RNS Number:0825H
Rotork PLC
02 August 2006
Rotork p.l.c.
2006 Interim Results
Highlights
Excellent growth in all three divisions
* Turnover at #101m up 29% (26% at constant currency)
* Order intake up 28% year on year
* Profit before tax at #23m up 38% (32% at constant currency)
* Earnings per share up 39% to 17.6p
* Order book at #79m is a new record
* Interim dividend at 6.5p up over 10%
* New Chinese production facility now operational
* Successful integration of the new Italian Gears business since
acquisition in January
Chief Executive, Bill Whiteley, commenting on the results, said:
"Rotork has again delivered a strong performance with the level of business in
the first half of the year exceeding our expectations.
"With buoyant markets and a record order book, we anticipate delivering a strong
performance for the year as a whole, with, as indicated at the AGM, a more
evenly balanced first and second half result."
For further information, please contact:
Rotork p.l.c. Tel: 01225 733200
Bill Whiteley, Chief Executive
Bob Slater, Finance Director
Financial Dynamics Tel: 020 7831 3113
Susanne Walker / Sally Lewis
REVIEW OF OPERATIONS
Financial Results
We are pleased to report particularly strong financial results for the first
half of 2006. Revenue increased by 29%, while operating profits increased by
36% compared with the prior year. Rotork's innovative and comprehensive product
portfolio, breadth of marketing and lean production structure allowed it to take
full advantage of increased investment in energy infrastructures around the
world. The results were enhanced by a stronger US dollar in the first quarter
which meant that the first half rates were 1.80 against 1.85 in the comparative
period. The strong order intake at the start of the year coupled with
increased production capacity at the Bath plant meant that first half output was
not affected by the same constraints as had been the case in the first halves of
2005 and 2004.
Operating Review
Order intake was up 28%. Nearly all our end user and geographic markets were
busy. Middle Eastern oil and gas projects were particularly active which
resulted in business through valvemakers in Europe and elsewhere. The order
book stood at #79m at the end of June, which was 24% above the start of the year
and 26% above the same point in 2005.
Electric Actuators
Electric input value was up 24% on the prior year and extends the period of
strong growth we have seen in recent years. Order intake was particularly high
in January which led to an exceptional first quarter. The biggest jump in input
units was for those destined for the Middle East and Africa. As a percentage of
total electric actuator input units this region increased from 8% in the first
half of 2005 to 13%. Business in Asia and the Far East remained at very high
levels but there was a decline in units destined for China, compared with the
unsustainably high levels experienced in the first half of last year. This,
together with the lack of the very large Singapore water project won in the
first half of last year, meant that this region declined from 54% of our total
destination units to 47%. Most other Asian and Far Eastern offices recorded
good increases in business. The Indian market, which is important to Rotork,
recorded a near doubling of input from the excellent prior year figure. We saw
more activity from UK customers, particularly the water and power companies, and
the UK increased as a percentage of our total destination units from 8% to 9%.
Additional Eastern European orders helped raise European business from 13% to
14%. The increase in units for the Americas was mainly destined for US water &
waste water plants with a reduction of units destined for South America. The
total Americas' share of business remained at 17%.
In terms of end user industry, oil and gas increased from 34% to 38% mainly on
the back of significant Middle Eastern activity. Power remained a similar
percentage due to the increase in Indian business more than offsetting
reductions in China. Shipments increased by 26% with profit from electric
operations increasing by 29%. Nearly all our profit centres performed well,
most recording good increases in operating profits over the comparative period.
The Bath production plant performed particularly well maintaining consistently
high levels of output which allowed us to reduce our delivery times, in spite of
the heavy levels of order intake.
Continued increases in energy costs and raw materials costs such as copper and
aluminium put pressure on the price of our components. However, these increases
are to a substantial extent being mitigated by our sourcing and engineering cost
reduction initiatives.
The new Shanghai assembly plant has progressed on schedule, within budget and is
now operational. Production of gearboxes commenced in the second quarter and
electric actuators will commence, as planned, in the third quarter.
Good progress has also been made within R&D. The new generation of Pakscan,
our two wire actuator control system, will be launched in the third quarter,
while the development of our new concept for the process control market
continues to advance.
Rotork Fluid System
This division continues to display exceptional growth levels. Order intake for
the six months is up 36% on the comparative period and the order book is up 36%
on the start of the year. Revenue and operating profits are up 44% and 150%
respectively against the relatively weak comparative period.
Upstream oil and gas work, coupled with transmission and LNG projects, continue
to drive this business which has benefited from Middle Eastern projects but
unlike the comparative period the order input does not include a dominant
project.
The Italian plant remains very busy while the PCI facility in Germany has
provided us with important extra capacity. The business generated by the
international sales subsidiaries continues to build and now represents a
significant contribution.
The increase in size of this division in recent years has encouraged us to
strengthen the top management team in order to further develop this operation
both in terms of size and profitability. Recent recruitments have completed the
process.
Rotork Gears
The Gears business has had a very successful first half year meeting its
management goals and exceeding its financial targets. Order input was up 46%
compared with the comparative period. Sales revenue and operating profits were
up 25% and 22% respectively.
There has been a smooth management transition following the retirement of the
divisional managing director. Omag Srl, which became Rotork Gears Srl after
purchase, has performed very well since its acquisition in January. Its range
of large gearboxes complements our existing products and its relationship with
important Italian valvemakers benefits our wider business. As already mentioned
production of gearboxes has commenced in the new Shanghai plant on schedule.
Progress has also been made in developing new business alliances with
significant customers.
Dividend
The interim dividend is to be increased by 10% to 6.5p and will be payable on 28
September 2006 to all shareholders on the register at 8 September 2006. During
2006 Rotork has committed to an increased dividend, outside the regular interim
and final dividends, totalling #10m to be paid in two instalments, in July and
December 2006. Taken together with the 2005 final there will be four dividends
paid to shareholders during 2006.
Outlook
The level of business has exceeded our expectations in the first half of the
year. Most of our markets continue to be healthy with significant levels of
investment planned for the future. With buoyant markets and record order books
we anticipate delivering a strong performance for the year as a whole.
Nevertheless as indicated at the time of our AGM we continue to expect the
financial results of the two halves of the current year to be more evenly
balanced than in the recent past. This view, which was based on the timing of
projects and the improvements in productivity, has been reinforced by the recent
movement of the US dollar.
Bill Whiteley
Chief Executive
2 August 2006
Consolidated Income Statement
Unaudited First half First half Full year
2006 2005 2005
Notes #000 #000 #000
Revenue 2 101,255 78,324 174,839
Operating profit 2 22,030 16,224 36,530
Financial income 3 2,774 2,169 4,479
Financial expenses 3 (2,265) (2,116) (4,352)
______ ______ ______
509 53 127
______ ______ ______
Profit before tax 22,539 16,277 36,657
Tax expense
UK (2,711) (2,052) (4,833)
Overseas (4,639) (3,320) (7,210)
______ ______ ______
(7,350) (5,372) (12,043)
______ ______ ______
Profit for the period 7 15,189 10,905 24,614
====== ====== ======
pence pence pence
Basic earnings per share 5 17.6 12.7 28.6
Diluted earnings per share 5 17.5 12.6 28.4
Consolidated Statement of Recognised Income
and Expense
Unaudited First half First half Full year
2006 2005 2005
#000 #000 #000
Foreign exchange translation differences (2,165) 890 2,190
Cash flow hedges: effective portion of
changes in fair value 470 (293) (487)
Actuarial loss in pension scheme - - (3,452)
Movement on deferred tax relating to
actuarial loss - - 2,552
______ ______ ______
Net gain recognised directly in equity (1,695) 597 803
Profit for the period 15,189 10,905 24,614
______ ______ ______
Total recognised income and expense for the period 13,494 11,502 25,417
______
Reclassification of preference shares (47) (47)
Effective cash flow hedges at 1 January 2005 277 277
______ ______
11,732 25,647
______ ______
Consolidated Balance Sheet
Unaudited Notes 30 June 30 June 31 Dec
2006 2005 2005
#000 #000 #000
Property, plant and equipment 16,978 17,644 17,214
Intangible assets 22,627 21,536 22,038
Deferred tax assets 6,898 5,905 9,115
Other receivables 660 231 633
______ ______ ______
Total non-current assets 47,163 45,316 49,000
Inventories 6 31,535 26,310 26,697
Trade receivables 38,520 31,094 36,492
Income tax receivable 2,331 2,147 2,225
Other receivables 5,006 3,887 2,560
Cash and cash equivalents 26,912 20,502 27,878
______ ______ ______
Total current assets 104,304 83,940 95,852
______ ______ ______
Total assets 151,467 129,256 144,852
====== ====== ======
Issued capital 7 4,314 4,308 4,310
Share premium 7 5,841 5,498 5,609
Reserves 7 712 1,299 2,405
Retained earnings 7 75,640 61,299 68,241
______ ______ ______
Total equity 7 86,507 72,404 80,565
______ ______ ______
Interest bearing loans and borrowings 769 1,415 236
Employee benefits 20,545 22,023 25,078
Deferred tax liabilities 416 989 1,164
Provisions 748 531 654
______ ______ ______
Total non-current liabilities 22,478 24,958 27,132
Bank overdraft 19 268 698
Interest bearing loans and borrowings 280 197 1,016
Trade payables 19,008 13,909 14,937
Income tax payable 6,916 7,062 5,620
Other payables 14,318 9,396 13,129
Provisions 1,941 1,062 1,755
______ ______ ______
Total current liabilities 42,482 31,894 37,155
Total liabilities 64,960 56,852 64,287
______ ______ ______
Total equity and liabilities 151,467 129,256 144,852
====== ====== ======
Consolidated Statement of Cash Flows
Unaudited First half First half Full year
2006 2005 2005
#000 #000 #000
Profit for the period 15,189 10,905 24,614
Amortisation of intangibles 55 169 179
Amortisation of development costs 130 146 293
Depreciation 1,235 1,357 2,671
Equity settled share based payment expense 231 134 312
Profit on sale of fixed assets (1) 42 22
Financial income (2,774) (2,169) (4,479)
Financial expenses 2,265 2,116 4,352
Income tax expense 7,350 5,372 12,043
______ ______ ______
23,680 18,072 40,007
Increase in inventories (5,326) (3,680) (3,359)
(Increase) / decrease in trade and other receivables (4,029) 4,225 (685)
Increase / (decrease) in trade and other payables 7,086 (1,551) 1,325
Increase / (decrease) in provisions 322 (16) 709
Difference between pension charge and cash contribution (4,379) (753) (3,243)
(Decrease) / increase in other employee benefits (750) (794) 1,509
______ ______ ______
16,604 15,503 36,263
Income taxes paid (4,791) (3,933) (11,296)
______ ______ ______
Cash flows from operating activities 11,813 11,570 24,967
Purchase of tangible fixed assets (1,246) (738) (1,396)
Development costs capitalised (151) (120) (291)
Proceeds from sale of tangible fixed assets 48 11 94
Acquisition of subsidiary net of cash acquired (1,590) (7,256) (7,227)
Interest received 510 285 776
______ ______ ______
Cash flows from investing activities (2,429) (7,818) (8,044)
Issue of ordinary share capital 236 513 626
Purchase of ordinary share capital (700) (913) (2,236)
Purchase of own preference shares (6) - -
Interest paid (76) (75) (232)
New loans less repayment of amounts borrowed (177) 1,184 677
Repayment of finance lease liabilities (59) (53) (100)
Dividends on ordinary shares (8,537) (8,342) (13,437)
______ ______ ______
Cash flows from financing activities (9,319) (7,686) (14,702)
Net increase / (decrease) in cash and cash equivalents 65 (3,934) 2,221
Cash and cash equivalents at 1 January 27,180 24,825 24,825
Effect of exchange rate fluctuations on cash held (352) (657) 134
______ ______ ______
Cash and cash equivalents at end of period 26,893 20,234 27,180
====== ====== ======
Notes to the Interim Report
1. Status of Interim Report and accounting policies
The interim report was approved by the Directors on 1 August 2006. It should be
read in conjunction with the 2005 Annual Report, which contains the most recent
audited financial statements.
The financial information for the six months to 30 June 2006 and the comparative
figures for the six months to 30 June 2005 are unaudited and have been prepared
applying the accounting policies and presentation that were applied in the
preparation of the company's published consolidated financial statements for the
year ended 31 December 2005.
The financial information for the year ended 31 December 2005 is an abridged
version of the full accounts for that year, which received an unqualified report
from the auditors and which have been filed with the Registrar of Companies.
2. Analysis of revenue, profit and net assets
First half First half Full year First half First half Full year
2006 2005 2005 2006 2005 2005
#000 #000 #000 #000 #000 #000
Revenue Operating profit
Analysis by operation
Electrics 73,377 58,243 128,535 18,820 14,554 30,912
Gears 11,660 9,339 19,063 2,261 1,857 3,825
Fluid system 19,079 13,267 32,321 1,962 784 3,669
Unallocated costs - - - (1,013) (971) (1,876)
Inter-segmental elimination (2,861) (2,525) (5,080) - - -
______ ______ ______ ______ ______ ______
101,255 78,324 174,839 22,030 16,224 36,530
______ ______ ______ ______ ______ ______
Segment assets Segment liabilities
Electrics 66,732 59,942 63,973 42,168 37,684 44,666
Gears 15,756 13,025 12,964 4,032 2,681 2,743
Fluid system 32,838 27,741 28,691 10,360 6,556 8,145
Unallocated 36,141 28,548 39,224 8,400 9,931 8,733
______ ______ ______ ______ ______ ______
151,467 129,256 144,852 64,960 56,852 64,287
______ ______ ______ ______ ______ ______
Revenue from external customers by location of customer
First half First half Full year
2006 2005 2005
#000 #000 #000
Europe 44,117 33,761 73,967
Americas 28,224 22,544 50,544
Rest of world 28,914 22,019 50,328
______ ______ ______
101,255 78,324 174,839
______ ______ ______
Segment assets by location of assets
First half First half Full year
2006 2005 2005
#000 #000 #000
Europe 79,918 63,024 67,102
Americas 19,726 23,608 23,578
Rest of world 15,682 14,076 14,948
Unallocated 36,141 28,548 39,224
______ ______ ______
151,467 129,256 144,852
______ ______ ______
3. Net financing income
First half First half Full year
2006 2005 2005
#000 #000 #000
Interest income 512 309 599
Expected return on assets in the pension schemes 2,204 1,828 3,770
Foreign exchange gain 58 32 110
______ ______ ______
2,774 2,169 4,479
______ ______ ______
Interest expense (101) (80) (221)
Interest charge on pension scheme liabilities (2,149) (1,965) (4,048)
Foreign exchange loss (15) (71) (83)
______ ______ ______
(2,265) (2,116) (4,352)
______ ______ ______
4. Dividends
First half First half Full year
2006 2005 2005
#000 #000 #000
The following dividends were paid in the period:
9.9p (2005: 9.7p) per qualifying ordinary share 8,537 8,342 8,342
5.9p per qualifying ordinary share - - 5,095
______ ______ ______
8,537 8,342 13,437
______ ______ ______
The following dividends were declared / proposed at the balance
sheet date:
9.9p final dividend proposed - - 8,521
6.5p (2005: 5.9p) interim dividend declared 5,603 5,095 -
5.8p first additional dividend declared (payable in July) 5,000 - -
5.8p second additional dividend declared (payable in December) 5,000 - -
______ ______ ______
15,603 5,095 8,521
______ ______ ______
5. Earnings per share
Earnings per share is calculated using the profit attributable to the ordinary
shareholders for the period and 86.1 million shares (six months to 30 June 2005:
86.0 million; year to 31 December 2005: 86.1 million) being the weighted average
ordinary shares in issue.
Diluted earnings per share is calculated using the profit attributable to the
ordinary shareholders for the period and the weighted average ordinary shares in
issue adjusted to assume conversion of all dilutive potential ordinary shares
under the Group's option schemes and Long-Term Incentive Plan.
6. Inventories
First half First half Full year
2006 2005 2005
#000 #000 #000
Raw materials and consumables 17,955 17,596 16,592
Work in progress and finished goods 13,580 8,714 10,105
______ ______ ______
31,535 26,310 26,697
______ ______ ______
7. Capital and reserves
Share Preference Share Translation Capital Hedging Retained Total
Capital shares premium reserve redemption reserve earnings
reserve
Balance at 1 January 2006 4,310 - 5,609 978 1,637 (210) 68,241 80,565
Profit for the period - - - - - - 15,189 15,189
Other items in the
statement of recognised
income and expense - - - (2,165) - 470 - (1,695)
Equity settled
transactions net of tax - - - - - - 213 213
Share options exercised by
employees 4 - 232 - - - - 236
Own ordinary shares
acquired - - - - - - (700) (700)
Own ordinary shares
awarded under share
schemes - - - - - - 1,234 1,234
Own preference shares
acquired - - - - 2 - - 2
Dividends to shareholders - - - - - - (8,537) (8,537)
______ ______ ______ ______ ______ ______ ______ ______
Balance at 30 June 2006 4,314 - 5,841 (1,187) 1,639 260 75,640 86,507
______ ______ ______ ______ ______ ______ ______ ______
Balance at 1 January 2005 4,300 47 4,993 (1,212) 1,637 - 58,489 68,254
Adoption of IAS32 and IAS39 - (47) - - - 277 - 230
______ ______ ______ ______ ______ ______ ______ ______
Restated equity at 1
January 2005 4,300 - 4,993 (1,212) 1,637 277 58,489 68,484
Profit for the period - - - - - - 10,905 10,905
Other items in the
statement of recognised
income and expense - - - 890 - (293) - 597
Equity settled
transactions net of tax - - - - - - 11 11
Share options exercised by
employees 8 - 505 - - - - 513
Own ordinary shares
acquired - - - - - - (913) (913)
Own ordinary shares
awarded under share
schemes - - - - - - 1,149 1,149
Dividends to shareholders - - - - - - (8,342) (8,342)
______ ______ ______ ______ ______ ______ ______ ______
Balance at 30 June 2005 4,308 - 5,498 (322) 1,637 (16) 61,299 72,404
______ ______ ______ ______ ______ ______ ______ ______
Balance at 1 January 2005 4,300 47 4,993 (1,212) 1,637 - 58,489 68,254
Adoption of IAS32 and IAS39 - (47) - - - 277 - 230
______ ______ ______ ______ ______ ______ ______ ______
Restated equity at 1
January 2005 4,300 - 4,993 (1,212) 1,637 277 58,489 68,484
Profit for the period - - - - - - 24,614 24,614
Other items in the
statement of recognised
income and expense - - - 2,190 - (487) (900) 803
Equity settled
transactions net of tax - - - - - - 562 562
Share options exercised by
employees 10 - 616 - - - - 626
Own ordinary shares
acquired - - - - - - (2,236) (2,236)
Own ordinary shares
awarded under share
schemes - - - - - - 1,149 1,149
Dividends to shareholders - - - - - - (13,437) (13,437)
______ ______ ______ ______ ______ ______ ______ ______
Balance at 30 December 2005 4,310 - 5,609 978 1,637 (210) 68,241 80,565
______ ______ ______ ______ ______ ______ ______ ______
8. Shareholder information
This interim report is being sent to all shareholders and copies are available
to the public from the Registered Office at the address below. The interim
report is also available on the company's website at www.rotork.com.
We offer shareholders a dividend reinvestment plan (DRIP) under which
shareholders can reinvest their cash dividends in the company, by buying shares
in the market at competitive dealing rates. If you have already elected to join
the DRIP, there is no further action for you to take.
If you would like to join for the first time, please contact our registrars
below.
Lloyds TSB Registrars
The Causeway
Worthing
West Sussex
BN99 6DA
Share dividend helpline number - 0870 241 3018
9. Group information
Secretary and registered office:
Stephen Rhys Jones
Rotork plc
Rotork House
Brassmill Lane
Bath BA1 3JQ
Company website:
www.rotork.com
This information is provided by RNS
The company news service from the London Stock Exchange
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