TIDMROR
RNS Number : 5191L
Rotork PLC
02 August 2011
Rotork p.l.c.
2011 Half Year Results
% change
(organic
constant
HY 2011 HY 2010 % change currency)
Revenue GBP199.4m GBP183.5m +8.7% +7.9%
Operating profit GBP49.2m GBP47.4m +3.8% +5.2%
Profit before tax GBP49.6m GBP47.5m +4.5% +5.8%
Adjusted* profit before
tax GBP50.7m GBP48.3m +4.9% +6.3%
Basic earnings per share 40.9p 38.8p +5.4% +7.2%
Adjusted* basic earnings
per share 41.7p 39.5p +5.6% +7.6%
Interim dividend 14.50p 12.75p +13.7%
Second additional dividend 11.50p -
* Adjusted figures are before the amortisation of acquired
intangible assets
Key Points
-- Achieved record revenue in the period
-- Order intake up 22.5%; record levels within each division
-- Order book at a record high of GBP170m, up 22.4% from
December
-- Expansion of global presence with acquisition of VVA in
Norway and Rotork Servo Controls in Mexico
-- Broadening of product portfolio with post-period end
acquisition of K-Tork in the US and Centork in Spain
-- Dividend increased by 13.7% plus a second additional dividend
declared
Peter France, Chief Executive, commenting on the results,
said:
"Strong order intake during the first six months, a record order
book and ongoing activity levels in our end markets mean that we
expect to achieve full year revenue materially ahead of our prior
expectations. Margins for 2011 are expected to be at similar levels
to those seen in 2010."
For further information, please contact:
Rotork p.l.c. Tel: 01225 733200
Peter France, Chief Executive
Jonathan Davis, Finance Director
Financial Dynamics Tel: 020 7269 7291
Nick Hasell / Richard Mountain
Review of operations
Business Review
Rotork has performed well in the period, achieving record order
intake and revenue. The order book is 5.0% higher than the previous
record set in December 2008 and is 22.4% higher than last December
at GBP170.1m. Order intake was 22.5% higher than the prior year,
revenue at GBP199.4m was up 8.7% and profit before tax was 4.5%
higher at GBP49.6m. Adjusted profit before tax, before the
amortisation of intangible assets, was 4.9% higher at GBP50.7m.
The global market for actuators has remained strong and activity
levels in the markets that we serve have remained positive.
Rotork's position in the flow control market means that we benefit
from infrastructure spend related to power and water as well as the
active oil and gas sector. The level of project activity seen in
2010 has continued into 2011 and looks set to continue for the
remainder of the year. All three divisions achieved strong order
intake growth in the period. Geographically, the BRIC countries,
the Middle East and Latin America, remain very active and important
to our growth strategy.
Continuing raw material cost pressures have moderated the
benefit of higher revenues. Whilst we can normally pass these
increases on to our customers, there is often a delay between the
rise and when this can be reflected in our pricing. Rotork Fluid
Systems, and in particular Rotork Gears, saw the effect of this in
the period. However, we expect margins in the second half to
improve as mitigation of the cost increases, including value
engineering, sourcing initiatives and a pricelist increase in
Gears, start to have an impact.
We have made progress with our aim of developing the Rotork Site
Services brand and we expect this to continue in the second half of
2011 and into 2012. The initiative to grow the number of actuators
under preventative maintenance contracts continues and we have now
secured agreements for a significant number of storage facilities
in France. We are taking advantage of the temporary slowdown in the
nuclear industry to continue to invest in the product development
and certification required for this industry. The acquisition of
Ralph A Hiller in 2010 is not expected to benefit the Group until
2012, as we continue to invest in the long term opportunities that
this market offers.
Investment continues in the Rotork Innovation Design and
Engineering Centre (RIDEC), based in Chennai, which is supporting
our product development plan. The next stage of the project will be
when the team moves into the purpose-built factory with R&D
capability at the start of 2012. We continue to work on a number of
product initiatives that will benefit the business in the second
half of 2011 and into 2012.
In addition to the work being undertaken on our new Chennai
factory, we began operation from our new Houston facility,
providing extra capacity and capabilities to all three of the
divisions. Our Gears business also completed its move to larger
facilities in China, having outgrown its original factory.
The project to implement a new global IT system to provide a
common platform for our sales and service companies is now
underway. This will provide efficiencies within the sales and
service companies as well as simplify the collection of information
from across the Group. Although we have experienced delays in the
introduction, we anticipate going live in November in Spain before
the wider roll out in 2012 and 2013.
We have completed two acquisitions in the period, and a further
two since the period-end, supporting our strategy of increasing
market share by broadening our geographical and market reach and by
increasing our product portfolio.
We continue to embed health and safety awareness throughout the
organisation, with best practice disseminated across the Group and
verified by a rolling programme of audits. The KPI we monitor for
health and safety, accident frequency rate, has improved once again
in the period. To emphasise the importance placed on health and
safety, we have developed a DVD and booklet that will be used as
part of the induction programme for all new employees.
Financial results
As anticipated, currency has been a headwind in the period but
this has been more modest than expected, with a net impact on
revenue of only GBP2.9m and GBP0.6m on operating profit. Revenue
growth at constant currency is therefore 10.2% and adjusted profit
before tax growth 6.1%. The US dollar was 6% weaker than the first
half of last year and this was the key driver, with minimal change
in the euro or the net position of all other currencies.
Cash balances at the period end are GBP7.7m lower than in
December 2010 at GBP90.2m following the payment of GBP27.1m of
dividends and a GBP2.1m cash outflow on acquisitions. The value of
net working capital has risen by GBP14.7m since last year end,
reflecting our higher activity levels and the increase in our
current orderbook. Within working capital, trade receivables stand
at 61 days sales outstanding, still below our 65 days target.
Inventory is the element of working capital which has risen most
significantly, up GBP9.9m, with net working capital now 25.8% of
annualised revenue. This is expected to reduce again in the second
half and should return to nearer the 23.2% reported last year
end.
The Group effective tax rate has reduced to 28.8% as a result of
declining tax rates in several jurisdictions and the mix of where
our profits are made in the period. The lower tax rate means that
basic Earnings per Share has grown 5.4% to 40.9p.
Operating Review
Our strategy remains to develop the business both organically
and through acquisition. We continue to invest in new products that
will benefit us in the second half of 2011 and into 2012. Global
infrastructure spend remains positive, especially in China and
India.
Rotork Controls
Sales revenue increased by 7.7% to GBP129.4m and the order book
was a record for the division at GBP99.9m. The operating margin
improved to 33.1%, 40 basis points higher than the first half of
2010, with the effect of operational gearing partly offset by
increased overhead and material cost pressures, resulting in
operating profit of GBP42.8m.
Project activity has remained strong and Rotork Process Control
(RPC) has had a much better start to 2011 than 2010. The outlook
for Controls, including RPC, remains positive, underpinned by good
levels of quotation activity and project visibility.
A number of countries saw revenue higher than the prior year.
The Netherlands benefited from the increased tank storage orders
received in late 2010. Flow-Quip, the US business bought in
November 2009, performed well in its targeted liquids pipeline
market and Canada benefited from further investment in the tar
sands region. Singapore, Malaysia and Korea all saw improved
trading environments whilst in China and India, increased activity
in water and power, as well as oil and gas markets, meant these
businesses continued to perform strongly. The Rotork Site Services
business grew and we have recruited more service engineers whilst
maintaining our high utilisation levels.
In July 2011 we completed the acquisition of Centorkin Spain for
EUR3.6m, providing Rotork with a new electric actuator range that
complements our existing products. Centork will utilise Rotork's
engineering resource to continue to develop its high efficiency
compact design actuators which are sold in various aligned
industries, including the European water market. We also concluded
the acquisition of RSCM in Mexico and VVA in Norway. These
acquisitions bring an established site services business and will
benefit all three divisions by providing increased sales coverage
in these important markets.
Rotork Fluid Systems
Revenue increased by 7.6% over last year to GBP53.1m. However,
due to increased overheads from developing our infrastructure to
cope with higher trading volumes and low margin projects won under
highly competitive conditions in 2010, operating margins reduced
from 11.8% to 7.4% resulting in operating profit of GBP3.9m. Strong
order intake, recovering sales margins, and the size of the order
book, provide confidence that the second half of the year should
see a return to more normal levels of profitability. Order intake
is 31.0% higher than last year and the order book at the end of
June, including the benefit of the acquisitions, was GBP61.2m,
33.4% up on the year-end total.
The oil and gas market has remained strong with investment seen
across most of the geographical markets that we serve. The Middle
East has remained an important area of growth and our investment in
developing our presence in this market is already reaping benefits.
Asia and Latin America have been active markets in the period, with
Latin America benefiting from higher activity in mining. Across the
division, the number of large projects we actively track is higher
than a year ago, continuing the trend of recent years for larger
scope projects. Our continued investment in facilities and our
broad product portfolio enable us to support our customers with a
complete solution to meet their needs.
Our investment last year in the main RFS plant in Italy has
provided us with the ability to take advantage of this growing
market and increase our market share. We have seen strong input and
revenue growth in this business and we expect to see the improving
results in Italy supported by a number of other subsidiaries in the
second half. RFS also continues to develop its facilities in India
and China with both now operational.
K-Tork Inc, a US company, was acquired in July for $10.6m,
strengthening the position of RFS in the water, industrial and
power sectors, as well as extending our product portfolio with the
K-Tork vane actuator.
Rotork Gears
Gears saw improved trading, with revenue in the first half of
2011 up 17.6% at GBP21.5m and operating profit of GBP4.7m, 16.3%
higher. Our recent cost reduction programmes and sourcing
initiatives have been successful, however, this business saw higher
raw material rises than the other divisions and as most sales are
made under longer-term supply agreements, it takes longer to adjust
the price to cover the negative impact of raw material increases.
We are expecting to see improved margins in the second half of the
year partly due to mid-year sales price increases. Order intake was
15.1% up on the comparative period, reflecting improving valvemaker
activity and the result of sales initiatives.
The Gears operation in China moved to its new 2,300 square metre
factory at the start of the year, enabling us to benefit from the
further growth of this important market. Gears has focused on
several geographic markets with high potential and has seen
increased sales in both Russia and India. Rotork Gears has moved
into its new facility in Houston that will serve as a major
stocking and finishing centre for our products and will provide
enhanced service to our US customers. We continue to invest in our
product portfolio and will benefit from new product sales in the
second half and into 2012.
Principal risks and uncertainties
The Group has an established risk management process which works
within the corporate governance framework set out in the 2010
Annual Report & Accounts. We regularly review the principal
risks and uncertainties facing our businesses and examine the
potential impacts on our processes and procedures. The risk
management process is described in detail on pages 22 and 23 of the
2010 Annual Report & Accounts. We identify risks in the form of
strategic, operational and financial risks and set out improvements
to our processes and procedures as necessary to adapt to these.
There have been no changes to the principal risks and uncertainties
from those identified in the 2010 Annual Report & Accounts
which therefore continue to be applicable to the remaining six
months of the year.
Statement of Directors' Responsibilities
The Directors confirm that this condensed consolidated interim
financial information has been prepared in accordance with IAS 34
as adopted by the European Union and that the interim management
report includes a fair review of the information required by DTR
4.2.7 and DTR 4.2.8, namely:
-- an indication of important events that have occurred during
the first six months and their impact on the condensed set of
financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
-- material related party transactions in the first six months
and any material changes in the related-party transactions
described in the last annual report.
The Directors of Rotork p.l.c. are listed in the Rotork p.l.c.
Annual Report & Accounts for 31 December 2010. A list of
current directors is maintained in the About Us section of the
Rotork website: www.rotork.com.
Dividend
The interim dividend is to be increased by 13.7% to 14.5p per
ordinary share and will be paid on 23 September 2011 to
shareholders on the register at the close of business on 26 August
2011. Our dividend policy remains to grow core dividends generally
in line with earnings and then supplement core dividends with
additional dividends when projected cash requirements show we are
able to do so. Following such a review, the directors also declare
a second additional interim dividend of 11.5p per ordinary share to
be paid on 16 December 2011 to shareholders on the register on 18
November 2011.
The 2010 final dividend of 19.75p per ordinary share was paid on
6 May at a cash cost of GBP17.1m and the additional dividend of
11.50p per ordinary share, declared in March 2011, was paid on 24
June at a cash cost of GBP10.0m.
Outlook
We have previously indicated that we expect the Group's
performance in 2011 to be weighted towards the second half. Strong
order intake during the first six months, a record order book and
ongoing activity levels in our end markets mean that we expect to
achieve full year revenue materially ahead of our prior
expectations. Margins for 2011 are expected to be at similar levels
to those seen in 2010.
By order of the Board
Peter France
Chief Executive
1 August 2011 Consolidated
Income Statement
Unaudited
First
half First half Full year
2011 2010 2010
Notes GBP000 GBP000 GBP000
--------- ---------- ---------
Revenue 2 199,415 183,531 380,560
Cost of sales (104,846) (94,529) (199,742)
--------- ---------- ---------
Gross profit 94,569 89,002 180,818
Other income 37 9 83
Distribution costs (1,726) (1,661) (3,604)
Administrative expenses (43,651) (39,937) (79,513)
Other expenses (11) (2) (60)
Operating profit before the
amortisation of acquired
intangible assets 50,273 48,209 99,442
Amortisation of acquired
intangible assets (1,055) (798) (1,718)
----------------------------- ----- --------- ---------- ---------
Operating profit 2 49,218 47,411 97,724
Financial income 3 3,765 3,378 6,931
Financial expenses 3 (3,381) (3,318) (6,800)
Profit before tax 49,602 47,471 97,855
Income tax expense 11
UK (3,939) (3,840) (8,616)
Overseas (10,324) (10,110) (19,718)
--------- ---------- ---------
(14,263) (13,950) (28,334)
Profit for the period 35,339 33,521 69,521
========= ========== =========
pence pence pence
Basic earnings per share 5 40.9 38.8 80.5
Diluted earnings per share 5 40.8 38.6 80.2
Consolidated Statement of Comprehensive Income and Expense
Unaudited
First First half Full year
half 2011 2010 2010
GBP000 GBP000 GBP000
--------- ---------- ---------
Profit for the period 35,339 33,521 69,521
Other comprehensive income and
expense
Foreign exchange translation
differences 2,894 (1,319) 1,119
Actuarial gain in pension scheme - - 1,095
Effective portion of changes in fair
value of cash flow hedges (803) 570 674
--------- ---------- ---------
Income and expenses recognised
directly in equity 2,091 (749) 2,888
Total comprehensive income for the
period 37,430 32,772 72,409
========= ========== =========
Consolidated Balance Sheet
Unaudited
30 June 30 June 31 Dec
2011 2010 2010
Notes GBP000 GBP000 GBP000
--------- ---------- ---------
Property, plant and equipment 27,143 24,837 25,780
Intangible assets 46,717 43,016 43,990
Deferred tax assets 11,594 11,434 11,480
Derivative financial
instruments - 478 -
Other receivables 1,339 1,163 1,290
Total non-current assets 86,793 80,928 82,540
Inventories 6 58,121 44,581 48,241
Trade receivables 76,126 63,028 70,362
Current tax 1,899 1,937 2,398
Other receivables 8,723 7,623 6,684
Derivative financial
instruments 521 987 918
Cash and cash equivalents 90,202 86,717 97,881
--------- ---------- ---------
Total current assets 235,592 204,873 226,484
Total assets 322,385 285,801 309,024
========= ========== =========
Ordinary shares 7 4,335 4,331 4,334
Share premium 7,431 7,118 7,389
Reserves 18,292 13,657 16,201
Retained earnings 184,518 159,776 175,927
--------- ---------- ---------
Total equity 214,576 184,882 203,851
--------- ---------- ---------
Interest-bearing loans and
borrowings 125 163 127
Employee benefits 16,920 21,537 19,752
Deferred tax liabilities 3,719 1,794 3,165
Derivative financial
instruments - 238 -
Provisions 1,796 1,967 1,968
--------- ---------- ---------
Total non-current liabilities 22,560 25,699 25,012
Interest-bearing loans and
borrowings 23 90 49
Trade payables 31,431 25,936 30,447
Employee benefits 5,005 5,378 8,220
Current tax 15,186 12,844 10,821
Derivative financial
instruments 1,001 824 294
Other payables 28,610 26,213 26,334
Provisions 3,993 3,935 3,996
--------- ---------- ---------
Total current liabilities 85,249 75,220 80,161
Total liabilities 107,809 100,919 105,173
Total equity and liabilities 322,385 285,801 309,024
========= ========== =========
Consolidated Statement of Changes in Equity
Unaudited
Issued Capital
equity Share Translation redemption Hedging Retained
capital premium reserve reserve reserve earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------- -------- ------------ ----------- -------- --------- ---------
Balance at 31
December
2009 4,330 7,033 12,981 1,642 (217) 140,402 166,171
Profit for the
period - - - - - 33,521 33,521
Other
comprehensive
income
-------- -------- ------------ ----------- -------- --------- ---------
Foreign
exchange
translation
differences - - (1,319) - - - (1,319)
Effective
portion of
changes in
fair value of
cash flow
hedges - - - - 570 - 570
Total other
comprehensive
income - - (1,319) - 570 - (749)
-------- -------- ------------ ----------- -------- --------- ---------
Total
comprehensive
income - - (1,319) - 570 33,521 32,772
Transactions
with owners,
recorded
directly in
equity
Equity settled
share based
payment
transactions
net of tax - - - - - (1,300) (1,300)
Share options
exercised by
employees 1 85 - - - - 86
Own ordinary
shares
acquired - - - - - (1,426) (1,426)
Own ordinary
shares
awarded under
share
schemes - - - - - 3,507 3,507
Dividends - - - - - (14,928) (14,928)
-------- -------- ------------ ----------- -------- --------- ---------
Balance at 30
June 2010 4,331 7,118 11,662 1,642 353 159,776 184,882
Profit for the
period - - - - - 36,000 36,000
Other
comprehensive
income
-------- -------- ------------ ----------- -------- --------- ---------
Foreign
exchange
translation
differences - - 2,438 - - - 2,438
Effective
portion of
changes in
fair value of
cash flow
hedges - - - - 104 - 104
Actuarial
gains and
losses on
defined
benefit
pension plans
net of tax - - - - - 1,095 1,095
-------- -------- ------------ ----------- -------- --------- ---------
Total other
comprehensive
income - - 2,438 - 104 1,095 3,637
-------- -------- ------------ ----------- -------- --------- ---------
Total
comprehensive
income - - 2,438 - 104 37,095 39,637
Transactions
with owners,
recorded
directly in
equity
Equity settled
share based
payment
transactions
net of tax - - - - - 1,494 1,494
Share options
exercised by
employees 3 271 - - - - 274
Own ordinary
shares
acquired - - - - - (1,450) (1,450)
Preference
shares
redeemed - - - 2 - (4) (2)
Dividends - - - - - (20,984) (20,984)
-------- -------- ------------ ----------- -------- --------- ---------
Balance at 31
December
2010 4,334 7,389 14,100 1,644 457 175,927 203,851
-------- -------- ------------ ----------- -------- --------- ---------
Consolidated Statement of Changes in Equity (continued)
Unaudited
Issued Capital
equity Share Translation redemption Hedging Retained
capital premium reserve reserve reserve earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------- -------- ------------ ----------- -------- --------- ---------
Balance at 31
December
2010 4,334 7,389 14,100 1,644 457 175,927 203,851
Profit for the
period - - - - - 35,339 35,339
Other
comprehensive
income
-------- -------- ------------ ----------- -------- --------- ---------
Foreign
exchange
translation
differences - - 2,894 - - - 2,894
Effective
portion of
changes in
fair value of
cash flow
hedges - - - - (803) - (803)
Total other
comprehensive
income - - 2,894 - (803) - 2,091
-------- -------- ------------ ----------- -------- --------- ---------
Total
comprehensive
income - - 2,894 - (803) 35,339 37,430
Transactions
with owners,
recorded
directly in
equity
Equity settled
share based
payment
transactions
net of tax - - - - - (671) (671)
Share options
exercised by
employees 1 42 - - - - 43
Own ordinary
shares
acquired - - - - - (2,184) (2,184)
Own ordinary
shares
awarded under
share
schemes - - - - - 3,157 3,157
Dividends - - - - - (27,050) (27,050)
-------- -------- ------------ ----------- -------- --------- ---------
Balance at 30
June 2011 4,335 7,431 16,994 1,644 (346) 184,518 214,576
-------- -------- ------------ ----------- -------- --------- ---------
Consolidated Statement of Cash Flows
Unaudited
First half First half Full year
2011 2010 2010
GBP000 GBP000 GBP000
---------- ---------- ---------
Profit for the period 35,339 33,521 69,521
Amortisation of acquired intangibles 1,055 798 1,718
Amortisation of development costs 366 346 639
Depreciation 2,139 1,882 3,972
Equity settled share based payment expense 609 436 1,086
Net (profit) on sale of property, plant
and equipment (26) (28) (12)
Financial income (3,765) (3,378) (6,931)
Financial expenses 3,381 3,318 6,800
Income tax expense 14,263 13,950 28,334
53,361 50,845 105,127
(Increase) / decrease in inventories (8,625) 3,513 489
Increase in trade and other receivables (5,538) (8,931) (14,503)
Increase / (decrease) in trade and other
payables 2,812 (1,316) 3,189
Difference between pension charge and
cash contribution (2,490) (293) (844)
(Decrease) / increase in provisions (614) 417 385
(Decrease) / increase in employee benefits (4,365) (1,619) 507
---------- ---------- ---------
34,541 42,616 94,350
Income taxes paid (9,307) (12,782) (26,186)
---------- ---------- ---------
Cash flows from operating activities 25,234 29,834 68,164
Purchase of property, plant and equipment (3,319) (2,315) (5,034)
Development costs capitalised (492) (308) (1,018)
Proceeds from sale of property, plant
and equipment 169 26 154
Acquisition of subsidiaries, net of cash
acquired (note 12) (2,070) (5,621) (5,621)
Interest received 338 154 483
---------- ---------- ---------
Cash flows from investing activities (5,374) (8,064) (11,036)
Issue of ordinary share capital 42 86 360
Purchase of ordinary share capital (2,184) (1,426) (2,876)
Purchase of preference shares treated
as debt - - (4)
Interest paid (20) (48) (88)
Repayment of amounts borrowed - (632) (464)
Repayment of finance lease liabilities (35) (45) (102)
Dividends paid on ordinary shares (27,050) (14,928) (35,912)
Cash flows from financing activities (29,247) (16,993) (39.086)
Net increase in cash and cash equivalents (9,387) 4,777 18,042
Cash and cash equivalents at 1 January 97,881 78,676 78,676
Effect of exchange rate fluctuations
on cash held 1,708 3,226 1,163
---------- ---------- ---------
Cash, cash equivalents and bank overdrafts
at end of period 90,202 86,679 97,881
========== ========== =========
Notes to the Half Year Report
1. Status of condensed consolidated interim statements,
accounting policies and basis of significant estimates
General information
Rotork p.l.c. is a company domiciled in England.
The Company has its primary listing on the London Stock
Exchange.
The condensed consolidated interim financial statements for the
6 months ended 30 June 2011 and 30 June 2010 are unaudited and the
auditors have not reported in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity'.
The information shown for the year ended 31 December 2010 does
not constitute statutory accounts within the meaning of Section 434
of the Companies Act 2006, statutory accounts for the year ended 31
December 2010 were approved by the Board on 28 February 2011 and
delivered to the Registrar of Companies. The Auditors' report on
those financial statements was unqualified, did not contain an
emphasis of matter paragraph and did not contain any statement
under Section 498 of the Companies Act 2006.
The consolidated financial statements of the Group for the year
ended 31 December 2010 are available from the Company's registered
office or website - see note 15.
Basis of preparation
The condensed consolidated interim financial statements of the
Company for the six months ended 30 June 2011 comprise the Company
and its subsidiaries (together referred to as 'the Group').
These condensed consolidated interim financial statements have
been prepared in accordance with the Disclosure and Transparency
Rules of the Financial Services Authority and with International
Accounting Standard 34, 'Interim Financial Reporting' as adopted by
the European Union. They do not include all of the information
required for full annual financial statements and should be read in
conjunction with the consolidated financial statements of the Group
for the year ended 31 December 2010, which have been prepared in
accordance with International Financial Reporting Standards (IFRSs)
as adopted by the European Union.
Going concern
The Company has considerable financial resources together with a
significant order book, with customers across different geographic
areas and industries. As a consequence, the directors believe that
the Company is well placed to manage its business risks
successfully despite the current uncertain economic outlook.
The directors have a reasonable expectation that the business
has adequate resources to continue in operational existence for the
foreseeable future. Thus they continue to adopt the going concern
basis in preparing the condensed consolidated interim financial
information.
Critical accounting estimates and judgements
The Group makes estimates and assumptions regarding the future.
Estimates and judgements are continually evaluated based on
historical experience, and other factors, including expectations of
future events that are believed to be reasonable under the
circumstances.
In the future, actual experience may deviate from these
estimates and assumptions. The estimates and assumptions that have
a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the current financial year
are discussed in the financial statements for the year ended 31
December 2010.
1. Status of condensed consolidated interim statements,
accounting policies and basis of significant estimates
(continued)
Accounting policies
The accounting policies applied and significant estimates used
by the Group in these condensed consolidated interim financial
statements are the same as those applied by the Group in its
consolidated financial statements for the year ended 31 December
2010.
New accounting standards and interpretations
The following amendments to standards or interpretations are
mandatory for the first time for the financial year ending 31
December 2011:
-- IAS 24 Related Party Disclosures revised definition of
related parties
-- IFRIC 19 Extinguishing Financial Liabilities with Equity
Instruments
Application of these standards and interpretations has not had a
material impact on the net assets or results of the Group.
Future accounting developments
The following standards and interpretations were issued but are
not yet effective and have not been adopted as application was not
mandatory for the period (and in some cases not yet endorsed for
use in the EU):
-- IFRS 7 Financial Instruments: Disclosures
-- IFRS 9 Financial Instruments
-- IFRS 10 Consolidated Financial Statements
-- IFRS 11 Joint Arrangements
-- IFRS 12 Disclosure of Interests in Other Entities
-- IFRS 13 Fair Value Measurement
-- IFRIC 14 (amendment) Prepayment of a Minimum Funding
Requirement
The Directors anticipate that the adoption of these standards
and interpretations will not have a material impact on the net
assets or results of the Group.
2. Analysis by Operating Segment:
Fluid
Half year to Controls Systems Gears Elimination Unallocated Group
30 June 2011 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------- -------- ------- ------------ ------------ ---------
Revenue from
external
customers 129,438 53,061 16,916 - - 199,415
Inter segment
revenue - - 4,543 (4,543) - -
--------- -------- ------- ------------ ------------ ---------
Total revenue 129,438 53,061 21,459 (4,543) - 199,415
--------- -------- ------- ------------ ------------ ---------
Operating
profit
before
amortisation
of acquired
intangible
assets 42,861 4,885 4,658 - (2,131) 50,273
Amortisation
of acquired
intangibles
assets (80) (975) - - - (1,055)
Operating
profit 42,781 3,910 4,658 - (2,131) 49,218
--------- -------- ------- ------------ ------------ ---------
Net financing
income 384
Income tax
expense (14,263)
---------
Profit for
the period 35,339
---------
Fluid
Half year to Controls Systems Gears Elimination Unallocated Group
30 June 2010 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------- -------- ------- ------------ ------------ ---------
Revenue from
external
customers 120,162 49,309 14,060 - - 183,531
Inter segment
revenue - - 4,184 (4,184) - -
--------- -------- ------- ------------ ------------ ---------
Total revenue 120,162 49,309 18,244 (4,184) - 183,531
--------- -------- ------- ------------ ------------ ---------
Operating
profit
before
amortisation
of acquired
intangible
assets 39,348 6,577 4,034 - (1,750) 48,209
Amortisation
of acquired
intangibles
assets - (768) (30) - - (798)
Operating
profit 39,348 5,809 4,004 - (1,750) 47,411
--------- -------- ------- ------------ ------------ ---------
Net financing
income 60
Income tax
expense (13,950)
---------
Profit for
the period 33,521
---------
Year to 30 Fluid
December Controls Systems Gears Elimination Unallocated Group
2010 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------- -------- ------- ------------ ------------ ---------
Revenue from
external
customers 243,361 106,838 30,361 - - 380,560
Inter segment
revenue - - 8,844 (8,844) - -
--------- -------- ------- ------------ ------------ ---------
Total revenue 243,361 106,838 39,205 (8,844) - 380,560
--------- -------- ------- ------------ ------------ ---------
Operating
profit
before
amortisation
of acquired
intangible
assets 78,786 14,911 9,161 - (3,416) 99,442
Amortisation
of acquired
intangibles
assets - (1,659) (59) - - (1,718)
Operating
profit 78,786 13,252 9,102 - (3,416) 97,724
--------- -------- ------- ------------ ------------ ---------
Net financing
income 131
Income tax
expense (28,334)
---------
Profit for
the year 69,521
---------
2. Operating segments (continued)
Revenue from external customers by location of customer
First Full
half First year
2011 half 2010 2010
GBP000 GBP000 GBP000
UK 15,033 15,498 24,277
Rest of Europe 60,326 57,728 121,595
USA 38,082 38,242 71,036
Other Americas 16,609 14,236 39,488
Rest of the World 69,365 57,827 124,164
-------- ----------- --------
199,415 183,531 380,560
-------- ----------- --------
3. Net financing income
Full
First First year
half half 2010 2010
2011 GBP000 GBP000 GBP000
Interest income 359 189 540
Expected return on assets in the
pension schemes 3,338 3,071 6,141
Foreign exchange gain 68 118 250
------------- ----------- --------
3,765 3,378 6,931
------------- ----------- --------
Interest expense (29) (56) (79)
Interest charge on pension scheme
liabilities (3,240) (3,171) (6,289)
Foreign exchange loss (112) (91) (432)
------------- ----------- --------
(3,381) (3,318) (6,800)
------------- ----------- --------
4. Dividends
First First Full
half half year
2011 2010 2010
GBP000 GBP000 GBP000
The following dividends were paid in
the period per qualifying ordinary share:
19.75p (2010: 17.25p) final dividend 17,065 14,928 14,928
12.75p interim dividend - - 11,033
Additional dividend of 11.5p paid in
July 2010 - - 9,951
Additional dividend of 11.5p paid in
June 2011 9,985 - -
-------- -------- --------
27,050 14,928 35,912
-------- -------- --------
The following dividends per qualifying
ordinary share were declared / proposed
at the balance sheet date:
19.75p final dividend proposed - - 17,120
14.5p (2010: 12.75p) interim dividend
declared 12,571 11,046 -
Additional dividend of 11.5p to be paid
in July 2010 - 9,963 -
Additional dividend of 11.5p to be paid
in June 2011 - - 10,000
Additional dividend of 11.5p to be paid
in December 2011 10,000 - -
22,571 21,009 27,120
-------- -------- --------
5. Earnings per share
Earnings per share is calculated using the profit attributable
to the ordinary shareholders for the period and 86.5m shares (six
months to 30 June 2010: 86.4m; year to 31 December 2010: 86.4m)
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 potentially dilutive ordinary shares under the
Group's option schemes, Sharesave plan and Long-term incentive
plan.
6. Inventories
30 June 30 June 31 Dec
2011 2010 2010
GBP000 GBP000 GBP000
Raw materials and consumables 35,075 27,512 30,345
Work in progress 10,131 6,854 11,411
Finished goods 12,915 10,215 6,485
-------- -------- --------
58,121 44,581 48,241
-------- -------- --------
7. Share capital and reserves
The number of ordinary 5p shares in issue at 30 June 2011 was
86,690,000 (30 June 2010: 86,637,000; 31 December 2010:
86,682,000).
The Group acquired 128,162 of its own shares through purchases
on the London Stock Exchange during the period, (30 June 2010:
108,919; 31 December 2010: 198,464). The total amount paid to
acquire the shares was GBP2,184,000 (30 June 2010: GBP1,426,000; 31
December 2010: GBP2,876,000), and this has been deducted from
shareholders equity. The shares are held in trust for the benefit
of Directors and employees for future payments under the Share
Incentive Plan and Long-term incentive plan. All issued shares are
fully paid.
Awards under the Group's long-term incentive plan and share
investment plan vested during the period and 87,078 and 141,136
shares respectively were transferred to employees.
Employee share options schemes: options exercised during the
period to 30 June 2010 resulted in 8,731 ordinary 5p shares being
issued (30 June 2010: 24,641 shares), with exercise proceeds of
GBP43,000 (30 June 2010: GBP86,000). The related weighted average
price at the time of exercise was GBP17.19 (30 June 2010: GBP12.71)
per share.
8. Related parties
The Group has a related party relationship with its subsidiaries
and with its directors and key management. A list of subsidiaries
is shown in the 2010 Annual Report & Accounts. Transactions
between key subsidiaries for the sale and purchase of products or
between the subsidiary and parent for management charges are priced
on an arms length basis.
Sales to subsidiaries and associates of BAE Systems plc, a
related party by virtue of non-executive director IG King's
directorship of that company, totalled GBPnil during the period to
30 June 2011 (First half 2010: GBPnil; Full year 2010: GBP21,000)
and there were no amounts outstanding at 30 June 2011 ( 30 June
2010: GBPNil; 31 December 2010: GBPNil).
Key management emoluments
The emoluments of those members of the management team,
including directors, who are responsible for planning, directing
and controlling the activities of the Group are:
First First Full
half half year
2011 2010 2010
GBP000 GBP000 GBP000
Emoluments including social security
costs 1,852 1,393 2,990
Post employment benefits 199 189 370
Share based payments 451 390 755
-------- -------- --------
2,502 1,972 4,115
-------- -------- --------
9. Interest-bearing loans and borrowings
The following loans and borrowings were issued and repaid during
the six months ended 30 June 2011:
Carrying
Interest value Year
Currency rate GBP000 of maturity
Balance at 1 January 2011 176
Movement in the period:
3% -
Repayment of finance leases Eur 10% (35) 2011-13
Currency adjustment 7
Balance at 30 June 2011 148
---------
10. Share-based payments
A grant of shares was made on 4 March 2011 to selected members
of senior management at the discretion of the Remuneration
Committee. The key information and assumptions from this grant
were:
Equity Settled Equity Settled
TSR condition EPS condition
Grant date 4 March 2011 4 March 2011
Share price at grant date GBP17.04 GBP17.04
Shares / Share equivalents under
scheme 63,985 63,985
Vesting period 3 years 3 years
Expected volatility 36.3% 36.3%
Risk free rate 1.8% 1.8%
Expected dividends expressed
as a dividend yield 1.9% 1.9%
Probability of ceasing employment 1% p.a. 1% p.a.
before vesting
Fair value GBP9.88 GBP16.11
The basis of measuring fair value is consistent with that
disclosed in the 2010 Annual Report & Accounts.
11. Income taxes
Income tax expense is recognised based on management's best
estimate of the weighted average annual income tax rate expected
for the full financial year. The estimated average annual tax rate
used for the year ended 31 December 2011 is 28.8% (the effective
tax rate for the year ended 31 December 2010 was 29.0%).
The Group continues to expect its effective corporation tax rate
to be slightly higher then the standard UK rate due to higher tax
rates in the US, Canada, France, Germany, Italy, Japan and
India.
12. Acquisitions
On 6 April 2011 the Group completed the acquisition of 99.9% of
the share capital of Rotork Servo Controles de Mexico S.A. de C.V.
("RSCM"), its Mexican sales and service agent, that it did not
already own.
On 8 June 2011 the Group acquired 100% of the share capital of
Valco Valves & Automation AS, the Norwegian sales and service
agent from Valco Group AS.
The two acquisitions had the following effect on the Group's net
assets.
Provisional
GBP000
Pre-acquisition net book amounts 1,777
Alignment of accounting policies (148)
Acquired Intangible assets 2,129
Fair value adjustments (515)
Provisional fair value 3,243
Goodwill on acquisition 667
------------
Fair value of purchase consideration 3,910
Less: Deferred consideration included
in provisions (400)
------------
Purchase consideration settled in cash 3,510
Cash acquired with businesses (1,440)
------------
Cash outflow on acquisition 2,070
------------
The intangible assets identified comprise customer relationships
and the acquired order books.
Goodwill has arisen as a result of the value attributed to staff
expertise and the assembled workforce, which did not meet the
recognition criteria for an acquired intangible asset.
13. Post balance sheet event
On 15 July 2011 the Group acquired 100% of the share capital of
Centork Valve Control S.L. ("Centork") based near San Sebastian,
North East Spain for cash consideration of GBP3.2m.
On 21 July 2011 the Group acquired 100% of the share capital of
K-Tork International Inc., based in Dallas, Texas, USA for cash
consideration of GBP6.5m.
The provisional combined net asset value of the acquisitions is
GBP2.9m.
14. Shareholder information
This interim report is being sent to shareholders who requested
it and copies are available to the public from the Registered
Office at the address below. The interim report is also available
on the Rotork website at www.rotork.com.
General shareholder contact numbers:
Shareholder General Enquiry Number (UK): 0871 384 203
International Shareholders - General Enquiries: (00) 44 121 415
7047
For enquires regarding the Dividend Reinvestment Plan (DRIP)
contact:
The Share Dividend Team Equiniti Aspect House Spencer Road
Lancing West Sussex BN99 6DA
Tel: 0871 384 2268
15. Group information
Secretary and registered office:
Stephen Rhys Jones
Rotork plc
Rotork House
Brassmill Lane
Bath
BA1 3JQ
Company website:
www.rotork.com
Investor Section:
http://www.rotork.com/en/investors/index/
This information is provided by RNS
The company news service from the London Stock Exchange
END
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