Well, good morning, everyone. My name is Chris Pockett. I'm head of communications for the Renishaw Group. I'd like to welcome you to this live Q&A session for Renishaw's full-year financial results for the year ended June the thirtieth, 2023. Hopefully, you've all had an opportunity to view the video presentation that was released as part of this morning's RNS statement. And Will Lee, Chief Executive, and Allen Roberts, Group Finance Director, are here now to answer any queries that you may have in relation to that presentation and the result statement. They will try to answer as many questions as possible before we close at around 11:15 A.M. I'll try to group similar questions together, so may not answer all individual questions. If you haven't already done so, you can submit questions via the question icon that you can see on the control panel on the right of your screen. We've had a huge number of questions this morning, and we're gonna start immediately with a question relating to the slight delay to these results. I think, Will, you're gonna answer this one, and quite simply, what did the audit matter relate to that delayed the full-year results? Thank you, Chris, and good morning, everyone. So this was a matter that arose late on in the audit process, and it related to our sales organization. We did feel it was relatively low risk, but we thought it was important that we really thoroughly investigated. Unfortunately, this did mean, despite the best efforts of the team here, and the auditors, that we did have to delay the results by a few days. Okay. Thanks, Will. Gonna move on to a question now that we've had relating to growth. So the question: organic growth in terms of constant currency growth was up 1% in H1, but down 1% for the full year, which implied down 3% in second half. How should the market think about the progression of organic growth into financial year 2024, in light of your comments of steady start for financial year 2024 and, quote, "solid order book?" And the second part to this question: Can you contextualize what you mean by solid order book? Is this holding steady versus prior quarters or months, or actually improving? And directionally, do you expect organic growth to further slow from being - 3% before it improves again? Conscious that you expected 10% growth through the cycle in many of your end markets. I think, Will, you're going to take that one. It's a multi-part question, and, over to you. Yeah. Thanks, Chris. So quite a few questions in there. Let's look at it in broad terms to start with, and really, what we're seeing as a market is very similar to as we talked about previously. The big uncertainty for us is still semiconductor. We're still seeing subdued demand here from the manufacturers of semiconductor manufacturing equipment. I see there are some questions coming through later on this for more specifics. We are still uncertain, really, on when this market is gonna pick up. It certainly will, but we don't have strong visibility yet of when that will happen. What we do still see is the positives that we've talked about. Particularly on some of our newer capital product lines, capital equipment, additive, REVO five-axis machines, we're seeing very positive market share growth there, which has really helped us this last year that we were talking about and continuing on into this year. We're also starting to see some of the impact of some of the newer products coming through, such as FORTiS, which being what we call OEM products, which get integrated with machine builders, always take longer to come through due to the volume of testing, et cetera, that happens before they end up really ramping up with production. In terms of where we are in order book, we've gone back from those unusual levels coming through and out of the pandemic. We're around about a couple of months, which is pretty typical for us in terms of the visibility that we would see there. I think that is probably the key points answered on that question. Okay. Thanks, Will. You mentioned semicon, so yes, we do. We have a number of questions around semicon, so we'll just take this one. Do you see geographic nuances in terms of semicon demand? Is China, for example, weaker than other Asian geographies, or the U.S., where semi-production capacity is currently being built up? And when do you expect demand from the U.S. CHIPS Act to affect Renishaw? And that's coming back to you, Will. So I think it's worth reiterating here to start with, so our route to market here is to the manufacturers of the semiconductor electronics display manufacturing equipment makers, not to the end users. So we don't actually know where the product ends up. So if a market is stronger for our customers, say, in China versus India, versus Europe, versus U.S., we wouldn't see that. We will see the demand coming through from our customers, who will then ship it on to those markets. So we can't really comment on the second bit of that. What we do see, I guess, from our customers, again, it's slightly complex here. So some of our U.S. customers, for example, will end up making stuff in Asia. So we will have both business going to U.S. with them, but also more significant stuff going through to Asia. The second part here, CHIPS Act, then clearly, we also have customers in China here who will be making semiconductor equipment, and they will be customers for us of our range of encoder products. So what we see is clearly challenges for some of our Western customers in terms of shipments and the CHIPS Act, but also investment going elsewhere as well. Okay, thanks, Will. And I think this is gonna be a question for Allen, because it relates to margins. What drove lower margin in Q4, sequentially, 500 basis points lower than Q3? Any year-end provisions or special effects? What margin trajectory do you expect going forward into FY 2024? And I think that's one for you, Allen. Thank you, Chris, and good morning, everybody. Yes, quarter four relative to quarter three, the principal impact in that change in that particular quarter was the lower revenue and, and obviously, the knock-on effect on the margins result. The other, the other impact was there was a year-end provision of EUR 1.6 million for amortization and impairment, which impacts it. Going forward, very difficult to project forward, but we are managing our costs, in particular, labor, going forward and only hiring particularly critical labor requirements. Okay. Thanks, Allen. Now, we've had a couple of similar questions in around analytical instruments and medical devices, so we'll take this particular one. So this sector delivered, or segment, delivered strong growth and record margin levels in the second half. What is the outlook for this segment on the back of the strong performance? I think, Will, you're going to take that one. Yeah. So it's good to see good performance here and the good growth coming through with really strong margin. Two smaller businesses, both of which we're excited about. We've talked about with the analytical instruments, Raman, moving actually with some non-substitutional new products there and opening up Raman into more production and process control environments, which we're really excited about. Neuro focus remains the same, very much on bringing in clinical trials with drug companies and getting revenue streams running up there. So we've had success with that, and that's our real focus for the neuro area this year. So positive on both of those two, and good to see a good performance from them last year. Okay. Thanks, Will. As I think we've got... yeah, there's sort of a raft of questions here around semiconductor. Just looking through, and look, quite a lot of these are actually duplicate. So, here's a question on general, sort of, regional performance, which I think is gonna go to Will. It looks like growth in your second half was similar to the first half in APAC, a bit lower in EMEA, but a reversal from +8% in the first half to -8% in the Americas, given the known weakness in semiconductor is largely in APAC. What drove that weakness in the Americas in that period? And that's one going over to Will. Okay. First of all, we did see a change in the US dollar, US dollar weakening in the second half. When you look at it constant currency, yes, there was still a small decline there, but less. We saw a mixed picture, really, with America. We talk a lot about encoders and the large scale of the semiconductor equipment manufacturers over in Asia, but there are also manufacturers in the Americas as well, and we saw a very similar, [time] turning gloomy picture there as well. That was weaker there, with pockets of areas that were going better over there as well. Machine tool probes, gauging, spectroscopy, all of them up in the second half. A bit of a mixed bag for us there. Okay. Thanks, Will. There's another one here, I think it's gonna be with you. You flagged lower levels of trading in the fourth quarter relative to the prior year. Was this as you expected across products, markets, geographies? Can you put any numbers to this lower level of trading? Would you characterize the first quarter of FY 2024 in a similar manner? So yeah, look, Q4 was lower than the same quarter of the last year. And slightly weaker than we saw in Q3, not that different to Q2. So I don't think it was unexpected for us there, and came in line. I guess the more interesting question is going forward. Now we won't talk about Q1 in any specifics, but we are seeing, as I mentioned earlier, some very similar trading conditions with the same market dynamics really going on. So we're not expecting any significant changes at the moment from where we finished at the end of last year. Okay, thank you. Where are we? Here we go. Sorry, I'm just looking through. There's a lot of duplicates here. You referred to weaker demand for optical encoders. Can you give an indication of what the sales decline was in FY 2023? And that's gonna be one for Will. Okay. So we don't tend to give actually specifics on some of this. I can say it was less than 20%, but more than 10% in that sort of teen number, so it's significant for us there. I think I can see that there's also some questions here on looking forward, again, on semiconductor and what's happening. And I think here we'd love to be able to say we were seeing significant green shoots and opportunities. We think we see some signs, but it's very limited and nothing we can really hold on to with any confidence. So where there are questions here about what's coming through, what indication do we have from machine builders? I don't think they know yet for sure when the recovery is happening, but when it does, we know it will happen very strongly and very quickly. Okay. Thanks, Will. Slightly different twist on the semicon. So notwithstanding the decline in semicon and encoders, China saw modest revenue growth. What was driving this? It's gonna be one for Will. So there were some real positives in China. Industrial metrology systems, Raman, calibration, all did really well. The one that we talk about as a real priority for the group in some of the CapEx, additive, really didn't—we don't sell that within China. But the key areas that we're pushing for, and we've talked about as themes, were all backed up by a really good performance in China, so that was really pleasing to see. So the stuff it feels like that we are in control of and can influence, gaining market share in newer markets went really well. Some of those, some of it, some of those trends we've talked about with semiconductor are still there. We still have those customers. We are waiting for the upturn. Okay, thanks, Will. Just scanning through, again, an awful lot on semicon, and we've really addressed all of those, I believe. Also, analytical instruments, profitability, we've addressed that. Here's another one, slightly different. Will mentioned that the Equator is proving very well suited to EV markets. Could you give us some more color on why this is, and what auto components are most relevant here? Yeah. So this is the motor components themselves and gearboxes all are at a really nice size, particularly for the Equator 500. So in terms of floor space, really effective, but also you're trying to inspect quite a lot of parts here quite early on in production processes. So actually, productivity and speed of measurement is really important here to get the throughput through. And also what we're seeing often is, which is where actually this leads often, and I think we also mentioned about REVO, that we'll see sometimes we want a combination. So particularly on some of the motors, we'll get parts we want to touch really quickly, which REVO allows us to do, and then optically inspect parts that we don't actually physically want to touch as well. So the optical system on, on REVO comes in very nicely. So both of those two product lines are proving very popular, for the drivers there with, with EV. So it's, it's the smaller size of machine, when it's REVO as well. Okay. Thanks, Will. Let me give you a bit of a rest now. I've got a run of questions here for Allen, I believe. The first one of which, in 2023, so financial year of 2023, costs rose faster than prices. What is the outlook for the price-cost spread in FY 2024? And are there some one-time reset elements in the wage cost change in FY 2023, which should now not repeat? So as I say, I'm gonna hand that one over to Allen. Thank you, Chris. We saw a very significant increase in our labor bill in the year just ended in 2023. But we're not expecting a significant increase in labor in this current year. That was the principal driver. As I said earlier, we're strictly monitoring our overheads going forward in this current year. Okay, thanks, Allen. Next question, which I think is probably for you as well: Is there any change to the planned phasing of investment on Miskin relative to the initial budget? Thank you. The, no change in the phasing. We're expecting to complete both Halls, Hall three, ready for, bringing into production, in the beginning of 2024. And Hall four also completed to the state where we can sort of mothball it for until absolutely required. So no change in the phasing of the investment. Okay, thank you. And another question, well, specifically for you, Allen. Could Allen comment on the outlook for the group tax rate in FY 2024, given the step up this year? Yeah, our tax rate depends on a number of different factors, mainly profit mix, balance between profits generated in the U.K. and also overseas, and then there's the interaction of Patent Box benefits and capital allowances. So it's quite complex. We are now in a U.K. tax rate of 25%, so it's unlikely that we'll see a reduction in our corporate tax rate, but it will be, you know, there or thereabouts around the 20%, + or - 1% or 2% maybe. Yeah, it depends on the balancing act between all the various factors that influence our tax charge. Okay, thanks, Allen. And staying with you, I'm sure it'll be a relief to Will. Distribution costs, can you elaborate on the significant distribution cost increase? There's a comment here that shipping logistics costs are coming down significantly. Volumes are likely negative, so it seems counterintuitive that distribution costs are up 12%. So Allan, can you comment on that, please? Yeah. Yes, we are seeing a reduction in actual shipping costs. However, we've seen most of our overseas costs are labor and we have seen wage inflation significant, as we've referred to earlier. There's been some significant currency adverse impacts. Travel and exhibition costs have increased significantly. If you go back 12 months, actually, China was in pretty much lockdown, so we're seeing post-COVID increases, particularly in the APAC region. So, yes, overseas distribution costs are increasing significantly. However, it, we don't anticipate significant increase in the current year. Okay, thanks, Allen. And this one's coming back to Will. Can you provide an update on the traction of recent product launches, including FORTiS, Renishaw Central, and the robot calibration tools, the new industrial automation product line? It will be helpful to understand, for example, when you expect FORTiS momentum to turn into revenue, or how many of the 100+ machine tool builders that you mentioned are converting into users, how many customers have adopted Renishaw Central, and what results are they seeing? How many aggregators are currently stocking the robot calibration tools, and how has adoption progressed since launch? Would it be unreasonable to assume this product line can reach GBP 25+ million in sales per annum in the medium term? So there's a lot there for you to go after, Will. Thank you, Chris. Yeah, quite a few points here, so let's go through. So in general, with the recent product launches, we are really, really pleased. If we take a look at some of the more OEMs, the component ones, we're selling to machine tool builders. A couple of note here. Let's start with the new radio system probes, uptake of that. Customers seeing the benefit, machine tool builders seeing the benefit, migrating over. Took a while for that migration process. That's really taking off quite quickly now. FORTiS, a non-substitutional, this is the machine tool enclosed encoder that we've talked about. We-- although we talk about here of, of the number of machine tool builders, that we're looking at in terms of evaluation, what we're actually judging ourselves on is, here, is, turnover and profitability of that business. It's moved on. The feedback has been very positive. We're now judging ourselves on how many machine tool builders we have selling their machines with our FORTiS encoders on. We think the inflection point probably on this is coming through soon in terms of really starting to accelerate. It does take time with these things to happen because correctly, machine tool builders want to go through and make sure they've done their own testing, making sure everything is correct, service, how they sell. That's really starting to come through now, so we'd expect over the next... This year and next year, really to start to accelerate in terms of turnover there. Next, maybe new for us with the robot calibration tools. So this was launched earlier this year. So yes, we have sales for that already. It is still early days, so it is not high volume; it's not having a material impact on our turnover yet. But with the positive feedback, we see this starting to accelerate, and this is really us deciding on how much we want to invest across the Renishaw network to support and grow this. Absolutely, if this wasn't gonna reach GBP 25 million in the medium term, then we would not be bothering to invest in this as a new business area for us. Then finally, Renishaw Central. We have some really interesting opportunities here. We've talked at Capital Markets Day of the benefit it's had for ourselves as an organization. We are working with a limited number of end customers here to show them the benefits and show them, and then migrate them from trials onto paying models for the software. Real push here is the EMO, the largest machine tool show happening this week in Hanover. And actually, if you look at our stand, the real push on it is the connectivity and intelligent process control with Renishaw Central. So again, one we still feel very confident in as being a key part of the business going forward. Right. Is that all the points for that question? I think it is. So back to you, Chris. Yep. Certainly covered all those points, Will. Thank you. We're gonna go back to Allen, I think, with this one. So this question refers to one of the slides in the presentation, where we detailed our approach to capital allocation, showed a sort of five-step process. And the question is: Do you feel it's fair to say that you're satisfying steps one to four of your capital allocation framework, which is organic investment, minimum cash targets, acquisition strategy, and a progressive dividend policy? And at what point would you consider step five, which is one-off capital return to shareholders? Is it reasonable to assume this might be considered once Miskin is through the CapEx expansion, and the semiconductor cycle is turning upwards? And what level of net cash balance does management consider necessary for the business at that stage? I think we're gonna hand that one over to Allen. Thank you, Chris. Yes, we are. We are absolutely working on items one to four, and we're sort of partway through that process. Miskin is, as we said earlier, due to be completed this year. We've got appropriate production equipment in place, and that's gonna require further investment. As you say, we've got the coming out of the semi cycle. We've got no current plans for any repayment to shareholders, but we will continue to monitor it. I think it's early days at the moment, but we're still focusing on items one to four. Okay, Allen, thank you. A couple of questions here around investor relations. What specific actions or access to the company should shareholders expect regarding increased engagement with investors over the next year? Hand that one to Will. Okay. Okay, so our priority here has been, to start with, to try and do the events that we have better. And we have been. Hopefully, everyone has seen, for example, at the last Capital Markets Day, we were more open with more information, allowing people to understand better what makes us drive and our exposure, and where we are. So we tried to listen there. What we're also been doing is engaging to understand what would help analysts and investors to better understand the business. Now, we do wanna be careful here. We don't wanna give information away that will help our competition and hinder our performance, but we do want to try and be more open to allow people to get a better understanding of Renishaw and what makes us special. This is a journey for us. We're not gonna transform overnight, but we think we're heading in a good direction, and it feels like, certainly feedback from the capital markets today was positive on the direction that we're taking. Thanks, Will. There's a question here, slightly different approach to, in relation to a question around Renishaw Central. What steps has the company taken to indemnify itself from liability due to cyber breaches via Renishaw Central? That's one for Will. If I talk about what we're doing from a product and a technology, and I guess this is such a big issue for us, not just from a central point of view, but from the whole business. A lot of discussion now going on this with board and ExCo of how do we protect ourselves. In terms of Renishaw Central, specific, then, a lot of stuff on the software. I think the bit that's key to point out here, just to reiterate, so Renishaw Central is a software, software platform. It will piggyback and sit on other people's connectivity. So our responsibility here is not on the fundamental infrastructure of going around and connecting up a whole bunch of machine tools and bits of metrology equipment. That is someone else's role. Our area here is providing the connectivity on metrology across that shop floor and the process control. It is also focused on, which is common in the industry, very much as an on-premise server and on-premise setup at the moment. So actually, the risks from what's being talked about here, rather than a cloud-based system, is significantly less. Okay, thanks for clarifying that, Will. Question here on pricing: Please, can you comment on pricing? Your planned hikes are 2%, but still lower than cost inflation. So what is the constraint on price hikes? And I think that's one for you, Will. Yeah, so pricing clearly, again, is something that we are talking about a lot more at the moment. It's when you kinda look within that 2% number, which clearly we are striving to beat, here you see differences both in terms of product line, and some areas we have more ability, and we've been accelerating the pricing more than in other areas, but also geographic. And actually, you'll see the ability, probably in Asia, to influence pricing is far less than it is in Europe or the Americas. So we do have quite a lot of detail there. We are pushing and looking at areas where we have the stickiness to increase pricing more. It is not always just as simple as a price increase, though. Often, discussion with customers are about migrating them to our latest generation of the products. Those are products inherently designed for manufacturing, with more automation built in, and actually the cost advantages and the margin advantages we can get of migrating a customer to our latest products is often better than just trying to go for a price increase on a legacy product. Two advantages for us there, the margin, and then also, once we get customers migrated to our latest products, we are better placed in terms of competing against others. Okay. Thanks, Will. Question here around succession planning. You comment in the release that you are reviewing succession plans for the business. What about the sale process that took place a couple of years back? Any update on inheritance tax issues? And can we get some idea of the timing when this will be sorted? Thank you. So really, no more information here than we talked about last time. Find this still discussing and thinking positive discussions in the background, but no information, nothing new here, I'm afraid. Okay, Will. It's a multi-part question here from somebody that joined the call late. So I think, a lot of these things we've already picked up in terms of optical encoders, semiconductor. So part of this question, so manufacturing technologies, so the second half adjusted operating profit margin declined versus, the first half. Do you expect the first half of FY 2024 margin at a similar level to the second half of 2023, or will it be up, down? If we, if we take that one first, because there's a lot of questions here, they don't-- they're not all necessarily linked. So, Allen, you want to comment on that, on that one? ... even if I could, half one margin, compared to similar level, half two. It's good to be probably at a similar level, with holding our costs, as we referred to already. So yeah, it'll be highly dependent on revenue, of course. It's very early in our year to forecast accurately. But we don't see any major margin impacts. There's nothing particular to note in the first half compared to the second half of last year. Okay, Allen. We've already talked about analytical instruments in terms of margin. There's a question here, I think, Will, perhaps you can pick this one up. Is the pickup in neurological robots a short-term bounce or part of a longer-term trend? Order pipeline for neurorobots is healthy. Lots of opportunities there. So I think there's a longer term trend there. For us, though, the key question there is on drug delivery and the clinical trials. That's the bit that is transformative for that business. The robot sales is very beneficial and nice and good margin to have, but the key bit, the drug delivery trials. Okay. And whilst we have you, Will, I'm just looking at this multi-part question. We haven't actually, surprisingly, talked about additive manufacturing. So the first question we've had today relating to AM. Can you talk about the rate of growth you are seeing in additive manufacturing? Is the product segment now profitable, and do you think your growth rate is being helped by market gain or market share gain? So that's one for Will. So growth rate, very good for us here. Over 20% in additive. Profitability, we don't comment on, but clearly, it's an area that we are still investing in, quite heavily in terms of, research and, development for the future. We are doing this 'cause we believe very strongly the more and more that the role that additive is gonna play in the future of manufacturing. Talked about that in the presentation, on actually the impact that we believe it's gonna have from a sustainability point of view as well. So is our growth rate being helped by market share gain? So please, I think the key bit to remember here is we are in a niche. So first of all, we're in powder bed fusion. Secondly, we are in production, relatively small to mid-size parts. So where we're targeting there, we think we are doing very well. And the most important part for us here on the strategy that we put in place a few years ago is that we had to get repeat business from the same customers to reduce our distribution costs and drive towards profitability. And that is really starting to come through with existing customers from last year and the year before, now ordering repeat machines for similar applications or sometimes even the same applications where their volumes go up. So yes, we continue to invest in this business. Okay, thanks, Will. I think the last part of this multi-part question is one for Allen, around CapEx. So despite the CapEx expenditures, obviously reasonably significant during the year, net cash at the end of FY 2023 was GBP 206 million. With your share price only around 10% above the 52-week low, when do you begin a share buyback? That's one for Allen. Yeah, I think this comes into in part of the discussion when we're talking about our capital allocation policy, which I covered a little earlier. We don't have any plans at the moment with regards to a share buyback. And you know, it's something we continue to monitor, but no current plans. Okay, thanks, Allen. And looks like this is going to be the last question, and it's gonna be one for you, Allen. Please, could you provide more detail on your current inventory levels and accounting treatment? Looking at note 16 in your accounts, it looks as though you have written down inventories to the tune of GBP 8.2 million in the year. Has this been taken above the line? Yes, okay. Let's look at inventory. As... During the year, we've seen a significant increase in our inventory levels. Partly an overspill from the supply chain issues that we encountered in the previous year, and we are looking to manage our inventories down during the current year. And there are certain areas where we were overstocked, particularly in our encoder product line, which we are looking to consume during the year. There were written down inventories, mainly associated with the obsolescence of some legacy encoder products, which and it was beneficial to switch to new products to customers. So yes, that was taken above the line, and we are closely monitoring stock levels during this current year. Okay, Allen. Well, that is the last question that we've received, which brings us almost pretty nicely, actually, up to towards 11:50, which is the time that we allocated for this webcast. So that is the end of today's session. As ever, we'll aim to publish a recording of this webcast. So we're gonna combine, as we did for the interims, we'll combine this Q&A session together with the video presentation that was released this morning as part of the RNS statement. So we'll aim to have that on the IR section of our website by tomorrow morning. So on behalf of Renishaw, I'd just like you to thank you all for attending this event, and have a good day.