CHAIRMAN’S STATEMENT

28th July 2011
Posted By : ES Admin
CHAIRMAN’S STATEMENT
I am delighted to announce record group results in terms of both revenue and profit for the year ended 30th June 2011.
Total group revenue for the year was £288.7m (including £8.9m revenue from acquisitions during the year (2010 £nil)), 59% ahead of the £181.6m for last year and, more importantly, 43% above the previous highest year‘s revenue of £201.2m reported in 2008. All geographic areas saw good progress, with growth of 64% in Europe, 57% in the Americas and 61% in the Far East, particularly in China, which has become the Group’s largest market, with revenues of £54.2m this year (2010 £34.2m).

Group profit before tax for the year, excluding exceptional items, was £80.4m, compared with £28.7m last year, and compared with £41.7m in 2008, being the previous highest year’s profit before tax (excluding exceptional items).

Adjusted earnings per share were 88.0p, an increase of 178% over last year’s adjusted earnings per share of 31.6p. Reported earnings per share were 90.3p (2010 29.3p).

Segmental analysis

Metrology:

There was an extremely strong performance by our metrology business during the year, with revenue of £267.0m, compared with £162.1m last year, an increase of 65%. There was growth across all product lines, with machine tool and encoder products showing particularly strong growth. Operating profit for this segment was £87.4m, compared with £31.5m last year, an increase of 177%.

During the year the Group acquired a 49% shareholding in Measurement Devices Limited (MDL) at a cost of £3.9m; there is agreement that MDL will become a 100% subsidiary in 2014. Accounting standards require the Group to consolidate its results as if the company were a subsidiary, due to the structure of the shareholders’ agreement. MDL is a metrology company whose laser scanner products are primarily marketed in the areas of marine positioning, mining, quarrying and surveying.

On 8th April 2011, the Group acquired for £3.8m, a 100% shareholding in MTT Investments Limited (“MTT”). MTT designs, develops and manufactures additive manufacturing and rapid prototyping systems, including selective laser melting, metal casting, and vacuum casting machines and processes. Based in Stone, Staffordshire, in the UK, MTT has 40 employees, with subsidiaries in the USA and Italy, and a branch office in France. MTT’s selective laser melting equipment currently has its main markets in aerospace and medical devices, but also has potential for use in other sectors. Its products are complementary to Renishaw’s existing technologies and business. Its results have been consolidated since the date of acquisition. On 1st July 2011 most of the business and assets were transferred to Renishaw plc and is now operating as the Renishaw additive manufacturing products division.

On 16th June 2011, the Group acquired, for a total consideration of £6m, of which £3m is payable in June 2013, certain calibration technology and software, together with drawings, designs and intellectual property relating to optical technology, from Aberlink Innovative Metrology in order to expand the Group’s technology portfolio.

A number of new products have been launched during the year, including Equator™, a radical new alternative to traditional dedicated gauging. This was launched in March 2011 and has been very well received.

Healthcare:

Our healthcare operations continue to develop both in our longer established spectroscopy business and in our newer dental,neuro and diagnostic activities.

Revenue from our healthcare products rose 11% to £21.7m (2010 £19.5m). Certain areas are still in the development phase and, as a result of the continuing research and development costs, an operating loss of £8.5m was recorded (2010 loss £3.4m).

During the year the Group has made several sales of the enhanced surgical robot used for neurosurgical procedures.

Renishaw Diagnostics Limited (“RDL”) has released the RenDx™ research-use-only (“RUO”) multiplex assay system, providing a highly sensitive and flexible tool to screen for multiple targets in a single analysis. RDL is preparing to apply for approval of the RenDx™ multiplex assay system as an in vitro medical device.

We continue to develop our dental business, including our collaboration with Biomet 3i, which is now a non-exclusive distributor of Renishaw dental scanning and milling systems.

Balance sheet:

Expenditure for the year on property, plant and equipment was £16.5m, of which £5.4m was in respect of property and £11.1m was in respect of plant and equipment.

Expenditure on property included:

- The refurbishment of our Charfield premises, purchased in 2008, which has been occupied by our dental, neurological and imaging coil product lines together with a team of group software engineers;

- Larger premises in Barcelona for our Spanish sales and marketing operation;

- Completion of the expansion of our Indian production facility in Pune which opened in March 2011; and

- On 24th June 2011, the Group contracted to purchase 461,000 sq ft of premises on a site of 193 acres in Miskin, South Wales, approximately 55 miles from the New Mills head office. This additional space is being acquired to secure manufacturing capacity required to accommodate future growth. The cost of these new premises will be £7.7m, of which £0.7m has been paid as a deposit prior to the year end.

The Group’s expenditure on plant, equipment and vehicles of £11.1m comprised mainly additional machine tools, other production machinery and IT investment to support the expanding business. Along with £1.6m of tangible fixed assets acquired through business acquisitions, the net book value of property, plant and equipment increased during the year from £70.5m at 30th June 2010 to £82.3m at 30th June 2011.

The Group has invested heavily in working capital during the financial year. Inventories have increased by £18.9m over the year, including £3.2m relating to acquisitions, as the Group has sought to ensure adequate stock to meet customer demands in an environment of growing but unpredictable and substantial order intake. At the end of June 2011, inventories were £49.8m compared with £30.9m at 30th June 2010.

The Group continues to have a solid balance sheet, with net cash balances of £34.6m at 30th June 2011, compared with £31.1m at 30th June 2010.

Awards:

The Group has received a number of awards during the year including our 14th Queen’s Award for Enterprise: Innovation 2011. This has been granted for the TRS2 laser-based tool breakage detection system used on CNC machine tools.

Staff:

The Group workforce has grown from 2,099 at 30th June 2010 to 2,675 at the end of June 2011, an increase of 576. Additional staff have been taken on in all areas, both to support the current increase in production as well as to ensure the ongoing development programmes in our metrology and healthcare businesses. The Group acquired 95 staff through the acquisitions of MDL and MTT. There are currently 267 outstanding vacancies, of which 139 are in the UK and 128 overseas.

Your directors are grateful for the tremendous support and commitment of our staff during a challenging and exciting year.

Prospects:

The Group has made very considerable progress during the year. There continue to be many challenges to be met and 3 overcome, not least the recruitment and absorption of new employees, the occupation of new premises, the integration of newly acquired companies and the ongoing development of Renishaw technologies. Nevertheless the directors confidently expect the current progress of the Group to continue due to the increased opportunities and the underlying strength of our markets.

Dividends:

A final dividend of 24.7p per share will be paid in respect of this year, which, together with the interim dividend of 10.3p, gives a total for the year of 35.0p per share, compared with 17.6p for last year and 25.4p in 2008, our previous highest dividend. The final dividend will be paid on 17th October 2011 to shareholders on the register on 16th Septemb

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