £116.9m to £105.1m,
with debtor days at the end of the current year of 76 days
(2019: 67 days).
Net cash balances and bank deposits at 30 June 2020
were £120.4m, compared with £106.8m at 30 June
2019. Additionally, there is an escrow account of £10.6m
(2019: £10.5m) relating to the provision of security to the
UK defined benefit pension scheme.
Corporate 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:
assisted local organisations through charitable donations;
invested in developing the skills of our employees;
recruited apprentices and graduates on our training
schemes; reduced our absolute total greenhouse gas
(GHG) emissions by 22%; and reduced our accident
frequency rate1 to 15.55. We reached more than 20,000
children with our educational outreach programmes, as
well as donating more than 10,000 hours of paid time to
educational organisations during the 2018/19 academic
year. Further information on our key performance indicators
(KPIs) and GHG performance can be found on pages
16 and 17 and 46 and 47.
Our people
Our workforce at the end of June 2020 was 4,463
(2019: 5,041), a decrease of 11.5%. During the year,
96 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 74 industrial and
summer placements in the year.
This year we faced exceptional challenges, including
tough trading conditions, the first pandemic for 100 years,
a Group-wide redundancy programme, plus reduced
working hours and many UK employees being furloughed.
It is, therefore, testament to the skill, resilience and
compassion of our employees that they still continue to
introduce innovative new products, support our customers
in very trying circumstances, and assist our communities
at a time of crisis. We recognise the potential impacts of
the pandemic on the health of our people and we have
developed a COVID-19 Wellbeing Programme to add to our
existing Employee Assistance Programme.
I am truly grateful for the understanding and commitment of
our people during this exceptionally challenging year.
Brexit
The Board continues to oversee the work of the Brexit
Steering Group in identifying the key risks and mitigation
plans arising from a possible no-deal Brexit at the end of
the transition period. This includes the following actions
already taken in 2019: a new distribution warehouse in
Ireland which will significantly reduce the number of direct
shipments between the UK and the EU post Brexit (we are
currently supplying a number of EU customers from this
warehouse and this will increase during the remainder of
this current year); and a general increase in inventory of
certain components and finished goods held at our various
sites within the EU and the UK, which is being maintained
dynamically in line with required demand.
The Steering Group will continue to carefully monitor
ongoing developments in the Brexit process and
consider their impact against our current plans as the
situation becomes clearer through the remainder of this
calendar year.
Outlook
As a result of the timely actions detailed above, despite
a very challenging year, the Group is in a strong financial
position. We continue to invest in the development of new
products and applications, along with targeted investment
in production, and sales and marketing facilities around
the world. Given the uncertain macroeconomic backdrop,
including the pandemic and the risks posed by reduced
freedom of global trade, we expect very challenging
market conditions, particularly in the automotive and
aerospace sectors.
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
18 August 2020
* 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.
1 Accident frequency rate per million hours worked.
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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
All areas of our organisation
seek to work in partnership
with customers to
understand and solve
their current and anticipated
real-life problems.
We aim to provide solutions
that help customers
increase innovation, improve
quality, expand output and
enhance efficiency.
Innovative
engineering
Our strategy of investment in
R&D and engineering skills
enables us to take a longer-
term view of the viability of
new technologies.
We are actively expanding
our significant portfolio
of innovative and patented
products.
Successful
solutions
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 make
and sell them through our
manufacturing and
sales organisations.
For more about customers see
pages 12, 13, 15 and 43
For more about innovation see
pages 14 and 22 to 25
For more about solutions see
pages 15 and 22 to 25
Our KPIs are shown on pages 16 and 17
Information on the risks associated with our business and how we manage them is on pages 26 to 37
10
Strategic reportRenishaw plc Annual Report 2020
…generating value for a wide range of stakeholders
What the stakeholder needs
Our people
• Our 2019 UK engagement survey showed that
a key requirement is for career development
and progression opportunities.
How we considered them
What we delivered
• We are implementing a new global learning
management system, which will allow all
employees to complete and track training, and
take more responsibility for their own learning.
• We build and grow internal talent pipelines
through our early career development
programmes to meet our future business needs.
Investment in global training
and development
£1.6m
Number of people in further
education, graduate and
industrial programmes
433
Our customers
• Security of supply is always important to our
• We worked hard to ensure COVID-secure
Number of offices
customers but especially during the pandemic.
Many identify us as a critical supplier within
their supply chains.
manufacturing and distribution facilities around
the world could continue to operate even at the
height of the pandemic.
• Our customers require innovative products that
will enable them to improve quality, output and
process efficiency.
• We aim to build long-term relationships to
enable us to understand our customers’ true
needs and use this knowledge to inform future
technology innovations.
79
New product R&D spend
£66.6m
Our suppliers
• Many of our suppliers are SMEs and value long-
term ethical relationships, clear communications
and prompt payments.
• We have supply chain staff located in key
Average UK payment days
markets around the world to ensure regular
communication with suppliers in their
own language.
• We actively engage with suppliers to share
best practice and ensure ongoing improvement
programmes are in place.
45
Number of key UK suppliers
c.400
Our communities
• As a substantial employer and facility owner
around the world, our communities desire
Renishaw to be a responsible business
that is aware of its social, economic and
environmental impacts.
• We have regular engagement with groups from
across our communities, including business,
education, the third sector, elected political
representatives and environmental campaigners,
to understand and respond to their issues.
Charitable donations
£198,000+
Paid UK hours donated within
the 2018/19 academic year
10,000+
Our shareholders
• Many of our investors have held Renishaw shares
for decades and are looking for a long-term return
on their investment.
• They require the Board to take a similar approach,
with a commitment to the long-term, whether
making investments in people, products
or property.
• We believe that our shareholders want us to have
a strong focus on cash management, especially
in periods of economic uncertainty, and therefore
would support our decision to cancel the interim
dividend and not propose a final dividend.
TSR over the past five years
90%
Dividend paid in the year
No payment
For more about how we engage with our stakeholders see pages 38 to 49
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Shareholder informationFinancial statementsGovernanceStrategic reportRenishaw plc Annual Report 2020
Our markets
At Renishaw, we have spent nearly
50 years engineering change.
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).
Our technology solutions help manufacturers to maximise
production output, to significantly reduce the time taken to
produce and inspect components, to keep their machines
running reliably, and allow machine builders to manufacture
highly accurate and reliable products. Within the healthcare
sector our products are designed to improve medical
research and surgical procedures.
With businesses increasingly focused on their environmental
impact and the need to reduce costs, our products also
help customers to reduce energy consumption and
minimise waste, for example by reducing unproductive
machine time, eliminating scrap components and reducing
the total energy consumption required to produce the same
level of machined components.
We help customers make the most of our technology
through expert sales and service support in 37 countries
and 79 locations.
We have listed our principal markets and the specific key
drivers of demand within those markets for our products
on page 13.
There are also more generic market economic drivers that
impact our business. These include:
• energy costs – rising energy prices mean energy
consumers require products that help maximise
output; lower energy prices reduce investments by
energy providers;
• 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;
• global economic growth – growth in key geographic
markets and global trade impact demand in key sectors
that we supply;
• global pandemic – reduced consumer spending on
vehicles and restrictions on travel impact global demand
for civil aircraft;
• 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;
• life expectancy increasing globally – increased demand
for healthcare products and continuing demand for
consumer products;
• near-shoring and reshoring – global politics and
trade tensions are driving investment in new localised
manufacturing facilities; in high-labour cost markets this
requires automation and robotics to be competitive;
• population growth and rising incomes – increased
consumption in our principal markets; and
• requirements for more capable products – increased
investments in research and development and
manufacturing capabilities.
We continue to reduce risk through the diversification of
applications for our products, our customer base and our
routes to market.
Our business has transitioned over time 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 from dealing
directly 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 additive
manufacturing, calibration, measurement and automation,
and healthcare lines are primarily sold direct to the end
user. This helps to deepen brand loyalty and develop new
revenue opportunities, including hardware and software
upgrades, the cross-selling of complementary products and
maintenance contracts.
12
Strategic reportRenishaw plc Annual Report 2020
Aerospace
Aircraft are highly complex structures and their key assemblies
rely on our products throughout the supply chain, including
maintenance, repair and overhaul (MRO), for process control
and post-process inspection during their manufacture.
Key drivers include more fuel-efficient engines, lighter
components and cost-down pressures. Despite the short-term
impacts of the COVID-19 pandemic, we still expect long-term
growth in the civil aviation market, especially from Asia.
Consumer products
This fast-paced market demands flexible manufacturing
systems that can adapt to shorter life cycles, yet still
deliver high-quality, high-volume components. These are
necessary for the high standard of fit and finish increasingly
required for home appliances and enclosures on products
such as mobile devices, where we see a trend away
from metal to glass and ceramic which aids 5G signal
reception. Rising labour costs are driving the increased use
of automation, while 5G products require more complex
integrated circuits.
Agriculture
Many key components on high-end agricultural equipment
are subject to process control using Renishaw products, while
automation benefits our encoder line. There is increasing
demand for food products due to a growing global population
with rising disposable incomes, against a backdrop of climate
change. This requires greater investment in machinery for
intensive farming capabilities and new technology, including
Smart Farming techniques and automation, to increase yields
and reduce input and environmental costs.
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,
and safer procedures with reduced human error, increasing
the demand for medical robots for precision positioning.
Automotive
Many key components on domestic and commercial
internal combustion engine (ICE) based vehicles are
subject to process control using our products.
Although there is reduced capital investment in ICEs,
there are multiple opportunities for our products in the
research and manufacture of hybrid and electric 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.
Power generation
Whether fossil fuels, civil nuclear or renewable energy,
our products are used to control the production of key
componentry including power transmission systems,
bearings, generators and pumps. 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.
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, 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 and skills shortages
within the sector requiring more automation within
equipment manufacturers.
Resource exploration
Equipment for oil and gas exploration must be
manufactured to stringent safety standards, requiring
accurate, cost-effective and traceable processes.
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.
13
Shareholder informationFinancial statementsGovernanceStrategic reportRenishaw plc Annual Report 2020
Our strategy
Our strategy focuses on key elements that keep our business model running.
1
People and culture
Delivering success through the
strength of our talented and
committed employees.
Our success is a result of the commitment, skills and
ingenuity of our 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. They provide the foundation for us to work
successfully towards our strategy, fulfil our purpose and
continue to build a sustainable and successful Group.
We are focused on delivering an internal communications
strategy to ensure effective information sharing,
engagement and feedback across the Group. Our focus
on learning and development, and leadership and
management training, is complemented by a new
performance review process.
• 470 UK managers completed mental health awareness
workshops and we implemented a UK network of mental
health first aiders
• We implemented Workday as our global HR system,
providing immediate access to business-critical
information with high levels of data accuracy, integrity
and security
• We created a Diversity and Inclusion Group focused
on establishing a more inclusive culture and
diverse workforce.
2
Continuous R&D
Creating strong market positions
with innovative products.
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 are prepared to take a long-term view with R&D and
continue 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 specialties.
• 17 new patent applications filed and 89 previously filed
patents granted during the year
• The new RFP fringe probe for the REVO measurement
system allows the inspection of freeform surfaces and
complex geometry, including delicate surfaces
• Featuring industry-first, blue laser technology, the new
NC4+ Blue system delivers significant improvements in
tool measurement accuracy including for very small tools.
3
High-quality manufacturing
Delivering robust and reliable products
tested to our exacting standards.
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
relationships with our third-party suppliers. We also have
supply chain management teams based in China, India
and Ireland.
• Despite huge challenges associated with the pandemic,
including our global supply chain and the necessity to
rapidly implement social distancing, hygiene measures
and remote working, we were able to maintain supply to
customers throughout the period
• New investments in electronics manufacturing capability
and a significant upgrade of IT infrastructure to support
our operational challenges.
14
Strategic reportRenishaw plc Annual Report 2020
4
Global customer support
Ensuring our customers recognise
Renishaw as a critical part of their
value chain.
We are passionate in our 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.
5
Delivering solutions
We are very focused on having a long-term relationship
with our customers. It is not just about a sale but also about
supporting and helping them to develop their processes,
and improving the quality of their product output.
• New 52,000 sq ft facility for Renishaw Fixturing
Solutions in Michigan, USA, expanding the design and
manufacturing capability for metrology fixturing and
including customer demonstration facilities
• Warehouse established in Ireland to allow direct
shipments to EU customers ensuring no disruption due
to Brexit
• Largest ever exhibition stands at EMO Hannover enabled
customers from around the world to see our full range of
metrology and additive manufacturing solutions.
Understanding our customers’ needs
to offer cost-effective, efficient and
easy-to-use solutions.
Our business has transitioned over time 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 cost-effective,
efficient and easy-to-use solutions.
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.
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.
• Memorandum of Understanding with BAE Systems
(UK) to work together on the development of additive
manufacturing capability for the aerospace and
defence sector
• Retrofitting a REVO 5-axis measurement system to a
flood-damaged CMM reduced cycle time by up to 55%
for Precision Machine & Auto Components (India)
• Automating workpiece set-up using machine tool
probing systems and software, Tigercat Industries Inc
(Canada) achieved a 75% reduction in set-up times in the
manufacture of forestry equipment components.
15
Shareholder informationFinancial statementsGovernanceStrategic reportRenishaw plc Annual Report 2020
Key performance indicators
The main performance measures monitored by the Board are:
Financial
Revenue £m
611.5
574.0
536.8
510.2
427.2
Total engineering costs
including R&D £m
9
.
7
8 9
.
9
8
3
.
7
8
4
.
2
8
6
.
3
8
4
.
7
7
0
.
8
8 7
.
8
6
8
.
8
6
2
.
3
6
Non-financial
UK employee turnover %
15.0
14.4
13.2
12.3
7.71
8.0
5.7
7.01
5.5
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
2018
2017
2016
2019
2020
We are focused on long-term growth
in revenue, through increasing our
market and geographic penetration and
continually introducing new products,
and supporting revenue growth by using
the Group’s worldwide marketing and
distribution infrastructure. Revenue in 2020
was adversely affected by challenging
global trading conditions, including the
COVID-19 pandemic.
The growth of the business is fundamentally
dependent on 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
typically in the range of 13−18% of Group
revenue, and has also been accelerating
new product development in certain areas.
Included in the Consolidated income statement
Gross expenditure
Adjusted profit before tax £m
Statutory profit before tax £m
145.1
155.2
109.1
103.9
87.5
117.1
109.9
48.6
61.7
3.2
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 leavers through discontinued
operations in 2017, site closures, redundancy
programmes and completion of fixed-
term contracts
Renishaw UK average (not published for 2020)
Number of new placements
and graduates
76
65
45
100
100
105
62
73
35
74
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
We aim to achieve growth in both statutory profit before tax and adjusted profit before tax,
with the adjusted measure being used by the Board to better review the underlying trading
profits of the Group, as explained in note 25, Alternative performance measures. The past
two years have shown a year-on-year reduction in both measures due to ongoing challenging
global trading conditions, with 2020 further impacted by the COVID-19 pandemic.
Dividend per share in respect
of the year pence
60.0
60.0
52.0
48.0
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.
Graduates
Placements
Number of apprentices in training
192
131
120
140
144
2016
2017
2018
2019
0
2020
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 growth. In exceptional circumstances the Board may deem it appropriate not to
issue a dividend, which was the case for 2020, with cash preservation being a key focus.
2016
2017
2018
2019
2020
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.
16
Strategic reportRenishaw plc Annual Report 2020
Total lost working time injuries
per million hours worked
2.1
2.1
2.1
2.1
2.1
0.8
0.4
0.2
0.95
0.54
2016
2017
2018
2019
2020
In a manufacturing environment, it is crucial
that we maintain high standards of health
and safety.
We have had no fatalities this year.
A breakdown of reportable accidents is
given on page 42.
Our aim is to have zero fatalities and zero
lost working time injuries.
Renishaw UK average
Energy consumption
Target
reduce our reliance on fossil-fuel derived energy through onsite generation
and the purchasing of renewable electricity.
Progress
59%
of operational energy (78% of electricity) across the Group was from renewable
sources (2019: energy: 59%; electricity: 79%).
3,674,381 kWh
of electricity across the Group was from on site generation (2019: 2,595,527).
For more information see page 46
Statutory GHG emissions
tCO2e per £m turnover
58.94
CO
GHG emissions
31.06
19.30
14.21 14.78
Target
3% reduction in statutory GHG emissions (tCO2e) per
£m turnover compared with 2019.
2019
2017
2016
2018
2020
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).
Group energy consumption
kWh
17.5m 17.5m
18.7m
19.6m
18.2m
33.1m
34.1m
35.6m
35.0m
31.4m
2016
2017
2018
2019
2020
Non-UK
UK
Progress
4%
increase in market-based statutory GHG emissions (tCO2e) per £m turnover
compared with 2019 (65% decrease compared with 2015, our base year).
8%
decrease in statutory GHG emissions compared with 2019
(63% decrease compared with 2015).
For more information see page 46
17
Shareholder informationFinancial statementsGovernanceStrategic reportRenishaw plc Annual Report 2020
Financial review
During a very challenging year,
the Board has heightened
its focus on preserving
cash balances and reducing
operating costs. We remain
confident in the long-term
prospects of the Group,
and continue to focus on
productivity improvements.
Allen Roberts
Group Finance Director
18
Overview
Revenue for the year amounted to £510.2m with Adjusted
profit before tax of £48.6m and statutory profit before tax
of £3.2m. Adjusted profit before tax is a key alternative
performance measure by which the Board evaluates the
Group’s performance as it better represents the underlying
trading of the Group, with restructuring costs and fair
value gains and losses on financial instruments not
eligible for hedge accounting excluded from this measure.
Further details of alternative performance measures are
provided in note 25. Cash preservation has always been a
key focus for the Board, particularly this year due to the high
level of uncertainty caused by the COVID-19 pandemic,
with net cash and bank deposit balances at the year end
of £120.4m (2019: £106.8m). The balance sheet remains
strong with total equity of £546.9m (2019: £583.3m).
Revenue
Revenue for the year amounted to £510.2m, compared with
£574.0m last year. It has been a very challenging trading
year for the Group due to the global macroeconomic
environment, initially due to the ongoing uncertainty caused
by the trade tensions between the USA and China and
weaker demand in the machine tool sector, compounded in
the second half of the year by the impact of the COVID-19
pandemic. The previous year also benefited from a number
of large orders from end-user manufacturers of consumer
electronic products in the APAC region which have not been
repeated to the same extent this year.
In our metrology business segment, revenue was £475.2m,
compared with £532.9m last year. Revenue in our healthcare
business segment was £35.0m, compared with £41.0m
last year.
Revenue analysis by region
2020
revenue
at actual
exchange
rates
£m
227.7
167.3
115.2
510.2
2019
revenue
at actual
exchange
rates
£m
240.1
201.3
132.6
574.0
Underlying
change at
constant
exchange
rates
%
-7
-17
-14
-13
Change
from
2019
%
-5
-17
-13
-11
APAC
EMEA
Americas
Total Group revenue
A geographical analysis of our metrology and healthcare
businesses is shown on page 3.
Operating costs
During the year we have taken a number of actions to
improve productivity and reduce the Group’s cost base in
response to the challenging trading conditions we were
facing, which were compounded in the second half of the
year by the pandemic. Group headcount has decreased
from 5,041 at 30 June 2019 to 4,463 at 30 June 2020, with
the average for the year of 4,797 compared with 4,968 last
year. Headcount reductions were mostly attributable to the
activities described in the restructuring costs section of
this review and the non-replacement of staff who left the
business. Labour costs were also mitigated by reduced
working hours and many employees being furloughed.
Strategic reportRenishaw plc Annual Report 2020
The resultant labour costs for the year were down 7% to
£221.3m (2019: £237.4m), including global job retention
grant income totalling £4.5m this year (2019: £nil).
The AM restructuring costs, including write-downs
of tangible fixed assets, inventories and capitalised
development costs, totalled £17.5m.
The ongoing macroeconomic conditions have resulted in
a higher level of uncertainty around the recoverability of
certain assets including capitalised development costs
and trade receivables. Excluding amounts included
in restructuring costs, impairments of capitalised
development costs totalled £9.9m (2019: £nil) relating
primarily to metrology products of a capital nature and
where the high-volume growth previously anticipated is
now less predictable. Movements in the provision for trade
receivables resulted in a charge to the Consolidated income
statement of £2.9m, mainly as a result of an increase in
the expected credit loss allowance, and this year also
included a £1.6m charge from the impairment of other
intangible assets.
Actions were also put in place to significantly reduce
discretionary spend such as travel and exhibitions, which
have also contributed to the decrease in operating costs.
Restructuring
The Board’s Fit for the future strategy was implemented
this year. This involved the reorganisation and
rationalisation of certain operating activities, particularly
related to our AM business including the closure of our
Staffordshire site and a rationalisation of the AM product
range to focus on our successful multi-laser platform.
Also included in restructuring costs are redundancy costs
of £6.3m, mostly relating to the UK redundancy programme
introduced as part of the business resizing.
Total restructuring costs for the year were £23.8m and
have been reported separately in the Consolidated
income statement. Further details are provided in note 26.
The comparatives for each of these items in 2019 was £nil.
Research and development
Gross expenditure on engineering costs, including R&D
on new products, was £82.4m (2019: £97.9m). The gross
charge amounts to 16% of Group revenue (2019: 17%).
The R&D tax credit in 2020 amounted to £4.4m compared
with £5.1m in 2019. Further details are provided in note 4.
Gross expenditure on engineering costs was £75.9m
(2019: £90.7m) in our metrology segment and £6.5m
(2019: £7.2m) in our healthcare segment.
New product R&D expenditure amounted to £66.6m, which
compares with £75.0m 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 2021
financial year.
Adjusted profit before tax bridge
£m
150.0
100.0
50.0
0
103.9
9
1
0
2
12.4
-48.0
-9.9
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19
Shareholder informationFinancial statementsGovernanceStrategic reportRenishaw plc Annual Report 2020 Financial review continued
Profit and tax
Adjusted profit before tax amounted to £48.6m compared
with £103.9m in 2019. Statutory profit before tax was £3.2m
compared with £109.9m in the previous year.
Last year benefited from a £6.0m currency gain, primarily
in respect of intra-group balances, compared with a loss
of £2.6m this year. This year also included a net gain of
£2.3m arising from the fair value adjustment of a convertible
loan, a partial disposal of shares and a subsequent partial
impairment of the investment and loans, all relating to our
associate company.
In our metrology business, Adjusted operating profit was
£50.3m compared with £90.6m last year, while in our
healthcare business, Adjusted operating profit was £1.4m
compared with £3.1m last year.
The overall effective rate of tax was 91.0% (2019: 16.1%).
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.
The year-on-year rate increase primarily arises from an
increase in the deferred tax rate in the UK from 17% to 19%
resulting in a charge of £1.1m, UK losses resulting in no
patent box benefit this year (2019: £1.8m credit) and the
partial derecognition of deferred tax assets for US tax losses
and excess interest totalling £3.0m. Note 8 provides further
analysis of the effective tax rate.
Sources and uses of cash
Consolidated balance sheet
Total equity at the end of the year was £546.9m, compared
with £583.3m at 30 June 2019, primarily as a result of
dividends paid of £33.5m and an increase in pension
liabilities due to changes in the discount rate and
inflation assumptions.
As a result of the high levels of uncertainty arising from
the COVID-19 pandemic, the Board has focused on cash
preservation, with capital expenditure significantly lower
in the second half of the financial year, reduced inventory
levels compared with December 2019 and the cancellation
of the interim dividend.
Net cash and bank deposit balances at 30 June 2020 were
£120.4m (2019: £106.8m). In line with our capital allocation
strategy (see following page), the chart below summarises
our sources and uses of cash for the year, reconciling
opening to closing cash and bank deposit balances.
Additions to property, plant and equipment and vehicles
totalled £38.7m, of which £24.6m was spent on property
and £14.1m on plant and machinery, IT equipment and
infrastructure, and vehicles.
£28.4m of the additions were incurred in the first half of the
year, with spend in the second half significantly lower at
£10.3m.
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Capital allocation strategy
Other uses of cash
20
Strategic reportRenishaw plc Annual Report 2020 The main additions were:
– in the UK, completion of the 94,000 sq ft extension to our
Renishaw Innovation Centre;
– acquisition of property in Pune, India to provide capacity
for future growth;
– refurbishment of the building purchased in Nagoya, Japan
last year; and
– completion of the new facility for Renishaw Fixturing
Solutions in Michigan, USA.
Within working capital, inventories decreased to £105.5m
from £129.0m at the beginning of the year, primarily as
a result of the lower trading levels. 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 £116.9m to £105.1m,
while debtor days were 76 at the end of the year, compared
with 67 at the end of last year.
Pensions
At the end of the year, the Group’s defined benefit pension
schemes, now closed for future accrual, showed a deficit
of £64.9m, compared with a deficit of £51.9m at 30 June
2019. Defined benefit pension schemes’ assets at 30 June
2020 increased to £188.6m from £181.6m at 30 June 2019,
primarily reflecting funding of £11.8m less benefits paid of
£6.9m.
Pension scheme liabilities increased from £233.5m to
£253.5m, primarily reflecting the net impact of decreases
in the discount rate, RPI and CPI for the UK defined benefit
scheme since 30 June 2019. According to the terms of the
deficit funding plan agreed with The Pensions Regulator,
the Company will pay £8.7m per annum into the scheme
for five years, effective from 1 October 2018. 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.
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, to maximise interest income
on cash deposits and to ensure appropriate funding
arrangements are available for each Group company.
The Group uses forward exchange contracts to hedge a
proportion of anticipated foreign currency cash inflows
and the translation of foreign currency denominated
intercompany balances. There are forward contracts in
place to hedge against the Group’s Euro, US Dollar and
Japanese Yen cash inflows and to offset movements
on Renishaw plc’s Euro, US Dollar and Japanese Yen
intercompany balances. The Group does not speculate with
derivative financial instruments.
Most of these forward contracts are subject to hedge
accounting under IFRS 9 ‘Financial Instruments’.
The hedged item in these contracts is the revenue forecasts
of Renishaw plc and Renishaw UK Sales Limited, and
during the year these forecasts were reduced due to the
global macroeconomic uncertainty. This has resulted in
proportions of forward contracts failing hedge effectiveness
testing according to IFRS 9.
Gains and losses which recycle through the Consolidated
income statement as a result of ineffectiveness are excluded
from adjusted profit measures. See note 20 for further
details on financial instruments and note 25 on alternative
performance measures.
Earnings per share and dividend
Adjusted earnings per share is 51.0p compared with 119.9p
last year.
Statutory earnings per share is 0.4p compared with 126.7p
last year.
In light of the increased global macroeconomic uncertainty
experienced in the first half of the year, and with redundancy
programmes in progress, the Directors elected to waive
their right to the interim dividend. Following the outbreak
of the COVID-19 pandemic, and according to the Board’s
priority of conserving cash and managing the Group in
a prudent manner through this period of uncertainty, the
interim dividend for the year was then cancelled, and no
final dividend is declared in respect of the year.
The Board will review its position on dividends during the
next financial year with the intention of reinstating its long-
term progressive dividend policy as soon as it is appropriate
to do so. While we have confirmed eligibility to participate in
the Coronavirus Corporate Finance Facility (CCFF), we do
not anticipate issuing commercial paper under the scheme.
If commercial paper were to be issued with a maturity date
on or after 19 May 2021, no dividends could be declared
until all related financing was repaid.
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, and to improve productivity, while managing
expenditure appropriate to trading conditions. This is
evidenced in the year with investments in capital and R&D
(see chart on previous page). 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. In exceptional circumstances the Board
may deem it appropriate to not issue a dividend.
Allen Roberts
Group Finance Director
18 August 2020
21
Shareholder informationFinancial statementsGovernanceStrategic reportRenishaw plc Annual Report 2020 Metrology
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
Performance
It was a challenging year for our metrology business.
Even before the pandemic, we were facing trading
challenges including the ongoing uncertainty caused by
the trade tensions between the USA and China and weaker
demand in the machine tool sector. There was, however,
good growth in our position encoder product line, with sales
of our optical and laser encoder products benefiting from a
recovery in the semiconductor market.
We initially experienced reduced demand in China due
to the Chinese Government’s actions to deal with the
COVID-19 outbreak, but we have since seen a good
recovery as factories have reopened. In our EMEA and
Americas markets we did not experience a significant
change in demand during the year as a result of the
pandemic, but we believe that the effects will begin to be
felt during the first half of the 2021 financial year.
The position encoder line benefited from a number of
positive market drivers during the year including the
ongoing investment in new flat panel display technologies,
commercialisation of new 7 nm semiconductor processes
(and the preparation of 5 nm processes for mass production
from the end of 2020), and the rollout of 5G programmes,
including both infrastructure and new mobile devices.
The latter requires more complex integrated circuits
and significant investment in manufacturing plants to be
produced in volume. As a result of the pandemic, and
the requirement for increased remote working and home
entertainment during lockdowns, the encoder line is also
benefiting from the global demand for telecommunications
equipment and data centres for streaming and cloud
storage. Similarly, the demand for video gaming has
increased sales of graphics processors, gaming consoles
and desktop PC components. There has been a resurgence
in demand for cryptocurrencies.
All of the position encoders supplied by the Group,
including magnetic encoders from our joint venture, RLS,
also continue to benefit from the ongoing global drive
towards industrial automation, including semiconductor
processing and materials handling, which aims to increase
capacity and flexibility, while reducing manufacturing lead
times and costs.
Market conditions
It was a difficult year for most of our metrology lines.
The important machine tool market was impacted by
reduced global demand for new machines, particularly
from China, with weakness in key sectors including
aerospace, automotive, consumer electronics, and oil and
gas. This affected many of our metrology product lines,
including our machine tool probe systems that are primarily
installed on new machines, and our calibration products
which saw reduced demand due to lower sales and less
utilisation of production machinery.
22
Strategic reportRenishaw plc Annual Report 2020 Although the AM line continued to benefit from the
adoption of our RenAM 500Q multi-laser system for high-
quality, productive metal part production, demand was
impacted by the global macroeconomic environment.
We are focused on those customers who are committed
to the integration of AM for volume production and require
multiple system installations. We are working closely with
Sandvik in Sweden, which is using our systems to develop
process parameters for a range of metal powders, with a
focus on qualifying in-house developed alloys for industrial
and medical applications. In December we signed a
Memorandum of Understanding with BAE Systems (UK) to
work together on the development of AM capability for the
aerospace and defence sector, designed to help improve
performance, reduce costs and speed up manufacturing
processes on combat aircraft of the future.
There has been a pronounced impact on the aerospace
and automotive sectors due to the pandemic, but there
remain opportunities for our metrology products due to
the drive to reduce costs, shorten lead times, meet the
need for increased complexity and closer tolerances in
product design, shorter vehicle life cycles, and the global
trend towards e-mobility (see page 13). This will benefit our
measurement and automation line with its flexible gauges,
and we are also seeing the continued adoption of our multi-
sensor REVO CMM technology for evaluating products both
during early-stage development and during production.
In Spain, we are collaborating with ITP Aero (a Rolls-Royce
subsidiary) on various projects that aim to utilise AM for
the production of new generation aeroengine turbine
components, and qualify those parts using our REVO
measurement technologies. During the year we launched
the RFP fringe probe which allows the inspection of freeform
surfaces and complex geometry, including delicate
surfaces, aerospace blades and automotive cylinder head
combustion chambers.
Strategy for growth
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.
We therefore continued to invest in R&D, with total gross
engineering costs of £75.9m 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, are
easier to use and help them bring connectivity and the
intelligent use of data within their manufacturing processes.
These include: miniaturised high-resolution position
feedback systems that support the manufacture of high-
precision electronics; multi-sensor capability for CMMs;
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; and simplified
software, including apps, for machine tool and CMM
probing, calibration and gauging.
Metrology in numbers 2020
Revenue
£475.2m
-10.8% (2019: £532.9m)
Adjusted operating profit
£50.3m
-44.5% (2019: £90.6m)
Percentage of Group revenue
93%
(2019: 93%)
Key developments
During the year we introduced new products for our
machine tool product line including the NC4+ Blue system,
which features industry-first, blue laser technology to deliver
significant improvements in tool measurement accuracy,
including for very small tools. New within our calibration line
is Compensate software, which works with the XM-60 multi-
axis calibrator to allow volumetric compensation to be
automatically applied to correct a machine tool’s positioning
errors in multiple degrees of freedom that vary throughout its
working volume.
It was a busy year for new launches within our position
encoder line, including the addition of new functional safety
(FS) certified encoders for use in safety critical applications,
including medical robots and collaborative robots (cobots).
We also added ATOM DX, our smallest all-in-one digital
incremental encoder which eliminates the need for bulky
interfaces, new robust RKLC and RKLA stainless steel
tape scales for linear and partial arc applications, and
diagnostics tools (interfaces and software) to optimise set-
up and analysis of position encoders.
Outlook
A detailed analysis of the key markets for our metrology
products can be seen in Our markets (page 12).
Given the uncertain macroeconomic backdrop, including
the pandemic and the risks posed by reduced freedom of
global trade, we expect very challenging market conditions,
particularly in the automotive and aerospace sectors.
However, 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, consumer electronics and power generation
(including renewables), all of which will require products that
help drive efficiencies to maximise valuable resources and
minimise waste.
23
Shareholder informationFinancial statementsGovernanceStrategic reportRenishaw plc Annual Report 2020 Healthcare
Our healthcare products are
designed to improve medical
research and surgical procedures.
Life expectancy
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 error. All our
healthcare product lines are well placed to
deliver on these requirements.
Applications
Our technologies are being applied to an
ever-increasing number of applications
within healthcare, including brain surgery,
reconstructive surgery and dentistry.
Key markets
Our key markets are dental, neurological
and craniomaxillofacial products as well
as Raman spectroscopy.
For further information, visit
www.renishaw.com/healthcare
24
Performance
It was also a challenging year for our healthcare business.
The medical dental, neurological and spectroscopy
product lines all experienced a decline in sales,
seeing an impact from the pandemic and the global
macroeconomic environment.
The medical dental product line experienced a significant
impact from the pandemic. Shipments and installations
of healthcare-configured AM machines were delayed
by business closures and travel restrictions, and the
postponement of non-essential operations impacted
orders for additively manufactured medical implants and
dental structures.
The spectroscopy product line saw some impact from the
pandemic due to delayed shipments, primarily in China,
where we are now seeing a return to normal levels of business.
However, the line has continued to expand its range of
applications and instrumentation. Environmental applications
continued to grow, with equipment being used for the detection
of microplastics: airborne, in water courses and the food chain.
In addition, the requirement for energy storage due to less
predictable renewable sources, the demand for faster charging
and longer battery life and the trend to e-mobility, have all
seen increased interest in the use of Raman spectroscopy for
battery research.
Industrial applications of Raman spectroscopy and
imaging are being driven by increasingly complex
chemical formulations in everyday products including
polymer laminates in household products and complex
medical products.
There has been increasing use of Raman spectroscopy in
research into disease detection. Raman could provide a
useful tool for early-stage cancer detection, with a number of
research institutes and companies developing technologies
using Renishaw equipment for early stage screening in
both tissue and blood. This liquid biopsy has potential to be
used as a universal screening technique for many diseases.
In addition, Raman can be used in the detection of other
infections including bacterial and viral, and we have seen
an interest in this area as a response to recent government
funding initiatives aimed at developing rapid virus testing
methods. This includes researchers from the Czech Academy
of Sciences who have been testing a novel way to identify
Staphylococcal bacteria, paving the way for faster diagnosis
and treatment of infectious diseases.
The neurological product line was most impacted by the
COVID-19 crisis. Orders for the neuromate stereotactic
robot were delayed and consumable sales reduced due to
non-essential surgeries being put on hold. However, there
remains underlying demand for robots in neurosurgery,
which is still an emerging market, with installations of
neuromate commissioned globally including Finland,
France, Saudi Arabia, Spain and North America, primarily
for stereoelectroencephalography (SEEG) procedures
used in the treatment of epilepsy. This included the world-
renowned neurosurgery and epilepsy centre at the Toronto
Western Hospital, Canada, where surgeons Dr Taufik
Valiante and Dr Suneil Kalia talking about the acquisition of
a neuromate robot said, “This allows us to provide cutting
edge care for our patients and embark on the research
and development of technologies for the next generation of
neuromodulation applications.”
Strategic reportRenishaw plc Annual Report 2020 During the year, it was reported that the world’s
youngest patient to receive deep brain stimulation
(DBS) underwent surgery at Evelina London Children’s
Hospital, UK, aimed at helping the two-year-old patient
to manage her symptoms of dystonia. The surgery was
particularly challenging given that the space within
the skull of such a young child is small and difficult to
navigate. Neurosurgeons Mr Richard Selway and Mr Haru
Hasegawa, who performed the surgery, commented,
“The Renishaw neuromate robot, with the 3D neurolocate
technology, enabled reliable and accurate placement
of the electrodes into the target deep inside the
patient’s brain.”
Market conditions
The pandemic has significantly reduced the number of
elective surgeries, which is impacting our medical dental
business and consumable sales for our neurosurgical
business. However, 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 and
more patient-specific treatments (e.g. implants). All our
healthcare product lines are well placed to deliver on
these requirements.
Academic funding has been reduced due to economic
conditions in some markets. The pandemic has caused a
slowdown in the mechanisms of procurement, equipment
demonstration and testing on customer samples within the
university research sector. However, much of this funding
is already allocated and will be released as universities
return to work; we have adapted to perform virtual product
demonstrations. We have seen a nervousness to invest
from some industrial customers, however the spectroscopy
product line is often used for troubleshooting and critical
development, and we are well placed once these customers
return to operations.
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 continued to invest
in R&D, with total gross engineering costs in this business
segment of £6.5m during the year. The regulatory
requirements for healthcare products demand
significant investment but make barriers to entry high for
competitive products.
We employ our core metrology technologies and
manufacturing expertise to minimise technology risks and
we actively seek out collaborations that will assist research
and our routes to market.
Key developments
In February 2020, the initial results were published of a
joint Phase 1-2 clinical study with Herantis Pharma plc,
for the investigation of cerebral dopamine neurotrophic
factor (CDNF) as a treatment for Parkinson’s disease.
Healthcare in numbers 2020
Revenue
£35.0m
-14.6% (2019: £41.0m)
Adjusted operating profit
£1.4m
-54.8% (2019: £3.1m)
Percentage of Group revenue
7%
(2019: 7%)
Our intraparenchymal drug delivery device had a critical
role in the study and the initial results indicate predictable
and accurate placement of the device as well as its positive
performance and safety, allowing us to build towards its
CE marking, so that further neurodegenerative and neuro-
oncological conditions can benefit from our technology.
During the year there have been several new spectroscopy
product innovations. A major launch was the Virsa
Raman Analyser, a versatile, fibre-optic-coupled Raman
spectroscopy system designed for reliable, detailed remote
analysis. This high-performance transportable Raman
spectroscopy system allows spectroscopic analysis away
from the confines of the laboratory microscope, opening up
diverse new markets and environments, including process
development, art and heritage, geology and forensics.
With its microscopic chemical specificity, Raman
spectroscopy has a unique place in forensic crime
laboratories and the new purpose-built inVia InSpect
system helps to target our solutions at a known market.
An additional development during the year was software
to correlate and combine images from other microscopy
systems, including SEM and AFM, with Renishaw
Raman images.
Outlook
The market for Raman spectroscopy continues to grow in
many areas and with an increased range of products we
are well placed to exploit new and growing applications
including medical, advanced materials and environmental.
In developing markets, levels of wealth have been
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.
25
Shareholder informationFinancial statementsGovernanceStrategic reportRenishaw plc Annual Report 2020 Risk and risk management
Effective risk management is critical to helping our business achieve its strategic
objectives and remaining a company led by innovation.
Overview of risk management
The Board has overall responsibility for risk management
and the system of internal controls. In particular, the Board
is focused on determining the extent of risk the Company
is willing to take in order to achieve its strategic objectives
and which risks pose the greatest threats and opportunities,
having regard to the internal and external environments in
which we operate.
The Board is supported by the Audit Committee, which
has responsibility for overseeing the effectiveness of risk
management and the internal control systems. It advises
the Board on principal risks that may threaten solvency
or liquidity.
The Executive Committee, which is responsible for
delivering the strategy set by the Board, helps to evaluate
those strategies against our risk appetite.
The risk committee, comprising a number of Executive
Committee members (including the Group Finance Director)
and senior management from across the business, helps
to create the risk management framework, which includes
all aspects of risk management such as governance and
identification of risks, as well as the management and
reporting of those risks.
Effective day-to-day risk management is embedded within
our operational business units. This is where the controls
are designed and implemented, and risks are identified at
an early stage and mitigated or escalated, as appropriate.
This bottom-up approach then feeds into the risk committee,
which manages the central repository of risk data from
across the business divisions and the regions in terms of
their respective principal risks.
Independent oversight
The internal audit team operates independently, reporting to
the Audit Committee. Scheduled visits to Group companies
were held in person, prior to the outbreak of COVID-19,
and were conducted via video conference facilities
during the travel restrictions as a result of the pandemic.
These were 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.
Independent oversight
Audit
Committee
• Reviews effectiveness
of the Group’s risk
management and internal
control processes
• Supports the Board in
monitoring risk exposure
Internal
Audit
• Provides input on the
effectiveness of the
risk programme
• Assesses the effectiveness
of controls for key risks,
particularly financial risks
n
w
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p
o
T
p
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t
t
o
B
Board
• Overarching responsibility
for risk management
Executive
Committee
• Reviews principal risks
• Evaluates proposed
strategies against
risk appetite
Risk
committee
• Creates the risk framework
• Aggregates
risk information
• Assists senior
management with
the identification and
management of principal
and emerging risks
Operational
managers
• Design and implement
key controls
• Embed risk management
• Monitor risks and respond
to manage those risks
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26
Strategic reportRenishaw plc Annual Report 2020
Activities during the year
The risk committee undertook a comprehensive review of
the Group’s approach to risk management at the end of
2019. This has resulted in a number of changes which affect
the whole life cycle of risk management, namely:
Brexit
Brexit is not considered to be one of the Company’s
principal risks, however it is factored into some of our
principal risks, notably supply chain dependencies, industry
fluctuations, and economic and political uncertainty.
• Governance – the terms of reference and composition of
the risk committee have been reviewed and amended;
• Identification – a new ‘top down’ approach has been
implemented whereby more than 20 senior executives
across the business are interviewed on a one-to-one
basis annually to help formulate the Group’s principal
risks. As from FY 2021, the output from this exercise will
be combined with the results from a ‘bottom up’ exercise
in which the key risks from the subsidiaries and the
divisions are aggregated;
In terms of our responses to the risk of Brexit, in 2018 we
formally established a Brexit steering group to evaluate
the potential impact of the UK’s departure from the EU on
the Group and make recommendations where required
and implement agreed actions. The UK left the European
Union (EU) on 31 January 2020 and there is now a transition
period until 31 December 2020. During this transition period,
the UK will effectively remain within the EU’s Customs Union
and Single Market, allowing trading to continue under
existing arrangements.
• Accountability – risk owners are now clearly identified
for all of the Group’s principal risks and will be invited
to present on the management of their risk at the risk
committee and/or the Executive Committee, Audit
Committee or Board; and
The Board continues to oversee the work of the Brexit
steering group in identifying the key risks and mitigation
plans arising from a possible ‘no deal’ Brexit at the end of
the transition period. This includes the following actions
taken in 2019:
• Reporting – the way in which we report and communicate
on our principal risks is improving. It is based on the
rationale that greater transparency and clarity leads to an
improved understanding of key areas for improvement
and allows both the Internal Audit function and
management to understand where to focus resources
and attention.
COVID-19
As mentioned earlier in this Strategic report, trading
conditions in the first half of this financial year were already
challenging due to the macroeconomic climate being
affected by increasing trade tensions between the US and
China. This was further compounded by the spread of
COVID-19 in the second half of the year.
The Organisation for Economic Development considers this
pandemic to be the greatest danger to the global economy
since the 2008 financial crisis. Although its full effects on
the macroeconomic environment are not yet known, it has
certainly had a wide ranging impact on a variety of risks
within the Company, including operational and financial
risks, such as those involving supply chain, people, industry
fluctuations, economic and political uncertainty, and
exchange rates. Rather than include a separate standalone
risk for COVID-19, the Company has reported on the impact
of the pandemic on each of its principal risks, as set out in
the table below see pages 29 to 36.
Priorities for the year ahead
• Increased focus on emerging risks
• Conducting deep dives on all our principal risks across
one or more of our governance bodies
• Improved reporting on action plans to address and
mitigate the principal risks
• Improved assessment, in a meaningful and relevant way,
of risk appetite and risk tolerance
• Ongoing focus on Brexit and trade-related disputes.
1. The establishment of a new distribution warehouse in
Ireland which will significantly reduce the number of
direct shipments between the UK and EU post Brexit.
We are currently supplying a number of EU customers
from this new warehouse and this will increase further
during the remainder of 2020.
2. A general increase in inventory of certain components
and finished goods held at our various sites within the
EU and UK which is being maintained dynamically in line
with the required demand.
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 becomes
clearer through the remainder of 2020.
Data protection
Renishaw remains committed to achieving high standards
of compliance with the General Data Protection Regulation
(GDPR) and other existing and emerging data protection
laws in the countries in which we operate. Integral to our
compliance programme is a focus on implementing the
relevant standards across the business, continuing to roll
out awareness training and providing access to tools which
will help to automate some of the key requirements.
Cyber security
Renishaw continues to be vigilant in addressing the ongoing
cyber security threat. The spread of COVID-19 and the
introduction of a lockdown in many countries across the
business meant that there was an immediate and extensive
requirement for remote working which was delivered with
minimal disruption. The Company continues to adopt
industry best practices and invest in technologies (including
extensive monitoring capabilities) to deal with this dynamic
risk, and to ensure the information security team is trained in
how to detect and respond to emerging threats.
27
Shareholder informationFinancial statementsGovernanceStrategic reportRenishaw plc Annual Report 2020 Risk and risk management continued
10
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I
Rare
Unlikely
Possible
Likely
Frequent
Likelihood
Risk likelihood and impact before mitigation
1 Supply chain dependencies – failure of a critical
supplier, failure of supply from a key market like
India or China
2 Industry fluctuations – cyclical nature of demand in
aerospace, automotive and consumer electronics
3 Capital allocation – failure to properly allocate
budget between core and emerging activities
4 People – loss of key talent and succession planning;
failure to attract future leaders and/or skillsets which are
in demand
5 Innovation strategy – failure to innovate to create new,
cutting-edge, high-quality products
6 Economic and political uncertainty – includes
trade wars, increased protectionism, Brexit, global
economic downturn
7 Route to market/customer satisfaction model –
inherent complexity in the move to systems integration
and sale of capital goods
8 Competitive activity – failure to adapt to market and/or
technological changes
9 Exchange rate fluctuations – volatility in foreign
exchange markets could impact on reported results
10 Fit for the future strategy – failure to successfully
deliver on the new business strategy
The heatmap sets out the impact and likelihood scores for
the Company’s top 10 principal risks. Details of the top 15
principal risks are set out in the following table.
28
Strategic reportRenishaw plc Annual Report 2020 Principal risks and uncertainties
Our performance is subject to a number of risks – the principal risks and factors
impacting on them are ranked in the table below. The Board has conducted a
robust assessment of the principal risks facing the business.
Supply chain dependencies
Risk
ranking
1
Risk owner
Group
Manufacturing
Directors
Risk description
We are exposed to
the risk that some
components we
source are provided
by a single-source
supplier and we
are vulnerable to an
interruption in supply.
We also manufacture
components at some
sites (such as cables)
for use in a wide
range of our products,
so our ability to supply
products to customers
could be impacted
by a significant
disruption at any of
these sites.
Potential impact
• Inability to fulfil
customer orders
leading to a reduction
in sales.
• Failure to
meet contractual
requirements.
• Increased costs of
alternative sourcing.
• Loss of market share.
• Damage
to reputation.
COVID-19 impact
Manufacture of
cables in India was
adversely impacted
by the shutdown
in that market.
Contingency plans
were implemented
in Ireland and with a
third-party supplier
to ensure ongoing
supply. Longer term,
dual sourcing will
be fully implemented.
Movement
Mitigation
• Continued focus on, and
review of, sourcing of
key components.
• Maintenance of
buffer inventory.
• Cost-effective alternative
sources of supply
actively sought to reduce
dependency on single-
source suppliers.
• Specifications may
need to be reviewed
and updated to facilitate
alternative sourcing.
Industry fluctuations
Risk description
We are exposed
to the cyclical
nature of demand
from aerospace,
automotive and
consumer electronics
industries, which
may be more severe
if the downcycles
of these key
industries coincide.
Risk
ranking
2
Risk owner
Chief
Executive
Potential impact
• Volatility in profitability.
• Reduced sales and
cash flow.
• Loss of market share.
• Increased
competition on prices.
COVID-19 impact
COVID-19 has had
a severe impact on
many industries,
but particularly the
aerospace and
automotive industries.
It is not yet clear
whether this impact will
be short or long term.
New risk
Mitigation
• Closely monitoring
market developments.
• Expanding and
diversifying the Group’s
product range in order
to meet the demands
of a number of different
industry sectors.
• Identifying and meeting
the needs of emerging
markets, for example in
robotic automation.
• Maintaining a strong
balance sheet with the
ability to flex manufacturing
resource levels.
Key Increased
Decreased
No change
New risk
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Shareholder informationFinancial statementsGovernanceStrategic reportRenishaw plc Annual Report 2020 Principal risks and uncertainties continued
Capital allocation
Risk description
Failure to properly
allocate budget
between core and
emerging activities.
Risk
ranking
3
Risk owner
Group Finance
Director
Potential impact
• Investing in declining
or less profitable
areas at the expense
of more profitable
and strategically
important areas.
COVID-19 impact
COVID-19 has meant
that we have continued
to ensure all capital
expenditure across
the Group is kept to
a minimum.
• Reduced profits
and increased
operating costs.
• Loss of market share.
Risk
ranking
4
Risk owner
Group Head
of HR
People
Risk description
Our people drive
the success of
our business.
Inability to attract,
retain and develop
key talent at all levels
of the organisation
could mean we fail to
successfully deliver
on our strategic goals.
Potential impact
• Loss of expertise,
skills and specialist
talent could impact
our ability to deliver
on objectives.
• Poor retention and
engagement could
slow the delivery
of our strategic
objectives, product
delivery and our
change agenda.
• Failure to develop
future leaders
through insufficient
talent progression.
• Loss of market share,
reduced sales, poor
customer service and
reduced profitability.
COVID-19 impact
• The pandemic
is one of the
most significant
external risks
currently facing the
business and has a
material impact on
our people.
• Lockdown, and
furloughing
specifically, has
affected employee
availability,
attendance and
engagement.
Sometimes this has
had an adverse
impact, including
where significant
time was spent
away from the
business. In other
cases it has had
a positive impact
with an opportunity
to engage and
interact in new and
different ways.
• Increased visibility
of senior leaders
actively being seen
to manage a crisis.
• Given employees
greater confidence
in the ability of
our systems and
processes to support
home working.
Key Increased
Decreased
No change
New risk
30
New risk
Mitigation
• Defining and prioritising
core and emerging areas
of the business.
• Identifying the return on
investment across core
and emerging areas of
the business.
• Developing strategies for
all core and emerging
areas, including whether
to increase, decrease
or maintain the previous
levels of investment
in these areas.
• Greater scrutiny of all
capital expenditure.
Movement
Mitigation
• Continued communication
with our employees and
taking steps to safeguard
their wellbeing during the
COVID-19 pandemic.
• Robustness of our business
continuity plans to enable
rapid adaptation to
changing circumstances.
• Ensure that robust talent
planning and people
development processes
are established across
the Group.
• Investment in direct
employee engagement;
exit interviews, feedback
mechanisms and
adherence to our
inclusion strategy, to
ensure we provide equal
opportunities for growth
and development of all
our people.
• Continued investment
in our graduate and
apprentice programmes.
• Commitment to executive-
level succession planning.
• 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.
Strategic reportRenishaw plc Annual Report 2020 Innovation strategy
Risk
ranking
5
Risk owner
Executive
Chairman/Director
of Group
Technology
COVID-19 impact
The furloughing
of some staff and
reduction in hours
for other employees
has meant that some
flagship projects have
been slightly delayed.
Potential impact
• Failing to meet
customer needs
for high-quality and
complex products –
leading to a loss of
market share.
• Reduced profitability
and cash flow.
• Failing to recover
investment in R&D.
Risk description
Failure to innovate to
create new cutting-
edge, high-quality
products, or failing
to protect the
intellectual property
that underpins
these products,
which allows us to
differentiate ourselves
from our competitors.
As a business driven
by leading-edge
innovation, there is a
higher risk with new
ventures outside
of our traditional
field of expertise
where the science
and engineering is
less proven.
Movement
Mitigation
• R&D projects are better
prioritised and rationalised
and regularly reviewed
against milestones.
Flagship projects are now
receiving greater focus
from management and
the Board.
• Medium to long-term
R&D strategies are
monitored regularly by the
Board and the Executive
Committee to ensure they
remain aligned with the
Company’s strategy.
• Developing products
based on input from
customers to ensure we
develop solutions to meet
their needs.
• New products involve beta
testing with customers to
ensure as far as possible
that they meet the needs of
the market.
• Market developments are
closely monitored.
• Patent and intellectual
property protection
are core to new
product development.
• Recruiting, training and
developing talented
engineers with the
appropriate skills.
Economic and political uncertainty
New risk
Risk
ranking
6
Risk owner
Chief
Executive
Potential impact
• Reduced sales,
profitability and
cash balances.
• Increased
competition on prices.
• Loss of assets in
a region.
COVID-19 impact
As a pandemic,
COVID-19 has
had severe health
and economic
consequences, and is
potentially the driver for
a global recession.
Mitigation
• Monitoring external
economic and
commercial environments
and identifying
relevant headwinds.
• Maintaining sufficient
headroom in our cash flow.
Risk description
As a global business,
we may be affected
by political, economic
or regulatory
developments in one
or more countries in
which we operate.
This could include
a global recession,
Brexit and US/China
trade relations.
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Shareholder informationFinancial statementsGovernanceStrategic reportRenishaw plc Annual Report 2020 Principal risks and uncertainties continued
Route to market/customer satisfaction model
Risk description
Inherent complexity in
the move to systems
integration and the
sale of capital goods.
Risk
ranking
7
Risk owner
Chief
Executive
Potential impact
• Low capital efficiency.
• High people costs
and low productivity.
• High R&D and
distribution costs.
• Lower return on
capital employed
than proposed target.
• Adversely affects
customer satisfaction
levels, sales
and profitability.
COVID-19 impact
COVID-19 has
provided an
opportunity for the
Group to review and
refine our business
model for how we are
vertically integrated
regarding the sale of
capital goods.
New risk
Mitigation
• Closely monitoring
customer feedback.
• Reviewing our business
model and global
strategy for this area
of the business.
• Analysing our return on
capital employed figures.
Competitive activity
Risk description
Failure to adapt
to market
and/or technological
changes.
Risk
ranking
8
Risk owner
Chief
Executive
Potential impact
• Reduced sales,
profitability and
cash flow.
• Loss of market share.
• Erosion of prices.
COVID-19 impact
The impact of
COVID-19 will
accelerate business
change in many
areas and therefore
technology
requirements are
likely to develop
more quickly.
New risk
Mitigation
• The Group is diversified
across a number of core
products, industries
and geographies.
• Closely monitoring
market developments,
particularly across our core
product areas.
• Having local sales and
engineering support which
can quickly respond to
a crisis and cope with
changing local needs.
• Strong historic and
ongoing commitment
to R&D investment to
continue to build our
product portfolio see
page 11 for details of
R&D expenditure.
Key Increased
Decreased
No change
New risk
32
Strategic reportRenishaw plc Annual Report 2020 Exchange rate fluctuations
Risk
ranking
9
Risk owner
Group
Finance
Director
Potential impact
• Significant variations
in the Group’s
income statement
and balance sheet.
• Reduced cash flow
and profitability.
COVID-19 impact
Impacts are likely to
increase during periods
of market uncertainty,
such as during the
pandemic, in which
some countries will
be more affected
by exchange rate
fluctuations than others.
Risk description
Due to the global
nature of our
operations, in which
over 90% of the
revenue is generated
outside of the UK,
we are exposed to
volatility in exchange
rates which could
have a significant
impact on the
reported results of
the Group.
The Group is exposed
to a number of
exchange rate risks,
including currency
cash flow, currency
translation risk and
the currency risk
on intercompany
balances.
Fit for the future strategy
Risk description
Failure to deliver
on our new Fit for
the future strategy
may mean that our
operating costs are
not aligned with
our trading levels,
potentially inhibiting
our growth and
investment in key
strategic areas.
Risk
ranking
10
Risk owner
Chief Executive/
Group
Finance Director
Potential impact
• Cost savings not
realised, leading to
reduced profits.
• Reduced
capacity to invest
in strategic areas.
• Inefficient
and inflexible
operating model.
COVID-19 impact
Additional cost-saving
measures have
been implemented
in response to the
pandemic, such as
furloughing staff and
reducing working
hours and salaries for
some staff.
Movement
Mitigation
• Rolling forward contracts
for cash flow hedges.
• We only enter contracts if
the rate is below the Board
approved caps.
• Currency pricing
reviews with some
large customers.
• Tracking of overseas net
assets value compared to
the market capitalisation.
• One month forward
contracts to manage
currency risks on inter-
company balances.
New risk
Mitigation
• Regular tracking and
reporting of cost-control
measures across
the Group.
• Greater focus on
managing the
highest spend areas,
such as labour and
capital expenditure.
• Identifying the return
on investment across
a number of areas of
the business.
• Reducing overheads
such as travel and
exhibition costs.
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Shareholder informationFinancial statementsGovernanceStrategic reportRenishaw plc Annual Report 2020
Principal risks and uncertainties continued
IT transformation failure
Risk
ranking
11
Risk owner
Group Business
Systems Manager
Risk
ranking
12
Risk owner
Group Business
Systems Manager
Risk description
The upgrade to our IT
systems to Dynamic
365, to remove
legacy systems and
ensure our business
is better integrated,
could impact our
business if there
are major technical
issues, or it is poorly
integrated, or there
are significant delays
to the programme,
or it runs significantly
over budget.
Cyber security
Risk description
External and internal
threat which could
result in a loss of data
including intellectual
property, or our
ability to operate
our systems which
could severely impact
our business.
Potential impact
• Major disruption
to our systems
(including our
financial and HR
systems) causing
delay to our
operations such as
our ability to process
or issue invoices and
customer orders, or
to procure goods
and services.
• Increased costs,
including to fix
technical issues
and restore or
upgrade other
impacted systems.
Potential impact
• Loss of intellectual
property/
commercially
sensitive data leading
to reputational
damage, claims
or fines.
• Inability to access,
or disruption to, our
systems leading
to reduced service
to customers and
therefore financial and
reputational damage.
• Delay or impact on
decision-making due
to lack of availability
of sound data or
disruption in the
denial of service.
COVID-19 impact
Having to progress
the transformation
programme remotely,
without physical access
to the central site,
made it more difficult
to meet milestones
and undertake
appropriate testing.
New risk
Mitigation
• Risk assessments
undertaken of all key
systems likely to be
impacted by the upgrade.
• A clear roadmap with
measurable milestones.
• Assigning project
managers who have clear
oversight of the project
and any potential or
actual issues.
• Promptly identifying and
dealing with any red flags.
COVID-19 impact
Increased vigilance
and awareness of
the risks associated
with remote working
were required to help
manage this risk
during the pandemic.
Movement
Mitigation
• Substantial resilience
and back-up built into the
Group’s systems.
• Cyber risk and security
is regularly discussed at
Board meetings.
• External penetration
testing is conducted
as appropriate.
• Operating systems are
continuously updated
and refreshed in line with
current threats.
• A number of physical,
logical and control
measures are deployed
to protect our information
and systems.
• Regular security
awareness training is
conducted, including in
relation to the specific
risks associated with
remote working.
Key Increased
Decreased
No change
New risk
34
Strategic reportRenishaw plc Annual Report 2020 Risk
ranking
13
Risk owner
Group
Finance Director
Potential impact
• Any deficit may
require additional
funding or security.
COVID-19 impact
Reduced returns on
investment assets.
Pensions
Risk description
Investment returns
and actuarial
variations of the
Group’s defined
benefit scheme
are subject to
economic and social
factors outside the
Group’s control.
Non-compliance with laws and regulations
Risk
ranking
14
Risk owner
General
Counsel &
Company
Secretary/Director
of Renishaw
Neuro Solutions
Potential impact
• Damage
to reputation.
COVID-19 impact
No specific impact
due to COVID-19.
• Potential penalties
and fines.
• Cost of investigations.
• Management time
and attention in
dealing with reports of
non-compliance.
• Inability to attract and
retain talent.
Risk description
We operate in a large
number of territories,
and in some highly
regulated sectors.
We are subject to a
wide variety of laws
and regulations,
including those
relating to anti-
bribery, anti-money
laundering, sanctions,
competition law,
privacy, health and
safety, product safety
and medical devices.
There is a risk that
somewhere in the
Group we may not
be fully compliant
with these laws
and regulations.
Movement
Mitigation
• Recovery plan
implemented in June 2019
with the aim of funding to
self-sufficiency.
• Active engagement with
the Trustees.
• The Trustees operate in
line with a statement of
investment principles
and take appropriate
independent professional
advice when necessary.
New risk
Mitigation
• Whistleblowing hotline
− available for use by all
employees, with a new
global provider appointed
in 2020.
• Regular compliance
training for all employees.
• Controls in place to
mitigate some of the risks,
and audits conducted
to review some of
these controls.
• Implementation of a global
GDPR programme (and
its equivalent in non-
EU countries).
• Insurance cover for some
of the risks.
35
Shareholder informationFinancial statementsGovernanceStrategic reportRenishaw plc Annual Report 2020 Principal risks and uncertainties continued
Loss of manufacturing output
Risk
ranking
15
Risk owner
Group
Manufacturing
Directors
Risk description
Manufacturing output
can be adversely
affected by a number
of factors including
environmental
hazards, technical
delays or outages,
plant or equipment
failure, inadequate
resourcing levels, or
factors affecting the
workforce such as
a pandemic.
Potential impact
• Inability to fulfil
customer orders
leading to a reduction
in sales.
• Failure to
meet contractual
requirements.
• Increased costs of
alternative sourcing.
• Maintenance of
buffer inventory.
• Loss of market share.
• Damage to
reputation.
COVID-19 impact
Manufacture of
cables in India was
adversely impacted
by the shutdown
in that market.
Contingency plans
were implemented
in Ireland and with a
third-party supplier
to ensure ongoing
supply. Longer term,
dual sourcing will be
fully implemented.
New risk
Mitigation
• Duplication of high-
dependency processes
such as component
manufacturing and
finishing, electronic
PCB assembly, and
microelectronics assembly
across more than one
manufacturing location.
• Ensuring we have flexible
manufacturing capacity
in various sites across
numerous territories, and
sufficient resilience across
these sites.
• Standardised approaches
to product assembly.
• Annual risk assessments
and business continuity
planning.
• Reviewing and maintaining
business interruption and
other insurance cover.
Significant changes over the last year
There have been a number of changes to the principal risks compared to those reported last year. This is due to a number of
factors. First, the means by which the principal risks are identified and approved has changed as part of the comprehensive
review of our approach to risk management, as referred to above. Secondly, the external risk landscape has changed,
including the impact of the COVID-19 pandemic and global trade wars. Thirdly, our internal risk landscape has also changed
as we improve our systems and processes, we seek to align our risks more closely with our strategy, and to reflect significant
projects, such as IT systems changes.
Key changes to note are:
• a greater number of risks have been reported this year, not because we are facing an increasing number of risks, but to
provide greater transparency of the diverse range of risks the Company is facing;
• all of the risks reported last year are included in the principal risks listed above. However, some have been subsumed
within larger or more overarching risks – for example, Regulation of healthcare, reported last year, has now been included
within Non-compliance with laws and regulations. Some risks have also been renamed and broadened in scope, such
as the Workforce risk reported last year, which is now referred to as the People risk, and the R&D risk reported last year,
which is now referred to as the Innovation strategy risk;
• this year’s principal risks are also very much aligned with the Company’s strategy, which is reflected in risks such as
Fit for the future, Capital allocation, Innovation strategy and Route to market/customer satisfaction; and
• there are also more externally focused risks reported this year, such as Industry fluctuations and Economic and
political uncertainty.
Key Increased
Decreased
No change
New risk
36
Strategic reportRenishaw plc Annual Report 2020 Viability statement
The Board undertakes an annual review of the Group’s corporate
strategy, which incorporates medium-term financial forecasts and
an assessment of the principal risks facing the business, including
consideration of how those principal risks may change to reflect
emerging risks. The corporate strategy provides the foundations for
monitoring of performance, budgets, risks and strategic actions by
the Board, and the basis on which the Board assess the viability of
the Group.
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 2023. This takes 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 this assessment period
is appropriate, as it reflects the Group’s corporate strategy, takes
account of the Group’s short order book and gives management and
the Board sufficient, realistic visibility of the future.
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 on pages 29 to 36, was robust and included
consideration of the potential impacts of the COVID-19 pandemic
and other emerging risks.
In addition, current financial year forecasts are reviewed regularly
by the Board, underpinned by regular briefings from its business
segments and regions on progress. Further information on the
assessment of the Group’s forecast performance, solvency and
liquidity for the 12 months to August 2021 is set out on pages
60 to 61.
Scenario analysis
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 potential impact of climate change on the demand
for our products was also considered, with opportunities arising
from an increasing need to make manufacturing more efficient,
and both the opportunities and challenges arising from the move
from internal combustion engines to hybrid and electric vehicles.
Other emerging issues such as competitor activity and industry
and technological disruption were also considered, particularly
regarding how our principal risks of industry fluctuations,
innovation strategy and competitive activity may evolve as a result.
This consideration anticipated that the competitive threats could
be mitigated through our continued investment in new product
development, as well as the opportunity for these new products to
increase market share, and that patented designs and investment
levels present a barrier to entry for potential competitors. Where
the scenario assumptions opposite refer to economic and political
uncertainty, this includes the potential impact of ‘reshoring’ on
our business in the three-year period, with political tensions
driving investment in new localised manufacturing facilities.
This investment is compounded in markets with a high labour cost,
where the need for automation and robotics is heightened.
The potential impacts of COVID-19 were also considered as an
emerging risk, including further lockdowns, reduced consumer
spending, the impact on aerospace and automotive markets
in particular, and the broader impact on the global economy.
In addition, while Brexit is not a separate principal risk for the
Group, the risks relating to Brexit have been considered when
assessing the impact of individual principal risks.
Third-party research and publications were reviewed, in which
the most severe scenario considered that a ‘second wave’ of the
pandemic would be experienced in calendar year 2020, before
easing from the start of the calendar year 2021. Taking this external
view into consideration, the Board’s most severe scenario therefore
assumed that:
– lockdown measures and other COVID-19 related restrictions
would reoccur in calendar year 2020, resulting in
reduced demand;
– an increase to pre-pandemic demand levels would follow from
January 2021 for the remainder of the financial year, consistent
with revenue in the first half of financial year 2020;
– principal risks most relevant to short- to mid-term revenue, being
supply chain dependencies, exchange rate fluctuations and
capital allocation strategy, would also crystallise in the first half
of financial year 2021, whilst other principal risks of industry
fluctuations and economic and political uncertainty are reflected
in the pre-pandemic demand. These factors included the impact
on revenue of a 15% strengthening of sterling.
– the above combination of assumptions produced an annual
revenue forecast of £350m for financial year 2021, with the
Board considering that the revenue forecasts for financial year
2022 and 2023 would be no lower than this given the assumed
combination of principal and emerging risks crystallising
concurrently in the first half of financial year 2021.
The Group’s profitability and liquidity have been assessed and
incorporated within each scenario, with relevant assumptions for
the most severe scenario being:
– a deterioration in debtor days to 85 days, which is worse than
was experienced by the Group in the 2009 global recession;
– continued funding of the UK defined benefit pension scheme in
line with the agreed recovery plan;
– no reduction in the Group’s operating expenses beyond the cost-
reduction initiatives that are already underway; and
– the impact on costs of a 15% strengthening in sterling against
the major trading currencies of the Group.
This scenario also assumed that the Group would conserve
its cash by not paying dividends and by restricting capital
expenditure to £10m per annum, a level which would support
our manufacturing facilities, IT infrastructure and other necessary
capital expenditure.
No additional borrowings or financing were reflected in this
severe scenario, and the cash flow forecast showed positive cash
balances, net of working capital requirements, throughout the
forecast period.
Reverse stress testing has also been applied to the model and was
updated to the date of signing the Annual Report to reflect actual
sales in July 2020. This stress testing demonstrated that the Group
would retain a liquid position until annual revenue from August
2021 decreased to c£325m. The Board considers the possibility of
this revenue forecast to be highly unlikely, and mitigating actions
to further reduce operating costs would be put in place if actual
trading in the period was consistent with this scenario.
Conclusion
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
2023. 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.
37
Shareholder informationFinancial statementsGovernanceStrategic reportRenishaw plc Annual Report 2020 Managing our resources and relationships
We have more than 1,700 registered shareholders,
4,463 colleagues and supplied more than 23,000 customer
accounts during the year. We deal with suppliers in more
than 35 countries. These individuals, businesses and
communities are all integral to our business.
How we engage with
our stakeholders
Our rich and varied network of
stakeholder relationships upholds
the values on which Renishaw
was founded.
Our stakeholders
People
It is through the
commitment and
dedication of our
people that we will
successfully deliver our
business strategy.
Why we engage
Only by fully engaging with
our workforce, embedding our
values across all that we do and
developing progressive people
management practices, will we
achieve a culture that aims to
allow employees to maximise their
potential. We strive to continuously
improve Renishaw as a great
place to work and to achieve
personal goals.
How we engage
We have a sustained focus on
engagement, this is achieved
through works forums, increasing
the flexibility in working practices,
wellbeing programmes and an
employee assistance helpline.
A Diversity and Inclusion Group has
also recently been established.
Customers
We work closely with
our customers to
solve their complex
challenges and deliver
on our purpose.
Why we engage
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.
How we engage
Through face-to-face contact
via a number of different forums,
regional marketing conferences,
trade shows, in-house seminars
and technical workshops. We have
moved to online equivalents during
the pandemic.
Suppliers
The supply of
outsourced goods and
services is critical to
our overall success.
Why we engage
The integrated nature of our supply
chain enables us to be agile and
deliver quality products at the right
time. To ensure we are all working
to the same quality standards and
delivery time frames we work closer
with our suppliers than ever before.
How we engage
Suppliers are engaged in our
supplier performance programme.
They are assessed on a regular
basis to ensure that they are
suitable suppliers for Renishaw
and are trained in best practice.
Appropriate ongoing improvement
programmes are also put in place,
as required.
Read more on pages 40 to 43
Read more on pages 11 and 43
Read more on page 11 and 44
38
Strategic reportRenishaw plc Annual Report 2020
Communities
We recognise the
impact we have on
our communities and
aim to make a positive
difference.
Why we engage
Our core value of integrity is central
to the relationships we have with
our communities around the world,
where we strive to be open, honest
and consistent. We aim to make a
positive difference and to maintain
an open dialogue with community
representatives.
How we engage
Our communities are supported
through charitable donations,
educational outreach, employee
volunteering, the donations of
equipment, the use of our facilities
and through supporting community
efforts where our respective
goals align.
Shareholders
We aim to provide
all shareholders with
high-quality information
at the same time.
Why we engage
We value the trust our shareholders
have placed in us by investing,
and want to pay that back in kind
through payment of dividends
where appropriate and/or capital
appreciation. By engaging we
can update on our progress and
seek feedback.
How we engage
We engage through various media
including our website, the Annual
Report, our financial results and
trading statements. We also hold
open webcasts of presentations of
the full and half-year results.
Planet
Sustainability is about
leaving a positive legacy
for the future. Part of our
long-term strategy is to
ensure we have a net
positive impact.
Why we engage
We believe that sustained action is
required to address climate change
and the impact it is having on our
planet. We feel that, as a business,
we have a responsibility to mitigate
our impact on the planet.
How we engage
We measure and report on the
impacts we have through our GHG
emissions and waste footprint.
We look for ways to invest our
time and money to reduce these
impacts, through on-site renewable
energy generation, waste and
energy reduction and the purchase
of clean electricity.
Read more on pages 11 and 45
Read more on pages 11 and 55 to 56
Read more on pages 46 and 47
39
Shareholder informationFinancial statementsGovernanceStrategic reportRenishaw plc Annual Report 2020 Managing our resources and relationships continued
Graduates and apprentices
Renishaw remains committed to its early career
programmes and endeavours to attract key talent that
will grow with the business and become part of the future
pipelines for succession and development.
Across our sites in the UK, we currently have 91 graduates
on two-year programmes across 11 different schemes/
disciplines and 192 apprentices across 13 different
standards and levels.
We continually review the requirements of our Early
Careers programmes to meet our future business needs.
This year we introduced an overarching development
framework to support skills development in areas including
communication, presentation and commercial awareness.
Further education programmes are in place to upskill our
existing employees where there is a business need. As part
of this we have also been able to utilise our Apprenticeship
Levy fund and currently have 31 employees on a variety of
degree apprenticeship programmes.
Higher engagement = higher performance
Through the commitment and dedication of our people
we will fulfil our potential and successfully deliver our
business strategy.
Only by fully engaging with our workforce, embedding our
values across all that we do and developing progressive
people management practices, will we achieve a culture
that aims to allow employees to maximise their potential.
We strive to continuously improve Renishaw as a great
place to work and to achieve personal goals.
Having a sustained focus on engagement will help us
retain our talent, which is crucial to our future success.
Improving engagement also helps us to build on our
core values, resulting in committed, hardworking and
loyal employees.
Restructure and focus
Renishaw has implemented difficult changes over the
course of the year, including a phased closure of the
Staffordshire site and a resizing programme that resulted
in a number of redundancies. These measures were
implemented with a view to preserving key skills, boosting
future productivity and ensuring that the company is best
placed to face the future.
Response to COVID-19
The COVID-19 pandemic compelled Renishaw to be
agile in its response to protect the health and safety of
our employees, as well as the business. This resulted
in many employees working from home at short notice
and the temporary shutdown of manufacturing sites to
implement robust COVID-secure procedures before
resuming operations.
The swift and successful implementation of these measures
highlighted how dynamic, resilient and committed our
employees were across all areas to facilitate these changes.
It also highlighted the importance of extending flexibility
to employees around their work commitments during this
unprecedented period, in relation to childcare and/or health-
related considerations.
People
and culture
Workforce engagement
Catherine Glickman (Non-executive Director) is our
ambassador for workforce engagement. Since joining the
Board in 2018, she has regularly visited our headquarters
and manufacturing sites, has been briefed on people
initiatives and meets with the Health & Safety team annually.
Since lockdown in March, she has participated in team
communications remotely, which she will continue during
2020/21. She is also advising the Diversity and Inclusion
Group and is contributing to its initiatives. In the next year,
she plans to continue the onsite visits (where permissible),
meeting staff directly, and extending engagement with the
international teams.
Global HR system implementation progress
Within this financial year, we have implemented and
embraced Workday as our global HR system. Our wider
focus is now on overseas configuration together with
preparing to migrate our legacy e-learning platform of
450 internal courses across to our new system. By bringing
HR, performance and learning data together, we are
enabling a future of greater connectivity and a more
transparent personal and career development pathway for
our employees.
The system provides immediate access to business-critical
information with high levels of data accuracy, integrity and
security. This brings increased management visibility across
many areas enabling the business to strengthen individual
performance management and accountability.
2020 leadership and development
Continuous development of our managers is critical to the
success of our business. This year has seen significant
focus on the development of a series of modular interactive
management and leadership programmes, which will
continue to be delivered during the next financial year.
These programmes are specifically aimed at improving the
performance of leadership and management capability,
by strengthening and understanding the key traits and
attributes that allow leaders to manage themselves and their
teams. These programmes will be available to our worldwide
management group.
40
Strategic reportRenishaw plc Annual Report 2020 The Diversity and
Inclusion Group
Renishaw recognises that the greater the range of
talent and diversity of our people, the greater the
performance potential of our business. To enable us
to align diversity with business strategy, we recently
established the Diversity and Inclusion Group, with the
purpose of ‘establishing a more inclusive culture and
diverse workforce at Renishaw by promoting equality and
diversity through a committed collaborative approach.’
Employee engagement will be driven through focus
groups that will collate data to guide and shape some of
the key objectives for the group. This will include national
awareness days, blogs and guest speakers. We will
also engage with our Regional HR Heads to look at the
Group diversity and inclusion strategy, supporting our
employees across the world.
The proportion of women and men in each pay quartile
Top quartile
(highest paid)
10%
90%
Upper middle
quartile
16%
84%
Lower middle
quartile
Lower quartile
(lowest paid)
28%
72%
35%
65%
9.4%
median pay gap
1.8%
median pay gap
0.9%
median pay gap
0.1%
median pay gap
Women
Men
Gender pay gap
25.2%
mean
2019 UK average (median) pay gap 17.3%
21.1%
median
Gender bonus gap
61.7%
mean
75.5% of women received bonus pay
78.6% of men received bonus pay
29.3%
median
All employee gender diversity ratio
76% (3,402) Male
23% (1,028) Female
1% (33) Not disclosed
Senior management team diversity*
93% (55) Male
7% (4) Female
* See table below for breakdown of the
senior management bands.
Board diversity
75% (6) Male
25% (2) Female
Management level
Board
Executive Committee
Senior managers1
Subsidiary directors2
Male
6
8
13
42
Male
%
75
89
81
98
Female
2
1
3
1
Female
%
25
11
19
2
1 Includes the direct reports of the Executive Committee, excluding those in
administrative or non-managerial roles.
2 Means statutory directors.
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Shareholder informationFinancial statementsGovernanceStrategic reportRenishaw plc Annual Report 2020 Managing our resources and relationships continued
Flexible working practices
Adopting flexible working practices to maintain business
continuity during the pandemic has highlighted the need
for us to increase our flexibility in working while maintaining
operational efficiency.
Employee wellbeing
Employee wellbeing has been a priority for Renishaw during
2019/20. To support the wellbeing of our employees during
the pandemic, we have introduced additional support in
the form of online presentations, self-help materials and
links to external resources. Training has been developed
for our managers to support remote management of
their teams. All of our UK management team completed
mental health awareness workshops during 2019/20 and
the implementation of a UK network of mental health first
aiders (MHFAs) has also been completed. Our MHFAs
are developing their own channels of communication
and sources of support in readiness to assist employees
more effectively.
Our worldwide Employee Assistance Programme (EAP)
continues to offer support and signposting in relation to a
variety of topics. Our employee wellbeing activities will be
expanded throughout the Group in 2021 to support our
global colleagues.
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 frames our
approach, drives our culture of safety throughout the
Company, and details Renishaw’s H&S management
structure and processes, in line with industry best practice.
The outcome is a clear and consistent approach to H&S that
is used throughout the Group.
The total number of accidents for the period was 118
(2019: 207) against a year-end headcount of 4,463
(2019: 5,041). This equates to an accident frequency rate of
15.55 per million hours worked (2019: 24.67).
There were four reportable accidents under the UK RIDDOR
reporting requirements: two musculoskeletal injuries,
one deep laceration to the hand and one suspected rib
fracture. This equates to a lost time injury rate of 0.54 per
million hours worked, compared with a UK manufacturing
average for RIDDOR reportable accidents of 2.10 per million
hours worked.
We continually assess H&S risks across the Group. This is
done through our risk assessment processes and regular
auditing. Through these actions, our AM activities and
associated processes continue to be identified as our main
area of risk. These are tightly controlled and managed
via training, policy and procedures, with the wider AM
industry generally accepting Renishaw as one of the safest
producers of AM machinery.
2019 saw the launch of the stress management
training programme for line managers within the UK.
This programme run by ACAS, was completed on schedule
with nearly 500 undertaking the training.
The internal H&S auditing procedure has been reviewed
and amended to ensure that auditing is conducted in a
consistent and robust manner. The 2021 H&S annual audits
will be conducted against the new audit structure.
During the COVID-19 pandemic, H&S has been a key
priority for the business, including the implementation of
safe working measures designed to ensure the continuity of
key activities.
In 2021, our H&S focus will be on the following key areas:
• The preparation and implementation of a robust home
working policy, including an assessment of the H&S risks
of homeworkers.
• A full review of the Group manual handling policy, risk
assessment strategy and training programmes.
• Maintaining global legal compliance and implementing
consistent strategies for managing H&S risks across
the Group.
Total number of accidents
Accident frequency rate
per million hours
296
40.99
234
233
207
30.79
26.22
24.67
118
15.55
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
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Strategic reportRenishaw plc Annual Report 2020 ensures that Renishaw people are easily accessible to
provide fast engineering support and answer queries.
Our model is to use the strength of our UK operations for
product development, but to decentralise decision making
to our subsidiary network. This allows our local offices to
make fast decisions and also to tailor sales and marketing
messages and customer solutions, to their specific needs.
Customers
Establishing feedback
Our future success depends on us:
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.
Building relationships
Our key aims for our customer relationships are to:
• build long-term relationships with our customers. It is not
just about a sale, but also about supporting and helping
our customers develop their processes and improving the
quality of their product output;
• bring high levels of integration to our customers’
manufacturing environments. We are especially
focused on those businesses who are looking to bring
connectivity and the intelligent use of data within their
manufacturing processes;
• deliver excellent customer support on a global basis.
Our customers can be global, with orders being placed in
one country and the product shipped to the eventual end
user, who could be located on a different continent; and
• provide innovative services to support changing customer
expectations and market requirements throughout the
life cycle of all our product ranges. We are flexible with
our approach and support customer needs from initial
purchase, right through to obsolescence, regardless of
global location.
Renishaw was ‘born global’ and we have always understood
the importance of providing excellent support at a local
level. We achieve this through our wholly-owned subsidiary
network and long-term distributors. This allows us to
assure our customers that whatever their needs, we can
support and assist them, resulting in a positive return on
their investment.
Although machinery and the application of our products
may be common across the globe, business practices, local
customs, levels of technical expertise and language, are
very different, so employing local people is vital. This also
• 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.
Due to the highly technical nature of both our customers’
requirements and our products, we prefer to do this through
direct contact with our customers. The voices of our
customers are 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, Executive Committee and regional presidents
also regularly engage with original equipment manufacturer
(OEM) customers and end users across our key sales
regions. They 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.
Prior to the pandemic, we attended 47 trade exhibitions
during the year, covering most of the industries that we
supply. The most important of these was EMO Hannover,
where, over six days and two different stands, we met with
customers from over 50 different countries. We also held
numerous in-house seminars, inauguration events (including
the opening of our new office in Moscow, Russia), 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.
COVID-19 has impacted and will continue to impact the
ability to meet customers at physical events. We have been
making good use of online conferencing tools and at the
end of the year we introduced a virtual exhibition platform
and a series of webinars, which will be utilised globally.
We continue to make use of social media to engage with
our customers, with multiple corporate, subsidiary and
product line accounts across platforms including Facebook,
Instagram and LinkedIn.
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Shareholder informationFinancial statementsGovernanceStrategic reportRenishaw plc Annual Report 2020 Managing our resources and relationships continued
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. Existing suppliers are assessed on a regular
basis to ensure that they meet expectations in the areas of
delivery, quality, corrective actions and responsiveness.
Where there are shortcomings, we engage with suppliers
to ensure they are trained in best practice and appropriate
ongoing improvement programmes are put in place.
Our supply chain 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 controls
in place to ensure the ongoing supply of quality goods
and services. We share 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; suppliers are no exception to this
policy. All suppliers we engage with are required to comply
with our trading terms and the Group Business Code,
covering areas such as modern slavery, conflict minerals,
human rights, anti-bribery, tax evasion, data protection and
dangerous goods.
Suppliers
The supply of outsourced goods
and services is critical to our overall
success. 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 for new suppliers to ensure that we
have supply chains capable of achieving Renishaw’s
requirements in the areas of quality, cost, timescales
and risk management. The ongoing management of
existing 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 UK suppliers who vary
in size and location, with about half being located within
a 100-mile radius of our main manufacturing sites in the
UK. Many of these are SMEs (small and medium-sized
enterprises). We also have many suppliers overseas.
To support this, we have supply chain staff located in the
UK, Ireland, India, China, the USA and various European
countries. This allows us to have regular and direct
communications with our suppliers while addressing
differences in culture, time zone and language.
44
Strategic reportRenishaw plc Annual Report 2020 Communities
We aim to be an inspiring employer
and a responsible business.
Our core value of integrity is central
to 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 communities
and aim to make a positive difference
and maintain an open dialogue with
community representatives.
Our approach
We achieve these aims through: engagement with trade
and general business organisations; financial support for
charities and other not-for-profit organisations; our extensive
education outreach initiatives; large work experience
programmes; support for employee fundraising and
volunteering; the free use of our facilities for educational and
other community events; and the sponsorship of community
sports clubs and festivals for science, music and the arts.
Charitable giving
Our values of innovation and integrity play a large part
in our approach to supporting charities and not-for-profit
organisations within our communities, which are supported
through formal charities committees, individual employee
fundraising and one-off fundraising events. The committees
are focused on supporting organisations local to Renishaw
offices 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.
In the UK, an additional fund is administered by the
employee-led charities committee, which donates monies to
aid the victims of global disasters.
In 2019/20, we made direct donations totalling more than
£198,000 to 219 different organisations. Although the
number of UK grant applications has dropped significantly
due to COVID-19, we responded to emergency appeals
from various charities and proactively supported foodbanks
located close to our major sites in the UK. In the USA our
support for local people included a Thanksgiving Food
drive; in Brazil, food, cleaning and hygiene supplies are
collected and donated to the Centro de Desenvolvimento
Bem Me Quer, which supports local children with
disabilities; and in South Korea our people took part in
Running with the Blind to raise money for the Foundation
for the Blind and mark the 20th anniversary of Renishaw
Korea. For a full list of organisations who received significant
donations of over £2,000 or local currency equivalent, see
page 151.
Community organisations
Before COVID-19 we continued to host tours and give
talks to a wide range of organisations including business
clubs, primary schools, secondary schools, colleges
and universities. We hosted events organised by other
organisations, including the Stroud Young Photographer of
the Year final and a regional engineering open house for the
Institution of Engineering Technology (IET).
We actively support the business community regionally,
nationally and internationally, through active membership of
trade associations and industry research centres. 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); the Association of British Healthcare Industries;
the Manufacturing Technologies Association (UK); Global
3D Printing Hub (Spain); PräziGen (Germany); and
Canada Makes.
We also 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: corporate
membership of the SS Great Britain Trust, Bristol Music
Trust and Bristol Museums; sponsorship of Cardiff Blues
Women and Gloucester-Hartpury Women rugby teams; and
sponsorship of professional rugby players including Tomos
Williams who plays for Cardiff Blues and Wales.
Education outreach
Our educational outreach programme is designed to excite,
interest and engage young people, regardless of gender,
sexuality, ethnicity or background, to study STEM subjects
and to consider engineering as a career. We aim to be a key
educational resource for the hands-on learning of design,
fabrication, manufacturing and engineering skills, delivering
workshops at our Gloucestershire HQ and dedicated
education centre at our Miskin site.
In an average academic year, we engage with around
22,000 students through our various outreach programmes
in South Wales, Gloucestershire and Bristol. These are
managed by our four full-time outreach staff and supported
by over 160 STEM ambassadors. In addition to workshops
this included careers fairs, school visits, our 3D printer
loan scheme, work experience programme and activities
delivered by trusted partners including Bloodhound
Education, Cardiff Blues and STEMworks.
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Shareholder informationFinancial statementsGovernanceStrategic reportRenishaw plc Annual Report 2020 Managing our resources and relationships continued
We recognise that COVID-19 and the restrictions on travel
will have significantly affected our GHG emissions during
this fiscal period. In 2019/20, our normalised statutory
emissions have increased by 4% (market-based) compared
with 2018/19 and have decreased by 65% (market-based)
compared with our base year (2015). We have also had
an absolute reduction in our total GHG emissions of 22%
(market-based).
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 sizeable proportion of our GHG emissions fall 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.
The details of our GHG emissions for this year are shown in
the charts on page 47 with the relevant data shown on
page 152.
To calculate our GHG emissions we have used the GHG
Protocol Corporate Accounting and Reporting Standard
(revised edition) and the UK Government’s GHG reporting
guidance. The emission factors are taken from the
DEFRA, IEA and IPCC libraries and energy suppliers.
Our GHG emissions are based on actual data taken
from bills, invoices, meter readings and expense claims
wherever possible.
For our Scope 1 and 2 emissions, less than 2% of the
data is estimated. We continue to strive to reduce our
GHG emissions and energy consumption worldwide,
including investing in renewable energy generation.
In 2019/20, we increased the area of solar panels at New
Mills, added a new ground mount array at Stonehouse and
installed new solar arrays at our new site in Norton Shores,
Michigan, USA and our existing site in Turin, Italy. We are
investigating further solar potential at other sites worldwide,
as well as considering hydroelectric and wind energy
generation opportunities.
We are pleased to report that our 2018/19 GHG emissions
figures have been independently verified by thinkstep and
they have found no inaccuracies. They also verified the
methodology we used as being compliant with the GHG
Protocol Corporate Accounting and Reporting Standard
(revised edition).
Our planet
We believe that sustained action
is required to address climate
change and that businesses have a
responsibility to mitigate their impacts.
We take this seriously and have
continued to invest in increasing our
energy efficiency, our generating
capacity, and lowering our GHG
emissions. The use of our own
products in our manufacturing facilities
is part of this strategy of increasing
efficiency by reducing raw material use,
waste, and energy consumption.
Our Corporate Responsibility (CR) Committee manages
the oversight of the CR strategy and released an updated
Group Business Code this year. This 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 continue to engage with colleagues around the
Group using our internal social networks, a newly
developed intranet site, and increased training for the
subsidiary representatives.
46
Strategic reportRenishaw plc Annual Report 2020 Waste management
During the year our waste management strategy successfully diverted a further 1,906 tonnes of waste from landfill.
Global waste totals (tonnes)
Reused
Recycled
Composted
Incinerated
Total non-landfilled
Landfilled
Percentage of waste
sent to landfill
Total waste
2020
88.00
1,541.20
47.75
229.26
1,906.21
247.10
11.48%
2,153.31
2019
166.00
2,208.90
100.97
300.00
2,775.87
235.00
2018
67.62
2,370.05
71.76
240.70
2,750.13
162.93
2017
0.00
2,151.00
27.50
310.60
2,489.10
129.52
7.81%
3,010.87
5.59%
2,913.06
4.95%
2,618.62
This year our target was a 5% reduction of waste to landfill from our global operations. Despite our best efforts this year the
amount of waste to landfill has increased by 5% or 12.1 tonnes. Due to the restrictions on operational practices because of
COVID-19 our manufacturing colleagues and our waste contractors struggled to meet the target of 5% reduction of waste
to landfill. We have, however, reduced the amount of waste produced by 28%. We have diverted more than 88.52% (2019:
92.19%) of our waste from landfill this year.
Total statutory emissions
tCO2e
Statutory GHG emissions
tCO2e per £m turnover
Group energy consumption
kWh
21.3k
58.94
13.0k
8.0k
3.8k
3.6k
3.7k
4.0k
4.0k
3.8k
3.6k
31.06
19.30
14.21
14.78
17.5m
17.5m
18.7m
19.6m
33.1m
34.1m
35.6m
35.0m
18.2m
31.4m
2016
Scope 1
Scope 2
2017
2018
2019
2020
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
UK
Non-UK
Energy source
kWh
Total measured GHG emissions
tCO2e
49.9m
50.4m
33.4m
22.4m
21.7k
20.4m
21.0k
24.6k
32.2m
29.1m
21.3k
22.9k
16.7k
20.9m
13.0k
816k
1.21m
2016
2017
2018
2019
2020
Renewable
Non-renewable
3.8k
2016
3.6k
2017
Scope 1
Scope 2
Scope 3
8.0k
3.7k
2018
4.0k
4.0k
2019
3.8k
3.6k
2020
47
Shareholder informationFinancial statementsGovernanceStrategic reportRenishaw plc Annual Report 2020 Non-Financial Reporting Statement
This section of the Annual Report is about how we manage our resources and relationships. It 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 CR and our Group Business Code are available on our website www.renishaw.com/CSR and expand on this
information. As required under the 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 the respective documentation.
Business model
Business strategy
Our business model
KPIs
Principal risks and uncertainties
Environmental matters Greenhouse gas emissions
Chief Executive’s review: CR
KPIs: Greenhouse gas emissions
Energy consumption and waste
Task Force on Climate-related Financial Disclosures statement
Further details of our approach to protecting the environment can be found
on our website
Our people
Social matters
Human rights
Anti-corruption and
anti-bribery matters
Principal risks and uncertainties: People
Chairman’s statement: People, culture and values
Chief Executive’s review: Our people
Our strategy: People and culture
Managing our resources and relationships: People and culture
KPIs: UK employee turnover
Further details on our people and opportunities are available on our website
Our business model
Health and safety
Managing our resources and relationships: Communities
Further details and policies on social matters are available on our website
Other statutory and regulatory disclosures: Employees
Details of our policy, as well as our approach to protecting human rights, can be
found on our website
Principal risks and uncertainties: Non-compliance with laws and regulations
Managing our resources and relationships: Suppliers
Our Group Business Code and other related policies can be found on our website
Page(s)
14 to 15
10
16 to 17
29 to 36
46 to 47
9
17
46 to 47
151
30
5
9
14
40 to 42
16
10 to 11
42
45
88
35
44
48
Strategic reportRenishaw plc Annual Report 2020 Section 172 statement
Key requirement
Under the Companies (Miscellaneous Reporting)
Regulations 2018, the Directors are required to explain
how they have complied with their duty to have regard to
the matters in section 172 (1) (a)-(f) (Section 172) of the
Companies Act 2006. Under Section 172 a director of a
company must act in the way they consider, in good faith,
would most likely promote the success of the company
for the benefit of its shareholders. In doing so the director
must have regard to other matters including: – likely
consequences of any decisions in the long term; – interests
of the company’s employees; – the need to foster the
company’s business relationships with suppliers, customers
and others; – impact of the company’s operations on the
community and the environment; – the company’s reputation
for high standards of business conduct; and – the need to
act fairly as between members of the company.
Examples of the way in which the Board had
regard to s172 matters
The Board’s engagement with employees, suppliers and customers
in 2019/20 is explained in the stakeholder engagement model on
pages 38 to 49. The Directors receive regular reports on health,
safety and environment and security to support their consideration
of the impact of their decisions on our community and the
environment. Further information can be found on pages 34, 42 and
46 to 47. Ensuring high standards of business conduct is critical
for the success of the Group. The Directors receive reports from
the Group Legal, Quality, Compliance, Human Resources and
Corporate Responsibility teams and our Non-Financial Reporting
Statement opposite identifies policies and guidelines governing our
approach to anti-corruption, anti-bribery, social matters and human
rights. Consideration of the long-term impact of decisions is integral
to the approval of strategy, and our strategic progress in 2019/20 is
disclosed on pages 1 to 49.
Examples of how the Directors discharged their s172 duty when taking the principal decisions during the year
The Board takes the interests of stakeholders into account when making decisions. The relevance of each stakeholder group may increase or decrease by
reference to the issue in question, so the Board seeks to understand the needs and priorities of each group during its discussions. This, together with the
combination of the consideration of long-term consequences of decisions and the maintenance of our reputation for high standards of business conduct,
has always been integral to the way the Renishaw Board operates. During a challenging year, the below have been the principal decisions taken and how
stakeholders views have been considered:
Engagement
Various communication forums to
achieve equitable treatment of our
stakeholders, given the effects of the
COVID-19 pandemic.
Outcome
No dividend paid for 2019/20 in line
with the Board’s priority of conserving
cash and managing the Group in a
prudent manner through this period
of uncertainty.
Page(s)
5
Stakeholder
Shareholders,
potential
investors
and lenders/
employees/
customers/
suppliers.
People/
customers/
suppliers/
communities
Principal decision
In light of the increased global
macroeconomic uncertainty due to the
COVID-19 pandemic, the interim dividend
payable during the year was cancelled,
and no final dividend is declared in
respect of the year. This reflects the
previously announced decision for all
directors to waive their dividends.
The implementation of the Fit for the
future strategy was a key area of focus
during the year, and saw the realignment
of the business with current global
demand and a heightened focus on key
strategic priorities.
Rigorous Board debate and
consideration of Board papers,
and business plans, consultation
processes, CEO communications,
workforce engagement
mechanism, staff survey by works
forum representatives.
People
Since the start of COVID-19 we put in
place short-notice arrangements for many
people to work from home, a temporary
shutdown of manufacturing operations
to implement strict social distancing
measures, implemented a heightened
focus on our Fit for the future strategy and
initiated temporary shorter working hours.
Additional bi-weekly Board calls,
regular CEO online briefings for
employees, COVID-19 support
group, consultation processes,
enhanced employee
wellbeing programme, senior
management feedback,
workforce engagement.
Customers
Development of alternative routes
to access customers as a result of
COVID-19 impact on the ability to meet
customers at physical events.
Key platform is trade exhibitions,
prior to the pandemic, 47 trade
exhibitions attended.
Allen Roberts
Group Finance Director
Implemented redundancy
programmes, the co-location of the
Staffordshire AM operations to New
Mills and Miskin, travel restrictions,
and other efficiencies. Where possible,
at risk employees were offered
other roles and those leaving the
business were not replaced to
reduce redundancies.
Highlighted need to evaluate our
working practices, increase our
flexibility and deliver on Fit for the
future. The Board considered a wide
range of operational and financial
scenarios and the interests of multiple
stakeholder groups to determine
the overhead and salary reductions
necessary to protect the financial
position of the Company.
Increased use of online conferencing
tools and introduction of a virtual
exhibition platform as well as a
series of webinars, which will be
utilised globally.
6, 9
and 22
6 and 40
38
and 43
The Strategic report on pages 1 to 49 was approved by the Board on 18 August 2020 and signed on its behalf by
Sir David McMurtry
Executive Chairman
49
Shareholder informationFinancial statementsGovernanceStrategic reportRenishaw plc Annual Report 2020 Directors’ corporate governance report
Introduction
I am pleased to introduce our corporate governance
report for the year, in which we describe our governance
arrangements, the operation of the Board and its
Committees, and how the Board discharged its
responsibilities. The Board is ultimately responsible to our
stakeholders 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.
Central to everything we do is the Group’s purpose to
design, develop and deliver solutions and systems that
provide unparalleled precision, control and reliability. We are
proud of our culture that aims to allow our employees to
maximise their potential, which aligns with our purpose,
strategy and values. Having a strong governance
framework, which supports the Group’s long-term strategic
development, is critical if we are to support the business
and enhance the interests of all our stakeholders for
the future.
The implementation of the Fit for the future strategy was
a key area of focus during the year, and saw the re-
alignment of the business with current global demand and
a heightened focus on key strategic priorities. This included
the decision to reorganise our additive manufacturing (AM)
business by co-locating our AM engineering, marketing and
commercial activities at Renishaw’s New Mills headquarters
in Gloucestershire, UK. The manufacturing of AM systems
will continue at the Company’s Miskin site near Cardiff,
South Wales. The Board also made the difficult decision
during the year to instigate redundancy programmes to
match our headcount with global demand for our products,
as well as pursuing other efficiencies.
The Board made a number of significant decisions in
response to the COVID-19 pandemic, and the associated
global macroeconomic uncertainty, so as to ensure the
long-term success of the Company. This included the
decision to cancel the previously announced interim
dividend and not declare a final dividend which were due to
be paid on 6 April 2020 and 29 October 2020 respectively,
in order to conserve the Group’s cash resources – see page
49 for more information.
A strong governance
framework, overseen by the
Board, is critical if we are to
support the business and
enhance the interests of all our
stakeholders.
Sir David Grant
Senior Independent Director
50
GovernanceRenishaw plc Annual Report 2020 As a Group, we are committed to equality and diversity at
Board and all levels, and this will remain an important area
for the Board to continue to work on. Employment policies
are designed to provide equal opportunities irrespective of
race, religion, gender, age, socio-economic background,
disability or sexual orientation – see page 88 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.
The Company reviewed its global whistleblowing policy
and process during the year with the aim of making it easier
for employees and other key stakeholders to report any
suspected unlawful or unethical conduct. A new hotline
provider has been appointed as part of the refreshed
service, now referred to as Speak Up, which launched in
July 2020.
During the year, the Board considered and approved John
Deer’s role change from Deputy Chairman (an executive role
until January 2020) to a non-executive role, retaining the title
Deputy Chairman.
This Annual Report is the first in which Renishaw is required
to report in accordance with the UK Corporate Governance
Code 2018 (Governance Code) which introduced a number
of significant changes with regard to corporate governance
in the UK. In addition, new legislation in respect of the
governance arrangements of private companies, including
major subsidiaries within listed companies, also applies to
the Group for the first time this financial year. The external
audit market and the role of auditors is currently under
review, with the UK Government considering how to
progress the recommendations of the various studies into
the statutory external audit market.
The Board continually monitors its governance
arrangements and we have carefully considered and in
many cases enhanced our governance arrangements in
light of those changes. We continue to discuss the most
effective methods of achieving greater Board engagement
with our workforce and other stakeholders and building
on our existing initiatives, in order to better understand
their views. Catherine Glickman, one of our Non-executive
Directors, has provided the Board with improved visibility
of workforce engagement activities across the Company
and of the views of our workforce. Catherine was appointed
as our designated officer for workforce engagement in
2019. It is essential that this framework is dynamic and we
are able to respond as our business and our stakeholders
evolve. Further information on workforce engagement can
be found on page 40.
51
Shareholder informationFinancial statementsGovernanceStrategic reportRenishaw plc Annual Report 2020 Board of Directors
Sir David McMurtry N*
CBE, RDI, FREng, FRS, CEng, FIMechE
Executive Chairman
Appointed September 1975
Areas of expertise
Strategy, Product Development, Engineering,
Science and Technology
Contribution, skills and experience
• Co-founder of Renishaw, provides strong
leadership to the Board, and responsible
for Group innovation, product strategy, and
Group technology.
• Significant contribution to long-term
sustainable success of the Company and all
aspects of the business.
• Strategic vision, and technical and
industry knowledge.
External appointments
None
John Deer
Non-executive Deputy Chairman
Appointed July 1974
Areas of expertise
Manufacturing, Strategy, International
Contribution, skills and experience
• Co-founder of Renishaw and contributes to
Board leadership and strategic decisions for
growing the business.
• Extensive manufacturing and quality
experience contributes to delivery of efficient,
high-quality manufacturing.
• Strategic vision, and commercial and
international experience.
External appointments
None
Will Lee
MA, MBA, FinstP
Chief Executive
Appointed August 2016 as Group Sales
and Marketing Director, February 2018 as
Chief Executive
Areas of expertise
Sales and Marketing, Strategy, Engineering,
Operations
Contribution, skills and experience
• Effective and strong leadership and
management, both technical and commercial,
with an acute awareness of the industry and its
opportunities and challenges.
• Maintains a wide breadth of knowledge, as
well as strong relationships which continue to
develop the Renishaw business.
• Joined the Renishaw graduate scheme in
1996 and since then has held various senior
management positions in engineering,
operations, and sales and marketing resulting
in an in-depth understanding of the Group’s
business, products and markets.
External appointments
None
Allen Roberts
FCA
Group Finance Director
Appointed October 1980
Areas of expertise
Finance, Strategy, Internal Controls, Operations,
Compliance
Contribution, skills and experience
• Significant contribution to financial planning
and strategy, including adept management of
financial risks and business development.
• Deep understanding of the Group’s business,
products, relationships and the sectors in
which it operates.
• Experienced in the management of financial
risks, reporting and planning.
External appointments
None
Sir David Grant A N R
CBE, PhD, FREng, FLSW, CEng, FIET
Senior Independent Director
Appointed April 2012
Areas of expertise
Engineering, People, Science and Technology
Contribution, skills and experience
• Contributes to talent recruitment, increasing
diversity and development of workforce.
• Extensive engineering experience and
recognised for his contributions to industry.
• Various previous leadership positions
at international engineering companies
and government-related science and
technology bodies.
External appointments
Non-executive director and nomination committee
and remuneration committee chair of IQE plc
Chair of the National Physical Laboratory
52
GovernanceRenishaw plc Annual Report 2020
Committees
A Audit Committee
R Remuneration Committee
N Nomination Committee
* Chair of Committee
Read more extensive Board
biographies online.
Visit www.renishaw.com/en/board-of-
directors-and-company-secretary--21878.
Carol Chesney A* N R
FCA
Independent Non-executive Director
Catherine Glickman A N R*
BA
Independent Non-executive Director
Appointed October 2012
Areas of expertise
Finance, Corporate Governance, Internal
Controls, Compliance, M&A, Pensions
Contribution, skills and experience
• Contributes to the effectiveness of the Board.
• In-depth understanding of corporate
governance, internal controls, compliance,
M&A and pensions.
• Career experience in finance, as a company
secretary, audit committee chair and having
responsibility for health and safety compliance
in listed company environments, and a wide
industry perspective.
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
Appointed August 2018
Areas of expertise
People, Remuneration, Pensions, Strategy
Contribution, skills and experience
• Renishaw HR team are able to readily access
Catherine’s expertise.
• Skilled at developing reward structures that
align leadership motivation with group strategy.
• Extensive HR, remuneration and pensions
experience, as well as previous international
experience with Genus plc and Tesco PLC.
External appointments
Non-executive director and remuneration
committee chair of TheWorks.co.uk plc
Non-executive director and remuneration
committee chair of RPS Group plc
John Jeans A N R
CBE, CEng
Independent Non-executive Director
Appointed April 2013
Areas of expertise
Healthcare, International, Strategy
Contribution, skills and experience
• Healthcare sector knowledge gained from
senior leadership positions in various
global companies.
• Experience serving on several government
bodies relating to healthcare.
• Invaluable insight into the healthcare industry
from a government/regulatory perspective.
External appointments
Non-executive director of Edinburgh Molecular
Imaging Ltd
Chair of the Scottish government’s Digital Health
& Care Innovation Centre at the University
of Strathclyde
Chair of the strategic advisory panel for
the Singapore Government’s diagnostics
development hub
Advisor to the Singapore Government
on advanced manufacturing, health and
biomedical science
Leads Innovate UK’s knowledge transfer
network’s (KTN) health board
Non-executive director of Karoo CGT Ltd
Jacqueline Conway
General Counsel &
Company Secretary
Appointed November 2019
Areas of expertise
Corporate Governance, Risk and Compliance
Contribution, skills and experience
• Responsible for providing legal and
governance advice to the Board and
senior management, as well as leading the
legal function.
• Specialised in corporate governance, risk
and compliance.
• Substantial experience of operating in a
listed environment.
External appointments
None
Renishaw plc Annual Report 2020
53
Shareholder informationFinancial statementsGovernanceStrategic reportRenishaw plc Annual Report 2020 Executive Committee
Will Lee (chair)
Chief Executive
See page 52 for biography
Sir David McMurtry
Executive Chairman
See page 52 for biography
Allen Roberts
Group Finance Director
See page 52 for biography
Jacqueline Conway
General Counsel &
Company Secretary
See page 53 for biography
The first three members of the Executive
Committee listed above were also plc Board
Directors during 2019/20.
Further information on the Executive Committee
can be found on page 57.
Leo Somerville
President, Americas
Appointed March 2004
Contribution, skills and experience
• Executive Committee responsibility for
development of the Americas region.
• Strong leadership and business development
skills combined with in-depth market and
product knowledge.
• Experience as project manager for machine
tool probing in the UK, and as business
manager for machine tool probing and
calibration products at Renishaw, Inc.
Dave Wallace
Director of Industrial Metrology
Appointed January 2008
Contribution, skills and experience
• Executive Committee responsibility
for the management and strategy of
Industrial Metrology.
• Deep insight into Renishaw’s products,
markets, and product development, as well
as strong management skills.
• Has worked in various functions of the
business, including as Director and General
Manager for the CMM Products Division and
previously was accountable to the Board for
the Styli and Fixturing Products Division.
Geoff McFarland
Director of Group Technology
Appointed July 2002
Contribution, skills and experience
• Responsibility for Renishaw’s research
centres and intellectual property.
• Skilled in computer-aided
mechanical engineering.
• Experience in the medical device and
electronic manufacturing sectors.
Gareth Hankins FIET
Director, Group Manufacturing
Services Division
Appointed February 2018
Contribution, skills and experience
• Responsibilities include manufacturing
operations, procurement and facilities
management within the UK, and holding a
directorship on our Ireland subsidiary.
• Skilled leader with acute insight into operations
and manufacturing.
• Experience in engineering, production, and
operations and business management,
including previous role as operations manager
in the Styli and Custom Products Division.
Mark Moloney
Director and General Manager,
Renishaw (Ireland) DAC
Appointed February 2018
Contribution, skills and experience
• Responsibility for manufacturing capabilities
and resources in Ireland, and Lyon, France,
and for the establishment and expansion of our
facilities in Pune, India.
• Skilled leader in operations and manufacturing.
• Prior experience in a production and inventory
planning management role, including
development of bespoke MRP/ERP systems
for manufacturing.
54
GovernanceRenishaw plc Annual Report 2020 Directors’ corporate governance report continued
UK Corporate Governance Code 2018
As mentioned in our Annual Report 2019, we welcome the
publication of the Governance Code which applies to the
Company for the 2020 financial year. We have been working
to ensure we apply the updated Principles with effect from
1 July 2019.
This activity has included:
• Structuring this corporate governance report in line
with the Provisions of the Governance Code: Board
leadership and purpose; Division of responsibilities;
Composition, succession and evaluation; Audit, risk
and internal control; and Remuneration.
• Considering the Provisions of the Governance Code
while completing the annual review of the Matters
Reserved for the Board and its Committees’ terms of
reference, and updating them accordingly.
• Developing a framework to assist our Directors with
engagement with our stakeholders.
The Directors receive a Legal and Governance Report from
the General Counsel & Company Secretary ahead of each
Board meeting and, since the publication of the Governance
Code, they have been updated on progress towards
compliance with the new requirements.
Scope of disclosures
This corporate governance report has been prepared in
accordance with the Governance Code. The Governance
Code can be viewed at: www.frc.org.uk. This report,
which incorporates the reports of the Audit Committee
and Nomination Committee, together with the Directors’
remuneration report, describes how we have applied the
main principles of the Governance Code.
We report on the operation of our business in the
following ways:
• a review of the Group’s business and likely future
developments is given in the Chairman’s statement,
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 49. Results are also reported by operating segment
in note 2 to the Financial statements, together with an
analysis of revenue by geographical market;
• 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 50
to 86 and 87 to 89 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.
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.
1. Board leadership and Company purpose
Reporting against the new Governance Code
The Board continues to be committed to the highest
standards of corporate governance in order to promote
the long-term sustainable success of the Group. The table
below seeks to cross-refer the reader to explanations given
elsewhere of how we have sought to comply with key
aspects of Governance Code Principles A-E, in order to
avoid duplication in this report. In addition, we report against
other relevant Governance Code principles and provisions
within this governance report.
Topic
Company purpose
Values and culture
Workforce engagement
Other stakeholder engagement
Strategy and business model
Effective controls
Sustainability
Capital allocation
Workforce policies and practices
Page(s)
IFC, 50
5
38, 40, 49
38–49
14–15, 10
60
46–47
21, 30
40–42, 48, 87 to 88
Engagement with shareholders and
other stakeholders
The Board seeks to ensure that it has effective engagement
with shareholders and other stakeholders. During this
financial year, the global economic climate has meant that
difficult decisions, necessary to safeguard the business’s
longer-term future, have been required. The table on page
49 illustrates examples of engagement and how the Board
has considered s172 obligations in Board discussions and
decision-making. The Board will be monitoring progress with
engagement mechanisms going forward.
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. The COVID-19 pandemic has
necessitated specific changes to this year’s AGM which
have been separately communicated.
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Shareholder informationFinancial statementsGovernanceStrategic reportRenishaw plc Annual Report 2020 Directors’ corporate governance report continued
Separate resolutions are proposed for each substantially
separate issue, and all resolutions are taken on a poll.
The Company reports on the number of votes lodged on
each resolution, the balance for and against each resolution
and the number of votes withheld. This information is
published via a Regulatory Information Service (RIS) and on
the Company’s website following the meeting.
At the 2019 AGM, the Board was again pleased that the
majority of resolutions were passed with a high level of
support from shareholders. The Board has considered
the votes against resolutions 4, the re-election of Sir David
McMurtry (22.40%) and 5, the re-election of John Deer
(22.75%). In order to better understand the reasons for
these votes against, the Board has considered the views
of shareholders and proxy voting agencies as to voting
and voting recommendations respectively (where these
had been made available to the Company for the 2019
AGM) and received feedback from the then 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 at AGMs and the annual Investor Days, which
include Q&A sessions with the Board. There are also Q&A
sessions with the Executive Chairman, Chief Executive
and Group Finance Director as part of the full and half-
year results webcasts. The Board regularly reviews the
Company’s investor relations policy. The Board will continue
to engage with shareholders to understand their views
on this and any other significant matter and published an
update on the matter as required under the Governance
Code at www.londonstockexchange.com/news-article/
RSW/statement-re-2019-agm-resolution-votes/14489925.
The Company’s overall approach to engagement with
shareholders, and the opportunities for interacting with the
Board, are set out earlier in this section and on page 39.
Employee whistleblowing
We have a whistleblowing policy, facilitated by a confidential
global hotline service, which allows the workforce to raise
concerns about suspected unlawful or unethical conduct.
Any calls to our whistleblowing line are rigorously followed
up. In July 2020, we refreshed our whistleblowing policy and
moved to a new service provider Navex Global, as part of
an initiative to improve our compliance and facilities in this
area, in line with the Governance Code requirements.
Conflicts of interest
The Board has a conflicts of interest policy and register
of authorisations, with 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.
2. Division of responsibilities
Governance structure
Board
Executive
Committee
Audit
Committee
Nomination
Committee
Remuneration
Committee
Executive risk committee, Brexit steering group,
divisions and subsidiary undertakings
Composition of the Board
The Governance Code recommends that at least half
the Board, excluding the chairman, should comprise of
independent Non-executive Directors. The Board currently
comprises two Executive Directors in addition to the
Executive Chairman and five Non-executive Directors, four
of whom are considered independent.
All the Non-executive Directors (with the exception of John
Deer) are considered by the Board to be independent
in character and judgement and there are no other
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
eight years and Carol Chesney for almost eight 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 contribution, skills and experience are summarised in
their biographies on pages 52 and 53.
Sir David McMurtry has held the position of Executive
Chairman since the Company listed in 1983. Following careful
consideration of the new provision of the Governance Code
relating to the chairman’s tenure, the Board concluded
Sir David’s continued service as Executive Chairman is in
the best interests of the Company and its shareholders.
This is because of his unique history as a co-founder of
the Company, his contribution to the long-term sustainable
success of the Company, in particular given his role and
responsibilities for Group innovation and product strategy,
and his continued effective leadership of Renishaw’s
Board in accordance with the Principles set out in the
Governance Code.
56
GovernanceRenishaw plc Annual Report 2020 Senior Independent Director and Non-executive
Directors
Sir David Grant is the Senior Independent Director and is
available to discuss material concerns with shareholders
including if the normal channels of the Executive Chairman,
the Chief Executive or the Group Finance Director fail to
resolve any concerns shareholders may have. The 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 or other
Directors present, in each case to discuss performance,
corporate governance and other matters.
Division of responsibilities
Throughout the year, the Board considered that there
was a clear division of responsibilities at Board level
ensuring an appropriate balance of power and authority
so that there is no one person with unfettered powers
of decision. The Board and Executive Committee 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 which also
detail the key responsibilities of the Senior Independent
Director. These are available on the Company’s website at:
www.renishaw.com/corporategovernance.
The Board of Directors
At the beginning of the financial year, the Board comprised
three Executive and four Independent Non-executive
Directors in addition to the Executive Chairman, until the
Board approved John Deer’s role change from Deputy
Chairman (an executive role until January 2020) to a non-
executive role, retaining the title Deputy Chairman. For the
remainder of the period there were two Executive Directors,
in addition to the Executive Chairman, and five Non-
executive Directors. The Directors holding office at the date
of this report, and biographical details, are given on pages
52 to 53 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 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, borrowing
facilities, reviewing the effectiveness of workforce
engagement mechanisms, reviewing whistleblowing
policy and processes, ensuring maintenance of a
sound and effective system of internal control and
risk management, business plans and budgets,
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
2020, the Board met for eight scheduled meetings and
the Directors’ attendance record at Board and Committee
meetings is set out at the end of this report. In addition,
the Non-executive Directors met a number of times without
Executive Directors present. A high-level summary of
subject areas discussed by the Board during the year is set
out on page 58.
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 Committee, 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 54. The Executive
Committee usually meets for two days on a quarterly basis
and considers the performance and strategic direction of
the metrology and healthcare businesses and other matters
of general importance to the Group.
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 Committee
and the level of authorities given to management below the
Executive Committee.
The framework for managing risk is set out on pages 26
to 28.
The formal schedule of matters specifically reserved
for the Board and the terms of reference of each of the
Nomination Committee, Audit Committee, and Remuneration
Committee are available on the Company’s website at:
www.renishaw.com/corporategovernance.
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Shareholder informationFinancial statementsGovernanceStrategic reportRenishaw plc Annual Report 2020 Directors’ corporate governance report continued
Scheduled Board and Committee meetings
in the year
High-level summary of subjects discussed by
the Board during the year
July 2019
August 2019
A
A
B
N
R
R
September 2019
October 2019
B
R
A
B
N
R
November 2019
December 2019
B
R*
January 2020
February 2020
A
B
N*
R*
March 2020
April 2020
B
N
R
May 2020
A
B
R
* Unscheduled meeting
Key
B Board
June 2020
B
R
N Nomination Committee
Strategy
• Business and corporate strategy
• Changes in markets and the competitive landscape
• Divisional strategies and objectives
• Products and intellectual property
• Strategic risks
• Productivity initiatives and redundancy programme
Risk
• COVID-19 pandemic
• Supply chain dependencies
• Brexit
• Cyber security
• Group’s risk analysis and process evolution
• Data protection
Governance
• Corporate Governance Code 2018 requirements and
legal updates, s172
• Board evaluation
• Committee terms of reference
• Business organisation and structure
• Draft Annual Report
• Executive management structure
• Board changes
Finance
• Dividend policy
• Forecasts, objectives, targets, budgets and costs
A Audit Committee
R Remuneration Committee
• Financial performance across the Group
• Oversight of the preparation and management of the
financial statements
• Tax strategy and updates
• Trading statements
• Remuneration policy
Shareholder engagement
• AGM and other shareholder feedback
• Investor day
• Communications with shareholders
People
• Health and safety system and updates
• Whistleblowing (now ‘Speak Up’) policy
• Salary reviews, bonus and pensions
• Culture and values
• Workforce and general stakeholder engagement
58
GovernanceRenishaw plc Annual Report 2020
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.
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.
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.
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 the number of meetings they were eligible
to attend during the year. During the pandemic, the Board
has held additional bi-weekly calls as part of its response
planning process.
Director
David McMurtry
John Deer
Will Lee
Allen Roberts
Carol Chesney
Catherine Glickman
David Grant
John Jeans
Board
8/8
8/8
8/8
8/8
8/8
7/8*
8/8
8/8
Audit
Committee
Remuneration
Committee
Nomination
Committee
4/4
5/5
5/5
5/5
5/5
9/9
9/9
9/9
9/9
4/4
4/4
4/4
4/4
* Catherine Glickman was absent from the Board meeting on 30 July 2019 due to a pre-existing commitment.
3. Composition, Succession and Evaluation
4. Audit, risk and internal control
Nomination Committee
A description of the structure and activities of the
Nomination Committee is set out in the Nomination
Committee report on pages 62 to 64 where the Board’s
commitment to diversity is also affirmed.
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.
Audit Committee
A description of the membership and activities of the Audit
Committee is set out in the Audit Committee report on pages
65 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 90 and the Independent
auditor’s report on pages 91 to 99.
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Shareholder informationFinancial statementsGovernanceStrategic reportRenishaw plc Annual Report 2020 Directors’ corporate governance report continued
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 26 and 28.
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 29 to 36.
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.
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
An overview of the Group’s business activities, including a
review of the key business risks that the Group face is given
in the Strategic report on pages 1 to 49, together with the
factors likely to affect its future development, performance
and position. Details of the financial and liquidity positions
are also given in the Financial review on pages 18 to 21 of
the Strategic report, and note 20 to the financial statements
sets out 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.
As explained in the Strategic report, and in note 26
Restructuring costs, changes were made to the Group’s
strategy for AM and resulted in impairments to capitalised
development costs, goodwill and property and equipment
relating to this part of the business. The Board do not
consider that this will have a significant adverse effect
on the Group’s profitability or liquidity in the period
covered by either the going concern assessment or the
viability statement, and have taken account of these
strategic changes when preparing the forecast models.
This consideration is also applicable to the impact on the
12-month forecast period of the impairment in 2020 of other
capitalised development costs.
As at 30 June 2020, the Group has a strong balance sheet
with net current assets of £286.4m, including net cash and
bank deposits of £120.4m. While the Group has secured
eligibility to the Bank of England Covid Corporate Financing
Facility (CCFF), no commercial papers have been issued
and the Group does not anticipate making use of this facility.
Access to the CCFF has not been taken into consideration
in the downside scenarios discussed below.
Against the backdrop of the aforementioned strong financial
position, as part of the Directors’ consideration of the
appropriateness of adopting the going concern basis in
preparing the consolidated financial statements, severe but
plausible scenarios have been considered that estimate
the potential impact of the principal risks on the financial
forecasts over the assessment period, as well as the
potential impact of the COVID-19 pandemic.
Third-party research and publications were reviewed,
in which the most severe scenario considered that a
‘second wave’ of the pandemic would be experienced in
the remainder of the calendar year 2020, before easing
from the start of the calendar year 2021. The Board’s most
severe scenario therefore assumed that lockdown measures
and other COVID-19 related restrictions would reoccur
in calendar year 2020, resulting in reduced demand for
that period, particularly in the aerospace and automotive
markets. Principal risks most relevant to short-term revenue,
being supply chain dependencies and exchange rate
fluctuations were also assumed to crystallise in the first six
months of the forecast period, reflecting the risks relating to
Brexit and the impact on revenue of a 15% strengthening
of sterling. Other principal risks of industry fluctuations
and economic and political uncertainty are reflected in the
assumption that trading in the second six months of the
forecast period would be comparable to the first half of
financial year 2020.
60
GovernanceRenishaw plc Annual Report 2020 5. 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
on pages 70 to 86.
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:
• (Provision 19) The chair should not remain in post beyond
nine years from the date of their first appointment to the
board. To facilitate effective succession planning and
the development of a diverse board, this period can be
extended for a limited time, particularly in those cases
where the chair was an existing non-executive director on
appointment. A clear explanation should be provided.
Sir David Grant
Senior Independent Director
18 August 2020
From this combination of assumptions, a revenue forecast
of c£350m was determined for the 12 months from the
date of signing. In assessing liquidity for the going concern
period the other key assumptions under this scenario were
a deterioration in debtor days from 79 to 85 days (worse
than was experienced by the Group in the 2009 global
financial crisis), continued funding of the UK defined benefit
pension scheme in line with the agreed recovery plan, no
reduction in the Group’s operating expenses beyond the
cost-reduction initiatives that are already underway, and the
impact on costs of a 15% strengthening in sterling against
the major trading currencies of the Group. This scenario
also assumes that the Group will conserve its cash by not
paying dividends and by restricting capital expenditure to
£10m per annum, a level which would support the Group’s
manufacturing facilities and IT infrastructure. No additional
borrowings or financing are assumed in this severe
scenario, and the cash flow forecast shows positive cash
balances, net of working capital requirements, throughout
the 12-month going concern period.
Reverse stress testing has also been applied to the model
and was updated at the date of signing the Annual Report
to reflect actual sales in July 2020. This stress testing
demonstrated that the Group would retain a positive
liquidity position until revenue decreased to c£169m for
the 12 months to August 2021. The Board considers the
possibility of this revenue forecast to be highly unlikely, and
mitigating actions to further reduce operating costs would
be put in place if actual trading in the period was consistent
with this scenario.
As a result of the assessments undertaken, 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.
Viability statement
The Board approved the Company’s viability statement on
page 37.
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Shareholder informationFinancial statementsGovernanceStrategic reportRenishaw plc Annual Report 2020 Nomination Committee report
Nomination Committee role, composition
and attendance
Principal role and responsibilities
The Committee is responsible for:
• reviewing the size, structure and composition – including
the balance of skills, knowledge, experience and diversity
– of the Board and its Committees, and recommending
changes to the Board, as appropriate;
• overseeing succession planning for the Board and other
senior executives;
• leading the process for new Board appointments and
nominating candidates for appointment to the Board;
• annually reviewing the independence and requirements of
Non-executive Directors; and
• monitoring the leadership needs of the Group, including
for directors and other senior executives.
The members of the Nomination Committee are Sir David
McMurtry (Chair), Sir David Grant, Carol Chesney, John
Jeans and Catherine Glickman. With the exception of Sir
David McMurtry, all of the members of the Committee are
independent non-executive directors.
Only Committee members are entitled to attend meetings,
although the Chief Executive is invited to attend (excluding
where his role is being discussed). Details of attendance
at meetings is shown below and the terms of reference are
published on the Company’s website at www.renishaw.com/
corporategovernance.
Committee composition and attendance
Committee members
Sir David McMurtry (Chair)
Sir David Grant
Carol Chesney
John Jeans
Catherine Glickman
Attended
4/4
4/4
4/4
4/4
4/4
Areas of focus for the year ahead
These include:
• increased focus on talent management and succession
planning at Board and senior executive level, and across
the wider Company;
• continued focus on diversity and inclusion; and
• implementing the recommendations from the Board
effectiveness review.
Boardroom diversity
The Board recognises the importance and value of all
forms of diversity, including gender, age, ethnicity and
background, as well as the importance of creating a culture
of inclusion. Our aim is for the Board to have a diverse
range of skills, experience and thought from individuals who
can really add value to the business and help us to develop
and achieve our strategic goals.
The Nomination Committee
leads the process for Board
appointments and in ensuring
the Board has the right
balance of experience, skills
and diversity to support the
Company in achieving its
strategy.
Sir David McMurtry
Chair of the Nomination Committee
Date
29 July 2019
Topic
• final review of draft 2019 Annual Report
24 October
• Board evaluation action plan 2019/20
• review of terms of reference
• meeting schedule for the year ahead
• Board evaluation action plan
2019/20 update
• UK Corporate Governance Code 2018
requirements
• succession planning for Directors
• diversity
28 January 2020*• change in role of the Executive Deputy
Chairman
31 March
• Board evaluation action plan 2020/21
• Board succession planning
* Unscheduled meeting
62
GovernanceRenishaw plc Annual Report 2020 The proportion of women on the Board is currently 25%.
While the Board supports the aspiration of gender diversity,
and best practices in this area, as set out in the Hampton-
Alexander review (with a target of 33%), as well as the
aspiration of ethnic diversity set out in the Parker Review,
it continues to believe it is not appropriate to set any
specific targets that may require positive discrimination
for appointments to the Board. The Committee considers
diversity when making Board and senior management
appointment recommendations. The most recent
appointments were Catherine Glickman, Non-executive
Director and Chair of the Remuneration Committee,
appointed in August 2018, and Jacqueline Conway,
General Counsel & Company Secretary, appointed in
November 2019.
The Board will have the opportunity to review and refresh
the diversity of its members in the next few years as some of
the Non-executive Directors reach the nine-year tenure and
decisions on the future composition of the Board are made.
In this regard, the Committee has commenced a process to
look for additional independent non-executive directors to
join the Board to ensure there is a timely succession of those
Board members approaching their nine-year tenure.
Board appointment process
The Board has an established process for identifying
and evaluating candidates for appointment to the Board
and senior management, which was applied for the
appointments of Catherine Glickman and Jacqueline
Conway referred to above. Board appointments are also
subject to the Company’s Equality, Diversity and Inclusion
Policy which was adopted in 2018 and which formalised
our commitment to diversity at all levels. The Committee’s
procedures require it to:
• evaluate the balance of skills, knowledge, experience and
diversity on the Board;
• identify the skills, knowledge and experience required;
• agree a role specification for the proposed appointment;
• select and appoint recruitment consultants to produce
a long list of diverse candidates for the Committee’s
consideration, if the position is not to be filled internally;
• review candidate profiles and prepare a shortlist of
diverse candidates for interview;
• consider and take forward candidates on merit and
against objective criteria, with due regard to the benefits
of diversity on the Board; and
• recommend the preferred candidate to the Board.
Senior management diversity
Following some changes to the Executive Committee
during the year, there are now nine members of this
Committee, comprising eight men and one woman (11%
women). There were previously no women on the Executive
Committee, so the appointment of Jacqueline Conway
in November 2019 was welcomed by the Nomination
Committee. Across senior management, which includes
the Executive Committee and some of their direct reports
(excluding those in administrative or non-managerial
roles), there are 21 men and four women (19% women).
The gender split for both the Executive Committee and
for the senior management are included in the table set
out below.
Management level
Board
Executive Committee
Senior managers1
Subsidiary directors2
Male
6
8
13
42
Male
%
75
89
81
98
Female
2
1
3
1
Female
%
25
11
19
2
1 Includes the direct reports of the Executive Committee, excluding those in
administrative or non-managerial roles.
2 Means statutory directors.
For the engineering sector to reach its full potential, it is
important that it reflects the society in which it operates.
The Committee will continue to focus on improving all
forms of diversity at senior management level across
the Company.
Tenure of the Chairman
The UK Corporate Governance Code issued by the
Financial Reporting Council in July 2018 sets out the
governance principles that applied to the Company
during the 2020 financial year. The Company complied
with all of the principles of the Code in 2020 with the
exception of Code Provision 19. This Code Provision
recommends that the Chairman should not remain in post
beyond nine years from the date of his first appointment
to the Board. This provision was introduced for the
first time for accounting periods beginning on or after
1 January 2019.
The Company’s Chairman, Sir David McMurtry, co-
founded Renishaw together with John Deer in 1973.
Sir David was appointed to the Board in September 1975
and has been Executive Chairman since the Company
listed in 1984. He also served as Chief Executive from
1975 to 2018, when Will Lee was appointed.
While Sir David’s tenure exceeds the nine years
recommended under the Code, his length of service
reflects his ongoing commitment and contribution to what
drives our business: innovation. Sir David is a leader in
disruptive engineering, and a creator of cutting-edge
products and technologies. He continues to be heavily
involved in our product strategy and in keeping Renishaw
at the forefront of global innovation in metrology and,
most importantly, in mentoring and supporting our next
generation of innovators. His unique skills, experience,
and knowledge of the industry are well recognised both
internally and externally, including within his profession,
and in the Board’s view this sets him apart and explains
the rationale for his lengthy tenure and the unanimous
support for him remaining in post.
Board effectiveness review
The Board undertakes an annual evaluation of its
performance and effectiveness.
In 2019, an external, independently-facilitated Board
effectiveness evaluation was conducted by Equity
Communications Limited, which resulted in an action plan
that was tracked against progress throughout the year.
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Shareholder informationFinancial statementsGovernanceStrategic reportRenishaw plc Annual Report 2020 Nomination Committee report continued
Equity Communications Limited has no other connection
with the Company or individual directors.
The next external review is scheduled for 2022, as set out in
the diagram below showing the three-year cycle of internal
and external reviews.
Internal review process conducted in 2020
During 2020 an internal Board effectiveness review was
conducted by the company secretarial team. The review
consisted of a questionnaire, covering a number of
areas such as strategy, succession and talent, conduct
of Committees, and content and effectiveness of Board
meetings. The questions were partly based on the output
from the 2019 review, together with feedback from the
Board on that process. The questionnaire was distributed
to the Board in May, and all eight Directors responded.
The responses were consolidated and anonymised, and
the results and key themes set out in a summary report.
The recommendations were set out in an action plan based
on the findings in the report. Both the report and the action
plan were reviewed and discussed by the Board at its
meeting in June.
The outcome of the evaluation confirmed that the Board and
its Committees continued to operate effectively.
Key findings from the 2020 review
It was noted the following areas had improved since the
2019 review:
• the quality and timeliness of feedback on the
implementation of Board decisions;
• the quality of the Board papers;
• the balance between background briefings and routine
matters, and strategic discussions in Board meetings; and
• communication between Board meetings −
particularly since the recent introduction of fortnightly
informal meetings.
The main recommendations from the 2020
evaluation included:
• getting the balance right between scheduled formal
Board meetings (currently nine per year) and more
informal updates, such as the regular calls held during the
COVID-19 pandemic;
• greater focus on talent management and succession
planning; and
• ongoing commitment to ensuring Board papers remain as
concise and relevant as possible with critical information
made suitably apparent.
Sir David McMurtry
Chair of the Nomination Committee
18 August 2020
Board evaluation: three-year cycle
Year 1 –
Internal
Year 2 –
Internal
Year 3 –
External
2020
• Coordinated internally by company
Next: 2021
• Coordinated internally by company
secretarial team
secretarial team
Last: 2019/Next: 2022
• Independent external
evaluator appointed
• Questionnaire based on outcomes
from previous external review
• Questionnaire based on outcomes
from previous internal evaluation
• Evaluation conducted via
interviews with directors
• Anonymised results discussed at
• Anonymised results discussed at
• Report prepared by
Board meeting and outcomes and
actions agreed.
Board meeting and outcomes and
actions agreed.
independent evaluator
• Board reviews and agrees
outcomes and actions.
64
GovernanceRenishaw plc Annual Report 2020 Audit Committee report
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.
Carol Chesney
Chair of the Audit Committee
Date
5 July
2019
Topic1
• results overview to 31 May, challenge critical
accounting judgements and estimates
• review/discuss EY report on hard close audits
29 July • results overview to 30 June, challenge critical
accounting judgements and estimates
• review/discuss EY report on year-end audits
• review/discuss Annual Report
• initial discussions with EY regarding FY20 audit
• tax strategy update
23
October
• discuss the application of the UK Corporate
Governance Code 2018 and requirements for s172
• IFRS 16 update
• results overview to 31 December, challenge critical
accounting judgements and estimates
• review/discuss EY audit plan for FY20
28
January
2020
• forward contract hedging policy update
11 May • year-end update including COVID-19 considerations
• banking controls update
• tax strategy update
1 An internal audit update is a standing item at all meetings.
Given the challenging macroeconomic conditions faced
during the year, exacerbated by the impact of the ongoing
COVID-19 pandemic, the Committee focused its efforts
on ensuring the control environment remained suitably
robust and appropriate to address the increase in the risks
associated with a number of areas of the financial statements.
In particular, the Committee reviewed and challenged the
assumptions used by management in preparing the going
concern assessment, the viability statement, the hedge
effectiveness testing, and in its consideration of the carrying
value of intangible assets and deferred tax assets.
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, and together with the Risk Committee
and the Board, reviews the effectiveness of the Group’s risk
management systems.
The Audit Committee comprises four Non-executive
Directors: Carol Chesney (Chair), Sir David Grant, John
Jeans and Catherine Glickman. 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 52
and 53.
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. The main topics discussed at the five
meetings held during 2019/20 are detailed in the table to
the left. 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.
65
Shareholder informationFinancial statementsGovernanceStrategic reportRenishaw plc Annual Report 2020 Audit Committee report continued
Key issues and activities
In addition to reviewing the financial reporting of the Group, the Committee also spends a significant amount of time
reviewing the effectiveness of the Group’s internal control processes and its internal and external audit activities.
The principal activities in the year were:
Risk management and
internal controls
Internal audit
External auditor and
non-audit work
• managed the relationship
with the external auditor;
• reviewed, considered and
agreed the scope and
methodology of the 2020
audit work to be undertaken
by the external auditor for
the full year;
• 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 2020 Annual Report;
• reviewed the level and
nature of non-audit
services provided by the
external auditor;
• reviewed the effectiveness
of the external audit
process by a questionnaire
completed by the Group
Finance Director, the
Head of Group Finance,
the Group Internal Audit
Manager, members of
the UK finance team and
subsidiary finance teams
where EY is the auditor; and
• reconfirmed the non-audit
services policy.
• reviewed the output from
• evaluated the scope of
the Risk Committee
regarding the identification
of the Group’s principal
risks, including emerging
risks, and the process
it followed 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 remaining updated
sections of the Group
Internal Control Manual;
• reviewed and agreed the
content of the viability
statement (see page
37) and the process
undertaken, including an
assessment of the stress
testing performed, in order
to approve both it and the
going concern assessment
(see pages 60 and 61);
• received updates on
compliance with the
Group’s anti-bribery and
corruption policy;
• monitored the effectiveness
of the Group’s global
whistleblowing and serious
misconduct policy; and
• reviewed the Group’s
published tax strategy.
work to be undertaken by
the internal audit function,
including the approach
to audits where onsite
visits could not take
place due to COVID-19
and requesting a review,
by questionnaire, of the
potential impact that
lockdowns in subsidiary
locations, due to
COVID-19, was having on
the control environment;
• reviewed progress
on recommendations
brought forward
and considered
recommendations
arising during the year,
and received regular
updates during the
year and challenged
management regarding
the progress relating to
the most significant
recommendations;
• 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.
Financial statements and reports
• assessed the effectiveness of the
Group’s risk management and
internal controls, and reviewed
the disclosures made in the 2020
Annual Report;
• reviewed the 2020 Annual Report
and the 2020 Interim Report.
The Committee received a report
from the external auditor on the
audit of the 2020 Annual Report;
• challenged the liquidity forecasts
for the short to medium term
that support management’s
going concern assessment,
the viability statement and the
related disclosures;
• assessed critical accounting
judgements and estimates in the
Annual Report, being: revenue
recognition; the amortisation and
impairment of intangible assets; the
capitalisation of development costs;
the carrying value of inventory; cash
flow hedges; the assumptions used
to determine the defined benefit
pension schemes’ liabilities; and the
estimates of future profits to utilise
tax losses;
• considered the effectiveness of
the Group’s hedging policy and its
application, including discussing
the ongoing hedging strategy
with management alongside the
forecasts that support the hedge
effectiveness calculations;
• considered the accounting and
disclosures in relation to the Group’s
defined benefit pension schemes;
• considered the appropriateness
of the alternative performance
measures included in the 2020
Annual Report;
• assessed the effective tax rate in the
Annual Report, including reviewing
the calculations in relation to the
partial derecognition of the deferred
tax asset in relation to US tax losses
and challenging management’s
assessment of the provision for
uncertain tax positions;
• considered 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, including
discussion of the work undertaken
by Internal Audit in the year; and
• reviewed and discussed with
management the work undertaken
to implement IFRS 16 ‘Leases’.
66
GovernanceRenishaw plc Annual Report 2020 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 (1)
the treatment of forward exchange contracts for hedging
purposes, (2) the forecasts which are used to support
judgements made in relation to the going concern
assessment, the viability statement, the carrying value
of capitalised development costs, other intangibles and
deferred tax assets, (3) the judgements made in relation
to the Group’s defined benefit pension schemes’ liabilities
and (4) the classification of certain items as restructuring
costs were the four significant issues relating to the
financial statements.
The Committee reviewed and challenged the revenue
forecasts that support the hedge effectiveness calculations.
During the year these forecasts were reduced due to
the global macroeconomic uncertainty which resulted in
portions of forward contracts failing hedge effectiveness
testing according to IFRS 9. The Committee discussed
the hedge effectiveness calculations with management
and has satisfied itself that the work undertaken was
appropriate, and agreed with the conclusions reached and
the accounting entries and disclosures made.
The Committee also reviewed the ongoing use of
alternative performance measures (APMs), being Revenue
at constant exchange rates, Adjusted profit before tax,
Adjusted earnings per share and Adjusted operating profit.
The Revenue at constant exchange rates APM adjusts
for changes in exchange rates, while the Adjusted profit
before tax, Adjusted earnings per share and Adjusted
operating profit APMs adjust for hedge ineffectiveness and
restructuring costs. The Committee concluded that these
APMs 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.
Due to the COVID-19 pandemic and the actual and potential
impacts on the Group’s future performance, the Committee
decided that it needed to increase its focus on the short
to medium-term forecasts prepared by management.
These forecasts are key in supporting the going concern
assessment, the viability statement, the carrying value
of capitalised development costs, other intangibles and
deferred tax assets. The Committee discussed the forecasts
with management and challenged the appropriateness of
the assumptions made including the achievability of the
business plans, assumptions in relation to revenue forecasts
and growth rates for products currently in development,
assumptions in relation to revenue forecasts and growth
rates of cash generating units and specifically the likelihood
of generating sufficient taxable profits to support the
level of deferred tax assets being recognised. During the
Committee’s feedback to the Board, these discussions
usefully continued with the benefit of contributions from all
Board members.
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 made enquiries of management
to understand the process undertaken for determining the
appropriate actuarial assumptions and satisfied itself that
the judgements reached by management were appropriate.
The Committee also reviewed the nature of the items
included in restructuring costs, with particular focus on
whether the items related to specific restructuring activities
that should be separately disclosed in order to aid users’
understanding of the Group’s performance. The Committee
agreed that the items were appropriately classified as
restructuring costs as they were incurred in relation to UK
redundancy programmes as part of the Group’s Fit for the
future strategy or to the rationalisation of the AM product
range to focus on the successful RenAM500Q platform.
The Committee then concluded that restructuring costs
should be separately disclosed items and were also
appropriately excluded from Adjusted profit before tax, a
key performance measure by which the Board evaluates the
Group’s performance.
The Committee discussed these issues with the external
auditor and was satisfied that its conclusions were
consistent with those of the external auditor.
Engagement with Financial Reporting Council
During the year, the Group’s 2019 Annual Report was
reviewed by the FRC’s Corporate Reporting Review
team. As a result of this review, the Group’s accounting
policy for Cash and cash equivalents has been amended
such that Cash and cash equivalents now comprise
cash balances, and deposits that either have an original
maturity of less than three months, or deposits with an
original maturity date of more than three months where the
deposit can be accessed on demand without significant
penalty for early withdrawal and where the original deposit
amount is recoverable in full. Deposits not meeting these
criteria are reported separately as Bank deposits. As the
amended accounting policy is applied retrospectively, the
comparatives in the Consolidated statement of cash flow
have been amended to show a cash outflow of £52.5m
in Investing activities for the amounts placed on deposits
exceeding three months and not accessible on demand,
and the comparatives in the Consolidated balance sheet
show £52.5m of Bank deposits in current assets separately
from Cash and cash equivalents. This amended policy has
no impact on profit before tax, net current assets or net
cash flow.
The review undertaken by the FRC is based on the
2019 Annual Report and does not benefit from detailed
knowledge of the business or an understanding of the
underlying transactions entered into. The review provides
no assurance that the 2019 Annual Report was correct
in all material aspects and the FRC’s role is not to verify
the information provided but to consider compliance with
reporting requirements. The FRC accepts no liability for
reliance on them by the Group or any third party.
67
Shareholder informationFinancial statementsGovernanceStrategic reportRenishaw plc Annual Report 2020 Audit Committee report continued
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 fourth financial year that the Annual Report has
been audited by EY following 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 continues to monitor the audit approach
undertaken by EY 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 EY.
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 as well as
a questionnaire completed by UK and subsidiary
finance teams.
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 2020, the external auditor provided £14,668 of non-
audit work in relation to separate pieces of work regarding
Wotton Travel’s annual ATOL/ABTA reporting, French tax
compliance and VAT turnover certificates for both the Irish
subsidiary and a UK subsidiary.
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.
During the year the Risk Committee undertook a
comprehensive review of the risk management processes
which resulted in a number of changes to its composition
and terms of reference, but also to how risks, including
emerging risks, are identified, managed and reported
across the Group. The changes included a new ‘top down’
process to identify the Group’s principal risks, including
emerging risks, through interviews with over 20 senior
executives from across the business, which meant there
was greater alignment between the risks identified and
the Company’s strategy. A new ‘bottom up’ process, in
which risk reports are submitted by the subsidiaries and
product divisions, will be implemented in 2020/21, creating
an improved central repository of risk data from across the
Group. Risk owners have also now been identified for each
principal risk, and as part of their responsibilities, owners will
be asked to report on how they are managing and tracking
their respective risks at the risk committee, Audit Committee
or Board.
The Internal Audit team reports and follows up on control
and operational weaknesses, and supports management
in making improvements where required. The review of the
Group Internal Control Manual was completed in the year
and compliance with the key controls set out therein has
been undertaken during each audit. Further, an annual
declaration of compliance with internal controls and
processes is completed by senior management from each
active Group company.
Internal Audit continues to review and develop its work
programmes to match the evolving risk landscape.
The original audit plan included performing 25 overseas
subsidiary audit visits during the year. Due to the COVID-19
pandemic, eight of the 25 overseas subsidiary audits
have been undertaken remotely. While the standard work
programme has been used for all audits undertaken
remotely, some of the physical checks have been
undertaken by members of the respective subsidiary team,
who are independent of the area being checked. This work
has been reviewed by the internal audit team and we have
no reason to believe the quality of the work was impacted.
Overseas subsidiary audits are currently expected to
be performed remotely for the 2020/21 financial year,
supplemented with the support of the respective subsidiary
team where required.
The Committee determined that the internal audit function is
effective following the review detailed in the Key issues and
activities section of this report.
An analysis of fees paid to EY is included in note 6 to the
Group financial statements.
Details of risk management and internal controls are set out
on pages 26 to 28.
68
GovernanceRenishaw plc Annual Report 2020 • at the Committee’s meeting in August 2020, 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, including the accounting treatment
and disclosures in relation to hedge effectiveness and
restructuring of the AM business; 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 August 2020 meeting, 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 60.
Carol Chesney
Chair of the Audit Committee
18 August 2020
During the year, the Company complied with The Statutory
Audit Services for Large Companies Market Investigation
(Mandatory Use of Competitive Tender Processes and Audit
Committee Responsibilities) Order 2014 issued by the UK
Competition and Markets Authority for the financial year.
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
Annual Report production process within a strict timeframe.
The processes adopted in relation to the Annual Report
included the following:
• overall management of the Annual Report was the
responsibility of the Group Finance Director and the
General Counsel & Company Secretary who instigated
a comprehensive review of the disclosures and then
assigned specific ownership and responsibility for the
individual sections;
• during the compilation period, regular meetings were
held with key contributors from Group Finance, Company
Secretarial, CR, Group HR 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 Annual Report
and that reporting was balanced;
• considered the enhancements to disclosures suggested
by the FRC’s Corporate Reporting Review of the 2019
Annual Report;
• an extensive review and verification process was
undertaken to ensure factual accuracy;
• a qualitative review of the entire Annual Report, including
the application of the Corporate Governance Code
2018 and s172 requirements, was undertaken to ensure
that it promotes consistency and balance between the
component elements;
• at the first of the Committee’s meetings in July 2020, the
Committee reviewed an initial draft of the Annual Report,
during which it probed and tested certain disclosures;
69
Shareholder informationFinancial statementsGovernanceStrategic reportRenishaw plc Annual Report 2020 Directors’ remuneration report
Committee Chair’s statement
Introduction
On behalf of the Board, I am pleased to present my
second remuneration report as Chair of the Remuneration
Committee. This year’s report contains a proposed update
to our remuneration policy for which we are seeking
shareholder approval at the 2020 AGM, together with the
FY20 Annual report on remuneration.
This remuneration report has been prepared in accordance
with the Large and Medium sized Companies and Groups
(Accounts and Reports) (Amendment) Regulations 2013,
LR 9.8 of the Listing Rules, the Companies (Miscellaneous
Reporting) Regulations 2018 (SI 2018/860), the Companies
(Directors’ Remuneration Policy and Directors’ Remuneration
Report) Regulations 2019 (SI 2019/970) and the UK
Corporate Governance Code 2018.
Remuneration in context
2020 has been a challenging year for the Group, with the
COVID-19 pandemic exacerbating the already difficult
economic conditions. In H1, the business experienced
subdued demand, partly as a result of trade tensions
between the USA and China, which had a knock-on effect
on the aerospace and automotive industries. In response,
the Company implemented its Fit for the future strategy
which incorporated: rationalisation and prioritisation of
key projects and products; aligning our structure to our
revised strategies; implementing tight cost control; and
cost reductions.
These measures have resulted in improved focus
and productivity across Renishaw. The cost-reduction
measures included not replacing staff who had left the
business, redundancies in direct manufacturing staff in
the UK, Ireland and India, and redundancies in other
roles across the Group. This resulted in a total headcount
reduction across the Group of 578 within the year.
The COVID-19 pandemic, recognised as both a global
health and an economic crisis, impacted the Group in the
second half of the financial year. The Company’s response
to this global crisis from a financial perspective has been
to focus on cash preservation, which in turn has impacted
decisions regarding current salaries and the 2020 salary
reviews and bonuses. The decisions that have been taken
in this regard are explained later in this statement.
In 2020 the Committee also undertook a review of the
Directors’ remuneration policy, in particular for non-founder
Executive Directors. The Committee agreed that the
policy remained fit for purpose and the primary focus of
the Company during the pandemic was on ensuring the
health and wellbeing of its employees, their families and
the communities in which they live and work, and Renishaw
customers while prudently managing the Group through
this period of uncertainty. The Committee therefore limited
the review to aligning the policy with developments in
governance and shareholder guidance, since the policy
was last approved in 2017.
The Committee recommends the
2020 Directors’ remuneration
policy to shareholders: the core
policy continues to support
high performance and long-
term sustainable growth while
evolving to align with market
practice.
Catherine Glickman
Chair of the Remuneration Committee
70
GovernanceRenishaw plc Annual Report 2020 Key remuneration activities during the year
Executive Directors’ bonus plan 2019/20
For the 2019/20 financial year, the Committee agreed that
the metrics should continue to be predominantly financial,
but that strategic drivers should also be rewarded. It was
agreed that the bonus should include, for the first time,
an element based on non-financial metrics, as follows:
90% of the 2019/20 bonus was based on financial metrics
(specifically Adjusted* profit before tax); and 10% on non-
financial metrics. Objectives with specific targets were set,
including reducing the cost base, improving productivity,
and rationalising and prioritising key projects. The bonus
plan structure is consistent with the 2017 remuneration
policy which allows up to 25% of the bonus opportunity to
be based on non-financial measures.
Salaries for Executive Directors and the wider
workforce
In response to the COVID-19 pandemic, the Committee
supported the Company’s decision in March 2020 to
participate in the UK Government’s Coronavirus Job
Retention Scheme, in order to help preserve its cash
position and retain employees. An average of 779
employees were furloughed each month in the UK from
6 April 2020 until the end of June 2020.
In addition, there were salary reductions across the Group,
and in particular approximately 1,200 UK employees agreed
to move to a 20% reduction in salary commencing on
6 April 2020 for a corresponding reduction in working hours.
The salary reduction scheme ended on 15 June 2020,
therefore lasting 10 weeks rather than the anticipated three
months. The majority of manufacturing staff were asked to
continue to work their usual hours for their usual salary to
fulfil customer orders, after social-distancing measures were
implemented on our sites.
The 20% reduction in salary, though not responsibilities,
applied to the Executive Directors and Group-wide senior
management, with the latter returning to full pay on 15 June
2020 along with the wider workforce, and the Executive
Directors returning to full pay on 1 July 2020. Further, Will
Lee, the Chief Executive, voluntarily agreed to an increased
level of reduction in salary (to 40%) during the period from
1 April to 30 June 2020. In addition, the Executive Chairman
waived his salary, and the Deputy Chairman waived his
Non-executive Director fees from 6 April to 30 June 2020.
The remaining Non-executive Directors aligned with the
senior management by reducing their fees by 20% from
6 April to 30 June 2020.
2020 salary and bonus reviews
In his announcement to staff published on 5 June 2020, Will
Lee confirmed that, because of the vital need to manage
costs and preserve cash, there would be no routine salary
increase this year, neither would a bonus be paid to eligible
staff in relation to 2019/20 performance.
In line with this decision, the Committee has confirmed
that there will be no salary increase for FY2021 for the
Executive Directors or the Executive Chairman, neither will
any bonus be payable for the year ending 30 June 2020.
The Committee did review performance against the bonus
targets, and while the financial targets were not met, it
was agreed that the non-financial targets of restructuring
the business, project rationalisation together with an
acceleration in cost reductions had been met or exceeded.
In accordance with the policy, no bonus award can be
made unless the financial targets are also met, so there was
no award in respect of the non-financial elements. As such,
there was no exercise of the Committee’s discretion in
relation to either the salary or bonus review for 2019/20.
Executive Director changes
John Deer stepped down from his Executive Deputy
Chairman role on 29 January 2020 to assume a Non-
executive Deputy Chairman role. John received his
Executive Director salary and benefits until that date.
From 30 January 2020 his remuneration has been aligned
with that of the other Non-executive Directors.
Remuneration policy review
The current policy has been in place since 2017,
when it received 98.9% approval from shareholders.
Its implementation in the last three years has also received
strong levels of support. The objectives of the policy remain
to attract, motivate and retain Executive Directors while
maximising long-term shareholder value and reinforcing
Renishaw’s culture. We prefer a policy that is simple,
conservative, consistent with the approach to remuneration
for the wider workforce, and aligned with the interests of our
shareholders and other stakeholder groups.
The Committee concluded that making significant
changes to the remuneration policy was inappropriate and
unnecessary this year. The elements introduced in 2017
– including the deferred annual equity incentive element –
have worked effectively in supporting succession planning,
aligning non-founder Executive Directors with shareholder
interests and rewarding strong performance.
We are therefore proposing that the policy be resubmitted
broadly unchanged, save for revisions relating to:
• aligning pension contributions for current and future
Executive Directors with the wider workforce and linked to
service with Renishaw;
• introducing a post-employment shareholding policy;
• increasing the level of bonus deferral into shares, but not
relaxing the stretching targets; and
• extending our malus and clawback policy.
These changes are set out in full on pages 74 to 77.
We consulted with shareholders on our proposals and
would like to thank those that engaged in giving us
feedback. The policy changes were broadly supported
by shareholders; there were some points raised that the
Committee will keep under review and consider at the
next policy review. The Committee continues to believe
that the Policy supports high performance and long-term
sustainable growth while being appropriately aligned with
evolving market practice.
* Note 25, Alternative performance measures, defines how Adjusted profit
before tax is calculated.
71
Shareholder informationFinancial statementsGovernanceStrategic reportRenishaw plc Annual Report 2020 Committee Chair’s statement continued
Areas of focus for the year ahead
We will implement the Policy, if approved by shareholders,
and work on the following areas:
• continue to review financial and non-financial measures
and targets ensuring that our incentives remain aligned
with performance and strategy, given the potential long-
term impact of COVID-19; and
• continue to engage with the wider workforce to help
inform decisions on executive reward.
I would like to thank shareholders for their continued
support, and am always happy to answer questions
or receive feedback: I can be contacted at
companysecretary@renishaw.com.
Committee composition and attendance
Committee members
Catherine Glickman (Chair)
Sir David Grant
Carol Chesney
John Jeans
Attended
scheduled
meetings
7/7
7/7
7/7
7/7
Attended
unscheduled*
meetings
2/2
2/2
2/2
2/2
* There were two unscheduled Committee meetings on 29 November 2019
(regarding remuneration for the Chairman and Deputy Chairman) and on
28 January 2020 (regarding John Deer stepping down as an Executive
Director and being appointed as a Non-executive Director).
Date
5 July 2019
Topic
• Committee’s terms of reference
Catherine Glickman
Chair of the Remuneration Committee
18 August 2020
Role of the Committee
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 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 and reviewing the structure and operation of
the remuneration policy.
Committee composition and attendance
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 www.renisaw.com/
corporategovernance. Executive Directors may attend
meetings of the Committee by invitation and independent
advisers are used as required.
29 July
26 September
• Chairman’s expenses
• Annual Report
• Executive Directors’ bonus plan
• senior management bonus plan
• Annual Report
• Executive Directors’ bonus plan
• remuneration policy review
• plan for FY 2019/20
• Committee meeting schedule
for 2020
24 October
• workforce considerations
31 March 2020
• feedback from
institutional shareholders
• Executive Directors’ bonus
plan update
• furloughing
• current salaries
• FY2020 bonus review and FY2021
salary review
11 May
• remuneration and COVID-19
25 June
• remuneration policy review
• remuneration and COVID-19
• additive manufacturing restructuring
• remuneration policy review
• Directors’ remuneration report
• Executive Directors’
service agreements
72
GovernanceRenishaw plc Annual Report 2020 Remuneration at a glance
KPI – performance snapshot
Adjusted profit before tax1*
)
m
£
(
x
a
t
e
r
o
f
e
b
t
fi
o
r
p
d
e
t
s
u
d
A
j
£160
£120
£80
£40
£0
142.5%
0%
0%
£48.6m
2020
£145.1m
2018
£103.9m
2019
Financial year ended 30 June
1 The percentages in this bar chart refer to the total of the awards made
to the Executive Directors. Note that in 2017/18 the founder Executive
Directors only received 100%, and in 2018/19 and 2019/20 no awards
were made as the financial targets were not met.
Total shareholder return (TSR)
0
1
0
2
e
n
u
J
0
3
n
o
d
e
t
s
e
v
n
i
0
0
1
£
f
o
l
e
u
a
V
1,000
800
600
400
200
0
How is performance reflected in our
incentives?
Adjusted* profit before tax (PBT) is a key measure of
Renishaw’s financial performance.
In 2019/20, Adjusted PBT was weighted 90% in both
the annual cash bonus and deferred equity incentive
plan, with the remaining 10% of the opportunity subject
to the achievement of non-financial objectives relating
to restructuring of the business, prioritisation of projects
and a cost-reduction programme.
Our financial performance for 2019/20 has resulted in no
awards being made in relation to the annual cash bonus
or the deferred annual equity incentive plan, under either
the financial or non-financial elements of the plan (although
the financial targets must be met in order for any award to
be made).
* Note 25, Alternative performance measures, defines how Adjusted profit
before tax is calculated.
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 15% and 90% respectively. This compares with -4%
and 12% for the FTSE 250 over the same timeframe.
2010 2011 2012 2013 2014 2015 2016 2017
2018
2019
2020
Financial year ended 30 June
Renishaw
FTSE 250
Executive Director remuneration in 2019/20
£’000
Base salary
Taxable benefits
Pension
Annual cash bonus
Deferred equity incentive
Total
Shareholding (multiple of salary)
Sir David
McMurtry
536
3
n/a
–
n/a
539
1,485x
John
Deer
260
12
n/a
–
n/a
272
n/a*
Will
Lee
505
20
76
–
–
601
0.265x
Allen
Roberts
398
20
60
–
–
478
0.497x
* John Deer stepped down as an Executive Director on 29 January 2020 (becoming a Non-executive Director) and therefore is no longer subject to the minimum
shareholding guideline. For the avoidance of doubt, while John Deer was an Executive Director his shareholding exceeded the shareholding guideline that
applied in that tenure (i.e. during the period from 1 July 2019 to 29 January 2020).
Implementation of policy in 2020/21
Salary
Benefits
Annual incentive plan
In line with the wider UK
workforce, there will be
no salary increase for
Executive Directors.
The package of benefits
for Executive Directors
is unchanged from
2019/20, with the
exception of home
telephone costs which
are no longer included
in the package.
Subject to the proposed 2020 policy being approved by shareholders,
the annual cash bonus and deferred equity incentive opportunities will
be combined into a single annual incentive opportunity for 2020/21
onwards for the non-founder Executive Directors. In line with the
proposed policy, 50% of any payment earned by the non-founder
Executive Directors will be deferred into shares for three years.
This change represents an increased level of deferral, but no change
to the previous maximum aggregate award opportunity. The Executive
Chairman’s opportunity remains at 100% of salary and any award
would be paid in cash.
73
Shareholder informationFinancial statementsGovernanceStrategic reportRenishaw plc Annual Report 2020
Directors’ remuneration policy
Executive Directors’ remuneration policy
This section of the Directors’ remuneration report sets out the proposed Directors’ remuneration policy of the Company, to
be approved at the 2020 AGM. This policy is largely unchanged from that approved by the shareholders at the 2017 AGM
and published most recently in the 2019 Directors’ remuneration report. If approved by shareholders, this 2020 policy will
come into force after the 2020 AGM, for a period of up to three years. Changes to the 2017 policy are also summarised in a
separate table on page 77. The 2020 policy was determined by the Committee after reviewing the impact of the 2017 policy,
key governance factors, and taking account of shareholder feedback. The Committee further reviewed the policy against
the six themes set out in paragraph 40 of the 2018 UK Corporate Governance Code: clarity, simplicity, risk, predictability,
proportionality and culture. The Committee concluded that:
• the policy and our approach to its implementation are simple, appropriately designed and well understood, reinforcing the
Group’s culture as well as strategy;
• the performance measures used in the incentive plans are well aligned to the Group’s strategy and goals, with stretching
and achievable targets: the maximum awards under any award are clearly stated and therefore predictable;
• the balanced approach drives behaviours that promote high performance and sustainable growth to drive the long-term
success of the Company for the benefit of all stakeholders, without encouraging or rewarding excessive risk-taking;
• the Committee retains sufficient discretion to adjust formulaic incentive outcomes or require the repayment of previous
awards to ensure that poor performance is not rewarded; and
• our approach to disclosure is transparent with clear rationale provided on its maintenance and any changes to policy.
The Committee has the discretion to amend the 2020 policy with regard to minor or administrative matters where it would,
in the opinion of the Committee, be inappropriate to seek or await shareholder approval. To ensure conflicts of interest are
managed, the Committee ensures no Director determines the policy regarding their own remuneration.
Executive Directors’ policy table
Total remuneration policy
Purpose and
relevance to
strategy
Operation
To attract, motivate and retain talented Executive Directors to support delivery of Renishaw’s strategy and
maximise long-term shareholder value.
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.
Our total remuneration policy comprises the following constituent elements:
Base salary
Purpose and
relevance to
strategy
Operation
Maximum
To provide a competitive remuneration package to motivate and retain Executive Directors of the required
calibre to help the Group meet its objectives to deliver the Group’s strategy.
Renishaw aims to pay base salaries between median and upper quartile, reflecting that its variable pay
opportunities remain significantly below market.
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
in the Executive Director’s home market, unless the Committee in its absolute discretion determines that
circumstances warrant a higher increase.
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.
Performance
measures
Continued good performance.
74
GovernanceRenishaw plc Annual Report 2020 Benefits
Purpose and
relevance to
strategy
Operation
To provide market-competitive benefits to motivate and retain Executive Directors and to support them to give
maximum attention to their role.
Benefits provided on an ongoing basis include:
• a car or car allowance;
• private medical insurance;
• life assurance; and
• long-term disability cover.
If, on the appointment of a new Executive Director, relocation is required to the director’s place of work,
reasonable and proportionate relocation support may be provided.
Maximum
Excluding accommodation and relocation costs, benefits are capped at £50,000 per annum.
Performance
measures
Not applicable.
Annual incentive opportunity (comprising cash bonus and deferred equity awards)
Purpose and
relevance to
strategy
Operation
To incentivise and reward execution of the Group’s objectives, reward outperformance and encourage
Executive Director share ownership.
The annual cash bonus and deferred annual equity opportunity under this proposed 2020 policy have been
combined into a single annual incentive award opportunity for the non-founder Executive Directors with 50%
of any earned payout deferred into shares for three years. Dividends may accrue on deferred shares over the
deferral period and, if so, will be paid as additional shares on vesting.
The Committee sets Group performance targets, including a threshold below which no annual incentive is
earned, increasing from zero on a straight-line basis to a target at which 75% of salary (equivalent to 50%
of the maximum opportunity for non-founder Executive Directors) would be earned, and to a cap at which
the maximum opportunity of 150% of salary could be earned. As under the previous policy, the targets for
payouts of between 100% of salary (‘Stretch’) to 150% of salary (‘Maximum’) will incentivise and reward even
greater outperformance of profit growth expectations for any year – this is shown in the chart below.
Sir David McMurtry participates in the annual bonus plan: his incentive opportunity is capped at a maximum
of 100% of salary, to be paid in cash.
Part or all of any annual incentive payment
(whether paid in cash or deferred into shares)
may be subject to repayment in the event of any:
(i) material financial misstatement;
(ii) error in calculation;
(iii) misconduct;
(iv) corporate failure;
(v) material loss; and/or
(vi) reputational damage.
150%
100%
75%
Maximum
Maximum
Stretch
Stretch
On-target
On-target
l
)
y
r
a
a
s
f
o
%
(
t
u
o
y
a
P
0%
Threshold
Threshold
On-target
Maximum
Stretch
■ 50% cash
■ 50% shares
Maximum
150% of salary for non-founder Executive Directors, and 100% of salary for Sir David McMurtry. Any award
for Sir David McMurtry will be paid in cash.
Performance
measures
Based on Group performance, primarily measured by Adjusted PBT (one of the key measures of
performance used 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.
75
Shareholder informationFinancial statementsGovernanceStrategic reportRenishaw plc Annual Report 2020
Directors’ remuneration policy continued
Pension
Purpose and
relevance to
strategy
To provide a pension contribution/allowance in line with the wider workforce of the home country of the
Executive Director and to motivate and retain Executive Directors of the required quality to meet the Group’s
objectives.
Operation
As from 1 August 2020, Executive Directors who joined Renishaw prior to 2007 will receive pension
contributions in to the Company’s defined contribution scheme, or all or part as an allowance paid in lieu, at
11% of salary, in alignment with other long-serving employees.
Executive Directors who joined Renishaw after 2007 will receive the same annual contributions as other
more recent joiners across the wider workforce (currently 9% of salary); the allowance will be made into
the Company’s defined contribution scheme or all or part as a cash allowance in lieu, as agreed by the
Committee.
Will Lee is a deferred member of the Company’s defined benefit scheme, which closed for future accruals on
5 April 2007. Sir David McMurtry receives no pension contribution or allowance in lieu.
Maximum
The maximum contribution to the defined contribution scheme, or, where applicable, additional salary
payment in lieu of contributions, is 11% of base salary for Executive Directors who joined Renishaw prior to
2007 and 9% of base salary for those who joined after 2007.
Performance
measures
Not applicable.
Minimum shareholding guideline
Purpose and
relevance to
strategy
Operation
Supports the alignment of Executive Director and shareholder interests.
The Chief Executive is expected to build up and maintain a level of share ownership of at least 200% of
base salary.
All other 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.
The required level of shareholding is expected to be achieved within five years from an Executive Director’s
appointment. Executive Directors’ shareholdings are reviewed annually by the Committee to ensure progress
is being made towards achievement of the guideline level of shareholding. However, if it becomes apparent
to the Committee that the guideline is unlikely to be met within the timeframe, then the Committee will discuss
with the Director a plan to ensure that the guideline is met over an acceptable timeframe.
Maximum
Not applicable.
Performance
measures
Not applicable.
Post-employment shareholding policy
Purpose and
relevance to
strategy
Operation
Supports the principle of long-term share ownership that is promoted by the 2018 UK Corporate Governance
Code.
Executive Directors (excluding Sir David McMurtry) will be required to maintain a personal shareholding
in Renishaw at a level of at least the lower of their actual shareholding and the level of their minimum
shareholding guideline for one year after they step down from the Board, and 50% of that level for a
further year.
The post-employment shareholding policy will apply to shares awarded under the new policy, effective
October 2020.
The Committee retains the discretion to modify the post-employment shareholding requirement in certain,
exceptional circumstances; for example, on a change of control or if a conflict of interest arises with an
Executive Director’s next appointment.
Maximum
Not applicable.
Performance
measures
Not applicable.
76
GovernanceRenishaw plc Annual Report 2020 Key changes from the 2017 Directors’ remuneration policy
As detailed in the statement from the Chair of the Remuneration Committee, the 2020 Policy is broadly unchanged from 2017,
apart from the revisions summarised in the table below.
Element of
remuneration
Pension
Malus and
Clawback
Summary of the changes
From 1 August 2020, Executive Directors (excluding
Sir David McMurtry) who joined Renishaw prior to 2007
will receive pension contributions in to the Company’s
defined contribution scheme (or all or part as an
allowance paid in lieu) at 11% of salary, in alignment
with other long-serving employees.
For any Executive Director who joined Renishaw after
2007, annual contributions of up to 9% of salary
(in alignment with the wider workforce) will be made in
to the Company’s defined contribution scheme (or all
or part as an allowance paid in lieu) as agreed by the
Remuneration Committee.
The 2017 policy maximum was 15% of salary.
Extended to include corporate failure, material loss and
reputational damage.
The 2017 policy limited recovery provisions to cases of
material financial misstatement, error in calculation or
misconduct.
Minimum
shareholding
requirement
The CEO is expected to build up and maintain a level of
share ownership of at least 200% of base salary (2017
policy: 50% of salary).
Post-
employment
shareholding
requirement
Executive Directors (excluding Sir David McMurtry)
will be required to maintain a personal shareholding
in Renishaw at a level of at least the lower of their
actual shareholding and the level of their shareholding
requirement for one year, and 50% of that level for a
further year.
Rationale
To fully align Executive Directors’ pensions with
the wider workforce.
This is consistent with a commitment made in the
2019 Directors’ remuneration report.
To align with market practice.
This is consistent with a commitment made in the
2019 Directors’ remuneration report.
This new requirement supports the principle of
long-term share ownership that is promoted by
the 2018 UK Corporate Governance Code.
Benefits
No longer includes home telephone costs.
To align with market practice.
Simplifies the bonus into a single award
opportunity, without increasing the current award
opportunity while encouraging Executive Director
share ownership.
Single annual
incentive
combining
cash bonus
and deferred
equity
A single annual incentive award opportunity comprising
a combined annual cash bonus and deferred annual
equity award of up to 150% of salary for non-founder
Executive Directors, with 50% of any bonus earned
deferred into shares for three years (rather than limiting
deferral into shares to any payout in excess of 100% of
salary, as provided for under the 2017 policy).
This represents an increased level of deferral, but no
change to the current maximum award opportunities.
The payout schedule remains unchanged, with 0%
payout at Threshold, increasing to a payout of 75%
of salary at Target, 100% of salary at Stretch, and a
maximum payout of 150% of salary. Performance targets
will continue to be set such that payouts above 100%
of salary will represent very stretching performance
outcomes which reward overperformance.
Sir David McMurtry’s maximum opportunity remains
100% of salary (to be paid in cash).
77
Shareholder informationFinancial statementsGovernanceStrategic reportRenishaw plc Annual Report 2020 Directors’ remuneration policy 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 over and above the
limits set out in the policy table 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 mentioned in the Statement from the Chair of the
Remuneration Committee, the pension contributions for all
incumbent Executive Directors are now aligned with that
available to the wider workforce in the relevant market, and
future Executive Directors will also be aligned following the
approval of the 2020 policy.
Committee discretion in exceptional
circumstances
The Committee retains discretion in exceptional
circumstances to offer a long-term incentive to support
Renishaw in securing the best Executive Director candidate,
if the Committee considers it to be in shareholders’ best
interests to do so. Any use of this discretion would be limited
by our internal policy for the aggregate of all incentive
opportunities (as a percentage of salary) not to exceed
market median, and for an individual Executive Director’s
total remuneration not to exceed upper quartile. Any use of
this discretion would be accompanied by a full rationale in
the relevant annual remuneration report.
Service contracts and policy on payment
for loss of office
The Executive Directors’ service contracts require 12 months’
notice of termination by either party. There are no obligations
in any Executive Director’s service contract, or Non-executive
Director’s letter of appointment, which would require the
Company to pay a specific amount of compensation for loss
of office.
The Executive Directors’ service contracts reflect the
Company’s policy regarding notice periods. No payment will
be made for a termination by the Company for a breach by
the Executive Director of his or her service contract. In other
cases, payment in lieu of notice will be considered up to the
12 months’ notice period to cover base salary, benefits and
pension contributions. If additional compensation is required
to be considered, such as on a settlement agreement, the
Committee will consider all relevant commercial factors
affecting the specific case. Directors’ service contracts are
available for inspection at the Company’s registered office
upon written request to the Company Secretary.
A summary of the key elements of the policy for loss of office are set out below:
Provision
Notice period
Pension
Treatment of annual incentive
plan awards
Policy
12 months’ notice by either party.
No obligation to pay a specific amount in compensation for loss of office.
Pension will continue to apply until the termination date; payment in lieu of notice will be
considered up to a period of 12 months.
No annual incentive is payable for the financial year, unless the Committee determines
otherwise in certain ‘good leaver’ circumstances. These include ill health, death, disability,
retirement in agreement with the Committee, redundancy, or any other reason as the
Committee in its absolute discretion may determine. For ‘good leavers’, any payment would
normally be pro-rated for time and reflect the Company’s performance against the targets set
at the start of the year. It would also take into account the circumstances of the individual’s
loss of office, and may be paid wholly in cash.
Unvested deferred equity awards normally lapse, unless the Committee determines
otherwise for a ‘good leaver’. In such cases, unvested awards would normally be pro-rated
to reflect the portion of the deferral period that has elapsed on cessation of employment,
and vest on the normal vesting date (except in the event of death, when vesting would
be brought forward). Unvested awards normally vest early on a change of control of the
Company.
Benefits
Benefits will continue to apply until the termination date; payment in lieu of notice will be
considered up to a period of 12 months.
78
GovernanceRenishaw plc Annual Report 2020 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 revised
remuneration policy for 2020. The top twenty external
shareholders as well as proxy voting agencies were
consulted in May and June 2020 regarding the proposed
changes. The Committee is grateful for the feedback
received from shareholders as part of this process, and
which indicated broad support for the initial proposals.
While no substantive changes were made to the policy as a
result of the feedback, the questions raised by shareholders
and proxy voting agencies to clarify certain points, such as
in relation to pension contributions for new versus existing
Executive Directors, was extremely helpful in shaping the
language used in the policy.
The Committee will continue to monitor trends and
developments in corporate governance and market
practice to ensure the structure of executive remuneration
remains appropriate.
Employee engagement
A variety of stakeholder views are taken into account
when determining executive pay, including those of
our shareholders, colleagues, and external bodies.
Further details on how we engage with, and consider the
views of, each of these stakeholders are set out on pages
38 and 39.
The Remuneration Committee is supportive of the
growing focus on engaging the employee voice, which
has accompanied recent changes to the UK Corporate
Governance Code. The Chair of the Committee is the
ambassador for our workforce engagement activities and
has attended a number of meetings with employee groups,
both in person and via Teams, and this has been useful
for gaining an insight into employee views on a range of
subjects. When reviewing and determining this policy, the
Remuneration Committee is briefed on pay and employment
conditions of employees in Renishaw as a whole, with
particular reference to the UK, being the market in which the
Executive Directors are based.
Illustrations of application of remuneration policy
The bar charts set out below for each Executive Director show remuneration for the financial year ending 30 June 2021 under
different performance scenarios:
• firstly, the minimum remuneration payable in respect of salary, benefits and pension;
• secondly, the remuneration payable if performance is on target and in line with the Company’s expectations; and
• thirdly, the remuneration payable if the maximum cash 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. Due to the absence currently of a
long-term incentive, the fourth scenario required by the latest reporting regulations (requiring the impact on the value of
long-term incentives of 50% share price growth over the performance period) is not shown; this is unchanged from the third
scenario above.
Sir David McMurtry
Will Lee
Allen Roberts
1,433
50%
1,254
43%
1,489
57%
1,067
39%
718
100%
57%
50%
646
100%
61%
43%
799
39%
61%
485
100%
1,112
56%
44%
Minimum
On-target
Maximum
Minimum
On-target
Maximum
Minimum
On-target
Maximum
Annual incentive opportunity
Minimum remuneration
All figures £’000
79
Shareholder informationFinancial statementsGovernanceStrategic reportRenishaw plc Annual Report 2020 Directors’ remuneration policy continued
Non-executive Directors’ policy table
The remuneration of the Non-executive Directors is determined by the Executive Directors and consists of a board fee only.
There is no entitlement to any additional fees nor any bonus, incentive plans or pension. There are no additional fees payable
as each Non-executive Director contributes in their own way, according to their unique skillset and experience. 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-
elections at AGMs, unless terminated earlier by either party on one month’s written notice. Appointments will not normally
continue beyond nine years in office, although there may be exceptions where a certain skillset is difficult to replace and/or in
order to allow a comprehensive recruitment exercise to be conducted.
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 calibre
to meet the Group’s
objectives.
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*.
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.
* Subject to the approval of a separate ordinary resolution at the 2020 AGM, the maximum aggregate fees under the Company’s Articles of Association for all Non-
executive Directors will be increased from £300,000 to £500,000 per annum to ensure that any future annual increases, in the ordinary course, can be made and
to allow for the appointment of additional Non-executive Directors.
80
GovernanceRenishaw plc Annual Report 2020 Annual report on remuneration
This section of the report sets out the remuneration of the Directors in the year ended 30 June 2020 and also contains details
of how we intend to implement the remuneration policy for the forthcoming financial year. The information on pages 81 to 86
has been audited where required under the regulations and is indicated as audited where applicable.
Single total figure table (audited) – Executive Directors
Salary
Benefits
Bonus2
Pension
Total fixed
remuneration
Total variable
remuneration
Total
remuneration
20201
£’000
2019
£’000
2020
£’000
2019
£’000
2020
£’000
2019
£’000
2020
£’000
2019
£’000
2020
£’000
2019
£’000
2020
£’000
2019
£’000
2020
£’000
2019
£’000
Sir David McMurtry
John Deer4
Will Lee
Allen Roberts
536
260
505
398
700
437
550
409
3
12
20
20
3
21
20
21
0
0
0
0
0
0
0
0
n/a
n/a
76
60
n/a
n/a
83
61
539
272
601
478
703
458
653
491
0
0
0
0
0
0
0
0
539
272
601
478
703
458
653
491
Single total figure table (audited) – Non-executive Directors
John Deer5
Carol Chesney
Catherine Glickman6
Sir David Grant
John Jeans
Fees
20201
£’000
9
53
53
53
53
2019
£’000
n/a
55
>50
55
55
Expenses
Total remuneration3
2020
£’000
2019
£’000
2020
£’000
0
0
0
0
2
n/a
0
>0
0
1
9
53
53
53
55
2019
£’000
n/a
55
51
55
56
1 The figures for 2020 represent the impact on salary or fees received for the financial year ended 30 June 2020, as a result of the COVID-19 pandemic, as follows:
Sir David McMurtry waived his salary from 1 April to 30 June; John Deer waived his fees from 1 April to 30 June; Will Lee had a 40% reduction in salary from
1 April to 30 June; Allen Roberts had a 20% reduction in salary from 6 April to 30 June; all of the independent Non-executive Directors had a 20% reduction in
fees from 6 April to 30 June.
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 The Non-executive Directors are not eligible for any variable remuneration and only receive fixed remuneration.
4 John Deer stepped down as an Executive Director on 29 January 2020 (becoming a Non-executive Director) and therefore these figures reflect remuneration
received during the period from 1 July 2019 to 29 January 2020.
5 John Deer became a Non-executive Director on 30 January 2020 and therefore these figures reflect remuneration received during the period from 30 January
2020 to 30 June 2020.
6 Catherine Glickman’s fees in 2019 were for part of the year only following her appointment on 1 August 2018.
Benefits
Sir David McMurtry
John Deer*
Will Lee
Allen Roberts
Car
allowance
£’000
–
12
20
20
Private medical cover applies to all Executive Directors and
insurance on personal cars apply to some Directors
£’000
3
<1
<1
<1
* John Deer stepped down as an Executive Director on 29 January 2020 (becoming a Non-executive Director) and therefore these figures reflect remuneration
received during the period from 1 July 2019 to 29 January 2020. John Deer ceased to receive benefits following his transition to a Non-executive role.
Incentive outcomes for 2019/20
Under the remuneration policy approved at the 2017 AGM, the Executive Directors were eligible in 2019/20 for a cash bonus
(of up to 100% of salary) and, in the case of Will Lee and Allen Roberts, an award of shares worth up to 50% of salary under
the deferred annual equity incentive plan. These awards were subject to the achievement of financial and non-financial
targets being met for the year to 30 June 2020. Ninety percent of the maximum cash and share award opportunity was based
on financial targets using a single financial measure, being the Group’s Adjusted profit before tax. The remaining 10% of
the bonus plan was, for the first time, based on non-financial measures in which objectives with specific targets were set,
specifically to reduce the cost base, improve productivity, and rationalise and prioritise key projects. The non-financial targets
were met or exceeded in 2019/20, but because the financial targets were not met, in line with policy, no bonus award was
made for 2019/20.
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 2019/20 were: threshold £104m; on-target £116m; and maximum £135m.
81
Shareholder informationFinancial statementsGovernanceStrategic reportRenishaw plc Annual Report 2020 Annual report on remuneration continued
Total pension entitlements
Will Lee is a member 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 2020:
Will Lee
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 Pension contributions
Paid in cash
9
Performance graph
The graph below shows the Company’s 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 2010.
TSR performance
1,000
0
1
0
2
e
n
u
J
0
3
n
o
d
e
t
s
e
v
n
i
0
0
1
£
f
o
e
u
a
V
l
800
600
400
200
0
2010
Renishaw
FTSE 250
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Financial year ended 30 June
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
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
594
653
601
95
n/a
0
0
n/a
n/a
1,066
969
663
632
1,298
668
1,207
818
100
n/a
69
n/a
10
n/a
0
100
0
77
100
n/a
n/a
n/a
n/a
n/a
1 Represents the total remuneration received by Sir David McMurtry in relation to this role.
82
GovernanceRenishaw plc Annual Report 2020
Chief Executive pay ratio
The table below sets out the Chief Executive pay ratios as at the 30 June 2020. The report will build up over time to show a
rolling ten-year period. The ratios compare the single total figure of remuneration of the Chief Executive with the equivalent
figures for the lower quartile (P25), median (P50) and upper quartile (P75) employees.
We have used the ‘Option B’ methodology (based on gender pay reporting), as the most robust way to identify the individual
reference points within an organisation with multiple operating segments.
Where necessary, adjustments have been made to the underlying data to reflect a reduction in working hours during April to
June in connection with the COVID-19 pandemic. The reductions in salary and employer pension contributions during this
time have been added back to give a full-time equivalent figure. No other adjustments were made to the underlying data.
Total remuneration
2020
Chief Executive
£601,241
Base salary
2020
Chief Executive
£505,350
P25
£27,476
Employee remuneration
P50
£35,619
P75
£51,683
P25
£24,650
Employee remuneration
P50
£32,634
P75
£47,092
P25
21.9
P25
20.5
Pay ratio
P50
16.9
Pay ratio
P50
15.5
P75
11.6
P75
10.7
Executive Directors serving as non-executive directors of other companies
During the year none of the Executive Directors served as a non-executive director of any other company in respect of which
any remuneration was received.
Statement of Directors’ shareholding and share interests
During the year, none of the Directors were required to own shares in the Company, although the remuneration policy
approved by the shareholders at the AGM in 2017 includes a minimum shareholding guideline for Executive Directors. As at
30 June 2020 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 2020)
26,377,291
3,700
5,165
12,172,040
1,000
675
–
440
Unvested and
subject to continued
employment
(awarded under
the deferred equity
incentive plan)
n/a
3,537
3,051
n/a
n/a
n/a
n/a
n/a
Minimum
shareholding
guideline
0.5x salary
2x salary
0.5x salary
n/a
n/a
n/a
n/a
n/a
Current
shareholding1
1,485x salary
0.265x salary
0.497x salary
n/a
n/a
n/a
n/a
n/a
Minimum
shareholding
guideline met
Yes
Building
Building
n/a
n/a
n/a
n/a
n/a
Sir David McMurtry
Will Lee
Allen Roberts
John Deer2
Carol Chesney
Catherine Glickman
Sir David Grant
John Jeans
1 Current shareholdings for comparison with the shareholding requirements for Executive Directors are calculated based on annualised salary as at 30 June 2020
and by reference to the closing share price on 30 June 2020 (4,024p).
2 John Deer stepped down as an Executive Director on 29 January 2020 (becoming a Non-executive Director) and therefore is no longer subject to the minimum
shareholding guideline. For the avoidance of doubt, while John Deer was an Executive Director his shareholding exceeded the share ownership guideline that
applied in that tenure (i.e. during the period from 1 July 2019 to 29 January 2020).
Deferred equity incentive plan awards granted during the year
No deferred equity incentive plan awards were granted to Executive Directors during 2019/20.
83
Shareholder informationFinancial statementsGovernanceStrategic reportRenishaw plc Annual Report 2020 Annual report on remuneration continued
Percentage change in remuneration of the Directors
The following table sets out the percentage change in the Directors’ remuneration compared with the percentage change in
average remuneration to UK employees from 2018/19 to 2019/20:
Sir David McMurtry
2019 £’000
2020 £’000
% change
John Deer
2019 £’000
2020 £’000
% change
Will Lee
2019 £’000
2020 £’000
% change
Allen Roberts
2019 £’000
2020 £’000
% change
Carol Chesney
2019 £’000
2020 £’000
% change
Catherine Glickman2
2019 £’000
2020 £’000
% change
Sir David Grant
2019 £’000
2020 £’000
% change
John Jeans
2019 £’000
2020 £’000
% change
UK employee (average)
% change
Salary
700
536
-23.4
Salary
437
2701
-38.2
Salary
550
505
-8.2
Salary
409
398
-2.4
Fees
55
53
-3.6
Fees
50
53
+6
Fees
55
53
-3.6
Fees
55
53
-3.6
Salary
+2.8
Benefits
3
3
0
Benefits
21
12
-42.9
Benefits
20
20
0
Benefits
21
20
-4.7
Expenses
0
0
0
Expenses
0
0
0
Expenses
0
0
0
Expenses
1
2
+100
Benefits
+1.1
Annual bonus
0
0
0
Annual bonus
0
0
0
Annual bonus
0
0
0
Annual bonus
0
0
0
Annual bonus
n/a
n/a
n/a
Annual bonus
n/a
n/a
n/a
Annual bonus
n/a
n/a
n/a
Annual bonus
n/a
n/a
n/a
Annual bonus
-100
1 John Deer stepped down as an Executive Director on 29 January 2020 (becoming a Non-executive Director) and therefore this figure was calculated on the
basis of the salary received as Executive Director during the period from 1 July 2019 to 29 January 2020 and the fees received as Non-executive Director during
the period from 30 January 2020 to 30 June 2020.
2 Fees in 2018/19 being paid for part year only following Catherine Glickman’s appointment on 1 August 2018.
84
GovernanceRenishaw plc Annual Report 2020 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
2020
£’000
225,641
33,478
2019
£’000
237,222
43,672
Change
%
-4.9
-23.3
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 remain unchanged with no increase for
2020/21 due to the financial impact of COVID-19 on the Company and the global economy. This aligns with no annual
awards this year for the wider UK workforce.
Sir David McMurtry
Will Lee
Allen Roberts
1 July 2020
£’000
715
562
418
30 June 2020
£’000
715
562
418
As stated in previous years, the Remuneration Committee reserves the right to adjust Will Lee’s salary to align closer to
the market in view of his increased tenure and experience, which may involve a salary increase above the average salary
increase for the UK employee population as a whole. The package of benefits for Executive Directors is unchanged from
2019/20 (excluding home telephone costs which are no longer payable), but the pension allowance for the non-founder
Executive Directors will reduce from 15% to 11% of salary effective from 1 August 2020.
Annual cash bonus and deferred annual equity incentive
As set out in the remuneration policy, the annual cash bonus and deferred annual equity incentive have been combined into
a single award opportunity for 2020/21 onwards. The maximum opportunity for the year ended 30 June 2021 will be 150%
of salary for non-founder Executive Directors and 100% of salary for Sir David McMurtry. For the non-founder Executive
Directors, 50% of any bonus earned will be deferred into shares for three years; any award to Sir David McMurtry will be
made in cash. Measures will be approved and targets set by the Committee in line with our stated policy. Further details
(including the targets) will be disclosed in next year’s Annual remuneration report.
Non-executive Directors
The fees payable for each Non-executive Director for the year ending 30 June 2021 will remain unchanged at £56,155.
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:
• Catherine Glickman
• Carol Chesney
• Sir David Grant
• John Jeans
Mercer Kepler assisted the Committee in reviewing and benchmarking the Executive Director 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 £17,715. Mercer Kepler was appointed by the Committee and has
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.
85
Shareholder informationFinancial statementsGovernanceStrategic reportRenishaw plc Annual Report 2020 Annual report on remuneration continued
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. 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 24 October 2019, 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
61,245,398
95.75
2,721,177
4.25
63,966,575
215,872
This report was approved by the Board and has been signed on its behalf by:
Catherine Glickman
Chair of the Remuneration Committee
18 August 2020
86
GovernanceRenishaw plc Annual Report 2020 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, Ireland, Israel, Italy,
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.
Research and development
The Group continues to invest significantly in developing
future technologies, with R&D activities located primarily
in the UK. We develop technologies that provide patented
products and methods to help deliver our product strategies
in both metrology and healthcare. Further information on the
expenditure on R&D is contained in note 4 on page 116.
The amount of R&D expenditure capitalised, the amount
amortised, and impairment charges in the year, are given in
note 11 on page 121.
Dividends
As referenced in the Chairman’s statement, the Board
decided to cancel the interim dividend and withdraw
the proposed final dividend for the year ending 30 June
2020 to help preserve cash in response to the ongoing
macroeconomic uncertainty. This position will be reviewed
by the Board in 2021 with the intention of reinstating
dividends when it is appropriate to do so.
As at 30 June 2020, 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,
namely 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 are listed on pages
52 and 53. 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 30 September 2020. Details of Directors who
offer themselves up for re-election are shown on pages
52 and 53 and full biographical details are available at
www.renishaw.com.
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.
The Directors’ interests in the share capital of the Company
(with the equivalent number of voting rights), as notified
to the Company, are listed on page 83. There has been
no change in the holdings shown on page 83 in the
period 1 July 2020 to 18 August 2020, other than on
14 August 2020 John Deer informed the Company that
he had disposed of 5,350 shares. All the interests were
beneficially held with the exception of 2,368,061 shares
(2019: 2,434,411 shares) which were non-beneficially held
by John Deer but in respect of which he has voting rights.
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.
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 2020 financial year. However, the Company did
not purchase any of its own shares during that time.
Auditor
A resolution to reappoint EY as the auditor of the Company
will be proposed at the forthcoming AGM.
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Shareholder informationFinancial statementsGovernanceStrategic reportRenishaw plc Annual Report 2020 Other statutory and regulatory disclosures continued
Disclosure of information to auditor
The Directors who held office at the date of approval of this
statement confirm that, so far as they are each aware, there
is no relevant audit information of which the Company’s
auditor is unaware, and each Director has taken all the
steps that he or she ought to have taken as a Director to
make himself/herself aware of any relevant audit information
and to establish that the Company’s auditor is aware of
that information.
Annual General Meeting
The notice convening the AGM and an explanation of
the resolutions sought is 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
16.72% 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 2020. 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
BlackRock, Inc.
Capital Research and
Management Company
Standard Life Investments Limited
% of issued
share capital
Number of
shares
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 2020 to
18 August 2020.
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
88
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 how the Directors have engaged with employees
and had regard to employee interests, information provided
to employees on the performance of the business,
consultation with employees and performance incentives
are set out on pages 38 to 49.
There are no agreements with employees providing for
compensation for any loss of employment that occurs
because of a takeover bid.
Suppliers, customers and other stakeholders
Details on how the Directors have had regard to the need
to foster the Group’s business relationships with suppliers,
customers and others are set out on pages 38 to 49.
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,
policies in relation to hedge accounting and exposure to
market risk, including credit and liquidity risk, can be found
in note 20 to the Consolidated financial statements on pages
128 to132.
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.
GovernanceRenishaw plc Annual Report 2020 By virtue of his shareholding in the Company, Sir David
McMurtry (Executive Chairman 36.23% shareholder) is a
controlling shareholder. John Deer (Non-executive Deputy
Chairman, together with his wife, 16.72% 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.
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 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 and energy consumption
The disclosures concerning GHG emissions and energy consumption required by law are set out on pages 46 and 47.
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.
Section
(1)
(2)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
Topic
Interest capitalised
Publication of unaudited financial information
Details of long-term incentive schemes
Waiver of emoluments by a director
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
Contracts of significance
Provision of services by a controlling shareholder
Shareholder waivers of dividends
(13)
Shareholder waivers of future dividends
(14)
Agreements with controlling shareholders
Location
Not applicable
Not applicable
Not applicable
Directors’ remuneration report page 71
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Directors’ remuneration report pages 70 to 86
Other statutory and regulatory disclosures page 87
and note 20 page 132
Other statutory and regulatory disclosures page 87
and note 20 page 132
Other statutory and regulatory disclosures pages
88 to 89
Signed on behalf of the Board.
Jacqueline Conway
General Counsel & Company Secretary
18 August 2020
Renishaw plc
Registered number 01106260
England and Wales
89
Shareholder informationFinancial statementsGovernanceStrategic reportRenishaw plc Annual Report 2020 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:
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:
• 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 Group
and of the Company at the year end, together with a
description of the principal risks and uncertainties that
they face.
Signed on behalf of the Board.
• select suitable accounting policies and then apply
them consistently;
Allen Roberts
Group Finance Director
• make judgements and accounting estimates that are
18 August 2020
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.
90
GovernanceRenishaw plc Annual Report 2020 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 2020 and of
the group’s profit for the year then ended;
• the group financial statements have been properly
prepared in accordance with IFRSs as adopted by the
European Union;
• the parent company financial statements have been
properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice; and
• the financial statements have been prepared in
accordance with the requirements of the Companies Act
2006, and, as regards the group financial statements,
Article 4 of the IAS Regulation.
We have audited the financial statements of Renishaw plc
which comprise:
Group
Parent company
Consolidated balance
sheet as at 30 June 2020
Balance sheet as at 30
June 2020
Statement of changes in
equity for the year then
ended
Related notes C.27 to C.42
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).
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable
law. Our responsibilities under those standards are further
described in the Auditor’s responsibilities for the audit
of the financial statements section of our report below.
We are independent of the group and parent company in
accordance with the ethical requirements that are relevant
to our audit of the financial statements in the UK, including
the FRC’s Ethical Standard as applied to listed public
interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to principal risks,
going concern and viability statement
We have nothing to report in respect of the following
information in the Annual Report, in relation to which the
ISAs(UK) require us to report to you whether we have
anything material to add or draw attention to:
• the disclosures in the Annual Report set out on page 29
that describe the principal risks and explain how they are
being managed or mitigated;
• the directors’ confirmation set out on page 60 in the
Annual Report that they have carried out a robust
assessment of the emerging and principal risks facing
the entity, including those that would threaten its business
model, future performance, solvency or liquidity;
• the directors’ statement set out on pages 60 to 61 in
the financial statements about whether they considered
it appropriate to adopt the going concern basis of
accounting in preparing them, and their identification of
any material uncertainties to the entity’s ability to continue
to do so over a period of at least twelve months from the
date of approval of the financial statements
• whether the directors’ statement in relation to going
concern required under the Listing Rules in accordance
with Listing Rule 9.8.6R(3) is materially inconsistent with
our knowledge obtained in the audit; or
• the directors’ explanation set out on page 37 in the Annual
Report as to how they have assessed the prospects
of the entity, over what period they have done so and
why they consider that period to be appropriate, and
their statement as to whether they have a reasonable
expectation that the entity will be able to continue
in operation and meet its liabilities as they fall due
over the period of their assessment, including any
related disclosures drawing attention to any necessary
qualifications or assumptions.
91
Shareholder informationFinancial statementsGovernanceStrategic reportRenishaw plc Annual Report 2020 Independent auditor’s report
to the members of Renishaw plc continued
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
• Valuation of the defined benefit pension liability
Audit scope
• Impact of COVID-19, including on the group’s going concern assessment
• 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 90% of
adjusted profit before tax, 87% of Revenue and 90% of Total assets.
Materiality
• Overall group materiality of £2.4m which represents 5% of adjusted profit before tax.
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 (£510.2m,
2019: £574.0m)
Refer to the Audit Committee Report
(page 66); Accounting policies
(pages 109 and 110); and Note 2 of
the Consolidated Financial Statements
(pages 115 and 116)
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 44% 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 in the
appropriate period.
We performed full and specific scope audit procedures
over this risk area in eight locations, which covered
82% of the group’s revenue, of which the Primary Team
performed the procedures in three locations which
covered 34% of the group’s revenue.
92
GovernanceRenishaw plc Annual Report 2020 Key observations
communicated to the
Audit Committee
Based on the audit
procedures performed,
manual journal entries
posted through the
consolidation process
are appropriate.
Our procedures did
not identify instances
of management
override of controls over
manual journal entries
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 ‘Financial
Instruments’.
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 hedge effectiveness
of forward currency contracts.
We assessed whether the requirements of IFRS 9
‘Financial Instruments’ 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
• assessing management’s sales forecasts, including
the extent to which these have been deemed to be
‘highly probable’ and therefore accounted for as
hedged items, by evaluating historical accuracy and
comparing to third party industry forecasts
• at the group level, ensuring that the financial
statement disclosures were in accordance with
accounting standards
Risk
Management override of controls over
manual journal entries posted through
the consolidation process to misstate
financial performance
Refer to the Audit Committee Report
(page 66); Accounting policies
(pages 108 and 109)
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.
Assessment of hedge effectiveness of
forward currency contracts (£58.6m,
2019: £50.1m)
Refer to the Audit Committee Report
(pages 66 and 67); Accounting policies
(pages 110 and 111); and Note 20 of
the Consolidated Financial Statements
(pages 128 to 132)
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.
The complexity of hedge accounting and
the requirements for hedge effectiveness
documentation under the provisions of
IFRS 9 lead to risk of error, therefore we
continued to focus on this area.
93
Shareholder informationFinancial statementsGovernanceStrategic reportRenishaw plc Annual Report 2020 Independent auditor’s report
to the members of Renishaw plc continued
Risk
Valuation of the defined benefit
pension liability (£253.5m, 2019:
£233.5m)
Refer to the Audit Committee Report
(page 67); Accounting policies
(page 141); and Note 13 of the
Consolidated Financial Statements
(pages 124 to 126)
A gross defined benefit pension
liability of £253.5m was held at
30 June 2020 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.
Impact of COVID-19, including on
the Company’s Going Concern
Assessment
Refer to the Audit Committee Report
(page 67); Strategic Report (page 27)
and Accounting policies (pages 106
and 108)
Since early 2020, the COVID-19
pandemic has caused significant
disruption to the world’s population,
business and economic activity and
may ultimately impact the group’s
future performance and asset values.
Government measures taken to
contain the virus have had an
impact not only on the way in which
businesses operate, but also in
the way in which an audit can be
performed.
There have been a number of impacts
for the business in the current year
and also on the short to medium
term forecasts as discussed in the
Strategic Report (page 27).
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 assessed the completeness and accuracy of the
data used by management’s external actuarial experts
using substantive audit procedures
We evaluated the competence and objectivity of
management’s external actuarial experts.
We obtained the IAS 19 actuarial valuations for the
UK, Irish and US 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.
For the UK and Irish schemes 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.
For the US scheme we used our internal actuarial
specialists to generate an independent valuation of the
liability and compared this to the valuation provided by
management’s experts.
We assessed the appropriateness and adequacy of the
disclosures in respect of the defined pension liability in
Note 13 of the Annual Report.
We performed full and specific scope audit procedures
over this risk area in three locations, which covered
100% of the risk amount.
Our audit procedures covered four key areas:
• Audit logistics
• Going concern
• Other audit matters
• Adequacy of disclosure.
Audit Logistics:
We had already completed our audit planning
procedures on site by the time COVID-19 impacted
the UK.
We have performed the year-end audit fully remotely.
We have engaged with the Company throughout this
period, using video calls, share-screen functionality,
secure encrypted document exchanges and data
downloads to avoid any limitation on the audit evidence
required.
We held regular calls with management to monitor
progress, discuss evidence provided, judgements and
accounting.
We held video calls with our overseas audit teams to
facilitate the supervision and direction of their fieldwork,
focusing on audit procedures designed to address
significant risks.
Key observations
communicated to the
Audit Committee
For the UK and Irish
schemes, 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.
For the US scheme, our
independent valuation
of the liability was not
materially different
to that provided by
management’s expert.
We are satisfied that
the disclosure in Note
13 is aligned with the
requirements of IAS 19.
Despite travel restrictions
preventing the attendance
at client sites in a number
of locations we were
able to conduct our audit
effectively, including
appropriate supervision,
direction and review of
work completed by our
overseas audit teams,
using technology including
video conferencing
and our bespoke audit
documentation tools.
We have confirmed
that management’s
assessment of going
concern is appropriate
and concur with the
directors’ assessment
that there is no material
uncertainty as there is
sufficient headroom in
cash flow forecasts after
severe but plausible
downside scenarios have
been factored in.
94
GovernanceRenishaw plc Annual Report 2020 Risk
Our audit focus has been on the
following key areas:
• How the audit would be
undertaken given the remote
working and travel restrictions and
the resulting refinements to our
team, approach and procedures,
including how we would
supervise and direct our overseas
audit teams;
• Consideration of the going
concern basis of preparation,
focusing on forecasting ranges to
reflect the impact of the COVID-19
pandemic and resulting liquidity;
• Consideration of the increased
risks associated with greater
forecasting uncertainty in the
COVID-19 environment; and
• The adequacy of the disclosures
made in the Annual Report.
Key observations
communicated to the
Audit Committee
See the separate key
audit matter on hedge
accounting in this audit
report.
We have concluded
that the asset
impairments recognised
by management
are appropriate
and that they reflect
management’s best
estimate of future
cashflows which have
been adjusted to
include the impact of
COVID-19.
We conclude that
the disclosure on the
impact of COVID-19,
including on the
group’s going concern
assessment, is
appropriate.
Our response to the risk
We held additional calls with the component teams that
we had planned to visit, to replicate the discussions we
otherwise would have had in person. We also requested
additional detailed working papers to be shared with us for
our review so that we could assess the quality of the work
performed by our component teams that we otherwise would
have assessed during site visits. For the component teams
which were unable to visit client sites, we discussed how
sufficient appropriate audit evidence had been obtained.
Going Concern:
We have assessed the going concern assumption adopted
by the directors of Renishaw, which included:
• Confirming our understanding of the going concern
evaluation process and also engaging with management
early to ensure all key matters were considered in
their assessment;
• Obtaining management’s forecast cash flows covering the
period from the date of signing to 31 August 2021;
• Performing reverse stress testing on management’s
forecasts to understand how plausible the severe adverse
scenarios would be to result in negative liquidity;
• Assessing management’s COVID-19 impact assessment
on the forecasts, considering both past historical accuracy
of management’s forecasting against the actual impact
experienced by the Company during the period in which
COVID-19 has impacted the performance of the business
(March – August 2020);
• Evaluating management’s assessment of options
potentially available to the group to reduce cash flow
spend in the going concern period, to determine whether
such actions could be successfully implemented and the
impacts this could result in.
Other audit matters:
The key areas of increased audit risk related to:
• Going concern assessment (mentioned previously within
this KAM)
• Assessment of hedge accounting criteria (mentioned in
KAM above)
• Carrying value of goodwill and capitalised
development costs
Our audit procedures in relation to assessing the carrying
value of goodwill and capitalised development costs
included:
– performing walkthroughs of the impairment review process
to assess the design and implementation of key controls
– performing detailed substantive procedures to test the
clerical accuracy of management’s impairment models
– Performing sensitivity analysis on the key inputs into these
models, including forecast cashflows, growth rates and
discount rates.
Adequacy of disclosures:
We have considered whether management’s additional
disclosure, included within the Strategic Report (page 27)
and Notes 1 and 20 sufficiently capture the impacts of
COVID-19 on the Company.
95
Shareholder informationFinancial statementsGovernanceStrategic reportRenishaw plc Annual Report 2020 Independent auditor’s report
to the members of Renishaw plc continued
An overview of the scope of our audit
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality
and our allocation of performance materiality determine our
audit scope for each entity within the group. Taken together,
this enables us to form an opinion on the consolidated
financial statements. We take into account size, risk profile,
the organisation of the group and effectiveness of group-
wide controls, changes in the business environment and
other factors such as recent internal audit results when
assessing the level of work to be performed at each entity.
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 53 reporting components of the group,
we selected 13 components covering entities within the UK,
Ireland, USA, Japan, Germany, China, India, Spain, Italy
and France, 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 90% of the group’s adjusted
profit before tax (2019: 94%), 87% (2019: 90%) of the
group’s Revenue and 90% (2019: 91%) of the group’s Total
assets. For the current year, the full scope components
contributed 81% of the group’s adjusted profit before tax
(2019: 87%), 81% (2019: 81%) of the group’s Revenue and
84% (2019: 85%) of the group’s Total assets. The specific
scope components contributed 9% of the group’s adjusted
profit before tax (2019: 7%), 6% (2019: 9%) of the group’s
Revenue and 6% (2019: 6%) 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
balances tested for the group.
Of the remaining 40 components that together represent
10% of the group’s adjusted profit before tax, none are
individually greater than 3% of the group’s adjusted
profit before tax. For these components, we performed
other procedures, including analytical review, testing of
consolidation journals and intercompany eliminations and
foreign currency translation recalculations to respond to
any potential risks of material misstatement to the group
financial statements.
96
The charts below illustrate the coverage obtained from the
work performed by our audit teams.
Profit before tax
2020
2019
81% Full scope
components
87% Full scope
components
9%
Specific scope
components
7%
Specific scope
components
10% Other
procedures
6% Other
procedures
Revenue
2020
2019
81% Full scope
components
81% Full scope
components
6%
Specific scope
components
9%
Specific scope
components
13% Other
procedures
10% Other
procedures
rotate to vertical line
Total assets
2020
2019
84% Full scope
components
85% Full scope
components
6%
Specific scope
components
6%
Specific scope
components
10% Other
procedures
9% Other
procedures
Involvement with component teams
In establishing our overall approach to the group audit, we
determined the type of work that needed to be undertaken
at each of the components by us, as the primary audit
engagement team, or by component auditors from other
EY global network firms operating under our instruction.
Of the eight full scope components, audit procedures
were performed on three of these directly by the primary
audit team. Of the five specific scope components, audit
procedures were performed on four of these directly by
the primary audit team. For the remaining specific scope
component, 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.
The group audit team planned to follow a programme
of visits that had been designed to ensure that the
Senior Statutory Auditor visited Japan and India in 2020.
During the current year’s audit cycle, visits were unable
to be undertaken due to travel restrictions caused by the
COVID-19 pandemic. A series of video calls were held
with all component teams. These calls involved discussing
the audit approach with the component teams and any
GovernanceRenishaw plc Annual Report 2020 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 £0.1m to £1.1m (2019: £0.3m to £2.5m).
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 £0.1m
(2019: £0.3m), which is set at 5% of planning materiality,
as well as differences below that threshold that, in our view,
warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both
the quantitative measures of materiality discussed above
and in light of other relevant qualitative considerations in
forming our opinion.
Other information
The other information comprises the information included in
the Annual Report set out on pages 1 to 90 and 150 to 155,
including the Strategic Report, set out on pages 1 to 49,
Governance, set out on pages 50 to 90, and Shareholder
information, set out on pages 150 to 155, 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.
issues arising from their work, talking to local management,
attending closing meetings and reviewing key audit working
papers on risk areas, copies of which we have retained
on our group audit file. In addition to these planned calls,
further video calls were held with Japan and India in
place of the planned on-site visits to discuss aspects of
the audit in further detail with our local component teams.
The primary team interacted regularly with the component
teams where appropriate during all stages of the audit,
reviewed key working papers 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
£2.4m(2019: £5.5m), which is 5% of adjusted profit before
tax as defined in note 25 to the financial statements
(2019: 5% of profit before tax). We believe that adjusted
profit before tax is a more appropriate measurement basis
on which to calculate materiality as it represents a better
reflection of the underlying performance of the group than
profit before tax which is significantly impacted by both the
volatility in the valuation of derivative financial instruments,
which is outside of the control of the group, and non-
recurring restructuring costs.
During the course of our audit, we reassessed initial
materiality, which was based on profit before tax, and
updated this to an adjusted profit before tax basis for the
reason described above.
We used a performance materiality for the parent company
of £1.1m(2019: £1.8m), being the amount allocated for
the purpose of forming our opinion on the group financial
statements, which was lower than that calculated for the
parent company individually.
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%
(2019: 75%) of our planning materiality, namely £1.8m
(2019: £4.1m). 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.
97
Shareholder informationFinancial statementsGovernanceStrategic reportRenishaw plc Annual Report 2020 Independent auditor’s report
to the members of Renishaw plc continued
• 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 90, 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.
In this context, we also have nothing to report in regard
to our responsibility to specifically address the following
items in the other information and to report as uncorrected
material misstatements of the other information where we
conclude that those items meet the following conditions:
• Fair, balanced and understandable set out on page 60
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 65 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 pages 50
to 51 – 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
98
GovernanceRenishaw plc Annual Report 2020 Our approach was as follows:
• We communicated all relevant instances of non-
• 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.
• We understood how Renishaw plc is complying with
those frameworks by reading internal policies and
codes of conduct and assessing the entity level control
environment, including the level of oversight of those
charged with governance. We made enquires of the
group’s legal counsel and internal audit of known
instances of non-compliance or suspected non-
compliance with laws and regulations. We corroborated
our enquiries through review of correspondence with
regulatory bodies. We designed our audit procedures to
identify non-compliance with such laws and regulations
identified in the paragraph above. As well as enquiry
and attendance at meetings, our procedures involved a
review of board meetings and other committee minutes
to identify any non-compliance with laws and regulations.
Our procedures also involved journal entry testing, with a
focus on journals meeting our defined risk criteria based
on our understanding of the business.
• We assessed the susceptibility of the group’s financial
statements to material misstatement, including how
fraud might occur by considering the programs and
controls that the group has established to address risks
identified by the entity, or that otherwise prevent, deter
and detect fraud; how senior management monitor
those programs and controls, evaluating conditions
in the context of incentive/pressure to commit fraud,
considering the opportunity to commit fraud and the
potential rationalisation of the fraudulent act, and by
making enquiries of senior management, including the
group Finance Director, Head of group Finance, group
Internal Audit Manager and Chair of the Audit Committee.
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.
compliance with laws and regulations identified at the
group level to our component teams and instructed
our component teams to report any instances of non-
compliance with laws and regulations identified at the
component level to us in order that we could design audit
procedures to respond.
A further description of our responsibilities for the audit of
the financial statements is located on the
A further description of our responsibilities for the audit of
the financial statements is located on the
Financial Reporting Council’s website at
https://www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor’s report.
Other matters we are required to address
• We were appointed by the company on 13 October
2016 to audit the financial statements for the year ending
30 June 2017 and subsequent financial periods.
• The period of total uninterrupted engagement including
previous renewals and reappointments is four years,
covering the years ending 30 June 2017 to 30 June 2020.
• 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
18 August 2020
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.
99
Shareholder informationFinancial statementsGovernanceStrategic reportRenishaw plc Annual Report 2020 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 90.
The notes (forming part of the financial statements) provide additional information required by statute, accounting standards or
other regulations to assist in a more detailed understanding of the primary financial statements. The basis of preparation section
(see note 1) provides details of accounting policies that apply to transactions and balances in general.
Company financial statements
Primary statements
138 Company balance sheet
139 Company statement of changes in equity
NotestotheCompanyfinancialstatements
140 C.27. Accounting policies
142 C.28. Property, plant and equipment
142 C.29. Intangible assets
143 C.30. Investments in subsidiaries
143 C.31. Investments in associates and joint ventures
143 C.32. Deferred tax
143 C.33. Inventories
144 C.34. Trade receivables
144 C.35. Provisions
144 C.36. Other payables
144 C.37. Employee benefits
145 C.38. Share capital
146 C.39. Related parties
146 C.40. Capital commitments
146 C.41. Subsidiary undertakings
149 C.42. Associated undertakings and joint ventures
Consolidated financial statements
Primary statements
101 Consolidated income statement
102 Consolidated statement of comprehensive income
and expense
103 Consolidated balance sheet
104 Consolidated statement of changes in equity
105 Consolidated statement of cash flow
Notes(formingpartofthefinancialstatements)
106 1. Accounting policies
115 2. Segmental analysis
116 3. Personnel expenses
116 4. Cost of sales
117 5. Financial income and expenses
117 6. Profit before tax
117 7. Earnings per share
118 8. Income tax expense
118 9. Deferred tax
120 10. Property, plant and equipment
121 11. Intangible assets
123 12. Investments in associates and joint ventures
124 13. Employee benefits
126 14. Share-based payments
126 15. Cash and cash equivalents
127 16. Inventories
127 17. Provisions
127 18. Other payables
127 19. Borrowings
128 20. Financial instruments
133 21. Share capital and reserves
134 22. Leases and right of use assets
135 23. Capital commitments
135 24. Related parties
136 25. Alternative performance measures
137 26. Restructuring costs
100
Financial statementsRenishaw plc Annual Report 2020 Consolidated income statement
for the year ended 30 June 2020
from continuing operations
Revenue
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Restructuring costs
Gains/(losses) from the fair value of financial instruments
Operating profit
Financial income
Financial expenses
Share of profits of associates and joint ventures
Profit before tax
Income tax expense
Profit for the year
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
Earningspershare(basicanddiluted)
notes
2
4
26
20
5
5
12
6
8
21
21
7
2020
£’000
2019
£’000
510,215
573,959
(271,633)
(289,832)
238,582
284,127
(123,276)
(58,584)
(23,797)
(26,631)
(126,822)
(58,593)
–
1,081
6,294
99,793
913
(4,840)
841
7,238
(902)
3,815
3,208
109,944
(2,920)
(17,712)
288
92,232
288
−
288
pence
0.0
46.0
92,232
–
92,232
pence
60.0
60.0
0.4
126.7
101
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual Report 2020 Consolidated statement of comprehensive income and expense
for the year ended 30 June 2020
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
Deferred 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
2020
£’000
288
2019
£’000
92,232
13
21
21
21
21
21
21
21
(23,978)
5,484
(18,494)
10,273
(1,534)
8,739
3,369
186
−
(403)
13,924
(1,978)
15,098
2,045
72
(205)
−
(27,573)
4,561
(21,100)
(3,396)
(12,361)
(3,108)
79,871
(3,108)
−
(3,108)
79,871
–
79,871
102
Financial statementsRenishaw plc Annual Report 2020 Consolidated balance sheet
at 30 June 2020
Assets
Property, plant and equipment
Intangible assets
Right of use assets
Investments in associates and joint ventures
Long-term loans to associates and joint ventures
Finance lease receivables
Deferred tax assets
Derivatives
Total non-current assets
Current assets
Inventories
Trade receivables
Finance lease receivables
Contract assets
Short-term loans to associates and joint ventures
Current tax
Other receivables
Derivatives
Pension scheme cash escrow account
Bank deposits
Cash and cash equivalents
Total current assets
Current liabilities
Trade payables
Contract liabilities
Current tax
Provisions
Derivatives
Lease liabilities
Borrowings
Other payables
Total current liabilities
Net current assets
Non-current liabilities
Borrowings
Lease liabilities
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
10
11
1,22
12
12
22
9
20
16
20
22
20
20
13
15
15,20
20
20
17
20
1,22
19
18
19
1,22
13
9
20
21
21
21
21
21
21
2020
£’000
Restated*
2019
£’000
270,049
43,364
12,672
16,604
2,818
4,801
39,641
1,242
391,191
105,497
105,077
1,982
606
318
3,878
23,196
3,758
10,568
10,000
110,386
375,266
16,998
5,976
2,905
5,591
22,546
4,241
1,061
34,372
93,690
281,576
10,482
8,925
64,895
499
41,102
125,903
546,864
14,558
42
(404)
17,729
(30,455)
546,100
(129)
547,441
(577)
546,864
263,477
59,056
–
13,095
750
4,992
29,855
1,311
372,536
129,026
116,929
1,230
352
6,644
4,553
24,461
2,778
10,490
52,500
54,326
403,289
21,513
5,631
4,538
2,846
18,920
–
1,043
41,065
95,556
307,733
9,356
–
51,870
539
35,227
96,992
583,277
14,558
42
(404)
14,577
(42,401)
597,784
(302)
583,854
(577)
583,277
* 2019 cash and cash equivalents and bank deposits have been restated following a change in accounting policy, see note 1, and trade receivables have been reclassified, with finance lease
receivables reported as separate line items, see note 22.
These financial statements were approved by the Board of Directors on 18 August 2020 and were signed on its behalf by:
Sir David McMurtry
Directors
Allen Roberts
103
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual Report 2020 Consolidated statement of changes in equity
for the year ended 30 June 2020
Year ended 30 June 2019
Balance at 1 July 2018
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
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
12,665 (19,389) 540,485
Other
reserve
£’000
(460)
Non-
controlling
interest
Total
£’000
£’000
(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
Year ended 30 June 2020
Profit for the year
−
−
−
−
−
288
−
−
288
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
Dividends paid
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,965
187
–
–
–
–
11,946
(18,494)
–
–
–
3,152
11,946
(18,494)
3,152
11,946
(18,206)
–
–
–
–
–
–
–
–
–
–
–
(33,478)
173
–
–
–
–
–
–
–
–
–
(18,494)
2,965
187
11,946
(3,396)
(3,108)
173
(33,478)
Balance at 30 June 2020
14,558
42
(404)
17,729 (30,455) 546,100
(129)
(577) 546,864
More details of share capital and reserves are given in note 21.
104
Financial statementsRenishaw plc Annual Report 2020 Consolidated statement of cash flow
for the year ended 30 June 2020
Cash flows from operating activities
Profit for the year
Adjustments for:
Depreciation of property, plant and equipment and right of use assets
Loss on sale of property, plant and equipment
Impairment of property, plant and equipment
Amortisation of development costs
Impairment of development costs
Amortisation of other intangibles
Loss/(profit) on disposal of other intangibles
Impairment of other intangibles
Impairment of goodwill
Share of profits from associates and joint ventures
Profit on disposal of investment in associate
Fair value gain on revaluation of investment in associate
Impairment of investment in associate
Remeasurement of defined benefit pension scheme liabilities from GMP equalisation
Financial income
Financial expenses
Losses/(gains) from the fair value of financial instruments
Share-based payment expense
Tax expense
Decrease/(increase) in inventories
Decrease in trade and other receivables
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
Sale of property, plant and equipment
Development costs capitalised
Purchase of other intangibles
Sale of other intangibles
Decrease/(increase) in bank deposits
Interest received
Dividends received from associates and joint ventures
Proceeds from sale of shares in associate
Cash flows from investing activities
Financing activities
Increase in borrowings
Repayment of borrowings
Interest paid
Repayment of lease liabilities
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
notes
2020
£’000
Restated*
2019
£’000
288
92,232
10
10
11
11
11
11
11
12
12
12
12
13
5
5
25
14
8
17
13
10
11
15
5
12
12
19
19
5
22
21
21
15
30,578
22
2,590
16,861
15,881
1,566
53
1,600
808
(841)
(1,053)
(2,775)
257
−
(913)
4,840
21,609
173
2,920
94,176
23,529
17,639
(11,297)
2,745
32,616
(11,816)
(10,605)
104,659
(38,657)
3,633
(17,405)
(3,338)
−
42,500
835
512
986
(10,934)
1,894
(1,136)
(549)
(4,896)
(33,478)
−
(38,165)
55,560
54,326
500
110,386
22,597
148
1,155
15,144
–
1,518
(455)
–
–
(3,815)
–
–
–
751
(7,238)
902
(6,081)
158
17,712
42,496
(18,463)
30,028
(7,183)
(607)
3,775
(6,831)
(25,183)
106,489
(56,792)
4,713
(18,091)
(4,161)
2,000
(52,500)
1,145
614
–
(123,072)
10,486
(87)
(57)
–
(43,672)
(404)
(33,734)
(50,317)
103,847
796
54,326
* 2019 cash and cash equivalents and bank deposits have been restated following a change in accounting policy, see note 1.
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Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual Report 2020 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
Cash flow hedges
Intangibles
Research and development costs
Goodwill and capitalised development costs
Inventories
Defined benefit pension schemes
Taxation
Keyjudgements(J)andestimates(E)
J – Timing of satisfaction of performance obligations
E – Estimates of highly probable forecasts of the hedged item
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
110
111
112
112
112
113
114
114
The impact of COVID-19 has been considered as part of the estimates and judgements above, and factored into sensitivity
analyses included in the following notes. Global macroeconomic uncertainty preceding COVID-19, and furthered by COVID-19,
has impacted the revenue, profit and cashflow forecasts which underpin most of the above estimates. The valuation of defined
benefit pension schemes’ liabilities are not affected by these forecasts, however COVID-19 has affected the key assumptions of
discount rate and inflation rate. The timing of satisfaction of performance obligations has not been affected by COVID-19.
New, revised or changes to existing accounting standards
The following accounting standards have been applied for the first time, with effect from 1 July 2019, and have been adopted in
the preparation of these financial statements.
IFRS 16 ‘Leases'
IFRS 16 ‘Leases’ replaces IAS 17 and related standards, and provides an accounting model under which substantially all leases
are recognised on the balance sheet of the lessee. A ‘right of use’ asset is recognised, being the right to use the underlying
asset of the lease, and a lease liability is also recognised on the balance sheet, being the obligation to make payments in
respect of the use of the underlying asset.
The Group adopted IFRS 16 on 1 July 2019 using the modified retrospective transition approach (and has therefore not restated
comparatives for the prior year) with the principal change being that leases previously classified as operating leases under IAS
17 were brought on to the balance sheet at 1 July 2019. The impact of IFRS 16 is disclosed later in this note.
In adopting IFRS 16 the Group took advantage of the following practical expedients permitted by the standard:
– The right of use assets were measured at an amount based on the lease liability at adoption, and initial direct costs incurred
when obtaining leases were excluded from this measurement;
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Financial statementsRenishaw plc Annual Report 2020 1.Accountingpolicies(continued)
– Reliance was placed on previous assessments of whether leases are onerous (the assessment of which determined that the
impact of onerous leases was trivial); and
– Operating leases with a remaining lease term of less than 12 months at 1 July 2019 were accounted for as ‘short-term leases’.
As IFRS 16 no longer distinguishes between operating leases and finance leases, operating lease commitments disclosed at
30 June 2019 were replaced with a lease liability and recognised at 1 July 2019, as follows:
Operating lease commitments as disclosed at 30 June 2019
Less: effect of discounting
Less: recognition differences and assumptions
Total lease liability recognised at 1 July 2019
£’000
16,390
(149)
(1,994)
14,247
Recognition differences include leases now classified as low value or short-term and re-evaluations of non-cancellable
lease terms according to IFRS 16. The weighted average incremental borrowing rate applied to the Group's lease liabilities
recognised in the Consolidated balance sheet at 1 July 2019 was 2.4%.
The impact on the primary statements of adopting IFRS 16 at 1 July 2019 is summarised below:
Impact on the Consolidated balance sheet
Right of use assets
Deferred tax assets
Non-current assets
Lease liabilities
Other payables
Current liabilities
Lease liabilities
Non-current liabilities
Total assets less total liabilities
Currency translation reserve
Retained earnings
Total equity
At 30 June 2020
£’000
12,672
139
12,811
4,241
203
4,444
8,925
8,925
(558)
10
(568)
(558)
At 1 July 2019
£’000
14,550
−
14,550
4,799
303
5,102
9,448
9,448
−
−
−
−
Right of use assets at 1 July 2019 consisted of £11,377,000 relating to property leases occupied for trading purposes,
£3,013,000 relating to vehicle leases and a small amount relating to machinery leases.
Impact on the Consolidated income statement
The impact on the Consolidated income statement for the financial year ended 30 June 2020 is to increase operating profit
by £62,000 and increase financial expenses by £766,000, therefore reducing profit before tax by £704,000. The aggregate of
depreciation and interest expense will generally result in higher expenses in the earlier periods of leases than would have been
the case under IAS 17.
Impact on the Consolidated cash flow statement
There is no change to net cash flow from the adoption of IFRS 16. Under IAS 17 operating lease payments were treated as
operating cash outflows, however under IFRS 16 payments made at lease inception and subsequently (both principal and
interest) are classified as financing outflows. The Group therefore shows both higher cash inflows from operating activities and
higher cash outflows from financing activities under IFRS 16.
In addition to IFRS 16, 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 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’.
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1.Accountingpolicies(continued)
Going concern
An overview of the Group’s business activities, including a review of the key business risks that the Group face is given in the
Strategic report on pages 1 to 49, together with the factors likely to affect its future development, performance and position.
Details of the financial and liquidity positions are also given in the Financial review on pages 18 to 21 of the Strategic report,
and note 20 to the financial statements sets out 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.
As explained in the Strategic report, and in note 26 Restructuring costs, changes were made to the Group’s strategy for additive
manufacturing and resulted in impairments to capitalised development costs, goodwill and property and equipment relating
to this part of the business. The Board do not consider that this will have a significant adverse effect on the Group’s profitability
or liquidity in the period covered by either the going concern assessment or the viability statement, and have taken account
of these strategic changes when preparing the forecast models. This consideration is also applicable to the impact on the
12-month forecast period of the impairment in 2020 of other capitalised development costs.
As at 30 June 2020 the Group has a strong balance sheet, with net current assets of £281.6m, including net cash and bank
deposits of £120.4m. While the Group has secured eligibility to the Bank of England Covid Corporate Financing Facility (CCFF),
no commercial papers have been issued and the Group does not anticipate making use of this facility. Access to the CCFF has
not been taken into consideration in the downside scenarios discussed below.
Against the backdrop of the aforementioned strong financial position, as part of the Directors’ consideration of the
appropriateness of adopting the going concern basis in preparing the consolidated financial statements, severe but plausible
scenarios have been considered that estimate the potential impact of the principal risks on the financial forecasts over the
assessment period, as well as the potential impact of the COVID-19 pandemic.
Third-party research and publications were reviewed, in which the most severe scenario considered that a ‘second wave’ of the
pandemic would be experienced in the remainder of the calendar year 2020, before easing from the start of the calendar year
2021. The Board’s most severe scenario therefore assumed that lockdown measures and other COVID-19 related restrictions
would reoccur in calendar year 2020, resulting in reduced demand for that period, particularly in the aerospace and automotive
markets. Principal risks most relevant to short-term revenue, being supply chain dependencies and exchange rate fluctuations,
were also assumed to crystallise in the first six months of the forecast period, reflecting the risks relating to Brexit and the
impact on revenue of a 15% strengthening of Sterling. Other principal risks of industry fluctuations and economic and political
uncertainty are reflected in the assumption that trading in the second six months of the forecast period would be comparable to
the first half of financial year 2020.
From this combination of assumptions, a revenue forecast of c£350m was determined for the 12 months from the date of
signing. In assessing liquidity for the going concern period, the other key assumptions under this scenario were a deterioration
in debtor days to 85 days (worse than was experienced by the Group in the 2009 global financial crisis), continued funding
of the UK defined benefit pension scheme in line with the agreed recovery plan, no reduction in the Group’s operating
expenses beyond the cost-reduction initiatives that are already underway, and the impact on costs of a 15% strengthening in
Sterling against the major trading currencies of the Group. This scenario also assumes that the Group will conserve its cash
by not paying dividends and by restricting capital expenditure to £10m per annum, a level which would support the Group’s
manufacturing facilities and IT infrastructure. No additional borrowings or financing are assumed in this severe scenario, and
the cash flow forecast shows positive cash balances, net of working capital requirements, throughout the 12-month going
concern period.
Reverse stress testing has also been applied to the model and was updated at the date of signing the Annual Report to reflect
actual sales in July 2020. This stress testing demonstrated that the Group would retain a positive liquidity position until revenue
decreased to c£169m for the 12 months to August 2021. The Board considers the possibility of this revenue forecast to be
highly unlikely, and mitigating actions to further reduce operating costs would be put in place if actual trading in the period was
consistent with this scenario.
As a result of the assessments undertaken, 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.
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Financial statementsRenishaw plc Annual Report 2020 1.Accountingpolicies(continued)
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.
Separately disclosed items
The Directors consider that certain items should be separately disclosed to aid understanding of the Group's performance.
Gains and losses from the fair value of financial instruments are therefore separately disclosed in the Consolidated income
statement, where these gains and losses relate to certain forward currency contracts that are not effective for hedge accounting.
Restructuring costs are also separately disclosed where significant costs have been incurred in rationalising and reorganising
our business as part of a Board-approved strategy, and relate to matters that do not frequently recur.
These items are also excluded from Adjusted profit before tax, Adjusted operating profit and Adjusted earnings per share
measures, as explained in note 25 Alternative performance measures.
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.
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 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.
b) Sale of software
The Group provides software licences and software maintenance to customers, sold both on their own and together with
associated products. Where the software licence and/or maintenance is provided as part of a contract that provides customers
with software licences and other goods and services 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.
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1.Accountingpolicies(continued)
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 are 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 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.
f) 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.
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 'Financial Instruments'. 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.
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Financial statementsRenishaw plc Annual Report 2020 1.Accountingpolicies(continued)
Financial liabilities in the form of loans are initially recognised at fair value and are subsequently held at amortised cost.
Financial liabilities are assessed for embedded derivatives and whether any such derivatives are closely related. If not closely
related, such derivatives are accounted for at fair value in the Consolidated income statement.
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 and
expenses in the Consolidated income statement. See note 20 for further detail on financial instruments.
Key estimate – Estimates of highly probable forecasts of the hedged item
Derivatives are effective for hedge accounting to the extent that the hedged item is 'highly probable' to occur, with 'highly
probable' indicating a much greater likelihood of occurrence than the term 'more likely than not'. Determining a highly
probable sales forecast for Renishaw plc and Renishaw UK Sales Limited, being the hedged item, over a multiple year
time period, requires judgement of the suitability of external and internal data sources and estimations of future sales.
Relevant sensitivity analysis is included in note 20.
Cash and cash equivalents
During the FRC’s review of our 2019 Annual Report we clarified that while we considered that certain bank deposits met the
requirements of IAS 7 to be treated as cash equivalents, the expiry date of three of these short-term deposits exceeded three
months. We have therefore amended our accounting policy to the following:
Cash and cash equivalents comprise cash balances, and deposits meeting the following criteria:
– deposits with an original maturity of less than three months; and
– deposits with an original maturity date of more than three months where the deposit can be accessed on demand without
significant penalty for early withdrawal and where the original deposit amount is recoverable in full.
Bank overdrafts that are repayable on demand form part of cash and cash equivalents for the purposes of the Consolidated
statement of cash flow.
This change in accounting policy has been applied retrospectively and therefore the comparatives in the Consolidated
statement of cash flow have been amended to show a cash outflow of £52.5m in investing activities for the amounts placed on
deposits exceeding three months and not accessible on demand, and the comparatives in the Consolidated balance sheet
show £52.5m of Bank deposits separately from Cash and cash equivalents.
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.
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1.Accountingpolicies(continued)
Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which
control is transferred to the Group.
Goodwill is stated at cost less any accumulated impairment losses. It is not amortised but is tested annually for impairment or
earlier if there are any indications of impairment. The annual impairment review involves comparing the carrying amount to the
estimated recoverable amount and recognising an impairment loss if the recoverable amount is lower. Impairment losses are
recognised in 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 product 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 10 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 two 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. Relevant sensitivity analysis is included in note 11.
112
Financial statementsRenishaw plc Annual Report 2020 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 use the higher of previous 12-month usage levels or demand from customer
orders and manufacturing build plans as a basis for estimating the future annual demand of individual stock items. For most
products and their components, provisions are typically made for quantities held in excess of three years' demand.
A demand basis lower than three years is used for those products and related components where the sales history is more
volatile. Where strategic purchases of critical components have been made, an outlook beyond three years is considered
where appropriate.
Leases
As a lessee
At the lease commencement date the Group recognises a right of use asset for the leased item and a lease liability for any lease
payments due.
Right of use assets are initially measured at cost, being the present value of the lease liability plus any initial costs incurred in
entering the lease and less any lease incentives received. Right of use assets are subsequently depreciated on a straight-line
basis from the commencement date to the earlier of i) the end of the useful life of the asset, or ii) the end of the lease term.
Lease liabilities are initially measured at the present value of the lease payments that are not paid at the commencement
date, discounted using the incremental borrowing rate of the applicable entity. The lease liability is subsequently measured at
amortised cost using the effective interest method and is remeasured if there is a change in future lease payments arising from
a change in an index or rate (such as an inflation-linked increase), or if there is a change in the Group’s assessment of whether
it will exercise an extension or termination option. When this happens there is also a corresponding adjustment to the right of
use asset.
Where the Group enters into leases with a lease term of 12 months or less, these are treated as ‘short-term’ leases and are
recognised on a straight-line basis as an expense in the Consolidated income statement. The same treatment applies to
low-value assets, which are typically IT equipment and office equipment.
As a lessor
The Group acts as a lessor for Renishaw-manufactured plant and equipment and determines at inception whether the lease is
a finance lease or an operating lease.
Where the Group transfers the risks and rewards of ownership of lease assets to a third party, the Group recognises a receivable
in the amount of the net investment in the lease. The lease receivable is subsequently reduced by the principal received, while
an interest component is recognised as financial income in the Consolidated income statement.
Where the Group retains the risks and rewards of ownership of lease assets, it continues to recognise the leased asset in
Property, plant and equipment. Income from operating leases is recognised on a straight-line basis over the lease term and
recognised as Revenue rather than Other revenue as such income is not material.
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.
113
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual Report 2020 Notes continued
1.Accountingpolicies(continued)
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. Relevant sensitivity analysis is included in note 13.
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.
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.
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 Consolidated balance sheet and released to
match the related expenditure. Where grants are expected to be received after the related expenditure has occurred, and there
is reasonable assurance that the entity will comply with the grant conditions, amounts are recognised to offset the expenditure
and an asset recognised. Accordingly, amounts relating to the UK Coronavirus Job Retention Scheme are recognised as grants.
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 (including the future release of
deferred tax liabilities) 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. Relevant sensitivity analysis is included in note 9.
114
Financial statementsRenishaw plc Annual Report 2020 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 2020
Revenue
Depreciation, amortisation and impairment
Operating profit before losses from fair value of financial instruments
Share of profits from associates and joint ventures
Net financial expense
Losses from the fair value of financial instruments
Profit before tax
Year ended 30 June 2019
Revenue
Depreciation, amortisation and impairment
Operating profit before gains from fair value of financial instruments
Share of profits from associates and joint ventures
Net financial income
Gains from the fair value of financial instruments
Profit before tax
Metrology
£’000
475,203
62,591
31,188
841
−
−
−
Metrology
£’000
532,940
37,714
95,345
3,815
–
–
–
Healthcare
£’000
35,012
2,557
1,737
−
−
−
−
Healthcare
£’000
41,019
2,700
3,367
–
–
–
–
Total
£’000
510,215
65,148
32,925
841
(3,927)
(26,631)
3,208
Total
£’000
573,959
40,414
98,712
3,815
6,336
1,081
109,944
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
2020
£’000
457,024
53,191
510,215
2019
£’000
519,782
54,177
573,959
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
Total Group revenue
2020
£’000
227,650
167,253
115,312
510,215
2019
£’000
240,115
201,255
132,589
573,959
Revenue in the previous table has been allocated to regions based on the geographical location of the customer. Countries with
individually material revenue figures in the context of the Group were:
China
USA
Japan
Germany
2020
£’000
102,840
101,153
57,833
49,397
2019
£’000
111,002
113,235
63,650
60,916
There was no revenue from transactions with a single external customer which amounted to more than 10% of the Group’s
total revenue.
115
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual Report 2020 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
2020
£’000
186,249
159,258
345,507
2019
£’000
196,214
140,164
336,378
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
Government grants – employment support
Share-based payment charge
Total payroll costs
2020
£’000
183,165
21,373
21,103
(4,532)
173
221,282
2019
£’000
193,035
21,485
22,701
–
158
237,379
Amounts recognised as 'Government grants - employment support' mostly relate to the UK Coronavirus Job Retention Scheme.
2020 total payroll costs do not include redundancy costs relating to restructuring, see note 26.
The average number of persons employed by the Group during the year was:
UK
Overseas
Average number of employees
Key management personnel have been assessed to be the Directors of the Company.
The total remuneration of the Directors was:
Short-term employee benefits
Post-employment benefits
Share-based payment charge
Total remuneration of the Directors
Full details of Directors’ remuneration are given in the Directors’ remuneration report.
4. Cost of sales
Included in cost of sales are the following amounts:
Production costs
Research and development expenditure
Other engineering expenditure
Gross engineering expenditure
Research and development expenditure capitalised (net of amortisation)
Research and development expenditure impaired (see note 11)
Research and development tax credit
Total engineering costs
Total cost of sales
2020
Number
3,001
1,796
4,797
2020
£’000
1,980
136
173
2,289
2019
Number
3,126
1,842
4,968
2019
£’000
2,810
205
158
3,173
2020
£’000
184,326
66,614
15,755
82,369
(544)
9,881
(4,399)
87,307
271,633
2019
£’000
200,050
75,049
22,817
97,866
(2,947)
–
(5,137)
89,782
289,832
Research and development expenditure includes the payroll costs, material costs and allocated overheads attributed to projects
identified as being related to new products or processes. Other engineering expenditure includes the payroll costs, material
costs and allocated overheads attributed to projects identified as being related to existing products or processes.
Research and development expenditure impaired excludes amounts relating to Restructuring costs, per note 26.
116
Financial statementsRenishaw plc Annual Report 2020 5. Financial income and expenses
Financial income
Currency gains
Fair value gains from one-month forward currency contracts (note 20)
Bank interest receivable
Total financial income
Financial expenses
Net interest on pension schemes’ liabilities (note 13)
Currency losses
Fair value losses from one-month forward currency contracts (note 20)
Lease interest
Interest payable
Total financial expenses
2020
£’000
−
−
913
913
2020
£’000
861
2,433
154
765
627
4,840
2019
£’000
5,940
76
1,222
7,238
2019
£’000
845
–
–
–
57
902
Currency gains and losses relate to revaluations of foreign currency-denominated balances using latest reporting currency
exchange rates. The gains recognised in 2019 largely related to a depreciation of Sterling relative to the US dollar affecting US
dollar-denominated intragroup balances in the Company.
Certain intragroup balances were reclassified as ‘net investments in foreign operations’ during 2019, 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 or expenses, to offset currency movements on remaining intragroup
balances. See note 20 for further details.
6. Profit before tax
Included in the profit before tax are the following costs/(income):
Depreciation and impairment of property, plant and equipment and right of use assets
Amortisation and impairment of intangible assets
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)
(b)
(b)
(b)
(b)
2020
£’000
33,168
36,716
22
−
293
398
12
3
2019
£’000
23,752
16,662
148
(455)
226
329
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 and (b) within administrative expenses.
7. Earnings per share
Basic and diluted earnings per share are calculated on earnings of £288,000 (2019: £92,232,000) and on 72,778,904 shares
(2019: 72,778,904 shares), being the number of shares in issue. The number of shares excludes 9,639 shares held by the EBT,
which were purchased on 10 December 2018.
There is no difference between the weighted average earnings per share and the basic and diluted earnings per share.
For the calculation of adjusted earnings per share, per note 25, earnings of £288,000 (2019: £92,232,000) are adjusted by post-
tax amounts for Fair value (gains)/losses on financial instruments not eligible for hedge accounting (reported in Revenue), Fair
value (gains)/losses on financial instruments not eligible for hedge accounting (reported in Gains/(losses) from the fair value of
financial instruments) and restructuring costs, amounting to £592,000 gain, £18,095,000 loss and £19,276,000 loss respectively.
117
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual Report 2020 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
Overseas tax – prior year adjustments
Total current tax
Deferred tax:
Origination and reversal of temporary differences
Prior year adjustments
Derecognition of previously recognised tax losses and excess interest
Recognition of previously unrecognised tax losses
Effect on deferred tax for changes in tax rates
Tax charge on profit
2020
£’000
−
333
9,236
(89)
9,480
(9,349)
(185)
2,953
(1,127)
1,148
(6,560)
2,920
The tax for the year is higher (2019: lower) than the UK standard rate of corporation tax of 19% (2019: 19%).
The differences are explained as follows:
Profit before tax
Tax at 19% (2019: 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
Derecognition of previously recognised tax losses and excess interest
Utilisation of unrecognised losses
Other differences
Tax charge on profit
Effective tax rate
2020
£’000
3,208
610
(312)
–
576
189
(85)
(596)
58
1,148
(1,127)
2,953
(399)
(95)
2,920
91.0%
2019
£’000
4,691
(622)
11,980
−
16,049
2,719
(882)
−
(55)
(119)
1,663
17,712
2019
£’000
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. Whilst the UK patent box benefit normally has
a significant impact on the ETR, UK losses in 2020 have resulted in £nil patent box benefit for 2020 (2019: £1,787,000 credit).
In the Spring Budget 2020, the Government announced that from 1 April 2020 the UK corporation tax rate would remain at
19%, rather than reducing to 17% as previously enacted. This has resulted in a deferred tax charge of £1,059,000. A partial
derecognition of deferred tax assets totalling £2,953,000 relating to US tax losses and excess interest, further contributed to the
year-on-year increase in the ETR.
The deferred tax asset derecognition has arisen from uncertainty over the recoverability of a portion of previously recognised
losses and excess interest against future taxable profits in our US business, as a consequence of recent macroeconomic
uncertainty and AM restructuring (see note 26).
9. Deferred tax
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 £39,142,000 asset (2019: £29,316,000 asset) is
presented as a £39,641,000 deferred tax asset (2019: £29,855,000 asset) and a £499,000 deferred tax liability (2019: £539,000
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.
118
Financial statementsRenishaw plc Annual Report 2020 9.Deferredtax(continued)
Balances at the end of the year were:
Property, plant and equipment
Intangible assets
Intragroup trading (inventories)
Intragroup trading (fixed assets)
Defined benefit pension schemes
Derivatives
Tax losses
Other
Balance at the end of the year
Assets
£’000
306
−
14,249
2,071
11,951
6,344
14,077
6,023
55,021
2020
Liabilities
£’000
(14,234)
(1,264)
(289)
−
(55)
−
−
(37)
(15,879)
Net
£’000
(13,928)
(1,264)
13,960
2,071
11,896
6,344
14,077
5,986
39,142
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
Other deferred tax assets include timing differences relating to inventory provisions totalling £1,876,000, other provisions
(including bad debt provisions) of £1,628,000, employee benefits relating to Renishaw KK of £731,000, and uniform capitalisation
relating to Renishaw Inc of £729,000, with the remaining balance relating to a number of other temporary differences.
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 currency translation 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 (inventories)
Intragroup trading (fixed assets)
Defined benefit pension schemes
Derivatives
Tax losses
Other
Total movement for the year
2020
£’000
29,316
−
163
6,560
(1,978)
(403)
5,484
3,103
39,142
2020
£’000
(847)
1,230
(2,725)
(238)
(2,114)
(494)
10,822
926
6,560
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)
A deferred tax asset of £11,225,000 is recognised in respect of losses made in the Company in 2020. It is considered likely
that the business will generate sufficient future taxable profits to recognise the deferred tax asset in full, as losses made in 2020
include a number of costs, such as restructuring costs per note 26, which are unlikely to reoccur in future years. Further deferred
tax net assets in respect of losses of £2,852,000 have been recognised across other Group companies where it is considered
likely that the business will generate sufficient future taxable profits.
Deferred tax assets have not been recognised in respect of tax losses carried forward of £20,930,000 (2019: £21,028,000),
due to uncertainty over their offset against future taxable profits and therefore their recoverability, of which 98% is accounted for
by Group companies in the US, Brazil, Canada, Switzerland and Australia. US and Canada losses, accounting for 65%, expire
no earlier than 30 June 2035, Switzerland (17%) expire by 2023, while there are no limitations on the remainder.
In determining profit forecasts for each Group company, revenue forecasts have been estimated using consistently applied
external and internal data sources, which is the key variable in the profit forecasts, while cost forecasts reflect cost reduction
measures and AM restructuring undertaken during the year (see note 26). Sensitivity analysis indicates that a reduction of 5% to
relevant revenue forecasts would result in an impairment to deferred tax assets recognised in respect of losses and intragroup
trading (inventories) of less than £2,400,000, while an increase of 5% would result in additions to deferred tax assets in respect
of tax losses not recognised of less than £1,100,000.
119
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual Report 2020 Notes continued
10. Property, plant and equipment
Year ended 30 June 2020
Cost
At 1 July 2019
Additions
Transfers
Disposals
Currency adjustment
At 30 June 2020
Depreciation
At 1 July 2019
Charge for the year
Impairment
Disposals
Currency adjustment
At 30 June 2020
Net book value
At 30 June 2020
At 30 June 2019
Freehold
land and
buildings
£’000
197,474
11,808
15,948
(297)
623
225,556
Plant and
equipment
£’000
245,027
7,818
5,169
(10,061)
33
247,986
31,893
3,985
–
(386)
350
35,842
158,567
20,796
2,590
(6,389)
300
175,864
Motor
vehicles
£’000
Assets in the
course of
construction
£’000
9,555
309
–
(1,305)
(33)
8,526
6,877
1,061
–
(1,235)
(27)
6,676
8,758
18,722
(21,117)
–
–
6,363
–
–
–
–
–
–
Total
£’000
460,814
38,657
–
(11,663)
623
488,431
197,337
25,842
2,590
(8,010)
623
218,382
189,714
165,581
72,122
86,460
1,850
2,678
6,363
8,758
270,049
263,477
At 30 June 2020, properties with a net book value of £83,200,000 (2019: £75,200,000) were subject to a fixed charge to secure
the UK defined benefit pension scheme liabilities.
Additions to assets in the course of construction of £18,722,000 (2019: £8,690,000) comprise £12,836,000 (2019: £5,806,000)
for freehold land and buildings and £5,886,000 (2019: £2,884,000) for plant and equipment.
Impairments in the year relate to restructuring costs described in note 26.
Freehold
land and
buildings
£’000
174,156
19,603
2,846
(1,520)
2,389
197,474
30,776
741
–
(106)
482
31,893
Plant and
equipment
£’000
218,018
27,596
3,886
(6,016)
1,543
245,027
138,576
20,701
1,155
(2,628)
763
158,567
Motor
vehicles
£’000
9,736
903
–
(1,241)
157
9,555
6,801
1,155
–
(1,182)
103
6,877
Assets in the
course of
construction
£’000
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
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
Disposals
Currency adjustment
At 30 June 2019
Net book value
At 30 June 2019
At 30 June 2018
120
Financial statementsRenishaw plc Annual Report 2020 11. Intangible assets
Year ended 30 June 2020
Cost
At 1 July 2019
Additions
Disposals
Currency adjustment
At 30 June 2020
Amortisation
At 1 July 2019
Charge for the year
Impairment
Disposals
Currency adjustment
At 30 June 2020
Net book value
At 30 June 2020
At 30 June 2019
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
Disposals
Currency adjustment
At 30 June 2019
Net book value
At 30 June 2019
At 30 June 2018
Goodwill
Goodwill on
consolidation
£’000
Other
intangible
assets
£’000
Internally
generated
development
costs
£’000
Software
licences and
intellectual
property
£’000
20,227
−
−
291
20,518
8,220
−
808
−
−
9,028
13,823
1,986
−
20
15,829
11,260
267
1,600
−
(22)
13,105
150,042
17,405
−
−
167,447
108,954
16,861
15,881
−
−
141,696
20,827
1,352
(140)
24
22,063
17,429
1,299
−
(87)
23
18,664
Total
£’000
204,919
20,743
(140)
335
225,857
145,863
18,427
18,289
(87)
1
182,493
11,490
12,007
2,724
2,563
25,751
41,088
3,399
3,398
43,364
59,056
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 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 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 segments. In the
following table, only the goodwill relating to the acquisition of Renishaw Fixturing Solutions, LLC is expected to be subject to
tax relief.
121
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual Report 2020 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
2020
£’000
3,148
2,039
5,585
718
11,490
2019
£’000
3,092
1,930
5,453
1,532
12,007
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 beyond five years.
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.
2020
Discount rate
8%
8%
15%
2019
Discount rate
12%
12%
15%
Discount rates for metrology CGUs (itp GmbH and Renishaw Fixturing Solutions, LLC) are based on a Group weighted average
cost of capital. The healthcare CGU (Renishaw Mayfield S.A.) has a higher risk weighting, reflecting the less mature nature of
this segment.
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.
The following bases have been used in determining cash flow projections:
itp GmbH
Renishaw Fixturing Solutions, LLC
Renishaw Mayfield S.A.
2020
Basis of forecast
5% growth rate
5 year business plan
5 year business plan
2019
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. 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 to these
forecast cash flows of 53% for itp GmbH, 70% for Renishaw Fixturing Solutions, LLC and 67% for Renishaw Mayfield S.A.
Management deems the likelihood of these reductions to be remote.
Internally generated development costs
The key assumption in determining the value-in-use for internally generated development costs is the forecast unit sales over
five years, which is determined by management using their knowledge and experience with similar products and the sales
history of products already available in the market. Resulting cash flow projections over five years, the period over which
product demand forecasts can be reasonably predicted and internally generated development costs are written off, are
discounted based on a Group weighted average cost of capital, being 8%.
Impairments of internally generated development costs in the year totalled £15,881,000 (2019: £nil), of which £9,881,000 was
recognised in Cost of sales and £5,999,000 was recognised in Restructuring costs (see note 26) in the Consolidated income
statement. Amounts recognised in Cost of sales primarily relate to metrology products of a capital nature, where the high-volume
growth previously anticipated is now less predictable as a result of global macroeconomic uncertainty.
For the largest projects, comprising over 75% of the net book value at 30 June 2020, a 10% reduction to forecast unit sales, or
an increase in the discount rate by 5%, would result in a further impairment of less than £1,000,000.
122
Financial statementsRenishaw plc Annual Report 2020 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. (joint venture)
Metrology Software Products Limited (joint venture)
HiETA Technologies Limited (31 December) (associate)
Country of
incorporation and principal
place of business
Slovenia
England & Wales
England & Wales
Ownership
2020
%
50.0
50.0
33.3
For the nature of the activities, see note C.42. Movements during the year were:
Balance at the beginning of the year
Additions
Dividends received
Share of profits of associates and joint ventures
Impairment
Exchange differences
Balance at the end of the year
2020
£’000
13,095
4,299
(512)
841
(1,306)
187
16,604
Ownership
2019
%
50.0
50.0
24.9
2019
£’000
9,822
–
(614)
3,815
–
72
13,095
On 6 January 2020 a third party acquired shares in Renishaw's associate company, HiETA Technologies Limited (HiETA).
As part of the transaction, Renishaw plc converted a loan to share capital in HiETA, disposed of a proportion of its shareholding,
and the remaining shareholding was diluted following a share issue to the third party. This resulted in an addition to Renishaw's
investments in associates and joint ventures of £4,299,000, which represents the converted loan of £1,524,000 and the fair value
gain of £2,775,000 on the loan option, with the latter being recognised in the Consolidated income statement. Following the
transaction, Renishaw plc has a 33.33% shareholding in HiETA.
A revision to HiETA's five-year business plan at 30 June 2020 in light of macroeconomic uncertainty resulted in a subsequent
impairment to Renishaw's investment of £1,306,000 and an impairment in the long-term loan of £1,297,000. The residual
carrying value of this long-term loan at 30 June 2020 is £2,500,000.
Other Long-term loans to associates and joint ventures of £318,000 relate to RLS Merilna tehnika d.o.o.
Long-term loans to associates and joint ventures are tested for impairment using discounted cash flow projections at each
reporting period, according to five-year business plans approved by management, or where there are indicators of impairment.
In respect of HiETA, a 30% reduction in forecast cash flows would result in additional impairments to the investment and
loan carrying values of £1,961,000 and £587,000 respectively, while an increase of 3% to the discount factor would result in
additional impairments to the investment and loan carrying values of £552,000 and £333,000 respectively.
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
Group’s share of profit/(loss) for the year
Joint ventures
Associate
2020
£’000
32,861
(5,053)
27,808
13,904
23,899
3,068
1,534
2019
£’000
30,570
(5,180)
25,390
12,695
26,886
7,630
3,815
2020
£’000
5,171
(7,494)
(2,323)
(767)
1,926
(3,685)
(1,088)
2019
£’000
3,083
(8,669)
(5,586)
(1,391)
1,032
(1,980)
(493)
The aggregate of the Group's share of profit/(loss) for the year does not total to amounts recognised as share of profits of
associates and joint ventures in the Consolidated income statement and the table above, with losses of £395,000 recognised in
Administrative expenses as an impairment against loan amounts until the carrying value of Renishaw's investment in HiETA was
in a positive position, following the investment noted above.
123
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual Report 2020 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
US defined benefit pension schemes, has ceased any future accrual for current members and these schemes are closed to
new members. UK, Ireland and US employees are now covered by defined contribution schemes.
The total pension cost of the Group for the year was £21,103,000 (2019: £22,701,000), of which £136,000 (2019: £205,000)
related to Directors and £5,253,000 (2019: £6,440,000) 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 2020 by a qualified independent actuary. The mortality assumption used for 2020 is S2PMA and S2PFA
tables, CMI (core) 2019 model with long-term improvements of 1% per annum.
Major assumptions used by actuaries for the UK, Ireland and US schemes were:
Rate of increase in pension payments
Lump sum - assumed settlement rate
Discount rate
Inflation rate (RPI)
Inflation rate (CPI)
Retirement age
30 June 2020
UK scheme Ireland scheme
1.3%
−
1.1%
1.3%
−
65
2.8%
−
1.5%
2.8%
2.2%
64
US scheme
−
0.8%
2.8%
−
−
65
30 June 2019
Ireland scheme
1.5%
–
1.2%
1.5%
–
65
UK scheme
3.3%
–
2.3%
3.4%
2.4%
64
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:
2020
years
21.4
23.4
22.4
24.6
US scheme
–
1.3%
3.3%
–
–
65
2019
years
21.3
23.2
22.3
24.4
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
2020
£’000
% of
total
assets
30 June
2019
£’000
% of
total
assets
110,027
54,822
17,756
6,014
188,619
(253,514)
(64,895)
11,896
58
29
10
3
100
−
−
−
111,209
64,708
3,135
2,536
181,588
(233,458)
(51,870)
8,526
61
36
2
1
100
–
–
–
Equities are held in externally-managed funds and primarily relate to UK and US equities. Bonds relate to UK, US and Eurozone
government-linked securities, again held in externally-managed funds. 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.
‘Cash and other’ investment assets were higher at the year end than in 2019 primarily due to the partial reallocation of
investment assets in the US, with a portion of funds being temporarily transferred from previous holdings in to highly liquid
assets at the year end, before being invested primarily in equities in the next financial year.
No scheme assets are directly invested in the Group’s own equity.
The UK scheme is closed for future accrual and is expected to mature over the coming years, and therefore while the focus of
the investment strategy remains on growth the trustees intend to start gradually de-risking the investments where appropriate.
124
Financial statementsRenishaw plc Annual Report 2020 13.Employeebenefits(continued)
The overall target investment strategy for the period to 30 June 2020 was therefore to still hold 64% of investment assets in
equities, 35% in diversified growth funds and 1% in index-linked gilts, excluding the investment of the £8.7m annual deficit
contributions agreed as part of the 2019 funding arrangement. These contributions for the year ended 30 June 2020 were
invested in a fund classified as ‘Fixed income’ as a short-term approach, and are expected to be invested in an externally-
managed high lease-to-value property fund in the future.
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 £25,681,000 (2019: £22,896,000) and the actuarial value of liabilities was £31,948,000
(2019: £30,027,000).
The movements in the schemes’ assets and liabilities were:
Year ended 30 June 2020
Balance at the beginning of the year
Contributions paid
Interest on pension schemes
Remeasurement loss under IAS 19
Benefits paid
Balance at the end of the year
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
Assets
£’000
181,588
11,814
4,371
(2,237)
(6,917)
188,619
Assets
£’000
172,842
6,831
4,902
–
4,219
(7,206)
181,588
Liabilities
£’000
(233,458)
–
(5,232)
(21,741)
6,917
(253,514)
Liabilities
£’000
(240,220)
–
(5,747)
(751)
6,054
7,206
(233,458)
Total
£’000
(51,870)
11,814
(861)
(23,978)
–
(64,895)
Total
£’000
(67,378)
6,831
(845)
(751)
10,273
–
(51,870)
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
2020
£’000
2019
£’000
(682)
(22,402)
1,648
(2,542)
−
(23,978)
2,937
(22,941)
(4,677)
3,454
31,500
10,273
The cumulative amount of actuarial gains and losses recognised in the Consolidated statement of comprehensive income and
expense was a loss of £124,782,000 (2019: loss of £100,804,000).
The total deficit of the Group’s defined benefit pension schemes, on an IAS 19 basis, has increased from £51,870,000 at
30 June 2019 to £64,893,000 at 30 June 2020, primarily reflecting the net impact of decreases in the discount rate, RPI and CPI
for the UK defined benefit scheme since 30 June 2019. 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
-£24.0m/+£28.1m
+£23.3m/-£23.1m
+£10.5m
+£5.8m
125
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual Report 2020 Notes continued
13.Employeebenefits(continued)
A deficit funding plan for the UK defined benefit pension scheme was agreed with The Pensions Regulator in 2018, which
superseded all previous arrangements. The Company agreed to pay £8,700,000 per annum into the scheme for five years with
effect from 1 October 2018.
A number of UK properties owned by the Company with a book value of £83,200,000 at 30 June 2020 are subject to registered
fixed charges and continue to provide security to the scheme under the plan. The Company also has an escrow bank account
with a balance of £10,568,000 at the end of the year (2019: £10,490,000) which is subject to a registered floating charge.
There is no scheduled release of funds back to the Company under the 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.
The current 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 plan is lower than the IAS 19 pension scheme deficit at 30 June 2020 and as
such, in accordance with IFRIC 14, no adjustment to the scheme’s liabilities has been necessary. At 30 June 2019, the increase
in liabilities under IFRIC 14 was also nil.
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.
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) exists 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 83 of the Directors’ corporate governance report for further details of the
Plan awards granted.
The total cost recognised in the 2020 Consolidated income statement in respect of the Plan was £173,000 (2019: £158,000).
No awards have been made in respect of 2020.
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
2020
£’000
108,609
1,777
110,386
Restated*
2019
£’000
49,897
4,429
54,326
The UK defined benefit pension scheme cash escrow account is shown separately within current assets.
*2019 cash and cash equivalents figures have been restated, where the original expiry date of short-term deposits totalling
£52,500,000 exceeded three months, see note 1. Accounting policies. Consequently, bank deposits amounting to £52,500,000
are shown separately within current assets at 30 June 2019. At 30 June 2020 bank deposits amounted to £10,000,000.
This amount is held by the Company, maturing on 28 July 2020.
126
Financial statementsRenishaw plc Annual Report 2020 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
2020
£’000
37,717
18,737
49,043
105,497
2019
£’000
46,102
23,431
59,493
129,026
During the year, the amount of inventories recognised as an expense in the Consolidated income statement was £169,769,000
(2019: £185,344,000) and the amount of write-down of inventories recognised as an expense in the Consolidated income
statement was £7,473,000 (2019: £1,276,000), which includes £4,910,000 related to restructuring costs, see note 26. At the end
of the year, the gross cost of inventories which had provisions held against them totalled £21,133,000 (2019: £14,137,000).
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
2020
£’000
2,846
5,308
(2,563)
2,745
5,591
2019
£’000
3,453
2,236
(2,843)
(607)
2,846
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. Included within the warranty provision created during the year is £3,400,000 (2019: £nil) where the
warranty cost has been reassessed to be the cost of replacing certain AM machines where the business will not have the capability
to honour the warranty on these machines going forward as a result of the Board's decision before the year end to fundamentally
change the direction of the AM business. As we will not have the ability to repair or maintain these machines, the warranty cost
reflects the cost of replacing these machines. These warranty costs are expected to be incurred in the next financial year.
18. Other payables
Balances at the end of the year were:
Payroll taxes and social security
Other creditors and accruals
Total other payables
2020
£’000
5,833
28,539
34,372
2019
£’000
7,333
33,732
41,065
19. Borrowings
Third party borrowings at 30 June 2020 include 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), and a loan drawn down in stages throughout 2020 by Renishaw (Korea) Limited,
amounting to KRW 2,835,636,000 (£1,894,000).
For the Renishaw KK loan, principal of JPY 12,000,000 is repayable each month, with a fixed interest rate of 0.81% also paid on
monthly accretion. The residual 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. For the Renishaw (Korea) Limited loan, repayment in full is required on completion of a new property,
expected to be in the year ended 30 June 2022, with no interest payable.
Borrowings are held at amortised cost. There is no significant 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
2020
£’000
10,399
1,894
78
(1,136)
308
11,543
2019
£’000
–
10,486
3
(90)
–
10,399
127
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual Report 2020
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 foreign
currency 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 foreign currency 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. The Group's
policy is that 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 & finance lease receivables
Other receivables
Cash and bank deposits
2020
£’000
9,293
33,358
15,607
20,416
33,186
111,860
2019
£’000
10,628
38,724
29,516
18,087
26,196
123,151
2020
£’000
16,974
946
1,663
337
3,276
23,196
2019
£’000
12,704
935
4,120
740
5,962
24,461
2020
£’000
75,052
7,096
6,324
4,553
27,361
120,386
2019
£’000
64,919
7,666
7,846
3,966
22,429
106,826
The above trade receivables, finance lease receivables, other receivables and cash are predominately held in the functional
currency of the relevant entity, with the exception of £18,142,000 of US Dollar-denominated trade receivables being held in
Renishaw (Hong Kong) Limited and £3,940,000 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.
Other receivables include mostly prepayments and indirect tax receivables. Prepayment balances are reviewed at each
reporting period to confirm that prepaid goods or services are still expected to be received, while indirect tax balances are
reviewed for recoverability.
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
128
2020
£’000
11,703
4,510
15,495
31,708
2020
£’000
3,081
3,254
(370)
5,965
2019
£’000
14,999
4,438
16,486
35,923
2019
£’000
3,301
292
(512)
3,081
Financial statementsRenishaw plc Annual Report 2020 20.Financialinstruments(continued)
The Group applies the simplified approach when measuring the expected credit loss for trade receivables, with a provision
matrix used to determine a lifetime expected credit loss.
For this provision matrix, trade receivables are grouped into credit risk categories, with category 1 being the lowest risk and
category 5 the highest. Risk scores are allocated to the customer’s country of operation, their type (such as distributor, end-user
and OEM), their industry and the proportion of their debt that was past due at the year-end. These scores are then weighted to
produce an overall risk score for the customer, with the lowest scores being allocated to category 1 and the highest scores to
category 5.
The matrix then applies an expected credit loss rate to each category, with this rate being determined by adjusting the Group’s
historic credit loss rates to reflect forward-looking information. This includes management’s assessment of the impact of
COVID-19 and the associated global macroeconomic uncertainty and has resulted in an increase in the expected credit loss
rate, and the expected credit loss allowance, compared to the prior year. These movements are shown in the table on page 128.
Where certain customers have been identified as having a significantly elevated credit risk these have been provided for on a
specific basis. Both elements of expected credit loss are shown in the matrix below and have been shown separately so as not
to distort the expected credit loss rate.
The Group has no material contract assets, and finance lease receivables are subject to the same approach as noted above for
trade receivables.
Year ended 30 June 2020
Gross trade receivables
Expected credit loss rate
Expected credit loss allowance
Specific loss allowance
Total expected credit loss
Net trade receivables
Risk category 1
£’000
714
1.24%
9
−
9
705
Risk category 2
£’000
39,931
1.35%
541
−
541
39,390
Risk category 3
£’000
64,908
1.42%
922
3,730
4,652
67,038
Risk category 4
£’000
5,187
1.58%
82
676
758
4,429
Risk category 5
£’000
302
1.69%
5
−
5
297
2020 Total
£’000
111,042
1.49%
1,559
4,406
5,965
105,077
2019 Total
£’000
113,848
0.19%
220
2,861
3,081
116,929
The maximum exposure to credit risk is £259,200,000, comprising the Group’s trade, finance 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 one and two years
Receivable between two and five years
Liquidity risk
2020
£’000
905
3,155
4,060
2019
£’000
1,075
1,485
2,560
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 on a rolling 12-month basis to monitor cash requirements.
In respect of net cash and bank deposits, being £120,386,000, the carrying value approximates to fair value because of
the short maturity of the deposits. 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 £1,200,000.
Changes in liabilities arising from financing activities
Movements during the year were:
Lease liabilities
Borrowings
1 July 2019 Cash flows
(4,896)
(1,136)
(6,032)
14,247
10,399
24,646
Additions
3,234
1,894
5,128
Interest
766
78
844
Currency
(185)
308
123
30 June 2020
13,166
11,543
24,709
There is no comparative for lease liabilities and the comparative for borrowings is disclosed in note 19.
129
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual Report 2020 Notes continued
20.Financialinstruments(continued)
The contractual maturities of financial liabilities at the year end were:
Year ended 30 June 2020
Trade payables
Other payables
Borrowings
Forward exchange contracts
Year ended 30 June 2019
Trade payables
Other payables
Borrowings
Forward exchange contracts
Contractual cash flows
Carrying amount
£’000
16,998
34,372
11,543
63,648
126,561
Effect of
discounting
£’000
−
−
226
−
226
Gross maturities
£’000
16,998
34,372
11,769
63,648
126,787
Carrying amount
£’000
21,513
41,065
10,399
54,147
127,124
Effect of
discounting
£’000
–
–
310
–
310
Gross maturities
£’000
21,513
41,065
10,709
54,147
127,434
Up to 1 year
£’000
16,998
34,372
1,149
22,546
75,065
Up to 1 year
£’000
21,513
41,065
1,120
18,920
82,618
1–2 years
£’000
−
−
3,034
29,220
32,254
1–2 years
£’000
–
–
1,115
12,626
13,741
Borrowings relate to loans in Renishaw KK and Renishaw (Korea) Limited, see note 19 for further detail.
Contract liabilities
Movements during the year were:
Balance at the beginning of the year
Released during the year
New items added
Currency
Balance at the end of the year
Extended
warranties
£’000
1,226
(950)
316
9
601
Maintenance
contracts
£’000
2,668
(1,299)
1,668
38
3,075
Volume
rebates
£’000
678
(675)
182
−
185
Point in time
performance
obligations
£’000
1,059
(878)
1,934
−
2,115
2–5 years
£’000
−
−
7,586
11,882
19,468
2–5 years
£’000
–
–
8,474
22,601
31,075
Total
£’000
5,631
(3,802)
4,100
47
5,976
Contract liabilities relating to volume rebates are the rebate agreements treated as a distinct performance obligation rather than
variable consideration.
The aggregate amount of the transaction price allocated to performance obligations that are unsatisfied at the end of the year
amounts to £7,416,000, of which £1,489,000 is not expected to be recognised in the next 12 months.
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
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; and
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.
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, and according to the categorisations of instruments noted in the previous market
risk section.
130
Financial statementsRenishaw plc Annual Report 2020 20.Financialinstruments(continued)
2020
2019
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
78,527
19,467
154,045
290,499
542,538
1,133
283
(11,415)
(24,925)
(34,924)
36,152
37,060
198,339
671,442
942,993
Amounts recognised in the Consolidated statement of comprehensive
income and expense
−
13,924
Forwardcurrencycontractsineffectiveasacashflowhedge(i)
Current derivative liabilities
Non-current derivative liabilities
Amounts recognised in Gains/(losses) from the fair value of financial
instruments in the Consolidated income statement
Foreigncurrencyoptionsineffectiveasacashflowhedge(ii)
Non-current derivative assets
Current derivative assets
Current derivative liabilities
Non-current derivative liabilities
Amounts recognised in Gains/(losses) from the fair value of financial
instruments in the Consolidated income statement
Forwardcurrencycontractsnotinadesignatedcashflowhedge(iii)
Current derivative assets
Current derivative liabilities
93,962
153,585
247,547
(10,030)
(16,021)
(26,051)
−
−
−
−
−
−
−
(24,361)
108
3,394
(122)
(155)
3,225
2,021
5,127
62,549
67,676
80
(979)
(899)
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
−
(154)
–
76
Total forward contracts and options
Non-current derivative assets
Current derivative assets
Current derivative liabilities
Non-current derivative liabilities
78,527
24,594
310,556
444,085
857,762
1,242
3,758
(22,546)
(41,102)
(58,648)
36,152
63,731
217,802
671,442
989,127
1,310
2,778
(18,920)
(35,227)
(50,059)
In addition to amounts noted above as recognised in Gains/(losses) from the fair value of financial instruments in the
Consolidated income statement, totalling £22,340,000 net loss, an additional loss of £4,291,000 was recognised in Gains/
(losses) from the fair value of financial instruments relating to ineffective portions of forward currency contracts which matured
during the year. Therefore, the total amounts recognised in Gains/(losses) from the fair value of financial instruments in the
Consolidated income statement amounts to £26,631,000.
131
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual Report 2020 Notes continued
20.Financialinstruments(continued)
The amounts of foreign currencies relating to these forward contracts and options are, in Sterling terms:
US Dollar
Euro
Japanese Yen
2020
2019
Nominal value
£’000
596,032
159,221
102,509
857,762
Fair value
£’000
(56,562)
409
(2,495)
(58,648)
Nominal value
£’000
678,323
187,833
122,971
989,127
Fair value
£’000
(43,689)
(3,501)
(2,868)
(50,059)
The following are the exchange rates which have been applicable during the financial year:
Currency
US Dollar
Euro
Japanese Yen
Average
forward
contract rate
1.37
1.09
136
2020
Year end
exchange
rate
1.24
1.10
134
Average
exchange
rate
1.26
1.14
136
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
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 £25,800,000 and increase profit before tax by
£12,000,000, while a depreciation of 5% would decrease pre-tax equity by £28,500,000 and decrease profit before tax by
£18,300,000.
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
according to IFRS 9 Financial Instruments 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.
During 2020, global macroeconomic uncertainty resulted in a reduction to the ‘highly probable’ revenue forecasts of Renishaw
plc and Renishaw UK Sales Limited, being the hedged item, which has resulted in proportions of forward contracts failing
hedge effectiveness testing, with nominal value amounting to £247,547,000.
Accumulated fair value losses on forward currency contracts ineffective as a cash flow hedge amounting to £24,361,000 were
recycled from the Cash flow hedging reserve to the Consolidated income statement to the extent that the hedged item was no
longer 'expected to occur', in accordance with IFRS 9.6.5.12.
Based on forward currency contracts outstanding at 30 June 2020, a reduction of 10% to the highly probable revenue forecasts
of the hedged item would result in an additional nominal value of £16,600,000 of forward currency contracts becoming
ineffective, with an additional £1,565,000 loss recycled to the Consolidated income statement.
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, while 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.
In light of the increased global macroeconomic uncertainty experienced in the first half of the year, and with redundancy
programmes in progress, the Directors elected to waive their right to the 2020 interim dividend. Following the outbreak of the
COVID-19 pandemic, and according to the Board’s priority of conserving cash and managing the Group in a prudent manner
through this period of uncertainty, the interim dividend payable during the year was then cancelled, and no final dividend is
declared in respect of the year. The Board will review its position on dividends during the next fiscal year with the intention of
reinstating its progressive dividend policy as soon as it is appropriate to do so.
132
Financial statementsRenishaw plc Annual Report 2020 21. Share capital and reserves
Share capital
Allotted, called-up and fully paid 72,788,543 ordinary shares of 20p each
2020
£’000
14,558
2019
£’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:
2019 final dividend paid of 46.0p per share (2018: 46.0p)
Interim dividend paid of nil per share (2019: 14.0p)
Total dividends paid
2020
£’000
33,478
−
33,478
2019
£’000
33,483
10,189
43,672
No final dividend is proposed in respect of the current financial year (2019: £33,482,729).
Currency translation reserve
The currency translation reserve comprises all foreign exchange differences arising from the translation of the financial
statements of the foreign operations and currency movements on intragroup loan balances classified as net investments in
foreign operations from December 2018 (see note 5).
Movements during the year were:
Balance at the beginning of the year
Gain on net assets of foreign currency operations
Gain on intragroup loans classified as net investments in foreign operations
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
2020
£’000
14,577
996
2,373
(403)
2,966
186
17,729
2019
£’000
12,665
1,218
827
(205)
1,840
72
14,577
The cash flow hedging reserve, for both the Group and the Company, comprises all foreign exchange differences arising
from the valuation of forward exchange contracts which are effective hedges and mature after the year end. These are valued
on a mark-to-market basis, are accounted for in Other comprehensive income and expense and accumulated in Equity, and
are recycled through the Consolidated income statement and Company income statement when the hedged item affects the
income statement, or when the hedging relationship ceases to be effective. See note 20 for further detail.
Movements during the year were:
Balance at the beginning of the year
Losses on contract maturity recognised in revenue during the year
Losses transferred to the Consolidated income statement during the year
Deferred tax transferred to the Consolidated income statement
Revaluations during the year
Deferred tax movement
Balance at the end of the year
Other reserve
2020
£’000
(42,401)
16,216
24,361
(4,629)
(26,653)
2,651
(30,455)
2019
£’000
(19,389)
19,782
–
–
(47,355)
4,561
(42,401)
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
2020
£’000
(302)
173
(129)
2019
£’000
(460)
158
(302)
133
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual Report 2020 Notes continued
21.Sharecapitalandreserves(continued)
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 14 for further detail. 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
2020
£’000
(404)
−
(404)
2019
£’000
–
(404)
(404)
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.
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
2020
£’000
(577)
−
(577)
2019
£’000
(577)
–
(577)
The non-controlling interest represents the minority shareholdings in Renishaw Diagnostics Limited – 7.6%.
22. Leases and right of use assets
Leases as lessor
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 (2020: £1,183,000 and 2019: £1,231,000). 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
2020
£’000
742
152
894
2019
£’000
804
700
1,504
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 Finance lease 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
2020
2019
Gross
investment
£’000
Interest
£’000
Net
investment
£’000
Gross
investment
£’000
2,113
5,118
7,231
131
317
448
1,982
4,801
6,783
1,348
5,469
6,817
Interest
£’000
118
477
595
Net
investment
£’000
1,230
4,992
6,222
Finance lease receivables are now identified as separate line items in the Consolidated balance sheet. 2019 figures have been
reclassified to recognise £4,992,000 as Finance lease receivables in non-current assets and £1,230,000 as Finance lease
receivables in current assets, reducing Trade receivables by the total amount of £6,222,000.
134
Financial statementsRenishaw plc Annual Report 2020 22.Leasesandrightofuseassets(continued)
Leases as lessee
The Group acts as lessee for land and buildings and vehicles in certain subsidiaries and from 1 July 2019 recognises leases as
a liability in the Consolidated balance sheet, with a corresponding amount recognised as a right of use asset.
Total amounts recognised in the Consolidated income statement include depreciation expense of right of use assets of
£4,736,000, interest expense on lease liabilities of £766,000, and expenses relating to short-term and low-value leases of
£80,000, totalling £5,582,000. Total cash outflows for leases amounted to £4,896,000, while non-cash additions to right of use
assets and lease liabilities amounted to £3,234,000.
Lease liabilities are analysed as below:
Due in less than one year
Due between one and five years
Due in more than five years
Total future minimum lease payments payable
Effect of discounting
Lease liability
Right of use assets are analysed as below:
Year ended 30 June 2020
Net book value
At 1 July 2019
Additions
Depreciation
Currency adjustment
At 30 June 2020
2020
2019
Leasehold property
£’000
Vehicles
£’000
Leasehold property
£’000
3,011
4,754
7,182
14,947
(4,189)
10,758
1,325
1,130
−
2,455
(47)
2,408
3,338
5,211
4,090
12,639
n/a
n/a
Vehicles
£’000
1,442
2,309
–
3,751
n/a
n/a
Leasehold
property
£’000
11,537
2,270
(3,351)
(169)
10,287
Vehicles
£’000
Total
£’000
3,013
779
(1,385)
(22)
2,385
14,550
3,049
(4,736)
(191)
12,672
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
Intangibles (software)
Total committed capital expenditure
2020
£’000
640
1,621
3,854
6,115
2019
£’000
18,087
3,995
280
22,362
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
2020
£’000
837
17,160
512
87
3,103
955
2019
£’000
908
21,290
614
167
1,933
1,250
2020
£’000
526
−
−
3,227
−
2,500
2019
£’000
913
1
–
424
–
6,144
There were no bad debts relating to related parties written off during the year (2019: £nil).
By virtue of their long-standing voting agreement, Sir David McMurtry (Executive Chairman 36.23% shareholder) and John Deer
(Non-executive Deputy Chairman, together with his wife, 16.72%), are the ultimate controlling party of the Group. See page 87
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 pages 80 to 86 of the Governance report.
135
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual Report 2020 Notes continued
25. Alternative performance measures
In accordance with Renishaw’s alternative performance measures (APMs) policy and ESMA Guidelines on Alternative
Performance Measures (2015), APMs are defined as - 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
2020
£’000
510,215
12,054
(6,821)
515,448
-13.2%
2019
£’000
573,959
19,782
–
593,741
Year-on-year revenue growth at constant exchange rates for 2019 was -6.8%.
Adjusted profit before tax, Adjusted earnings per share and Adjusted operating profit are defined as the profit before tax,
earnings per share and operating profit after excluding costs relating to business restructuring, and gains and losses in fair
value from forward currency contracts which did not qualify for hedge accounting and which have yet to mature.
Restructuring costs reported separately in the Consolidated income statement have also been excluded from adjusted
measures, on the basis that they relate to matters that do not frequently recur. See note 26 for further detail.
From 2017, the gains and losses from the 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. This is classified as ‘Fair value (gains)/losses on financial instruments not eligible for hedge
accounting (i)’ in the following reconciliations. The amounts shown as reported in revenue represent the amount by which
revenue would change had all the derivatives qualified as eligible for hedge accounting.
Gains and losses which recycle through the Consolidated income statement as a result of contracts deemed ineffective during
2020, as described in note 20, are also excluded from adjusted profit measures, on the basis that all forward contracts are still
expected to be effective hedges for Group revenue, while the potentially high volatility in fair value gains and losses relating
to these contracts will otherwise cause confusion for users of the financial statements wishing to understand the underlying
trading performance of the Group. This is classified as ‘Fair value (gains)/losses on financial instruments not eligible for hedge
accounting (ii)’ in the following reconciliations.
The Board considers these alternative performance measures to be more relevant and reliable in evaluating the
Group’s performance.
Adjusted profit before tax:
Statutory profit before tax
Restructuring costs
Fair value (gains)/losses on financial instruments not eligible for hedge accounting (i):
– reported in revenue
– reported in (gains)/losses from the fair value of financial instruments
Fair value (gains)/losses on financial instruments not eligible for hedge accounting (ii):
– reported in (gains)/losses from the fair value of financial instruments
Adjusted profit before tax
Adjusted earnings per share:
Statutory earnings per share
Restructuring costs
Fair value (gains)/losses on financial instruments not eligible for hedge accounting (i):
– reported in revenue
– reported in (gains)/losses from the fair value of financial instruments
Fair value (gains)/losses on financial instruments not eligible for hedge accounting (ii):
– reported in (gains)/losses from the fair value of financial instruments
Adjusted earnings per share
2020
£’000
3,208
23,797
(731)
(2,021)
24,361
48,614
2020
pence
0.4
26.5
(0.8)
(2.2)
27.1
51.0
2019
£’000
109,944
–
(5,001)
(1,081)
–
103,862
2019
pence
126.7
–
(5.6)
(1.2)
–
119.9
136
Financial statementsRenishaw plc Annual Report 2020
25.Alternativeperformancemeasures(continued)
Adjusted operating profit:
Statutory operating profit
Restructuring costs
Fair value (gains)/losses on financial instruments not eligible for hedge accounting (i):
– reported in revenue
– reported in (gains)/losses from the fair value of financial instruments
Fair value (gains)/losses on financial instruments not eligible for hedge accounting (ii):
– reported in (gains)/losses from the fair value of financial instruments
Adjusted operating profit
Adjustments to the segmental operating profit:
Metrology
Operating profit before loss from fair value of financial instruments
Restructuring costs
Fair value (gains)/losses on financial instruments not eligible for hedge accounting (i):
– reported in revenue
Fair value (gains)/losses on financial instruments not eligible for hedge accounting (ii):
– reported in revenue
Adjusted metrology operating profit
Healthcare
Operating profit before loss from fair value of financial instruments
Fair value (gains)/losses on financial instruments not eligible for hedge accounting (i):
– reported in revenue
Fair value (gains)/losses on financial instruments not eligible for hedge accounting (ii):
– reported in revenue
Adjusted healthcare operating profit
2020
£’000
6,294
23,797
(731)
(2,021)
24,361
51,700
2020
£’000
31,188
23,797
2019
£’000
99,793
–
(5,001)
(1,081)
–
93,711
2019
£’000
95,345
–
(688)
(4,745)
(4,036)
50,261
2020
£’000
1,737
–
90,600
2019
£’000
3,367
(43)
(256)
(255)
1,439
–
3,111
26. Restructuring costs
During the year the Board introduced its Fit for the future strategy, which incorporated the rationalisation and reorganisation of
certain operating activities, particularly relating to the additive manufacturing (AM) business, and cost control measures which
included a UK compulsory redundancy programme.
For the changes in the AM business, there has been a rationalisation in the AM product range to focus on the Group's multi-
laser platform, and therefore restructuring costs include the impairment of capitalised development costs, goodwill, and plant
and equipment where these relate to technologies that are not being taken forward in the AM business. Write-downs in the
carrying value of inventories for these AM products have also been reported in restructuring costs, as has the increase in
warranty provision that directly arises from the reassessed warranty costs for certain machines that the business will not have
the capability to repair and therefore where the warranty will be honoured by replacing the machines. Part of the impairment
of capitalised development costs relate to technologies which will be taken forward by the Group but where economic benefits
are not expected to be realised in the next five years. The costs of the UK compulsory redundancy programme, arising from a
reorganisation of the business, are also reported in restructuring costs.
The Board considers that the costs relating to these restructuring activities should be reported separately in the Consolidated
income statement in order to aid users' understanding. The table below shows the analysis of these costs:
Redundancy costs (a)
Impairment of capitalised research and development costs (b)
Impairment of goodwill (c)
Impairment of property, plant and equipment (a)
Increase in inventory provisions (b)
Increase in warranty provisions (b)
Other expenses (c)
Total restructuring costs
£’000
6,281
5,999
405
2,590
4,910
3,400
212
23,797
These costs would be found under the following headings in the Consolidated income statement if they had not been separately
identified in Restructuring costs: (a) within cost of sales, distribution costs and administrative expenses; (b) within cost of sales;
and (c) within administrative expenses.
137
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual Report 2020 Company balance sheet
at 30 June 2020
Assets
Property, plant and equipment
Right of use assets
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
Bank deposits
Cash and cash equivalents
Total current assets
Current liabilities
Trade payables
Short-term loans from Group undertakings
Provisions
Lease liabilities
Derivatives
Other payables
Total current liabilities
Net current assets
Non-current liabilities
Employee benefits
Lease liabilities
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
2020
£’000
Restated*
2019
£’000
144,319
1,857
27,371
288,548
2,999
96,234
2,818
18,509
1,242
583,897
60,313
63,523
4,083
318
2,850
16,783
3,758
10,568
10,000
71,576
243,772
9,163
59,507
1,681
40
22,546
43,952
136,889
106,883
58,628
1,841
41,102
101,571
589,209
14,558
42
(404)
(30,455)
605,137
331
589,209
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
52,500
11,122
334,641
11,383
51,996
2,382
–
18,920
66,284
150,965
183,676
44,739
–
35,227
79,966
616,244
14,558
42
(404)
(42,401)
644,291
158
616,244
The Company reported a profit for the financial year ended 30 June 2020 of £12,861,000 (2019: £28,478,000).
*2019 cash and cash equivalents and bank deposits have been restated following a change in accounting policy, see note 1.
These financial statements were approved by the Board of Directors on 18 August 2020 and were signed on its behalf by:
Sir David McMurtry
Allen Roberts
Directors
138
Financial statementsRenishaw plc Annual Report 2020 Company statement of changes in equity
for the year ended 30 June 2020
Year ended 30 June 2019
Balance at 1 July 2018
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-based payments charge
Purchase of own shares
Dividends paid
Balance at 30 June 2019
Year ended 30 June 2020
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
(19,389) 649,594
Other
reserve
£’000
Total
£’000
– 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
–
(404)
–
(404)
–
–
–
–
–
(43,672)
(42,401) 644,291
158
–
–
158
(404)
(43,672)
158 616,244
–
–
–
–
–
–
12,861
–
12,861
–
11,946
11,946
(18,537)
–
(18,537)
11,946
(5,676)
–
–
–
–
(18,537)
11,944
(6,591)
6,270
Share-based payments charge
Dividends paid
Balance at 30 June 2020
–
–
14,558
–
–
42
–
–
(404)
–
–
–
(33,478)
(30,455) 605,137
173
–
173
(33,478)
331 589,209
139
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual Report 2020 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 IFRS
– 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.
Critical accounting judgements and estimation uncertainties
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 for the Company are consistent with those of
the Group, as summarised on page 106.
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. With strong net cash and bank deposit balances, the Group
has considerable financial resources at its disposal and the Directors have considered the current financial projections which
have been sensitised to reflect plausible downside scenarios as a result of the COVID-19 pandemic and its impact on the global
economy (further detail is provided in the Group's Going concern accounting policy on page 108). The Company has secured
eligibility to the Bank of England Covid Corporate Financing Facility however, due to the terms of eligibility of the programme, the
Company is unable to rely on eligibility alone in its going concern assessment as no commercial papers have been issued.
As a result of the assessments undertaken, the Directors consider 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.
140
Financial statementsRenishaw plc Annual Report 2020 Accountingpolicies(continued)
Research and development
Expenditure on research activities is recognised in the income statement as an expense as incurred. Expenditure on
development activities is capitalised if the product or process is technically and commercially feasible and the Company intends
and has the technical ability and sufficient resources to complete development, future economic benefits are probable and the
Company can measure reliably the expenditure attributable to the intangible asset during its development.
Taxation
The charge for taxation is based on the Company’s profit for the year. Deferred tax is provided on temporary differences
between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for
taxation purposes.
Deferred tax assets are recognised to the extent that it is regarded as probable that they will be recovered.
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, if applicable.
Derivative financial instruments
In accordance with its treasury policy, the Company does not hold or issue derivative financial instruments for
speculative 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 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.
141
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual Report 2020 Notes to the Company financial statements continued
C.28. Property, plant and equipment
Year ended 30 June 2020
Cost
At 1 July 2019
Additions
Transfers
Disposals
At 30 June 2020
Depreciation
At 1 July 2019
Charge for the year
Impairments
Released on disposals
At 30 June 2020
Net book value
At 30 June 2020
At 30 June 2019
Freehold
land and
buildings
£’000
96,536
−
15,948
−
112,484
18,564
1,857
−
−
20,421
92,063
77,972
Plant and
equipment
£’000
183,326
384
5,169
(7,241)
181,638
124,041
13,833
1,130
(5,035)
133,969
47,669
59,285
Motor
vehicles
£’000
Assets in the
course of
construction
£’000
Total
£’000
293,133
16,718
−
(7,917)
301,934
145,969
16,220
1,130
(5,704)
157,615
8,758
16,219
(21,117)
−
3,860
−
−
−
−
−
3,860
8,758
144,319
147,164
4,513
115
−
(676)
3,952
3,364
530
−
(669)
3,225
727
1,149
At 30 June 2020, properties with a net book value of £83,200,000 (2019: £75,200,000) 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:
2020
£’000
10,452
5,767
16,219
2019
£’000
5,806
2,697
8,503
Internally
generated
development
costs
£’000
Software
licences and
intellectual
property
£’000
Goodwill
£’000
9,305
−
−
9,305
9,305
−
−
−
9,305
150,300
17,297
(5,199)
162,398
109,212
16,730
15,881
(1,037)
140,786
−
−
21,612
41,088
22,660
3,430
(866)
25,224
16,635
1,319
1,600
(89)
19,465
5,759
6,025
Total
£’000
182,265
20,727
(6,065)
196,927
135,152
18,049
17,481
(1,126)
169,556
27,371
47,113
Freehold land and buildings
Plant and equipment
C.29. Intangible assets
Year ended 30 June 2020
Cost
At 1 July 2019
Additions
Disposals
At 30 June 2020
Depreciation
At 1 July 2019
Charge for the year
Impairment
Disposals
At 30 June 2020
Net book value
At 30 June 2020
At 30 June 2019
142
Financial statementsRenishaw plc Annual Report 2020 2020
£’000
288,548
−
−
288,548
2019
£’000
290,362
186
(2,000)
288,548
2020
£’000
1,468
4,299
(2,768)
2,999
2019
£’000
1,468
–
–
1,468
Net
£’000
(9,171)
(2,494)
7,606
8,816
–
280
5,037
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
Impairment
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:
Property, plant and equipment
Intangible assets
Defined benefit pension scheme
Derivatives
Losses
Other
Balance at the end of the year
Assets
£’000
−
−
11,139
6,344
11,225
281
28,989
2020
Liabilities
£’000
(9,787)
(693)
−
−
−
−
(10,480)
Net
£’000
(9,787)
(693)
11,139
6,344
11,225
281
18,509
Assets
£’000
–
–
7,606
8,816
–
280
16,702
2019
Liabilities
£’000
(9,171)
(2,494)
–
–
–
–
(11,665)
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 £18,509,000 asset (2019: £5,037,000 asset) is
presented as a £18,509,000 deferred tax asset (2019: £5,037,000 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
2020
£’000
5,037
13,472
18,509
2020
£’000
24,257
17,934
18,122
60,313
2019
£’000
4,848
189
5,037
2019
£’000
25,947
22,652
20,336
68,935
143
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual Report 2020 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
2020
£’000
179
63,344
63,523
2020
£’000
1,681
2020
£’000
2,382
1,772
(2,472)
(700)
1,681
2019
£’000
400
55,579
55,979
2019
£’000
2,382
2019
£’000
2,900
2,324
(2,842)
(518)
2,382
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
2020
£’000
32,480
297
2,460
8,715
43,952
2019
£’000
47,927
177
3,350
14,830
66,284
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 £15,289,000 (2019: £15,769,000), of which £136,000 (2019: £205,000)
related to Directors. The latest full actuarial valuation of the scheme was carried out at 30 September 2018 and updated to
30 June 2020 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 2020
2.8%
1.5%
2.8%
2.2%
64
30 June 2019
3.3%
2.3%
3.4%
2.4%
64
30 June 2018
3.3%
2.8%
3.4%
2.4%
64
The mortality assumption adopted for 2020 is S2PMA and S2PFA tables, CMI (core) 2019 model with long-term improvements of
1% per annum.
The weighted average duration of the defined benefit scheme obligation is around 24 years.
144
Financial statementsRenishaw plc Annual Report 2020 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
2020
£’000
% of
total
assets
30 June
2019
£’000
% of
total
assets
101,676
52,286
7,637
1,341
162,940
(221,566)
(58,626)
11,139
62
32
5
1
100
104,098
50,337
1,721
2,536
158,692
− (203,431)
(44,739)
−
7,606
−
65
32
1
2
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 2020
Deficit in scheme at the beginning of the year
Contributions
Interest on pension scheme
Remeasurement loss
Benefits paid
Deficit in scheme at the end of the year
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
Assets
£’000
158,692
11,005
3,703
(4,031)
(6,429)
162,940
Assets
£’000
151,777
5,831
4,235
–
3,717
(6,868)
158,692
Liabilities
£’000
(203,431)
−
(4,605)
(19,959)
6,429
(221,566)
Liabilities
£’000
(212,656)
–
(4,987)
(751)
8,095
6,868
(203,431)
Total
£’000
(44,739)
11,005
(902)
(23,990)
−
(58,626)
Total
£’000
(60,879)
5,831
(752)
(751)
11,812
–
(44,739)
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
2020
£’000
2019
£’000
(656)
(20,951)
1,648
(4,031)
–
(23,990)
2,515
(20,911)
(5,009)
3,717
31,500
11,812
2020
£’000
14,558
2019
£’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.
145
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual Report 2020 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
2020
£’000
48
1,917
100
297
955
2019
£’000
78
2,808
200
177
1,250
Associate
2020
£’000
2019
£’000
−
−
−
−
–
1
–
–
2,500
6,144
All transactions were on an arm’s length basis. There were no bad debts relating to related parties written off during the year
(2019: £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
2020
£’000
5,357
2019
£’000
10,213
C.41. Subsidiary undertakings
The following are the subsidiary undertakings of Renishaw plc as at 30 June 2020, 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 87, except as indicated below:
D Dormant company
^ 31 December year end
H Holding company
† Ordinary-A shares
T Travel agency
‡ Ordinary-C shares
* 31 March year end
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.
Renishaw Neuro Solutions Limited
146
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
Wotton Road, Charfield, Wotton-under-Edge, Gloucestershire,
GL12 8SP
United Kingdom
Financial statementsRenishaw plc Annual Report 2020 C.41.Subsidiaryundertakings(continued)
Company
Registered Office
Owned by MTT Investments Limited
MTT Technologies LimitedD
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 (5.1% owned by Renishaw plc)
Renishaw Healthcare, Inc.
Renishaw Hungary Kft
Renishaw Ibérica S.A.U.
Renishaw K.K.
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, 115477, Moskva,
Russian Federation
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
Republic of 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, Cook County, Chicago IL 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
147
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual Report 2020 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.^ (0.001% owned by
Renishaw, Inc.)
Renishaw Oceania Pty Limited
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
Renishaw Oy
Renishaw S.A.S.
Renishaw S.p.A.
Renishaw s.r.o.
Renishaw Sp. z o.o.
Renishaw SRL (0.1% owned by Renishaw UK Sales
Limited)
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
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
Section A.2.13, 2nd Floor, Building A, Central Business Park,
Calea Șerban Vodă 133, București, 040205
Romania
Turgut Özal Blv. No:193, Şerifali Mahallesi, Dudullu Osb, Ümraniye,
İstanbul, 34775
Turkey
c/o The Corporation Trust Company, 1209 Orange Street -
Corporation Trust Center, New Castle County,
Wilmington DE 19801
United States
c/o C T Corporation System (Chicago), 208 South LaSalle Street,
Suite 814, Cook County, Chicago IL 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
148
Financial statementsRenishaw plc Annual Report 2020 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 SA
Owned by Renishaw Mayfield SA
Renishaw Mayfield SARL
Owned by Renishaw Medical Limited
Renishaw Medical AM Solutions LimitedD
c/o The Corporation Company, 40600 Ann Arbor Road East,
Suite 201, Plymouth, MI, 48170
United States
c/o The Corporation Trust Company, 1209 Orange Street -
Corporation Trust Center, New Castle County, Wilmington DE
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 2020. 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 87.
† Ordinary-A shares
^ 31 December year-end
Company
Owned by Renishaw plc
HiETA Technologies Limited^† (33.33%)
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
149
Strategic reportShareholder informationGovernanceFinancial statementsRenishaw plc Annual Report 2020 10 year financial record
Results
note
2020
£’000
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
Overseas revenue
482,784 539,915 580,940 509,212 404,472 469,221 331,682 326,213 313,007 273,989
UK and Ireland revenue
27,431
34,044
30,567
27,595
22,752
25,499
23,816
20,668
18,885
14,761
Total revenue
Operating profit
Profit before tax
Taxation
Profit for the year
Capital employed
Share capital
Share premium
Reserves
Total equity
Statistics
Overseas revenue
as a percentage of
total revenue
Adjusted earnings
per share
510,215 573,959 611,507 536,807 427,224 494,720 355,498 346,881 331,892 288,750
51,700
93,711 143,045 108,733
86,952 143,924
70,388
79,071
83,188
79,286
48,614 103,862 145,081 109,079
87,475 144,196
70,106
79,193
86,046
80,410
11,547
37,067
16,557
20,942
12,819
14,880
22,850
10,720
15,046
17,008
16,345
87,305 124,139
96,260
72,595 121,346
59,386
64,147
69,038
64,065
2020
£’000
2019
£’000
2018
£’000
2017
£’000
2016
£’000
2015
£’000
2014
£’000
2013
£’000
2012
£’000
2011
£’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
532,264 568,677 533,994 429,214 366,785 413,918 336,163 262,119 227,799 187,118
546,864 583,277 548,594 443,814 381,385 428,518 350,763 276,719 242,399 201,718
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
94.6% 94.1% 95.0% 94.9% 94.7% 94.8% 93.3% 94.0% 94.3% 94.9%
Proposed dividend
0.0p
60.0p
60.0p
52.0p
48.0p
46.5p
51.0p
119.9p
170.5p
132.4p
100.4p
167.5p
82.3p
41.2p
88.9p
40.0p
95.6p
38.5p
88.5p
35.0p
Note
The results and adjusted earnings per share for the years 2011, 2013, 2014, 2016, 2017, 2018, 2019, and 2020 exclude certain items. These were: 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), 2019 (£6.1m pre tax gain) and 2020 (£21.6m pre tax loss) – gains and
losses from financial instruments not effective for cash flow hedging, and 2020 – restructuring costs (£23.8m). No years prior to 2016 have been adjusted for gains
and/or losses from financial instruments not effective for cash flow hedging.
150
Renishaw plc Annual Report 2020Shareholder information Additional information
Organisations which received significant charitable donations over
£2,000 in 2019/20
• Sassoon General Hospital, India
• Jeevan Jyot Mandal, India
• Pune Marathi Garanthalay, India
• Zilla Parishad School Mahalunge, India
• Apal Ghar, India
• Indian Herpetological Societies’ Wild Animal Rescue
& Rehabilitation Center, India
• Namdeorao Mohol Vidya & Krida Pratishthan, India
• Abhijat Education Society, India
• Zilla Parishad School Sangawade, India
• Hinjewadi Police Station, India
• Gloucestershire Arthritis Trust, UK
• Children in Need 2019, UK
• Age UK
• King Edward Memorial (KEM) Hospital, India
• Janakalyan Rakta Pedhi (blood bank), India
Task Force on Climate-related Financial Disclosures
Renishaw continues to be committed to implementing the
recommendations of the Task Force on Climate-related
Financial Disclosures (TCFD).
We recognise climate change as one of the biggest threats
the world faces, and one which could pose challenges
and opportunities 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 them and assists in our efforts to
mitigate them.
This is our second disclosure to address the TCFD
recommendations and we expect this to develop and evolve
over time.
Governance
The Board has appointed Allen Roberts, Group Finance
Director, as the Director responsible for CR. Allen, has
in turn, appointed Ben Goodare, Head of Corporate
Responsibility to chair the CR Committee. This Committee
is responsible for managing our impact 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 CR Committee has overall responsibility for CR strategy
within the Group. We are committed to achieving net zero
carbon emissions by 2050 at the latest and are investigating
options to allow us to do this sooner.
We are starting to look at the carbon impact of our products
both in manufacture and in use, and are hoping to have
completed our first life cycle assessment within the next
reporting period, which will allow us to begin quantifying
improvements in the design of next generation machinery.
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 26 to 28.
Metrics and targets
We have reduced our operational emissions from 2014/15
levels by 63% 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 continue to move our purchased electricity
to 100% from renewable sources and have invested heavily
in solar PV at sites across the UK, our Indian manufacturing
site and other sites like Turin, Italy and Michigan, USA.
More details on climate change metrics and targets are
disclosed on pages 17, 46 and 47.
151
Renishaw plc Annual Report 2020Strategic reportGovernanceFinancial statementsShareholder information 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 2
Purchased heat
Location-based
Electricity
Total Scope 2 (tCO2e)
Market-based
Electricityg
Total Scope 2 (tCO2e)
2020e
2019a, c
2018a
2017a
2016a
771.69
2,286.45
35.56
279.03
274.92
73.37
3,647.65
752.71
2,694.60
37.99
220.80
353.92
75.98
4,060.02
845.05
2,463.30
34.95
188.00
206.42
49.76
3,737.72
886.30
2,241.78
28.67
231.48
266.00
78.21
3,654.23
771.82
2,492.30
26.38
234.00
305.73
60.85
3,830.24
11.19
5.98
13.29
4.50
19.88
10,272.67
10,283.86
11,991.00
11,996.98
14,307.00b
14,320.29
15,746.08
15,750.57
17,003.42
17,023.30
3,883.33
3,894.52
4,091.00
4,096.98
8,053.00b
8,066.29
13,016.00b
13,020.50
21,329.12b
21,349.01
Total statutory GHG emissionsd, f (tCO2e)
market-based
Normalised statutory GHG emissions by revenue
(market-based tCO2e/£m)
7,542.18
8,157.00
11,804.00
16,674.73
25,179.25
14.78
14.21
19.30
31.06
58.94
Scope 3
Business travel
Product distribution
Raw material purchasei
Waste
Post and communicationsj
WTT and T&D totalh
Out of scope (bio-fuel blend)
Total significant scope 3 (tCO2e)
Total GHG emissionsf (tCO2e) market-based
Normalised total GHG emissions by revenue
(market-based tCO2e/£m)
2,491.02
8,100.76
1,333.92
63.63
918.06
3,885.96
10.06
16,793.35
3,927.08
11,191.63
2,265.05
78.09
1,067.77
4,454.25
3.99
22,983.88
3,246.61
14,313.13
1,492.79
71.00
857.33
4,706.69
3.57
24,687.55
2,638.79
11,048.65
1,517.53
67.40
773.11
4,964.78
3.99
21,010.26
4,717.04
9,534.18
1,260.40
73.20
774.00
5,352.59
29.49
21,711.41
24,335.52
31,140.88
36,491.55
37,684.99
46,890.65
47.70
54.25
59.68
70.20
109.76
a thinkstep was engaged to provide independent limited assurance over the greenhouse gas emissions data from the years 2015/16, 2016/17, 2017/18 and
2018/19. 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 Location-based electricity has been restated for 2017/18 and market-based for 2015/16, 2016/17 and 2017/18 due to an error discovered in the use of
conversion factors in previous reports.
c 2018/19 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 e.
d Statutory emissions are Scope 1 and 2 as required by the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013.
e 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 material difference is seen.
f 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.
g 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.
h Well to Tank and Transmission and Distribution losses total use location-based conversion factors for calculations.
i Raw material purchase figures are based on metal purchased by weight in the UK and office paper purchased across the UK. We are exploring how to increase
the scope of this data to include other raw materials.
j This is based on post and communications used within the UK and we are exploring how to increase the scope of this data to overseas operations in the future.
152
Renishaw plc Annual Report 2020Shareholder information 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 emissions sources were excluded from
Renishaw’s reported emissions (e.g. small Group sales
offices). This had no material impact on the overall
emissions profile.
Independence
This is the fifth year that thinkstep has undertaken a
verification and provided an opinion statement with regard
to Renishaw’s scope 1 and scope 2 GHG emissions data.
The thinkstep 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 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
ending 30 June 2019 (1 July 2018 – 30 June 2019).
The reviewed GHG data includes all scope 1 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 ISO14064-3.
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; is not a fair representation of Renishaw’s
GHG data and information; and has not been prepared in
accordance with the GHG Protocol. The assurance results
were as follows:
Scope 1 emissions: 4,060.02 tonnes CO2-equivalent
Scope 2 emissions – Location-Based: 11,996.98 tonnes
CO2-equivalent
Scope 2 emissions – Market-Based: 4,096.98 tonnes
CO2-equivalent.
153
Renishaw plc Annual Report 2020Strategic reportGovernanceFinancial statementsShareholder information Additional information continued
Glossary
AFM
AGM
AM
APAC
APMs
Brexit
Governance
Code
– atomic force microscopy
– Annual General Meeting
– additive manufacturing (3D printing)
– Asia Pacific
– alternative performance measures
– UK exit from the EU
– UK Corporate Governance Code 2018
the Code
– Group Business Code
Company
– Renishaw plc
CAD
CMM
CNC
CPI
CR
CRM
DEFRA
DTR
EBT
EMEA
EPS
ERP
EU
EUR
EY
FCA
FRC
FX
GBP
GDNF
GHG
Group
H&S
HKD
HR
IEA
IFRS
IPCC
– computer aided design
– co-ordinate measuring machine
– computer numerically controlled
– consumer price index
– corporate responsibility
– customer relationship management
– Department for Environment, Food &
Rural Affairs
– the FCA’s Disclosure Guidance and
Transparency Rules
– Employee Benefit Trust
– Europe, Middle East and Africa
– earnings per share
– enterprise resource planning
– European Union
– Euro
– Ernst & Young LLP
– Financial Conduct Authority
– Financial Reporting Council
– foreign exchange
– Great British Pound or Pound Sterling
– Glial Cell Line-Derived Neurotrophic Factor
– greenhouse gas
– Renishaw plc and its subsidiaries
– health and safety
– Hong Kong Dollar
– human resources
– International Energy Agency
– International Financial
Reporting Standards
– Intergovernmental Panel on
Climate Change
KPI(s)
– key performance indicator(s)
kW
kWh
– kilowatt – an amount of power equal to
1,000 watts
– kilowatt hour – an amount of energy
equivalent to delivering 1 kW of power for
an hour
LIBOR
– London inter-bank offered rate
LR
M&A
MRO
NCI
OCI
P&L
PBT
PV
RIS
R&D
RCC
RIDDOR
Scope 1
Scope 2
Scope 3
SEEG
SEM
STEM
tCO2e
TCFD
– the FCA’s Listing Rules
– mergers and acquisitions
– maintenance, repair and overhaul
– non-controlling interest
– other comprehensive income
– profit and loss account
– profit before tax
– photovoltaic
– Regulatory Information Service
– research and development
– Renishaw Charities Committee
– Reporting of Injuries, Diseases and
Dangerous Occurrences Regulations 2013
– 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
– GHG emissions from the generation
of purchased electricity consumed by
the company
– Indirect GHG emissions are a
consequence of the activities of the
company, but occur from sources not
owned or controlled by the company
– stereoelectroencephalography
– scanning electron microscopy
– science, technology, engineering
and mathematics
– tonnes of carbon dioxide equivalent
– Task Force on Climate-related
Financial Disclosures
thinkstep
– thinkstep ltd
TPR
TSR –
UK
– The Pensions Regulator
– total shareholder return, calculated
as change in share price, assuming
dividends are immediately reinvested
– The United Kingdom of Great Britain and
Northern Ireland
USD/US$
– United States Dollar
USA
– United States of America
Trade marks
The following registered and unregistered trade marks, which are owned by Renishaw plc and its subsidiaries, appear
throughout this Annual Report.
ATOM DX™
inVia™
neurolocate™
neuromate®
REVO®
VirsaTM
154
Renishaw plc Annual Report 2020Shareholder information Shareholder information
Ordinary shares
The Company has one class of ordinary 20p shares listed
on the London Stock Exchange under code RSW, ISIN
number GB0007323586.
Registrars
For all enquiries about shareholders’ holdings, transfer and
registration of shares and changes of name and address,
contact the Company’s registrars, Equiniti Limited:
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 9:00am to 5:00pm
(UK time), Monday to Friday (excluding English and Welsh
public holidays).
AGM
The 2020 AGM will be convened electronically in
accordance with the provisions of the Corporate Insolvency
and Governance Act 2020 on Wednesday 30 September
2020 at 12 noon. The Notice of Meeting is set out in a
separate circular to shareholders. This year’s AGM will be
a closed meeting and shareholders will not be permitted
to attend. However, shareholders will be able to submit
questions prior to the meeting and are encouraged to vote
by proxy either electronically or by post. Further details are
set out in the Notice of 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.
Electronic communications
All shareholder communications, including the Company’s
Annual Report, are made available on the Renishaw website
and you may opt to receive email notifications informing
you when shareholder communications are available to
view and download rather than receiving paper copies
through the post. Receiving communications electronically
provides certain advantages to shareholders and Renishaw,
including accessing documents more quickly, reduce our
environmental impact and reducing the cost of printing and
delivery of documents. If you would like to sign up for this
service, visit Equiniti’s Shareview Portfolio website. You may
change the way you receive communications at any time by
contacting Equiniti.
Dividend mandate
Shareholders can arrange to have their dividends paid
directly into their bank or building society account by
completing a bank mandate form. This is the most secure
and efficient method of payment. A mandate form can
be obtained from Equiniti or you will find one on your last
dividend confirmation.
Financial calendar
Annual General Meeting
30 September 2020
Half year
31 December 2020
Half-year results
February 2021
Trading update
May 2021
Interim dividend (provisional)
April 2021
Registration details and Company Secretary
General Counsel & Company Secretary
Jacqueline Conway
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
155
Renishaw plc Annual Report 2020Strategic reportGovernanceFinancial statementsShareholder information
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
%
1.49
2.64
2.12
3.90
5 100,001 – 500,000
14.46
6 500,001 – 1,000,000
7.31
7 1,000,001 – 3,000,000 12.06
8 more than 3,000,000 56.02
Shareholdings
1 Directors
2 Individuals
3 Institutions
%
52.98
1.15
45.87
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;
2
1
• check they are properly authorised by the FCA before
getting involved by visiting www.fca.org.uk/firms/financial-
services-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-us.
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.
156
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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