Renishaw plc

Welcome to Renishaw's final results presentation for the 2025 financial year. I'm Will Lee, Chief Executive, and I'm joined by Alan Roberts, Group Finance Director. I'm going to start by talking you through the highlights of our performance this year, followed by Alan's more detailed review of our financial performance. I'll then go through the solid strategic progress that we've made this year and wrap things up with our outlook for the year ahead. FY25 has been a year of solid achievement in what remain challenging market conditions. I'm pleased to report record revenue, increased adjusted profit before tax, as well as strong cash generation. Innovation has always been the lifeblood of our business and this year we have delivered many key new products to market. These have been developed to target specific opportunities and customer needs. A great example of this is our new Equator X gauge and Modus IM software which will exploit the growing trend for shop floor metrology and we are really excited about their impact on our growth in the years ahead. As we discussed at our recent Capital Markets Day, our priority remains profitable growth, but we're also ensuring that we underpin this with a more focused and leaner business. We have taken decisive action this year to reduce our annualised operating costs by around 3% of revenue, which will benefit our performance in FY26 and beyond. Whilst markets remain challenging, we expect steady growth in the year ahead. Let's look at a few of the highlights of our performance in FY25. As I mentioned, we achieved record revenue this year, combined with an increase in adjusted profit. Our organic growth strategy is working well across our portfolio of businesses against a tough economic backdrop. Constant currency growth was 3.7% this year, with good growth from position encoders, driven by improving demand from semiconductor manufacturing equipment builders. We also saw growing demand for our agility coordinate measuring machines, while sales of additive manufacturing and spectroscopy systems were weaker. APAC was the strongest region, with constant currency growth of 7%, including good growth in China. Our operating profit margin this year is the same as last year, with the benefits of pricing, productivity initiatives and restructuring in the year offsetting inflationary cost pressures. We are taking further action to improve our margins and I will return to this topic shortly. Last year, we introduced a new return on invested capital KPI to signal our focus on allocating capital to profitable investments. We have turned the corner with this metric, helped by higher profits this year, as well as a reduction in invested capital as we have actively managed our capex and working capital growth. This discipline has also benefited our other new cash conversion KPI, which is now well above target, resulting in a strong balance sheet and cash position. Our ESG strategy is a fundamental pillar of our business, underpinning our commitment to doing business responsibly. We will be setting out our ESG goals and the good progress that we are making in our forthcoming annual report. A highlight this year has been our continued progress on reducing our statutory emissions in relation to our revenue. I'd now like to hand over to Alan, who will look at our financial performance in a little more detail.

Thank you Will. As Will has already commented, FY 2025 was a year of profit progress and record revenue in challenging market conditions. Revenues at reported exchange rates rose by 3.1% to £713 million. We continue to benefit from being diversified across a range of end-user markets. Whilst the automotive and consumer electronics markets were weaker this year, the semiconductor and defence markets were more positive. 20% of our revenues come from the USA, whilst our manufacturing is located in the UK, Ireland and India. We have therefore been affected by US government tariff changes in our final quarter. Whilst we experienced some net costs when changes to tariff rates first came into effect, we have since been able to mitigate them with surcharges. Constant currency revenue growth of 3.7% this year. Whilst the pound is appreciated against the US dollar during the year, our forward cash flow hedging contracts have largely mitigated this headwind. Our adjusted operating profit grew at the same rate as our revenue this year, leaving operating margins stable at 15.7%. It is pleasing to note that we have turned the corner on gross margins, excluding engineering, where a combination of growth and investments in process automation has contributed to a 0.7% improvement to 61.7%. We have, however, continued to experience inflationary cost pressures with increases in engineering, distribution and administration costs, offsetting most of the gross margin improvement. These costs include our continued investment in IT transformation, which we expect to streamline customer interactions and improve productivity in the future. We have taken action during the year to reduce our fixed costs, which will benefit us in future years. Our review of engineering projects resulted in the closure of the drug delivery aspect of our neurological business and the closure of a research facility in Edinburgh, which are expected to benefit operating profit by approximately £4 million per annum. and we incurred 4.4 million of restructuring costs relating to this, which are excluded from our adjusted profit metrics. We also made the difficult decision in June to initiate a redundancy programme, mostly in the UK, Ireland and EMEA, to achieve £20 million of annualised savings. Redundancy costs of around £16 million will be recognised in FY2026 and excluded from adjusted profit and earnings measures. Our adjusted profit also excludes provisions of £4.9 million relating to interest on historical and non-recurring tax matters. The resultant statutory profit before tax is 4% lower at £118 million and was £83.8 million after tax. The underlying effective tax rate, excluding the impact of the historical and non-recurring tax matters of £9.2 million, was 21%, which is the same as in the previous year. Our progressive dividend policy aims to increase dividend per share whilst maintaining a prudent level of dividend cover. This year we paid an interim dividend of 16.8 pence per share. We propose a final dividend of 61.3 pence, bringing the full-year dividend to 78.1 pence per share, 2.5% higher than last year. As Will noted earlier, we have achieved strong cash generation this year. Adjusted cash flow conversion from operating activities improved by 21% to 91%, exceeding our 70% target. This improvement was driven by a combination of lower working capital and reduced capital expenditure. Capital expenditure was 46.3 million this year, substantially lower than the prior period, as we reduced our investment in property following completion of the first phase of our expansion at our Meskin manufacturing site. As explained at our recent CMD, we are now seeking to keep our property assets stable with lower levels of additions balanced by depreciation and disposals. We are, however, continuing to invest in planted equipment to meet the evolving needs of the business, adding capacity and increasing automation to reduce our operating costs. CapEx for FY26 is planned to be around £40 million. On capital allocation, we continue to prioritise investment in organic growth, with our progressive dividend policy providing our principal means of shareholder returns. With cash and equivalents now standing at £273.6 million, the Board is increasingly focused on more active capital allocation to support the next phase of Renishaw's development. I'd now like to hand back to Will.

Thanks, Alan. We continue to make solid progress with our innovation-led growth strategy, introducing many exciting new products this year. We are now reaping the benefit of resource allocation and prioritization decisions made in recent years, which have both focused and accelerated our development processes. This is vital as product innovation underpins our organic growth strategy, which comprises three main activities shown here. The first of these is growing our existing business in the field of metrology and position sensors, which are mainly sold to machine builders. This year saw strong growth in demand for laser encoders, which are mainly used for wafer inspection and semiconductor manufacturing. We are strengthening our leading position in this sector with a new generation of encoders that offer even higher performance combined with plug and play installation and easier servicing. We also continue to refresh our market leading range of machine tool probing sensors. Our second growth strategy relates to increasing the value of our technology through the sale of systems and software. These are all emerging businesses where our key focus is on capturing market share to drive our growth. This year, we have extended our RenAM product family with a new dual laser metal AM machine. But perhaps the most significant product introductions are our new EquatorX Gauge and Modus IM metrology software, the outcome of substantial investment over the last few years. We expect these to be disruptive in our markets, offering unprecedented inspection speed and ease of use. They will also streamline our sales activities and open up new distribution channels. Finally, we are also extending into new close adjacent markets. This year, we launched our new Astria inductive encoder product line. This offers robust and accurate position measurement in demanding environments, including robotics, defense and medical devices. Astria's introduction was accelerated by deploying a minimum viable product development approach, which enables us to bring products to market faster, generating revenue earlier than had been the case previously. It also allows us to gauge market reaction, which confirms that we are meeting customer needs and has given us the confidence to invest further. At our Capital Markets Day in June, we talked about where we are targeting improvements to our operating performance. We set out where we want to drive each element of the P&L, delivered through a combination of growth, productivity and cost reduction. Overall, we're targeting operating profit margins in excess of 20%. Now, whilst we don't expect to achieve all of this in a single period, we are taking steps now that will make an impact in the year ahead. Whilst gross margins have moved in the right direction this year, we have further to go. At our CMD, we demonstrated many examples of our investment in automation to drive productivity improvements in our recently expanded factory at Miskin. We expect these initiatives to reduce direct headcount and contribute several tens of basis points to margins each year. To reach our gross margin target, however, we will also need to exploit our recent capital investments to gain operational leverage as we grow. We have substantial expansion capacity to grow into, which will only require limited further capex and minimal additional labour benefiting margins. We are also seeking improvements in the fixed cost elements of our P&L. Our goal is to move each of our engineering, distribution, and administration costs towards the bottom of their historic ranges by ensuring that their growth remains below our rates of sales growth. This will be achieved partly through prudent resource allocation, streamlining of our processes, and improving our IT infrastructure. But we have also taken decisive action to control costs. This includes closure of a research office in the first half of FY25, as well as the recent decision to exit our neurological drug delivery business. In June, we announced an operating cost reduction programme, targeting 20 million in annualised payroll savings. This has been implemented over the summer, with more than 300 employees leaving the business since June, mostly on a voluntary basis. These annualised savings amounted to around 300 basis points of margin improvement, which will help to offset inflationary pressures on the cost base during the year. The actions that we are taking to limit working capital growth, to control CapEx and to reduce operational costs will also help to drive Roic back into our target range. Now let's turn to our outlook. There has been a steady start to FY26 in line with our expectations and at this stage we are expecting to achieve steady revenue growth in the year ahead. We remain confident in our long-term sustainable growth model. The structural divers that underpin our markets continue to present growth opportunities across our businesses. We are accelerating our innovation processes and making them more efficient. We're really excited by the growth potential of the key new products that we have introduced this year, as well as others that we have in our R&D pipeline. We are focused on achieving our financial targets over time. We continue to invest in our infrastructure and make productivity improvements and we are reducing our fixed costs in relation to the size of the business with clear targets for production, engineering, distribution and administration costs. Our resilient balance sheet provides us with the financial capacity to pursue our strategy. Following the substantial investment programme at our Miskin facility, attention is now turning to the capital allocation priorities that will support the next phase of our development. Thank you for listening.