Final Results
Renishaw PLC
25 July 2007
25th July 2007
Renishaw plc and subsidiary undertakings
Preliminary announcement of results for the year ended 30th June 2007
CONSOLIDATED INCOME STATEMENT
2007 2006
£'000 £'000
Revenue 180,883 175,835
Cost of sales (97,899) (90,901)
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Gross profit 82,984 84,934
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Distribution costs (32,911) (30,782)
Administration costs (20,344) (18,684)
Exceptional pension curtailment credit 19,460 -
--------- ---------
Operating profit 49,189 35,468
Financial income 8,180 6,507
Financial expenses (5,237) (3,873)
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Profit before tax 52,132 38,102
Income tax expense (11,981) (7,621)
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Profit for the year 40,151 30,481
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Earnings per share (basic and diluted) 55.2p 41.9p
Dividend per share arising in respect of the year 22.87p 21.78p
Adjusted earnings per share (excluding exceptional item) 35.9p 41.9p
CONSOLIDATED BALANCE SHEET
at 30th June 2007 2006
£'000 £'000
Assets
Property, plant and equipment 69,460 69,081
Intangible assets 13,811 12,543
Investments in associates 6,972 908
Deferred tax assets 4,733 10,606
Employee benefits 5,562 -
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Total non-current assets 100,538 93,138
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Current assets
Inventories 36,178 28,359
Trade receivables 37,880 37,717
Current tax 323 183
Other receivables 6,482 6,320
Cash and cash equivalents 20,761 30,728
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Total current assets 101,624 103,307
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Current liabilities
Trade payables 11,223 10,692
Current tax 1,315 1,402
Provisions 693 793
Other payables 8,779 10,239
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Total current liabilities 22,010 23,126
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Net current assets 79,614 80,181
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Liabilities
Employee benefits - 18,838
Deferred tax liabilities 12,152 11,745
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Total non-current liabilities 12,152 30,583
--------- ---------
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Total assets less total liabilities 168,000 142,736
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Equity
Share capital 14,558 14,558
Share premium 42 42
Currency translation reserve (210) 265
Cash flow hedging reserve 1,845 2,007
Retained earnings 151,765 125,864
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Total equity 168,000 142,736
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CONSOLIDATED STATEMENT OF CASH FLOW
2007 2006
£'000 £'000
Cash flows from operating activities
Profit for the year 40,151 30,481
--------- ---------
Adjustments for:
Amortisation of development costs 2,038 1,397
Amortisation of other intangibles 1,176 703
Depreciation 7,874 7,840
Profit on sale of fixed assets (25) (51)
Share of profits from associates 46 -
Exceptional pension curtailment credit (19,460) -
Financial income (8,180) (6,507)
Financial expenses 5,237 3,873
Tax expense 11,981 7,621
--------- ---------
687 14,876
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Increase in inventories (7,819) (963)
Increase in trade and other receivables (2,936) (4,289)
Increase in trade and other payables (336) 2,664
Difference between pension service cost and
contributions (266) (1,261)
(Decrease)/increase in provisions (100) 161
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(11,457) (3,688)
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Income taxes paid (7,021) (7,605)
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Cash flows from operating activities 22,360 34,064
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Investing activities
Purchase of tangible fixed assets (10,037) (12,816)
Development costs capitalised (3,624) (3,227)
Purchase of other intangibles (865) (4,217)
Investment in associate (6,110) (928)
Sale of tangible fixed assets 187 399
Interest received 1,710 1,911
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Cash flows from investing activities (18,739) (18,878)
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Financing activities
Interest paid (297) (15)
Dividends paid (16,101) (14,853)
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Cash flows from financing activities (16,398) (14,868)
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Net (decrease)/increase in cash and cash equivalents (12,777) 318
Cash and cash equivalents at beginning of the year 30,728 30,072
Effect of exchange rate fluctuations on cash held 2,810 338
--------- ---------
Cash and cash equivalents at end of the year 20,761 30,728
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CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
2007 2006
£'000 £'000
Foreign exchange translation differences (475) (390)
Actuarial gain/(loss) in the pension schemes 3,144 (147)
Effective portion of changes in fair value of cash flow
hedges (304) (326)
Deferred tax on income and expense recognised in equity (1,151) 280
--------- ---------
Profit/(loss) recognised directly in equity 1,214 (583)
Profit for the year 40,151 30,481
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Total recognised income and expense for the year 41,365 29,898
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REVENUE ANALYSIS
2007 2007 at 2006
£'000 2006 £'000
exchange
rates
£'000
Continental Europe 67,196 67,005 58,945
Far East, including Japan & Australia 50,736 56,185 53,130
North & South America 46,160 50,193 46,708
Rest of World 5,002 5,031 5,539
UK and Ireland 11,789 11,789 11,513
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Total Group revenue 180,883 190,203 175,835
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NOTES:
1. The group financial statements consolidate those of the Company and its
subsidiaries (together referred to as the 'Group') and equity account the
Group's interests 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 applicable law.
2. The financial information set out above does not constitute the Company's
statutory financial statements for the years ended 30th June 2007 or 30th
June 2006 but is derived from those financial statements. Statutory
financial statements for 2006 have been delivered to the Registrar of
companies, whereas those for 2007 will be delivered following the Company's
annual general meeting. The auditors have reported on those financial
statements; their reports were unqualified and did not contain a statement
under section 237(2) or (3) of the Companies Act 1985.
3. The proposed final dividend of 15.82 net per share for the year ended 30th
June 2007 will be paid on 15th October 2007 to shareholders on the register
on 14th September 2007.
The Chairman's statement to be included in the 2007 Annual report and financial
statements:
I report the Company's results for the year ended 30th June 2007.
Revenue and Trading
Revenue for the year increased by 3% to £180.9m (2006 £175.8m) which represents
growth of 8% at constant exchange rates.
With the exception of co-ordinate measuring machine (CMM) products, where one of
our major customers in Japan has been subject to an export ban, there was growth
in all product line revenue - in particular machine tool and dental.
Geographically, there was substantial growth in Europe.
Profit
Operating profit for the year, excluding an exceptional non-cash pension
curtailment credit, reduced to £29.7m (2006 £35.5m), due to a number of factors
particularly exchange rate movements, primarily the US Dollar and Japanese Yen
(with an adverse profit effect of £7m) and difficulties in the CMM market.
Profit before tax and exceptional item was £32.7m (2006 £38.1m), resulting in
earnings per share of 35.9p (2006 41.9p).
Sales and Marketing
The Group's worldwide marketing programmes continue, with the many new offices
growing and prospering as they have become fully established, particularly in
the Far East, including China and India.
The Group participates worldwide in excess of 100 exhibitions annually which
contribute significantly to the recognition of the Group's products and to
sales.
Manufacturing
The Group's UK manufacturing facilities at Stonehouse, Woodchester (including
the new automated stores), New Mills and also in Ireland have continued to
invest in additional equipment to improve efficiencies and are preparing for the
introduction of a new manufacturing Enterprise Resource Planning (ERP) business
system. At Pune in India, the production facilities are now fully operational
and the range of products being manufactured there is being extended.
Research and Development
Research and Development during the year amounted to £31.1m including associated
engineering costs (2006 £29.3m) prior to the capitalisation of development costs
(net of amortisation) of £1.6m (2006 £1.8m) giving a net profit and loss charge
of £29.5m (2006 £27.5m).
RevoTM is now in production and is being extensively tested and integrated by
OEMs and major end user customers worldwide. Several Revos are being used in
their production and are delivering significant improvements for them in
throughput and productivity.
A number of new products have been introduced during the year. In addition to
those referred to in the interim statement, recent products include the XL80
laser and XC80 compensator, which provide significant improvements to the
product offerings in the laser and calibration market. The TRS2 tool recognition
system has been introduced, which provides rapid broken tool detection on a wide
range of machine tools. Our spectroscopy product line has recently introduced
StreamlineTM technology, which enables very fast production of Raman chemical
images.
Investments
During the year, the Group acquired, for £6.1m, a 20% interest in Delcam plc,
which specialises in advanced CAD/CAM software product development solutions for
the manufacturing industry. Delcam is listed on the London Stock Exchange's AIM
market. Renishaw and Delcam have worked together for many years and share common
metrology interests and customers. Renishaw believes that closer cooperation
with Delcam will enhance the sales of both companies and will provide
opportunities for developing software to support Renishaw's products.
Since the year end, Renishaw has acquired a 75% interest in D3 Technologies
Limited ('D3'), a company set up in collaboration with the University of
Strathclyde and others to exploit certain patents related to Surface Enhanced
Raman Spectroscopy ('SERS') and to develop SERS for molecular diagnostics and
trace detection. The investment in D3 will comprise cash of £1.85m and the
supply of instrumentation, with a combined value of approximately £5m over the
next 5 years.
Part of the D3 investment has been used to purchase for £850,000 the business
and assets of the analytical business unit ('ABU') operated by Mesophotonics
Limited, a spin-out company from the University of Southampton. The ABU develops
and manufactures substrates used in SERS applications.
Balance Sheet
Capital expenditure during the year on tangible fixed assets was £9.7m (2006
£13.2m). Net cash balances, after the capital expenditure during the year, the
investment in Delcam plc and increase in working capital, were £20.8m (2006
£30.7m).
Pension Fund
Following the announcement with the Interim results and completion of the
consultation process with fund members, future accrual for current members of
the UK pension scheme ceased on 5th April 2007. A new defined contribution
pension scheme was established on 6th April 2007. As a result of the changes, an
exceptional non-cash curtailment credit of £19.5m has been incorporated in the
Consolidated income statement as required by IAS 19.
The Queen's Award for Enterprise 2007
On 21st April 2007, the birthday of Her Majesty the Queen, it was announced that
Renishaw had been honoured with a Queen's Award for Enterprise: Innovation 2007
for the RMP60 and RMI probe system. This is the 12th Queen's Award in the
Company's history.
The award was made to the Company for the development of a radio transmission
spindle probe system used on computer numerically controlled (CNC) machine
tools. The systems are able to measure work pieces, provide off-set fixtures,
control in-cycle processes and inspect work being machined automatically.
Personnel
The numbers of those employed by the Group in the UK and overseas increased by
150 to 2,154 (2006 2,004). I thank all our employees for their contribution to
the Group during this challenging year.
Prospects and Dividend
For the purposes of budgeting for the financial year, we are not expecting to
see any benefit from an improvement in foreign exchange rates. Nevertheless, if
current rates of order intake continue we would expect to see sales growth
approaching double digits, assisted by the anticipated recommencement of
business in the second half of the current financial year with our Japanese
customer whose export activities have been restricted in the past year. In view
of last year's trading performance we are also taking steps to address the cost
base of the Group, with the objective of restoring our operating margin to its
previous level. I am optimistic about the prospects for continuing long-term
growth.
Your Board proposes a final dividend of 15.82p per share giving a total for the
year of 22.87p (2006 21.78p).
Sir David R McMurtry, CBE, RDI, CEng, FIMechE, FREng
Chairman & Chief Executive
25th July 2007
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
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