RNS Number:1457B
Rotork PLC
31 July 2007
31 July 2007
Rotork p.l.c.
2007 Interim Results
Excellent growth in all three divisions
Financial Highlights
2007 2006 % change % change
(constant
currency)
Revenue #113.3m #101.3m +12% +18%
Operating profit #26.0m #22.0m +18% +27%
Profit before tax #26.9m #22.5m +19% +28%
Earnings per share 21.3 p 17.6 p +21% +31%
* Order intake up 10% year on year (15% at constant currency)
* Record order book of #94m, up 23% on the start of year
* Interim dividend at 7.7p up 18%
Chief Executive, Bill Whiteley, commenting on the results, said:
"We are pleased to report that the Group continued to make excellent progress
with revenue and profit before tax increasing by 12% and 19% against a
particularly strong first half in 2006. At constant currency the revenue
increased by 18% and profit before tax by 28%. Our end user industrial markets,
the oil & gas, power and water sectors, are very active.
Despite the weakness of the US dollar, the strength of all of our end user
markets and the ability of our international sales and operational units to
leverage these opportunities should ensure further growth in the second half of
the year."
For further information, please contact:
Rotork p.l.c. Tel: 01225 733200
Bill Whiteley, Chief Executive
Bob Slater, Finance Director
Financial Dynamics Tel: 020 7269 7291
Susanne Yule / James Ottignon
REVIEW OF OPERATIONS
Financial Results
We are pleased to report that the Group continued to make excellent progress
with revenue and profit before tax increasing by 12% and 19% respectively
against a particularly strong first half in 2006. Margins increased from 22.3%
to 23.7%. This was in spite of a negative currency background with the US
dollar averaging 1.98 against 1.80 in the first half of last year. At constant
currency the revenue increased by 18% and profit before tax by 28%.
Operating Review
Our end user industrial markets, the oil & gas, power and water sectors, are
very active. The activity has a wide geographical spread and benefited all
three of our businesses each of which expanded sales revenue, profit and margins
over the comparative period. Order intake was up 10%, 15% at constant currency.
This resulted in the order book at 30 June being #94m, up 23% on the start of
the year.
Rotork Controls
Revenue for our electric actuator division, Rotork Controls, increased by 8% to
#79m whilst operating profit rose by 11% to #21m. At constant currencies these
results would have been 14% and 20% respectively.
The mix profile was beneficial and material costs were kept under control due to
cost reduction and procurement initiatives. These factors resulted in an
increased gross margin despite currency impacts. As a result of this and the
operational gearing on the overheads, the operating margin increased to 26.3%
from 25.6%.
Strong demand resulting from new plant construction in Asia and the Far East
meant that actuator unit input from this region increased from 47% to 52% of the
total. The substantial increase in destination of units to this area was
principally due to increased levels of oil & gas business. This was
particularly evident in China where increased demand for units going into this
sector and the continued strong demand for units for power generation resulted
in increased business levels over the first half of 2006. In this region high
levels of growth in order intake were also seen in Malaysia, Taiwan, Australia
and Vietnam.
Actuators with a UK destination increased from 9% to 10% of the total with a
substantial increase in business from the UK water companies, whilst units
destined for Continental Europe increased from 14% to 16% of the total input, as
activity in oil & gas and water & waste water increased significantly. The
Middle East and Africa sector reduced from 13% to 8% due to a reduction of the
very high level of oil & gas projects which were entered in the first half of
2006. However, activity levels in the Middle East remain encouraging for the
year as a whole.
There was a small reduction in the number of units ordered for North American
destination. However our US businesses benefited from additional orders from
domestic valvemakers, who were more competitive on the world stage due to the
weakness of the US dollar.
High levels of oil & gas activity in Asia and Europe led to an increase in unit
sales into this sector but it remained at 38% of the total units sold. Water &
waste water increased their share of the total business to 23% with nearly all
areas reporting increased activity, while power reduced as a share of the total
units sold to 30% despite the quantity of units sold increasing.
The Bath plant continued to perform well and nearly all the European and Asian
profit centres achieved growth. The US saw a 10% increase in profits in local
currency but when translated into sterling the results were similar to the
previous year. Profits of the Canadian operations were down, impacted by lower
business levels.
Progress has been made in developing Rotork's Service and Support business. As
previously indicated this was restructured to create a single worldwide
business, reported predominantly within the Controls division of the Group.
Rotork Site Services was created during the period and achieved revenues and
profits in the first half of 2007 of #17m and #5m respectively.
The Control Valve actuator project continues to be the focus of our development
work. A project sales director has been selected to take responsibility for the
commercial aspects of the development. Meanwhile beta samples of the linear
product are available which will allow us to further test the market reaction.
Design of the remainder of the product range continues. An initial product
launch in the second half of 2008 is anticipated.
Rotork Fluid Systems
This division continues to grow strongly and, we believe, increase its market
share. Revenue increased by 19% to #23m and operating profits by 51% to #3m.
Operating margin reached 13.1% for the half year, with the expectation that the
target of 15% will be achieved for the year as a whole.
The main plant in Italy was very busy and increased revenue by nearly 33% and
profits nearly 57%. The two other production plants, in Germany and the US,
also saw substantial growth.
The wholly owned 'Centres of Excellence', which provide locally engineered
solutions and support for these products to customers around the world, also
performed well, with particularly good results from the UK, French and Spanish
operations.
RFS has been at the forefront of developing actuators for high integrity safety
and protection systems. It has recently won a large contract for its
Electro-Hydraulic product range, which is designed to operate at SIL3, the most
demanding of the recently introduced safety standards for valve actuators. It
has also been successful in providing solutions for HIPPS, High Integrity
Pressure Protection Systems, valves which are used in applications demanding
guaranteed rapid operation.
Rotork Gears
Rotork Gears had a very successful six months' trading. Revenue was up 33% to
#16m and operating profit up 55% to #3m on the comparative period. The strong
growth was based on an active worldwide valvemaker market and strong demand from
the in-house Controls Division where a high percentage of electric units
required secondary reduction gearboxes. This division is also reaping the
benefits of the work it has put into reducing component costs and increasing the
efficiency of its operations.
Particularly strong performances were delivered from the Leeds plant and Gears
b.v. in The Netherlands.
Dividend
The interim dividend is to be increased by 18% to 7.7p and will be payable on 28
September 2007 to all shareholders on the register at 7 September 2007. Rotork
has already paid over #18m of dividends in the first half of 2007 (88% of its
free cash flow in the period) with the #10m 2006 final dividend paid in May and
an #8m additional dividend paid in June.
Outlook
The increasing weakness of the US dollar provides an unfavourable trading
backdrop compared with 2006. However, the strength of all of our end user
markets and the ability of our international sales and operational units to
leverage these opportunities should ensure further growth in the second half of
the year.
Bill Whiteley
Chief Executive
30 July 2007
Consolidated Income Statement
Unaudited First half First half Full year
2007 2006 2006
Notes #000 #000 #000
Revenue 2 113,346 101,255 206,709
Operating profit 2 25,969 22,030 45,089
Financial income 3 3,302 2,774 5,568
Financial expenses 3 (2,370) (2,265) (4,596)
______ ______ ______
932 509 972
______ ______ ______
Profit before tax 26,901 22,539 46,061
Tax expense
UK (3,386) (2,711) (6,690)
Overseas (5,116) (4,639) (8,038)
______ ______ ______
(8,502) (7,350) (14,728)
______ ______ ______
Profit for the period 7 18,399 15,189 31,333
===== ===== =====
pence pence pence
Basic earnings per share 5 21.3 17.6 36.4
Diluted earnings per share 5 21.2 17.5 36.1
Consolidated Statement of Recognised Income
and Expense
Unaudited First half First half Full year
2007 2006 2006
#000 #000 #000
Foreign exchange translation differences (186) (2,165) (3,748)
Effective portion of changes in fair value of 461 470 (80)
cash flow hedges
Actuarial gain in pension scheme - - 6,743
Movement on deferred tax relating to actuarial - - (2,023)
gain
______ ______ _____
Income and expenses recognised directly in 275 (1,695) 892
equity
Profit for the period 18,399 15,189 31,333
______ ______ ______
Total recognised income and expense for the 18,674 13,494 32,225
period
===== ===== =====
Consolidated Balance Sheet
Unaudited Notes 30 June 30 June 31 Dec
2007 2006 2006
#000 #000 #000
Property, plant and equipment 16,722 16,978 16,616
Intangible assets 22,288 22,627 22,225
Deferred tax assets 4,606 6,898 5,739
Other receivables 849 660 735
______ ______ ______
Total non-current assets 44,465 47,163 45,315
Inventories 6 34,434 31,535 29,027
Trade receivables 40,961 38,520 37,385
Current tax 2,107 2,331 1,219
Other receivables 5,134 5,006 4,104
Cash and cash equivalents 22,371 26,912 28,460
______ ______ ______
Total current assets 105,007 104,304 100,195
______ ______ ______
Total assets 149,472 151,467 145,510
===== ===== =====
Issued equity capital 7 4,321 4,314 4,314
Share premium 7 6,346 5,841 5,857
Reserves 7 (1,146) 712 (1,421)
Retained earnings 7 80,862 75,640 80,386
______ ______ ______
Total equity 7 90,383 86,507 89,136
===== ===== =====
Interest-bearing loans and borrowings 178 769 180
Employee benefits 5,002 17,829 8,186
Deferred tax liabilities 1,203 416 1,225
Provisions 1,016 748 941
______ ______ ______
Total non-current liabilities 7,399 19,762 10,532
Bank overdraft 314 19 62
Interest-bearing loans and borrowings 90 280 526
Trade payables 18,796 19,008 16,835
Employee benefits 3,332 2,716 3,941
Current tax 8,570 6,916 6,236
Other payables 18,125 14,318 15,923
Provisions 2,463 1,941 2,319
______ ______ ______
Total current liabilities 51,690 45,198 45,842
Total liabilities 59,089 64,960 56,374
______ ______ ______
Total equity and liabilities 149,472 151,467 145,510
===== ===== =====
Consolidated Statement of Cash Flows
Unaudited First half First half Full year
2007 2006 2006
#000 #000 #000
Profit for the period 18,399 15,189 31,333
Amortisation of intangibles 36 55 98
Amortisation of development costs 154 130 259
Depreciation 1,399 1,235 2,554
Equity settled share based payment expense 327 231 496
Profit on sale of fixed assets (42) (1) (33)
Financial income (3,302) (2,774) (5,568)
Financial expenses 2,370 2,265 4,596
Income tax expense 8,502 7,350 14,728
______ ______ ______
27,843 23,680 48,463
Increase in inventories (5,510) (5,326) (3,610)
Increase in trade and other receivables (4,322) (4,029) (3,786)
Increase in trade and other payables 5,450 7,083 6,691
Increase in provisions 247 322 731
Difference between pension charge and cash contribution (2,468) (4,379) (6,801)
(Decrease) / increase in employee benefits (1,316) (750) 776
______ ______ ______
19,924 16,601 42,464
Income taxes paid (5,819) (4,791) (11,247)
______ ______ ______
Cash flows from operating activities 14,105 11,810 31,217
Purchase of tangible fixed assets (1,311) (1,246) (2,425)
Development costs capitalised (328) (151) (372)
Sale of tangible fixed assets 78 48 116
Acquisition of subsidiary net of cash acquired - (1,589) (1,589)
Interest received 474 510 876
______ ______ ______
Cash flows from investing activities (1,087) (2,428) (3,394)
Issue of ordinary share capital 489 236 252
Purchase of ordinary share capital (1,186) (700) (2,047)
Purchase of own preference shares treated as debt - (4) (4)
Interest paid (62) (76) (147)
Repayment of amounts borrowed (430) (177) (467)
Repayment of finance lease liabilities (31) (59) (212)
Dividends paid on ordinary shares (18,087) (8,537) (24,140)
______ ______ ______
Cash flows from financing activities (19,307) (9,317) (26,765)
Net (decrease) / increase in cash and cash equivalents (6,289) 65 1,058
Cash and cash equivalents at 1 January 28,398 27,180 27,180
Effect of exchange rate fluctuations on cash held (52) (352) 160
______ ______ ______
Cash and cash equivalents at end of period 22,057 26,893 28,398
===== ===== =====
Notes to the Interim Report
1. Status of Interim Report and accounting policies
The interim report was approved by the Directors on 30 July 2007. It should be
read in conjunction with the 2006 Annual Report, which contains the most recent
audited financial statements.
The financial information for the six months to 30 June 2007 and the comparative
figures for the six months to 30 June 2006 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 2006.
The financial information for the year ended 31 December 2006 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
2007 #000 2006 #000 2006 #000 2007 #000 2006 2006 #000
#000
Revenue Operating profit
Analysis by operation
Controls 79,278 73,377 147,795 20,885 18,820 37,024
Gears 15,535 11,660 24,282 3,494 2,261 4,638
Fluid Systems 22,637 19,079 40,504 2,962 1,962 5,374
Unallocated costs - - - (1,372) (1,013) (1,947)
Inter-segmental elimination (4,104) (2,861) (5,872) - - -
______ ______ ______ ______ ______ ______
113,346 101,255 206,709 25,969 22,030 45,089
______ ______ ______ ______ ______ ______
Segment assets Segment liabilities
Controls 68,759 66,732 67,969 33,815 42,168 34,557
Gears 17,547 15,756 12,325 5,117 4,032 4,146
Fluid Systems 34,082 32,838 29,796 9,802 10,360 9,442
Unallocated 29,084 36,141 35,420 10,355 8,400 8,229
______ ______ ______ ______ ______ ______
149,472 151,467 145,510 59,089 64,960 56,374
______ ______ ______ ______ ______ ______
Revenue from external customers by location of customer
First half First half Full year
2007 2006 2006
#000 #000 #000
Europe 54,521 44,117 89,992
Americas 27,295 28,224 58,398
Rest of world 31,530 28,914 58,319
______ ______ ______
113,346 101,255 206,709
______ ______ ______
Segment assets by location of assets
First half First half Full year
2007 2006 2006
#000 #000 #000
Europe 81,948 79,918 72,810
Americas 21,123 19,726 21,849
Rest of world 17,317 15,682 15,431
Unallocated 29,084 36,141 35,420
______ ______ ______
149,472 151,467 145,510
______ ______ ______
3. Net financing income
First half First half Full year
2007 2006 2006
#000 #000 #000
Interest income 503 512 982
Expected return on assets in the pension schemes 2,779 2,204 4,518
Foreign exchange gain 20 58 68
______ ______ ______
3,302 2,774 5,568
______ ______ ______
Interest expense (81) (101) (121)
Interest charge on pension scheme liabilities (2,272) (2,149) (4,309)
Foreign exchange loss (17) (15) (166)
______ ______ ______
(2,370) (2,265) (4,596)
______ ______ ______
4. Dividends
First half First half Full year
2007 2006 2006
#000 #000 #000
The following dividends were paid in the period per qualifying
ordinary share:
11.65p (2006: 9.9p) final dividend 10,051 8,537 8,537
6.5p interim dividend - - 5,601
5.8p 2006 first additional dividend - - 5,004
5.8p 2006 second additional dividend - - 4,998
9.3p 2007 additional dividend 8,036 - -
______ ______ ______
18,087 8,537 24,140
______ ______ ______
The following dividends per qualifying ordinary share were declared
/ proposed at the balance sheet date:
11.65p final dividend proposed - - 10,019
7.7p (2006: 6.5p) interim dividend declared 6,654 5,603 -
5.8p first additional dividend declared - 5,000 -
5.8p second additional dividend declared - 5,000 -
9.3p 2007 additional dividend declared - - 8,000
______ ______ ______
6,654 15,603 18,019
______ ______ ______
5. Earnings per share
Earnings per share is calculated using the profit attributable to the ordinary
shareholders for the period and 86.2 million shares (six months to 30 June 2006:
86.1 million; year to 31 December 2006: 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, Sharesave plan and Long-Term Incentive Plan.
6. Inventories
First half First half Full year
2007 2006 2006
#000 #000 #000
Raw materials and consumables 18,733 17,955 16,815
Work in progress and finished goods 15,701 13,580 12,212
______ ______ ______
34,434 31,535 29,027
______ ______ ______
7. Capital and reserves
Share Share Translation Capital Hedging Retained Total
premium reserve redemption reserve earnings
Capital reserve
#000 #000 #000 #000 #000 #000 #000
Balance at 1 January 2007 4,314 5,857 (2,770) 1,639 (290) 80,386 89,136
Profit for the period - - - - - 18,399 18,399
Other items in the - - (186) - 461 - 275
statement of recognised
income and expense
Equity settled - - - - - 236 236
transactions net of tax
Share options exercised by 7 489 - - - - 496
employees
Treasury shares purchased - - - - - (1,186) (1,186)
Treasury shares issued - - - - - 2,007 2,007
Loss on re-issue of - - - - - (893) (893)
treasury shares
Dividends to shareholders - - - - - (18,087) (18,087)
______ ______ ______ ______ ______ ______ ______
Balance at 30 June 2007 4,321 6,346 (2,956) 1,639 171 80,862 90,383
______ ______ ______ ______ ______ ______ ______
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 - - (2,165) - 470 - (1,695)
statement of recognised
income and expense
Equity settled - - - - - 213 213
transactions net of tax
Share options exercised by 4 232 - - - - 236
employees
Treasury shares purchased - - - - - (700) (700)
Treasury shares issued - - - - - 1,238 1,238
Own preference shares - - - 2 - (4) (2)
acquired
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 2006 4,310 5,609 978 1,637 (210) 68,241 80,565
Profit for the period - - - - - 31,333 31,333
Other items in the - - (3,748) - (80) 4,720 892
statement of recognised
income and expense
Equity settled - - - - - 915 915
transactions net of tax
Share options exercised by 4 248 - - - - 252
employees
Treasury shares purchased - - - - - (2,047) (2,047)
Treasury shares issued - - - - - 1,368 1,368
Own preference shares - - - 2 - (4) (2)
acquired
Dividends to shareholders - - - - - (24,140) (24,140)
______ ______ ______ ______ ______ ______ ______
Balance at 31 December 4,314 5,857 (2,770) 1,639 (290) 80,386 89,136
2006
______ ______ ______ ______ ______ ______ ______
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 p.l.c.
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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