Final Results

RNS Number : 4093I

Renishaw PLC

25 July 2012

 



RENISHAW plc

New Mills, Wotton-under-Edge

Gloucestershire GL12 8JR

United Kingdom

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www.renishaw.com

25th July 2012

Renishaw plc and subsidiary undertakings

Preliminary announcement of results for the year ended 30th June 2012

HIGHLIGHTS

	2012	2011	Change
Revenue (£m)	331.9	288.7	+15%
Adjusted operating profit (£m)*	83.2	79.3	+5%
Adjusted profit before tax (£m)*	86.0	80.4	+7%
Adjusted earnings per share (pence)*	95.6	88.5	+8%
Dividend per share (pence)	38.5	35.0	+10%
STATUTORY
Profit before tax (£m)	86.0	82.1	+5%
Basic earnings per share (pence)	95.6	90.8	+5%

* Adjusted figures for are stated after excluding the exceptional item, a reversal of an impairment write-down, in 2011.

CHAIRMAN'S STATEMENT

I am pleased to announce a record set of Group results in terms of both revenue and profit for the year ended 30th June 2012; a year of further progress and growth.

Total Group revenue for the year was £331.9m, 15% ahead of the £288.7m for last year. All geographic areas saw good progress, with growth of 18% in the Americas (revenue of £76.8m), 14% in the Far East (£130.2m), 12% in Europe (£95.7m) and 28% in the UK (£18.9m) benefitting from a full year's trading from acquisitions. In the Far East we saw a strong recovery in the final quarter of the year, principally due to revenue from China.

Group profit before tax for the year was £86.0m, compared with £80.4m last year (excluding a £1.7m exceptional item), an increase of 7%.

Adjusted earnings per share were 95.6p, an increase of 8% over last year's adjusted earnings per share of 88.5p. Reported earnings per share for the year were 95.6p (2011 90.8p).

Segmental analysis

Metrology

Revenue from our metrology business was extremely strong in the last quarter of the year, resulting in revenue for the full year of £305.8m, compared with £267.0m last year, an increase of 15%. Operating profit was £91.8m, compared with £87.7m in 2011. 

All product lines reported growth, apart from encoder products which experienced a slowdown during the year but a recovery in the final quarter. The machine tool and calibration product lines performed particularly well and there was strong interest for our Equator product which is gaining wider exposure and acceptance.

Measurement Devices Limited (MDL) and MTT Investments Limited (the latter now operating as the additive manufacturing product line), acquired last year, also contributed to the growth in this segment. In June an additional 17% shareholding in MDL was acquired, bringing the Company's shareholding to 66%.

New product releases during the period include the Resolute™ ETR,  an absolute encoder with extended temperature range for operation in very cold environments such as aerospace; the XR20-W rotary axis calibrator; the REVO^® SFP1 surface finish probe and a multi-axis option for our Productivity+™ software.

On 3rd February 2012 the Group acquired Thomas Engineering and Construction Limited, an MDL distributor  and services provider based in Canada, for the sum of £0.7m, of which £0.2m was paid at the date of acquisition and the balance is payable over the following two years.

On 26th April 2012 the Group acquired R&R Sales LLC ("R&R") for the sum of £2.6m plus additional payments based on future performance. R&R is a US-based supplier of fixtures for the measurement and inspection market. The acquisition of R&R will provide fixturing solutions for our Equator gauge and enable R&R to expand further by utilising Renishaw's worldwide sales and distribution network.

Healthcare

Revenue from our healthcare business for the year was £26.1m, compared with £21.7m last year, an increase of 20%. Spectroscopy sales were at a record level, driven by an increasing range of applications in nanotechnology, advanced materials and life sciences, and there was also growth in the dental and neurological product lines.

During the year, the Board refocused part of the healthcare activities to a smaller number of projects, particularly in our neurological products line, and withdrew from the supply of radio frequency coils for use in MRI scanning research which was no longer considered core to our business strategy.

Our spectroscopy product line introduced a new integrated Raman/Atomic Force Microscope package and the neurological product line saw further sales of its neuromate^® surgical robot used for neurosurgical procedures with the UK's first Stereo Electro Encephalography procedures being carried out to aid the treatment of chronic epilepsy at Frenchay Hospital in Bristol. The next generation of neuroinspire™ surgical planning software achieved CE approval in January 2012.

The continuing significant expenditure on research and development in this segment resulted in an operating loss of £8.6m, compared with a loss of £8.4m for last year. The Board is targeting that the Healthcare segment will move into profit in the next two years.

Investment for growth

The Group continues to invest for long-term growth and during the year has invested £30.3m (2011 £16.5m) on facilities, plant and machinery and information technology capacity to provide the platform to accommodate growth expectations:-

·      In September 2011, the Group completed its purchase of the premises at Miskin, South Wales. 68,500 sq ft (of a total of 461,000 sq ft) has been refurbished and new CNC machine tools have now been brought into production.

·      In York, construction of 20,000 sq ft of new premises for occupation by MDL has begun, with completion due at the end of this calendar year.

·      In Dublin, planning consent has been received for a 26,000 sq ft extension of our manufacturing facility. This is due to be completed by the end of this calendar year.

·      At New Mills and Charfield, planning consent has been granted for 230,000 sq ft and 50,000 sq ft respectively, primarily to provide additional research and development space on a phased basis.

·      In Slovenia, a new 30,000 sq ft facility has been recently completed and occupied by our associate company, RLS.

During the year the Group expended a total of £47.9m (2011 £40.0m) on engineering including research and development, current product engineering and manufacturing processes, which is planned to increase further in the coming year.

We continue to grow and expand our global marketing and distribution activities to support the new products introduced:-

·      The Group has established a new subsidiary company in Mexico to market and support the Group's products in that country and other Central American countries.

·      We have expanded our working premises in Germany, Brazil and China, and have refurbished and re-occupied a 16,000 sq ft building in Schaumburg, USA.

·      Our Canadian subsidiary has acquired, refurbished and moved into a larger 17,000 sq ft facility in Mississauga, Toronto.

·      Our Spanish subsidiary has relocated to newly acquired premises in Barcelona and, in Italy, our subsidiary purchased the property it has occupied for a number of years.

Balance sheet and working capital

Net cash balances at 30th June 2012 were £21.1m, compared with £23.7m in 2011. In addition, there is an escrow account amounting to £11.5m (30th June 2011 £10.8m) relating to the provision of security to the Company's defined benefit pension scheme.

The Group has also financed an increase of £23.1m in working capital, primarily trade receivables resulting from exceptionally strong revenue in the final quarter.

Directors

David Snowden and Terry Garthwaite have each completed 9 years on the Board and will not be seeking re-election at the AGM on 18th October 2012. The Board is very grateful for their considerable contributions to the Group.

The Board is pleased that Dr David Grant has joined the Board with effect from 25th April 2012 and further appointments will be made in due course.

Resolutions to re-elect all continuing directors will be put to the AGM.

Employees

The directors thank the Group's employees for their continuing support and significant contribution during this successful year. 

Headcount at the end of June 2012 was 2,904, an increase of 229 during the year. There are currently 182 staff vacancies in the Group, of which 118 are in the UK, and in common with other UK engineering companies, Renishaw is continuing to experience difficulty in recruiting high calibre engineers.

Awards

The Group has again received a number of awards during the year, including our 15th Queen's Award, for Enterprise 2012 in the Innovations Category for the SP80 ultra-high accuracy analogue scanning probe. 

Outlook

As expected the final quarter of the year saw an increase in revenue growth and was a record quarter for the Group, with revenue of £103.1m. Renishaw's markets exhibit attractive, long-term structural growth drivers with continuing global investment in production systems and processes. The Group therefore continues to invest a significant amount in R&D, manufacturing, marketing and distribution capability with a number of initiatives underway. Although the world economic outlook is uncertain, the Board remains optimistic regarding the Group's own future and prospects and expects that 2013 will be another year of progress for Renishaw.

Dividends

A final dividend of 28.2 pence per share will be paid on 22nd October 2012 to shareholders on the register on 21st September 2012.

Sir David R McMurtry, CBE, RDI, FREng, FRS, CEng, FIMechE

Chairman & Chief Executive

25th July 2012

CONSOLIDATED INCOME STATEMENT

for the year ended 30th June 2012

		2012	2011
		£'000	£'000
Revenue		331,892	288,750
Cost of sales		(154,996)	(128,443)
Gross profit		176,896	160,307
Distribution costs		(62,155)	(52,088)
Administrative expenses including exceptional item		(31,553)	(27,265)
Operating profit excluding exceptional item		83,188	79,286
Exceptional item:  Reversal of impairment write-down made in 2010		-	1,668
Operating profit		83,188	80,954
Financial income		8,979	7,108
Financial expenses		(6,811)	(6,447)
Share of profits of associates		690	463
Profit before tax		86,046	82,078
Income tax expense		(17,008)	(16,345)
Profit for the year from continuing operations		69,038	65,733

Profit attributable to:		2012	2011
		£'000	£'000
Equity shareholders of the parent company		69,555	66,115
Non-controlling interest		(517)	(382)
Profit for the year from continuing operations		69,038	65,733

		Pence	Pence
Dividend per share arising in respect of the year		38.5	35.0
Dividend per share paid in the year		35.0	23.9
Earnings per share (basic and diluted)		95.6	90.8

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME AND EXPENSE

for the year ended 30th June 2012

		2012	2011
		£'000	£'000
Profit for the year		69,038	65,733
Foreign exchange  translation differences		(1,779)	339
Actuarial loss in the pension schemes		(7,781)	(1,577)
Effective portion of changes in fair value of cash flow
hedges, net of recycling:		9,039	(5,954)
Comprehensive income and expense of associates		(1,229)	164
Deferred tax on income and expense recognised in equity		(1,397)	1,652
Expense recognised directly in equity		(3,147)	(5,376)
Total comprehensive income and expense for the year		65,891	60,357
Attributable to:
Equity shareholders of the parent company		66,408	60,739
Non-controlling interest		(517)	(382)
Total comprehensive income and expense for the year		65,891	60,357

CONSOLIDATED BALANCE SHEET

at 30th June 2012

		2012	2011
		£'000	£'000
Assets
Property, plant and equipment		100,972	82,344
Intangible assets		54,407	47,095
Investments in associates		6,790	7,437
Deferred tax assets		17,777	23,750
Derivatives		3,532	684
Total non-current assets		183,478	161,310
Current assets
Inventories		53,983	49,809
Trade receivables		83,407	61,533
Current tax		2,791	2,134
Other receivables		10,590	8,457
Derivatives		3,157	886
Pension fund cash escrow account		11,523	10,818
Cash and cash equivalents		21,127	23,733
Total current assets		186,578	157,370
Current liabilities
Trade payables		22,900	13,821
Current tax		5,662	5,591
Provisions		1,170	770
Derivatives		1,052	4,789
Other payables		25,596	22,126
Total current liabilities		56,380	47,097
Net current assets		130,198	110,273
Non-current liabilities
Employee benefits		41,988	37,664
Deferred tax liabilities		19,492	17,211
Derivatives		2,313	2,496
Other payables		7,484	12,494
Total non-current liabilities		71,277	69,865
Total assets less total liabilities		242,399	201,718
Equity
Share capital		14,558	14,558
Share premium		42	42
Currency translation reserve		2,583	4,362
Cash flow hedging reserve		2,526	(4,115)
Retained earnings		223,820	187,750
Other reserve		(389)	(389)
Equity attributable to the owners of the Company		243,140	202,208
Non-controlling interest		(741)	(490)
Total equity		242,399	201,718

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 30th June 2012

				Cash
			Currency	flow			Non-
	Share	Share	translation	hedging	Retained	Other	controlling
	capital	premium	reserve	reserve	earnings	reserve	interest	Total
Year ended 30th June 2011	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1st July 2010	14,558	42	4,023	172	140,459	(201)	(432)	158,621
Profit/(loss) for the year	-	-	-	-	66,115	-	(382)	65,733
Other comprehensive income and expense:
Actuarial loss in the pension schemes (net of tax)	-	-	-	-	(1,592)	-	-	(1,592)
Foreign exchange translation differences	-	-	339	-	-	-	-	339
Changes in fair value of cash flow hedges (net of tax)	-	-	-	(4,287)	-	-	-	(4,287)
Relating to associates	-	-	-	-	164	-	-	164
Total other comprehensive income	-	-	339	(4,287)	(1,428)	-	-	(5,376)
Total comprehensive income	-	-	339	(4,287)	64,687	-	(382)	60,357
Acquisition of non-controlling interest	-	-	-	-	-	(188)	324	136
Dividends paid	-	-	-	-	(17,396)	-	-	(17,396)
Transactions with owners recorded directly in equity	-	-	-	-	(17,396)	(188)	324	(17,260)
Balance at 30th June 2011	14,558	42	4,362	(4,115)	187,750	(389)	(490)	201,718
Year ended 30th June 2012
Profit/(loss) for the year	-	-	-	-	69,555	-	(517)	69,038
Other comprehensive income and expense:
Actuarial loss in the pension schemes (net of tax)	-	-	-	-	(6,780)	-	-	(6,780)
Foreign exchange translation differences	-	-	(1,779)	-	-	-	-	(1,779)
Changes in fair value of cash flow hedges (net of tax)	-	-	-	6,641	-	-	-	6,641
Relating to associates	-	-	-	-	(1,229)	-	-	(1,229)
Total other comprehensive income	-	-	(1,779)	6,641	(8,009)	-	-	(3,147)
Total comprehensive income	-	-	(1,779)	6,641	61,546	-	(517)	65,891
Acquisition of non-controlling interest	-	-	-	-	-	-	266	266
Dividends paid	-	-	-	-	(25,476)	-	-	(25,476)
Transactions with owners recorded directly in equity	-	-	-	-	(25,476)	-	266	(25,210)
Balance at 30th June 2012	14,558	42	2,583	2,526	223,820	(389)	(741)	242,399

CONSOLIDATED STATEMENT OF CASH FLOW

for the year ended 30th June 2012

		2012	2011
		£'000	£'000
Cash flows from operating activities
Profit for the year		69,038	65,733
Adjustments for:
Amortisation of development costs		6,747	7,200
Amortisation of other intangibles		3,901	3,855
Depreciation		9,518	7,575
Profit on sale of property, plant and equipment		(94)	(8)
Share of profits from associates		(1,030)	(803)
Reversal of exceptional impairment write-down		-	(1,668)
Financial income		(8,979)	(7,108)
Financial expenses		6,811	6,447
Tax expense		17,008	16,345
		33,882	31,835
Increase in inventories		(4,006)	(15,698)
Increase in trade and other receivables		(24,704)	(16,634)
Increase in trade and other payables		5,173	5,705
Increase in provisions		400	231
		(23,137)	(26,396)
Defined benefit pension contributions		(1,359)	(667)
Income taxes paid		(14,079)	(11,698)
Cash flows from operating activities		64,345	58,807
Investing activities
Purchase of property, plant and equipment		(30,328)	(16,491)
Development costs capitalised		(9,679)	(10,123)
Purchase of other intangibles		(1,123)	(1,203)
Investment in subsidiaries and associates		(2,611)	(8,418)
Sale of property, plant and equipment		414	71
Interest received		695	372
Dividend received from associate		108	84
Contributions to pension fund escrow account (net)		(705)	(10,818)
Cash flows from investing activities		(43,229)	(46,526)
Financing activities
Interest paid		(296)	(208)
Dividends paid		(25,476)	(17,396)
Cash flows from financing activities		(25,772)	(17,604)
Net increase in cash and cash equivalents		(4,656)	(5,323)
Cash and cash equivalents at beginning of the year		23,733	31,143
Effect of exchange rate fluctuations on cash held		2,050	(2,087)
Cash and cash equivalents at end of the year		21,127	23,733

STATUS OF THIS PRELIMINARY ANNOUNCEMENT

The financial information set out above does not constitute the Company's statutory accounts for the years ended 30th June 2012 or 2011 but is derived from those accounts. Statutory accounts for 2011 have been delivered to the registrar of companies, and those for 2012 will be delivered in due course. The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

This preliminary announcement and the presentation of results will be available on the Company's website www.renishaw.com.

NOTES TO THE FINANCIAL STATEMENTS

1. Accounting policies

Basis of preparation

Renishaw plc (the "Company") is a company incorporated in the UK.

The group financial statements consolidate those of the Company and its subsidiaries (together referred to as the "Group") and equity account the Group's interest in associates.

The group financial statements have been prepared and approved by the directors in accordance with International Financial Reporting Standards as adopted by the EU ("adopted IFRS") and those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

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 accounting

The financial statements have been prepared under the historical cost convention, subject to items referred to in the derivative financial instruments note below. The accounting policies set out below have been consistently applied in preparing both the 2011 and 2012 financial statements.

Critical accounting judgements

The preparation of financial statements in conformity with adopted IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis.

The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities in the next financial year are listed below:

(i) Impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of cash generating units (CGUs) to which goodwill has been allocated. The value in use calculation involves an estimation of the future cash flows of CGUs and also the selection of appropriate discount rates, which involves judgement, to calculate present values (see note 10).

(ii) Defined benefit pension scheme liabilities

Determining the value of the future defined benefit obligation requires judgement in respect of the assumptions used to calculate present values. These include future mortality, discount rate, inflation and salary increases. Management makes these judgements in consultation with an independent actuary. Details of the estimates and judgements in respect of the current year are given in note 15.

(iii) Amortisation of intangibles and impairment

The periods of amortisation of intangible assets require judgements to be made on the estimated useful lives of the intangible assets to determine an appropriate rate of amortisation. Future assessments of impairment may lead to the writing off of certain amounts of intangible assets and the consequent charge in the Consolidated income statement for the accelerated amortisation.

(iv) Capitalisation of development costs

Product development costs are capitalised once a project has reached a certain stage of development and these costs are subsequently amortised over a five-year period. Judgements are required to assess whether the new product development has reached the appropriate point for capitalisation of costs to begin. Should a product be subsequently obsoleted, the accumulated capitalised development costs would need to be immediately written off in the Consolidated income statement.

(v) Pension fund cash escrow account

The Company holds a pension fund cash escrow account as part of the security given for the UK defined benefit pension scheme. This account is shown within current assets in the Consolidated balance sheet as it may be used to settle pension fund liabilities at any time.

New, revised or changes to existing accounting standards

There have been no new or amendments to accounting standards and interpretations, issued by the IASB and endorsed by the EU or International Financial Reporting Interpretations Committee (IFRIC), which are effective for the first time in the current financial year and which have had a significant impact on the Group's consolidated results or financial position.

Consolidation

Subsidiaries are entities controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. The consolidated financial statements include the Group's share of the total recognised income and expense of associates on an equity accounted basis, from the date that significant influence commences until the date that significant influence ceases.

Derivative financial instruments

Derivative financial instruments are recognised at fair value. The gain or loss on remeasurement to fair value is recognised immediately in the Consolidated income statement. However, where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of the item being hedged.

Hedge of net investment in foreign operation

The portion of the gain or loss on an instrument used to hedge a net investment in a foreign operation that is determined to be an effective hedge is recognised directly in equity. Any ineffective portion is recognised immediately in the Consolidated income statement. The effectiveness of the hedging is tested monthly.

Goodwill and other intangible assets

Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group.

Costs related to the acquisition, other than those associated with the issue of debt or equity securities, are expensed as incurred. Deferred consideration relating to acquisitions is subject to discounting to the date of acquisition and subsequently unwound to the date of the final payment.

Goodwill arising on acquisition represents the difference between the cost of the acquisition and the fair value of the net identifiable assets acquired, net of deferred tax. Identifiable intangibles are those which can be sold separately or which arise from legal rights regardless of whether those rights are separable.

Goodwill is stated at cost less any accumulated impairment losses. It is not amortised but is tested annually for impairment or earlier if there are any indications of impairment. The annual impairment review involves comparing the carrying amount to the estimated recoverable amount and recognising an impairment loss if the recoverable amount is lower. Impairment losses are recognised through the Consolidated income statement.

Intangible assets such as customer lists, patents, trademarks, 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 5 to 10 years.

On a transaction by transaction basis, the Group elects to measure non-controlling interests, which have both present ownership interests and are entitled to a proportionate share of net assets of the acquiree in the event of liquidation, either at its fair value or at its proportionate interest in the recognised amount of the identifiable net assets of the acquiree at the acquisition date. All other non-controlling interests are measured at their fair value at the acquisition date.

Going concern

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Business review, where also given are details of the financial and liquidity positions. In addition, note 22 in the financial statements includes the Group's objectives and policies for managing its capital, details of its financial instruments and hedging activities and its exposures to credit risk and liquidity risk.

The Group has considerable financial resources at its disposal and the directors have considered the current financial projections. As a consequence, the directors believe that the Group is well placed to manage its business risks successfully.

After making enquiries, the directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the Annual report and accounts.

2.             SEGMENTAL ANALYSIS

Renishaw manages its operations in two segments, comprising metrology and healthcare products. The results of these segments are regularly reviewed by the Board to allocate resources to segments and to assess their performance. The Group evaluates performance of the segments on the basis of revenue and profits. Within metrology, there are multiple operating segments that are aggregated into a reporting segment for reportable purposes, where the nature of the products and their customer base are similar. The revenue, depreciation and amortisation, and operating profit for each reportable segment were:

Year ended 30th June 2012	Metrology	Healthcare	Total
	£'000	£'000	£'000
Revenue	305,832	26,060	331,892
Depreciation and amortisation	16,360	3,806	20,166
Operating profit/(loss) before exceptional item	91,845	(8,657)	83,188
Share of profits from associates	690	-	690
Net financial income			2,168
Profit before tax			86,046
Year ended 30th June 2011	Metrology	Healthcare	Total
	£'000	£'000	£'000
Revenue	267,022	21,728	288,750
Depreciation and amortisation	15,337	3,293	18,630
Operating profit/(loss) before exceptional item	87,738	(8,452)	79,286
Exceptional item - Reversal of impairment write-down	1,668	-	1,668
Share of profits from associates	463	-	463
Net financial income			661
Profit before tax			82,078

There is no allocation of assets and liabilities to operating segments. Depreciation is included within certain other overhead expenditure which is allocated to segments on the basis of the level of activity.

The analysis of revenue by geographical market was:

		2012	2011
		£'000	£'000
Far East		130,169	114,553
Continental Europe		95,702	85,751
North and South America		76,841	65,113
United Kingdom		18,885	14,761
Other regions ("ROW")		10,295	8,572
Total group revenue		331,892	288,750

Revenue in the above table has been allocated to regions based on the geographical location of the customer. Individual countries which comprised more than 10% of group revenue were:

		2012	2011
		£'000	£'000
China		65,166	54,204
USA		64,584	52,796
Germany		42,539	38,612
Japan		38,496	36,139

There was no revenue from transactions with a single customer amounting to 10% or more of the Group's total revenue.

The following table shows the analysis of non-current assets by geographical region:

		2012	2011
		£'000	£'000
United Kingdom		114,329	93,071
Overseas		47,840	43,805
Total non-current assets		162,169	136,876

3.             FINANCIAL INCOME AND EXPENSES

		2012	2011
Financial income		£'000	£'000
Expected return on assets in the pension schemes		8,284	6,736
Bank interest receivable		695	372
Total financial income		8,979	7,108
Financial expenses
Interest on pension scheme liabilities		6,186	6,239
Bank interest payable		296	208
Unwinding of deferred acquisition cost interest		329	-
Total financial expenses		6,811	6,447

4.             INCOME TAX EXPENSE

		2012	2011
		£'000	£'000
Current tax:
UK corporation tax on profits for the year		7,906	9,223
Overseas tax on profits for the year		5,049	7,460
Adjustments for prior years		-	(74)
Total current tax		12,955	16,609
Deferred tax
Origination and reversal of other temporary differences		4,982	447
Effect on deferred tax for change in UK tax rate to 24%		(929)	(711)
		4,053	(264)
Tax charge on profit		17,008	16,345
Effective tax rate (based on profit before tax)		20%	20%

The tax for the year is lower (2011 lower) than the weighted average UK standard rate of corporation tax of 25.5% (2011 27.5%). The differences are explained as follows:

		2012	2011
		£'000	£'000
Profit before tax		86,046	82,078
Tax at 25.5% (2011 27.5%)		21,942	22,571
Effects of:
Different tax rates applicable in overseas subsidiaries		(3,776)	(4,126)
Research and development tax credit		(1,342)	(1,461)
Adjustments for prior years		-	(74)
Expenses not deductible for tax purposes		312	142
Companies with unrelieved tax losses		527	406
Exceptional item with no tax effect		-	(459)
Effect on deferred tax for change in UK tax rate to 24%		(929)	(711)
Other differences		274	57
Tax charge on profit		17,008	16,345

The UK corporation tax rate is proposed to reduce to 22%, with a phased reduction until April 2014.  As a result of the reduction in the corporation tax rate by 1% to 23%, which is expected to take effect from 1st April 2013, the group tax charge is estimated to reduce next year by approximately £600,000. A further reduction of £400,000 in the group tax charge is expected to be made in the following year if the corporation tax rate reductions are enacted as proposed.

5.             EARNINGS PER SHARE

Basic and diluted earnings per share are calculated on earnings after tax of £69,555,000 (2011 £66,115,000) and on 72,788,543 shares, being the number of shares in issue during both years. There is no difference between the weighted average earnings per share and the basic and diluted earnings per share. Adjusted earnings per share figures exclude the exceptional items. The previous year has been amended to be based on the profit attributable to equity shareholders of the Company.

6.             PROPERTY, PLANT AND EQUIPMENT

	Freehold			Assets in the
	land and	Plant and	Motor	course of
	buildings	equipment	vehicles	construction	Total
Year ended 30th June 2012	£'000	£'000	£'000	£'000	£'000
Cost
At 1st July 2011	74,940	84,065	6,516	4,838	170,359
Additions	5,396	3,973	1,522	19,437	30,328
Acquisitions through business combinations	-	689	127	-	816
Transfers	7,961	12,318	-	(20,279)	-
Disposals	-	(2,456)	(749)	-	(3,205)
Currency adjustment	(2,443)	(1,974)	(360)	-	(4,777)
At 30th June 2012	85,854	96,615	7,056	3,996	193,521
Depreciation
At 1st July 2011	17,736	66,143	4,136	-	88,015
Charge for the year	1,747	6,844	927	-	9,518
Released on disposals	-	(2,252)	(633)	-	(2,885)
Currency adjustment	(745)	(1,155)	(199)	-	(2,099)
At 30th June 2012	18,738	69,580	4,231	-	92,549
Net book value
At 30th June 2012	67,116	27,035	2,825	3,996	100,972
At 30th June 2011	57,204	17,922	2,380	4,838	82,344

At 30th June 2012, properties with a net book value of £22,148,000 (2011 £22,718,000) were subject to a registered charge to secure the UK defined benefit pension scheme liabilities.

Additions to assets in the course of construction of £19,437,000 (2011 £6,896,000) comprise £8,285,000 (2011 £2,420,000) for freehold land and buildings and £11,152,000 (2011 £4,476,000) for plant and equipment.

7.             INTANGIBLE ASSETS

			Internally	Software licences
		Other	generated		In the
	Goodwill on	intangible	development		course of
	consolidation	assets	costs	In use	acquisition	Total
Year ended 30th June 2012	£'000	£'000	£'000	£'000	£'000	£'000
Cost
At 1st July 2011	12,694	10,219	46,064	18,516	87	87,580
Additions	-	25	9,679	679	419	10,802
Additions through acquisitions	7,069	43	-	-	-	7,112
Transfers	-	-	-	475	(475)	-
Currency adjustment	(349)	60	-	(18)	-	(307)
At 30th June 2012	19,414	10,347	55,743	19,652	31	105,187
Amortisation
At 1st July 2011	-	4,149	27,721	8,615	-	40,485
Charge for the year	198	1,758	6,747	1,605	-	10,308
Currency adjustment	-	-	-	(13)	-	(13)
At 30th June 2012	198	5,907	34,468	10,207	-	50,780
Net book value
At 30th June 2012	19,216	4,440	21,275	9,445	31	54,407
At 30th June 2011	12,694	6,070	18,343	9,901	87	47,095

Additions to Goodwill on consolidation include £2,794,000 is in respect of the accounting for deferred tax on the intangible assets acquired through business combinations in the year ended 30th June 2011, which was not previously accounted for when assessing the fair value of assets acquired at the time of the acquisitions.

During the year, goodwill of £198,000 relating to the acquisition of PulseTeq Limited was written off following a review of the Group's healthcare strategy.

Goodwill acquired has arisen on the acquisition of a number of businesses and has an indeterminable useful life. Therefore it is not amortised but is tested for impairment annually and at any point during the year when an indicator of impairment exists. Goodwill is allocated to the Group's cash generating units (CGUs), which are currently the statutory entities acquired. This is the lowest level in the Group at which goodwill is monitored for impairment and is at a lower level than the Group's operating segments. In the table below, only the goodwill relating to the acquisition of R&R Sales LLC is expected to be subject to tax relief.

The analysis of acquired goodwill on consolidation is:

		2012	2011
		£'000	£'000
itp GmbH		2,886	3,120
Renishaw Diagnostics Limited (92.4%)		1,784	1,784
Renishaw Mayfield S.A. (75%)		1,559	1,674
Measurement Devices Limited (66%)		6,661	5,713
Renishaw Software Limited		1,559	-
R&R Sales LLC		4,275	-
Other smaller acquisitions		492	403
Total acquired goodwill		19,216	12,694

The recoverable amounts of acquired goodwill are based on value in use calculations. These calculations use cash flow projections with assumptions as follows:

-               itp GmbH  (part of the metrology reportable segment) - actual operating results and an average growth rate of 5% for 5 years with a nil growth rate to perpetuity (2011 same basis).

-               Renishaw Diagnostics Limited, Renishaw Mayfield S.A. (both in the healthcare reportable segment), Measurement Devices Limited and R&R Sales LLC (both in the metrology reportable segment) -5-year business plans with a nil growth rate to perpetuity (2011 same basis where applicable).

These are considered prudent estimates based on management's view of the future and experience of past performance. The growth rates used in the business plans vary from 13% to 26%, except for Renishaw Diagnostics Limited, which is in its research and development phase and thus has negligible revenue to date.

A pre-tax discount rate of 12% has been used in discounting the projected cash flows of itp GmbH, Measurement Devices Limited and R&R Sales LLC (2011 12% where applicable). A pre-tax discount rate of 15% has been used for Renishaw Diagnostics Limited and Renishaw Mayfield S.A. (2011 15%). These have been set on the basis of them being appropriate rates for a market participant. On this basis, no impairment write-downs are required.

There is significant headroom in all the above and for an impairment to arise, there would need to be a significant material deterioration in business; this is considered to be remote. An increase in 5% in the discount rate would not result in an impairment. For goodwill to be impaired in the CGU with the minimum headroom, the discount rate would have to increase to 21.5%.

8.             INVESTMENT IN ASSOCIATES

The Group has the following investments in associates (all investments being in the ordinary share capital of the associate), whose accounting years end on 30th June unless otherwise stated:

		Ownership	Ownership
	Country of	2012	2011
	incorporation	%	%
RLS merilna tehnika d.o.o.	Slovenia	50	50
Metrology Software Products Limited	England & Wales	50	50
Delcam plc (31st December)	England & Wales	20	20

Delcam plc is listed on AIM at the London Stock Exchange. Its share price on 30th June 2012 was £7.525 (2011 £4.55). The Company holds 1,543,032 shares (2011 1,543,032). Equity accounting has been applied in the Group's results based on the company's management accounts to 30th June 2012.

Movements during the year were:

		2012	2011
		£'000	£'000
Balance at the beginning of the year		7,437	5,152
Investments made during the year		-	74
Dividends received		(108)	(84)
Share of profits of associates		1,030	803
Amortisation of intangibles		(340)	(340)
Other comprehensive income and expense		(1,229)	164
Reversal of impairment write-down		-	1,668
Balance at the end of the year		6,790	7,437

Summarised aggregated financial information for associates:

		2012	2011
		£'000	£'000
Revenue		12,287	10,232
Share of profits for the year		1,030	803
Assets		10,771	10,015
Liabilities		6,161	5,049

9.             ACQUISITIONS

Thomas Engineering and Construction Limited

On 3rd February 2012 the Group acquired a 100% shareholding in Thomas Engineering and Construction Limited ("TEC") for the sum of £0.7m, of which £0.2m was paid at the date of acquisition and the balance is payable over the following two years. Prior to acquisition, the company had been a supplier in Canada of products manufactured by Measurement Devices Limited, a subsidiary undertaking of Renishaw plc. Further payments may be payable subject to the future profitability of the acquired company, although the amount is not material.

The fair values of assets acquired were £659,000.

Included in the fair value of assets are acquired intangible assets, which comprise customer relationships and customer list. Acquisition costs were £15,000 and are included in administrative expenses.

Of the total consideration, £211,000 was paid in cash and £448,000 has been accounted for as deferred contingent consideration and is shown within other payables (£203,000 within one year and £245,000 beyond one year).

R&R Sales LLC

On 26th April 2012 the Group acquired a 100% shareholding in R&R Sales LLC, ("R&R") for the sum of £2,609,000. There may be additional payments in respect of the shares acquired based on the earnings of R&R over the five year period to 31st December 2016. An estimate of the outstanding purchase price, based on R&R's five year forecast, but which will be between £nil and £5.9m, is provided for within the financial statements. R&R is a US-based supplier of fixtures for the global measurement and inspection market.

The fair values of assets acquired, which were considered to be not materially different from their book value, were:

			Fair
			value
			£'000
Tangible fixed assets			504
Inventories			119
Receivables and prepayments			227
Cash			77
Creditors			(504)
Fair value of assets acquired			423
Goodwill			4,275
Total consideration			4,698

Of the total consideration, £2,609,000 was paid in cash and £2,089,000 has been accounted for as deferred contingent consideration and is shown within other payables (£151,000 within one year and £1,938,000 beyond one year).

Goodwill exists due to the potential future opportunities from combining this business with the Group's Equator product range. The Group's investment in R&R will enable R&R to expand further on a global basis and benefit from Renishaw's worldwide distribution network and manufacturing expertise. Acquisition costs were £64,000 and are included in administrative expenses.

TEC's and R&R's contribution to the consolidated profit before tax since acquisition and their historical trading results for their previous full year were:

	TEC		R&R
	Period to 30th	Year to 29th	Period to 30th	Year to 31st
	June 2012	February 2012	June 2012	December 2011
	£'000	£'000	£'000	£'000
Revenue	501	1,407	313	1,701
Expenses	(427)	(1,296)	(303)	(1,188)
Profit before tax	74	111	10	513

If TEC and R&R had been within the Group for the full year, their contribution to the Group's revenue would have been £3,110,000 and their contribution to the Group's profit before tax would have been a profit of £536,000.

10.          DEFERRED TAX ASSETS AND LIABILITIES

Balances at the end of the year were:

	2012			2011
	Assets	Liabilities	Net	Assets	Liabilities	Net
	£'000	£'000	£'000	£'000	£'000	£'000
Property, plant and equipment	-	(4,561)	(4,561)	-	(4,628)	(4,628)
Intangible assets	-	(7,630)	(7,630)	-	(5,329)	(5,329)
Intragroup trading (inventory)	7,261	-	7,261	8,690	-	8,690
Pension schemes	9,519	-	9,519	9,393	-	9,393
Other	997	(7,301)	(6,304)	5,667	(7,254)	(1,587)
Balance at the end of the year	17,777	(19,492)	(1,715)	23,750	(17,211)	6,539

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

			2012	2011
			£'000	£'000
Balance at the beginning of the year			6,539	4,623
Movements in the Consolidated income statement			(4,053)	264
Intangible assets acquired			(2,804)	-
Movement in relation to the cash flow hedging reserve			(2,398)	1,667
Movement in relation to the pension schemes			1,001	(15)
Total movement in the Consolidated statement of comprehensive income and expense			(1,397)	1,652
Balance at the end of the year			(1,715)	6,539

No deferred tax asset has been recognised in respect of tax losses carried forward of £8,104,000 (2011 £8,431,000) due to the uncertainty over their recoverability.

11.          DERIVATIVES

		2012	2011
Derivatives comprising the fair value of outstanding forward contracts with positive fair values are shown within:		£'000	£'000
Non-current assets		3,532	684
Current assets		3,157	886
Total of derivatives with positive fair values		6,689	1,570
		2012	2011
Derivatives comprising the fair value of outstanding forward contracts with negative fair values are shown within:		£'000	£'000
Non-current liabilities		2,313	2,496
Current liabilities		1,052	4,789
Total of derivatives with negative fair values		3,365	7,285

12.          EMPLOYEE BENEFITS

The Group operates a number of pension schemes throughout the world. The major scheme, which covers the UK-based employees, was of the defined benefit type. In 2007, this scheme, along with the Irish defined benefit scheme, ceased any future accrual for current members and both were closed to new members. UK and Irish employees are now covered by defined contribution schemes.

The total pension cost of the Group for the year was £9,674,000 (2011 £7,703,000), of which £162,000 (2011 £154,000) related to directors and £3,059,000 (2011 £2,267,000) related to overseas schemes.

The latest full actuarial valuation of the UK defined benefit scheme was carried out at September 2009 and updated to 30th June 2012 by a qualified independent actuary.

The major assumptions used by the actuary for the UK and Irish schemes were:

		2012		2011
	UK scheme	Irish scheme	UK scheme	Irish scheme
Rate of increase in pension payments	2.7%	1.7%	3.4%	2.4%
Discount rate	4.3%	3.4%	5.5%	4.9%
Inflation rate (RPI)	2.7%	1.7%	3.6%	2.4%
Inflation rate (CPI)	1.7%	-	2.9%	-
Expected return on equities	6.7%	5.8%	8.3%	7.5%
Retirement age	64	65	64	65

The mortality assumption used for 2012 is PCA00, year of birth, medium cohort , which reflects the increasing life expectancy.

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

		2012	2011
		£'000	£'000
Market value of assets:
Equities		93,827	99,365
Bonds and cash		1,409	1,684
		95,236	101,049
Actuarial value of liabilities		(137,224)	(138,713)
Deficit in the schemes		(41,988)	(37,664)
Deferred tax thereon		9,519	9,393

The expected rates of return on each asset category are based on market conditions at 30th June 2012 and represent the best estimate of future returns, allowing for risk premiums where appropriate.

The movements in the schemes' assets and liabilities were:

	Assets	Liabilities	Total
Year ended 30th June 2012	£'000	£'000	£'000
Balance at the beginning of the year	101,049	(138,713)	(37,664)
Contributions paid	1,359	-	1,359
Expected return on pension schemes' assets	8,284	-	8,284
Interest on pension schemes' liabilities	-	(6,186)	(6,186)
Actuarial gain/(loss)	(13,868)	6,087	(7,781)
Benefits received/(paid)	(1,588)	1,588	-
Balance at the end of the year	95,236	(137,224)	(41,988)

Under the defined benefit deficit funding plans, there are certain UK properties, owned by Renishaw plc, and a property owned by Renishaw (Ireland) Limited, which are subject to registered fixed charges to secure the UK and Irish defined benefit pension schemes' deficits respectively.  Renishaw plc has also established an escrow account, into which it has paid £11,400,000 in 2011 and into which it is obliged to pay approximately £158,000 per month until September 2012. This account is subject to a registered floating charge to secure the UK defined benefit pension scheme liabilities. The balance of this account was £11,523,000 at the end of the year (2011 £10,818,000).

The Company has given a guarantee relating to recovery plans for the UK scheme and the trustees have the right to enforce the charges to recover any deficit up to £44,210,000 if an insolvency event occurs in relation to the Company before 1st November 2016 or if the Company has not made good any deficit up to £44,210,000 by midnight on 1st November 2016. No scheme assets are invested in the Group's own equity.

The value of the guarantee discussed above is greater than the value of the pension fund's deficit. As such, in line with IFRIC 14, the UK pension fund's liabilities have been increased by £9,700,000, to represent the maximum discounted liability as at 30th June 2012 (30th June 2011 £23,700,000).

13.          INVENTORIES

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

		2012	2011
		£'000	£'000
Raw materials		25,758	20,793
Work in progress		11,511	10,560
Finished goods		16,714	18,456
Balance at the end of the year		53,983	49,809

During the year, the amount of inventories recognised as an expense in the Consolidated income statement was £99,211,000 (2011 £82,320,000) and the amount of write-down of inventories recognised as an expense in the Consolidated income statement was £567,000 (2011 £289,000).

14.          CASH AND CASH EQUIVALENTS

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

		2012	2011
		£'000	£'000
Bank balances and cash in hand		10,118	12,891
Short-term deposits		11,009	10,842
Balance at the end of the year		21,127	23,733

The pension fund cash escrow account is shown separately within current assets. In the previous year, this was shown within cash and cash equivalents.

15.          PROVISIONS

Warranty provision

Movements during the year were:

		2012	2011
		£'000	£'000
Balance at the beginning of the year		770	539
Created during the year		526	513
Acquired through business combinations		-	99
Utilised in the year		(126)	(381)
		400	231
Balance at the end of the year		1,170	770

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.

16.          OTHER PAYABLES

Balances at the end of the year were:

		2012	2011
		£'000	£'000
Payroll taxes and social security		3,965	3,814
Other creditors and accruals		21,631	18,312
Total other payables		25,596	22,126

17.          OTHER PAYABLES (NON-CURRENT)

The deferred consideration of £7,484,000 (2011 £12,494,000) comprises:

- £5,301,000 (2011 £8,312,000) in respect of the investment in Measurement Devices Limited, which is payable over the next two years.

- £1,938,000 (2011 £nil) in respect of the investment in R&R Sales LLC, which is payable over the next five years.

- £245,000 (2011 £nil) in respect of the investment in Thomas Engineering and Construction Limited, which is payable over the next two years.

The previous year included £1,182,000 in respect of the investment in Renishaw Diagnostics Limited and £3,000,000 in respect of the investment in Renishaw Software Limited. Following a rights issue undertaken by Renishaw Diagnostics Limited during the year, the majority of their liability has been extinguished. The remaining liability to the non-controlling interest of £182,000 is shown within current liabilities. The liability in respect of Renishaw Software Limited is now classified as a current payable.

18.          CAPITAL AND RESERVES

Share capital

		2012	2011
		£'000	£'000
Allotted, called-up and fully paid
72,788,543 ordinary shares of 20p each		14,558	14,558

The ordinary shares are the only class of share in the Company. Holders of ordinary shares are entitled to vote at general meetings of the Company and receive dividends as declared. The Articles of Association of the Company do not contain any restrictions on the transfer of shares nor on voting rights.

Currency translation reserve

The currency translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of the foreign operations, offset by foreign exchange differences on bank liabilities which have been accounted for directly in equity on account of them being classified as hedging items. The movement in the year of a loss of £1,779,000 (2011 gain £339,000) comprises a loss on the net assets of foreign currency operations of £3,829,000 (2011 gain £2,426,000) and a gain on foreign currency bank accounts of £2,050,000 (2011 loss £2,087,000).

Cash flow hedging reserve

The cash flow hedging reserve comprises all foreign exchange differences arising from the valuation of forward exchange contracts which are effective hedges and mature after the year end. These are valued on a mark-to-market basis, are accounted for directly in equity and are recycled through the Consolidated income statement when the hedged item affects the Consolidated income statement. The forward contracts mature over the next three and a half years.

Movements during the year were:

		2012	2011
		£'000	£'000
Balance at the beginning of the year		(4,115)	172
Amounts transferred to the Consolidated income statement		3,835	2,188
Revaluations during the year		5,204	(8,142)
Deferred tax movement		(2,398)	1,667
Balance at the end of the year		2,526	(4,115)

Dividends paid

Dividends paid comprised:

		2012	2011
		£'000	£'000
2011 final dividend paid of 24.7p per share		17,979	9,899
Interim dividend paid of 10.3p per share (2011 10.3p)		7,497	7,497
Total dividends paid		25,476	17,396

A final dividend in respect of the current financial year of 28.2p per share is proposed, to be paid on 22nd October 2012 to shareholders on the register on 21st September 2012, with an ex-dividend date of 19th September 2012.

Non-controlling interest

Movements during the year were:

		2012	2011
		£'000	£'000
Balance at the beginning of the year		(490)	(432)
Share of investments		266	324
Share of loss for the year		(517)	(382)
Balance at the end of the year		(741)	(490)

The non-controlling interest represents the minority shareholdings in Renishaw Diagnostics Limited -7.6% (2011 15.2%), Renishaw Mayfield S.A. - 25% and Renishaw Advanced Materials Limited - 45%. The change in the ownership share in Renishaw Diagnostics Limited was the result of an issue of shares by that company during the year.

19.          RELATED PARTIES

During the year, associates and other related parties purchased goods and services from the Group to the value of £319,000  (2011 £276,000) and sold goods and services to the Group to the value of £4,328,000 (2011 £3,142,000). At 30th June 2012, associates owed £73,000 to the Group (2011 £100,000). Associates were owed £253,000 by the Group (2011 £229,000). Dividends of £108,000 were received from associates during the year (2011 £84,000). Loans to related parties from Renishaw plc at 30th June 2012 were £2,745,000 (2011 £1,498,000).

All transactions were on an arm's length basis. There were no bad debts written off during the year (2011 £nil).

20.          PRINCIPAL RISKS AND UNCERTAINTIES

The principal risks and uncertainties are considered by management to be:

Risk or uncertainty	Potential impact	Mitigation
Current trading levels and order book Revenue growth is unpredictable and orders from customers generally involve short lead-times with the outstanding order book at any time being around one month's worth of revenue value.	Global market conditions continue to highlight risks to growth and demand, especially in the Far East, with a forecast economic slowdown in China, where high growth over the past three years has helped to sustain the global economic recovery and in the Eurozone where governments are targeting substantial cuts in public expenditure budgets. Against this background, revenue growth for the Group for the year was encouraging at 15%, but future growth is difficult to predict, especially with such a short-term order book. This limited forward order visibility leaves the annual revenue forecasts uncertain.	The Group has sought to expand and diversify its product range in order to maintain a world-leading position in its sales of metrology products and to lessen the risks to revenue growth by applying our measurement expertise into the growing healthcare business sector. The Group has made a small number of acquisitions to expand the product range with complementary technologies into new market areas. The Group pays close attention to the management of production and inventory levels, to ensure the timely supply of product to customers, whilst keeping inventory levels at an acceptable level. The Board monitors closely costs and approves all labour additions.
Research and development The development of new products and processes involves risk, such as development timescales, meeting the required technical specification and the impact of alternative technology developments.	Being at the leading edge of new technology in metrology and healthcare, there are uncertainties whether new developments will provide an economic return.	R&D risks are minimised by operating strictly managed research and development programmes with regular reviews against milestones achieved and against forecast business plans. Research and development also involves beta testing at customers to ensure that new products will meet the needs of the market. When necessary, projects may be cancelled. Development of alternative technologies is monitored closely. Expenditure is only capitalised once the commercial and technical feasibility of a product is proven.
Supply chain management Customer deliveries may be threatened by a failure in the supply chain.	Inability to meet customer deliveries could result in loss of revenue and profit.	Production facilities are maintained with fire and flood risk in mind and production lines are replicated at different locations where practical. Regular vendor reviews are performed for critical part suppliers and stock policies are reviewed by the Board on a regular basis. Product quality is closely monitored.
Regulatory legislation for healthcare products The expansion of the Group's business into the healthcare markets involves a significantly increased requirement to obtain regulatory approval prior to the sale of these products.	Regulatory approval can be very expensive and time-consuming. This area is also very complex and there is a risk that the correct approvals are not obtained.	Specialist legal and regulatory staff have been recruited to support the healthcare business. Along with external advisers, all regulatory legislation is considered and approvals obtained as necessary.
Defined benefit pension schemes Investment returns and actuarial valuations of the defined benefit pension fund liabilities are subject to economic and social factors which are outside of the control of the Group.	Volatility in investment returns and actuarial assumptions can significantly affect the defined benefit pension fund deficit, impacting on future funding requirements.	The investment strategy is managed by the pension fund trustees who operate in line with a statement of investment principles which is agreed by the Company. Recovery plans are in place for the defined benefit pension schemes which will be reviewed following the tri-annual actuarial valuations.
Treasury Fluctuating foreign exchange rates may affect the results of the Group.	With over 94% of revenue generated outside of the UK, there is an exposure to major currency fluctuations, mainly in respect of the US Dollar, Euro and Japanese Yen. Such fluctuations could adversely impact both the Group's income statement and balance sheet.	The Group enters into forward contracts to hedge varying proportions of forecast US Dollar, Euro and Japanese Yen revenue. The Group also uses currency contracts to hedge the foreign currency denominated assets held in the Group's balance sheet.

Enquiries:                             B R Taylor                             01453 524445

A C G Roberts                      01453 524445

Registered office:                                New Mills, Wotton-under-Edge, Gloucestershire. GL12 8JR

Telephone:                           01453 524524

Registered number:           1106260, England and Wales

Website:                                                www.renishaw.com

 

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