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2007 Interim results
24th January 2007
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Chairman’s statement
I report the Company’s results for the first six months of the current financial year ended 31st December 2006.
Revenue in this period increased 7% to £87.1m (2005: £81.6m), representing growth of 12% at constant exchange
rates and demonstrating good progress in all our major geographic markets. There was above average growth in
dental, styli, machine tool and encoder products which offset a softening in the market for co-ordinate measuring
machine (CMM) products.
Operating profit for the period was £12.0m (2005: £13.9m).The adverse impact of the strong pound on the profit for
the period, which was highlighted at the AGM in October, is estimated to be £3.1m. Profit before tax amounted to
£13.5m (2005: £15.3m). Profit after tax was £10.8m resulting in earnings per share of 14.9p (2005: 16.9p). Net cash
balances at 31st December 2006 were £26.5m (2005: £25.7m).
We remain committed to a high level of research and development which, including associated engineering costs,
amounted to £14.8m (2005: £13.8m), an increase of 7%. New products introduced include the UCClite controller from
our CMM product line, an optical toolsetter (OTS) and optical interface (OMI-2T) from our machine tool product line
and the REXM high accuracy angle encoder.
Capital expenditure during the six months amounted to £5.5m (2005: £7.2m).
The refurbishment at Woodchester is complete and equipment for the new automated stores is being commissioned.
The laser and calibration product line has been successfully relocated to Woodchester. At New Mills, the former
machine shop has been refurbished and now provides pre-production machining and assembly facilities with further
investment being made in the Group’s rapid prototyping facility.
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Chairman’s statement
In India, we have expanded our sales and procurement activities and the production facility at Pune is now
operational and the software development team has been established.
The Company has continued to strengthen its worldwide marketing representation, in particular a new subsidiary has
been established in Singapore and two additional regional offices in Brazil.
The Company announced on 19th January 2007 that agreement had been reached with the Trustees of the
Company’s defined benefit pension scheme to cease future accrual for current members of the scheme and future
employees. The pension fund liability as at 31st December 2006, measured under the rules for IAS19 accounting
purposes, has increased to £32.1m (30th June 2006: £18.8m) reflecting the latest triennial valuation undertaken by
the scheme actuary on 29th September 2006. This valuation resulted in a £41m funding deficit on an ongoing basis
which reduces to £24m after the proposed changes. This change should reduce the reported deficit at the end of our
financial year and reduce the Group’s exposure to future volatility. The Company and Trustees are now in the
process of consultation with members to establish a new defined contribution scheme (with a Company contribution
of 11%) within the existing pension scheme trust to take effect from 6th April 2007.
Although we remain very confident for the longer term, at this stage it appears likely that the adverse effects of
currency exchange rates, together with the softening of demand for our products in the CMM market (with some
development delays in delivering certain of our new and in-demand products, in particular the REVO™ and
GYRO™), will result in profits for the full year being below those for last year.
An interim dividend of 7.05p per share (2006: 6.71p per share) will be paid on 9th April 2007 to shareholders on the
register on 9th March 2007.
Sir David R McMurtry CBE, RDI, CEng, FIMechE, FREng
Chairman and Chief Executive
24th January 2007
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Financial highlights
2007
£m
2006
£m
change
%
Sales
At actual exchange rates
At constant exchange rates
87.1
91.6
81.6
81.6
+7%
+12%
Operating profit
At actual exchange rates
At constant exchange rates
12.0
15.1
13.9
13.9
-13%
+9%
Profit before tax
At actual exchange rates
At constant exchange rates
Profit before tax
£m
15.3
15.3
-12%
+8%
15.3
16
13.5
12.4
12
8
13.5
16.6
% of sales
20
6.5
6.6
10
4
0
Earnings per share
14.9p
16.9p
-12%
0
2003
2004
2005
2006
First half year
Dividend per share
7.05p
6.71p
+5%
Profit before tax
Notes
30
% of sales
2007
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Profit and loss account
2007
£m
%
2006
£m
%
Sales
87.1
100
81.6
100
+7%
Cost of sales
33.3
38
29.5
36
+13%
R&D (incl Engineering)
14.8
17
13.8
17
+7%
Gross profit
39.0
45
38.3
47
change
%
+2%
£m
% of sales
Cost of sales (excl. Engineering)
40
26.9
30
18.7
29.6
33.3
50
40
21.0
30
Distribution costs
16.4
19
14.8
18
+11%
20
Administration costs
10.6
12
9.6
12
+10%
10
10
Operating profit
12.0
14
13.9
17
-13%
0
0
1.5
2
1.4
2
-
13.5
16
15.3
19
-12%
Financial income (net)
Profit before tax
Notes
20
2003
2004
2005
2006
First half year
2007
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Profit and loss account
£m
•Engineering costs (including R&D):
2007
16
2006
•Total spend
£16.0m
£14.3m
•Less capitalised
£1.2m
£0.5m
•Remaining in P&L £14.8m
12
11.0
9.9
12.1
4
10
0
0
2003
2004
2005
2006
2007
First half year
20
12
8
% of sales
Distribution costs
£m
16
11.0
12.6
13.4
14.8
% of sales
16.4
40
30
20
4
10
0
0
2003
2004
2005
2006
2007
First half year
Distribution costs
% of sales
Notes
40
20
Engineering costs
•More offices being opened in Brazil
14.8
30
•Gross increase 13%
•Subsidiary company opened in Singapore
13.8
8
£13.8m
•Expansion on marketing resources in India and
the Far East, mainly China
% of sales
Engineering costs
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Profit and loss account
Headcount now 2,106 (June 2006 2,004), an increase of
102 people
£m
% of sales
Administrative expenses
16
40
12
UK & Ire
overseas
1,606
500
+44
+58
8
7.7
9.1
8.4
9.6
10.6
20
4
10
0
0
2003
Operating profit
This year’s operating profit at last year’s exchange rates
would have been £15.1m compared with £13.9m, an
increase of 9%
2005
16
12
8
4
0
13.9
11.0
5.4
2007
% of sales
% of sales
12.0
30
20
5.6
10
0
2003
2004
2005
2006
2007
First half year
Operating profit
Notes
2006
Operating profit
£m
Adverse currency effect of £3.1m at the operating profit
level, when comparing current year’s results at previous
year’s exchange rates
2004
First half year
Administrative expenses
No adjustments made to periods prior to 2005 for IFRS in
any of the figures and graphs in this presentation
30
% of sales
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Profit and loss account
Earnings per share
Dividend per share
21.78
19.80
16.9
18
pence
15
12
9
7.4
14.9
7.6
6
11.36
12.39
10
5.34
13.70
7.05
6.71
6.10
5.61
15.07
5
3
0
2003
2004
2005
2006
0
2007
2003
First half year
Notes
18.00
16.70
15
pence
13.7
20
2004
First half
2005
2006
Second half
2007
Total
Increase
+5%
+8%
+10%
+10%
cover
1.2
1.2
1.8
1.9
+5% (int)
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Sales analysis
•Record first half year revenue
•Sales up 7% at actual exchange rates, 12% at
Revenue
£m
previous year’s exchange rates
•Sales adversely affected by exchange rates compared
with the previous year, sales would have been £4.5m
higher at previous year exchange rates
•Europe
•UK & Ireland
•Far East
•Americas
Notes
72.5
80
60 51.5
81.6
87.1
58.6
40
•Changes in geographic areas:
At act fx
100
At p/y fx
+18%
+19%
+4%
+4%
+3%
+13%
level
+7%
20
0
2003
2004
2005
First half year
2006
2007
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Sales analysis
•Growth in all product lines, except Co-ordinate
measuring machine
•Above-average growth in the product lines:
•Dental
•Styli
•Machine tool
•Encoders
•Calibration
(6%)
UK
6%
Other
3%
(3%)
Europe
36%
(33%)
America
25%
(27%)
•Growth in Styli assisted by the acquisition of itp
GmbH in May 2006
Far East
30% (31%)
Notes
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Group sales
2007
£m
2006
£m
change
%
Continental Europe
31.7
26.9
+18%
31.9
+19%
0.2
EUR
Far East
25.8
25.0
+3%
28.3
+13%
2.5
JPY/USD
America (North & South)
22.0
22.1
-0%
23.7
+7%
1.7
USD
ROW
2.4
2.6
-6%
2.5
-2%
0.1
UK & Ireland
5.2
5.0
+4%
5.2
+4%
87.1
81.6
+7%
91.6
+12%
Total
Notes
at p/y fx
£m
change
%
adverse
fx effect (£m)
4.5
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Capital expenditure
Total capital spend £5.9m (2006 £7.2m), of
which £1.8m spent on property, £3.8m on plant
and £0.3m on vehicles
•Property additions –
- India factory and offices (0.6m)
- refurbishment of Woodchester
for automated stores (£0.8m)
Capital expenditure
£m
12
9
6
3
0
2003
•Pre-production, machining and assembly
equipment at New Mills
•Rapid prototyping equipment and further IT
investment
Notes
2004
2005
First half year
Plant & vehicles
2006
Property
2007
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Capital expenditure
•India facility development
•28,500 sq ft building on 4.5
acre site
•Headcount in India now 72
(51 in June 2006)
•Manufacturing facility now
operational
•Expansion of sales and
marketing resource ongoing
•Software development team
in place
Notes
Manufacturing facility,
Pune
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New product releases
UCClite cmm controller
13-bit magnetic sensor for rotary and
angular positioning control, named
'Product of the Month' for November
2006 by NASA Tech Briefs magazine
(product from RLS d.o.o., an
associate company)
Twin probe system, with new
OTS tool setting probe and
OMI-2T/OMI-2H interface
REXM high accuracy angle
encoder
Productivity+ v1.3 with
GibbsCAM plug-in
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New product releases
before
after
Dental – remedial and cosmetic work,
including manufacture of frameworks
for bridges and crowns, using the
incise™ dental scanner
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Balance sheet
Notes
Dec
2006
£m
June
2006
£m
change
%
Fixed assets
Intangible assets
Deferred tax assets
69.8
14.5
14.6
69.1
13.4
10.6
+1%
+8%
+38%
Total non-current assets
98.9
93.1
+6%
Stock
Debtors
Cash
Creditors
31.0
40.8
26.5
(20.4)
28.4
44.2
30.7
(23.1)
+9%
-8%
-14%
-12%
Current assets less current liabilities
77.9
80.2
-3%
Deferred tax liability
Pension liability (gross)
(11.7)
(32.1)
(11.8)
(18.8)
Net assets
133.0
142.7
+70%
-7%
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Cash flow from operating activities
2007
£m
12.1
2006
£m
13.9
Depreciation
Capitalisation of development costs
Additional pension contributions
4.3
(1.2)
0.2
4.0
(0.5)
(0.7)
Increase in stock
Decrease in debtors
(Decrease)/increase in creditors
(2.6)
2.4
(2.9)
(0.8)
1.8
(1.2)
Total movement in working capital
(3.1)
(0.2)
2003 2004 2005 2006 2007
Cash from operating activities
12.3
16.5
First half year
Operating profit
Cash from operating activities
£m
20
16.5
16
12
7.6
9.5
11.1
12.3
8
4
0
Notes
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Cash flow
2007
£m
2006
£m
Cash from operating activities
12.3
16.5
Interest received
Tax paid
Dividends paid
Fixed assets purchased (net)
Investments in associates
Fx changes
0.8
(2.0)
(11.0)
(6.2)
1.9
1.0
(3.6)
(10.0)
(6.9)
(0.9)
(0.5)
Total cash movement
Cash at 1st July
(4.2)
30.7
(4.4)
30.1
Cash at 31st December
26.5
25.7
Notes
Bank balances
£m
35
30
25
20
15
10
5
0
33.2
29.2
23.2
2003
2004
25.7
2005
First half year
2006
26.5
2007
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Future business plans
•Renishaw continues to develop key technologies and processes in each of its
business areas to support continued sales growth and to remain the market leader.
•These include further growth in our traditional markets as well as continued
emphasis in the fields of dental/medical equipment and systems for
semiconductor/electronic production.
•Improvement in manufacturing and assembly efficiencies
•Continued development and investment in •new product development
•geographic markets
Notes
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Key objectives
•Renishaw believes that success fundamentally comes from
innovative and patented products and processes, low cost, high
quality manufacturing and the ability to provide excellent local
customer support in all our markets.
Notes