Good morning, and welcome to our financial year 2023 results presentation. I'm William Lee, Chief Executive, and I'm joined today by Allen Roberts, our Group Finance Director. I'm gonna start by taking a look through some of the financial highlights. Overall, this year, we've seen solid performance in quite challenging trading conditions. Our growth, and the positive here, is in one of our strategic growth initiatives, this is in our capital equipment sales. So this is sales of high-value metrology systems and also additive manufacturing equipment. What we have seen, counteracting that, is the reduction in demand from the semiconductor equipment sector after what was a really strong year in financial year 2022. This resulted in headline revenue growth of 3%, but some of this is due to currency tailwinds. At constant currency, revenue was 1% lower.
If we look at this by our three sales regions, then APAC, this is the region where many of the semiconductor equipment builder customers are located, and so therefore, it was the area most impacted by the semicon slowdown. On a positive note here, though, we did see good growth in metrology products, but not enough to offset this drop in position measurement and encoder business, so revenues were down 4% at constant currency. EMEA story, overall more positive, steady growth in all areas of the business, resulting in a 3% constant currency increase. Additive manufacturing was the really particular bright spot here, and we started to secure some repeat machine sales to a growing number of key customers.
Americas, we saw the strongest overall headline revenue growth, but this was due to the strength of the U.S. dollar over the year, and once you remove this, actually, our revenue in the Americas was flat. Very similar picture here to the group. Good growth in our metrology, additive, medical devices, businesses, but balanced out by the lower demand, again, from encoders, this time to U.S.-based semiconductor equipment builders. This has been a more challenging trading period, not just in terms of the demand that I talked about earlier, but also due to the inflationary pressures facing the business. Our adjusted PBT is 14% lower at GBP 141 million, with return on sales falling by 4% compared to the last year.
This breaks down into a 1% fall in gross margin before engineering costs, while fixed costs in engineering, distribution, and administration have also risen. Focusing on gross margin, this has been impacted by higher employee pay, as well as low recovery of fixed overheads in our manufacturing organization as activity levels have reduced. These headwinds have been partially offset by currency benefits on purchased production inputs and also by price increases that we have implemented throughout the year. Other areas of fixed cost in the P&L, engineering, distribution, administration, these have seen significant increases. This is due to a combination of targeted headcount increases in areas we feel are really critical to our future, as well as also inflationary pressures in employee pay and also expenses.
For instance, here, travel and marketing expenses have risen compared to the really unusually low levels seen in the previous two years, during the pandemic restrictions. Also on this slide, we show our segmental reporting, analysis. What you can see here in the manufacturing technologies business, as we touched on already, that we did see positive, good growth from multi-laser additive manufacturing, five-axis CMM inspection systems, calibration and laser encoders, being offset by the weak demand in our optical encoder business. If we now look at analytical instruments and medical devices, first thing here, really pleasing record revenue for spectroscopy, and this included demand for two new products that we've talked about in recent presentations, new Virsa modular Raman, and also the inLux interface for scanning electron microscopes. We continue to make steady progress in our neurosurgical business.
Here, we're continuing to focus on developing this pipeline of opportunities for our drug delivery technology, working with large pharma companies, to initiate clinical trials. Let's now take a look in more detail about the end markets for our products. Around the outside of the main pie chart, you can see the application areas for our products, with the center of the pie chart showing the end use industries, where these products are used. The red and green arrows show areas that are rising, and falling, as a share of total revenue, compared to last year. Now, please bear in mind here, these are our estimate. This is unaudited, management estimates, and this is because much of our sales go through machine builders and distributors.
We think it's useful for you to understand what our estimate is. Now, because it's still majority of businesses in the factory, this is mostly related to the machining of precision parts and allowing the automation of this process. Now, across here, products are widely used in many different industries. Biggest key ones we talk about, automotive, aerospace, and consumer electronics. We supply into these industries, as you can see from the smaller pie chart, through a combination of machine builders, distributors, and also selling direct to the end user. Positively, aerospace and automotive have increased their share, this year. You can also see here that we have separated out consumer electronics, the darker brown, from semiconductor manufacturing equipment, the light gray, and we used to cover these together. What do we mean by semicon equipment here?
Well, this is where we supply our encoder systems direct to machine builders of semiconductor capital equipment, and then they then get sold onto the semiconductor fab. This is in contrast to our consumer electronics business, where this is where we are supplying industrial metrology equipment into the manufacturers of, say, enclosures for consumer electronics products. Unfortunately, both semiconductor equipment and consumer electronics are down as a share for us this year. The more significant one here is the supplying, as we've talked about already, of encoder products into semiconductor equipment. This, we estimate, has fallen from about 20% of our business last year to around about 16% of revenues this year. Now we're gonna have a look over the next few slides at the strategic progress that we have made over the last year.
Gonna start having a look at the machine shop. Really important area for us here, where we sell a whole range of products from machine tool probes to CMM systems to additive manufacturing machines. If you look at some of the key highlights here, what we've seen is a positive, steady rise in demand for our machine tool probes. This is really with manufacturers continuing to increase automation of their machining processes. We're also seeing really good progress with our recently launched FORTiS enclosed encoder. We're targeting this at our core customers, those machine tool builders. A significant proportion of them are now testing the product, and we have a rising number of early adopters that have already now cut it into their production processes. Our Equator flexible gauge is used for a wide range of applications.
We have recently been increasing our focus with it, though, on electric vehicle applications, where it's proving to be very well suited for the measurement of powertrain parts. We've also been targeting growth in direct end user sales of our REVO five-axis CMM systems. These allow multi-sensor measurement, allowing rapid, comprehensive inspection of complex parts. This is both on shop floor and in the QC lab. Focusing here on key customers in automotive, aerospace, consumer electronics, securing repeat sales of high-value equipment and also the maintenance contracts. Similar story in additive manufacturing. Here, we're targeting repeat sales to customers that are deploying additive for volume production applications. Highly productive RenAM 500Q machine really gives a great combination of low cost per part, high material properties.
Here, areas of most interest that we're seeing real success in: consumer electronics, and medical, and also defense applications. Next, we'll take a look at Renishaw Central. Now, as background here, if you visit any machine shop anywhere around the world, then for sure, you will see a large range of different makes of machine tool. But what you will see in pretty much every one of those machine shops is Renishaw metrology equipment, from machine tool sensors on the machines to Equator, Equator gauges next to them. This puts us in a really strong position, and there's two important points to explore here. Firstly, there's a lot of data generated by our sensors and our systems, which we believe can add extra value to our customers.
and secondly, we've been collaborating with these machine tool builders very closely for many years, and therefore, we've developed the software platforms to communicate with their controllers. We've built Renishaw Central on these strengths, and it allows our customers to access information from metrology devices all across their shop floor, both Renishaw and third party. It allows our customers, with this information, to consolidate and then drive efficiency and productivity in their manufacturing processes. This really helps our customers driving their automation. It allows them to use metrology data now, not just to monitor a process, but to actually automate decision-making, keep a process running on track by providing closed loop feedback. Let's now take a look at our role in the semiconductor fab.
So we know at the moment, as we've talked about, we are on a down cycle here at the moment, but we know this will recover, and this is a cyclical industry with good overall growth in the long term. We're therefore continuing to invest. We're investing in innovation, looking at developing the new products to strengthen our product portfolio. The sales organization are continuing to win new machine builder customers, which is positive for us. When the upturn comes, it will come back stronger. And to make sure we're well positioned for that, we do have a strong inventory. We've also been investing in the automation equipment to allow us to ramp up with our manufacturing quicker. Let's next take a look at the robotics and automation sector.
We've been supplying our encoder products into robot manufacturers for many years, so we're familiar with this area, but we have now launched our new industrial automation product line. What we are doing here is helping customers, whether that's end users, system integrators, or robot builders, with the setup, calibration, process control, and actually recovery after a crash of their robots. We have done this by taking the software that we have developed, the metrology software from our machine tool and CMM business, adapted it to work with robotics, and complemented it with a new range of hardware products. We launched this product line earlier this year, and we've received really positive feedback from our customers. They love the innovation that we have brought to solving some of these challenges that they face.
We're excited about the prospects here of this new product line in this close adjacent market, which has a strong growth rate. Okay, I will now hand over to Allen to go through the financials in more detail.
Thank you, Will, and good morning, everybody. I'm now gonna give you an overview of the financial results. As well as already reported, we achieved revenue for the year of GBP 688.6 million, compared to GBP 671.1 million last year, although this was a 1% year-on-year reduction at constant exchange rates. This growth has been more than offset by increases in our overheads, which I'll cover on the next slide, such as the adjusted profit before tax, was GBP 141 million, down from GBP 163.7 million last year. Within statutory profit, we have a GBP 5.5 million gain in the period on ineffective hedges. All forward contracts previously designated as ineffective have now matured, and no further contracts have been designated as ineffective during the year.
Therefore, we do not anticipate there being any adjustments for ineffective hedges in future years. We have now closed our U.S. defined benefit pension scheme and reported a GBP 2.1 million defined benefit pension scheme, past service cost relating to this closure. The effective tax rate of 20% compares with 17.3% for the previous year. This increase has mostly resulted from a reduction in Patent Box tax incentives and an increase in the U.K. corporation tax rate from 19%-25%. The resulting adjusted earnings per share was GBP 1.551. The Board has proposed a final dividend of GBP 0.594 per share to be paid on the seventh of December. This gives an increase in total dividend of 5% over the previous year.
The profit bridge shows the movements reconciling the adjusted profit before tax of GBP 163.7 million for the previous year to GBP 141 million this year. Labor is our largest cost. We have taken a cautious approach to recruitment during the year, and our headcount increased by 78 to 5,175 on the 30th of June. This growth includes continued investment in our early careers programs. We have carried out global salary benchmarking, which has helped to improve employee retention. This, together with an increase in average headcount of 205, are the main drivers for total labor costs, which have increased by 13% to GBP 268.2 million from GBP 236.5 million last year.
Accordingly, our production, engineering, distribution, and administrative costs have all increased, partially offset by a GBP 6.6 million reduction in performance bonuses. This year's gross margin, excluding engineering costs, was 64%, compared with 65% last year. This change is mostly due to a reduction in production volumes, leading to a lower recovery of fixed overheads and the higher labor pay rates. We helped minimize the effect of these by introducing targeted price increases, which increased revenue by around 2%. We remain committed to our long-term strategy of delivering growth by developing innovative and patented products. To that end, we invested GBP 72.5 million in research and development expenditure, compared with GBP 59.4 million last year.
We also incurred GBP 28.1 million of other engineering expenditure to support existing products and technologies, and our total engineering expenditure, net of R&D tax credits and capitalization, increased by 15%. Travel and exhibition costs are higher this year as COVID-19 related restrictions have been lifted, and we have been able to engage in more customer-facing activity. In addition to the labor cost growth, this has increased our distribution costs by 12%. We have also experienced inflationary increases across other cost categories, notably software licenses, health insurance, and professional fees. Finally, net financial income has increased by GBP 9.8 million, which includes a GBP 5.5 million increase in interest on bank deposits, mainly due to higher interest rates.
This bridge tracks the movements from our opening cash and bank deposits balance of GBP 253 million at the first of July 2022 to the closing position of GBP 206.4 million at the thirtieth of June 2023. Within working capital, we have increased our inventories to GBP 185.8 million from GBP 162.5 million at the beginning of the year. This is mainly a result of targeted increases in components and sub-assemblies for our optical encoder products following global supply chain shortages in previous years. Given the reduction in demand for optical encoders, some of our components are currently overstocked. Now that supply chain challenges have eased, we have plans to reduce safety stock levels of critical components.
There is also an outflow relating to trade and other payables due to reduced purchasing activity and lower bonus accruals this year. We have invested GBP 74 million in capital expenditure, including production, plant, and equipment, the ongoing development of our production facility in Miskin, Wales, and the expansion of distribution facilities in Brazil and the Netherlands. We also paid GBP 53.4 million of dividends during the year. We regularly review the capital requirements of the group to maintain a strong financial position to protect the business and provide flexibility to fund future growth. We've consistently applied our capital allocation strategy for many years. Organic growth is our first priority, and we're committed to R&D investment for new products, manufacturing processes, and global support infrastructure to generate growth in future returns and improve productivity.
We may supplement organic growth with acquisitions in current and adjacent market niches that are aligned to our strategy. We have always valued having cash in the bank to protect the core business, from downturns, and we monitor our cash against the minimum holding according to forecast overheads and revenue downturn scenarios. This cash also allows us to react swiftly as investment or market capture opportunities arise. Actual and forecast returns, along with our strong financial position, support our progressive dividend policy, which aims to increase the dividend per share while maintaining a prudent level of dividend cover. I'll now hand back to Will, who is going to cover our future investment plans.
Thanks, Allen. Clearly, our innovation-led growth model is powered by our people, and our success is down to their skill and their dedication. This is an opportunity for me to say thank you to everyone for their hard work and their contributions. Like many businesses, we saw a rise in employee turnover following the pandemic, and so we are taking a range of steps to improve retention and to attract the skilled employees that we need to support our growth. As we've discussed in previous presentations, we have been benchmarking our pay around the world to ensure that we are competitive in what has been a tight employment market in many countries. This has resulted in like-for-like basic pay increases of 10% in constant currency terms across the group during the last 12 months.
We're continuing to invest in our talent pipeline through our early careers and education outreach programs. We're taking on a further 160 graduates and apprentices, as well as 65 industrial placements, and they're starting this month. We continue to make capital investments in the business. A noticeable increase this year has been in property expenditure. Construction here is well underway, with two new halls at our largest factory in Miskin, in South Wales, and we plan to be occupying the first hall there during the first half of the calendar year 2024. When both halls are completed, this will add more than 50% to our global factory footprint.
This is gonna be really important for us, especially as a lot of the planned growth that we have in our plans is coming from physically larger products, like our CMMs, AM machines, and FORTiS encoders. CapEx during FY 2024 is expected to be a similar level to FY 2023, as we complete the investment in the Miskin facility and also invest in new manufacturing equipment designed to boost our productivity. Sustainability is at the heart of our purpose, and we're committed to making our entire business net zero by no later than 2050. We've got several targets along the way to this, including reaching net zero in our Scope One and Scope Two emissions by 2028. Scope One and Scope Two are those emissions relating to our own operations and purchased energy.
We've made good progress on our plan, reducing emissions by 21% this year. This has been driven by an investment to remove legacy heating systems, increasing further our proportion of renewable energy purchases, and increasing our own self-generation. We've also switched many of our company vehicles to EVs, and we've introduced a leasing scheme to encourage employees to reduce their commuting emissions. A major focus for this year has been our work towards fully quantifying the emissions relating to our supply chain and the distribution and use of our products, known as Scope Three emissions. We estimate that these accounted for 97% of our total carbon emissions in our baseline year, which was financial year 2020. We're targeting a 50% reduction in these emissions by 2030, and we'll publish our full climate transition plan during this financial year.
Not only is sustainability important for how we run the business, sustainability is actually a key driver of future demand for our products, and it's therefore an area of great opportunity for us. When we've worked through our own net zero challenges, this has helped us to really understand how Renishaw's products can actually help other manufacturers like ourselves on their own journeys. Starting with additive manufacturing, the real advantage here is the design flexibility. This allows lighter-weight parts to be made than those in more traditional manufacturing techniques. Now, clearly here, sometimes the benefit is really obvious. In the aviation industry, making a part lighter can significantly reduce the lifetime fuel costs associated with it. Having reviewed our Scope Three emissions, we realized there was a significant percentage from embodied carbon in the raw metal that we were buying in to machine to make our own products.
We've therefore been investigating the design flexibility and the process efficiency of additive manufacturing, to look and see how we can reduce our own embodied carbon by adopting additive manufacturing internally. You can see on the slide an example of a part that we now manufacture traditionally, but are looking at migrating to an additive manufacture process. We very much believe the benefits this can give us will be very applicable to a wide range of our customers, too. We're seeing a lot of investment by automotive manufacturers in the electrification process, in setting up new facilities for the manufacture of EVs. This is clearly generating a whole number of new measurement challenges for them. What we're finding, as we've talked about, is both the Equator and the REVO multi-sensor capabilities are really well suited to the challenges that they are facing.
We're expecting this to be a really good area of growth for us as this investment gathers pace. And finally, our core message for many years to our manufacturing customers on helping them reduce their waste and inefficiency feels like it's gonna become ever more important as they face both carbon taxation, driving up cost of energy and materials, and also as they strive to meet their own net zero targets. In summary, we believe we've got a really significant role to play in the transition to a more sustainable manufacturing future. So in summary, looking back at FY 2023, as we've talked about during this presentation, certainly was a tough year for us with the depressed semiconductor equipment sector, but one where we saw elsewhere in the business really positive progress with our strategic priorities and sales in other product lines.
The demand trends that we saw during FY 2023 have continued into the start of FY 2024. We've had a steady start to the year, and our order book remains solid. We're seeing the continued positives, continued investment into low emission transportation, defense, additive manufacturing, and robotics. Meanwhile, the demand we talked about from the semiconductor equipment suppliers for our position encoder equipment is remaining subdued. We are positive here, though. We're in a really good position when this demand rises, and it will, that we're in a good place to supply the customers and grow our market share. Meanwhile, the short-term macroeconomic picture does remain unclear. We are also seeing inflationary pressures that are continuing into this financial year. We're therefore really focusing on managing costs very carefully at the moment.
We only have essential recruitment going on at the moment, and very much focusing on productivity and the people that we have. We are also, again, implemented targeted price rises, and these are forecast to generate an additional couple of percent, 2% of revenue, for this financial year. I remain confident in our strategy and that we're taking the right actions to deliver long-term sustainable growth. Thank you for watching.