Good morning, everyone. My name is Chris Pockett. I'm the Head of Communications for Renishaw. I'd like to welcome you to this live Q&A session for Renishaw's half-year results for the period that ended December the 31st, 2003. Hopefully, you've all had the opportunity to view the video presentation that was released as part of this morning's RNS statement. 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'll try to answer as many questions as possible before we close at around 11:15 A.M., and I'll try to group similar questions together, so we may not answer all individual questions. Thank you to everyone who pre-submitted questions to our communications inbox by the cutoff time at 9:30 A.M. this morning. 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. So we're gonna start with the pre-submitted questions, and the first one is on the, sort of, market related. On the strategic goal to increase technology value through data monetization, how do you plan to compete with the larger names or names with greater software offerings? And how can Renishaw win in this space? I think that one's gonna go to Will. Thank you, Chris, and good morning, everyone. So here from data monetization, we're talking about the central platform that we talked about in the webcast presentation. Some background here, I guess wherever you go around the world in manufacturing facilities, you'll see a huge range of different equipment. The one normal constant is that you will see a Renishaw sensor or a probe on one of those machines. So we are gathering data at the point of manufacture at all of these sites. This puts us in a good position. What we wanna do to exploit this is not focus not have a generic shop floor data capturing system. There's plenty of those out there which serve a purpose, but focus on the specialty, which is very much around using that data for process control and making decisions, particularly there for keeping manufacturing sites running 24/7. So we think we have quite a differentiated product here. We will collaborate with others, whether that's software providers or other hardware providers, to allow our customers the flexibility to get the most out of those. Still early stages, and we are in some key trials now with some significant customers, to really understand the value proposition and the benefits they get from our new platform. Thanks, Will. And second question now relates to our spectroscopy business. So any comment on geography or customers that are supporting the strength you have seen in spectroscopy? And that one's gonna go to Will. So, very broad here, and hard to tie down, so, a range of different industries, that we've seen and different specific countries. So I don't think there's any huge theme. We talked in the webcast about EMEA having done well, but it's actually quite a broad picture here, so nothing really to call out. Okay. Thanks, Will. Question here on the growth rate. Can we please get the H1 growth rate broken down into price versus volume? And I think that one's gonna go to Allen. Thank you, Chris, and good morning, everybody. Yes, this is quite a complex picture on this one, where there's a range of factors, and it's very difficult to give a definitive answer. We have implemented targeted price increases in some product lines, which have benefited us by circa GBP 7 million. However, we sell a wide range of products through different channels, so changing customer mix affects the net pricing. Overall, we estimate that net pricing has been broadly flat during the period, so the revenue change is primarily due to volume. Okay. Thanks, Allen. This question now relating to outlook. So what are the specific signs of market condition improvement you're already seeing, that makes you confident to guide towards an acceleration in H2, in light of a stable order book? And, I think, Will, you're going to deal with that one. Yeah. So looking forward to this half, the second half, I guess there's a few themes that we're hoping to see play out. The APAC region, our largest region, probably the single most important thing, is the semiconductor demand, electronics, pulling through the encoder business there. And still early, but we think we see some signs there coming through from our customers to give us the confidence there. Probably a slightly different picture in Americas and Europe. And here, actually, it's more the capital goods that we see coming through for a better H2. So some in terms of orders and a strong start to the year, and then a growing confidence going forward for the rest of the half. So slightly different factors across the group-... which give us the confidence in, albeit a large range, in terms of turnover for the end of the year, but confidence in that forecast. Okay, Will, linked to that question, how much of the anticipated business acceleration in H2 relies on general market improvement compared to your highlighted range of growth opportunities and new products gaining traction? And that's another one for- So certainly, when we talk about some of the big drivers here, it's actually existing customers ramping up in terms of their demand. Now, that may well be some of them, which we managed to migrate them to some of our newer products through the downturn, but not when they have more time to work with us on integrating our, our latest products. But it's really existing customers existing business there. There's some positive. We've talked about FORTiS in terms of growing number of machine tool builders now buying. These things do take a long time to come through and really be significant. We also had on some of the capital goods, clearly, those come through quicker, really positive, the response, for example, on the new RenAM machine from Formnext, and those sales will come through relatively quickly with new customers as they wanna get the real benefits of the productivity of that machine. Okay. Thanks, Will. I think there's another one that's coming your way. How and by when do you expect the significant build-out of chip manufacturing capacity in the U.S. to impact your business? And is this already a topic in conversations with your customers today? That's another one for you, Will. In general, our discussions with our customers are far more around their demand and what they see for us. The bigger impacts for us recently trying to understand has been understanding their inventory levels of our products they bought from us and their inventory levels of finished goods that they have. It's a really complicated set. We're dealing with a whole bunch of different customers here, who have a number of different products that they are selling into different stages of predominantly back-end semiconductors, with the optical encoders and front-end more, it's front-end inspection with the laser encoders. So it's quite a few different areas driven by different technological demands coming from their customers. So we don't tend to look too far at some of the more macroeconomic stuff going on with semiconductor manufacturing. We tend to focus our more discussions on the immediate demands coming through from our customers and make sure we're ready with, A, what they need in terms of delivery, and B, in terms of product performance. Okay, thanks. Another question here: Can you elaborate on the key moving parts impacting the wide H2 guidance range for revenue between 4%-16% growth and the profit margin range of 19%-23%? I suspect this one's gonna be split between... Do you want to start with this one, Will? Yeah, if I start, I guess this builds on the question we answered earlier here. So we're going into the new year with a good order book around a couple of months of order book, increased confidence on capital goods in Europe and the Americas, and also increased confidence of a recovery that's now been going on for almost 18 months in our encoder business with semiconductor manufacturing. So that's the main things we're looking at there in terms of this improvement in the second half. With respect to profitability, the main driver there will be the drop-through for the additional gross margin arising from higher revenues. We believe we have the sufficient capacity to handle the anticipated rise in demand without any significant increase in the fixed cost base. And also, we don't expect to see a massive reduction in inventory in the second half, so the absorption of overheads in half two should make half two show an improvement in half two. Okay, Allen, there's another one coming your way, I think. When do you expect currency headwinds to abate based on current prevailing exchange rates? That's back to you. Yeah. Okay. Thanks, Chris. Yes, based on the latest exchange rates and the forward contracts in place for half two, we do not anticipate any significant currency impacts versus the first half. And moving into fiscal year 25, we do have better forward contract rates for both the US dollar for 25, so we would expect to see some currency benefits next year if exchange rates remain as they are today. Thanks, Allen. Another one coming your way, I think. Why are you reducing inventory if anticipating increasing demand? And do you expect an inventory rebuild from here into the market recovery? ... We did have a targeted inventory reduction in areas where we had excess stock following the last upcycle. Like many firms, we experienced difficulties in sourcing some components, especially semiconductors, which led us to place long lead time orders and extend our lead times and stockholding safety stock holdings. But as the demand has fallen and supply lead times have improved, we've found ourselves with more stock than we needed in certain areas, and as we said at the full year announcement and as we also signaled at our capital markets day last year in previous webcasts, we have a planned reduction of these supply chains and as they have normalized. We've increased production rates in some of our product lines in anticipation of the half two growth, and expect inventory to continue... But we do expect inventory to continue to fall in half two. Okay, and then, another inventory-related question here. So how large was the impact from inventory reduction and currency on gross margins in percentage points, respectively? We estimate that about 1% of the 3% reduction in gross margin was currency, and about 2% was a currency impact. Okay. Thank you, and keeping you busy, there's another one I think coming your way. Is it correct that the GBP 1.9 million severance payments have not been excluded from adjusted profit before tax, even if one-off in nature? And if so, where is that GBP 1.9 million included in the profit bridge on slide five? Yes, the 1.9 million has not been excluded from the adjusted profit before tax, and the cost has been allocated across the various functions, so a number of items in the profit bridge are impacted. Okay, thank you. I'm gonna give Allen a rest now, and one for Will. Do you anticipate any further workforce reduction or severance scheme payments? So, no, nothing significant planned there. So we're actually, as we talked about, targeted recruitment in some areas, to make the most of the opportunities that we have, some direct recruitment in manufacturing. And we'll constantly look at making sure and focusing on this more actively, of really balancing, make sure we've got the right resources, the right people in, to deliver on the opportunities that we've got. So nothing significant there, no. Okay. Thanks, Will. Short rest for Allen. Why did you decide to conduct the insurance buy-in of the pension liability? Yeah, our strategy was to undertake a buy-in at a time when it could be achieved from the fund assets and with no further funding required from the company. The recent market conditions allowed for the transaction to be completed and with around GBP 10 million of assets remaining in the fund. As a result, going forward, we have it's mitigated our future funding and balance sheet and protected the balance sheet from future significant future funding adjustments. Okay, thanks, Allen. Here's one on capital allocation, so I think this is coming back to you. Please elaborate how you think about capital allocation, given the significant expansion cycle, when Miskin comes to an end, and your end markets are bottoming out. How do you balance the group's financial policy on net cash, potential M&A opportunities, dividends, and share buybacks? Thank you, Chris. As we've outlined previously, we continue to prioritize our organic growth through investment in our engineering and R&D, capital equipment, and capital expenditure and working capital. We will continue to allow to align this organic investment in line with the growth opportunities that we see in front of us. At Miskin, we have completed the basic construction of the additional halls, and we're now in the process of fully fitting and installing production equipment to undertake production of principally our large, some of our larger capital capital plant and products. We're also putting investment in centralized European warehousing and logistics. We're replacing a number of our older, fully depreciated machinery with more automated equipment as a part of our ongoing focus on improving productivity. As previously mentioned, we also maintain minimum cash to support the business through any downturn, and we continue to consider appropriate M&A to augment our organic growth strategy. We maintain a progressive dividend policy to ensure that the investors share in the proceeds of our business growth over the longer term, and we have no current plans for any share backs, buybacks, in the immediate future. Yeah, thank you. I think this one's heading Will's way. Additive manufacturing seems to be going through a bit of a lull. Noted from the questioner that Desktop Metal recently announced a 20% headcount reduction. You talk of up to 9% increase in productivity with the latest AM development, but this does not sound sufficient to move the tipping point to mass adoption. I assume growth here is one of the reasons for the Miskin expansion. Will, you can pick that one up. Okay, so yes, in the news here, there's tougher news around Additive. Actually, for us, it feels one of the most positive times we've had for our Additive business. I think you've got to put the context here. So back in 2019, we made some strategic calls to get the business very focused. We took decisions on consolidating manufacturing on one site, consolidating R&D on one site, pulling out of certain markets over in Asia, and focusing on key accounts, focused on those sort of repeat business, people who needed highly productive machines in Americas and Europe. That strategy has put us in a really good place, and we're certainly starting to see the benefits from that now. I think the real buoyant stuff is from Formnext, the launch of our new Tempus machine. This is not a 9% increase. If it was, we would not be excited. You're quite right. This is up to 50% in improvement in productivity. The more productivity is when you're making parts that are less dense, so very thin wall parts are all the future for Additive because they are quicker and less carbon intensive as well. So some real step forwards there in terms of productivity. They've been really well received by our customers. We've got some really nice key accounts coming through, both in Europe and America. We're actually looking at probably putting in more resource, particularly in the US, to make the opportunity of the product innovations that we've got there. So yeah, really positive, and we are continuing to invest here, as one of our newer businesses in the future, with exciting developments on the next generation of technology coming through. And just finally on there, yes, so, so one of the reasons for Miskin expansion is to cope with these larger, capital goods, such as AGILITY, FORTiS, and the RenAM machine as well. Okay, thanks, Will. And the last now of the pre-submitted questions, so thanks to those of you online, being patiently waiting for your questions to be answered. You sound more positive on semicon. The drive to AI clearly provides a positive macro, and the questioner just wonders what the evidence is on the ground. So yes, we are more positive on semicon. It's been a while, and it's still early stages, but the signs are there from our customers, in terms of, forward-looking and, orders that things are starting to, improve. Exactly what the drivers are, then our main source of information here is from talking to our customers. Their equipment goes into a wide range of different fabs. I don't even really think they know exactly what the drivers are, so I would not want to say whether this is AI, automotive, or something completely different. We just honestly don't know. Okay, Will. Thank you. So we're now gonna move to questions submitted online. And there's a multi-part question here, so I'm gonna read this out, and I'm sure we'll break it up in bite-sized chunks. So what are your semi, semicon equipment customers saying? When do they expect activity to pick up? Is this related to the H2 market conditions improving? Secondly, what is the size and visibility of the order book? Also, are there any orders coming in for position encoders? Third part of the question: What is behind the AM year-on-year sales decline in H1? Have you been losing share? And the final part is: How much more inventory reduction are you targeting? So I think we're gonna start with Will. Okay, so let's go through these one by one. Semiconductor equipment customers, I think we've probably already covered most of that, so we are definitely seeing signs there of improvement, and this is important for our second half. The size and the visibility order book, so we're pretty healthy there with around two months, which is good for us. And clearly, all the time, we have orders coming in for position encoders, but we're starting to see signs of those improving from what's been a real low. The AM year-on-year, it is probably as much a timing issue, so sometimes we'll get a few larger orders and the phasing of those. So in terms of losing share, then, I mean, you've got to look at this. So not only are we, we're in additive, we're in laser powder bed fusion, we're only in the medium size of machine, and we're in the high productivity. So machines designed for manufacturing rather than R&D there. So in that niche, we think we're doing well. But as I talked about earlier, we think we can probably start to accelerate that probably more now. And we will be probably looking to put some more resource there from the sales side. In terms of the inventory, then there's probably gonna be a shift. As Allen mentioned, we have had some components stock in place there from stuff that we built up during pandemic times, and we'll be working our way through, so reducing. But also to make sure we're ready to respond quickly, both from electronics, consumer electronics and some of the capital goods areas will be increasing as well. So we have been recruiting, for example, people making cables, over in India and some of the other assembly facilities, to make sure that we're ready to respond, because when we do get orders, we don't get very much time. And our existing customers, one of the things they expect from us is not just performance, it is, delivery time. Okay, thanks, Will. Next question. China. China appears to have been strong in the period. Can you please discuss what is driving that and how sustainable you think that may be? Is there still some post-COVID reopening catch-up in this? I think that's over to you, Will. Yeah, China is interesting. So having been over a couple of times, not too long ago, so recently, you can see, I don't think this is a post-COVID reopening catch-up. This is very much the scale of the investment going on there is still huge. So from visiting machine tool builders, CMM manufacturers, automotive manufacturers, semiconductor, there is massive investment going on in the future, of which with our products, I think we're really well positioned to exploit. And we're looking at quite a few strategic initiatives there that we think can help us to really continue to grow our China business over the next 5-10 years. Clearly, there's some macroeconomic stuff there, but we feel pretty positive on China and the opportunities and our strategy to make the most of those at the moment. Okay, thank you. Now, there's a question relating to machine tool business. Large order backlogs for machine tool companies built up during supply chain crunch now appear to be eroding. Are you convinced that end demand will pick up before lower order intake during the last year depresses production? Yes, it's a good question. Clearly, I think particularly with the higher value, the more high-end machine tools, five-axis, then there certainly has been quite an order backlog, and some of our customers have been using some of that up. In the sort of more commodity vertical machining center, there was certainly a lull that seems to have stabilized. Could be those machines are on a much shorter lead time for our machine tool customers. So exactly how that plays out, so we have a bit of uncertainty in the plan around the more established markets, so Germany, US, Japan, in terms of core machine tool consumption. But still, I think there's an overall healthy demand there. Okay, thanks, Will. And the question here just relates to our profits from associates. So, JV profits were up nicely in the first half. What is driving that, and would you expect it to continue in the second half? Who's gonna pick that one up? Okay, over to you. Yes, this primarily relates to our JV, RLS, based in Slovenia, involved in produce and design and manufacture magnetic encoders. Yes, they had a very good first half, particularly from a large customer. They're trading very well, but probably not to repeat exactly the same in the second half as they did in the first half, so expect it to be slightly lower in the second half than the first half. Okay, thank you, Allen. Semiconductor related again. We heard recently ASML talk up medium-term semiconductor CapEx outlook materially for 2025 and beyond.... Themes that seem, that drive, that seem to be quite generic. For example, AI. Should we expect Renishaw to benefit from these structural trends as well? I think we've probably answered most of that already, but Will, do you want to just chip in? Yeah, I think we've talked about the first bit of really not being aware of exactly what the drivers are for our customers. I mean, ASML, interesting one, big name there. The nice thing with all of these is that their demand for precision is constantly going up, so they are providing a really nice driver for us, pushing the boundaries of our new products coming through to make sure that we can deliver for them what they need to be able to do to deliver for their customers in next generation of chips. Okay, thanks, Will. Question here on efficiency drive. So, given the software focus and continuous efficiency drive, could gross margins move higher from their traditional 50%-53% in the long term? Who's gonna pick that one up? We'll start with that one. So if I talk about the two strategies to start with. So software, clearly key for us. The biggest part here in terms of the MODUS software we launched with gauge control. I think really worth mentioning. So not only trying to drive our software revenue stream, but also simplify our route to market and improve profitability that way as well. So a double attack on group profitability there. And in terms of continuous efficiency here, clearly, it's something that we are making sure with all the opportunities we have in both the underlying markets and the opportunities for our performance, we wanna make sure we are resourcing the best of those opportunities, and doing that by being as productive as we possibly can and cutting out areas where we just don't need to focus on. So I think we've got positivity there. In terms of talking about longer term in terms of financials, I don't know if anything, Allen, you want to add there or not? Yes, it will. If you can get it. Yes, it will help to improve our margins in the longer term, but it'll take, it'll take some time to achieve significant revenue growth from, from the software revenue. Okay, thank you. This question relating to one of our markets, so precision manufacturing. Your great strength is with customers in precision manufacturing. Are there any significant new customer industries being targeted? And I'll put that one over to Will. Not really here. I mean, we've talked about some of the drivers here in terms of all those markets, that the need for more precision, more automation coming through, but they tend to be one underpinning all of the end user markets that we sell into. Clearly, we are, as we've talked about in our strategy, diversifying into close markets, so we're making a bigger play on the robotics area. Also, I think it's been interesting seeing launching our new sort of world's smallest wireless machine tool probe of actually how much machining there was on really small machines that we didn't realize there was a need for until we started to show what we had done there. So small areas, nothing really significant, I would say, on top of what we've already talked about. Yeah. Looks like we just have one more question, so if there are any last calls, then please submit now. So the final question, please, can you remind us of your normal order lead times across, your main product categories? And I'll start with Will on that one. Sounds like we could have an order. Yeah, that's good. So this is quite variable. So clearly we'll have customers that we'll work on with delivery plans and scheduling. We'll then have customers we do that with, but still change quite quickly in terms of demand on us. And we will find that with core products such as encoders, machine tool probes, Equators, we are quite well geared up to being able to very quickly respond to quite large orders in those areas. There is then more specific stuff to the other end of the street. So if you come along and you're after a specific size of CMM, then that will clearly take a few months for us to manufacture a custom machine. So quite a range there from the instant to a few months. Okay, Will. Well, thanks very much. That's all the pre-submitted questions and the questions that were submitted via the webinar app we've dealt with. So that now ends today's Q&A session. We'll aim to publish a recording of this webcast on the IR section of our website by tomorrow morning. So on behalf of Renishaw and everyone here, I'd like to thank you all for attending this event, and have a good day.