Annual Financial Report

RNS Number : 8811X

Renishaw PLC

24 August 2009

 



Renishaw plc (the 'Company')

Annual Report and Accounts 2009

Further to the publication of the Company's preliminary announcement of its annual results for the year ended 30 June 2009 on 29 July 2009 (the 'Preliminary Announcement'), it is confirmed that two copies of the following have been submitted to the UK Listing Authority:

1.    Annual Report and Accounts for the year ended 30 June 2009 containing Notice of AGM; and

2.    Proxy Form

These will shortly be available for inspection at the UK Listing Authority's Document Viewing Facility, whose address is set out below.

UK Listing Authority

Financial Services Authority

25 The North Colonnade

Canary Wharf

London

E14 5HS 

Tel. No. (0)20 676 1000

The Annual Report and Accounts 2009 will also be available on www.renishaw.com

In compliance with the Disclosure and Transparency Rules, the following information, together with the Preliminary Announcement (available on www.renishaw.com), forms the information required to be communicated to the media in unedited full text as required by DTR 6.3.5:

Risk Management

Worldwide recession

Although the Group had good results for the first quarter of the 2009 financial year, the collapse in demand for the Group's products as a consequence of the global recession induced a large turnaround in the results of the Group for the remainder of the year.

In early 2009, the Group began a cost reduction programme which included a reduction in employee headcount by 437 and the introduction of a 20% voluntary reduction in group salaries, which applies up to December 2009. Also there is a targeted reduction of £10m per year in other overhead running costs.

It is impossible to forecast the timing of an upturn in the global economy and the Group's internal budgets and forecast reflect this uncertainty.

Order book

Orders from customers generally involve short lead times with the outstanding order book at any time being around one month's worth of sales value.

This limited forward order visibility restricts the Group's ability to accurately forecast demand and therefore requires maximum production flexibility.

Research and development

The Group invests heavily in research and development, to develop new products and processes to maintain the long-term growth of the Group. This research and development encompasses new innovative products within our core metrology business, as well as the application of our technology in other areas, such as dental and specific applications in the medical field.

The development of new products and processes involves risk, such as with development time, which may take longer than originally forecast and hence involve more cost. Also, being at the leading edge of new technology, there are uncertainties whether new developments will work as planned and in some cases, projects may need to be halted with the consequent non-recoverability of expenditure if the intended deliverables of the project are not forthcoming. Expenditure is only capitalised once the commercial and technical feasibility of a product is proven.

These 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 our major customers to ensure that new products will meet the needs of the market at the right price.

Defined benefit pension schemes

With the closure of the UK and Irish defined benefit schemes to new employees and future accruals for existing members, the major risk surrounding accounting for pension costs and future funding arise from investment performance within the portfolio and actuarial assumptions proving appropriate. 

This year has seen the Consolidated statement of income and expense (the 'SORIE') bear an actuarial loss of £13.0m (2008 loss of £20.5m).

The UK defined benefit scheme is secured by a registered charge on certain of the Group's UK properties, with the Pension Regulator having confirmed that it does not propose to issue any scheme funding directions under Part 3 of the Pensions Act 2004.

Treasury

With the concentration of manufacturing in the UK and Ireland, there is inevitably an exposure to fluctuating currencies on export sales, largely in respect of the US Dollar, Euro and Japanese Yen. This year has seen significant movements in exchange rates which have been reflected in improved results when the performance of overseas operations have been translated into Sterling, although the amount was limited by the hedging of some currencies during the year.

The Group was hedged throughout the year for a significant amount of its exposure to changes in the Euro and, to a lesser extent, US Dollar and Japanese Yen.

The hedging contracts outstanding at the end of the year were marked to market at the year end and the SORIE shows a loss for the year of £1.6m on these outstanding contracts, increasing the cash flow hedging reserve to £5.4m.

The Group continues to be hedged against the Euro and Japanese Yen receivables on a rolling three-and-a-half year basis. A smaller percentage of estimated US Dollar receivables are also hedged up to June 2010. The Group monitors the effectiveness of its hedging policies regularly and any ineffective proportions may need to be accounted for in the Consolidated income statement. The policy relating to the Group's hedging practices is noted within the treasury policies on page 14 of the Annual report. 

Tax

Significant judgement is required in determining the effective tax rate and in evaluating certain tax positions. Tax provisions are adjusted due to changing facts and circumstances, such as case law, progress of tax audits or when an event occurs requiring a change in tax provisions. Management regularly assesses the appropriateness of tax provisions.

Directors Responsibility Statement

We confirm that to the best of our knowledge:

(a)    the financial statements, prepared in accordance with the accounting standards referred to in the Statement of directors' responsibilities, give 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 taken as a whole; and

(b)    the Financial review includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

Related Party Transactions

During the year, associates purchased goods and services from the Group to the value of £168,000 (2008 £236,000) and sold goods and services to the Group to the value of £1,990,000 (2008 £1,450,000). At 30th June 2009, associates owed £132,000 to the Group (2008 £479,000). Associates were owed £77,000 by the Group (2008 £90,000). Dividends of £80,000 were received from associates during the year (2008 £80,000). 

No bad debts were incurred during the year. All transactions were on an arm's length basis.

24 August 2009

Renishaw plc

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

Registered number:    1106260

Contact name:           Norma Tang

Contact telephone:     [phone]

www.renishaw.com

 

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