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efg
2004 Annual results
July 2004

2. Chairman’s statement apply innovation
I have pleasure in announcing a successful set of results for the 12 months ended 30th June 2004.
Turnover rose by 15% to £127.7m (2003 £110.6m), an increase of 19% if measured at constant exchange rates. This represents the highest turnover in the Company’s history. Sales rose in all markets with the exception of the UK, most notably in the Far East (including Japan), but also in the emerging markets of Eastern Europe and Russia. This reflected growth in all our product lines, but with above-average growth in Digitising (including dental), Encoders, Calibration and Machine Tool products.
Operating profit increased by 15% to £18.1m (2003 £15.6m) despite a reduction in one-off currency profits on forward foreign exchange contracts of £0.4m this year and £3.0m in Profit before tax rose by 13% to £20.1m (2003 £17.8m). Profit after tax amounted to £16.1m compared with £14.3m in the previous year, giving rise to earnings per share growth of 12% to 22.1p ( p).
Manufacturing
There has been significant investment at the New Mills and Woodchester sites in additional capacity and capability, including CNC lathes, additional machines for incorporation into the Company’s automated milling, turning and inspection system and surface-mount electronic assembly inspection and test equipment. Phase II development at Woodchester is now complete; a further 30,000 sq feet of manufacturing space will become available at this site later in the year.
Marketing
Our activity in marketing throughout the world has continued at a high level. All our recently established subsidiaries in Czech Republic, Poland, Russia, Austria, Sweden, Canada, Israel and South Korea have grown well in their markets and are already making a significant contribution to the Group’s overall results and distribution infrastructure. The Group is planning to open additional offices in both China and Russia.
Research and development
The Group’s ongoing commitment to research and development, which has continued through the recent economic downturn, has resulted in the successful launch of a number of new products during the year, including the UCC2 and SPA2 CMM controller system, the NC4 non-contact laser system for high speed toolsetting and tool breakage detection, RMP60/RMI radio system, the invia reflex raman microscope interfaced with scanning electron microscopes for precision single point sample analysis, a range of rotary magnetic encoder products and additional software products.
Expenditure on our research and development increased to £22.0m (2003 £20.2m) including related engineering costs.

3. Chairman’s statement continued
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Chairman’s statement continued
Capital expenditure
Capital expenditure, including that on new manufacturing equipment, amounted to £15.6m (2003 £8.2m), of which £6.5m (2003 £2.7m) was spent on freehold property, with the new offices in Japan costing £5.1m. Further investment was made in IT hardware and software throughout the Group, but particularly for design systems, marketing and management systems and group infrastructure.
Liquidity
The Group continues to maintain a high level of liquidity, with net bank balances at the year end of £32.8m (2003 £37.2m).
Awards
I am delighted to report that the Group has again won a number of awards. The Queen’s Award for Enterprise was won in respect of the OMP40 compact spindle probe. This, I am pleased to say, was the 10th Queen’s Award in the Company’s history. The Metalworking and Production Award at the Mach 2004 Exhibition was awarded in respect of the SP25 scanning probe for “The Best Quality Control Product or System”. The Worshipful Company of Scientific Instrument Makers awarded their 2003 Annual Achievement Award in respect of the RESR angle encoder.
In addition, the Company won the 2003 National Training Award and was the regional winner of the National Languages for Export Award.
Personnel
With recruitment primarily targeted at local production and overseas sales personnel, particularly in the Far East and our recently established subsidiary companies, numbers employed in the Group worldwide have grown to 1,754 (2003 1,639). To all of them I express my gratitude for their commitment and drive in maintaining Renishaw as a world leader in its field.
I should also like to congratulate Joe McGeehan on his recent award of a CBE.
Prospects and dividend
Activity picked up considerably in the second half of the year and forward order books have continued to increase. Although exchange rates continue to limit the Group’s ultimate profitability, we are optimistic for the current year and confident of the Group’s longer term prospects.
Your Board proposes a final dividend of 12.39p per share, giving a total for the year of 18.00p ( p).
Sir David R McMurtry
CBE, RDI, CEng, FIMechE, FREng
Chairman and Chief Executive
21st July 2004

4. Financial highlights 2004 2003 change £m £m % Sales 127.7 110.6 +15%
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Financial highlights £m
change
£m £m %
Sales %
Operating profit %
Profit before tax %
Cash at bank %
Earnings per share p p %
Dividend per share p p % £m
% of sales
Notes

5. Profit and loss account
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Profit and loss account
R&D
£m £m
change
£m £m %
Sales %
Cost of sales %
R&D (incl Engineering) %
Gross profit %
Distribution costs %
Administration costs* %
Operating profit* %
* before one-off profit on forward exchange contracts £m
% of sales
Notes

6. Profit and loss account
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Profit and loss account
£m % £m %
Sales
Cost of sales
R&D (incl Engineering)
Gross profit
Distribution costs
Administration costs*
Operating profit*
* before one-off profit on forward exchange contracts £m
% of sales
Notes

7. Profit and loss account
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Profit and loss account £m
% of sales
Further investment in emerging markets and new geographic regions
New employees +30 overseas
New offices to be opened in China and Russia
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8. Profit and loss account
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Profit and loss account £m
Administration expenses, excluding currency gains and redundancy costs (2002)
% of sales
Notes

9. Profit and loss account
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Profit and loss account
change
£m £m %
Operating profit (pre-currency) %
Interest income
Currency gains %
FRS
Profit before tax % £m
% of sales
Notes

10. Profit and loss account
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Profit and loss account
Earnings per share
Increase +15% % % % %
cover
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11. Sales analysis Highest turnover in the Company’s history
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Sales analysis
Highest turnover in the Company’s history
Sales up 15% at actual exchange rates
Sales would have been up 19% at the previous year’s exchange rates, i.e. £3.8m higher
All geographical regions showed growth, except UK
Good growth in: At act fx At p/y fx
Far East +29% %
Europe +18% %
America +7% %
UK experienced a reduction of 9% in sales £m
Notes

12. Sales analysis Emerging markets and Russia also showed good growth
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Sales analysis
Emerging markets and Russia also showed good growth
All product lines grew, especially Digitising (including Dental), Encoders, Calibration and Machine Tool products
Order book continued to grow during the year
Notes

13. Group sales 2004 2003 change at p/y fx change fx effect
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Group sales
change at p/y fx change fx effect
£m £m % £m %
Continental Europe % % EUR
Far East % % JPY/USD
America (North & South) % % USD
ROW % %
UK & Ireland % %
Total % % net
Notes

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Capital expenditure
Total capital spend £15.6m (2003 £8.2m), of which £6.5m spent on property, £8.2m on plant and £0.9m on vehicles
Property additions -
Continuing refurbishment of production facilities at Woodchester, Phase 2 now complete. Woodchester will house the UK machine shop,assembly operations and stores
Purchase of freehold property in Japan £m
Notes

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Capital expenditure
Further investment in manufacturing plant and equipment
Additional expenditure on IT systems to support design, marketing and management information systems and group IT infrastructure
New property in Japan
Assembly operations at Woodchester
New Surface mount technology equipment
Notes

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Organisation
Headcount now 1,754 (June ,639), an increase of 115 people, including 68 in manufacturing and 30 overseas
Awards received during the year -
Queen’s Award for Enterprise for the OMP40 spindle probe
Metalworking and Production award for SP25 scanning probe
Worshipful Company of Scientific Instrument Makers awarded their 2003 Annual Achievement Award in respect of RESR rotary encoder
National Training Award
Regional winner of ‘National Languages for Export’ Award
Pilot study for Six Sigma quality improvement techniques has proven successful, roll-out to the whole organisation is being planned
Presentation of Queen’s Award
Award for RESR rotary encoder
Award for SP25 scanning probe
Notes

17. New product releases Signum intelligent encoder systems
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New product releases
Signum intelligent encoder systems
Piccolo 2.1 which adds extra functionality and has the ability to scan dental abutments
Magnetic rotary encoder product range
UCC2 and SPA2 controllers

18. New product releases OMP 40 compact spindle probe
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New product releases
OMP 40 compact spindle probe
NC4 non-contact laser system for high speed tool setting and tool breakage detection
RMP60/RMI radio system using FHSS (Frequency hopping spread spectrum)
Productivity+ - integrates probing into CAM software.

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New product releases
InVia reflex raman microscope combined with a Leica confocal scanning microscope
Release of new laser software, Windows 2000/XP compatible, incorporating Taiwanese and Korean languages. Also, Russian and Czech language versions of Ballbar 5 HPS software released
RLE differential interferometer system for vacuum applications in the semiconductor industry
Special low power RLE10 laser encoder system integrated into Philips/IBS ISARA Ultra-Precise CMM
SensIR’s IlluminatIR FT-IR module fitted to an inVia Raman microscope

20. Balance sheet 2004 2003 change £m £m % Fixed assets 58.5 50.8 +15%
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Balance sheet £m
change
£m £m %
Fixed assets %
Stock %
Debtors %
Cash %
Creditors (26.0) (20.5) +27%
Net current assets %
Provisions (4.3) (3.5) +23%
Pension liability (8.4) (8.6) %
Net assets % £m
Notes

21. Cash flow from operating activities
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Cash flow from operating activities
£m £m
Operating profit
Depreciation
Additional pension contributions (0.6) (1.5)
(Increase)/decrease in stock (2.1)
(Increase) in debtors (4.3) (2.7)
Increase in creditors
Total movement in working capital (2.1)
Cash from operating activities £m
Notes

22. Cash flow 2004 2003 £m £m Cash from operating activities 22.2 20.5
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Cash flow
£m £m
Cash from operating activities
Interest received
Tax paid (3.1) (1.4)
Dividends paid (12.4) (11.8)
Fixed assets purchased (net) (14.7) (8.0)
Fx changes
Total cash movement (4.4)
Cash at 1st July
Cash at 30th June £m
Notes

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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 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 fundamentally believes that success 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