Source - LSE Regulatory
RNS Number : 8551M
Renishaw PLC
19 September 2023
 

Renishaw plc        

 

 

19 September 2023

 

Preliminary announcement of results for the year ended 30 June 2023

 

 

Solid performance in challenging markets

 

 

 

2023

 

 

2022

 

 

Change

Revenue (£m)

688.6

671.1

                  +3%

 

 



Adjusted1 profit before tax (£m)

141.0

163.7

-14%

 

 



Adjusted1 earnings per share (pence)

155.1

185.5

-16%

 

 



Dividend per share (pence)

76.2

72.6

+5%

 

 



Statutory profit before tax (£m)

145.1

145.6

-

 

 



Statutory earnings per share (pence)

159.7

165.4

-3%

 

 

Performance highlights

 

·    Revenue of £688.6m (FY2022 £671.1m):

•       Revenue growth in challenging trading conditions, although 1% lower at constant exchange rates; and

•       Good revenue growth from system sales, offset by weaker demand from the semiconductor sector.

·    Manufacturing technologies revenue increased by 2% to £648.2m, with: 

•       Good growth in sales of multi-laser additive manufacturing (AM) systems, 5-axis co-ordinate measuring machine (CMM) inspection systems, laser encoders and machine calibration systems; and

•       Weaker demand for optical encoders, notably in APAC, due to lower investment in the semiconductor sector.

·    Analytical instruments and medical devices revenue increased by 10% to £40.3m, with:

•       Record sales for our Spectroscopy product line, with strong growth across all our regions; and

•       Growth for our Neurological product line, with renewed growth in robot sales.

·    Adjusted* profit before tax of £141.0m (FY2022 £163.7m), with return on sales reduced to 20% (24% last year).

•       1% reduction in gross margin before engineering costs: employee pay inflation and reduction in production volumes (leading to a lower recovery of fixed overheads), partially offset by currency and price increases; and

•       Engineering, distribution and administration costs up 12%: targeted recruitment, plus investment in employee pay in all areas to improve employee retention, and other inflationary pressures.

·    Statutory profit before tax of £145.1m (FY2022: £145.6m).

·    Strong balance sheet with net cash and bank deposit balances of £206.4m, compared with £253.2m at 30 June 2022:

•       Invested £73.8m (FY2022: £30.8m) in capital expenditure, including ongoing development of our production facility in Miskin, Wales

·    Final dividend of 59.4p per share.

 


* Note 29, '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 progress

·    A number of new product launches including a new radio transmission system for our machine tool probes, a scanning electron microscope interface for our Raman spectrometers, and a smart factory software platform to consolidate shop floor measurement data.

·    Introduced our new Industrial Automation product line to enhance the accuracy and productivity of industrial robots, applying our proven technology and knowledge to a close adjacent market that is experiencing strong underlying growth.

·    In shop-floor metrology, we achieved good growth in end user sales of our AGILITY® co-ordinate measuring machines equipped with REVO® 5-axis systems, and we've also seen increased sales of our EQUATOR™ flexible gauges for electric vehicle manufacturing applications.

·    A significant number of machine tool builders have now evaluated our FORTiS™ enclosed optical encoders with a growing number of early adopters fitting them to machines being produced in volume.

·    Growth in repeat sales of our multi-laser AM machines to the medical and consumer electronics sectors.

·    Rising sales of our Virsa™ Raman analyser which takes research-grade materials analysis out of the lab and into sampling applications in-situ, including solar cell analysis and cultural heritage.

·    Upgraded our machine tools and expanded our automated encoder assembly systems to enable us to rapidly ramp production up and down to track cyclical demand.

·    Good progress on our largest ever capital expenditure project at Miskin, where we are increasing manufacturing floorspace by 50% in a phased manner.

·    Committed to a new Net Zero target with an aim to achieve a 50% reduction in our Scope 3 emissions by 2030.

 

William Lee, Chief Executive, commented:

"In challenging trading conditions, our performance demonstrates the resilience of our business model, and the hard work and dedication of our teams around the world. In a year when we saw a downturn in demand from one of our key sectors, we achieved good growth in systems sales, which is an area of strategic priority.

We have seen a steady start to FY2024 and our order book remains solid. We continue to see positive trends for investment in low emission transportation, defence, additive manufacturing and robotics. Meanwhile, demand from semiconductor equipment suppliers for position encoders remains subdued. While the short-term macroeconomic picture remains unclear, we continue to manage costs prudently, we are implementing further price rises, and remain focused on improving our productivity.

I'm confident in our strategy and the actions we're taking to deliver sustainable long-term growth, including investments in people, infrastructure and product innovation."

 

 

About Renishaw

 

We are a world leading supplier of measuring and manufacturing systems. Our products give high accuracy and precision, gathering data to provide customers and end users with traceability and confidence in what they're making. This technology also helps our customers to innovate their products and processes. We are a global business, with customer-facing locations across our three sales regions; the Americas, EMEA, and APAC. Most of our R&D work takes place in the UK, with our largest manufacturing sites located in the UK, Ireland and India.

 

Results presentation and live Q&A session today

 

See below a video presentation of these results, presented by William Lee, Chief Executive, and Allen Roberts, Group Finance Director. There will be a live audio-only question and answer session with William and Allen at 10:30 BST today. Details of how to register for and access this webcast are available at the following link:

https://attendee.gotowebinar.com/register/3038498618137830494

Questions can be submitted in advance of the webcast either through the webcast platform or to communications@renishaw.com (if sending by email, please submit by 10:00 BST).

A recording of the Q&A session will be made available by Wednesday 20 September 2023 at: www.renishaw.com/investors.

 

Enquiries: communications@renishaw.com

 







COMMENTARY BY THE CHAIRMAN

 

It's a pleasure for me to use this opportunity to thank every one of our talented and inspiring people who have helped to make our business what it is today.

 

Since co-founding Renishaw in 1973 with John Deer, I continue to be immensely proud of how far we have come. From the early days of production taking place in John's family home (with dust seals made from the underlay of my carpets!), we have grown into a truly global and respected business.

 

We've been pioneers and innovators on behalf of our customers throughout our 50 years. To play a part in this and to transform the capabilities of manufacturing - making the products, creating the materials and developing the therapies that are going to be needed for the future - is a true honour.

 

This has been a year of celebration for the Board and me, and it has also been a year of revenue growth despite challenging market conditions. Throughout FY2023 we have continued to build upon our strategy and deliver our purpose of Transforming Tomorrow Together.

 

The Board, like our people, embodies our values of innovation, inspiration, integrity and involvement. As we continue to grow, it's important that we stay true to the principles that have ensured our success over the past 50 years.

 

50 years of innovation

 

Innovation has always been central to what we do. Our products have revolutionised component manufacturing and scientific research, helping to make the high-performing, precision products that we all use in our daily lives.

 

Each year we launch new products, and this year has been no different. We've released innovative new products for smart factories and robot metrology and introduced new technologies to strengthen our established product ranges.

 

I am a passionate engineer, and it's a privilege to continue working on product developments that will transform our customers' capabilities. This year, I have worked closely with our Additive Manufacturing (AM) team on our next-generation machine. To be involved in, and directly witness, the technological advancements our engineers make, means everyday is very exciting.

 

Inspiring each other, our customers and our communities

 

Last year, I talked about how embedding and communicating our values are of particular importance to the Board.

 

To demonstrate that importance, we launched a new annual global values competition this year to encourage employees to share ways in which they have exemplified our values through their work.

 

The competition was a great success, and I was delighted to review the entries from across the business with my fellow Executive Directors. As part of the contest, each winning team chose a charity to receive a £5,000 (or local currency equivalent) donation. So, through our values, we also aim to inspire our local communities by making a difference to people's lives.

 

We want to share our success with the communities where we operate, who have been highly supportive of our growth. Therefore, as part of our anniversary celebrations, the Board was delighted to approve a '50 at 50' charity initiative. During our 50th year, we will donate £150,000 to 50 not-for-profit organisations in our local communities.

 

Integrity is at the heart of what we do

 

Our ambition to be more sustainable is testament to how we put integrity at the heart of our business. It is also central to our purpose as we work closely with our customers to help them on their own sustainability journeys and are focused on promoting the sustainability benefits that our products offer. For example, as I have seen first-hand in my work with the AM team, this technology has the potential to reduce energy and material consumption compared to traditional subtractive manufacturing.

 

We are also playing our part in creating a sustainable future. This year we have made excellent progress in reducing our environmental impact.

 

We expect our employees to always act with integrity. To support this, we are currently working on our new Code of Conduct which we will launch globally in FY2024. This will apply to our employees, customers and suppliers. It will provide guidance on decision-making and behaviours and bring all our key policies and compliance expectations together in one place.

 

This year we held an externally-facilitated Board evaluation which highlighted that the Board is working effectively. It found that meetings were conducted with a good dynamic, facilitating challenge but also encouraging the effective contribution of the whole Board. It also highlighted our culture of trust, openness and debate.

 

Following feedback from investors, including at our Capital Markets Day, the Board has also this year reviewed our approach to investor relations, and we will be looking at how we can increase engagement with investors over the next year.

 

Involvement of all our people is key to success

 

Equality, Diversity and Inclusion (EDI) remains an important area of focus for the Board. We pride ourselves on our open and collaborative culture. This year, we were pleased to appoint a dedicated EDI Lead, who will be instrumental in the development of our global approach to EDI. This will help us provide an inclusive, rewarding environment for all our people.

 

I am delighted to welcome Professor Karen Holford CBE to the Board as a Non-executive Director with effect from 1 September 2023. Karen brings extensive experience with her strong background in engineering research and development. A Fellow of the Royal Academy of Engineering, Karen received a CBE for services to engineering and the advancement of women in engineering in 2017, and her appointment also enhances the diversity of views we have on the Board.

 

We acknowledge that we still have a way to go as a business. In appointing Directors, the Board considers diversity at all stages of the process while being mindful that the right person for the long-term success of the Company should be appointed. The Nomination Committee continues to take diversity in all its forms into consideration when considering Board succession plans in FY2024.

 

To improve involvement across the business, we also reorganised our existing product groups during the year. We believe this will bring synergies between teams and technologies and simplify reporting to the Board. We are also currently reviewing succession plans throughout the business.

 

Celebrating 50 years

 

Our anniversary year has given us a wonderful opportunity to celebrate. Throughout 2023, employees across the world have taken part in local events and activities to mark the occasion. From dressing up in 1970s clothing to family open days, it's been fantastic to see our people come together and celebrate.

 

This year also marked the anniversary of the opening of several of our global subsidiaries including China, who are celebrating 30 years in the market, and Austria, Canada, Hungary, Israel and Sweden which are each marking 20 years.

 

It's been wonderful to reflect on and celebrate our success, but we wouldn't be where we are today without our customers, suppliers and other stakeholders. We've had close relationships with many of them for most of our history and they continue to support us today.

 

We've achieved a great deal over 50 years. I would like to thank everyone who has been a part of Renishaw's story and I'm proud of the difference we continue to make to the world.

 

It's important to look back and mark these milestones, but we have always been focused on the future. So, as we move into our sixth decade, I am eager to see what Renishaw and our customers will accomplish next.

 

 

 

Sir David McMurtry

Executive Chairman

18 September 2023

 

 

 

 

 

COMMENTARY BY THE CHIEF EXECUTIVE

 

I'm pleased to look back on a year in which we've made further progress, as we continue to fulfil our purpose, execute our strategy, and invest in our long-term success. We've achieved 3% revenue growth at actual exchange rates, although this was a 1% reduction at constant currency.

 

We delivered good growth in systems sales, one of our strategic priority areas, which was offset by weaker demand for optical encoders from the semiconductor sector. Our performance demonstrates the resilience of our business model, our excellent position in attractive markets, and the hard work and dedication of our teams around the world.

 

Our purpose of Transforming Tomorrow Together remains central to everything that we do. We continue to work closely with our customers, helping them to create the products, materials and therapies of the future. We play a leading role in the transition towards a sustainable future in which manufacturing processes are increasingly efficient, automated and self-governing.

 

Group performance

 

Total revenue this year was £688.6m, compared with £671.1m in FY2022, with both our operating segments delivering growth. While this is record revenue for the Group, at constant currency rates our revenue was 1% lower than last year. At actual currency rates we had growth in the EMEA and Americas regions but saw a small reduction in the APAC region. We introduced targeted price increases in H1 FY2023 which have contributed to the revenue growth.

 

Our Manufacturing technologies segment delivered 2.2% revenue growth. There were notable advances for our REVO 5-axis co-ordinate measuring machine (CMM) inspection systems, additive manufacturing (AM) machines, and machine calibration solutions. By contrast, we have seen lower capital investment in the key semiconductor market this year. This has reduced demand for our open optical encoders, most notably in the APAC region.

 

Meanwhile, our Analytical instruments and medical devices segment delivered 10.5% revenue growth. Our Spectroscopy product line achieved record revenue, with growing research and industrial applications for Raman spectroscopy, while our Neurological product line also grew.

 

This year's Adjusted* profit before tax was £141.0m compared with £163.7m last year. Adjusted* earnings per share was 155.1p compared with 185.5p last year. Adjusted measures are the ones we use as a Board to measure our underlying trading performance. Statutory profit before tax was £145.1m compared with £145.6m last year, leading to Statutory earnings per share of 159.7p compared with 165.4p last year.

 

Profits fell this year due to a combination of modest revenue growth and inflationary increases in our labour costs and expenses. For more detail see the commentary by the Group Finance Director.

 

Strategic progress

 

Innovation has always been the lifeblood of our business, and we continue to focus on developing new solutions for emerging customer needs. We have grown our R&D teams, and increased total engineering expenditure by 14.8%. This year, we've introduced new products to strengthen our market-leading product ranges. These include the RMI-QE machine tool radio transmission system, and inLux scanning electron microscope interface for our Raman spectrometers. We have a strong pipeline of significant new products under development, which we will introduce over the next few years.

 

The use of industrial robots is accelerating as manufacturers automate work handling, fabrication, and assembly operations. This year, we launched our new Industrial Automation product line to enhance the accuracy and productivity of industrial robots. Our new products enable rapid robot cell installation, and reduce the time taken to recover from unplanned stoppages from several days to just a few minutes. We can also compensate for errors in a robot's motion. This improves positioning accuracy so that robots can be used for higher precision tasks. We are excited about our prospects in this high-growth market.

 

Over the years we've pioneered in-process control of machining processes, helping manufacturers to minimise waste and boost productivity. We are now taking this a step further with Renishaw Central, our new smart factory software platform. Central consolidates actionable data from almost any shop-floor metrology device, enabling fast, robust process control feedback. This means we can help customers improve process outcomes, rather than simply monitoring them. We believe this is a major step towards autonomous manufacturing.

 

Our global sales and marketing teams support our customers' success around the world. Our metrology probes and position encoders are primarily sold via machine builders and distributors, and our priority here is to boost fitment levels and gain market share. For example, our open optical encoders are being designed into a wide range of manufacturing equipment in the automotive, semiconductor, robotics, and automation sectors. Meanwhile, more than 100 machine tool builders have evaluated our FORTiS enclosed optical encoders and a growing number of early adopters are fitting them to machines being produced in volume.

 

We also supply complete machines and software, mostly sold direct to end users, and serviced by our global teams. We have significant opportunities to gain market share in substantial, high-growth markets, so our priority is to grow these products towards market leadership positions.

 

Shop-floor metrology systems are a key growth area for us. We've been particularly successful this year with our AGILITY CMMs equipped with REVO 5-axis systems, where we have gained repeat sales from key customers in the automotive, aerospace and consumer electronics sectors. Our unique combination of rapid scanning and multi-sensor measurement, including optical and ultrasonic sensors, enables complete inspection in a single automated process. We've also increased sales of Equator flexible gauges for electric vehicle (EV) applications.

 

It's been a similar story for our RenAM family of multi-laser AM machines this year, with growth of repeat sales to the medical and consumer electronics sectors. Meanwhile, our Spectroscopy business has seen rising sales of the Virsa Raman analyser, which takes research-grade materials analysis out of the lab and onto the factory floor.

 

Our in-house manufacturing is also critical to our success, giving us the flexibility to meet changing demands, while maintaining our exacting standards. The current inflationary environment makes it essential that we improve our productivity, so we can absorb higher costs while remaining price competitive. We continue to upgrade our machine tools and expand our automated encoder assembly systems, which will enable us to rapidly ramp production up and down to track cyclical demand. We've also been running Renishaw Central in our machine shops over the last year, reducing our own unplanned stoppages and batch changeover times.

 

Meanwhile, we are making our biggest ever capital investment. We are progressing well with building works at our site in Miskin, Wales, that will, in a phased manner, increase our manufacturing floorspace by 50%, giving us room to grow in the years ahead.

 

Sustainability

 

Sustainability is at the heart of our purpose, and we are committed to making our entire business Net Zero by no later than 2050. We've made good progress on our plan, reducing greenhouse gas (GHG) emissions relating to our own operations and purchased energy, by 21% in FY2023.

 

A major focus this year has been our work towards fully quantifying the emissions relating to our supply chain and the distribution and use of our products, known as Scope 3 emissions. We estimate that these accounted for 97% of our total carbon emissions in our baseline year (FY2020). We are targeting a 50% reduction in these emissions by 2030, and will publish our full climate transition plan next year.

 

People

 

Sir David has already acknowledged the tremendous contribution our employees have made this year and throughout the past 50 years. I'd also like to add my own thanks for everything they've done to drive us forward towards our vision to innovate and transform the capabilities of our customers.

 

To pursue our purpose of Transforming Tomorrow Together, we need to attract and develop outstanding people. We are focused on modernising our approach to pay and reward, improving our performance reviews, and supporting career development to help our people fulfil their potential. We've increased our average pay by around 10.2% in FY2023 compared to FY2022, excluding other factors, such as headcount growth. Our global voluntary turnover rate has fallen from 10.7% to 6.8% this year.

 

We've responded to slowing customer demand for our optical encoders this year by reducing direct manufacturing headcount through non-replacement of leavers. We continue to take a long-term view for success, and our early careers programmes provide a vital pipeline of new talent to maintain and grow our teams. As of 30 June 2023, we employ 343 apprentices and graduates and in FY2023 we took on 45 industrial placement students.

 

Outlook

 

FY2023 has seen mixed conditions for our markets. Demand for most of our product lines has risen, with good growth in systems sales, but the semiconductor equipment sector has been notably weaker this year.

 

We have seen a steady start to FY2024 and our order book remains solid. We continue to see positive trends for investment in low emission transportation, defence, additive manufacturing and robotics. Meanwhile, demand from semiconductor equipment suppliers for position encoders remains subdued. While the short-term macroeconomic picture remains unclear, we continue to manage costs prudently, we are implementing further price rises, and remain focused on improving our productivity.

 

I'm confident in our strategy and the actions we're taking to deliver sustainable long-term growth, including our investments in people, infrastructure and product innovation.

 

 

Will Lee

Chief Executive

18 September 2023

 

* Note 29, Alternative performance measures, defines how Adjusted profit before tax and Adjusted earnings per share are measured.




COMMENTARY BY THE GROUP FINANCE DIRECTOR

 

We have achieved revenue for the year of £688.6m, compared with £671.1m last year. However, revenue at constant exchange rates* was £662.8m, a reduction of 1% from last year. The weakening of the semiconductor market during the year has resulted in challenging trading conditions, however we have seen good growth in our systems sales.

 

We have made significant investments in our production infrastructure and our people during the year. We continue to be in a strong financial position, with cash and cash equivalents and bank deposit balances of £206.4m at 30 June 2023 (30 June 2022: £253.2m).

 

Revenue analysis

 

Manufacturing technologies revenue grew by 2.2% to £648.2m this year at actual rates. Our optical encoder revenue has fallen, mainly due to lower demand from the semiconductor market, notably in the APAC region. However, we are pleased that this has been largely offset by good growth in sales of our multi-laser AM systems, machine calibration systems, laser encoder systems, and CMM inspection systems.

 

Revenue from our Analytical instruments and medical devices segment grew by 10.5% to £40.3m this year, with record revenue for our Spectroscopy products. We also saw growth in our Neurological business.

 

The below table shows revenue by geographic region.


2023
revenue
at actual
exchange
rates
£m

Change
from
2022
%

2022
revenue
at actual
exchange
rates
£m

Underlying
change at
constant
exchange
rates
%

APAC

310.6

-2

317.0

-4

EMEA

216.5

+5

205.8

+3

Americas

161.5

+9

148.2

0

Total Group revenue

688.6

+3

671.1

-1

 

 

Operating costs

 

Our labour costs are our largest cost. We have taken a cautious approach to recruitment during the year and our headcount was 5,175 at 30 June 2023, compared with 5,097 at the end of June 2022. This growth includes continued investment in our early careers programmes.

 

We have carried out global salary benchmarking, which has helped improve employee retention. This, together with an increase in average headcount of 205, are the main drivers for total labour costs (excluding bonuses) increasing by 13% to £268.2m from £236.5m last year. Accordingly, our production, engineering, distribution and administrative costs have all increased. A reduction in performance bonuses of £6.6m has partially offset the total labour cost increases.

 

This year's gross margin (excluding engineering costs) was 64%, compared with 65% last year. This change is mostly due to a reduction in production volumes (leading to a lower recovery of fixed overheads) and the higher labour pay rates. We helped minimise the effect of these by introducing targeted price increases and not replacing leavers in our direct manufacturing teams.

 

We remain committed to our long-term strategy of delivering growth by developing innovative and patented products. To that end, we invested £72.5m in research and development expenditure, compared with £59.4m last year (see Note 4 to the Financial statements). We also incurred £28.1m (FY2022: £26.4m) of other engineering expenditure, to support existing products and technologies.

 

Travel and exhibition costs are higher this year as COVID-19-related restrictions have been lifted and we have been able to engage in more customer facing activity. In addition to the labour cost growth, this has increased our distribution costs by 12%.

 

We have also experienced inflationary increases across other cost categories, notably software licences, health insurance and professional fees.

 

 

Profit and tax

 

As a result of the increased costs in a year of modest revenue growth, Adjusted* profit before tax amounted to £141.0m, compared with a record £163.7m in FY2022. This is a reduction of 13.9%. Statutory profit before tax was £145.1m, compared with £145.6m in the previous year.

 

Sometimes infrequently occurring events can affect our financial statements, recognised according to applicable IFRSs. We exclude such events from adjusted performance measures to give the Board and other stakeholders another useful metric to understand and compare our underlying performance.

 

This year, the items we excluded from Adjusted profit before tax include: gains of £5.5m from forward contracts deemed ineffective for cash flow hedging (FY2022: £8.3m losses); a revised estimate of FY2020 restructuring provisions of £0.7m gain (FY2022: £1.7m gain); and a defined benefit (DB) pension scheme past service cost relating to termination of the US DB pension scheme totalling £2.1m. These have not affected cash flow during the financial year. Additional items excluded in the previous year are detailed in Note 29. The table below reconciles Adjusted profit before tax to Statutory profit before tax.

 

 


2023
£'000

2022
£'000

Adjusted profit before tax

140,983

163,742

Revised estimate of 2020 restructuring provisions

717

1,688

Third-party FSP (formal sale process) costs

-

200

US/UK DB pension scheme past service cost

(2,139)

(11,695)

Fair value gains/(losses) on financial instruments

5,504

(8,349)

Statutory profit before tax

145,065

145,586

 

 

Adjusted operating profit in our Manufacturing technologies segment was £125.5m, compared with £158.6m last year. Meanwhile, in our Analytical instruments and medical devices segment, Adjusted operating profit was £4.9m, compared with £2.8m last year.

 

Financial income for the year was £9.7m, compared with £0.9m last year, and includes a £5.5m increase in interest on bank deposits mainly due to higher interest rates.

 

The FY2023 effective tax rate has increased to 20.0% (FY2022: 17.3%) mostly as a result of a reduction in patent box tax incentives and an increase in the UK tax rate from 19% to 25%. Note 7 provides further analysis of the effective tax rate.

 

Consolidated balance sheet

 

We have invested £74.0m (FY2022: £31.0m) in capital expenditure, including production plant and equipment and the ongoing development of our production facility in Miskin, Wales.

 

Within working capital, we have increased our inventories to £185.8m from £162.5m at the beginning of the year. This is mainly a result of targeted increases in components and sub-assemblies for our optical encoder products following global supply chain shortages in previous years. Given the reduction in demand for optical encoders some of our components are currently overstocked. Now that supply chain challenges have eased, we have plans to reduce safety stock levels of critical components. However, we remain committed to our policy of holding sufficient finished goods to ensure customer delivery performance, given our short order book.

 

Trade receivables reduced from £127.6m to £123.4m due to lower levels of trading in the fourth quarter of FY2023 relative to the previous year. Debtor days remained constant year-on-year at 64 days. We continue to experience low levels of defaults, and hold a provision for expected credit losses at 0.4% of trade receivables (FY2022: 0.2%).

 

Total equity at the end of the year was £896.7m, compared with £815.2m at 30 June 2022. This is primarily a result of profit for the year of £116.1m, offset by dividends paid of £53.4m.

 

Cash and liquidity

 

We continue to have a strong liquidity position, with cash and cash equivalents, and bank deposit balances at 30 June 2023 of £206.4m (30 June 2022: £253.2m). This is a result of our trading performance, offset by our previously noted capital investments and working capital movements, and dividends paid of £53.4m.

 

We disclose details of 'severe but plausible' scenario forecasts used in our going concern and viability assessments in note 1 and conclude that we have a reasonable expectation that we will retain a liquid position and be able to continue in operation for at least the next three years.

 

Pensions

 

At the end of the year, our DB pension schemes, now closed for future accrual, showed a net surplus of £57.4m, compared with £42.2m at 30 June 2022.

 

In October 2022, following a significant improvement in the UK scheme's funding position due to rising gilt yields, the Trustees (in consultation with the Company) de-risked the investment strategy by disinvesting from the scheme's equity and diversified growth holdings and investing the proceeds into index-linked gilts. The overall impact of these changes is to reduce investment risk, with the assets better matching the expected movements in the liabilities. We now believe the scheme is fully funded and are in the process of seeking to insure the liabilities.

 

During the year, pension schemes' liabilities decreased from £174.5m to £139.0m, on an IAS 19 basis, primarily reflecting the increase in the UK scheme discount rate from 3.6% to 5.1%.

 

Our DB pension schemes' assets at 30 June 2023 decreased to £196.3m from £216.7m at 30 June 2022, with UK asset values falling (in line with expectations) given the liability matching approach.

 

A termination of the US DB pension scheme was formally commenced during the year. The Trustees of the scheme and Renishaw Inc agreed that the surplus will be distributed to the members of the scheme, resulting in a change to members' benefits. Accordingly, this change has resulted in a charge of £2.1m to the Consolidated income statement, which has been excluded from Adjusted profit before tax.

 

See Note 23 for further details on employee benefits.

 

Treasury policies

 

Our treasury policies are designed to manage the financial risks that arise from operating in multiple foreign currencies. The majority of sales are made in these currencies, while most manufacturing and engineering is carried out in the UK, Ireland and India.

 

We use 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 our Euro, US Dollar and Japanese Yen cash inflows, and to offset movements on Renishaw plc's Euro, US Dollar and Japanese Yen intercompany balances. We do not speculate with derivative financial instruments.

 

Our treasury policies are also designed to maximise interest income on our cash and bank deposits and to ensure that appropriate funding arrangements are available for each of our companies.

 

Sustainability

 

With our Sustainability team doing more work this year to better understand the risks and opportunities of climate change, we have reviewed the effect on our financial statements and financial planning. Our five-year financial plan includes estimates of the capital expenditure needed in this period to help deliver our own Net Zero plans. We have also considered the potential impact on topics such as the expected useful lives of tangible assets and the headroom on intangible assets, and have not identified a material effect on this year's financial statements. We will continue to review this as the Group further develops its work on both our own Net Zero plans and the wider impact of climate change on our risks and opportunities.

 

Capital allocation strategy

 

Our Board regularly reviews the capital requirements of the Group, to maintain a strong financial position to protect the business and provide flexibility to fund future growth.

 

We've consistently applied our capital allocation strategy for many years. Organic growth is our first priority and we're committed to R&D investment for new products, manufacturing processes and global support infrastructure to generate growth in future returns and improve productivity. This is evidenced in the year by our capital expenditure, the increase in working capital and investments in R&D.

 

We may supplement organic growth with acquisitions in current and adjacent market niches that are aligned to our strategy. We have always valued having cash in the bank to protect the core business from downturns, and we monitor our cash against a minimum holding according to forecast overheads and revenue downturn scenarios. This cash also allows us to react swiftly as investment or market capture opportunities arise.

 

Actual and forecast returns, along with our strong financial position, support our progressive dividend policy, which aims to increase the dividend per share while maintaining a prudent level of dividend cover.

 

Earnings per share and dividend

 

Adjusted earnings per share is 155.1p, compared with 185.5p last year, while statutory earnings per share is 159.7p, compared with 165.4p last year.

 

We paid an interim dividend of 16.8 pence per share (FY2022: 16.0p) on 11 April 2023 and are pleased to propose a final dividend of 59.4 pence per share in respect of the year (FY2022: 56.6p).

 

Looking forward

 

Given the uncertain market conditions, we continue to be cautious as we enter FY2024, and are currently recruiting for critical roles only.

 

Where possible, we are implementing further price rises to mitigate ongoing inflation, and are focused on delivering productivity improvements across the business.

 

However, we have many drivers in our key markets to deliver long-term revenue growth and we continue to invest in the infrastructure required to meet the expected future demand. We expect to spend around £35m to complete phase 1 of our new production facility at Miskin, Wales, which is expected to be operational from early 2024, and continue to invest in automation and productivity opportunities.

 

 

Allen Roberts

Group Finance Director

18 September 2023


*Note 29, 'Alternative performance measures', defines how revenue at constant exchange rates, Adjusted profit before tax, Adjusted operating profit and Adjusted earnings per share are calculated.

 

 


 

PRINCIPAL RISKS AND UNCERTAINTIES

 

Our performance is subject to a number of risks - the principal risks, factors impacting on them and mitigations are ranked in the table below, as well as an indication of the movement of the risk in the last year, our appetite towards that risk, and how the risk links to our strategy. The Board has conducted a robust assessment of the principal risks facing the business.

 

Appetite:

- Low: Minimal risk exposure is considered the safest approach, which may mean lower returns.

- Medium: A balanced approach which carefully considers the risks and rewards.

- High: Greater risk tolerance, which may involve maximum risk for maximum return.

Link to strategy:

- SM: Sales & Marketing

- E: Engineering

- P: People and Culture

- M: Manufacturing

- CS: Corporate Services

- S: Sustainability

 

Economic and political uncertainty

Movement: increased risk           Appetite: High Link to strategy: All           Risk owner: Chief Executive

Risk description

As a global business, we may be affected by global political, economic or regulatory developments. This could include a global recession, USA-China trade relations, or the Russia-Ukraine conflict. This risk can also drive industry fluctuations.

Potential impact

What we are doing to manage this risk

·      Loss of financial and physical

         assets in a region.

·      Supply issues leading to failures to meet contractual obligations.

·      Reduced revenue, profit and

         cash generation.

·      Increased risk to credit, liquidity and currency.

·      Monitoring external economic and commercial environments and markets in which we operate, and identifying relevant headwinds.

·      Maintaining sufficient headroom in our cash balances.

·      Maintaining appropriate levels of buffer inventory.

·      Resilient business model and clear strategy, both of which are subject to regular scrutiny.

Innovation strategy

Movement: stable risk                 Appetite: High            Link to strategy: E         Risk owner: Directors of Industrial Metrology, Position Measurement and Additive Manufacturing

Risk description

Failure 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 innovation, there is a higher risk when venturing outside our traditional field of expertise where the science and engineering are less proven.

Potential impact

What we are doing to manage this risk

·      Failure to lead the market in innovation of products in our core and adjacent sectors.

·      Loss of market share.

·      Reduced revenue, profit and

          cash generation.

·      Failing to recover investment in R&D.

·      Increase in R&D expenditure with a continued focus on investment for new product development.

·      Establishing a 'Product Group Directors Team', which focuses on R&D productivity initiatives around the Group. Topics in FY2023 included: embedding the flagship projects programme and establishing in-depth quarterly reviews with the Chief Executive; and evolving hybrid working. We will see the impact of these initiatives in FY2024.

·      Monthly monitoring of the 'key technologies' R&D targets, with an aim of identifying business value and accelerating our promising new technologies and associated patents very early in the life-cycle.

·      Continuing the drive towards incremental development and more open customer collaboration at early stages of R&D projects, to ensure our innovations are successful in the market.

People

Movement: decreased risk       Appetite: Medium   Link to strategy: P       Risk owner: Head of Group HR

Risk description

Our people are fundamental to the success of our business.

Inability to attract, retain and develop key talent at all levels of the organisation, as well as a failure to ensure we have appropriate succession plans in place, could mean we fail to successfully deliver our strategic objectives.

Potential impact

What we are doing to manage this risk

·      Loss of expertise, skills, and specialist talent could affect delivery of objectives.

·      Poor retention and engagement could slow the delivery of our strategic objectives and product delivery.

·      Failure to develop future leaders, insufficient talent progression.

·      Loss of market share, reduced revenue, poor customer service, and reduced profit.

·      Continuing our focus on attracting, rewarding and retaining our people globally.

·      Continuing our global salary benchmarking programme, with our largest investment in reward, to date. We have seen an improvement in retention since conducting our benchmarking exercises.

·      Working towards implementing a global engagement platform.

·      Continuing to invest in our education and early career programmes as well as talent development and succession planning. For example, we opened our dedicated STEM Centre at our headquarters in Gloucestershire, UK.

·      Developing a competency framework to complement our new job architecture.

·      Advancing our employee engagement through multi-media communications, surveys, promoting wellbeing, evolving feedback mechanisms and further developing our work to build an inclusive culture.

·      Establishing continuity plans to enable rapid adaptation to changing circumstances.

Industry fluctuations

Movement: stable risk                Appetite: High        Link to strategy: SM, M, E                Risk owner: Chief Executive

Risk description

We're exposed to the cyclical nature of demand from aerospace, automotive, semiconductor and consumer electronics markets, which may be more severe if downcycles in these key industries coincide. This risk can also be influenced by economic and political uncertainty.

Potential impact

What we are doing to manage this risk

·      Reduced revenue, profit and cash generation.

·      Increased competition on prices.

·      Loss of market share if unable to meet rapid increases in demand.

 

·      Closely monitoring market developments.

·      Expanding our product range to serve different industry sectors and markets.

·      Identifying and meeting the needs of rapidly growing markets, for example in robotic automation.

·      Maintaining a strong balance sheet and strategic inventories with the ability to flex.

Route to market / customer satisfaction model

Movement: stable risk           Appetite: Medium   Link to strategy: SM              Risk owner: Chief Executive

Risk description

Failure to implement appropriate and efficient sales and support processes relating to systems integration and the sale of capital goods could restrict growth opportunities in these areas.

Potential impact

What we are doing to manage this risk

·      Low capital efficiency - high people costs and low productivity.

·      High application engineering and distribution costs.

·      Adversely affects customer satisfaction levels, revenue, and profits.

·      Focusing on key customers to generate reporting revenues.

·      Closely monitoring customer feedback.

·      Collaborating with complementary third parties.

·      Adopting new approaches to the sale of capital goods.

Cyber

Movement: increased risk      Appetite: Low        Link to strategy: All        Risk owner: Director of Group Operations

Risk description

External and internal threats that could result in a loss of (i) data, including IP; or (ii) our ability to operate our systems, which could severely affect our business.

Potential impact

What we are doing to manage this risk

·      Loss of IP and/or commercially sensitive data and/or personal data.

·      Inability to access, or disruption to, our systems leading to reduced service to customers.

·      Financial loss and reputational damage.

·      Impact on decision-making due to lack of clear and accurate data, or disruption caused by the lack of service.

·      Ensuring substantial resilience and back-up is built into our systems, which are continuously updated for current threats and good industry practice. This includes duplication of hardware, dual and diverse connections where possible, and regular back-up schedules.

·      Regularly discussing cyber and security risks at Board and Audit Committee meetings, including the strength of our control environment.

·      Deploying physical and logical control measures to protect our information and systems. Real-life restores of data and services are carried out regularly.

·      Conducting regular security awareness training, including phishing simulation exercises, which are proving effective. We also conduct external penetration testing as appropriate.

IT transformation failure

Movement: increased risk    Appetite: Low         Link to strategy: All       Risk owner: Director of Group Operations

Risk description

The upgrade of our Sage CRM and Sage ERP systems to Microsoft Dynamics 365, to remove legacy systems and ensure our global operations are better integrated, could affect our business if there are major technical issues, or it is poorly integrated. This risk could also result in problems if there are significant delays to the programme or it runs significantly over budget.

Potential impact

What we are doing to manage this risk

·      Major disruption to our systems, causing delays to our operations.

·      Affect 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 affected systems.

·      Maintaining close project management between ourselves, Microsoft and our system integrator.

·      Working to a clear, risk-elimination-based roadmap with measurable milestones.

·      Strengthening the deployment team to accelerate roll out, with targeted recruitment and upskilling.

·      Obtaining commitment from the Board to invest as necessary.

Supply chain dependencies

Movement: decreased risk        Appetite: Low        Link to strategy: M, S  Risk owner: Head of Group Manufacturing

Risk description

Critical components, or some components that we buy from single-source suppliers, make us vulnerable to an interruption in supply.

Potential impact

What we are doing to manage this risk

·      Inability to fulfil customer orders, leading to a reduction in revenue and profits, and damage to reputation.

·      Failure to meet contractual requirements.

·      Increased cost of alternative sourcing or redesign.

·      Loss of market share.

·      Maintaining a risk dashboard for our key manufacturing sites, to help us prioritise and determine stock levels.

·      Adapting stock levels for high-risk items, to take account of supply lead times and time to redesign in the event of loss of supply. We actively seek cost-effective alternative sources of supply (including in-house manufacturing), to reduce dependency on single-source suppliers, with a continued focus on key components.

·      Collaborating with product groups on an ongoing basis to review risks and, where appropriate, carry out reviews and updates to specifications where necessary to facilitate alternative sourcing or redesign.

Competitive activity

Movement: stable risk           Appetite: Low                 Link to strategy: All                      Risk owner: Chief Executive

Risk description

Failure to adapt to market and/or technological changes.

Potential impact

What we are doing to manage this risk

·      Reduced revenue, profits and cash generation.

·      Loss of market share.

·      Price erosion.

·      Loss of reputation as a leader in innovation.

·      Ensuring we are diversified across a range of products, industries and geographies.

·      Closely monitoring market developments, particularly across our core product groups.

·      Maintaining local sales and engineering support to quickly identify changing local needs.

·      Continuing to build our product portfolio through our strong historic and ongoing commitment to R&D (see Note 4 to the Financial statements for details of R&D expenditure).

 

 

 

 

Capital and resource allocation

Movement: stable risk           Appetite: Medium     Link to strategy: E     Risk owner: Group Finance Director

Risk description

This risk could be triggered by a failure to properly allocate budget and resource between core and emerging activities.

Potential impact

What we are doing to manage this risk

·      Investing in declining or less profitable areas at the expense of more profitable and strategically important areas.

·      Reduced profits.

·      Loss of market share.

·      Impact on innovation.

·      Defining, prioritising, and developing strategies for all core and emerging areas of the business.

·      Scrutinising all expenditure, including regular reporting on labour costs and capital expenditure.

·      Regular reporting of cash balances.

·      Tracking performance objectives, including regular reporting on flagship project progress.

Exchange rate fluctuations

Movement: increased risk      Appetite: Medium     Link to strategy: SM     Risk owner: Group Finance Director

Risk description

We report our results and pay dividends in Sterling and, with more than 90% of our revenue generated outside the UK, we're exposed to volatility in exchange rates that could have a significant impact on our results.

Movements of Sterling against our major trading currencies cause cash flow, currency translation, and intercompany balance translation risks.

Potential impact

What we are doing to manage this risk

·      Significant variations in profit.

·      Reduced cash generation.

·      Increased competition on product prices.

·      Increased costs.

·      Maintaining rolling forward contracts for cash-flow hedges in accordance with Board-approved policy, and one-month forward contracts to manage risks on intercompany balances.

·      Tracking overseas net assets value compared to the market capitalisation.

·      Obtaining input from external sources, including our banks.

Climate change

Movement: stable risk    Appetite: Low       Link to strategy: All           Risk owner: Head of Group Manufacturing

Risk description

We could be exposed to climate-related physical risks, such as hurricanes, floods, wildfires and pandemics, which could potentially affect our ability to operate.

Other risks related to a transition to a low-carbon economy could also affect us if we fail to react adequately to new climate-related legislation, technology or market factors.

Potential impact

What we are doing to manage this risk

·      Increased costs of key raw materials, due to climate- related legislation affecting the macroeconomic landscape with the introduction of carbon taxes.

·      Disruption to operations caused by climate-related hazards could reduce our revenue, create safety risks to our people and increase our operational costs.

·      If we fail to achieve Net Zero commitments, we could experience damage to reputation and loss of business.

·      Our Sustainability team supports the Risk Committee in evaluating and understanding the possible effect of climate-related risks and opportunities.

·      Climate-related hazards have been a driver in developing our manufacturing approach. More detail on our risk mitigation work can be found in the descriptions of our Loss of manufacturing output and Supply chain dependencies risks.

·      Using our product groups' priorities to manage climate-related transitional risks.

·      Reviewing and maintaining business interruption and other insurance cover.

·      Investing to reduce energy consumption and increase renewable energy generation across the Group. For example, we are aiming for all new buildings and refurbishments to achieve Net Zero emissions in operation.

 

 

 

 

 

 

 

Loss of manufacturing output

Movement: decreased risk    Appetite: Low        Link to strategy: M       Risk owner: Head of Group Manufacturing

Risk description

Manufacturing output can be adversely affected by 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

What we are doing to manage this risk

·      Inability to fulfil customer orders leading to a reduction in revenue, failure to meet contractual requirements and damage to reputation.

·      Increased costs of alternative sourcing or redesign.

·      Impact on maintenance of buffer inventory.

·      Loss of market share.

·      Duplication of high-dependency processes, such as component manufacturing and finishing, electronic printed circuit board assembly, and microelectronics assembly, across multiple manufacturing locations.

·      Ensuring we have flexible manufacturing capacity and sufficient resilience across our manufacturing sites.

·      Ensuring standardised approaches to assembly, annual risk assessments, and business continuity planning.

·      Reviewing and maintaining business interruption and other insurance cover.

Non-compliance with laws and regulations

Movement: stable risk           Appetite: Low         Link to strategy: All              

Risk owner: General Counsel & Company Secretary and Managing Director - Renishaw Medical

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.

Potential impact

What we are doing to manage this risk

·      Damage to reputation and loss of future business.

·      Potential penalties and fines, and cost of investigations.

·      Management time and attention in dealing with reports of non-compliance.

·      Inability to attract and retain talent.

·      Maintaining our whistleblowing hotline (Speak up), available to all employees and third parties who provide services for or on behalf of the Group, which means that our people and other stakeholders can make us aware of any potential non- compliance issues.

·      Establishing global compliance programmes for all high-risk areas, which includes policies, key controls and effective communication. Training also includes refreshed mandatory anti-bribery and anti-corruption modules.

·      Promoting all compliance functions under the umbrella brand 'Responsible Renishaw'. This helps to raise awareness about compliance, and makes it easier for our people to find the information they need to comply.

·      Maintaining our global privacy programme.

Product failure

Movement: stable risk           Appetite: Low         Link to strategy: E, M

Risk owner: Group Quality Manager and Quality Manager - Healthcare Regulatory

Risk description

The quality of our products could be adversely affected by internal threats, such as inadequate quality management processes. Product quality could also be affected by external threats, such as substandard performance from third-party suppliers. We could also be affected by other external risk factors, including grey market and counterfeit goods in our supply chain, and this may result in latent risks where product failures are not yet realised.

 

This risk is particularly notable in our neurological products, where failure could result in significant personal injury claims or regulatory action.

Potential impact

What we are doing to manage this risk

·      Damage to reputation.

·      Claims, including personal injury.

·      Potential penalties and fines, cost of investigations and high recall costs for medical devices.

·      Increase in non-revenue-generating warranty activity.

·      Inability to fulfil customer orders leading to a reduction in sales.

·      Ensuring we have rigorous internal product development and testing procedures (during development, manufacturing and release) to international standards where applicable, to ensure high levels of quality assurance. This includes following ISO 14971 and ISO 13485 for all medical devices.

·      Interacting with customers and regulators to obtain and address feedback.

·      Conducting a thorough vendor approval process, and regular monitoring of third-party suppliers to ensure incoming parts and sub-contracted activity meet requirements.

·      Applying grey market product verification activity where component sourcing is not from original equipment manufacturers (OEMs) or franchised providers.

·      Limiting our liability through our terms and conditions of sale and we also have product liability insurance. For clinical studies, we have separate trial insurance.

Pensions

Movement: stable risk           Appetite: Medium         Link to strategy: P         Risk owner: Group Finance Director

Risk description

Investment returns and actuarial assumptions of our defined benefit pension (DB) schemes are subject to economic and social factors outside our control.

Potential impact

What we are doing to manage this risk

·      Any deficit may need additional funding in the form of supplementary cash payments to the plans or the provision of additional security.

·      Significant management time.

·      External support costs.

·      Damage to reputation.

·      Implementing recovery plan for the UK DB scheme in June 2019, with the aim of funding to self-sufficiency by 2031.

·      Appointing a corporate Trustee in June 2022, which has reduced management time and support costs.

·      Engaging with the corporate Trustee on investment strategy.

·      The corporate Trustee works to a statement of investment principles, and the Company and corporate Trustee seek appropriate independent professional advice, if needed.

·      During FY2023, the Company and Trustees of the UK DB scheme agreed to de-risk the investment strategy by disinvesting from the scheme's equity and diversified growth holdings and investing the proceeds into index-linked gilts. This followed a significant improvement in the scheme's funding position due to rising gilt yields. As a result, the Trustees agreed to £8.7m of funding due between 1 October 2022 and 30 September 2023 being deferred to 2026.

 

 

 

 

 

 

 

 

 

CONSOLIDATED INCOME STATEMENT

for the year ended 30 June 2023

 

 

from continuing operations

 

 

 

2023

 

2022

 

notes

£'000

£'000

 

 

 


Revenue

2

688,573

671,076

 

 

 


Cost of sales

4

(337,908)

(313,527)


 

 


Gross profit

 

350,665

357,549

 

 

 


Distribution costs

 

(137,744)

(122,455)

Administrative expenses


(74,894)

(69,736)

UK defined benefit pension scheme past service cost

23

-

(11,695)

US defined benefit pension scheme past service cost

23

(2,139)

-

Losses from the fair value of financial instruments

25

(1,399)

(10,413)



 


Operating profit


134,489

143,250



 


Financial income

5

9,669

932

Financial expenses

5

(1,861)

(2,938)

Share of profits of joint ventures

13

2,768

4,342



 


Profit before tax


145,065

145,586

 


 


Income tax expense

7

(28,963)

(25,235)



 


Profit for the year


116,102

120,351

 

 

Profit attributable to:


 


Equity shareholders of the parent company


116,102

120,351

Non-controlling interest

26

-

-

Profit for the year

 

116,102

120,351

                               

 

 

pence

pence

Dividend per share arising in respect of the year

26

76.2

72.6

Dividend per share paid in the year

26

73.4

68.0

 


 


Earnings per share (basic and diluted)

8

159.7

165.4

 

 

Adjusted profit before tax for the year was £140,983,000 (2022: £163,742,000). See note 29 Alternative performance measures for more details.

 

 

 

 

 

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME AND EXPENSE

for the year ended 30 June 2023

 

 

 

 

2023

 

2022

 

notes

£'000

£'000

Profit for the year


116,102

120,351

 


 


Other items recognised directly in equity:


 


 


 


Items that will not be reclassified to the Consolidated income statement:


 


Current tax on contributions to defined benefit pension schemes


-

1,653

Deferred tax on contributions to defined benefit pension schemes


-

(1,653)

Remeasurement of defined benefit pension scheme assets/liabilities

23

13,612

69,078

Deferred tax on remeasurement of defined benefit pension scheme assets/liabilities


(3,071)

(15,997)

Total for items that will not be reclassified


10,541

53,081

 


 


Items that may be reclassified to the Consolidated income statement:


 


Exchange differences in translation of overseas operations

26

(8,000)

12,151

Exchange differences in translation of overseas joint venture

26

-

118

Current tax on translation of net investments in foreign operations

26

313

(1,529)

Effective portion of changes in fair value of cash flow hedges, net of recycling

26

23,167

(28,423)

Deferred tax on effective portion of changes in fair value of cash flow hedges

7,26

(5,692)

6,155

Total for items that may be reclassified


9,788

(11,528)



 


Total other comprehensive income and expense, net of tax


20,329

41,553



 


Total comprehensive income and expense for the year


136,431

161,904



 


Attributable to:


 


Equity shareholders of the parent company


136,431

161,904

Non-controlling interest

26

-

-

Total comprehensive income and expense for the year

 

136,431

161,904

 

 

 

CONSOLIDATED BALANCE SHEET

at 30 June 2023

 

 

 

2023

 

2022


notes

£'000

£'000

Assets

 

 


Property, plant and equipment

9

286,085

243,853

Right-of-use assets

10

8,402

9,950

Investment properties

11

10,323

10,568

Intangible assets

12

46,468

44,218

Investments in joint ventures

13

22,414

20,570

Finance lease receivables

14

9,935

6,961

Employee benefits

23

57,416

43,241

Deferred tax assets

7

19,944

22,893

Derivatives

25

9,443

-

Total non-current assets


470,430

402,254

 


 


Current assets


 


Inventories

16

185,757

162,482

Trade receivables

25

123,427

127,551

Finance lease receivables

14

3,764

3,348

Contract assets


861

578

Short-term loans to joint ventures


-

302

Current tax


19,558

8,901

Other receivables

25

27,979

27,068

Derivatives

25

5,373

7,121

Bank deposits

15

125,000

100,000

Cash and cash equivalents

15,25

81,388

153,162

Total current assets


573,107

590,513

 


 


Current liabilities


 


Trade payables

25

21,551

30,947

Contract liabilities

18

9,971

12,956

Current tax


7,118

10,078

Provisions

17

2,758

4,244

Derivatives

25

5,089

17,890

Lease liabilities

21

3,009

3,714

Borrowings

20

4,694

919

Other payables

19

48,130

51,949

Total current liabilities


102,320

132,697

Net current assets

 

470,787

457,816

 


 


Non-current liabilities


 


Lease liabilities

21

5,624

6,466

Borrowings

20

-

5,160

Employee benefits

23

45

996

Deferred tax liabilities

7

38,770

22,815

Derivatives

25

120

9,463

Total non-current liabilities


44,559

44,900

Total assets less total liabilities


896,658

815,170

 


 


Equity


 


Share capital

26

14,558

14,558

Share premium


42

42

Own shares held

26

(2,963)

(750)

Currency translation reserve

26

6,772

14,459

Cash flow hedging reserve

26

6,552

(10,923)

Retained earnings


871,777

798,541

Other reserve

26

497

(180)

Equity attributable to the shareholders of the parent company

 

897,235

815,747

Non-controlling interest

26

(577)

(577)

Total equity

 

896,658

815,170

 

These financial statements were approved by the Board of Directors on 18 September 2023 and were signed on its behalf by:

 

Sir David McMurtry            Allen Roberts

Directors

 




CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 30 June 2023


 

 

 

 

Cash

 





 

 

Own

Currency

flow

 


Non-



Share

Share

Shares

translation

hedging

Retained

Other

controlling



capital

premium

Held

reserve

reserve

earnings

reserve

interest

Total

Year ended 30 June 2022

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000


 

 

 

 

 

 




Balance at 1 July 2021

14,558

42

(404)

3,719

11,345

674,603

44

(577)

703,330











Profit for the year

-

-

-

-

-

120,351

-

-

120,351











Other comprehensive income and expense (net of tax)










Remeasurement of defined benefit pension scheme liabilities

-

-

-

-

-

53,081

-

-

53,081











Foreign exchange translation differences

-

-

-

10,622

-

-

-

-

10,622











Relating to associates and joint ventures

-

-

-

118

-

-

-

-

118











Changes in fair value of cash flow hedges

-

-

-

-

(22,268)

-

-

-

(22,268)

Total other comprehensive income and expense

-

-

-

10,740

(22,268)

53,081

-

-

41,553

Total comprehensive income and expense

-

-

-

10,740

(22,268)

173,432

-

-

161,904











Share-based payments charge

-

-

-

-

-

-

180

-

180

Own shares transferred on vesting

-

-

404

-

-

-

(404)

-

-

Own shares purchased

-

-

(750)

-

-

-

-

-

(750)

Dividends paid

-

-

-

-

-

(49,494)

-

-

(49,494)

Balance at 30 June 2022

14,558

42

(750)

14,459

(10,923)

798,541

(180)

(577)

815,170











Year ended 30 June 2023










Profit for the year

-

-

-

-

-

116,102

-

-

116,102











Other comprehensive income and expense (net of tax)










Remeasurement of defined benefit pension scheme assets/liabilities

-

-

-

-

-

10,541

-

-

10,541











Foreign exchange translation differences

-

-

-

(7,687)

-

-

-

-

(7,687)











Changes in fair value of cash flow hedges

-

-

-

-

17,475

-

-

-

17,475

Total other comprehensive income and expenses

-

-

-

(7,687)

17,475

10,541

-

-

20,329

Total comprehensive income and expenses

-

-

-

(7,687)

17,475

126,643

-

-

136,431

 










Share-based payments charge

-

-

-

-

-

-

677

-

677

Own shares purchased

-

-

(2,213)

-

-

-

-

-

(2,213)

Dividends paid

-

-

-

-

-

(53,407)

-

-

(53,407)

Balance at 30 June 2023

14,558

42

(2,963)

6,772

6,552

871,777

497

(577)

896,658

 

More details of share capital and reserves are given in note 26.

 

 

 

 

 

 

 

 

CONSOLIDATED STATEMENT OF CASH FLOW

for the year ended 30 June 2023

 


 

 

 

2023

 

2022


notes

£'000

£'000

Cash flows from operating activities

 

 


Profit for the year

 

116,102

120,351

Adjustments for:

 

 


Depreciation of property, plant and equipment, investment properties

9,11

19,882

25,898

Loss on sale of property, plant and equipment

9

155

157

Impairment of property, plant and equipment

9

-

1,259

Depreciation of right-of-use assets

10

4,223

4,205

Impairment of right-of-use-assets


-

1,837

Amortisation of development costs

12

5,150

4,698

Amortisation of other intangibles

12

1,012

1,225

Impairment of development costs

12

1,611

-

Write-off of intangible assets


-

3,510

Loss on disposal of intangible assets


550

-

Share of profits from joint ventures

13

(2,768)

(4,342)

Profit on disposal of investment in associate


-

(582)

Write-off of lease liabilities


-

(1,985)

Defined benefit pension schemes past service cost

23

2,437

11,695

Financial income

5

(9,669)

(932)

Financial expenses

5

1,861

2,938

(Gains)/losses from the fair value of financial instruments

25

(5,504)

8,349

Share-based payment expense

24

677

180

Tax expense

7

28,963

25,235


 

48,580

83,345

Increase in inventories

 

(23,275)

(48,919)

Increase in trade, finance lease and other receivables

 

(12,379)

(11,301)

(Decrease)/increase in trade and other payables

 

(15,013)

12,288

Decrease in provisions


(1,486)

(2,015)


 

(52,153)

(49,947)

Defined benefit pension scheme contributions

23

(2,341)

(8,866)

Income taxes paid

 

(25,891)

(23,410)

Cash flows from operating activities

 

84,297

121,473


 

 


Investing activities

 

 


Purchase of property, plant and equipment, and investment properties

9,11

(74,024)

(30,960)

Sale of property, plant and equipment


7,948

687

Development costs capitalised

12

(10,448)

(7,966)

Purchase of other intangibles

12

(379)

(929)

(Increase)/decrease in bank deposits

15

(25,000)

20,000

Interest received

5

6,302

834

Dividend received from joint ventures

13

924

525

Proceeds from sale of shares in associate


-

582

Payments from pension scheme cash escrow account


-

10,578

Cash flows from investing activities

 

(94,677)

(6,649)

 

 

 


Financing activities

 

 


Repayment of borrowings

20

(914)

(974)

Interest paid

5

(656)

(591)

Repayment of principal of lease liabilities

22

(4,206)

(4,081)

Own shares purchased

26

(2,213)

(750)

Dividends paid

26

(53,407)

(49,494)

Cash flows from financing activities

 

(61,396)

(55,890)

 

 

 


Net (decrease)/increase in cash and cash equivalents

 

(71,776)

58,934

Cash and cash equivalents at beginning of the year

 

153,162

95,008

Effect of exchange rate fluctuations on cash held

 

2

(780)

Cash and cash equivalents at end of the year

15

81,388

153,162

 

 

 

 

NOTES (FORMING PART OF THE FINANCIAL STATEMENTS)

 

1. Accounting policies

 

This section sets out our significant accounting policies that relate to the financial statements as a whole, along with the critical accounting judgements and estimates that management has identified as having a potentially material impact on the Group's consolidated financial statements. Where an accounting policy is applicable to a specific note in the financial statements, the policy is described within that note.

 

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 'we') 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 financial information set out in the announcement does not constitute the Group's statutory accounts for the years ended 30 June 2023 or 30 June 2022. The financial information for the year ended 30 June 2022 is derived from the statutory accounts for that year, which have been delivered to the Registrar of Companies. The auditor reported on those accounts; their report was unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain a statement under s498 (2) or (3) Companies Act 2006. In respect of the year ended 30 June 2023, an unqualified auditor's report was signed on 18 September 2023. The statutory accounts will be delivered to the Registrar of Companies following the Group's annual general meeting.

 

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.

 

Basis of consolidation

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.

 

Joint ventures are accounted for using the equity method (equity-accounted investees) and are initially recognised at cost. The Group's investment includes goodwill identified on acquisition, net of any accumulated impairment losses.

 

The consolidated financial statements include the Group's share of the total comprehensive income and equity movements of equity accounted investees, from the date that significant influence commences until the date that significant influence ceases. When the Group's share of losses exceeds its interest in an equity accounted investee, the Group's carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal obligations or made payments on behalf of an investee.

 

Intragroup balances and transactions, and any unrealised income and expenses arising from intragroup transactions, are eliminated on consolidation. 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.

 

Foreign currencies

 

On consolidation, overseas subsidiaries' results are translated into Sterling at weighted average exchange rates for the year 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.

 

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.

 

New, revised or changes to existing accounting standards

The following accounting standard amendments became effective as at 1 January 2022 and have been adopted in the preparation of these financial statements, with effect from 1 July 2022:

- amendments to IFRS3, References to the Conceptual Framework;

- amendments to IAS 16, Property, Plant and Equipment - Proceeds before Intended Use; and

- amendments to IAS 37, Onerous Contracts - Costs of Fulfilling a Contract.

 

These have not had a material effect on these financial statements.

 

At the date of these financial statements, the following amendments that are potentially relevant to the Group, and which have not been applied in these financial statements, were in issue but not yet effective:

 

- amendments to IAS 1, Classification of Liabilities as Current or Non-current (not yet endorsed by the UK);

- amendments to IAS 1 and IFRS Practice Statement 2, Disclosure of Accounting Policies;

- amendments to IAS 7, Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures (not yet endorsed by the UK);

- amendments to IAS 8, Definition of Accounting Estimates;

- amendments to IAS 12, International Tax Reform Pillar Two Model Rules;

- amendments to IAS 12, Deferred Tax related to Assets and Liabilities arising from a Single Transaction; and

- amendments to IFRS 16, Lease Liability in a Sale and Leaseback.

 

The adoption of these Standards and Interpretations in future periods is not expected to have a material impact on the financial statements of the Group.

 

The Finance (No 2) Bill 2023, that includes Pillar Two legislation, was substantively enacted on 20 June 2023 for IFRS purposes. As permitted by the amendments to IAS 12 International Tax Reform Pillar Two Model Rules the Group has applied the exemption from recognising and disclosing information about deferred tax assets and liabilities related to Pillar Two income taxes.

 

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, 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 29).

 

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 initiative, and relate to matters that do not frequently recur.

 

During the period, a change to the US defined benefit pension scheme rules, per note 23, resulted in a significant non-recurring amount being recognised in the Consolidated income statement. In the previous period, a change to the UK defined benefit pension scheme rules resulted in a significant non-recurring amount being recognised in the Consolidated income statement. These have also been separately disclosed.

 

These items are also excluded from Adjusted profit before tax, Adjusted operating profit and Adjusted earnings per share measures, as explained in note 29 Alternative performance measures.

 

Critical accounting judgements and estimation uncertainties

The preparation of financial statements in conformity with UK-adopted IAS 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 other factors that are believed to be reasonable under the circumstances. The results of this 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 therefore 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

 

Key judgements (J) and estimates (E)

Taxation

E - Estimates of future profits to use deferred tax assets

Research and development costs

J - Whether a project meets the criteria for capitalisation

Goodwill and capitalised development costs

E - Estimates of future cash flows for impairment testing

Inventories

E - Determination of net realisable value

Defined benefit pension schemes

E - Valuation of defined benefit pension schemes' liabilities

Cash flow hedges

E - Estimates of highly probable forecasts of the hedged item

 

Climate change

We have considered the potential effect of physical and transitional climate change risks when preparing these consolidated financial statements and have also considered the effect of our own Net Zero commitments. Our consideration of the potential effect of climate change on these consolidated financial statements included reviewing:

 

- discounted cashflow forecasts, used in accounting for goodwill, capitalised development costs, and deferred tax assets;

- useful economic lives and residual values of property, plant and equipment;

- planned use of right-of-use assets; and

- expected demand for inventories.

 

We also considered the estimated capital expenditure needed in the next five years to deliver our Net Zero plan.

 

Overall, we do not believe that climate change has a material effect on our accounting judgements and estimates, nor in the carrying value of assets and liabilities in the consolidated financial statements for the year ended 30 June 2023. We will continue to review the effect of climate change on financial statements in the future, and update our accounting and disclosures as the position changes.

 

Going concern

In preparing these financial statements, the Directors have adopted the going concern basis. The decision to adopt the going concern basis was made after considering:

- the Group's business model and key markets;

- the Group's risk management processes and principal risks;

- the Group's financial resources and strategies; and

- the process undertaken to review the Group's viability, including scenario testing.

 

The financial models for the viability review were based on the pessimistic version of the five-year business plan, but covering a period to 30 September 2026. For context, revenue in the first year of this pessimistic base scenario is similar to FY2023 revenue of £688.6m, while costs and other cash outflows still reflect ambitious growth plans. In the going concern assessment, the Directors reviewed this same version of the plan but to 30 September 2024, as well as the 'severe but plausible' scenarios used in the viability review, again to 30 September 2024. These scenarios reflected a significant reduction in revenue, a significant increase in costs, and a third scenario incorporating both a reduction to revenue and an increase in costs but to a less degree than the first two scenarios. In each scenario the Group's cash balances remained positive throughout the period to 30 September 2024.

 

The Directors also reviewed a reverse stress test for the period to 30 September 2024, identifying what would need to happen in this period for the Group to deplete its cash and cash equivalents and bank deposit balances. This identified a trading level so low (between 50 and 60% of FY2023 revenue) that the Directors feel that the events that could trigger this would be remote. The Directors also concluded that the risk of a one-off cash outflow that would exhaust the Group's cash and cash equivalents and bank deposits balances in the assessment period was also remote.

 

Based on this assessment, incorporating a review of the current position, the scenarios, the principal risks and mitigation, the Directors have a reasonable expectation that the Group will be able to continue operating and meet its liabilities as they fall due over the period to 30 September 2024.

 

2.         Revenue disaggregation and segmental analysis

We manage our business by segment, comprising Manufacturing technologies and Analytical instruments and medical devices, and by geographical region. The results of these segments and regions are regularly reviewed by the Board to assess performance and allocate resources, and are presented in this note.

Accounting policy

The Group generates revenue from the sale of 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. For software licences, where the 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 distinct 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) 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.

d) Contract balances

Contract assets represent the Group's right to consideration in exchange for goods, capital equipment and/or 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, capital equipment and/or services to a customer for which the Group has either received consideration or consideration is due from the customer.

e) Disaggregation of revenue

The Group disaggregates revenue from contracts with customers between: goods, capital equipment and installation, and aftermarket services; operating 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.

 

Within the two operating segments there are multiple product offerings with similar economic characteristics, similar production processes and similar customer bases. Our Manufacturing technologies business consists of industrial metrology, position measurement and additive manufacturing (AM) product groups, while our Analytical instruments and medical devices business consists of spectroscopy and neurological product lines.

 

Year ended 30 June 2023

 

Manufacturing technologies

Analytical instruments and medical devices

 

 

Total

 

£'000

£'000

£'000

 

 

 


Revenue

648,240

40,333

688,573

Depreciation, amortisation and impairment

28,431

3,447

31,878

Operating profit before losses from fair value of financial instruments        and US defined benefit pension scheme past service cost

 

132,843

 

5,184

 

138,027

Share of profits from joint ventures

2,768

-

2,768

Net financial income/(expense)

-

-

7,808

US defined benefit pension scheme past service cost

-

-

(2,139)

Losses from the fair value of financial instruments

-

-

(1,399)

Profit before tax

-

-

145,065

 

 

 

 

Year ended 30 June 2022

 

Manufacturing technologies

£'000

Analytical instruments and medical devices £'000

 

 

Total

£'000

Revenue

634,588

36,488

671,076

Depreciation, amortisation and impairment

36,552

2,570

39,122

Operating profit before losses from fair value of financial instruments        and UK defined benefit pension scheme past service cost

 

162,549

 

2,809

 165,358

Share of profits from joint ventures

4,342

-

4,342

Net financial expense

-

-

(2,006)

UK defined benefit pension scheme past service cost

-

-

(11,695)

Losses from the fair value of financial instruments

-

-

(10,413)

Profit before tax

-

-

145,586

 

There is no allocation of assets and liabilities to operating segments. Depreciation, amortisation and impairments are allocated to segments on the basis of the level of activity.

 

The following table shows the analysis of non-current assets, excluding deferred tax, derivatives and employee benefits, by geographical region:

 

 

2023

2022

 

 

£'000

£'000

UK

 

231,619

181,530

Overseas

 

152,008

155,725

Total non-current assets

 

383,627

337,255

 

No overseas country had non-current assets amounting to 10% or more of the Group's total non-current assets.

 

The following table shows the disaggregation of group revenue by category:

 

 

2023

2022

 

 

£'000

£'000

Goods, capital equipment and installation

 

624,992

615,641

Aftermarket services

 

63,581

55,435

Total Group revenue

 

688,573

671,076

 

Aftermarket services include repairs, maintenance and servicing, programming, training, extended warranties, and software licences and maintenance. There is no significant difference between our two operating segments as to their split of revenue by type.

 

The analysis of revenue by geographical market was:

 

 

2023

2022

 

 

£'000

£'000

APAC total

 

310,637

317,023

UK (country of domicile)

 

38,899

31,536

EMEA, excluding UK

 

177,582

174,290

EMEA total

 

216,481

205,826

Americas total

 

161,455

148,227

Total Group revenue

 

688,573

671,076

 

Revenue in the previous table has been allocated to regions based on the geographical location of the customer. Countries with individually significant revenue figures in the context of the Group were:

 

 

2023

2022

 

 

£'000

£'000

China

 

155,360

152,772

USA

 

138,721

128,531

Japan

 

67,915

69,829

Germany

 

61,565

58,636

 

There was no revenue from transactions with a single external customer which amounted to more than 10% of the Group's total revenue.

 

3.         Personnel expenses

The remuneration costs of our people account for a significant proportion of our total expenditure, which are analysed in this note.

 

The aggregate payroll costs for the year were:

 

 

 

2023

 

2022

 

 

£'000

£'000

Wages and salaries

 

226,126

207,783

Compulsory social security contributions

 

26,579

24,497

Contributions to defined contribution pension schemes

 

26,142

21,988

Share-based payment charge

 

677

180

Total payroll costs

 

279,524

254,448

 

Wages and salaries and compulsory social security contributions include £11,338,000 (2022: £17,914,000) relating to performance bonuses.

 

The average number of persons employed by the Group during the year was:

 

2023

2022

 

Number

Number

UK

3,332

3,132

Overseas

1,804

1,799

Average number of employees

5,136

4,931

 

Key management personnel have been assessed to be the Directors of the Company and the Senior Leadership Team (SLT), which includes an average of 21 people (2022: 21 people).

 

The total remuneration of the Directors and the SLT was:

 

2023

2022 restated*

2022

 

£'000

£'000

£'000

Short-term employee benefits

5,659

8,061

3,763

Post-employment benefits

511

444

121

Share-based payment charge

677

180

180

Total remuneration of key management personnel

6,847

8,685

4,064

 

Short-term employee benefits include nil (2022: £2,791,000) relating to performance bonuses payable in cash.

 

The share-based payment charge relates to share awards granted in previous years, not yet vested. No shares (2022: £1,915,000 equivalent) are to be awarded in respect of 2023 (see note 24). 


*The assessment of key management personnel was updated during the year to include the SLT, who are, along with the Directors, deemed to have authority and responsibility for planning, directing and controlling the activities of the Renishaw Group. This also follows the expansion of the deferred annual equity incentive plan (DAEIP) to include the SLT, as explained in the Governance section. Accordingly, 2022 figures have been restated.

 

4.         Cost of sales

Our cost of sales includes the costs to manufacture our products and our engineering spend on existing and new products, net of capitalisation and research and development tax credits.

Included in cost of sales are the following amounts:

 

2023

2022

 

£'000

£'000

Production costs

247,665

234,919

Research and development expenditure

72,500

59,415

Other engineering expenditure

28,063

26,356

Gross engineering expenditure

100,563

85,771

Development expenditure capitalised (net of amortisation)

(5,298)

(3,268)

Development expenditure impaired

1,611

-

Research and development tax credit

(6,633)

(3,895)

Total engineering costs

90,243

78,608

Total cost of sales

337,908

313,527

 

Production costs includes the raw material and component costs, payroll costs and sub-contract costs, and allocated overheads associated with manufacturing our products.

 

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.

 

5.         Financial income and expenses

Financial income mainly arises from bank interest on our deposits, while we are exposed to realised currency gains and losses on translation of foreign currency denominated intragroup balances and offsetting financial instruments.

Included in financial income and expenses are the following amounts:

 

 

 

 

2023

 

2022

Financial income

notes

£'000

£'000

Bank interest receivable


6,302

834

Interest on pension schemes' assets

23

1,639

-

Fair value gains from one-month forward currency contracts

25

1,728

98

Total financial income


9,669

932

Financial expenses


 


Net interest on pension schemes' liabilities

23

29

306

Currency losses


1,130

1,414

Lease interest

21

348

481

Interest payable on borrowings

20

46

52

Other interest payable


308

110

Realised currency reserve losses from discontinuation of foreign operation


-

575

Total financial expenses


1,861

2,938

 

Currency losses relate to revaluations of foreign currency-denominated balances using latest reporting currency exchange rates. The losses recognised in 2022 and 2023 largely related to an appreciation of Sterling relative to the US dollar affecting US dollar-denominated intragroup balances in the Company.

 

Certain intragroup balances are classified as 'net investments in foreign operations', such that revaluations from currency movements on designated balances accumulate in the Currency translation reserve in Equity. Rolling one-month forward currency contracts are used to offset currency movements on remaining intragroup balances, with fair value gains and losses being recognised in financial income or expenses. See note 25 for further details.

 

6.         Profit before tax

Detailed below are other notable amounts recognised in the Consolidated income statement.

 

Included in the profit before tax are the following costs/(income):

 

 

 

 

2023

 

2022

 

notes

£'000

£'000

Depreciation and impairment of property, plant and equipment and investment properties (a)

9,11

19,882

27,157

Loss on sale of property, plant and equipment (a)

9

155

157

Depreciation and impairment of right-of-use assets (a)

10

4,223

6,042

Amortisation, impairment, and write-off of intangible assets (a)

12

7,773

5,923

Profit from sale of shares in associate (c)


-

582

Impairment of net assets of foreign operation (b)


-

2,126

Grant income (a)


(3,017)

(2,840)

 

These costs/(income) can be found under the following headings in the Consolidated income statement: (a) within cost of sales, distribution costs and administrative expenses, (b) within distribution costs, and (c) within administrative expenses. Further detail on each element can be found in the relevant notes.

 

Grant income relates to government grants, relating to R&D activities, which 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.

 

Costs within Administrative expenses relating to auditor fees included:

 

 

 

2023

2022

 

 

£'000

£'000

Audit of these financial statements

 

707

718

Audit of subsidiary undertakings pursuant to legislation

 

576

526

Other assurance

 

6

32

All other non-audit fees

 

-

-

Total auditor fees

 

1,289

1,276

               

7.         Taxation

The Group tax charge is affected by our geographic mix of profits and other factors explained in this note. Our expected future tax charges and related tax assets are also set out in the deferred tax section, together with our view on whether we will be able to make use of these in the future.

Accounting policy

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 used, 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.

The following table shows an analysis of the tax charge:

 

 

2023

 

2022

 

 

£'000

£'000

Current tax:

 

 


UK corporation tax on profits for the year

 

5,814

9,288

UK corporation tax - prior year adjustments

 

(1,307)

(28)

Overseas tax on profits for the year

 

14,161

16,734

Overseas tax - prior year adjustments

 

291

(176)

Total current tax

 

18,959

25,818

Deferred tax:

 

 


Origination and reversal of temporary differences

 

9,140

(1,372)

Prior year adjustments

 

(1,052)

166

Derecognition of previously recognised tax losses and excess interest

 

439

623

Recognition of previously unrecognised tax losses and excess interest

 

(591)

-

Effect on deferred tax for changes in tax rates

 

2,068

-

 

 

10,004

(583)

Tax charge on profit

 

28,963

25,235

 

The tax for the year is lower (2022: lower) than the weighted UK standard rate of corporation tax of 20.5% (2022: 19%). The differences are explained as follows:

 

 

2023

 

2022

 

£'000

£'000

Profit before tax

145,065

145,586

Tax at 20.5% (2022: 19%)

29,738

27,661

Effects of:

 


Different tax rates applicable in overseas subsidiaries

(1,695)

(1,834)

Permanent differences

1,595

978

Companies with unrelieved tax losses

292

-

Share of profits of joint ventures

(567)

(825)

Tax incentives (patent box and capital allowances super-deduction)

(679)

(1,400)

Prior year adjustments

(2,068)

(38)

Effect on deferred tax for changes in tax rates

2,068

-

Recognition of previously unrecognised tax losses and excess interest

(591)

-

Derecognition of previously recognised tax losses and excess interest

439

623

Irrecoverable withholding tax

609

2

Other differences

(178)

68

Tax charge on profit

28,963

25,235

Effective tax rate

20.0%

17.3%

 

We operate in many countries around the world and the overall effective tax rate (ETR) is a result of the combination of the varying tax rates applicable throughout these countries. The FY2023 effective tax rate has increased mostly as a result of a reduction in patent box tax incentives and an increase in the UK tax rate from 19% to 25%.

 

The Group's future 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.

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 £18,826,000 liability (2022: £78,000 asset) is presented as a £19,944,000 deferred tax asset (2022: £22,893,000 asset) and a £38,770,000 deferred tax liability (2022: £22,815,000 liability) in the 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.

Balances at the end of the year were:


2023

2022


Assets

Liabilities

Net

Assets

Liabilities

Net

 

£'000

£'000

£'000

£'000

£'000

£'000

Property, plant and equipment

735

(25,124)

(24,389)

517

(19,966)

(19,449)

Intangible assets

-

(3,922)

(3,922)

-

(2,980)

(2,980)

Intragroup trading (inventories)

16,765

-

16,765

20,158

-

20,158

Intragroup trading (fixed assets)

1,770

-

1,770

1,457

-

1,457

Defined benefit pension schemes

6

(14,354)

(14,348)

125

(11,173)

(11,048)

Derivatives

-

(2,184)

(2,184)

3,508

-

3,508

Tax losses

2,281

-

2,281

3,893

-

3,893

Other

5,894

(693)

5,201

4,953

(414)

4,539

Balance at the end of the year

27,451

(46,277)

(18,826)

34,611

(34,533)

78

Other deferred tax assets include temporary differences relating to inventory provisions totalling £2,256,000 (2022: £1,774,000), other provisions (including bad debt provisions) of £913,000 (2022: £975,000), and employee benefits relating to Renishaw KK of £806,000 (2022: £853,000), with the remaining balance relating to several other smaller temporary differences.

 

The movements in the deferred tax balance during the year were:

 

 

2023

2022

 

 

£'000

£'000

Balance at the beginning of the year

 

78

10,890

Movements in the Consolidated income statement

 

(10,004)

583

Movement in relation to the cash flow hedging reserve

 

(5,692)

6,155

Movement in relation to the defined benefit pension schemes

 

(3,071)

(17,650)

Total movement in the Consolidated statement of comprehensive income and expense

 

(8,763)

(11,495)

Currency translation

 

(137)

100

Balance at the end of the year

 

(18,826)

78






 

The deferred tax movement in the Consolidated income statement is analysed as:

 

 

2023

2022

 

 

£'000

£'000

Property, plant and equipment

 

(4,940)

(2,328)

Intangible assets

 

(942)

(371)

Intragroup trading (inventories)

 

(3,393)

5,619

Intragroup trading (fixed assets)

 

313

205

Defined benefit pension schemes

 

(229)

2,255

Derivatives

 

-

284

Tax losses

 

(1,612)

(4,472)

Other

 

799

(609)

Total movement for the year

 

(10,004)

583

 

Deferred tax assets of £2,281,000 (2022: £3,893,000) in respect of losses are recognised 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 £6,563,000 (2022: £4,815,000), due to uncertainty over their offset against future taxable profits and therefore their recoverability. These losses are held by Group companies in France, Brazil, Australia, Canada and the US, where for 97% of losses there are no time limitations on their utilisation.

 

In determining profit forecasts for each Group company, the key variable is the revenue forecasts, which have been estimated using consistently applied external and internal data sources. 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 £300,000. An increase of 5% to relevant revenue forecasts would result in additions to deferred tax assets in respect of tax losses not recognised of less than £200,000.

 

It is likely that the majority of unremitted earnings of overseas subsidiaries would qualify for the UK dividend exemption. However, £65,555,000 (2022: £61,204,000) of those earnings may still result in a tax liability principally as a result of withholding taxes levied by the overseas jurisdictions in which those subsidiaries operate. The tax liabilities for the earnings for which management intend to repatriate in the foreseeable future are not material and consequently no deferred tax liability has been recognised.

 

8.         Earnings per share

Basic earnings per share is the amount of profit generated in a financial year attributable to equity shareholders, divided by the weighted average number of shares in issue during the year.

Basic and diluted earnings per share are calculated on earnings of £116,102,000 (2022: £120,351,000) and on 72,719,565 shares (2022: 72,774,147 shares), being the number of shares in issue. The number of shares excludes 68,978 (2022:14,396) shares held by the Employee Benefit Trust (EBT). On this basis, earnings per share (basic and diluted) is calculated as 159.7 pence (2022: 165.4 pence).

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 29, earnings of £116,102,000 (2022: £120,351,000) are adjusted by post-tax amounts for:

- fair value (gains)/losses on financial instruments not eligible for hedge accounting (reported in Revenue), which represents the amount by which revenue would change had all the derivatives qualified as eligible for hedge accounting, £5,488,000 gain;

- fair value (gains)/losses on financial instruments not eligible for hedge accounting (reported in Gains/(losses) from the fair value of financial instruments), £1,133,000 loss;

- a revised estimate of 2020 restructuring costs, £570,000 gain; and

- a US defined benefit pension scheme past service cost, £1,626,000 loss.

9.         Property, plant and equipment

The Group makes significant investments in distribution and in-house manufacturing infrastructure. During the year we have significantly expanded our production facility in Wales and invested in our manufacturing equipment in the UK. We expect to complete this facility and continue our investments in property, plant and equipment in the coming year.

Accounting policy

Freehold land is not depreciated. Other assets are stated at costs less accumulated depreciation and accumulated impairment losses, if any. Depreciation is provided to write off the costs 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; and vehicles, 3 to 4 years.


Freehold

 

 

Assets in the



land and

Plant and

Motor

course of



buildings

equipment

vehicles

construction

Total

Year ended 30 June 2023

£'000

£'000

£'000

£'000

£'000

Cost






At 1 July 2022

217,820

263,557

7,520

7,481

496,378

Additions

1,730

16,934

1,033

54,075

73,772

Transfers

3,240

4,847

-

(8,087)

-

Disposals

(5,383)

(9,681)

(1,369)

-

(16,433)

Currency adjustment

(4,022)

(2,501)

(72)

-

(6,595)

At 30 June 2023

213,385

273,156

7,112

53,469

547,122

Depreciation

 

 

 

 

 

At 1 July 2022

43,816

202,214

6,495

-

252,525

Charge for the year

4,175

14,891

576

-

19,642

Disposals

(1,619)

(5,544)

(1,167)

-

(8,330)

Currency adjustment

(725)

(2,015)

(60)

-

(2,800)

At 30 June 2023

45,647

209,546

5,844

-

261,037


 

 

 

 

 

Net book value

 

 

 

 

 

At 30 June 2023

167,738

63,610

1,268

53,469

286,085

At 30 June 2022

174,004

61,343

1,025

7,481

243,853

 

Losses on disposals of Property, plant and equipment amounted to £155,000 (2022: £157,000). Additions to assets in the course of construction comprise £42,646,000 (2022: £826,000) for land and buildings and £11,429,000 (2022: £6,318,000) for plant and equipment. At 30 June 2023, properties with a net book value of £88,778,000 (2022: £54,208,000) were subject to a fixed charge to secure the UK defined benefit pension scheme liabilities.


Freehold

 

 

Assets in the



land and

Plant and

Motor

course of



buildings

equipment

vehicles

construction

Total

Year ended 30 June 2022

£'000

£'000

£'000

£'000

£'000

Cost

 

 

 

 


At 1 July 2021

216,783

242,432

7,421

7,109

473,745

Additions

5,715

16,756

1,150

7,144

30,765

Transfers of assets in the course of construction

2,800

3,972

-

(6,772)

-

Transfers to investment properties

(11,563)

-

-

-

(11,563)

Disposals

97

(3,587)

(1,269)

-

(4,759)

Currency adjustment

3,988

3,984

218

-

8,190

At 30 June 2022

217,820

263,557

7,520

7,481

496,378

Depreciation






At 1 July 2021

38,530

182,557

6,416

-

227,503

Charge for the year

4,623

20,029

1,056

-

25,708

Impairment

1,259

-

-

-

1,259

Transfers to investment properties

(1,222)

-

-

-

(1,222)

Disposals

81

(2,837)

(1,180)

-

(3,936)

Currency adjustment

545

2,465

203

-

3,213

At 30 June 2022

43,816

202,214

6,495

-

252,525







Net book value






At 30 June 2022

174,004

61,343

1,025

7,481

243,853

At 30 June 2021

178,253

59,875

1,005

7,109

246,242








 

10.        Right-of-use assets

The Group leases mostly properties and cars from third parties and recognises an associated right-of-use asset where we are afforded control and economic benefit from the use of the asset.

Accounting policy

At the commencement date of a lease arrangement the Group recognises a right-of-use asset for the leased item and a lease liability for any 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 incentives received. See note 21 for further detail on lease liabilities. Right-of-use assets are subsequently depreciated on a straight-line basis from the commencement date to the earlier of the end of the useful life or the end of the lease term.

 


Leasehold property

Plant and equipment

Motor vehicles

Total

Year ended 30 June 2023

£'000

£'000

£'000

£'000

 

Net book value





At 1 July 2022

8,055

117

1,778

9,950

Additions

261

64

2,907

3,232

Reductions in consideration

(308)

-

(13)

(321)

Depreciation

(2,737)

(93)

(1,392)

(4,222)

Currency adjustment

(202)

1

(36)

(237)

At 30 June 2023

5,069

89

3,244

8,402

 


Leasehold property

Plant and equipment

Motor vehicles

Total

Year ended 30 June 2022

£'000

£'000

£'000

£'000

 

Net book value





At 1 July 2021

10,297

102

2,030

12,429

Additions

1,293

115

1,058

2,466

Depreciation

(2,805)

(102)

(1,298)

(4,205)

Impairment

(1,837)

-

-

(1,837)

Currency adjustment

1,107

2

(12)

1,097

At 30 June 2022

8,055

117

1,778

9,950

 

11.        Investment properties

The Group's investment properties consist of five properties in the UK, Ireland and India. Which, are occupied by rent-paying third parties.

Accounting policy

Where property owned by the Group is deemed to be held to earn rentals or for long-term capital appreciation it is recognised as investment property.

Where a property is part-occupied by the Group, portions of the property are recognised as investment property if they meet the above description and if these portions could be sold separately and reliably measured. If the portions could not be sold separately, the property is recognised as an investment property only if a significant proportion is held for rental or appreciation purposes.

The Group has elected to value investment properties on a cost basis, initially comprising an investment property's purchase price and any directly attributable expenditure. Depreciation is provided to write off the cost of assets on a straight-line basis over their estimated useful economic lives, being 50 years. Amounts relating to freehold land is not depreciated.

 

 

 

 

 

 


2023

2022


£'000

£'000

Cost

 


Balance at the beginning of the year

11,905

-

Transfers from Property, plant and equipment

-

11,563

Additions

252

195

Disposals

-

(102)

Currency adjustment

(261)

249

Balance at the end of the year

11,896

11,905

Depreciation

 


Balance at the beginning of the year

1,337

-

Transfers from Property, plant and equipment

-

1,222

Charge for the year

240

190

Disposals

-

(81)

Currency adjustment

(4)

6

Balance at the end of the year

1,573

1,337


 


Net book value

10,323

10,568

 

The Group has no restrictions on the realisability of its investment properties and no contractual obligations to purchase, construct or develop investment properties.

Amounts recognised in the Consolidated income statement relating to investment properties:


2023

2022

 

£'000

£'000

Rental income derived from investment properties

915

453

Direct operating expenses (including repairs and maintenance)

258

105

Profit arising from investment properties

657

348

 

The fair value of the Group's investment properties totalled £14,718,000 at 30 June 2023 (2022: £14,626,000). Fair values of each investment property have been determined by independent valuers who hold recognised and relevant professional qualifications and have recent experience in the location and category of each investment property being valued.

12.        Intangible assets

Our Consolidated balance sheet contains significant intangible assets, mostly in relation to goodwill, which arises when we acquire a business and pay a higher amount than the fair value of its net assets, and capitalised development costs. We make significant investments into the development of new products, which is a key part of our business model, and some of these costs are initially capitalised and then expensed over the lifetime of future sales of that product.

Accounting policy

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.

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 10 years.

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; 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 the useful economic life appropriate to each product or process, ranging from five to 10 years, and is stated at cost less accumulated amortisation and less accumulated impairment losses. Amortisation commences when a product or process is available for use as intended by management. Capitalised development expenditure is removed from the balance sheet 10 years after being fully amortised.

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 fair value less costs to sell 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 judgement - Whether a project meets the criteria for capitalisation          

Product development costs are capitalised once a project has reached a certain stage of development, being the point at which the product has passed testing to demonstrate it meets the technical specifications of the project and it satisfies all applicable regulations. Judgements are required to assess whether the new product development has reached the appropriate point for capitalisation of costs to begin. These costs are subsequently amortised over their useful economic life once ready for use. Should a product be subsequently obsoleted, the accumulated capitalised development costs would need to be immediately written off in the Consolidated income statement.

Key estimate - Estimates of future cash flows used for impairment testing.

Determining whether goodwill and capitalised development costs are impaired requires an estimation of the value-in-use of cash-generating units (CGUs) to which goodwill has been allocated. To calculate the value-in-use we need to estimate the future cashflows of each CGU and select the appropriate discount rate for each CGU.


 

 

Other

Internally

generated

Software licences and



 

intangible

development

Intellectual



Goodwill

assets

costs

property

Total

Year ended 30 June 2023

£'000

£'000

£'000

£'000

£'000


 

 

 

 


Cost






At 1 July 2022

20,475

4,629

168,212

22,379

215,695

Additions

-

254

10,448

125

10,827

Disposals

-

-

-

(10,518)

(10,518)

Currency adjustment

(214)

(8)

-

(8)

(230)

At 30 June 2023

20,261

4,875

178,660

11,978

215,774

Amortisation

 

 

 

 

 

At 1 July 2022

9,028

2,240

139,460

20,749

171,477

Charge for the year

-

179

5,150

833

6,162

Impairment

-

-

1,611

-

1,611

Disposals

-

-

-

(9,969)

(9,969)

Currency adjustment

-

33

-

(8)

25

At 30 June 2023

9,028

2,452

146,221

11,605

169,306

Net book value

 

 

 

 

 

At 30 June 2023

11,233

2,423

32,439

373

46,468

At 30 June 2022

11,447

2,389

28,752

1,630

44,218



 

 

Goodwill

Other intangible assets

Internally generated development costs

Software licences and intellectual property

 

 

 

Total

Year ended 30 June 2022

£'000

£'000

£'000

£'000

£'000







Cost






At 1 July 2021

19,533

15,783

177,291

24,962

237,569

Additions

-

53

7,966

876

8,895

Write-off

-

-

-

(3,510)

(3,510)

Disposals

-

(11,211)

(17,045)

-

(28,256)

Currency adjustment

942

4

-

51

997

At 30 June 2022

20,475

4,629

168,212

22,379

215,695

Amortisation






At 1 July 2021

9,028

13,254

151,807

19,685

193,774

Charge for the year

-

201

4,698

1,024

5,923

Disposals

-

(11,211)

(17,045)

-

(28,256)

Currency adjustment

-

(4)

-

40

36

At 30 June 2022

9,028

2,240

139,460

20,749

171,477

Net book value






At 30 June 2022

11,447

2,389

28,752

1,630

44,218

At 30 June 2021

10,505

2,529

25,484

5,277

43,795

 

 

 

Goodwill

 

Goodwill has arisen on the acquisition of several businesses and has an indeterminable useful life. It is therefore not amortised but is instead 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). 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.

 

The analysis of goodwill according to business acquired is:

 

 

2023

2022

 

 

£'000

£'000

itp GmbH

 

2,985

2,985

Renishaw Mayfield S.A.

 

2,089

2,055

Renishaw Fixturing Solutions, LLC

 

5,454

5,677

Other smaller acquisitions

 

705

730

Total goodwill

 

11,233

11,447

 

The recoverable amounts of acquired goodwill are based on value-in-use calculations. These calculations use cash flow projections based on the financial business plans approved by management for the next five financial years. 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:

 

 

2023

2022

Business acquired

CGU

Discount rate

Discount rate

itp GmbH

itp GmbH entity ('ITP')

13.2%

11.3%

Renishaw Fixturing Solutions, LLC

Renishaw plc ('PLC')

14.3%

11.5%

Renishaw Mayfield S.A.

Renishaw Mayfield S.A. entity ('Mayfield')

26.3%

22.9%

 

The Group post-tax weighted average cost of capital, calculated at 30 June 2023, is 10.7% (2022: 9.0%). The increase is mainly driven by higher risk-free rates in the market. Pre-tax discount rates for Manufacturing technologies CGUs (ITP and PLC) are calculated from this basis, given that they are aligned with the wider Group's industries, markets and processes. The Analytical instruments and medical devices' CGU (Mayfield) has a higher risk weighting, reflecting the less mature nature of this segment.

 

During the period, the CGU relating to the goodwill arising on the acquisition of Renishaw Fixturing Solutions, LLC has been changed from the Renishaw fixturing product line to Renishaw plc. This follows the closure of Renishaw Fixturing Solutions, LLC, with production of fixturing products now undertaken by the manufacturing division of Renishaw plc.

For there to be an impairment in the PLC, ITP or Mayfield CGUs the discount rate would need to increase to at least 20%, 18% and 32% respectively.

 

The following bases have been used in determining cash flow projections:

 

CGU

2023

Basis of forecast

2022

Basis of forecast

itp GmbH entity

five-year business plan

five-year business plan

Renishaw plc

five-year business plan

five-year business plan

Renishaw Mayfield S.A. entity

five-year business plan

five-year business plan

 

These five-year business plans are considered fair 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. Within these plans, revenue forecasts are calculated with reference to external market data, Renishaw past outperformance, and new product launches, consistent with revenue forecasts across the Group. Production costs, engineering costs, distribution costs and administrative expenses are calculated based on management's best estimates of what is required to support revenue growth and new product development. Estimates of capital expenditure and working capital requirements are also included in the cash flow projections.

 

The key estimate 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 modelling a reduction 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 29% for ITP, 30% for PLC and 21% for Mayfield. Management deems the likelihood of these reductions to be unlikely.

 

Internally generated development costs

 

The key assumption in determining the value-in-use for internally generated development costs is the forecast unit sales over the useful economic life, 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 to 10 years, the period over which product demand forecasts can be reasonably predicted and internally generated development costs are written off, are discounted using pre-tax discount rates, which are calculated from the Group post-tax weighted average cost of capital of 10.7% (2022: 9.0%).

There was an impairment of £1,611,000 (2022: nil) of internally generated development costs in the year, which wholly related to a drug delivery project in our Neurological business. Revenue from our drug delivery business continues to be slow due to the long lead-time of pharmaceutical programmes, although we remain confident in our opportunity pipeline. The uncertainty of the near-term cash flows resulted in this partial impairment of £1,611,000, with the remaining net book value totalling £1,984,000 at 30 June 2023.

For the largest projects, comprising 95% of the net book value at 30 June 2023, a 10% reduction to forecast unit sales, or an increase in the discount rate by 5%, would result in an impairment of less than £800,000.

 

13.        Investments in joint ventures

Where we make an investment in a company which gives us significant influence but not full control, we account for our share of their post-tax profits in our financial statements. We have joint venture arrangements with two companies, RLS and MSP.

 

The Group's investments in joint ventures (all investments being in the ordinary share capital of the joint ventures), whose accounting years end on 30 June, were:

Country of

incorporation and

principal place of business

Ownership

Ownership

2023

2022

%

%

RLS Merilna tehnika d.o.o. ('RLS') - joint venture

Slovenia

50.0

50.0

Metrology Software Products Limited ('MSP') - joint venture

England & Wales

70.0

70.0

 

Although the Group owns 70% of the ordinary share capital of MSP, this is accounted for as a joint venture as the 'control' requirements of IFRS 10 are not satisfied. This is primarily because the shareholders agreement includes that for so long as the Group's holding is less than 75% of the total shares of MSP, Renishaw agrees to exercise its voting rights such that it only votes as if it has the same aggregate shareholding as the remaining Management Shareholders.

 

Movements during the year were:

2023

2022

 

£'000

£'000

Balance at the beginning of the year

20,570

16,634

Dividends received

(924)

(525)

Share of profits of joint ventures

2,768

4,342

Currency differences

-

119

Balance at the end of the year

22,414

20,570

 

Summarised financial information for joint ventures:

 

 

 

 

RLS

MSP

 

2023

2022

2023

2022

 

£'000

£'000

£'000

£'000

Assets

43,168

42,308

4,539

4,601

Liabilities

(4,969)

(7,422)

(378)

(963)

Net assets

38,199

34,886

4,161

3,638

Group's share of net assets

19,100

17,443

2,913

2,547

Revenue

35,764

35,247

2,554

2,492

Profit/(loss) for the year

5,162

7,886

264

570

Group's share of profit/(loss) for the year

2,583

3,943

185

399







 

The financial statements of RLS have been prepared on the basis of Slovenian Accounting Standards.

The financial statements of MSP have been prepared on the basis of FRS 102.

 

14.        Leases (as lessor)

The Group acts as a lessor for Renishaw-manufactured equipment on finance and operating lease arrangements. This is principally for high-value capital equipment such as our additive manufacturing machines.

 

Accounting policy

 

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. Standard contract terms are up to five years and there is a nominal residual value receivable at the end of the contract.

 

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. Operating leases are on one to five year terms.

 

The total future lease payments are split between the principal and interest amounts below:

 

 

2023

 

 

2022


 

Gross investment

£'000

 

Interest

£'000

Net investment

£'000

Gross investment £'000

 

Interest

£'000

Net investment

£'000

Receivable in less than one year

4,375

611

3,764

3,703

355

3,348

Receivable between one and two years

3,600

447

3,153

2,882

252

2,630

Receivable between two and three years

3,283

289

2,994

2,015

148

1,867

Receivable between three and four years

2,478

151

2,327

1,779

70

1,709

Receivable between four and five years

1,502

41

1,461

770

15

755

Total future minimum lease payments receivable

15,238

1,539

13,699

11,149

840

10,309

 

Finance lease receivables are presented as £9,935,000 (2022: £6,961,000) non-current assets and £3,764,000 (2022: £3,348,000) current assets in the Consolidated balance sheet.

 

The total of future minimum lease payments receivable under non-cancellable operating leases were:

 

 

2023

2022

 

£'000

£'000

Receivable in less than one year

1,394

1,246

Receivable between one and four years

1,569

2,365

Total future minimum lease payments receivable

2,963

3,611

 

During the year, £974,000 (2022: £1,184,000) was recognised in Revenue from operating leases.

 

 

15.        Cash and cash equivalents and bank deposits

We have always valued having cash in the bank to protect the Group from downturns and enable us to react swiftly to investment or market capture opportunities. We currently hold significant cash and bank deposits, which is mostly in the UK and spread across a number of banks with high credit ratings.

Accounting policy

Cash and cash equivalents comprise cash balances, and deposits with an original maturity of less than three months or 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.

Cash and cash equivalents

An analysis of cash and cash equivalents at the end of the year was:

 

 

2023

2022

 

 

£'000

£'000

Bank balances and cash in hand

 

80,196

141,208

Short-term deposits

 

1,192

11,954

Balance at the end of the year

 

81,388

153,162

 

Bank deposits

Bank deposits at the end of the year amounted to £125,000,000 (2022: £100,000,000), of which £30,000,000 matured on 7 August 2023, and £45,000,000 matures in December 2023, and £50,000,000 matures in March 2024.

 

16.        Inventories

We have increased our inventories in the year, in line with increases in global demand and reflecting planned increases in certain component safety stock levels to mitigate global supply shortages, and remain committed to high customer delivery performance.

 

Accounting policy

 

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 management to estimate future demand, especially in respect of provisioning for slow moving and potentially obsolete inventory. When calculating an inventory provision, management use historic usage levels (capped at 18 months), demand from customer orders and manufacturing build plans as a basis for estimating the future annual demand of individual stock items, except in the following instances:

 

-       for key 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 key products and related components where the sales history is more volatile; and

-       where strategic purchases of critical components have been made, an outlook beyond three years is considered where appropriate.

 

An analysis of inventories at the end of the year was:

 

 

2023

2022

 

 

£'000

£'000

Raw materials

 

66,210

56,034

Work in progress

 

35,354

31,002

Finished goods

 

84,193

75,446

Balance at the end of the year

 

185,757

162,482

 

At the end of the year, the gross cost of inventories which had provisions held against them totalled £24,525,000 (2022: £17,520,000). During the year, the amount of write-down of inventories recognised as an expense in the Consolidated income statement was £8,228,000 (2022: £481,000).

 

A 10% reduction in the value of exceptions in the Renishaw plc inventory calculation would result in an increase in the write-down of inventories of £1,130,000. Inventories in Renishaw plc account for 64% of total inventories of the Group.

 

17.        Provisions

A provision is a liability recorded in the Consolidated balance sheet, where there is uncertainty over the timing or amount that will be paid, and is therefore often estimated. The main provision we hold is in relation to warranties provided with the sale of our products.

 

Accounting policy

 

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.

 

Warranty provision movements during the year were:

 

2023

2022

 

£'000

£'000

Balance at the beginning of the year

4,244

6,259

Created during the year

2,382

1,975

Unused amounts reversed

(717)

(1,688)

Utilised in the year

(3,151)

(2,302)

 

(1,486)

(2,015)

Balance at the end of the year

2,758

4,244

 

The warranty provision has been calculated on the basis of historical return-in-warranty information and other internal reports. It is expected that most of this expenditure will be incurred in the next financial year and all expenditure will be incurred within three years of the balance sheet date.

 

18.        Contract liabilities

Contract liabilities represent the Group's obligation to transfer goods, capital equipment and/or services to a customer for which the Group has either received consideration or consideration is due from the customer. Our balances mostly comprise advances received from customers and payments for services yet to be completed.

Balances at the end of the year were:

2023

2022

 

£'000

£'000

Goods, capital equipment and installation

615

1,470

Aftermarket services

4,793

4,471

Deferred revenue

5,408

5,941

Advances received from customers

4,563

7,015

Balance at the end of the year

9,971

12,956

 

The aggregate amount of the transaction price allocated to performance obligations that are unsatisfied at the end of the year is £9,971,000 (2022: £12,956,000). Of this, £2,214,000 (2022: £1,620,000) is not expected to be recognised in the next financial year.

 

19.        Other payables

Separate to our trade payables and contract liabilities, which directly relate to our trading activities, our Other payables mostly comprises amounts payable to employees, or relating to employees.

Balances at the end of the year were:

 

 

2023

2022

 

 

£'000

£'000

Payroll taxes and social security

 

6,677

6,823

Performance bonuses

 

11,338

16,179

Holiday pay and retirement accruals

 

7,383

7,810

Indirect tax payable

 

4,486

1,762

Other creditors and accruals

 

18,246

19,375

Total other payables

 

48,130

51,949

 

Holiday pay accruals are based on a calculation of the number of days' holiday earned during the year, but not yet taken. Other creditors and accruals includes a number of other individually smaller accruals.

 

20.        Borrowings

The Group's only source of external borrowing is a fixed-interest loan facility in our Japanese subsidiary, entered into to directly finance the purchase of a new distribution facility in Japan in 2019.

 

Third-party borrowings at 30 June 2023 consist of 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). 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. There are no covenants attached to this loan.

 

Movements during the year were:

 

 

2023

2022

 

 

£'000

£'000

Balance at the beginning of the year

 

6,079

7,449

Interest

 

46

52

Repayments

 

(914)

(974)

Currency adjustment

 

(517)

(448)

Balance at the end of the year

 

4,694

6,079

 

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 25.

 

21.        Leases (as lessee)

The Group leases mostly distribution properties and cars from third parties and recognises an associated lease liability for the total present value of payments the lease contracts commits us to.

 

Accounting policy

 

At the commencement date of a lease arrangement the Group recognises a right-of-use asset for the leased item and a lease liability for any payments due. 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 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.

 

Lease liabilities are analysed as below:

 

 

2023

 

Leasehold property

£'000

 

Plant and  equipment

£'000

 

Motor

vehicles

£'000

 

 

Total

£'000

Due in less than one year

1,737

21

1,520

3,278

Due between one and two years

691

13

1,192

1,896

Due between two and three years

510

13

858

1,381

Due between three and four years

351

6

387

744

Due between four and five years

110

1

66

177

Due in more than five years

3,481

-

-

3,481

Total future minimum lease payments payable

6,880

54

4,023

10,957

Effect of discounting

(1,566)

(1)

(756)

(2,324)

Lease liability

5,314

53

3,267

8,633

 

 

 

2022

 

Leasehold property

£'000

 

Plant and  equipment

£'000

 

Motor

vehicles

£'000

 

 

Total

£'000

Due in less than one year

2,916

33

930

3,879

Due between one and two years

1,857

18

523

2,398

Due between two and three years

805

10

278

1,093

Due between three and four years

624

9

78

711

Due between four and five years

553

3

7

563

Due in more than five years

3,611

-

-

3,611

Total future minimum lease payments payable

10,366

73

1,816

12,255

Effect of discounting

(1,993)

(1)

(81)

(2,075)

Lease liability

8,373

72

1,735

10,180

 

Lease liabilities are also presented as a £3,009,000 (2022: £3,714,000) current liability and a £5,624,000 (2022: £6,466,000) non-current liability in the Consolidated balance sheet.

 

Amounts recognised in the Consolidated income statement relating to leases were:

 

 

2023

2022

 

 

£'000

£'000

Depreciation of right-of-use assets

 

4,223

4,205

Impairment of right-of-use assets

 

-

1,837

Derecognition of lease liabilities

 

-

(1,985)

Interest expense on lease liabilities

 

348

481

Expenses relating to short-term and low-value leases

 

471

51

Total expense recognised in the Consolidated income statement

 

5,042

4,589

Total cash outflows for leases

 

5,025

4,613

 

During the previous year we withdrew from Russia, including moving out of a leased property by August 2022. We therefore derecognised amounts relating to the leased property totalling £1,985,000, with a corresponding impairment to the right-of-use asset of £1,837,000.

22.        Changes in liabilities arising from financing activities

 

1July 2022

Cash flows

Other

Currency

30 June 2023

Lease liabilities

10,180

(4,206)

2,918

(259)

8,633

Borrowings

6,079

(914)

46

(517)

4,694

 

16,259

(5,120)

2,964

(776)

13,327

 

 

1July 2021

 

Cash flows

 

Other

 

Currency

 

30 June 2022

Lease liabilities

12,562

(4,081)

513

1,186

10,180

Borrowings

7,449

(974)

52

(448)

6,079

 

20,011

(5,055)

565

738

16,259

 

See notes 20 and 21 for further details on borrowing and leasing activities.

 

23.        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 Group's largest defined benefit scheme is in the UK.

 

Accounting policy

 

Defined benefit pension schemes are administered by trustees who are independent of the Group finances. Investment assets of the schemes are measured at fair value using the bid price of the unitised investments, quoted by the investment manager, at the reporting date. Pension scheme liabilities are measured using a projected unit method and discounted at the current rate of return on a high-quality corporate bond of equivalent term and currency to the liability. Remeasurements arising from defined benefit schemes comprise actuarial gains and losses, the return on scheme assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest). The Company recognises them immediately in Other comprehensive income and all other expenses related to defined benefit schemes are included in the Consolidated income statement.

 

The pension schemes' surpluses, to the extent that they are considered recoverable, or deficits are recognised in full and presented on the face of the Consolidated balance sheet under Employee benefits. Where a guarantee is in place in relation to a pension scheme deficit, liabilities are reported in accordance with IFRIC 14 'The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction'. To the extent that contributions payable will not be available as a refund after they are paid into the plan, a liability is recognised at the point the obligation arises, which is the point at which the minimum funding guarantee is agreed. Overseas-based employees are covered by a combination of 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 low 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.

 

Key estimate - Valuation of defined benefit pension schemes' liabilities

 

Determining the value of the future defined benefit obligation requires estimation in respect of the assumptions used to determine the present values. These include future mortality, discount rate and inflation. Management makes these estimates in consultation with independent actuaries.

 

The total pension cost of the Group for the year was £26,142,000 (2022: £21,988,000), of which £126,000 (2022: £121,000) related to Directors and £6,220,000 (2022: £5,292,000) related to overseas schemes.

 

The latest full actuarial valuation of the UK defined benefit pension scheme was carried out as at 30 September 2021 and updated to 30 June 2023 by a qualified independent actuary. The mortality assumption used for 2023 is the S3PxA base tables and CMI 2022 model, with long-term improvements of 1% per annum. Adjustments have been made to both the core base tables and CMI 2022 model to allow for the scheme's membership profile and best estimate assumptions of future mortality improvements.

 

Major assumptions used by actuaries for the UK, Ireland and US schemes were:

 


30 June 2023

       30 June 2022


 

UK scheme

Ireland scheme

 

US scheme

 

UK scheme

Ireland scheme

 

US scheme

Rate of increase in pension payments

3.05%

2.70%

-

3.05%

2.45%

-

Discount rate

5.10%

3.60%

-

3.60%

3.20%

4.50%

Inflation rate (RPI)

3.25%

2.70%

-

3.10%

2.45%

-

Inflation rate (CPI)

2.25% pre-2030

-

-

2.10% pre-2030

-

-

 

3.25% post-2030

 

 

3.10% post-2030



Retirement age

64

65

65

64

65

65









 

 

The life expectancies from the retirement age of 65 for the UK scheme implied by the mortality assumption at age 65 and 45 are:

 

 

2023

2022

 

 

years

years

Male currently aged 65

 

21.1

21.5

Female currently aged 65

 

23.5

23.8

Male currently aged 45

 

21.8

22.2

Female currently aged 45

 

24.3

24.7

 

The weighted average duration of the UK defined benefit obligation is around 17 years (2022: 22 years).

 

The assets and liabilities in the defined benefit schemes at the end of the year were:

 


30 June 2023 £'000

% of total assets

30 June 2022 £'000

% of total assets

Market value of assets:





  Index linked gilts

55,183

28

1,489

1

  Credit and fixed income funds

54,656

28

19,489

9

  Cash and other

40,576

20

802

-

  Multi-asset funds

26,966

14

82,442

38

  Fixed interest gilts

13,219

7

1,502

1

  Equities

5,729

3

111,025

51

 

196,329

100

216,749

100

Actuarial value of liabilities

(138,958)

-

(174,504)

-

Surplus/(deficit) in the schemes

57,371

-

42,245

-

Deferred tax thereon

(14,348)

-

(11,048)

-

 

The UK scheme was in a net surplus position at 30 June 2023 totalling £57,416,000, (2022: surplus £40,331,000), and is therefore presented in non-current assets in the Consolidated balance sheet. The Ireland scheme was in a net deficit position at 30 June 2023 (2022: deficit), totalling £45,000, and is therefore presented in non-current liabilities.

 

Equities are held in externally-managed funds and primarily relate to UK and US equities. Credit and fixed income funds, fixed interest gilts, and index linked gilts 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 25. 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 at 30 June 2023 mostly comprises a Sterling liquidity fund, in which the principal is preserved and same day liquidity is available.

 

In October 2022, following a significant improvement in the UK scheme's funding position due to rising gilt yields, the Trustees (in consultation with the Company) de-risked the investment strategy by disinvesting from the scheme's equity and diversified growth holdings and investing the proceeds into index-linked gilts. The overall impact of these changes is to reduce investment risk, with the assets better matching the expected movements in the liabilities. We now believe the scheme is fully funded and are in the process of seeking to insure the liabilities. No scheme assets are directly invested in the Group's own equity.

 

The movements in the schemes' assets and liabilities were:

 

 

Assets

Liabilities

Total

Year ended 30 June 2023

£'000

£'000

£'000

Balance at the beginning of the year

216,749

(174,504)

42,245

Contributions paid

2,341

-

2,341

Interest on pension schemes

7,745

(6,135)

1,610

Remeasurement loss from augmentation of members' benefits (US)

-

(1,930)

(1,930)

Remeasurement gain/(loss) under IAS 19

(16,722)

30,334

13,612

Scheme administration expenses

(398)

-

(398)

(Loss)/gain on settlements

(1,098)

989

(109)

Benefits paid

(12,288)

12,288

-

Balance at the end of the year

196,329

(138,958)

57,371

 

 

Assets

Liabilities

Total

Year ended 30 June 2022

£'000

£'000

£'000

Balance at the beginning of the year

231,355

(255,053)

(23,698)

Contributions paid

8,866

-

8,866

Interest on pension schemes

4,337

(4,643)

(306)

Remeasurement loss from augmentation of members' benefits (UK)

-

(11,695)

(11,695)

Remeasurement gain/(loss) under IAS 19, the asset ceiling and IFRIC 14

(17,264)

86,342

69,078

Benefits paid

(10,545)

10,545

-

Balance at the end of the year

216,749

(174,504)

42,245

 

The analysis of the amount recognised in the Consolidated statement of comprehensive income and expense was:

 

2023

2022

 

£'000

£'000

Actuarial gain/(loss) arising from:

 


- Changes in demographic assumptions

2,028

3,860

- Changes in financial assumptions

37,318

67,442

- Experience adjustment

(9,012)

(7,818)

Return on plan assets excluding interest income

(16,722)

(17,264)

Adjustment for the asset ceiling

-

3,280

Adjustment to liabilities for IFRIC 14

-

19,578

Total amount recognised in the Consolidated statement of comprehensive income and expense

13,612

69,078

 

The cumulative amount of actuarial gains and losses recognised in the Consolidated statement of comprehensive income and expense was a loss of £8,807,000 (2022: loss of £22,419,000).

 

The net surplus of the Group's defined benefit pension schemes, on an IAS 19 basis, has increased from £42,245,000 at 30 June 2022 to £57,371,000 at 30 June 2023, primarily reflecting the effect of an increase in the UK discount rate, based on increases in corporate bond yields, which was partially offset by a reduction in investment asset values.

 

In 2022, the Company agreed to an augmentation of UK scheme members' benefits to reflect current and historic administrative revaluation practice. The impact on liabilities of this plan amendment, totalling £11,695,000, was recognised as a past service cost in the Consolidated income statement.

 

In 2023, a termination of the US plan (other than distribution of surplus) was completed, with most members opting for lump sum payments, and it was agreed that the surplus will be distributed to qualifying scheme members. Accordingly, the surplus of £1,930,000 has been treated as an augmentation to member benefits. This, together with related expenses of £209,000, has been reported separately in the Consolidated income statement as a past service cost and excluded from adjusted profit measures.

 

For the UK scheme, the latest actuarial report prepared in September 2021 shows a deficit of £52,800,000, 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 net surplus being higher than the actuarial deficit.

 

The existing deficit funding plan for the UK defined benefit pension scheme is in place until 30 June 2031, at which time any outstanding deficit will be paid. The agreement will end sooner if the actuarial deficit (calculated on a self-sufficiency basis) is eliminated in the meantime. The net book value of properties subject to fixed charges under this agreement at 30 June 2023 was £88,778,000 (2022: £54,208,000).

 

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.

 

Under the Ireland defined benefit pension scheme deficit funding plan, a property owned by Renishaw Ireland (DAC) is subject to a registered fixed charge to secure the Ireland defined benefit pension scheme's deficit.

 

For the UK defined benefit scheme, a guide to the sensitivity of the value of the respective liabilities is as follows:

 

 

 

Approximate

 

Variation

effect on liabilities

UK - discount rate

Increase/decrease by 0.5%

-£9.6m/+£10.7m

UK - future inflation

Increase/decrease by 0.5%

+£8.2m/-£7.6m

UK - mortality

Increased/decreased life by one year

+£4.0m/-£3.8m

 

24.        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 Governance section provides information of how these awards are determined.

Accounting policy

Renishaw shares are granted in accordance with the Renishaw plc deferred annual equity incentive plan (the Plan). 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 straightline 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 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 Remuneration 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.

 

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. These are held by the EBT 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. This amount is accrued over the vesting period.

 

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.

 

The total cost recognised in the 2023 Consolidated income statement in respect of the Plan was £677,000 (2022: £180,000). See note 26 for reconciliations of amounts recognised in Equity

 

In accordance with the Plan, no shares (2022: £1,915,000 equivalent) are to be awarded in respect of 2023.

 

25.        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.

 

Accounting policy

 

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. This note 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. 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.

 

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 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 when the hedging instrument or hedged item no longer qualify for hedge accounting. If the forecast transaction is still expected to occur, but is no longer highly probable, the cumulative gain or loss in the cash flow hedge reserve remains in that reserve until the transaction occurs. If the forecast transaction is no longer expected to occur, the cumulative gain or loss in the cash flow hedge reserve is immediately reclassified 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.

 

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.

 

 

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. Risk is spread across 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:

 

 

Trade & finance lease receivables

Other receivables

Cash and cash equivalents and bank deposits

 

2023

2022

2023

2022

2023

2022

Currency

£'000

£'000

£'000

£'000

£'000

£'000

Pound Sterling

17,530

21,391

20,592

19,565

161,489

201,668

US Dollar

49,609

45,433

814

867

12,465

13,965

Euro

28,418

28,314

1,433

1,568

6,481

8,712

Japanese Yen

16,555

19,480

137

457

6,481

5,720

Other

25,014

23,242

5,003

4,611

19,472

23,097

 

137,126

137,860

27,979

27,068

206,388

253,162

 

The above trade & finance lease receivables, other receivables and cash and bank deposits are predominately held in the functional currency of the relevant entity, with the exception of £19,669,000 (2022: £21,271,000) of US Dollar-denominated trade receivables being held in Renishaw (Hong Kong) Limited and £1,697,000 (2022: £1,852,000) of Euro-denominated trade receivables being held in Renishaw UK Sales Limited, along with some foreign currency cash balances which are of a short-term nature.

 

The ageing of trade receivables past due, but not impaired, at the end of the year was:

 

 

2023

2022

 

 

£'000

£'000

Past due zero to one month

 

11,808

9,548

Past due one to two months

 

3,880

3,879

Past due more than two months

 

9,732

5,252

Balance at the end of the year

 

25,420

18,679

 

Movements in the provision for impairment of trade receivables during the year were:

 

 

2023

2022

 

 

£'000

£'000

Balance at the beginning of the year

 

2,540

3,826

Changes in amounts provided

 

1,784

(834)

Amounts used

 

(886)

(452)

Balance at the end of the year

 

3,438

2,540

 

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.

 

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.

 

 

Risk category 1

Risk category 2

Risk category 3

Risk category 4

Risk category 5

2023

Total

Year ended 30 June 2023

£'000

£'000

£'000

£'000

£'000

£'000

Gross trade receivables

3,126

60,826

57,991

4,922

-

126,865

Expected credit loss rate

0.34%

0.38%

0.41%

0.44%

-

0.39%

Expected credit loss allowance

11

228

240

22

-

501

Specific loss allowance

-

219

1,313

1,405

-

2,937

Total expected credit loss

11

447

1,553

1,427

-

3,438

Net trade receivables

3,115

60,379

56,438

3,495

-

123,427

 

 

Risk category 1

Risk category 2

Risk category 3

Risk category 4

Risk category 5

2022

Total

Year ended 30 June 2022

£'000

£'000

£'000

£'000

£'000

£'000

Gross trade receivables

2,742

51,598

70,298

5,453

-

130,091

Expected credit loss rate

0.19%

0.20%

0.22%

0.24%

-

0.21%

Expected credit loss allowance

5

104

154

13

-

276

Specific loss allowance

-

-

1,502

762

-

2,264

Total expected credit loss

5

104

1,656

775

-

2,540

Net trade receivables

2,737

51,494

68,642

4,678

-

127,551

 

Finance lease receivables are subject to the same approach as noted above for trade receivables.

Derivative assets are assessed based on the credit risk of the banks counterparty to the forward contracts.

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 tax balances are reviewed for recoverability.

Other receivables at the year end comprised:

 

 

2023

2022

 

 

£'000

£'000

Indirect tax receivable

 

9,304

9,010

Software maintenance

 

5,857

7,430

Grants

 

1,426

1,250

Other prepayments

 

11,392

9,378

Total other receivables

 

27,979

27,068

 

The maximum exposure to credit risk is £386,309,000 (2022: £425,211,000), comprising the Group's trade, finance and other receivables, cash and cash equivalents and derivative assets.

The maturities of non-current other receivables, being only derivatives, at the year end were:

 

 

2023

2022

 

 

£'000

£'000

Receivable between one and two years

 

9,443

-

Receivable between two and five years

 

-

-

 

 

9,443

-

 

Liquidity risk

 

Our approach to managing liquidity is to ensure, as far as possible, that we will always have sufficient liquidity to meet our liabilities when due, without incurring unacceptable losses or risking damage to the Group's reputation. We use monthly cash flow forecasts on a rolling 12-month basis to monitor cash requirements.

 

With cash and cash equivalents and bank deposits at 30 June 2023 totalling £206,388,000 and £84,297,000 cash flows generated from operating activities in the period, the Group remains in a strong liquidity position.

 

In respect of cash and cash equivalents and bank deposits, the carrying value is materially the same as fair value because of the short maturity of the bank deposits. Bank deposits are affected by interest rates that are either fixed or floating, which can change over time, affecting the Group's interest income. An increase of 1% in interest rates would result in an increase in interest income of approximately £1,250,000.

 

 

The contractual maturities of financial liabilities at the year end were:

 

 

 

 

 

Contractual cash flows

 

Carrying amount

Effect of discounting

Gross maturities

Up to 1 year

1-2 years

2-5 years

Year ended 30 June 2023

£'000

£'000

£'000

£'000

£'000

£'000

Trade payables

21,551

-

21,551

21,551

-

-

Other payables

48,130

-

48,130

48,130

-

-

Borrowings

4,694

36

4,730

4,730

-

-

Forward exchange contracts

5,209

-

5,209

5,089

120

-

 

79,584

36

79,620

79,500

120

-

 

 

 


Effect of

Gross

Contractual cash flows

 

Carrying amount

discounting

maturities

Up to 1 year

1-2 years

2-5 years

Year ended 30 June 2022

£'000

£'000

£'000

£'000

£'000

£'000

Trade payables

30,947

-

30,947

30,947

-

-

Other payables

51,949

-

51,949

51,949

-

-

Borrowings

6,079

82

6,161

926

5,235

-

Forward exchange contracts

27,353

-

27,353

17,890

9,463

-

 

116,328

82

116,410

101,712

14,698

-

 

Market risk

 

The Group operates in several foreign currencies with the majority of sales being made in these non-Sterling currencies, but with most manufacturing being undertaken in the UK, Ireland and India.

 

A large proportion of sales are made in US Dollar, Euro and Japanese Yen, therefore 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 24 months;

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 29, '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 matured 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.

 

 

The amounts of foreign currencies relating to these forward contracts and options are, in Sterling terms:

 


2023

2022


Nominal value

£'000

Fair value

£'000

Nominal value

£'000

Fair value

£'000

US Dollar

345,010

5,009

306,270

(26,249)

Euro

179,992

1,389

129,799

1,711

Japanese Yen

30,318

3,209

37,941

4,306


555,320

9,607

474,010

(20,232)

 

The following are the exchange rates which have been applicable during the financial year.

 

 

2023

2022

 

Currency

Average forward contract rates

Year end exchange rate

Average exchange rate

Average forward contract rates

Year end exchange rate

Average exchange rate

US Dollar

1.24

1.27

1.21

1.34

1.22

1.33

Euro

1.13

1.16

1.15

1.12

1.16

1.18

Japanese Yen

141

183

166

132

165

156









 

 

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 around 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 resulted in proportions of forward contracts failing hedge effectiveness testing, with nominal value amounting to £247,547,000. These contracts have matured in the periods since, and the remaining nominal value of ineffective forward contracts at 30 June 2023 was nil (2022: £63,045,000). Fair value gains of £5,504,000 (2022: £8,349,000 losses) recognised in the Consolidated income statement relate to the unwinding of the mark-to-market valuations of the ineffective contracts.

 

No contracts have become ineffective during the period. A decrease of 10% in the highly probable forecasts would result in around £30,000,000 nominal value of forward contracts becoming ineffective.

 

The following table details the fair value of these forward foreign currency derivatives according to the categorisations of instruments noted previously:

 

 


2023

 

2022



Nominal value

£'000

Fair value

£'000

Nominal value

£'000

Fair value

£'000

Forward currency contracts in a designated cash flow hedge (i)

 

 



Non-current derivative assets

268,908

9,443

-

-

Current derivative assets

118,271

4,461

77,460

7,077

Current derivative liabilities

109,434

(5,048)

128,950

(12,046)

Non-current derivative liabilities

21,148

(120)

179,149

(9,463)


517,761

8,736

385,559

(14,432)


 

 



Amounts recognised in the Consolidated statement of comprehensive income and expense

 

-

 

23,167

 

-

 

28,423


 

 



Forward currency contracts ineffective as a cash flow hedge (i)

 

 



Current derivative liabilities