TIDMRSW

RNS Number : 3556B

Renishaw PLC

30 January 2020

Renishaw plc

30 January 2020

Interim report 2020 - for the six months ended 31 December 2019

Highlights

 
                             6 months to       6 months   Year ended 
                             31 December             to      30 June 
                                    2019    31 December         2019 
                                                   2018 
 
 Revenue (GBPm)                    259.4          296.7        574.0 
 
 Adjusted(1) profit 
  before tax (GBPm)                 14.3           59.6        103.9 
 
 Adjusted(1) earnings 
  per share (pence)                 15.1           69.3        119.9 
 
 Dividend per share 
  (pence) (2)                       14.0           14.0         60.0 
 
 Statutory profit before 
  tax (GBPm)                         9.9           61.6        109.9 
 
 Statutory earnings 
  per share (pence)                 10.2           71.5        126.7 
 

(1) Note 11, 'Alternative performance measures', defines how adjusted profit before tax and earnings per share are calculated.

(2) All directors have waived their rights to the interim dividend - see note 7 for further details.

Chairman's and Chief Executive's statement

We report our Group results for the six months to 31 December 2019.

Highlights

   --      First half year revenue of GBP259.4m, compared with previous year of GBP296.7m. 

-- First half year adjusted(1) profit before tax of GBP14.3m, compared with adjusted previous year of GBP59.6m.

   --      First half year statutory profit before tax of GBP9.9m, compared with GBP61.6m last year. 
   --      Cash balances of GBP71.3m, compared with GBP106.8m at 30 June 2019. 

Trading results

 
                   First half    First half   Change %     Constant 
                         2020          2019               fx change 
                                                                  % 
 Group revenue      GBP259.4m     GBP296.7m        -13          -14 
                 ------------  ------------  ---------  ----------- 
 Comprising: 
                 ------------  ------------  ---------  ----------- 
   APAC             GBP106.8m     GBP131.2m        -19          -20 
                 ------------  ------------  ---------  ----------- 
   Americas          GBP63.6m      GBP65.4m         -3           -9 
                 ------------  ------------  ---------  ----------- 
   EMEA              GBP89.0m     GBP100.1m        -11          -12 
                 ------------  ------------  ---------  ----------- 
 

Revenue for the six months ended 31 December 2019 was GBP259.4m, compared with GBP296.7m for the corresponding period last year, with all regions experiencing a reduction in revenue.

It has been a challenging trading period for the Group due to the global macroeconomic environment, including the ongoing uncertainty caused by the trade tensions between the USA and China and weaker demand in the machine tool sector. The first half of 2019 also benefitted from a number of large orders from end-user manufacturers of consumer electronic products in the APAC region which have not been repeated this year. There are however some positive indications of recovery in the semiconductor market which has benefitted our encoder lines.

Adjusted profit before tax for the first half year was GBP14.3m compared with GBP59.6m last year, primarily due to the reduced revenue. Last year's first half benefitted from a GBP5.3m currency gain, primarily in respect of intra-group balances, compared with a loss of GBP2.0m in the first half of this year. This year also includes a GBP2.7m gain arising from the fair value adjustment of a convertible loan option in an associate company and a GBP2.0m charge from the impairment of intangible assets.

Statutory profit before tax for the first half year was GBP9.9m, compared with GBP61.6m last year, which includes a GBP2.2m charge for restructuring costs and a GBP2.1m loss from the fair value of derivatives not included in adjusted profit before tax.

Adjusted earnings per share were 15.1p, compared with 69.3p last year. Statutory earnings per share were 10.2p, compared with 71.5p last year.

Metrology

Revenue in our metrology business for the first six months was GBP241.5m, compared with GBP277.7m last year. Adjusted operating profit was GBP17.4m, compared with GBP52.2m for the comparable period last year. Despite subdued demand conditions overall, we have seen growth in our optical and laser encoder product lines due to a recovery in the semiconductor market.

Healthcare

Revenue from our healthcare business for the first six months was GBP17.8m, compared with GBP19.0m last year, but we did see growth in our neurological product line due to increased demand for our neurosurgical robot. The business recorded an adjusted operating loss of GBP1.5m in the first half of this year compared to break even in the corresponding period last year.

Operating costs

As previously communicated, due to the challenging trading conditions faced, we are taking a number of actions to improve productivity and to reduce the Group's cost base. These include the non-replacement of staff who have left the business, reductions in direct manufacturing staff in the UK, Ireland and India, and the planned closure of the Staffordshire site in February 2020 with activities consolidated in Gloucestershire and South Wales. We have also commenced a proposed UK compulsory redundancy programme that could lead to a headcount reduction of around 200 people (approximately 6% of total UK employees). We have reviewed all other areas of operating costs and reduced expenditure where appropriate.

Total Group headcount at the end of December 2019 was 4,871, a net reduction of 170 since June 2019.

The Group remains committed to our long-term strategy of delivering growth through the development and introduction of innovative and patented products and during the first six months of this year we incurred net engineering expenditure of GBP46.1m compared with GBP47.7m last year.

The directors thank employees for their valued support and contribution during this challenging period.

Capital Expenditure

Capital expenditure for the first six months was GBP28.4m. Expenditure on property totalled GBP20.8m for the period, including the extension to our Innovation Centre in Wotton-under-Edge, Gloucestershire which is nearing completion; acquisition of property in Pune, India to provide capacity for future growth; refurbishment of the building purchased in Nagoya, Japan last year; and the construction of our new facility in Michigan, USA. Expenditure on plant and equipment for the period was GBP7.6m.

With the building projects listed nearing completion, capital expenditure in the second half of this year is planned to reduce significantly.

Working capital

Net cash balances at 31 December 2019 were GBP71.3m, compared with GBP100.5m at 31 December 2018 and GBP106.8m at 30 June 2019.

Inventory balances at 31 December 2019 were GBP117.8m, a decrease of GBP11.2m since 30 June 2019, primarily

reflecting the reduction in trading activity.

Dividend

The Board has approved an interim dividend of 14.0 pence net per share (2019: 14.0 pence) which will be paid on 6 April 2020 to shareholders on the register on 6 March 2020. All directors have waived their rights to the interim dividend which results in the cost of the dividend being GBP4.8m compared to GBP10.2m last year.

Outlook

The Board believes that the structural demand drivers in our end-markets remain intact. The Group is in a strong financial position and we remain confident in the Group's long-term prospects due to the high quality of our people, our innovative product pipeline, extensive global sales and marketing presence and relevance to high-value manufacturing.

As indicated in our trading statement in October 2019, trading conditions are expected to remain challenging through the remainder of this financial year driven by the global macroeconomic environment. At this stage, we expect full year revenue to be in the range of GBP530m to GBP560m. Adjusted profit before tax is expected to be in the range of GBP50m to GBP70m, with profits in the second half of the year expected to benefit from an increase in revenue, reduced operating costs and a favourable currency impact from forward contracts compared to the first half year. Statutory profit before tax is expected to be in the range of GBP38m to GBP58m.

Investor Day

An Investor Day is being held on 12 May 2020 at our Gloucestershire headquarters and registration details will be published in due course.

   Sir David McMurtry                                                          Will Lee 
   Executive Chairman                                                        Chief Executive 

30 January 2020

(1) Note 11, 'Alternative performance measures', defines how adjusted profit before tax, operating profit and earnings per share are calculated.

Consolidated income statement

Unaudited

 
                                                                                          Audited 
                                                           6 months        6 months    Year ended 
                                                                 to              to       30 June 
                                                        31 December     31 December          2019 
   Continuing operations                      Notes            2019            2018       GBP'000 
                                                            GBP'000         GBP'000 
 Revenue                                       3            259,380         296,670       573,959 
 
 Cost of sales                                            (144,504)       (148,521)     (289,832) 
 
 Gross profit                                               114,876         148,149       284,127 
 
 Distribution costs                                        (65,580)        (63,766)     (126,822) 
 Administrative expenses                                   (31,933)        (29,002)      (58,593) 
 Gains/(losses) from the fair value 
  of financial instruments - derivatives      10            (8,570)         (1,230)         1,081 
 Gains from the fair value of financial 
  assets                                      12              2,700               -             - 
 
 Operating profit                                            11,493          54,151        99,793 
 
 Financial income                              4              1,083           5,713         7,238 
 Financial expenses                            4            (3,590)           (454)         (902) 
 Share of profits from associates and 
  joint ventures                                                947           2,185         3,815 
 
 Profit before tax                                            9,933          61,595       109,944 
 
 Income tax expense                            5            (2,538)         (9,572)      (17,712) 
 
 Profit for the period                                        7,395          52,023        92,232 
-----------------------------------------  --------  --------------  --------------  ------------ 
 
 Profit attributable to: 
 Equity shareholders of the parent 
  company                                                     7,395          52,023        92,232 
 Non-controlling interest                                         -               -             - 
-----------------------------------------  --------  --------------  --------------  ------------ 
 Profit for the period                                        7,395          52,023        92,232 
-----------------------------------------  --------  --------------  --------------  ------------ 
 
                                                              pence           pence         Pence 
 Dividend per share arising in respect 
  of the period                                7               14.0            14.0          60.0 
-----------------------------------------  --------  --------------  --------------  ------------ 
 
 Earnings per share (basic and diluted)        6               10.2            71.5         126.7 
-----------------------------------------  --------  --------------  --------------  ------------ 
 

Consolidated statement of comprehensive income and expense

 
 Unaudited 
                                                                                       Audited 
                                                       6 months        6 months     Year ended 
                                                             to              to        30 June 
                                                    31 December     31 December           2019 
                                                           2019            2018        GBP'000 
                                                        GBP'000         GBP'000 
 
 Profit for the period                                    7,395          52,023         92,232 
-----------------------------------------------  --------------  --------------  ------------- 
 
 Other items recognised directly in equity: 
 
 Items that will not be reclassified to 
  the Consolidated income statement: 
 Remeasurement of defined benefit pension 
  scheme liabilities                                      2,417          13,254         10,273 
 Deferred tax on remeasurement of defined 
  benefit pension scheme liabilities                      (319)         (2,230)        (1,534) 
 
 Total for items that will not be reclassified            2,098          11,024          8,739 
-----------------------------------------------  --------------  --------------  ------------- 
 
 Items that may be reclassified to the 
  Consolidated income statement: 
 Exchange differences in translation of 
  overseas operations                                   (9,154)           1,934          2,045 
 Exchange differences in translation of 
  overseas joint venture                                  (524)           (121)             72 
 Current tax on translation of net investments 
  in foreign operations                                     763               -          (205) 
 Effective portion of changes in fair 
  value of cash flow hedges, net of recycling            47,910        (23,686)       (27,573) 
 Deferred tax on effective portion of 
  changes in fair value of cash flow hedges             (8,479)           4,058          4,561 
 
 Total for items that may be reclassified                30,516        (17,815)       (21,100) 
-----------------------------------------------  --------------  --------------  ------------- 
 
 Total other comprehensive income and 
  expense, net of tax                                    32,614         (6,791)       (12,361) 
-----------------------------------------------  --------------  --------------  ------------- 
 
 Total comprehensive income and expense 
  for the period                                         40,009          45,232         79,871 
-----------------------------------------------  --------------  --------------  ------------- 
 
 Attributable to: 
 Equity shareholders of the parent company               40,009          45,232         79,871 
 Non-controlling interest                                     -               -              - 
 
 Total comprehensive income and expense 
  for the period                                         40,009          45,232         79,871 
-----------------------------------------------  --------------  --------------  ------------- 
 

Consolidated balance sheet

Unaudited

 
                                                                                             Audited 
                                                        At 31 December     At 31 December      At 30 
                                                                  2019               2018       June 
                                              Notes            GBP'000            GBP'000       2019 
                                                                                             GBP'000 
 Assets 
 Property, plant and equipment                 8               272,255            239,984    263,477 
 Intangible assets                             9                58,626             56,342     59,056 
 Right of use assets                           2                12,950                  -          - 
 Investments in associates and joint 
  ventures                                                      13,006             11,514     13,095 
 Long-term loans to associates and 
  joint ventures                                                   519              3,322        750 
 Deferred tax assets                                            21,157             29,073     29,855 
 Derivatives                                  10                13,187              2,066      1,311 
-----------------------------------------  --------  -----------------  -----------------  --------- 
 Total non-current assets                                      391,700            342,301    367,544 
-----------------------------------------  --------  -----------------  -----------------  --------- 
 
 Current assets 
 Inventories                                                   117,794            122,476    129,026 
 Trade receivables                                             101,508            127,811    123,151 
 Contract assets                                                    99                477        352 
 Short-term loans to associates 
  and joint ventures                          12                10,203                  -      6,644 
 Current tax                                                     7,550              3,124      4,553 
 Other receivables                                              20,337             24,426     24,461 
 Derivatives                                  10                 4,965              3,092      2,778 
 Pension scheme cash escrow account                             10,490             10,451     10,490 
 Cash and cash equivalents                                      71,307            100,504    106,826 
 Total current assets                                          344,253            392,361    408,281 
-----------------------------------------  --------  -----------------  -----------------  --------- 
 
 Current liabilities 
 Trade payables                                                 15,141             23,698     21,513 
 Contract liabilities                                            6,723              4,952      5,631 
 Lease liabilities                             2                 4,463                  -          - 
 Current tax                                                     4,506              7,131      4,538 
 Provisions                                                      2,473              2,952      2,846 
 Derivatives                                  10                 5,975             30,222     18,920 
 Borrowings                                                      1,073                  -      1,043 
 Other payables                                                 27,849             29,282     41,065 
-----------------------------------------  --------  -----------------  -----------------  --------- 
 Total current liabilities                                      68,203             98,237     95,556 
-----------------------------------------  --------  -----------------  -----------------  --------- 
 
 Net current assets                                            276,050            294,124    312,725 
-----------------------------------------  --------  -----------------  -----------------  --------- 
 
 Non-current liabilities 
 Borrowings                                                      9,628                  -      9,356 
 Lease liabilities                             2                 8,469                  -          - 
 Employee benefits                                              42,831             52,566     51,870 
 Deferred tax liabilities                                          539                188        539 
 Derivatives                                  10                16,391             24,928     35,227 
 Total non-current liabilities                                  77,858             77,682     96,992 
-----------------------------------------  --------  -----------------  -----------------  --------- 
 
 Total assets less total liabilities                           589,892            558,743    583,277 
-----------------------------------------  --------  -----------------  -----------------  --------- 
 
 Equity 
 Share capital                                                  14,558             14,558     14,558 
 Share premium                                                      42                 42         42 
 Own shares held                                                 (404)              (404)      (404) 
 Currency translation reserve                                    5,661             14,478     14,577 
 Cash flow hedging reserve                                     (2,970)           (39,017)   (42,401) 
 Retained earnings                                             573,798            570,051    597,784 
 Other reserve                                                   (216)              (388)      (302) 
-----------------------------------------  --------  -----------------  -----------------  --------- 
 Equity attributable to the shareholders 
  of the parent company                                        590,469            559,320    583,854 
 Non-controlling interest                                        (577)              (577)      (577) 
-----------------------------------------  --------  -----------------  -----------------  --------- 
 Total equity                                                  589,892            558,743    583,277 
-----------------------------------------  --------  -----------------  -----------------  --------- 
 

Consolidated statement of changes in equity

Unaudited

 
                                            Own      Currency       Cash                                 Non- 
                     Share      Share    shares   translation       flow    Retained      Other   controlling 
                   capital    premium      held       reserve    hedging    earnings    reserve      interest      Total 
                   GBP'000    GBP'000   GBP'000       GBP'000    reserve     GBP'000    GBP'000       GBP'000    GBP'000 
                                                                 GBP'000 
 Balance at 1 
  July 2018         14,558         42         -        12,665   (19,389)     540,487      (460)         (577)    547,326 
 
 Profit for the 
  period                 -          -         -             -          -      52,023          -             -     52,023 
 
 Other 
 comprehensive 
 income 
 and expense 
 (net of tax) 
---------------  ---------  ---------  --------  ------------  ---------  ----------  ---------  ------------  --------- 
 Remeasurement 
  of defined 
  benefit 
  pension 
  liabilities            -          -         -             -          -      11,024          -             -     11,024 
 Foreign 
  exchange 
  translation 
  differences            -          -         -         1,934          -           -          -             -      1,934 
 Relating to 
  associates 
  and joint 
  ventures               -          -         -         (121)          -           -          -             -      (121) 
 Changes in 
  fair value 
  of cash flow 
  hedges                 -          -         -             -   (19,628)           -          -             -   (19,628) 
---------------  ---------  ---------  --------  ------------  ---------  ----------  ---------  ------------  --------- 
 Total other 
  comprehensive 
  income and 
  expense                -          -         -         1,813   (19,628)      11,024          -             -    (6,791) 
 
 Total 
  comprehensive 
  income 
  and expense            -          -         -         1,813   (19,628)      63,047          -             -     45,232 
 
 Transactions 
 with owners 
 recorded in 
 equity 
 Share-based 
  payments 
  charge                 -          -         -             -          -           -         72             -         72 
 Purchase of 
  own shares             -          -     (404)             -          -           -          -             -      (404) 
 Dividends paid          -          -         -             -          -    (33,483)          -             -   (33,483) 
---------------  ---------  ---------  --------  ------------  ---------  ----------  ---------  ------------  --------- 
 Balance at 31 
  December 
  2018              14,558         42     (404)        14,478   (39,017)     570,051      (388)         (577)    558,743 
 
 Profit for the 
  period                 -          -         -             -          -      40,209          -             -     40,209 
 
 Other 
 comprehensive 
 income 
 and expense 
 (net of tax) 
---------------  ---------  ---------  --------  ------------  ---------  ----------  ---------  ------------  --------- 
 Remeasurement 
  of defined 
  benefit 
  pension 
  liabilities            -          -         -             -          -     (2,287)          -             -    (2,287) 
 Foreign 
  exchange 
  translation 
  differences            -          -         -          (94)          -           -          -             -       (94) 
 Relating to 
  associates 
  and joint 
  ventures               -          -         -           193          -           -          -             -        193 
 Changes in 
  fair value 
  of cash flow 
  hedges                 -          -         -             -    (3,384)           -          -             -    (3,384) 
---------------  ---------  ---------  --------  ------------  ---------  ----------  ---------  ------------  --------- 
 Total other 
  comprehensive 
  income and 
  expense                -          -         -            99    (3,384)     (2,287)          -             -    (5,572) 
 
 Total 
  comprehensive 
  income 
  and expense            -          -         -            99    (3,384)      37,922          -             -     34,637 
 
 Transactions 
 with owners 
 recorded in 
 equity 
 Share-based 
  payments 
  charge                 -          -         -             -          -           -         86             -         86 
 Purchase of             -          -         -             -          -           -          -             -          - 
 own shares 
 Dividends paid          -          -         -             -          -    (10,189)          -             -   (10,189) 
 Balance at 30 
  June 2019         14,558         42     (404)        14,577   (42,401)     597,784      (302)         (577)    583,277 
 
 Profit for the 
  period                 -          -         -             -          -       7,395          -             -      7,395 
 
 Other 
 comprehensive 
 income 
 and expense 
 (net of tax) 
---------------  ---------  ---------  --------  ------------  ---------  ----------  ---------  ------------  --------- 
 Remeasurement 
  of defined 
  benefit 
  pension 
  liabilities            -          -         -             -          -       2,097          -             -      2,097 
 Foreign 
  exchange 
  translation 
  differences            -          -         -       (8,392)          -           -          -             -    (8,392) 
 Relating to 
  associates 
  and joint 
  ventures               -          -         -         (524)          -           -          -             -      (524) 
 Changes in 
  fair value 
  of cash flow 
  hedges                 -          -         -             -     39,431           -          -             -     39,431 
---------------  ---------  ---------  --------  ------------  ---------  ----------  ---------  ------------  --------- 
 Total other 
  comprehensive 
  income and 
  expense                -          -         -       (8,916)     39,431       2,097          -             -     32,612 
 
 Total 
  comprehensive 
  income 
  and expense            -          -         -       (8,916)     39,431       9,492          -             -     40,007 
 
 Transactions 
 with owners 
 recorded in 
 equity 
 Share-based 
  payments 
  charge                 -          -         -             -          -           -         86             -         86 
 Purchase of             -          -         -             -          -           -          -             -          - 
 own shares 
 Dividends paid          -          -         -             -          -    (33,478)          -             -   (33,478) 
 Balance at 31 
  December 
  2019              14,558         42     (404)         5,661    (2,970)     573,798      (216)         (577)    589,892 
---------------  ---------  ---------  --------  ------------  ---------  ----------  ---------  ------------  --------- 
 

Consolidated statement of cash flow

Unaudited

 
                                                                                           Audited 
                                                            6 months        6 months    Year ended 
                                                                  to              to       30 June 
                                                         31 December     31 December          2019 
                                                                2019            2018       GBP'000 
                                                             GBP'000         GBP'000 
 Cash flows from operating activities 
 Profit for the period                                         7,395          52,023        92,232 
----------------------------------------------------  --------------  --------------  ------------ 
 
 Adjustments for: 
 Amortisation of development costs                             8,118           7,027        15,144 
 Amortisation of other intangibles                               606             908         1,518 
 Amortisation of right of use assets                           2,207               -             - 
 Impairment of goodwill and other intangibles                  1,973               -             - 
 Impairment of property, plant and equipment                       -               -         1,155 
 Depreciation                                                 12,373          11,436        22,597 
 (Profit)/loss on sale of property, plant 
  and equipment                                                 (46)              79           148 
 Profit on sale of other intangibles                               -           (455)         (455) 
 Remeasurement of defined benefit pension 
  scheme liabilities from GMP equalisation                         -             751           751 
 (Gains)/losses from the fair value of financial 
  instruments - derivatives                                    2,120         (1,970)       (6,081) 
 Gains from the fair value of financial assets               (2,700)               -             - 
 Share of profits from associates and joint 
  ventures                                                     (947)         (2,185)       (3,815) 
 Financial income                                            (1,083)         (5,713)       (7,238) 
 Financial expenses                                            3,590             454           902 
 Share based payment expense                                      86              72           158 
 Tax expense                                                   2,538           9,572        17,712 
----------------------------------------------------  --------------  --------------  ------------ 
                                                              28,835          19,976        42,496 
----------------------------------------------------  --------------  --------------  ------------ 
 
 Decrease/(increase) in inventories                           11,232        (11,913)      (18,463) 
 Decrease/(increase) in trade and other receivables           18,709          26,404        30,028 
 (Decrease)/increase in trade and other payables            (14,795)        (15,980)       (7,183) 
 (Decrease)/increase in provisions                             (676)           (501)         (607) 
                                                              14,470         (1,990)         3,775 
----------------------------------------------------  --------------  --------------  ------------ 
 
 Defined benefit pension contributions                       (7,081)         (2,747)       (6,831) 
 Income taxes paid                                           (4,708)        (13,618)      (25,183) 
 
 Cash flows from operating activities                         38,911          53,644       106,489 
----------------------------------------------------  --------------  --------------  ------------ 
 
 Investing activities 
 Purchase of property, plant and equipment                  (28,398)        (19,643)      (56,792) 
 Development costs capitalised                               (7,948)         (8,200)      (18,091) 
 Purchase of other intangibles                               (2,864)         (2,620)       (4,161) 
 Sale of other intangibles                                         -           2,001         2,000 
 Sale of property, plant and equipment                           990           3,241         4,713 
 Interest received                                               575             446         1,222 
 Dividends received from associates and joint 
  ventures                                                       512             614           614 
 Payments (to)/from pension scheme escrow 
  account                                                          -            (38)          (77) 
----------------------------------------------------  --------------  --------------  ------------ 
 Cash flows from investing activities                       (37,133)        (24,199)      (70,572) 
----------------------------------------------------  --------------  --------------  ------------ 
 
 Financing activities 
 Interest paid                                                  (99)            (16)          (57) 
 Increase in borrowings                                        1,169               -        10,486 
 Repayment of borrowings                                       (425)               -          (87) 
 Repayment of lease liabilities                              (2,480)               -             - 
 Dividends paid                                             (33,478)        (33,483)      (43,672) 
 Purchase of own shares                                            -           (404)         (404) 
----------------------------------------------------  --------------  --------------  ------------ 
 Cash flows from financing activities                       (35,313)        (33,903)      (33,734) 
----------------------------------------------------  --------------  --------------  ------------ 
 
 Net (decrease)/increase in cash and cash 
  equivalents                                               (33,535)         (4,458)         2,183 
 Cash and cash equivalents at the beginning 
  of the period                                              106,826         103,847       103,847 
 Effect of exchange rate fluctuations on 
  cash held                                                  (1,984)           1,115           796 
----------------------------------------------------  --------------  --------------  ------------ 
 Cash and cash equivalents at the end of 
  the period                                                  71,307         100,504       106,826 
----------------------------------------------------  --------------  --------------  ------------ 
 

Responsibility statement

The condensed set of financial statements is the responsibility of, and has been approved by, the Directors. We confirm that to the best of our knowledge:

-- As required by DTR 4.2 of the Disclosure Rules and Transparency Rules, the condensed set of financial statements, which has been prepared in accordance with the applicable set of accounting standards, gives a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation as a whole. The Interim report has been prepared in accordance with IAS 34, 'Interim Financial Reporting', as issued by the International Accounting Standards Board and as adopted by the EU.

   --               The Interim report includes a fair review of the information required by: 

(a) DTR 4.2.7 of the Disclosure Rules and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b) DTR 4.2.8 of the Disclosure Rules and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last Annual Report that could do so.

On behalf of the Board

Allen Roberts FCA

Group Finance Director

30 January 2020

Notes

   1.         Basis of preparation 

The Interim Report, which includes the condensed consolidated financial statements for the six months ended 31 December 2019, was approved by the Directors on 30 January 2020.

The condensed consolidated financial statements for the six months ended 31 December 2019 were prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' (IAS 34) as issued by the International Accounting Standards Board and as adopted by the European Union, and apply the same accounting policies, presentation and methods of calculation as were applied in the preparation of the Group's consolidated financial statements for the year ended 30 June 2019, except for income taxes which are accrued using the forecast tax rate for the financial year, and except for the adoption of new accounting standards as set out in note 2.

The condensed consolidated financial statements included in this Report have not been audited and do not constitute the Group's statutory accounts as defined in section 434 of the Companies Act 2006. The information relating to the year ended 30 June 2019 is an extract from the Group's published Annual Report for that year, which has been delivered to the Registrar of Companies, and on which the auditor's report was unqualified and did not contain any emphasis of matter or statements under section 498(2) or 498(3) of the Companies Act 2006.

The Group has considerable financial resources at its disposal, and having considered the current financial projections, the Directors believe that the Group is well placed to manage its business risks successfully. Having made appropriate enquiries, the Directors are satisfied that, at the time of approving the unaudited condensed consolidated financial statements, it is appropriate to continue to adopt a going concern basis of accounting.

Given the nature of some forward-looking information included in this report, which the Directors have given in good faith, this information should be treated with due caution.

   2.         New accounting standards and policies 

IFRS 16 'Leases'

Summary

IFRS 16 'Leases' replaces IAS 17 and related standards, and provides an accounting model under which substantially all leases are recognised on the balance sheet of the lessee. A 'right of use' asset is recognised, being the right to use the underlying asset of the lease, and a lease liability is also recognised on the balance sheet, being the obligation to make payments in respect of the use of the underlying asset.

The Group adopted IFRS 16 on 1 July 2019 using the modified retrospective transition approach (and has therefore not restated comparatives for the prior period) with the principal change being that leases previously classified as operating leases under IAS 17 were brought on to the balance sheet at 1 July 2019. The impact of IFRS 16 is disclosed later in this note.

In adopting IFRS 16 the Group took advantage of the following practical expedients permitted by the standard:

- The right of use assets were measured at an amount based on the lease liability at adoption, and initial direct costs incurred when obtaining leases were excluded from this measurement

- Reliance was placed on previous assessments of whether leases are onerous (the assessment of which determined that the impact of onerous leases was trivial)

- Operating leases with a remaining lease term of less than 12 months at 1 July 2019 were accounted for as 'short-term leases'

Impact - at transition and subsequently

As IFRS 16 no longer distinguishes between operating leases and finance leases, operating lease commitments disclosed at 30 June 2019 were replaced with a lease liability and recognised at 1 July 2019, as follows:

 
                                             GBP'000 
 Operating lease commitments as disclosed 
  at 30 June 2019                             16,390 
 Less: effect of discounting                   (149) 
 Less: recognition differences and 
  assumptions                                (1,994) 
------------------------------------------  -------- 
 Total lease liability recognised at 
  1 July 2019                                 14,247 
 

The weighted average incremental borrowing rate applied to the Group's lease liabilities recognised in the consolidated balance sheet at 1 July 2019 was 2.4%.

The impact on the primary statements of adopting IFRS 16 at 1 July 2019 is summarised below:

Impact on the Consolidated balance sheet

 
                             At 1 July 2019   At 31 December 
                                    GBP'000             2019 
                                                     GBP'000 
 
 Right of use assets                 14,550           12,950 
 Deferred tax assets                      -               56 
--------------------------  ---------------  --------------- 
 Non-current assets                  14,550           13,006 
--------------------------  ---------------  --------------- 
 
 Lease liabilities                    4,799            4,463 
 Other payables                         303              291 
--------------------------  ---------------  --------------- 
 Current liabilities                  5,102            4,754 
--------------------------  ---------------  --------------- 
 
 Lease liabilities                    9,448            8,469 
 Deferred tax liabilities                 -                - 
--------------------------  ---------------  --------------- 
 Non-current liabilities              9,448            8,469 
--------------------------  ---------------  --------------- 
 
 Total assets less 
  total liabilities                       -            (217) 
--------------------------  ---------------  --------------- 
 
 Currency translation 
  reserve                                 -               12 
 Retained earnings                        -            (229) 
 
 Total equity                             -            (217) 
--------------------------  ---------------  --------------- 
 

Right of use assets at 1 July 2019 consisted of GBP11,377,000 relating to property leases occupied for trading purposes, GBP3,013,000 relating to vehicle leases and a small amount relating to machinery leases.

Impact on the Consolidated income statement

The impact on the Consolidated income statement for the six months ended 31 December 2019 is to increase operating profit by GBP272,000 and increase finance costs by GBP557,000, therefore reducing profit before tax by GBP285,000. The aggregate of depreciation and interest expense will generally result in higher expenses in the earlier periods of leases than would have been the case under IAS 17.

Impact on the Consolidated cash flow statement

There is no change to net cash flow from the adoption of IFRS 16. Under IAS 17 operating lease payments were treated as operating cash outflows, however under IFRS 16 payments made at lease inception and subsequently (both principal and interest) are classified as financing outflows. The Group therefore shows both higher cash inflows from operating activities and higher cash outflows from financing activities under IFRS 16.

Accounting policy

As a lessee

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

Right of use assets are initially measured at cost, being the present value of the lease liability plus any initial costs incurred in entering the lease and less any lease incentives received. Right of use assets are subsequently depreciated on a straight-line basis from the commencement date to the earlier of i) the end of the useful life of the asset, or ii) the end of the lease term.

Lease liabilities are initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the incremental borrowing rate of the applicable entity. The lease liability is subsequently measured at amortised cost using the effective interest method and is remeasured if there is a change in future lease payments arising from a change in an index or rate (such as an inflation-linked increase), of if there is a change in the Group's assessment of whether it will exercise an extension or termination option. When this happens there is also a corresponding adjustment to the right-of-use asset.

Where the Group enters into leases with a lease term of 12 months or less, these are treated as 'short term' leases and are recognised on a straight-line basis as an expense in the Income Statement. The same treatment applies to low-value assets, which are typically IT equipment and office equipment.

As a lessor

The Group acts as a lessor for Renishaw-manufactured plant and equipment and determines at inception whether the lease is a finance or an operating lease.

Where the Group transfers the risks and rewards of ownership of lease assets to a third party, the Group recognises a receivable in the amount of the net investment in the lease, within Trade receivables. The lease receivable is subsequently reduced by the principal received, while an interest component is recognised as financial income in the Consolidated income statement.

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.

   3.         Segmental information 

The Group manages its business in two segments, comprising metrology and healthcare products. The results of these are regularly reviewed by the Board to allocate resources to segments and to assess their performance. Within the operating segment of metrology, there are multiple product offerings with similar economic characteristics, and where the nature of the products and production processes and their customer bases are similar. More details of the Group's products and services are given in the Strategic report of the 2019 Annual report.

Whilst future revenue is difficult to predict given that the Group's outstanding order book is typically around one month's worth of revenue value, larger consumer electronics orders in the APAC region within the metrology segment typically fall in the first or last quarter of the financial year. In addition, the Group typically experiences lower demand in August and December, and so revenue and operating profits are typically lower in the first half of the year. This information is provided to allow for a better understanding of the results, and management do not believe that the business is 'highly seasonal' in accordance with IAS 34.

 
 6 months to 31 December 2019                     Metrology   Healthcare     Total 
                                                    GBP'000      GBP'000   GBP'000 
 
 Revenue                                            241,545       17,835   259,380 
 Depreciation and amortisation                       21,954        1,116    23,070 
 
 Operating profit before losses from fair 
  value of financial instruments - derivatives       21,350      (1,286)    20,064 
 Share of profits from associates and joint 
  ventures                                              947            -       947 
 Net financial gain/(expense)                             -            -   (2,508) 
 Losses from the fair value of financial 
  instruments - derivatives                               -            -   (8,570) 
 
 Profit before tax                                        -            -     9,933 
-----------------------------------------------  ----------  -----------  -------- 
 
 6 months to 31 December 2018 
 
 Revenue                                            277,717       18,953   296,670 
 Depreciation and amortisation                       18,468          903    19,371 
 
 Operating profit before losses from fair 
  value of financial instruments                     55,171          211    55,382 
 Share of profits from associates and joint 
  ventures                                            2,185            -     2,185 
 Net financial gain/(expense)                             -            -     5,259 
 Losses from the fair value of financial 
  instruments - derivatives                               -            -   (1,230) 
 
 Profit before tax                                        -            -    61,596 
-----------------------------------------------  ----------  -----------  -------- 
 
 Year ended 30 June 2019 
 
 Revenue                                            532,940       41,019   573,959 
 Depreciation and amortisation                       37,714        2,700    40,414 
 
 Operating profit before gains from fair 
  value of financial instruments - derivatives       95,345        3,367    98,712 
 Share of profits from associates and joint 
  ventures                                            3,815            -     3,815 
 Net financial expense                                    -            -     6,336 
 Gains from the fair value of financial 
  instruments - derivatives                               -            -     1,081 
 
 Profit before tax                                        -            -   109,944 
-----------------------------------------------  ----------  -----------  -------- 
 

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

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

 
                              6 months to    6 months to   Year ended 
                              31 December    31 December      30 June 
                                     2019           2018         2019 
                                  GBP'000        GBP'000      GBP'000 
 
 Goods, capital equipment 
  and installation                232,145        269,569      519,782 
 Aftermarket services              27,235         27,101       54,177 
 
 Total group revenue              259,380        296,670      573,959 
--------------------------  -------------  -------------  ----------- 
 

Aftermarket services include repairs, maintenance and servicing, programming, training, extended warranties, and software licences and maintenance.

The following table shows the analysis of revenue by geographical market:

 
                         6 months to    6 months to   Year ended 
                         31 December    31 December      30 June 
                                2019           2018         2019 
                             GBP'000        GBP'000      GBP'000 
 
 APAC                        106,801        131,181      240,115 
 EMEA                         88,998        100,078      201,255 
 Americas                     63,581         65,411      132,589 
 
 Total Group revenue         259,380        296,670      573,959 
---------------------  -------------  -------------  ----------- 
 

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

 
             6 months to    6 months to   Year ended 
             31 December    31 December      30 June 
                    2019           2018         2019 
                 GBP'000        GBP'000      GBP'000 
 
 China            43,259         65,246      111,002 
 USA              52,698         54,961      113,235 
 Japan            30,635         33,212       63,650 
 Germany          27,178         31,477       60,916 
 

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

for the period.

   4.         Financial income and expenses 
 
                                                 6 months       6 months   Year ended 
                                                       to             to      30 June 
                                              31 December    31 December         2019 
                                                     2019           2018      GBP'000 
                                                  GBP'000        GBP'000 
 Financial income 
------------------------------------------  -------------  -------------  ----------- 
 Currency gains                                         -          5,267        5,940 
 Fair value gains from 1 month 
  forward currency contracts                          508              -           76 
 Interest receivable                                  575            446        1,222 
------------------------------------------  -------------  -------------  ----------- 
 Total financial income                             1,083          5,713        7,238 
------------------------------------------  -------------  -------------  ----------- 
 
 Financial expenses 
------------------------------------------  -------------  -------------  ----------- 
 Interest on pension schemes' liabilities             459            438          845 
 IFRS 16 lease interest                               557              -            - 
 Currency losses                                    2,476              -            - 
 Bank interest payable                                 98             16           57 
 Total financial expenses                           3,590            454          902 
------------------------------------------  -------------  -------------  ----------- 
 

Currency gains relates to revaluations of foreign currency denominated balances using latest reporting currency exchange rates. The gain recognised in the six months to 31 December 2018 largely related to a depreciation of sterling relative to the dollar affecting dollar denominated intra-group balances in the Company (Renishaw plc).

Certain long-term intra-group receivable balances for which settlement is neither planned nor likely to occur were reclassified as net investments in foreign operations on 3 December 2018, such that revaluations from future currency movements on designated balances will accumulate in the Currency translation reserve in Equity. Additionally, from 1 January 2019, a policy of entering into rolling one month forward currency contracts began, with fair value gains and losses being recognised in financial income, to partially offset currency movements on remaining intra-group balances. After these mitigating activities, currency losses in the six months to 31 Decemebr 2019 amounted to GBP2,476,000.

   5.         Taxation 

The income tax expense in the Consolidated income statement has been estimated at a rate of 17.4% (December 2018: 15.5%) before a deferred tax asset impairment of GBP809,000, based on management's best estimate of the full year effective tax rates by geographical unit applied to half year profits. The impairment arises from uncertainty over the recoverability of a portion of previously recognised losses against future taxable profits in our US business. The effective tax rate including the impairment for the 6 months to 31 December 2019 is 25.6%.

Deferred tax assets and liabilities have been calculated based on the rate expected to be applicable when the relevant items are expected to reverse.

   6.         Earnings per share 

The earnings per share for the six months ended 31 December 2019 is calculated on earnings of GBP7,395,000 (December 2018: GBP52,023,000) and on 72,778,904 shares (December 2018: 72,778,904 shares), being the number of shares in issue during the period. This excludes 9,639 shares held by the Renishaw Employee Benefit Trust (EBT), which were purchased on 10 December 2018.

   7.         Dividends 
 
  Dividends paid during the period     6 months to       6 months   Year ended 
   were:                               31 December             to      30 June 
                                              2019    31 December         2019 
                                           GBP'000           2018      GBP'000 
                                                          GBP'000 
 
 2019 final dividend of 46.0p 
  per share (2018: 46.0p)                   33,478         33,483       33,483 
 2019 interim dividend of 14.0p                  -              -       10,189 
 
 Total dividends paid during the 
  period                                    33,478         33,483       43,672 
-----------------------------------  -------------  -------------  ----------- 
 

All Directors have waived their right to the interim dividend. All other shareholders on the register on 6 March 2020 will be paid an interim dividend of 14.0p net per share on 6 April 2020, resulting in a dividend payable of GBP4,782,067.

   8.         Property, plant and equipment 
 
                            Freehold     Plant and        Motor             Assets       Total 
                            land and     equipment     vehicles             in the     GBP'000 
                           buildings       GBP'000      GBP'000             course 
                             GBP'000                               of construction 
                                                                           GBP'000 
 Cost 
 At 1 July 2019              197,474       245,027        9,555              8,758     460,814 
 Additions                    12,349         5,145          276             10,628      28,398 
 Transfers                        34         1,077            -            (1,111)           - 
 Disposals                         -       (3,099)        (687)                  -     (3,786) 
 Currency adjustment         (5,077)       (3,929)        (242)                  -     (9,248) 
 
 At 31 December 2019         204,780       244,221        8,902             18,275     476,178 
-----------------------  -----------  ------------  -----------  -----------------  ---------- 
 
 Depreciation 
 At 1 July 2019               31,893       158,567        6,877                  -     197,337 
 Charge for the period         1,671        10,106          596                  -      12,373 
 Released on disposals             -       (2,189)        (653)                  -     (2,842) 
 Currency adjustment           (882)       (1,892)        (171)                  -     (2,945) 
 
 At 31st December 2019        32,682       164,592        6,649                  -     203,923 
-----------------------  -----------  ------------  -----------  -----------------  ---------- 
 
 Net book value 
 At 31 December 2019         172,098        79,629        2,253             18,275     272,255 
-----------------------  -----------  ------------  -----------  -----------------  ---------- 
 At 30 June 2019             165,581        86,460        2,678              8,758     263,477 
-----------------------  -----------  ------------  -----------  -----------------  ---------- 
 

Additions to assets in the course of construction of GBP10,628,000 (December 2018: GBP5,528,000) comprise GBP8,412,000 (December 2018: GBP2,445,000) for freehold land and buildings and GBP2,216,000 (December 2018: GBP3,083,000) for plant and equipment.

At the end of the period, assets in the course of construction, not yet transferred, of GBP18,275,000 (December 2018: GBP5,958,000) comprise GBP14,269,000 (December 2018: GBP2,361,000) for freehold land and buildings and GBP4,006,000 (December 2018: GBP3,597,000) for plant and equipment.

   9.         Intangible assets 
 
                                    Goodwill   Other intangible     Internally            Software     Total 
                            on consolidation             assets      generated            licences 
                                                                   development    and intellectual 
                                                                         costs            property 
                                     GBP'000            GBP'000        GBP'000             GBP'000   GBP'000 
 Cost 
 At 1 July 2019                       20,227             13,823        150,042              20,827   204,919 
 Additions                                 -              1,900          7,948                 964    10,812 
 Currency adjustment                   (510)                (7)              -                (55)     (572) 
 
 At 31 December 2019                  19,717             15,716        157,990              21,736   215,159 
-----------------------  -------------------  -----------------  -------------  ------------------  -------- 
 
 Amortisation 
 At 1 July 2019                        8,220             11,260        108,954              17,429   145,863 
 Charge for the period                     -                 28          8,118                 578     8,724 
 Impairment                              403              1,571              -                   -     1,974 
 Currency adjustment                       -                  7              -                (35)      (28) 
 
 At 31 December 2019                   8,623             12,866        117,072              17,972   156,533 
-----------------------  -------------------  -----------------  -------------  ------------------  -------- 
 
 Net book value 
 At 31 December 2019                  11,094              2,850         40,918               3,764    58,626 
-----------------------  -------------------  -----------------  -------------  ------------------  -------- 
 At 30 June 2019                      12,007              2,563         41,088               3,398    59,056 
-----------------------  -------------------  -----------------  -------------  ------------------  -------- 
 

Impairments of GBP1,973,000 at 31 December 2019 have been recognised in Administrative expenses in the Consolidated income statement due to the uncertain future cash flows relating to these assets.

   10.       Financial instruments 

There is no significant difference between the fair value of financial assets and financial liabilities and their book value in the Consolidated balance sheet. All financial assets and liabilities are held at amortised cost, apart from the forward exchange contracts and a convertible loan option, which are held at fair value, with changes going through the Consolidated income statement unless subject to hedge accounting.

The fair values of the forward exchange contracts have been calculated by a third party expert, discounting estimated future cash flows on the basis of market expectations of future exchange rates, representing level 2 in the IFRS 13 fair value hierarchy. There were no transfers between levels during any period disclosed.

At 31 December 2019 the total nominal value of USD contracts held for cash flow hedging purposes was $870,000,000, or GBP636,232,521. On the basis of a highly probable sales forecast according to IFRS 9 'Financial Instruments' of Renishaw plc (the Company) and Renishaw UK Sales Limited, a partial prospective discontinuation of contracts with nominal value of $133,130,000, or GBP96,802,000 (15.2% of total USD contracts) was necessitated. The fair value loss on such contracts at 31 December 2019 recognised in 'Gains/(losses) from the fair value of financial instruments - derivatives' was GBP3,030,000. Additionally, GBP3,317,000 of realised losses was accounted for in 'Gains/(losses) from the fair value of financial instruments - derivatives' relating to ineffective portions of contracts which matured in the six months to 31 December 2019. The remaining loss amount of GBP2,223,000 relates to fair value movements on option contracts, which are ineffective for cash flow hedging purposes.

On an ongoing basis as a consequence of the above, a 10% depreciation of the GBP:USD exchange rate would result in a GBP9,680,173 loss being recognised in the Consolidated Income Statement, while a 10% appreciation would result in a GBP8,800,157 gain.

Fair value gains and losses relating to this have been excluded from adjusted profit measures, see note 11 for further detail.

   11.       Alternative performance measures 

Alternative performance measures are - Revenue at constant exchange rates, Adjusted profit before tax, Adjusted earnings per share and Adjusted operating profit.

Revenue at constant exchange rates is defined as Revenue recalculated using the same rates as were applicable to the previous year and excluding forward contract gains and losses.

 
 Revenue at constant exchange rates                 6 months    6 months 
                                              to 31 December       to 31 
                                                        2019    December 
                                                                    2018 
                                                     GBP'000     GBP'000 
 
 Statutory revenue as reported                       259,380     296,670 
 Adjustment for forward contract losses                7,324      10,265 
 Adjustment to restate at previous year              (3,081)           - 
  exchange rates 
 
 Revenue at constant exchange rates                  263,623     306,935 
------------------------------------------  ----------------  ---------- 
 Year on year revenue growth at constant 
  exchange rates                                        -14% 
------------------------------------------  ----------------  ---------- 
 

Adjusted profit before tax, Adjusted earnings per share and Adjusted operating profit - These measures are defined as the profit before tax, earnings per share and operating profit after excluding gains and losses in fair value from forward currency contracts which did not qualify for hedge accounting and which have yet to mature, and costs relating to business restructuring.

The gains and losses from fair value of financial instruments not effective for cash flow hedging have been excluded from statutory profit before tax, statutory earnings per share and statutory operating profit in arriving at adjusted profit before tax, adjusted earnings per share and adjusted operating profit to reflect the Board's intent that the instruments would provide effective hedges. This is classified as 'Fair value (gains)/losses on financial instruments not eligible for hedge accounting (i)' in the following reconciliations.

This includes gains or losses from fair value movements on derivatives deemed partially ineffective 31 December 2019. Such contracts are still expected to achieve management's hedging intent for the consolidated Group, despite failing certain elements of IFRS 9 hedge effectiveness criteria. This is classified as 'Fair value (gains)/losses on financial instruments not eligible for hedge accounting (ii)' in the following reconciliations.

Restructuring costs accounted for in Cost of sales, Distribution costs and Administrative expenses relating to the planned closure of the Staffordshire site and reductions in direct manufacturing staff in the UK have also been excluded from these alternative performance measures.

The Board considers these alternative performance measures to be more relevant and reliable in evaluating the Group's performance.

 
 Adjusted profit before tax                             6 months    6 months   Year ended 
                                                           to 31       to 31      30 June 
                                                        December    December         2019 
                                                            2019        2018 
                                                         GBP'000     GBP'000      GBP'000 
 
 Statutory profit before tax                               9,933      61,596      109,944 
 
 Restructuring costs reported in Cost of                   2,249           -            - 
  sales, Distribution costs and Administrative 
  expenses 
 Fair value (gains)/losses on financial instruments 
  not eligible for hedge accounting (i) 
  - reported in revenue                                  (3,133)     (3,200)      (5,001) 
  - reported in (gains)/losses from the fair 
   value of financial instruments - derivatives            2,223       1,230      (1,081) 
 Fair value (gains)/losses on financial instruments 
  not eligible for hedge accounting (ii) 
  - reported in (gains)/losses from the fair               3,030           -            - 
   value of financial instruments - derivatives 
 
 Adjusted profit before tax                               14,302      59,626      103,862 
----------------------------------------------------  ----------  ----------  ----------- 
 
 
 Adjusted earnings per share                            6 months    6 months   Year ended 
                                                           to 31       to 31      30 June 
                                                        December    December         2019 
                                                            2019        2018 
                                                           pence       pence        pence 
 
 Statutory earnings per share                               10.2        71.5        126.7 
 
 Restructuring costs reported in Cost of                     2.5           -            - 
  sales, Distribution costs and Administrative 
  expenses 
 Fair value (gains)/losses on financial instruments 
  not eligible for hedge accounting (i) 
  - reported in revenue                                    (3.5)       (3.6)        (5.6) 
  - reported in (gains)/losses from the fair 
   value of financial instruments - derivatives              2.5         1.4        (1.2) 
 Fair value (gains)/losses on financial instruments 
  not eligible for hedge accounting (ii) 
  - reported in (gains)/losses from the fair                 3.4           -            - 
   value of financial instruments - derivatives 
 
 
 Adjusted earnings per share                                15.1        69.3        119.9 
----------------------------------------------------  ----------  ----------  ----------- 
 
 
 Adjusted operating profit                              6 months    6 months   Year ended 
                                                           to 31       to 31      30 June 
                                                        December    December         2019 
                                                            2019        2018 
                                                         GBP'000     GBP'000      GBP'000 
 
 Statutory operating profit                               11,493      54,151       99,793 
 
 Restructuring costs reported in Cost of 
  sales, Distribution costs and Administrative 
  expenses                                                 2,249 
 Fair value (gains)/losses on financial instruments 
  not eligible for hedge accounting (i) 
  - reported in revenue                                  (3,133)     (3,200)      (5,001) 
  - reported in (gains)/losses from the fair 
   value of financial instruments - derivatives            2,223       1,230      (1,081) 
 Fair value (gains)/losses on financial instruments 
  not eligible for hedge accounting (ii) 
  - reported in (gains)/losses from the fair               3,030           -            - 
   value of financial instruments - derivatives 
 
 Adjusted operating profit                                15,862      52,181       93,711 
----------------------------------------------------  ----------  ----------  ----------- 
 

Adjustments to segmental operating profit:

 
 Metrology                                              6 months    6 months   Year ended 
                                                           to 31       to 31      30 June 
                                                        December    December         2019 
                                                            2019        2018 
                                                         GBP'000     GBP'000      GBP'000 
 
 Operating profit before gain/loss from fair 
  value of financial instruments - derivatives            21,350      55,171       95,345 
 
 Restructuring costs reported in Cost of 
  sales, Distribution costs and Administrative 
  expenses                                                 2,249 
 Fair value (gains)/losses on financial instruments 
  not eligible for hedge accounting (i) 
  - reported in revenue                                  (2,919)     (2,998)      (4,745) 
 Fair value (gains)/losses on financial instruments 
  not eligible for hedge accounting (ii) 
  - reported in revenue                                  (3,318)           -            - 
 
 Adjusted metrology operating profit                      17,362      52,173       90,600 
----------------------------------------------------  ----------  ----------  ----------- 
 
 
 Healthcare                                             6 months    6 months   Year ended 
                                                           to 31       to 31      30 June 
                                                        December    December         2019 
                                                            2019        2018 
                                                         GBP'000     GBP'000      GBP'000 
 
 Operating loss before gain/loss from fair 
  value of financial instruments - derivatives           (1,286)         211        3,367 
 Fair value (gains)/losses on financial instruments 
  not eligible for hedge accounting (i) 
  - reported in revenue                                    (214)       (202)        (256) 
 
 Adjusted healthcare operating profit                    (1,500)           9        3,111 
----------------------------------------------------  ----------  ----------  ----------- 
 
   12.       Related party transactions and post balance sheet events 

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

Full details of the Group's other related party relationships, transactions and balances are given in the Group's Annual report for the year ended 30 June 2019.

No related party transactions have taken place in the first six months of the financial year that have materially affected the financial position or the performance of the Group during that period.

On 6 January 2020 a third party acquired shares in our associate company, HiETA Technologies Limited. As part of the transaction, Renishaw plc converted a loan to share capital in HiETA, disposed of a proportion of our shareholding and the remaining shareholding was diluted following a share issue to the third party. Following the transaction, Renishaw plc has a 33.33% shareholding in the company. Given the high level of confidence at 31 December 2019 that the transaction would complete in January, a fair value gain of GBP2,700,000 has been recognised in the Consolidated income statement and the Consolidated balance sheet in respect of the convertible loan option. The fair value adjustment reflects a valuation for the company based on the cash consideration paid by the third party for it's shareholding.

   13.       Principal risks and uncertainties 

A number of potential risks and uncertainties exist which could have an impact on the Group's performance. The Group has processes in place for identifying, evaluating and managing principal risks. These risks, together with a description of our approach to mitigating them, are set out on pages 40 to 42 of the Annual report 2019, which is available on the Group's website at www.renishaw.com.

We continue to monitor the current economic uncertainties, particularly those arising from trading conditions between the US and China. If prolonged, this could continue to have an adverse impact on group revenue as a result of reduced demand for products manufactured by our customers, particularly in China.

Following the referendum in June 2016 and the subsequent triggering of Article 50 in March 2017, the UK is scheduled to leave the European Union on 31 January 2020 ("Brexit"). The decision has led to a higher level of uncertainty surrounding trading conditions, particularly between the UK and the EU. In the year ended 30 June 2019, 25% of group revenue resulted from trading with the EU.

Renishaw has a Brexit steering group which assesses and monitors the potential impact on the Group and which manages the implementation of mitigation plans.

With a strong direct presence in the EU, the Board believes that Renishaw is well placed to respond to changes to future trading arrangements between the EU and the UK. The establishment of a distribution warehouse in Ireland is complete which, if required, will significantly reduce the number of direct shipments from the UK to the EU post Brexit. Inventory holdings of certain components and finished goods have been increased at our various sites within the EU and UK to mitigate the risk of delays in customs and border clearances.

Other than set out above, the Directors do not consider that the principal risks and uncertainties have changed since the publication of the Annual report 2019 and confirm that they remain relevant for the second half of the financial year.

Financial calendar

   2020 interim dividend record date                                      6 March 2020 
   2020 interim dividend payment date                                   6 April 2020 
   Investor day                                                                        12 May 2020 
   Announcement of 2020 full year results                              3 August 2020 
   Publication of 2020 Annual report                                       Late August 2020 
   Annual general meeting                                                       22 October 2020 
   2020 final dividend record date (provisional)                       25 September 2020 
   2020 final dividend payment date (provisional)                   29 October 2020 

Registered office:

Renishaw plc

New Mills

Wotton-under-Edge

Gloucestershire

GL12 8JR

UK

   Registered number:                01106260 
   LEI number:                            21380048ADXM6Z67CT18 
   Telephone:                            +44 1453 524524 
   Email:                                      uk@renishaw.com 
   Website:                                  www.renishaw.com 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

IR PPUWCGUPUGRB

(END) Dow Jones Newswires

January 30, 2020 02:00 ET (07:00 GMT)

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