Kostoula Symianaki (08449275)Tutor: Paul HaffnerLevel 4

BUSINESS FUNDAMENTALS

ASSIGNMENT:

Business Portfolio for Renishaw

Porfolio Statement

This assignment is a business report portfolio of a company that is listed on the FTSE 250 index.The portfolio will include a brief history of the company, its products & services, competitors, market sector, areas of operation amongst other things as well as a complete SWOT analysis, a funding letter and a job advert for the company.

• Introduction to Renishaw

Renishaw are a British company based in Gloucestershire, England. They have been in business since 1973, remaining in Britain the whole time.

John Deer, currently the Deputy Chairman of Renishaw was the founder of the company in 1973. Earlier on from 1960 to 1974 he had trained as a mechanical angineer and worked for Rolls Royce PLC. During the company’s conception to 1989 John Deer was the Magaing Director, being primarily involved in the commercial direction of the Group; with particular emphasis on marketing and the establishment of wholly-owned subsidiaries in America, Japan, Germany, France and Italy. As part of his role as Deputy Chairman he is responsible for group manufacturing and chairman of the overseas marketing subsidiaries.

The company was first founded by Sir David McMurtry and John Deer in 1973. Sir David McMurtry was born and educated in Dublin and joined Bristol Aero Engines as a junior apprentice in 1958. It was in 1966 that he was consequently employed by Rolls Royce PLC after a major acquisition, becoming the Deputy Chief Designer and Assistant Chief of Engine Design. In 1973 it was whilst working on Concorde’s engines that the designed the world’s first trigger probe, his gateway in to Renishaw. After leaving Rolls Royce PLC and joining his former colleague John Deer he acquired the patents for his trigger probes from Rolls Royce PLC.

It can be said that the major breakthrough towards the creation of the Renishaw company was when McMurtry had needed to measure fuel pipes on a prototype engine whilst coordinating measuring machine sensors, which required manual positioning on the surface and resulted in poor repeatability when measuring extremely delicate components. To meet this need, McMurtry invented the touch-trigger probe device.

Basic Timeline of Renishaw:

In the 1960’s, the precursor to the Renishaw companies, Renishaw applied its innovative approach to Raman spectroscopy and combined the application of a number of technologies, including its own encoder systems, to the development of smaller systems, key to engineering manufacturing systems.

Renishaw’s designers apply advanced metrology techniques to projects such as the structural and chemical analyser which is an interface that enables chemical identification power of Raman spectroscopy to be added to a scanning electron microscope.

It can be said that the first ever Renishaw product was invented in 1972 by Sir David McMurtry, the touch-trigger probe, first used when fitted to Olympus engines on the Concorde. McMurtry then discussed the patent for the touch-trigger probe in 1972 with Deer who was by then looking to start his own business.

The first Renishaw company, Renishaw Electrical Ltd was first registered on 4th of April 1973 and acquired its first commercial premises in 1976 in Wotton-under-Edge, Gloucestershire, UK. At that time there were only nine employees manufacturing the touch-trigger probes which were already being used by nearly all of the co-ordinate measuring machines manufacturers in the world.

Within five years of Renishaw starting its first company annual sales were reaching approximately £3 million. In 1981 Renishaw established a department in Dublin, Republic of Ireland. The same year also saw the acquisition of the New Mills sute outside Wotton-Under-Edge and the establishment of the first overseas subsidiary company near Chicago, Illinois, America. To date, Renishaw now has over 20 sites worldwide and over 1700 employees, 1200 of which being in the United Kingdom.To date, a wide range of automated probing systems have been developed to meet the needs of post process inspection for quality control in manufacturing as well as automated jobset-up, tool setting and computer numerical control machines.

1960’sMcMurtry & Deer start working for Rolls Royce PLC

1973Deer starts Renishaw company

1974McMurtry joins Renishaw

1983Renishaw listed on London Stock Exchange

2006Renishaw buys ITP

Renishaw In The Last 20 Years

At the end of the 1980s and the beginning of the 1990s, Renishaw stepped up its international expansion, launching subsidiaries in Italy in 1989, Spain and Switzerland in 1991, and Hong Kong in 1993. The company was also expanding its manufacturing base, opening a new facility, the Technology Centre, on its Wotton headquarters and manufacturing campus in 1990. A further addition to that facility was made with the completion of a new machine shop in 1993. By 1997, the company was expanding again, in the first phase of what was seen as a long-term expansion program designed to double the size of the company's Gloucestershire campus.

In the late 1990s, Renishaw continued to build on its commanding world leadership position, opening a number of new offices around the world. The company entered South America, with a subsidiary in Sao Paulo, Brazil, in 1996. By then, the company had also begun to build its interests in the Pacific and Far East, opening representative offices in Singapore and Beijing, China, in 1994, then in Jakarta, Indonesia, in 1995. Renishaw added a new office in Shanghai in 1997, while adding a presence in Seoul, South Korea, in 1999 and in India through new subsidiary Renishaw Metrology Systems Private Ltd. in 2000. The company also strengthened its position in the Pacific region, launching subsidiary Renishaw Oceania, based in Australia.

In 2001, the company made its first moves into the Eastern European market, establishing a 50-50 joint venture agreement with RLS merilna tehnika d.o.o., of Slovenia. As part of that agreement, RLS was to handle the marketing of Renishaw's products in Slovenia, Croatia, Hungary, Romania, and Bulgaria, while Renishaw agreed to introduce RLS's products in its own markets. In that year, also, Renishaw established a new Dutch subsidiary, Renishaw International BV, to support its business in the Benelux market.

Renishaw suffered from the economic downturn at the turn of the century, particularly as its largest market, the United States, struggled to throw off a possible recession in 2001. The company continued to boast revenues gains, however, boosting its sales past £125 million for that year. With a portfolio of more than 700 patents, many of which were signed by chairman and CEO McMurty, Renishaw seemed certain to continue its tradition of technological inventiveness into the twenty-first century.

• Key Products from Renishaw

Laser Calibration and machine performance monitoring:

These are performance measurement products for the analysis and calibration of position critical systems. The laser interferometers for precision calibration of motion systems are the industry standard ballbar systems for machine tool performance diagnostics.

CMM probes, software and retrofits:

Precision CMM sensors give fast and accurate acquisitions of components dimensions and key surface data

Incise:

The Incise Dental CAD/CAM system allows precision building, measuring and monitoring of the crown or bridge of a patient.

Machine tool probes and software:

An on-machine dimensional measurement of components and cutting tools for process set up, control and verification; including measuring touch probes for part set up and inspection on a CNC machine tool.

• Market Sector & Competitors

Renishaw deals in various different engineering products which can be broken down in to the following categories:

• Calibration

• Coordinate Measuring Machines

• Dental CAD products

• Machine Tools

• Position Encoders• Spectroscopy

• Probe Styli

There are no other companies in the world that deal in all of these different product

categories, therefore as a whole, Renishaw Group does not have any direct competitors, but individually Renishaw companies have competitors.

In the dental products category Renishaw has one main competitor; Delcam Healthcare Solutions who have been specialists in the area of CAD/CAM since the 1960’s, founded in Oxfordshire and specialise solely on this area. The differentiation between the two companies Renishaw Dental and Delcam Healthcare is that the latter caters for high precision, expert and high end products, whilst Renishaw caters for the affordable market sector.

Of the Spectroscopy section of Renishaw their main competitors are several; including Shimadzu and Axsun. Whilst these two companies specialise in the areas of spectroscopy and Renishaw does not, they do not have the greater access to raw materials, but this shall be discussed further.All in all, Renishaw are the leading company in all but two of the product areas that they manufacture in, but in one their product niche is ‘affordable equipment’ and in another they have the long term reputation over the rest and easier access to raw materials, allowing for greater long term profit.

Financial Progress of Renishaw During The Recession

Despite the size and scope of the Renishaw Group they have been hit hard economically by the recession. Below is a table that shows the drastic decrease in profits in just one financial year (2008 – 2009):

2009 2008 change

Revenue (£m) 171.2 201.2 -15%

Adjusted operating profit (£m) 6.0 37.3 -84%

Adjusted profit before taxation (£m) 8.8 41.7 -79%

Adjusted earnings per share (pence) 9.3 45.9 -80%

Dividend per share (pence) 7.76 25.39 -69%

Statutory

Profit before tax (£m) 4.7 43.0 -89%

Basic earnings per share (pence) 4.9 47.6 -90%

From this table we can see just how much Renishaw has suffered financially over a

one year period. The profit before tax decreasing by nearly 100% and the basic earnings per share sharing a similar fate.

To combat this Renishaw has implemented an investment strategy, to focus investment on new and emerging products. They have added a number of new metrology products and applications to their established product lines. The new range of dental products were introduced in March 2010, this is an area that they are keen to focus on.

Renishaw have also acquired a 75% shareholding in a company called Schaerer Mayfield Neuromate AG, a company based in Switzerland which was a leading manufacturer of surgical robots. This is part of Renishaw Group’s objective of expanding in to the neurosurgical market. They also recently increased its investment in Pulseteq Limited, a company specialising in the development of coils in MRI scanners, by 25% to a 75% shareholding.

Whilst pledging a commitment to a strategy of investment to combat the recessional economic losses Renishaw had announced major job cuts in the UK:

Initially they cut staff wages by 20pc (equivalent to an average of £50 a week) but within several months announced laying off 500 of its 2240 global staff as a result of a £10 million operating loss in the six months leading up to June 2009. Their shares had plunged 37 to 281 after having made major losses in January and February of 2009. The total savings hoped for by Renishaw with these cuts is annual pretax savings of £20 million.

• Company Culture

It can be said that Renishaw have a conservative business culture, being careful not to over invest and not to expand too quickly. Their philosophy has been expansion not only where necessary but when necessary.

Several business analysts believe though that Renishaw’s mistakes were to be too conservative and reserved in investments during vital times; which has contributed to their recent big financial losses. They may have been too slow to change their attitude towards investment and expansion, relying too much on commodity-type products.

The impact now is that they have to take more of a careful and costly risk in investing in new areas to ensure profits in new areas where previous areas have slowed down.The company attitude has however been to focus in innovation in their product ranges, something which has, since the birth of the company, paid off very well. John Deer, Deputy Chairman of the group and founder states that:

“For over 30 years, Renishaw has been an innovator in metrology, the

science of measurement, enabling measurements to be taken to international standards.”

The culture of Renishaw is one of being proud of tradition and innovation.

• Funding Letter:

May 2010

To Our Valued Share Holders,

The last two financial years have been without a doubt the most difficult in the history of the Renishaw Group.

The first year commenced with record first quarter results and an extremely positive outlook for the year, followed by an unprecedented downturn in the periods since.

As you will be aware, we were forced to make difficult decisions in order to ensure profitability for you, our valued share holders. The most difficult of decisions, we’re sure you’ll agree is when we had to make 437 redundancies within Renishaw globally.

We believe, backed up with experience from our board members and company history, that in order to continue to maintain the leading position in the market that we must invest in new products and services.

We are looking to raise £1.3 million to invest in the production of a new range of products; neurosurgery. In the world neurosurgery is making fast progress and through careful research we have found that there are few companies with our operating capability who can exploit this market opportunity.

The money raised from you, our valued shareholders will be used to research, produce and manufacture a new line of neurosurgical products at a lower price than current competitors can offer as we have the operating and manufacturing capabilities that they currently do not possess.

You will be contacted in due course with details on the new shares we will be offering.

Yours Sincerely

Kostoula Symianaki

Renishaw plc, Registered office: New Mills, Wotton-under-Edge, Gloucestershire, GL12 8JR, United Kingdom.

Registered in England and Wales under number 1106260. Regulated by the Financial Services Authority and listed on the London Stock Exchange. VAT number GB 422-9005-81.

• Job Advert:

Want to be part of a cutting edge innovative company?

Do you want to influence the future

As part of Renishaw’s commitment to invest in the future ,we are seeking to appoint an Apprenticeship and Technician Manager to support the expansion of our existing apprenticeship programme. In brief the role will:

- Support existing Apprentices

- Develop in-house training to supplement learners external learning

- Develop progression routes supporting Level 2 learners through to level 4

- Exploit external funding opportunities

- Support learners on programme

- Develop a network of preferred learning suppliers

- Work with learning providers to support the delivery of the ‘technician level’

programmes

- Work with Sector Skills Councils to develop appropriate accredited learning

- Ensure the right calibre of learners are recruited and encouraged to pursue a

vocation route

- Challenge misconceptions in respects of the sector

- Actively support the company’s commitment to diversity

To apply please visit www.renishaw.com/corporate/recruitment or for more details please email recruitment@renishaw.hr.com

PESTLE ANALYSIS:

• Political• Current uncertainly in terms of domestic politics, coalition government.• Cuts to Higher Education funding could affect the flow of graduates and

R&D within Higher Education institutions .• Increased investment in Apprenticeships could be an opportunity the

company could exploit building upon their current apprenticeship programme .

• Current conflicts in Afghanistan and Iraq have caused unrest in terms of British trade with some countries .

• Given ALL government procurement contracts are under review. Renishaw will have to monitor this closely .

• Cuts in public sector spending could result in a double dip recession .

• Minimum wage is set in UK by the then Labour government, meaning that Renishaw may find employing people in the UK for tertiary jobs too costly.

• Renishaw deals a lot with companies in the EU and therefore have to abide by new EU regulations on production, importing and exporting.

• Countries sometimes contract Renishaw to manufacture equipment for medical or aviation; stable money but costly if they provide solutions to two opposing countries.

• Conservative & Lib Dem coalition are planning on easing tax on UK corporations to stimulate economy growth and jobs; may prove beneficial to Renishaw.

• Economical

• Current political uncertainty has resulted in poor performance of the markets which will continue to impact on share prices

• Low rate of the £ will have an impact on imported raw material but an increase in Renishaw export market will benefit from the current rate of exchange

• Should we experience a further recession due to the cut in public spending and lack of consumer confidence this will clearly have an impact. Measure have already been taken to reduce overheads a contingency plan should be put in place to cover the possibility of a double dip recession

• Throughout the developed world there is a recession, especially in the UK and the EU, this has meant far less contracts and orders for Renishaw

• New climate change proposals are being drafted which aim to bring in a carbon emission tax, this may affect Renishaw greatly

• Renishaw are based in the UK where the Sterling currency is still adopted, however they deal with other countries which have different currencies; sometimes timing of payments can be crucial to maximizing profit

• Sociological

• Recent cost saving measure will undoubtedly have had an effect on staff moral and this will need to be monitored, current economic and political uncertainty will lead to people feeling vulnerable, clearly further cuts would exasperate this

• The mean age of the company is fairly young however Renishaw must ensure they invest in the company’s future through the development of young talent, promotion from within ect

• With a diverse mix of employees it is important the company fosters a culture than is in line with it diversity

• Due to the nature of the productrs they manufacture (medical), Renishaw may have a moral obligation to deliver high quality products (costly)

• Moral obligations also dictate that to less well off countries they should also provide reasonable prices

• Despite struggling financially Renishaw will have a lot of societal pressure to retain all UK based jobs regardless, redundancies will affect the company negatively

• As a multinational company Renishaw has to deal with different people, cultures and life prospects. It is a difficult task to manage all those different people under a head administration.

• Technological

• Company manufactures medical equipment for the UK and abroad, therefore liable for action should equipment jeopardize patients’ health

• Due to the nature of the productrs they manufacture (medical), Renishaw may have a moral obligation to deliver high quality products (costly)

• Aviation and medical technology is very short term, moves very fast and therefore needs a lot of investment in research and development

• Company must ensure that it employs highly skilled stuff in technological research if it is to generate more income than other companies (and reputation)

• Legal

• Compliance with Health and Safety• Greater knowledge and understanding on patent law• Impact of carbon emission targets • Since signing of Lisbon Treaty Renishaw is now liable to a multitude of

new laws and regulations; this is costly in terms of legal fees and realigning the mechanisms within the country

• Company manufactures medical equipment for the UK and abroad, therefore liable for action should equipment jeopardize patients’ health

• Renishaw must me concerned about Industry regulations, especially Health & Safety laws for its employees.

• Renishaw also falls in the European Law regulations and the Employment Law. Their products are passing effectiveness control and are given the legal certificates

• Environmental

• New climate change proposals are being drafted which aim to bring in a carbon emission tax, this may affect Renishaw greatly

• Public concern over environmental issues is rising, therefore Pr-wise Renishaw must ensure that they employ an environmentally friendly attitude

• Renishaw has to comply with the Environmental legislation at different levels. It has special policies for the use of energy and the use of raw materials. It takes special care not to pollute the environment with the by-industrial-products and to control their wastes.

• Low carbon agenda

SWOT ANALYSIS :

• Strengths

• Operation since 1973 and have responded to the challenges that have occurred over this time, including 3 recessions

• Exploit new and emerging markets both in terms of development of products and overseas investment

• Good Research and Development base in partnership with Exeter University

• Background of Chairman in developing market driven solutions

• Apprenticeship programme

• One of the leading manufacturers in the world for small aviation equipment

• Company is home to the ‘touch trigger probe’, regarded as one of the single most innovative measuring devices in engineering

• Company has great reputation as experience innovator, more so than others, been around for longer than other companies

• Large production chain allows for bulk buying of resources and same factories being used for different company sections; e.g. aviation and medical supplies being manufactured in same factory location

• Weaknesses

• Age demographic of senior exec

• Issues surrounding patent infringement

• Impact of recent staffing cuts and pay reduction on productivity

• Base in Gloucester may limit recruitment opportunities

• Worst performing year financially

• Current financial forecasts are predicting the same, if not worse financial results for end of 2010 financial year

• Potential investors are put off investing in the company due to publically known decreasing profits and increasing costs

• Contracts may be lost due to the above reputation

• Recession is now becoming global, resulting in less orders

• Opportunities

• Global recession has opened up possibilities for ventures in developing companies with improving economies; thus resulting in potential revenue streams; like aviation in Brazil and India

• Aviation and medical equipment are always in need, people will always need to travel, countries will always be at war and people will always need medical treatment; an endless revenue stream if potential is reached

• Major healthcare reforms in key countries like America and Canada, gives huge potential for new contracts for medical equipment to be achieved

• Technology is fast improving which means less expenditure on manufacturing (costs cut)

• Investment in new technologies to support new industries

• Develop opportunities in line with FTSE4 status (company with strong social corporate responsibility)

• Move towards advanced manufacturing techniques thus supporting government policy, this move may be supported by government funding

• Strengthening of global operations

• Development of apprenticeship and technician programme

• Threats

• Competitors in medical equipment are quickly becoming stronger in their individual countries

• Lack of orders can prove drastic for company; more cuts mean less innovation and research

• More and more beurucratic legislation coming through, meaning more legal work to go through and more money spent on legal fees

• Rival aviation company is working through a patent similar to one of Renishaw’s key products but is different enough to potentially be legally accepted

• Pensions deficit

• If share prices do not recover or continue to fall

• Current political uncertainty and the knock on effect this is having on economy and performance of market

• Cut in University funding could affect the flow of graduates to the company

Designed and produced by Kostoula Symianaki

for Business Fundamentals