Renishaw plc

Right I have the thumbs up from the back so we're good to go. So welcome everyone to our four-year results presentation for 2026. I am going to go through on strategy and outlook after John, our Chief Financial Officer, has given an update on the financial results for the year. Clearly it's been an excellent year for us and I just wanted to go through some of the highlights though before handing over to John. So great progress, revenue and profit growth in all areas. Now clearly the headline driver and star there has been the investment triggered by AI going into Semicon investment. For me, most pleasing though is the progress that we've made in our portfolio of emerging businesses and we'll touch more on that later. We remain very well positioned in a range of attractive markets and I really think we're making the most of that opportunity with our innovation-led strategy. Important new products that we've released that are really going well and more coming through and again I will touch more on this later. So we are investing. We have been investing in capacity. This is targeted to meet the needs and the demands that we are seeing. We are doing this very cognizant of the fact that we operate in cyclical industries, particularly that semiconductor one of making sure that we invest in the right way to support our customers there. We are doing this also making sure that we're focusing on the underlying productivity of the group, making sure that we're really well positioned there for the future. So an exciting time and John is going to talk through now the financial performance.

Thanks Will and good morning everyone. It's a great pleasure to present my first Renishaw results and I do so very much on behalf of the wider team who delivered the successful year. So let's start with the headlines. Revenue increased by 14% to £816 million or 17% at constant FX. Adjusted operating profit grew by 36% to £153 million, lifting margin by 3 percentage points to 18.7%, and earnings per share grew 30%. Reflecting this performance and our strong balance sheet, we're proposing a 5% increase in the regular dividend for the year, plus a special dividend of 70 pence per share. These results demonstrate positive progress against our medium term financial targets. We're delivering high single digit through cycle revenue growth. Operating margin is moving closer to the 20% threshold and indeed surpassed it in the second half. Cash conversion fell year on year, but remained above our 70% target. and return on invested capital broke back above 15%. Undoubtedly, our performance was boosted by positive cyclical trends that will reverse at some point. We acknowledge that and we're focused on driving sustainable through cycle improvement in all four metrics. Let's now look at revenue and profit by segment, starting with industrial metrology. Industrial metrology, which accounts for more than half of the business, delivered steady progress. Revenue grew by 4% or 7% at constant FX, supported by rising demand for 5-axis coordinate measuring machines and equator gauges. Metrology sensors were flat, with higher demand from consumer electronics customers, offset by weaker sales to machine builders in Europe. Operating margin was broadly stable at just over 17%, with currency headwinds offsetting the benefits of cost reduction. Position measurement delivered an excellent performance. Revenue increased by 26% or 29% at constant FX. Growth was led by optical encoders for semiconductor equipment and magnetic encoders for automation and robotics. Laser encoders were lower but started to recover in the second half and the order book is in growth. And we also secured early production orders for Astria inductive encoders for aerospace and defence applications. That top line growth converted to even stronger profit growth. Operating profit was up more than 50% and operating margins jumped by 5 percentage points to 27.4%. Specialised technologies achieved the strongest revenue growth of all three segments. It was up 43% or 46% at constant FX. Additive manufacturing was the engine of this growth, with strong demand from aerospace and defence customers. Spectroscopy dipped slightly. But overall, operating margin for specialised technologies grew by almost 18 percentage points to 4.4%. Driven by the operating leverage in additive manufacturing. It's also pleasing to note that all product lines in this segment are now profitable. Turning back to the group as a whole, you can see the change in operating margin from 15.7% in FY25 to 18.7% in FY26. Currency was a significant headwind because of both forward contracts and in-year average FX rates. That was more than offset by the benefits of restructuring. Gross margin dipped slightly, principally because of product mix. But the biggest impact came from operating leverage as a result of volume growth. That drove margins up to 18.7% for the year and indeed to over 21% in the second half. Turning to cash. Adjusted operating cash flow was £121 million. Cash conversion dipped to 79% from 91% in the prior year. CapEx was actually down year on year, but working capital was up, especially receivables, in line with the very strong sales growth in Q4. After tax, cost reduction expenditure, dividends and other movements, Net cash increased by £17 million. We closed the year with cash and deposit balances of £291 million, maintaining a strong financial position. The special dividend of 70p per share will reduce H1FY27 cash flow by £51 million. Finally, a look at return on invested capital. There's no doubt we're currently benefiting from the semiconductor super cycle. But our focus is on taking action to improve ROIC through cycle. In FY26, we successfully restructured our cost base. In FY27, we'll significantly increase manufacturing capacity, primarily for encoders. That will mean a doubling of capex on production assets. and over the medium term, productivity improvements will extend beyond just manufacturing to include sales and the back office. One Renishaw is a multi-year programme to implement standardised globalised processes that will enable existing and future business. All three initiatives are designed to ensure that Renishaw is positioned for long-term sustainable success through the business cycle. I'll hand back to Will.

Thank you John. So let's now take a look at strategy going forward. So we are very much focused on being a world leader in sensors and systems for both measuring and manufacturing. We have a very strong purpose. I'm very fortunate that I get to see this in action out visiting our customers and it's then you really realise the important role that we play with them, those long-term relationships that we have and how we help them meet the needs of today and the future, those precision needs, those productivity needs, those challenges that they face. We have a clear strategy underpinning this, that very clear innovation-led organic growth strategy, making sure we're disciplined on those investments. Secondly, focusing on the attractive markets, so good through-cycle growth if cyclical. Next we have this strategy of really accelerating our growth so really disruptive R&D coming through on close adjacent markets making sure that we are accelerating the growth broader than just the core and then finally of looking at relatively small targeted acquisitions close to our core really accelerating growth through those as well. So when we're discussing this, we put this all together in a model that I'm sure many of you are familiar with now, our value creation model. So if we take a look at this, then on the left here we have what is happening to us from the outside, the markets that we operate in, and on the right we have our strategy to drive out performance. So markets, fortunate, definitely growing more than 5% per annum through cycle. Accessible market up to 7 billion, certainly on those drivers and trends. And I'll talk through some of the more of the end markets shortly. But definitely AI and the pull through there is the most significant clearly at the moment. that strategy then for outperformance very much to start with with our traditional sensor business these three pillars at the top you can see here growing in the existing market with that traditional sensor business increasing technology value so the industrial metrology and the am systems so the hardware and software enabled systems there and then extending into new markets of which our Astria inductive encoder is a prime example of moving very close to where we are with new disruptive technology. As John has mentioned clearly this middle layer is really important for us making the most of the investments that we are making for the future with a very targeted focused execution and then that portfolio growth strategy of starting with what has to be very disruptive patented new R&D Thank you very much. So sometimes we know for sure where we're selling. So if we're selling a position encoder to a company that makes semiconductor manufacturing equipment, we know for sure where that is going to end up. If we're selling a machine tool sensor to a machine tool builder, we don't know. So we are looking then at estimates to try and gauge that. I think the other thing worth stressing here is when we are selling our products, we have very generic solutions. So an example here would be our industrial metrology systems. It's the same hardware and software that we are selling to a consumer electronics as it is to an automotive as to an aerospace. So we're not aligned so much on specific solutions there. If we look at the specific outperformers then for this year, then a few key green ones going up. Two of those feel very much like they're powered by that AI driver that we talked about before. So clearly the semiconductor equipment is, but also the energy generation with investment into gas turbines and also into backup power with internal combustion engine units there driving that market well as well. and also we are seeing definitely a flow through in aerospace and defence. Let's have a look a little bit more at a couple of those areas. So in the world of semiconductor, so our sales here, this is our position encoders, our range of position encoders from optical encoders through to laser encoders, right through to a whole range from manufacturers of front-end equipment, back-end equipment, advanced packaging, a whole different range. What we see here really is the benefit I think of investment over many years of the innovation to make sure we've got the products that are needed and customer relationships and working with these customers for many years integrating our solutions with them making sure they meet their metrology needs. We are now seeing the real benefits of that on this upturn. That is meaning that we are investing significantly in our capital. This is right across from machining, so machining centers for machining of encoder bodies, electronics manufacturing ramping up, and also then the automation equipment for putting together the encoders themselves. You can see this is actually an atom cell here with the robot doing a lot of the heavy lifting and the assembly of an atom product. So we have been investing, we continue to invest here. Our strategy is very much to make sure we support our customers on the upcycle. We have to be there, we have to be a trusted partner for them to supply their customers during these cycles that we see. The benefit of this, because clearly we're very cognizant that this is cyclical, we've lived through this before, the upturns and the downturns, the investments that we're putting in are helping us to drive the underlying productivity and therefore the manufacturing efficiency of these products. If we next look at aerospace and defence, so certainly we are seeing a flow through of investment here and this is customers investing both in capability and in capacity. Now this has been a very strong traditional market for us but when you think of this for Renishaw you think of our IM sensors and you think of our IM systems business and that is indeed doing well and we're spending a lot of time with customers of how do we help them support them ramp up in that area. but two areas really wanted to talk on today so the first is with additive manufacturing and particularly in the defense space here what we're seeing is customers really understanding the benefits additive manufacturing can give in terms of design freedom and what they can achieve a couple of examples some gun suppressors for large guns this is not how they're supposed to be they wouldn't work very well at that obviously that's just so you can see the insides and also jet small jet engines for drones which can be 3d printed So lots of investment going in there. The other area with defense to mention is our new Astrea inductive encoder. Customers here that we talk to are really appreciating the combination of the metrology, the accuracy. This is rotational accuracy that we can give them. the robustness and ruggedness of the product and also its ease of installation so we seem to really have hit a sweet spot we are investing here again in manufacturing ramp up this is quite new going through our new product manufacturing facilities at the moment so we're investing in that and also in a range of sizes that customers are after there This really shows, I think, here the benefit of the investment that we put in in our innovation engine. So Astria, a prime one there, coming through. Also additive recent advances in terms of the software programs we've talked about with Libertas, for example, and Tempus of really driving up the productivity of the machine. This means actually not only are there opportunities coming through, but we feel we're in a really competitive position that in the mid-sized market we have the most productive platform and we think that we are therefore gaining share there relative to our competitors. So that investment in long-term innovation is key for us. We continue to invest over £100 million a year in engineering. That is right the way through from current to the real blue sky thinking. The areas I just talked about and actually the Equator X that you can see here, which also has been extremely well received. And again, we're in a ramp up phase with together with the Modus IM software are very much targeted towards our emerging businesses. So when I said at the start, really pleased with the progress we're making there, that is underpinned and the future of that by what you're seeing here. Now, really importantly, though, for us, if you run back to our strategy, it's that census business. That's our core. And what has been really nice was actually we have just launched a new census. This is for our CMM and machine tools business. And you can see pictures of these down here. It was over in Germany last week, A&B trade show, meeting up with our customers, and they really understood the benefits that we are bringing to them with new measurement capabilities both in what they can measure and how quickly they can measure with these sensor technologies. Also in our core business the product you can see here in the middle is our latest generation which is coming through now released now of our new laser encoder system so here we have a strong position with the companies that make this is for front-end wafer inspection So they have phenomenally tough metrology challenges. We are very strong in this market. The new product moves us on to keep us ahead of their metrology challenges, ahead of the game, and again shows that strong relationship that we have. So looking forward, over the long term, we're clearly excited about the opportunities that we have with the market drivers. We're very pleased with the progress that we're making with the strategy here, with the innovation that's come through, and the innovation that is there for the foreseeing years. In the short term, what we clearly have is a continued growing order book. We are investing in that capacity as I talk about in a number of different areas to make sure we support our customers through that growth. But we're doing that very mindful that some of these areas are cyclical. And this year, really, then we are looking at further strong progress on revenue, profit and operating margin. Thank you very much for listening. So if John and I now would welcome questions apart from anything to do with the semiconductor cycle and our predictions on how long, how fast, when, it will change.