Renishaw plc

Chris Pockett - Head of Communications David McMurtry - Co-Founder, Chairman, Chairman & Chief Executive Allen Roberts - Group Finance Director, Secretary & Director William Lee - Group Sales & Marketing Director

Good morning, everyone. My name is Chris Pockett, I'm Head of Communications for the Renishaw Group, and I would like to welcome you to the slide webcast presentation of Renishaw's interim financial results for the six months ended December 2017.

Present in the room today are Sir David McMurty, Renishaw's Chairman and Chief Executive, who will run through the results, highlights and chair the later Q&A session. He will be followed by today's main presenters, Allen Roberts, Group Finance Director; and Will Lee, Group Sales and Marketing Director.

Before they speak, I would like to go through some basic housekeeping for the event. After the presentation, which will last around 30 minutes, there will be a Q&A session in which we will try to answer as many questions as possible before we close around 11:00 a.m.

No questions will be answered during the formal presentation. [Operator Instructions].

I should also point out that all financial information given during this presentation will be in pound sterling. Thank you again for joining the presentation.

And I will now hand over to Sir David.

Well, thank you, Chris. Before we start, I'm sure most of you are aware by now that Will Lee will be taking over the position of CEO, and I would like to congratulate Will on his new position.

I have worked with Will and watched his progress through the company over the years. And in my opinion, there is no doubt that he is more than capable of taking the company forward and doing a better job than I have done.

I'm looking forward to working and supporting him as Executive Chairman in this new role. And I'm also looking forward to see the company thrive under his leadership.

And I'd like to start off with the summary results. Revenue has gone from - revenue of £279.5 million, compared with 2017 of £238.1 million, restated; the growth of 17%, 20% at constant exchange rates; metrology, growth in all product lines, particularly strong growth in additive manufacturing and measurement and automation product lines; healthcare, growth in spectroscopy and neuro product lines.

Adjusted profits before tax of £62.3 million, compared with 2017 of £36.1 million, an increase of 73%. Statutory profit before tax of £66.2 million, compared with 2017 of £25.3 million, restated.

Strong balance sheet, with cash of £69.1 million, excluding pension escrow account at the end of the period. An increase in the dividend to 14p per share, 2017 was 12.5%.

I'll now hand over to Allen who will go through the financial results.

Thank you, David, and good morning, everybody. Before talking through the financial highlights, I would like to note that this presentation focuses on results from continuing operations.

Details of discontinued operations and restatement to prior year results can be found in the interim report and are in line with those of the previous year-end. We are very pleased to report record first half results, both in revenue and profit.

Revenue is up by 17% to £280 million, with growth in all but one product lines in the group. Growth would have been 20% at constant exchange rates, but sterling strengthened slightly compared to the prior year.

David has already mentioned the product lines with particular strong growth in the period, it is worth noting that the majority of growth comes from underlying business, excluding the large Far East orders, which contributed 10% to the overall revenue growth. Will Lee will go into more detail of our revenue streams shortly during his presentation.

Adjusted profit before tax is up by a very healthy 73%, and statutory profit before tax is 162% up on the prior year, going to more detail on this shortly. The income tax rate of 15.2% is the rate forecast for the full financial year and is in line with the 2017 full year rate when adjusted for prior year adjustments and the impact of rate changes on deferred tax balances.

Now and just not surprisingly, our adjusted earnings per share is up 76% to 72.7p per share, and the board has set an interim dividend of 14p per share, which is an increase of 12%. Taking a look at our income statement.

In terms of our production cost, the cost of sales is 2 percentage points better than the corresponding period last year and is now 34% compared to 36% in the prior year. Production levels have increased this year to service both revenue and inventory growth.

As a result, hourly rates have improved as the fixed overhead element of the production costs is absorbed over the increased activity level. I will discuss engineering and distribution goals in a little more detail in a moment.

Administrative expenses at £24.1 million are marginally down compared to last year, primarily due to the P&L benefit rising from currency factors. Including in other category is the share of profits from associates, which has increased from £0.9 million last year to £1.6 million this year, demonstrating the strong trade activities in these associate companies.

The fair value gain on financial instruments was £3.5 million, compared to a loss last year of £12.6 million, so these helped to produce statutory profit before tax of £66.2 million, some £31 million better than last year. Our adjusted profit before tax, the measure by which the board evaluates the underlying performance of the group, is £62.3 million, compared to £36.1 million in the previous year, a growth of 73%.

We continue to invest heavily in research and engineering, and associated gross expenditure is up by over 7% at £41.7 million. This reflects mostly inflationary increases and [indiscernible] during the financial year.

The amount of net R&D capitalizes marginally down at £1.1 million, compared to £1.4 million last year. And R&D tax credit is increased from £1.1 million last year to £1.5 million this year.

The gross spend represents 15% of turnover compared to 16% last year. By segment.

Engineering costs in metrology was £38.4 million against 38 - £33.8 million, whilst in healthcare costs, costs are reduced from £5.1 million to £3.3 million in the current year. Distribution costs are up by 8% to £59.2 million, which is an increase of £4.6 million.

Such costs are slightly lower because of the impact of currency factors, we've - there's a small number of people to support our global distribution network. Looking at employee numbers.

Overall, now we have 4,584 employees in the organization worldwide, which represents a 5% increase, 226 people, from 12 months ago and 54 additions since June 2017. You can see the number of U.K.

employees in the 12 months to December '17 has risen by 80 to 2,888, with most of this increase unsurprisingly relating to production employees where there have been only modest changes in other functions. Overseas, we've improved 346 employees, giving a headcount of 6,396.

Of this increase, 64% is accounted for by production employees, again volume related. And there is also being 40 additional sales and marketing, technical support employees.

We continue to invest in our training and development programs for all employees. And this year, we've added another further 44 graduates and 43 apprentices.

This profit map highlights the movement from our adjusted profit before tax of £36.1 million for the six months of last year to our adjusted profit of 66.2 - £62.3 million for the first half. The revenue increase net of cost of sales and excluding fair value gains on financial instruments is £32.1 million.

Nearly £6 million of this gain relates to margin improvements, the thesis of which I touched on earlier. Engineering and distribution costs rose by a combined £7.3 million and have benefited from slightly favorable currency factors on translation and only modest staff increases.

These are the main factors which, combined, give a first half adjusted profit before tax of £62.3 million. As already mentioned, our adjusted earnings per share is 72.7p, up by over 31p.

And the dividend is 14p, up 12%, and payable to shareholders on the 9th of April 2018. I'll now hand over to Will to talk through the group revenue and new product releases.

Thank you very much, Allen, and thank you, David. So looking at the numbers and looking at it from a regional point of view.

The really good news here is that we have growth across all of our regions. And in fact, double-digit growth across all of the regions.

The other good news is when we look and split the revenue down by the sectors of metrology and healthcare, both have shown a good growth. Also, and particularly nice in metrology, is actually all of our product lines have grown within the metrology business.

So looking in a bit more detail about what's going on in metrology. Then what we can see here, when we look at metrology from a regional point of view, everything has grown from - all different regions have grown.

And also, what we've seen is a significant increase in the operating profit, up from £42 million to £63.2 million. So if we have a look at some of the new products that we've launched in the metrology area, which are going to be critical for our growth going forward, then the first that I'd like to go through is our new additive manufacturing system, which is the RenAM 500Q.

Now this addresses one of the challenges that we've talked of in the past of productivity in additive manufacturing, a height to build parts cost effectively in production. So parts can currently take a long time to build on the machine, so with the benefit of this new system, with four high-power lasers, which actually each address all of the bad, is that we can build things much more quickly and therefore much more cost effectively.

So what does this do? It reduces the cost per part, and that allows us to open up additive manufacturing for more applications, which maybe before we're uneconomic.

Now one of the other large costs in the additive manufacturing part is actually verifying it and understanding the integrity of the part after it's been built. So what we're now adding actually in this is during process inspection, so what we're looking at is we're looking at the melt force of the plasma from the melt pool.

Those plasma of the build and the melt pool and the laser intensity as we build. And we're building up a model in real time as we are manufacturing the part.

So what this means is, actually, as an operator of a machine, you can tell how well the build is going and decide and make decisions that you want to do with a long expensive build early on in the build process. The other new thing that we've launched for our additive manufacturing business is InfiniAM Central.

So this is really designed that the production manager, when you have a number of AM machines running, that you can monitor them and understand where they are, what they're producing, where they are in the build process and any alarms that have been raised on the build process. So this can be seen either from in the office, on the shop floor or remotely from home.

From the machines tool side, what we launched here is an enhanced new version of our laser tool setting probe, the NC4. So what we've done here is two new things.

One is we've made it more flexible in how the measurements - it does the measurements. So actually, in terms of whether you want to optimize on speed or performance, you can decide.

The other thing we've looked at is, actually, we're seeing an increasing drive with small and more delicate parts being made into smaller tools, so we've actually upgraded the optical system on the NC4 to make it better for measuring smaller tools. To measure small tools, you also need to make sure that they are very clean before you measure them.

So we now have an integrated air blast in all of the enhanced NC4 systems to make sure you got a very good metrology from your measurement. The other machines or products that's been launched is an in-spindle optical receiver.

So you can see that the bottom of the spindle with the receiver mounted in, such a very nice, compact, meat mounting. And this allows communication with up to three independent Renishaw probes.

So maybe one spindle probe and two tool setters on different pallets coming in. From the encoder product line, we have a new version of the resolute absolute encoder, the resolute FS.

Now the resolute is an absolute encoder, meaning that it knows where it is all of the time. So when it first gets switched on, it knows the exact position.

The FS, Functional Safe, version means that actually now the design of the RESOLUTE inside, we've made some changes, so that it's compatible with tolerance, such as the ISOPL and SIL manufacturing standards. So this allows it to be used in more applications where actually the strength of the machinery it's going in to could cause physical harm to people, for example, in a CNC machine tool or a robotic system.

So if we move on and have a look at healthcare. So in healthcare, again, if we look at it from a regional basis, we've seen particularly good growth in Europe and the Americas.

And we've actually made a significant step forward in terms of the profitability of the business, changing from a loss of £6 million at the first half of last year to £1.9 million for this year. And what we're expecting is a further reduction in losses going forward, as we mentioned in the Chairman's statement.

So some of the highlights from the healthcare business. So very good news that we've received approval from the FDA over in the United States so that we can now sell our newer inspire neurosurgery planning software, together with our robot over in the United States.

We've also - so we've mentioned this before, about the Herantis collaboration that we have. And the really good news here is that, back in November last year, the first patient in the clinical study was implanted with our drug delivery system.

We have also seen very strong interest on the RA802 pharmaceutical analyzer, so this is the product that we mentioned before, which takes the Raman system that we have very much as an R&D for the laboratory and makes it into a much simpler-to-use process control system to be used in industry. So I'm going to hand over back now to Allen, who is going to take us through the balance sheet.

Thank you very much, Will. I think I just like to make a slight correction.

But I think, perhaps, in my lead in, where we talked about Far East sales, I might have said 10%, but actually, it is 2% of the increase was Far East sales, not 10%. So I just wanted to correct that if that's what I said.

So moving on. Our balance sheet continues to be strong, with total noncurrent assets of £340 million, of which fixed assets represent £228 million, so more on this shortly, and intangible assets and investments in associates of £63 million.

Net current assets are £246 million, of which working capital, inventory debtors and creditors account for £183 million, up just £2 million from June 2017. Inventory increases reflect growth in trading levels and expect in the future to bounce, particularly in our additive manufacturing products line.

Debtor days have reduced from 77 days at June to 71 days at December, reflecting sales mix by territory and associated territory trading terms. Creditors have reduced since June, primarily as a result of employee-directed bonuses accrued at the year-end and paid in July.

Cash excluding the pension fund escrow accounts stands at £69 million, up from - up by £17 million from June. The derivatives liabilities is £19 million, being accumulative factors, the mark-to-market forward exchange contracts due to mature in the next 12 months.

Long-term liabilities for deferred tax pension fund and other items, including derivatives, amount to £96 million, a reduction of around £16 million since June. This arises primarily due to the liabilities on derivatives, reducing as sterling has strengthened during the first half.

Total equity of the company now stands at £491 million, an increase of £47 million compared to June 2017. You can see on this slide the various movements, which reconcile the opening cash balance at June 2017 of £51.9 million to the balance of December of £69.1 million.

Profit after tax, adjusted for noncash items, such as depreciation and amortization, produced cash inflows of nearly £82 million. Additionally, exchange rate changes positively affected cash in the tune of nearly £2.5 million.

Increases in inventory of £11 million, combined with reductions in both debtors and creditors, £13 million and £11 million, respectively, result in net increase to cash from working capital balances of £9 million. Significant cash outflows include net capital spend of £14.5 million and dividends paid of £29 million and taxes of £5 million.

The effect of all these movements was a net cash inflow of £17.2 million, so the balance at the end of the year is a healthy £69.1 million. To finish our interim results review, a few words on our significant capital spend items.

We have continued to make substantial investments in fixed assets to the tune of nearly £16 million in the period. However, this amount is significantly down on previous years.

We have now made significant progress on most of the major building and refurbishment projects, so the capital expenditure is now more weighted towards planting machinery, particularly in the U.K. and the IT infrastructure within the organization.

Although property spend is lower, we have nonetheless invested in the facilities of Mexico, Italy and Exeter, with Mexico due for completion in March. Italy due for completion - refurbishment to complete in March also.

And Exeter, we have acquired and renovated and moved in this month. And finally, to the outlook.

Notwithstanding current economic uncertainties, the board remains confident in the future prospects of the group. We're continuing to anticipate growth in both revenue and profit in this financial year and expect full year revenue to be in the range of £575 million to £605 million, and adjusted profit before tax to be in the range of £127 million to £147 million.

Statutory profit before tax is expected to be in the range of £136 million to £156 million. Thank you very much.

Okay. Thank you, Sir David, Allen and Will.

We're now going to move to questions. We have around 35 minutes remaining, so I'm going to split the questions as evenly as possible between webcast and the conference call.

As usual, as there are many more people on the webcast than the conference call, I'm going to start with some of the webcast questions. Throughout the session, I will try to group similar questions together, so we may not answer all individual questions.

I'm going to start with a couple of questions that we've had about China. The first of which is a question from Tom Fagan who asked or says, First of all, congratulations to the board and management on another excellent result.

William will have some act to follow. His question, do you think that the Chinese government initiative, Made in China 2025, poses a strategic threat?

Is there a risk that China will deem Renishaw's core business to be one in which it wants to have world dominance? Or will Renishaw manage to stay under the radar, as it has done successfully so far?

I think it depends on the product lines. There's a lot of our product lines that I believe will stay under the radar.

Product lines that - such as additives there, which is getting greater activity, certainly, there will be a lot of people interested in that, but we believe that the philosophy of bringing all the core elements of that technology in-house, so we can develop them as of fund. It's taking us longer to get started, but we now have all the core elements, and we can develop things much quicker, and we have a significant patent portfolio protecting these products.

So we will actually have to deal with these things as they happen. And so far, I have no reason to be over-alarmed.

I don't know if anybody wants to make a comment on that.

Yes. I think the other thing is we have to see it as an opportunity as well as a threat, because, actually, this is about Chinese manufacturers becoming more efficient, getting better capability and becoming greener, which is actually where our products can help them do that.

So yes, there's a threat, but there's also a good opportunity for us there, too.

Yes, good point. I agree with that.

Okay, thank you. And another question, this time from Moises Michael, who says, I assume it is intended to achieve major expansion of the business in China.

What are the main obstacles of expanding the business in China? And how will you overcome them?

Well, I think I'll leave this to Will, being developing the product. But it's certainly, the service and support and the patents and the quality of the product.

Yes, absolutely. And I think that's one thing that Renishaw, over the years, has been very good at is getting in early to these new emerging markets.

So if you look at China now, we have 13 offices in China. We are investing heavily in not just sales, but actually, as David listed, applications and service engineers to make sure that we're doing no different to everywhere else in the world.

We're supporting and servicing our customers well and making sure that we can solve their problems for them. And if we can do that, then we see the business coming through just like elsewhere.

Yes. I think one interesting point is China, as its putting a lot into technology and a lot into patent itself, so it's respecting other people's patents as well.

So that - it certainly would be in our favor.

Okay. Thank you both.

We've had a number of questions as we often do around sort of large orders, orders from the Far East. So I'm going to start with one particular question from Mark Fielding.

And Mark asks, What is the outlook for further large orders from the Far East? While on the topic, can we please clarify the correction that was made?

Am I correct, on that basis, to think that large Far East orders in the first half at 2% of growth would be around £4 million to £5 million of revenue?

Can you confirm that, Allen?

That would have been the growth year-on-year, yes, 2% of the growth.

Do you want to comment on that, Will?

I mean, I can talk maybe about the outlook, which, I guess, is the normal uncertainty that we have around some of these things. I think that's generally where we see the more general consumer-electronics investment in Asia where there is plenty of things going on.

We don't have any certainty on anything else, though.

Okay. And here is a question from Richard Paige, also around Far Eastern orders.

His point is, If Far Eastern project work only represented 2% of sales in first half, please, can you provide more detail on the quarter one versus quarter two PBT performance, please? From your statements, it would appear that Q1 PBT was £35.8 million, which reduced to £26.9 million in Q2.

Allen?

Okay. Yes.

Actually, the turnover in the second quarter was lower than the first quarter. We have a very relatively fixed cost base, so with reduced turnover, we do see a reduced margin, of course.

Also, December was low-productivity month where the booked to credited sales was lower, but we still maintain the same fixed cost base. And obviously, there was product mix differentials between the first quarter and the second quarter.

Okay. Thanks, Allen.

And here is a similar-ish question again around the larger contracts.

Can I just qualify that? Your question was represented 2% of sales in the first half.

Now the 2% represents the increment on the previous year, relative to this year in the quarter.

Okay. So again, from David Larkam.

Can you clarify larger contract impact given the geographical growth spread does not look to have had that much impact? Also, given the full year forecast for sales suggests similar level, are these really exceptional nowadays?

So yes, I think that highlights what we talked in the presentation. The thing we're really pleased of is actually is the geographical spread, so it's all the different markets putting together here.

The special projects build - special projects sales and consumer electronics has changed and matured, so the market in China is different to how it was. So I think I would agree to a certain degree with the statement there that some things become more than underlying consumer-electronics business.

Occasionally, there are still things where there can be larger orders which we never quite know whether we're going to get or not.

Okay. That's a number of questions there on the large Far East contracts.

I'm now going to take a couple of questions around additive manufacturing, which is always a bit of a hot topic, literally, at these events. So first question, again from David Larkam, Are you still seeing customers buying machines as one-offs for research prototyping?

Or are you starting to see multiple machine orders suggesting customers are starting to invest in production line scope commercial volumes?

Yes. The industry - to learn about the technology and to make parts and to understand how to make good parts, the present situation is the single agent machines are really been taken up by that market.

[Indiscernible] the quad lasers, and I think you can take over from there on this likely sales of the quad into a production environment rather than the - what we've been used to as more academic and research environment.

Yes. I think you've absolutely said it correctly there, David, that with the new products that we talked about earlier in the presentation, you can see they really are designed for the mass production.

We're certainly getting a lot of interest there with our new products. And they are the ones that we should be seeing the multiple machine orders for production environment.

Yes. At the last show, we're really quite clear there was a step change in the interest in production machines with the quad laser.

Okay. Thank you.

And another question around additive manufacturing. And this is from Henry Carver.

What's sort of addressable market size do the new RenAM products open up?

Yes. I'll have a go.

These machines are really coming to their own, making high-value complex parts. And the industry is now gearing up to see what parts in their requirement really gets a benefit from this.

You can make it. Parts that were - assemblies can be made in one part now.

So there is great interest in that, and I'm certainly looking forward to seeing the quad laser being - getting into production and answering problems, particularly in the high-value components, which other body part components or parts going to satellites and aerospace. And the third, Will, can you?

Yes. And I think that's - well answer that.

I think we're still clear that the AM machines, AM manufacturing is going to be used whether as a real performance advantage in the part that you can make compared to traditional manufacturing methods. That's going to be the market that they change for us really now is lowering that cost of part opens up more opportunities where we can do that.

So it's going to be a really interesting next 12, 18 months of seeing this technology come through.

Certainly, it's progressing well.

Okay. Thank you.

I'm now going to pick up some questions around currency. First of which is from Richard Paige, who says, Given recent FX moves, please, can you provide detail on your currency hedging rates currently in place?

Okay. Yes, we have currency forward contracts in yen, dollars and euro.

And then they go forward over several years. And the forwards, the current average of contracts, is about 1.45 to the dollar and 1.19 for the euro and approximately 1.44 for the yen.

Okay. And another question around currency is from Michael Blogg, Does the four-year guidance take account of yesterday's weakness of the U.S.

dollar?

Yes. The latest rates are covered by the revenue and profit ranges, and then I think further changes would affect the outlook.

Okay, thank you. And a question from Rolando Grandee.

Can you give us more color on the £11 million forward contract restatement? Any impact on cash?

No. There's absolutely no impact on cash.

This arises from the restatements that were made at the end of June. And this reflects the change for the first half of the previous year where certain currency forward contracts were deemed not to be - once they were hedging, hedging documents, they complied fully with the accounting standard for effectiveness.

And so at the end of June last year, restatements were made. And this effectively is the first half of what the adjustment was last year.

I would add that all contract - the appropriate contracts have not been restructured, and hence, when you look at the outlook, you see a differential between the adjusted profit before tax and the statutory profit before tax, and that is how they're being pulled through in subsequent years. And so the underlying adjusted profit before tax is the business measure that the business is using for year-on-year comparison.

Okay. Thank you, Allen.

I'm now going to take a question on pensions. There's a question from Joseph Safarti [ph], who says, Congratulations for such a fantastic set of results.

Also, a big thank you to Sir David for what he has done for us so far and for what he is going to do in the next 40 years. And lastly, congratulations to Will Lee.

And now his question, Could Allen please elaborate and explain the increase in U.K. pension liabilities by £19.5 million, compared to £7.8 million in 2016?

Yes. Thanks, Chris.

The adjustment is the IFRIC 14 adjustment, which is based upon the - taking a look at our recovery plan and the future cash flows associated with the future - with the recovery plan and discounting future cash flows at what is a slightly reduced discount rate, which obviously reflects a higher potential liability. In the first half, we've seen significant growth in the assets, which reduces the IAS 19 deficit, but that's not reflected in the IFRIC 14 calculations.

So the overall adjustment to the pension fund is, at £67 million, is very much in line with the previous year.

Okay, Allen. I'm keeping you busy this morning, and I'm afraid it's going to continue.

We have a question, a question from Michael Blogg, relating to margins. And Michael asks, The adjusted PBT margin has reduced between Q1 and Q2 from 22% to 18.5%.

What has changed in terms of gross margin or overheads? Four-year guidance implies back to 22% to 24%, why should it bounce back from the lower level in Q2?

Thanks, Michael. Sales mix does impact our profit before tax margin.

And then we did see a reduction in quarter two sales versus quarter one. And that does have also an impact on margin because of our fixed cost base.

With regard to the future, six months, we are expecting growth in revenue and reestablishment of margins that we've seen in the first six months. And the actual forecasts that we put in the range accommodates the - that future view.

Okay, Allen. I'd like to say I can give you a rest, but unfortunately not.

I have a question here from Jo Reedman relating to CapEx. And his question, CapEx was very modest in first half.

What are your budgeting for CapEx in financial year '18 as a whole?

As a whole, well, we are looking at maybe around about £20 million for the second half, which mean, aggregate, we'd look about £36 million. So between £36 million and £40 million for the total year at the moment.

Okay, thank you. Potentially, a question for somebody else here.

So this is a question relating to R&D, and this is again from Rolando Grandee. Can you give us some idea on the areas where you are focusing the most in terms of R&D?

Where is the budget allocated the most?

We don't used to give this away. But obviously, the areas that are going to affect our future new areas, there's obviously R&D going on to support the existing products and continuous improvement.

But the additive layer, obviously - but also, there is - the huge market is replacing hard gauging and the Equator-type machines and their successors will be getting a fair amount of R&D. But also, it goes right through the all product lines.

Will, I don't know, would you want to say anything more on that at all?

Nothing. The final comment there is that there's fantastic R&D plans for all the product lines.

The challenge is prioritizing, deciding which - where to invest most, and recruiting the engineers of the future to deliver those new products that we want to do.

Okay. So this one's going to be firmly back in Allen's court.

So the question relating to tax. This is a question from Mark Davies Jones.

What do you expect your group tax rate to be for the full year? Do you see any material benefit from U.S.

tax reform?

Yes. We're expecting the full year tax rate to be around about 15.2%, which was the rate for the first half.

And with regard to the U.S., there is a small benefit, but not a material benefit.

Okay, thank you. And another question on CapEx, this one from Henry Carver.

What's the CapEx guidance for financial year '19?

So '19, '19?

Yes.

Actually, we're all looking to expand some of our facilities, particularly here at New Mills and our Miskin site. I can't quote any numbers at the moment because that's under review, and we're talking to a number of people and talking about the size of the development that we will need at Miskin to accommodate the growth that's taking place now and what we're projecting over the next couple of years.

But where Miskin is, is - has been fully refurbished now, and the space is being occupied quite quickly. So we are looking to do further developments down there.

Okay. I think it's fair to say actually that the last couple of years there's been some fairly major investments overseas with our sales and distribution network, which we haven't seen so much this year.

Yes.

Okay. I'm sure Allen would be delighted, this one's going to be heading Will's way.

So another question from Michael Blogg. He's asking about growth in the Americas.

Is this driven mainly by the auto industry following that belated recognition of the capabilities of your metrology equipment?

So we are certainly very pleased with how our equipment is being used in the automotive industry in North America and being accepted, going very well. However, I would say that the growth is much broader than that.

So again, as a number, the market in the Americas is strong. So across-the-board, we are doing well there.

Okay. And we have a question here, which is probably going to come Will's way as well.

This is from David Robinson who asks, Are you able to give any indication on the size of the AM business now? And secondly, can you comment on how the REVO product is growing with auto customers?

So similar to the last question in some respects.

So I don't think we ever gave really an indication on particular size of businesses. The second one is a [indiscernible] question on REVO.

And we talked, I think, six months ago about actually the - saying primarily the benefit to REVO automotive customers traditionally was actually the cycle time and how quickly we can measure. The nice thing there is the new products that we have launched, so the surface finish probe, has been extremely well received.

And what this now means is that automotive customers can do two measurements at the same station. So tying on from the previous question, we have a very strong proposition for actually not just automotive, but any high-volume manufacturer needing inspection, both with REVO and, as David alluded to earlier, with our gauging the Equator product line.

Anything you want to add to that, David?

No, that's fine.

Okay. And so a question finally on healthcare, so again from David Larkam.

David asks or says, Good progress on reducing losses and encouraging comments on achieving profitability. It sounds as though some of the improvement has come from lower investment in the first half.

What is required for the business to be sustainably profitable? More top line or more cost out?

Yes.

Okay. Yes.

So I think, just to start with, so we have probably been more focused with our investment in the healthcare for the first six months. So yes, there has been some cost savings.

But actually, what we really see going forward is with most of our product lines is the growth that is going to drive the business and the profitability. So as we mentioned earlier, we are optimistic for this second path, looking at where we are.

So yes, I think a cautious optimism that we are on a really good track there.

Okay?

Okay. Well, I think we pretty much covered all the current questions out there that were submitted on the web.

As I said, we didn't answer necessarily everything individually, but hopefully, we answered everything that was post collectively. So I'm now going to move to people who have been waiting quite impatiently on the conference call, give them an opportunity to ask questions.

So for this, I'm going to ask Rosie, who is the conference call operator, to take over and ask the next set of questions. So over to you, Rosie.

I think I have a problem with the conference call. Just give a moment.

So if there's any more questions, people that are on the web, if you'd like to submit some more questions. Okay.

So we've had a question come in from Michael Blogg. And Michael asks, How close are you to realizing some value from the space at Miskin not used by the group?

Well, there's no progress being made on looking at the site development as yet. What we are looking at is utilization of this - of available space down there for Renishaw occupation, but no further progress.

And now there are very strategic views being taken by the Vale and [indiscernible] Council, and they're looking at opening up various access routes to the airport, down in Cardiff and the Junction 34, which is where we're located, is, I know, being part of discussions that are taking place. But nothing of any substance so far.

Okay. We have another question from Jo Reedman.

And Jo asks, Is your FY '18 guidance based on general trends? Or do you have any greater visibility than normal into the second half?

No. We're still very much as we always are.

We've got about five or six, maybe 6.5, seven weeks order book visibility, and the rest is...

I think those...

The board's view of where we expect to be.

Yes. I think also, events occur during the next six months that we're not aware of now traditionally, and they can make it a sizable change.

Okay. We're going to try again to see if we can get some questions from the conference call.

So Rosie, can you hear me now?

Okay. Well, it appears we have no further questions.

So that now ends the Q&A session and indeed ends this morning's webcast and teleconference events. We will aim, as usual, to publish a recording of today's presentation and Q&A session on the Investor Relations section of our website by tomorrow morning, latest.

So on behalf of Renishaw, I would like to thank you all for attending this event. And hopefully, it has been a value to all of you that have done so.

Finally, just a reminder, you can download the interim report and a copy of the financial presentation that you've just seen from our Investor Relations web pages. Again, thank you for attending, and have a good day.