TIDMROR
RNS Number : 4167B
Rotork PLC
04 March 2014
Rotork plc
2013 Full Year Results
2013 2012 % change OCC *(2)
% change
Revenue GBP578.4m GBP511.7m +13.0% +6.3%
Adjusted*(1) operating
profit GBP151.4m GBP131.9m +14.8% +8.5%
Adjusted*(1) operating
margin 26.2% 25.8% +40 bps +50 bps
Profit before tax GBP138.0m GBP124.2m +11.1% +8.8%
Adjusted*(1) profit before
tax GBP150.1m GBP131.6m +14.1% +7.8%
Basic earnings per share 114.8p 103.1p +11.3% +9.0%
Adjusted*(1) basic earnings
per share 124.9p 109.3p +14.3% +7.9%
Full year dividend 48.05p 43.00p +11.7%
*(1) Adjusted figures are before the amortisation of acquired
intangible assets
*(2) OCC is organic constant currency
Key Points
-- Record order intake, revenue and profit in each division
-- Order intake up 7.3%
-- Order book at GBP187.8m, up 3.8% from December 2012
-- Operating margin increased 40 bps to 26.2%
-- Sales to oil & gas market up 24%
-- Continued expansion of product portfolio
-- Four acquisitions completed in the year
Peter France, Chief Executive, commenting on the results,
said:
"Our strategy of expanding our product portfolio, geographic
reach and end market exposure has enabled us to deliver another
year of record order intake, revenue and profit.
We continue to invest for growth, increasing our international
sales network and expanding our product portfolio both organically
and by acquisition to strengthen our presence in the wider flow
control market.
The global markets that we serve remain active, providing
further opportunities for growth, although we recognise that we are
likely to experience weakness within some regions due to economic
conditions and a headwind from currency. Nevertheless the Board
remains confident of achieving further progress in the coming
year."
For further information, please contact:
Rotork plc Tel: 01225 733200
Peter France, Chief Executive
Jonathan Davis, Finance Director
FTI Consulting Tel: 020 7269 7291
Nick Hasell / Susanne Yule
Chairman's Statement
Our strategy of expanding our product portfolio, geographic
reach and end market exposure has enabled us to deliver another
year of record order intake, revenue and profit.
Financial Highlights
The 13% growth in revenue this year to GBP578m benefited from
the four acquisitions made during the year and a currency tailwind.
On an organic constant currency basis revenue grew 6% with currency
adding 2% and acquisitions providing the remaining 5%. Adjusted*
operating profit increased by 15% to GBP151m, or 9% on an organic
constant currency basis, delivering an operating margin of 26.2%,
compared with 25.8% in 2012. Each of the divisions reported
improved margins compared with the prior year. Earnings per share
increased 11% to 114.8 pence per share or, based on adjusted
profit*, by 14% to 124.9 pence. With operating cash conversion of
100% in the year, net cash balances increased by GBP9m to GBP69m at
the year end.
Growth has been generated this year from developing both new end
markets and new geographies and from a combination of organic
expansion and acquisition. Acquisitions have always been a part of
our growth strategy and this year we acquired four companies that
supplemented our organic growth.
At the beginning of 2013 we acquired the Schischek group of
companies, which performed very well in the year, and mid-year we
acquired GTA Group, a rack and pinion actuator manufacturer. The
products of both acquisitions are now being sold through Rotork's
network of sales subsidiaries and the process of integration is
well underway. Flowco, acquired in July, services the water
utilities after-market and has become part of our Rotork UK
business. Renfro, acquired in August, provides Rotork with the
opportunity to create a US-based valve adaption business similar to
our current Valvekits business in the UK. All of the acquisitions
made positive contributions during the year, as did Soldo, the
Italian switchbox manufacturer acquired in November 2012, which
delivered a good first full year of trading within the Instruments
division.
Innovation has always been one of Rotork's core strengths. This
year saw a number of product launches with more planned in each
division for 2014. The Rotork Innovation Design & Engineering
Centre (RIDEC) based in Chennai, India, has supported these
efforts, working with all Rotork divisions and helping accelerate
the pace of innovation.
I would like to acknowledge the high level of commitment and
professionalism of our employees and to congratulate them on their
contribution in delivering another year of record results.
Board Composition
After serving on our Board for nine years, latterly as the
Senior Independent Director, Ian King will retire at the June Board
meeting. I would like to thank Ian on behalf of the Board for his
excellent contribution to the Group over this period. We are
currently recruiting to fill the vacancy that Ian's departure will
create and we will announce this and any consequent changes in
positions in due course. The Board is compliant with the Corporate
Governance Code at present in that half the Board, excluding myself
as Chairman, are independent non-executives and following the
changes outlined above it will remain compliant. In addition the
Board meets our stated aim that 25% of our independent
non-executives are women.
Board Performance
We have used external consultants to conduct an independent
appraisal of Board effectiveness for a number of years and did so
again this year. The feedback from the review was positive and
there was a strong sense that the Board has continued to build on
the progress made in prior years. There is a level of openness and
support between Board members which allows the Board to function
effectively and in a way that all members are comfortable with. The
review noted that improvements had been made this year in the
process of setting strategy and monitoring the performance of new
initiatives and acquisitions. The focus areas for the coming year
include succession planning, talent management and continuing to
manage the growth of the Company, whether that is within the
existing operations or through the making and integration of
acquisitions. Overall, I remain satisfied that the composition of
the Board with its broad range of experience and skills enables it
to fulfil its role to full effect.
Corporate Governance
The Board is committed to high standards of governance, we see
this as central to delivering increasing shareholder value over the
long term. The Board considers all the aspects of the business
necessary to provide good governance and these are set out in the
Corporate Governance Report. I am pleased to be able to confirm
that Rotork complies with all aspects of the 2010 and 2012 versions
of the UK Corporate Governance Code.
Dividend
The Board recommends a final dividend of 30.0p per share which,
taken together with the 2013 interim dividend, gives a payment of
48.05p per share (2012 dividend: 43.0p), representing a 11.7%
increase in dividends. This dividend will be payable on 19 May 2014
to shareholders on the register on 11 April 2014.
Outlook
We continue to invest for growth, increasing our international
sales network and expanding our product portfolio both organically
and by acquisition to strengthen our presence in the wider flow
control market.
The global markets that we serve remain active, providing
further opportunities for growth, although we recognise that we are
likely to experience weakness within some regions due to economic
conditions and a headwind from currency. Nevertheless the Board
remains confident of achieving further progress in the coming
year.
Roger Lockwood
Chairman
3 March 2014
* References to adjusted profit throughout this document are
defined as the IFRS profit, whether operating profit or profit
before tax, with GBP12.1m (2012: GBP7.4m) of amortisation of
acquired intangibles added back.
Business Review
Rotork's performance once again highlights the benefits of our
diverse end market exposure and the critical role that our products
play in keeping the world flowing. We have continued to invest in
our product portfolio and international sales channels and each of
our divisions has achieved record results this year.
Our geographic presence continues to grow and during the year we
expanded our factories in Shanghai and Houston, moved to new
facilities in Malaysia, Mexico, Middle East and Brazil and opened a
new office in Bath, UK. We now have 24 manufacturing sites, 58
national offices and 81 regional locations in 34 countries. In
total we have over 800 sales channels in 95 countries. In line with
our strategy and the requirements of our customers, we remain
focused on building a truly global operation with a local
presence.
The year ended strongly, with order intake returning to the
levels we saw at the start of 2013, although the strengthening of
sterling reduced the fourth quarter reported order intake by 6.1%
compared with the first quarter. For the year as a whole order
intake was GBP578.7m, 7.3% higher than 2012. Acquisitions
contributed 4.9% of the growth and currency a further 1.6%.
During the year, we delivered on orders from a number of the
larger projects won in 2012. As a result, revenue grew 13.0% to
GBP578.4m and was boosted by a record output in the last quarter,
beating the previous record set in the final quarter of 2012, with
organic constant currency growth of 6.3%. The adjusted* operating
profit margin was 26.2%, a 40 basis point improvement on 2012.
At our Capital Markets Day in November we introduced our new
strapline, 'Keeping the World Flowing'. As a flow control company,
Rotork's products impact our everyday lives from the moment we wake
until the end of the day, whether we are turning on a light,
filling a kettle or putting fuel in our car. Our products operate
in some of the most remote and challenging environments, where
reliability and local support are vital to keep our customers'
operations running. The industries we serve often have high
barriers to entry and our products often require certification
because of their mission-critical nature. Our strategy is to
continue to expand our product portfolio and strengthen our
geographic reach, whilst broadening our end-market exposure.
In 2013 we saw a 24% increase in sales to the oil & gas
market, which now represents 59% of Group revenue. These sales were
into many different parts of the oil & gas industry with
upstream sales increasing to 11% of Group revenue, mid-stream to
22% and downstream reducing to 26%. The increases in upstream and
midstream were driven partly by the major projects delivered during
the year in Australia and Mexico. The Indian power market has still
not regained its former strength and, combined with the
consequential effect this has had on demand from Chinese boiler
makers, revenue from the power market declined 13%. The long-term
drivers behind this market remain positive and we remain confident
that it will return to growth. Water sales grew 4% with products
serving this end market now to be found in each of the divisions.
The growth of our Instruments division and recent acquisitions such
as Schischek have boosted our industrial and mining sales, which
rose by 18% such that revenue from these end markets is now very
close to our sales in the water market.
During the year we invested in our infrastructure and will
continue to do so in 2014. Our sales office network will continue
to grow as we look at opportunities for new offices in Eastern
Europe, China, Southern Africa and Australia. These new locations
have been identified as areas where either there is a significant
installed base of our products which will provide service
opportunities or where there are opportunities for new product
sales. We will also continue to invest in our existing locations
with the new factory in Leeds due to complete in 2014, the planned
expansion of our Singapore office and our business in Bilbao,
Spain, relocated to new and larger premises.
Rotork Controls
GBPm 2013 2012 Change OCC change
-------------------- ------ ------ ------- -----------
Revenue 321.9 293.3 +9.7% +3.1%
-------------------- ------ ------ ------- -----------
Adjusted operating
profit 105.5 94.8 +11.3% +5.2%
-------------------- ------ ------ ------- -----------
Adjusted operating
margin 32.8% 32.3% +50bps +70bps
-------------------- ------ ------ ------- -----------
The year ended with improving order input and strong fourth
quarter revenue. This resulted in full year revenue growth of 9.7%
which in turn drove a 50 basis point improvement in adjusted*
operating profit margin.
Having launched the third generation of our flagship IQ actuator
in 2012, this year was one of transition with IQ2 volumes
diminishing and IQ3 growing. IQ3 was first manufactured at our site
in Bath, UK, where it now accounts for the vast majority of IQ
production and has now been rolled out to our factory in Rochester,
USA. Innovation has been key to Rotork's success over the years and
the benefits and features of the IQ3 have reinforced our reputation
for being the market leader for medium to heavy-duty electric
actuators. The Compact Modulating Actuator (CMA), launched at the
end of 2012, gained market acceptance during 2013 and we saw sales
of this product line supplement those of the Control Valve Actuator
(CVA) and expand our process control sales.
In 2012 we received a number of large Australian coal seam gas
project orders that we did not expect to be repeated in 2013. As a
result, although order intake increased by 2.9% on a reported
basis, on an organic constant currency basis it was 3.4% lower than
2012. Overall activity levels improved towards the end of the year
but the order book closed the year 2.6% lower at GBP100.3m.
Revenue grew 9.7% to GBP321.9m, supported by the delivery of the
projects referred to above. Removing the impact of currency and
acquisitions revenue growth was 3.1%. Schischek performed in line
with our expectations whilst the impact of currency, which had been
a tailwind in the first half, was neutral in the second half.
Adjusted* operating profit increased by 11.3% to GBP105.5m,
producing a margin of 32.8%, which was 50 basis points higher than
2012 and mainly arose from lower material costs. Whilst currency
increased the reported profit, it had a slight dampening effect on
margin. Schischek margins were in line with the division as a
whole, resulting in organic constant currency margins of 33.0%,
with adjusted operating profit growth on this basis of 5.2%.
Our North American offices performed well overall and this was
due to a number of factors including; the continued expansion of
tight oil & gas exploration and production in the US; our
targeted growth in municipal water infrastructure; and a strong
export market from the US valvemakers focused on the global oil
& gas markets. China continued to deliver growth and despite
the downturn in power projects globally, there were still
significant projects in power.
Following the investment in our facilities in China we continue
to focus on expanding our domestic business alongside our
international one. Korea was an important market for us this year
due to the success of Korean contractors securing international EPC
contracts. As expected, Australia had a positive year, benefiting
from coal seam gas projects. Some of the domestic markets of our
European companies were still subdued but this was offset by our
export business with European valvemakers, whose international
markets were strong. Following our investment in the Middle East,
this office produced a year of good growth. The Indian power market
did not regain its previous highs in the year and this impacted our
Indian subsidiary with our electric actuator sales flat year on
year.
At the beginning of 2013 we acquired Schischek, an electric
actuator company focused on the HVAC market, and we have started
integrating it into our international sales network and
reorganising how we operate in Germany. The business met our
expectations in the year and we expect further growth in 2014 as
the integration continues and our offices identify opportunities in
Schischek's end markets. In July 2013 we acquired Flowco, an
actuator service company based near our headquarters in Bath, UK
and the company has been successfully integrated into our Rotork UK
sales subsidiary.
During 2013 we relocated our offices in Mexico and Malaysia. The
investment in Mexico will facilitate further growth in this active
market whilst the new Malaysian office will allow us to serve the
local market better and grow our valve automation and retrofit
sales. As planned, Rotork expanded into a new office, workshop and
production storage facility near its headquarters in Bath, UK.
During 2014 we plan to develop our international network further
and broaden the range of products offered through our existing
facilities.
Product development remains an important part of our growth
strategy and 2013 saw the continued development of our IQ3 and CMA
product ranges, with the full range of sizes and options becoming
available. In 2014 we look forward to continuing to launch
innovative new products.
Rotork Fluid Systems
GBPm 2013 2012 Change OCC change
-------------------- ------ ------ -------- -----------
Revenue 187.0 160.9 +16.2% +11.7%
-------------------- ------ ------ -------- -----------
Adjusted operating
profit 31.0 24.6 +25.9% +23.5%
-------------------- ------ ------ -------- -----------
Adjusted operating
margin 16.6% 15.3% +130bps +160bps
-------------------- ------ ------ -------- -----------
Rotork Fluid Systems (RFS) had another strong year with
double-digit growth in order intake and revenue. We also saw
adjusted* operating margin increase by 130 basis points to 16.6% in
the year, reflecting the benefit of operational gearing and our
focus on cost management.
RFS manufactures a wide range of pneumatic, hydraulic and
electro-hydraulic actuators mainly for the oil & gas market.
Oil & gas covers a wide range of applications and RFS benefited
from strong demand from LNG, gas and liquids pipelines, gas storage
and off-shore projects during the year. Our diverse product
portfolio and engineering capability enables us to participate in
the upstream, mid-stream and downstream markets.
Revenue grew 16.2% to GBP187.0m, a new record, with the second
half accounting for 52% of annual revenue. This weighting was in
line with the Group as a whole and less pronounced than the 56%
second half weighting in the division last year. Removing the small
contribution from the GTA acquisition and the positive currency
impact, revenue grew 11.7%. Order intake grew at a slower rate than
revenue, up 12.2%, but still exceeded revenue which led to a 14.3%
increase in order book during the year to GBP76.0m. Adjusted*
operating profit of GBP31.0m was 25.9% higher than the prior year
and set a record operating margin of 16.6%, a 130 basis point
improvement on 2012. Both currency and acquisitions were a
headwind, so on an organic constant currency basis adjusted
operating profit margins were 16.9%. The positive impact of
operational gearing and improvements to material costs were the
main contributors to the further improvement in margins.
Oil & gas remained the largest end-market for RFS with
revenue from this segment increasing 21%. This represented 77% of
the division's revenue in the year but was spread across many
aspects of the oil & gas market, ranging from wellhead skids in
Australia in upstream, to safety systems in tank storage
applications in downstream. We also saw good increases in our sales
destined for the water, industrial and mining markets, albeit
slower than the rate of growth in oil & gas.
In August 2013 we acquired the GTA Group, comprising G.T.
Attuatori Italia S.r.l. based in Milan, Italy, together with G.T.
Attuatori Europe GmbH and Max Process GmbH, both of which are in
Germany. This acquisition extends our product portfolio with a
small rack and pinion actuator which is often sold in petrochemical
and industrial applications. Since the acquisition we have focused
our attention on improving GTA's supply chain and sales channels
and we anticipate that we will see the benefit of this in 2014 and
beyond.
We have continued to integrate K-Tork, based in Dallas, USA,
into our business and are focused on developing its products to
cover a wider range of sizes and options. This is in conjunction
with a review of component sourcing to take advantage of our
international supply chain. K-Tork's products are often used in
power, water and the process control market and will further
diversify RFS's end market exposure.
Geographically, we saw strong performances from around the world
with the biggest improvements in Italy, Russia, Spain, Singapore
and Australia. Australia benefited in particular from coal seam gas
investment. Mexico continues to be an important market following
the large pipeline projects we won a few years ago and we have
grown our service business significantly. In 2011 we acquired full
ownership of the Mexican business and in 2013 we opened a new
Centre of Excellence (CoE) in Mexico to meet the increasing demands
of our local customers. The CoEs provide valve automation
facilities for factory fitting, testing, panel build, actuator
overhaul capabilities and other local support.
To ensure that we continue to provide support to our customers
locally we made further investment in our facilities, with several
office moves and expansions during the year. The Middle East
workshop was opened in April and a new Malaysian facility opened in
August. We also expanded our facilities in Brazil and Mexico.
Increasingly the market is requiring safety systems as standard
in hazardous applications and we have made considerable investment
in R&D in this area of the business. We have continued to
develop our existing product portfolio and have four products
planned to launch in 2014, including a new product from Rotork
Hiller, our US-based company focused on the nuclear power
industry.
Rotork Gears
GBPm 2013 2012 Change OCC change
-------------------- ------ ------ ------- -----------
Revenue 56.0 52.9 +6.0% +2.2%
-------------------- ------ ------ ------- -----------
Adjusted operating
profit 13.0 12.1 +7.3% +4.9%
-------------------- ------ ------ ------- -----------
Adjusted operating
margin 23.1% 22.9% +20bps +60bps
-------------------- ------ ------ ------- -----------
For the first time sales to third party customers accounted for
over 80% of revenue, reflecting the success of our strategy of
expanding our international sales presence and reducing reliance on
intragroup sales.
The Gears division manufactures manual and motorised gearboxes
and accessories. There are two sales channels for gearboxes and
accessories; sales made to a Rotork division or to a third party
valvemaker. A gearbox is effectively a component of the valve and,
with the majority of valves still being manually operated, most
require a gearbox to provide the necessary mechanical advantage to
operate the valve. Each valvemaker therefore requires a supply of
gearboxes and whilst some make their own, our sales proposition is
attractive. We provide high quality, reliable gearboxes which we
are able to support throughout the world. Our scale and
international supply chain allows us to offer the valvemaker an
outsourced solution at a competitive price.
Positive performances were seen in the year from our businesses
in Italy, The Netherlands and Spain. The market in India also
improved as we strengthened our local manufacturing capabilities in
the year. The establishment of our Indian Gears manufacturing plant
has strengthened our international component supply chain.
Order intake ended the year ahead of 2012, up 5.1% in total, or
1.5% on an organic constant currency basis. Revenue increased by
6.0% to GBP56.0m resulting in the order book reducing by 0.9%
during the year. However, without the positive impacts of Renfro
and currency, revenue growth was 2.2%. Adjusted* operating profit
increased by 7.3% to GBP13.0m and the margin improved 20 basis
points to 23.1%. Whilst product mix was positive in the Italian
factory it was negative in China but, by careful management of the
cost base, net margins improved slightly. Currency and acquisitions
were both slightly dilutive to adjusted operating margins, so with
organic constant currency profit growth of 4.9%, the margin was 60
basis points higher at 23.5%.
Rotork Valvekits is our valve adaption business based in the UK.
As part of our strategy to expand this product offering
internationally, in August we acquired Renfro Associates Inc., a
valve adaption and mounting business based in Broken Arrow, USA.
This long established business has an excellent reputation for
delivering high quality product and service to its customers and
provides us with the opportunity to replicate our successful UK
business model across the USA.
During 2013 we expanded our manufacturing facilities in
Shanghai, China and in Houston, USA. The extra capacity in both
locations will enable us to service the local markets more
efficiently. 2014 will see the completion of the new Leeds facility
and the businesses there relocate into a modern manufacturing
plant.
Sales into the various oil & gas markets remained constant
at 52% of Gears' revenue this year but within this we saw growth in
sales of subsea gearboxes. These heavily engineered gearboxes are
manufactured in Italy close to the valvemakers. Like other
divisions, we saw a reduction in sales into power but this was
offset by growth in the water market.
In 2012 we created a new product introduction team dedicated to
developing new products. During 2013 we brought to market a range
of new products including two manual gearboxes and a motorised
gearbox and we have continued to offer project specific subsea
product solutions. A new multi-turn gearbox has been specifically
designed to comply with GOST, a standard for valves in the oil,
gas, power generation and utility industries throughout Russia and
the neighbouring countries. We are continuing to invest in Research
& Development in terms of recruiting additional engineers and
in our testing capability to improve further our ability to bring
new products to market. The new FB fire protection series of
gearboxes also enables us to access a market that we have yet to
address.
Rotork Instruments
GBPm 2013 2012 Change OCC change
-------------------- ------ ------ ------- -----------
Revenue 24.9 16.4 +51.8% +16.6%
-------------------- ------ ------ ------- -----------
Adjusted operating
profit 7.8 5.1 +53.5% +20.0%
-------------------- ------ ------ ------- -----------
Adjusted operating
margin 31.4% 31.1% +30bps +90bps
-------------------- ------ ------ ------- -----------
The first full year contribution from Soldo has provided a solid
platform for growth for the Instruments division.
The Instruments division was formed in late 2011 and is Rotork's
vehicle to expand our addressable market beyond actuators into the
wider flow control market. The division now comprises two companies
both of which make products that measure or control flow and
pressure. Rotork Fairchild, which is based in Winston-Salem, USA,
manufactures precision pneumatic and electro-pneumatic control
products whilst Soldo, based in Desenzano, Italy, is a switchbox
manufacturer. These products can be used in conjunction with
actuators but are also used in other end markets, further
broadening our end-market exposure as we implement our strategy of
organic as well as acquisition-led growth.
With a first full year contribution from Soldo, revenue grew
51.8% to GBP24.9m, or 16.6% on a like for like basis. Investment in
product development and the sales infrastructure continued through
the year and the increase in revenue supported a 30 basis point
rise in adjusted operating profit margin to 31.4%. The GBP7.8m
adjusted* operating profit is 53.5% higher than 2012 or 20.0%
higher on an organic constant currency basis.
Rotork Fairchild experienced good growth in North America,
Europe and Japan. Our strong performance in North America was due
to the reorganisation and strengthening of the sales team, an
improved trading environment and growth in the medical industry
sales supported by a new product introduction. North Asia performed
well with project successes in the tyre sector being one of the
highlights. Our European sales were supported by customers there
winning export projects around the world. Australia and Brazil are
less well developed markets for Fairchild, with Brazil affected by
a slower than expected pulp and paper industry. Both will be focus
markets for the coming year.
The Instruments division has the most diversified end market
exposure of all Rotork's divisions. 34% of sales are now into oil
& gas and this has increased with the addition of Soldo which
has a greater oil & gas focus than the Fairchild products.
Water and power accounted for 5% between them with industrial and
mining a further 18%. The balance fell into our "Other" category
reflecting the fact that pneumatic control is used in a wide range
of industries.
During the year we moved a number of offices to take advantage
of improved facilities, foster closer working relationships with
other divisions and control costs. We moved the Soldo USA office
from Cincinnati to Winston-Salem, where it has been a successfully
integrated into the Fairchild operation. In Brazil we moved
Fairchild into the Rotork Sao Paulo facility and in China the
Fairchild office in Chengdu moved to a new building where the
Rotork sales team in Chengdu has now joined them. In 2014 we have
already merged the Soldo Asia business into Rotork Singapore and
will continue to look for similar opportunities in other parts of
the world.
Rotork Instruments operates an asset-light business model and
has outsourced the majority of component manufacture. Rotork's
international supply chain provides opportunities to support our
ongoing material cost management programme. In 2013 there were a
number of products launched for Rotork Fairchild whereas the focus
for Soldo was on integration. New products are currently under
development in both companies and we will see several of these
launched during 2014.
There are further opportunities with both product lines to grow
sales organically using the Rotork global sales offices. Whilst the
route to market is typically not the same as the other divisions,
being more distribution sales than project sales, the sales offices
provide a base from which to enter a new territory. Growth will
also be through acquisitions as we look to build the product
portfolio with other devices used in flow control which share the
same technologies, routes to market, customers or end markets.
Research and Development
Innovation remains a core driver of our growth and 2013 has seen
product launches or range expansions in all divisions. In Controls
we extended the range of IQ3 sizes and options available and
continued the process of certifying the product for more of the
markets we sell into. In Fluid Systems the second phase of the
Gas-over-oil product range was launched and both Gears and
Instruments launched a number of new ranges.
We have continued to add to the number of engineers who are
focused on product development and we have restructured our
electronics development team to reflect the fact that this resource
supports all of the divisions rather than just Controls. Our spend
on R&D increased once again this year, up 13.4% to GBP8.4m,
despite the investment in IQ3 now being past the peak spend prior
to initial launch. The initiatives currently being worked on will
support product launches in 2014 and beyond.
Rotork Site Services
RSS predominately operates within Rotork Controls and Rotork
Fluid Systems and we have built on this position to provide a
standard approach to how we service customers of all our products
and divisions. The team focuses on their ability to provide service
and support in virtually every country in the world through
preventative maintenance contracts, onsite and workshop service and
retrofit solutions.
Our flow control products are often required to support
operations in some of the most remote and challenging environments
and our customers demand reliable products. Should they require
support, local service is critical. To extend our current offering
we are launching a new Client Support Programme in 2014 that will
offer a tailor-made service that precisely fits the specific needs
of every customer.
The performance of RSS is measured against key metrics including
the number of service engineers. In 2013 we increased the number of
service engineers by 9% so that we now have over 350 service
employees around the world. The number of actuators under some form
of preventative maintenance contract is greater than 120,000.
Acquisitions
Rotork has grown through a combination of organic expansion and
acquisitions. Acquisitions are made on the basis that they will
provide a product we currently don't have, improve our access to a
geographic or end-user market or some combination of these
objectives. During the year we completed four acquisitions for a
total consideration of GBP48.0m. Schischek, acquired in January
2013 for GBP35.0m, was the largest of these with the three other
mid-year acquisitions of Flowco, GTA and Renfro costing a combined
GBP13.0m. Taking all four acquisitions together, GBP24.2m of the
consideration was attributed to intangible assets which will be
amortised and GBP24.9m is goodwill which will be subject to an
annual impairment review.
The increased number and value of acquisitions this year led to
a rise in the amortisation charge related to acquired intangible
assets to GBP12.1m (2012: GBP7.4m). With the acquisitions taking
place throughout the year, and Soldo acquired in November 2012, in
order to adjust the income statement to show a like-for-like period
for each acquisition, 2013 revenue has to be reduced by GBP25.2m
and adjusted* operating profit by GBP7.3m. The profit margin in the
acquired business was slightly accretive in aggregate, at 28.9%,
with Schischek the key contributor to this.
Currency
The weakness of sterling in 2013 compared with 2012 resulted in
a significant tailwind for our 2013 results. The tailwind was very
much stronger in the first half of the year but sterling
strengthened appreciably in the second half, particularly against
the Australian dollar, Indian rupee and South African rand. Looking
at the constant currency adjustment to revenue, of the GBP9.1m full
year impact, GBP7.2m was felt in the first half with only the
remaining GBP1.9m in the second half of the year. US dollar and
related currencies represented around 40% of Group sales and are
our largest non-sterling currency flows. The largest influence on
the reduced second half currency tailwind was the US dollar moving
from 3% stronger than sterling in the first half compared with 2012
to only 1% stronger in the second half. The euro remained 4%
stronger in both halves of the year and with a greater
euro-denominated sales base, Fluid Systems and Gears therefore
benefited from the positive currency in the second half which
Controls and Instruments did not.
These currency impacts were a mix of both translation and
transaction and the GBP1.0m increase in operating profit was net of
any cost / benefit of sourcing components from outside the
respective factories' home country. Whilst we manufacture and sell
from offices based in 34 countries, with 19 different currencies,
and source components from a wide geographic footprint, the Group
is still a net seller of euros and US dollars. It is the net sale
of these currencies which we principally address through our
hedging policy, covering up to 75% of trading transactions in the
next 12 months and up to 50% between 12 and 24 months.
In order to estimate the impact of currency, at the current
exchange rates we consider the effect of a 1 cent movement versus
sterling. For euro a 1 cent movement now results in a GBP325,000
adjustment to profit and for US dollar a GBP450,000 adjustment.
Return on capital employed (ROCE)
Our asset-light business model and high profit margins mean
Rotork generates high ROCE. Our definition of ROCE is based on
adjusted* operating profit as a return on the average net assets
excluding net cash and the pension scheme liability net of the
related deferred tax. This means that as we make acquisitions our
capital base grows with intangible assets and goodwill being
recognised. During the year intangibles and goodwill increased by
GBP37.2m in total which, after allowing for the related deferred
tax, accounts for approximately half of the increase in capital
employed which rose 21.4% to GBP281.0m. As a result of this, ROCE
reduced to 59.1% despite the improved profit margin and growth in
revenue this year.
Taxation
The Group's effective tax rate fell from 28.1% to 27.9%. This is
a blended rate from the 25 countries in which we currently pay tax
and is affected by the mix of where our taxable profits are
generated, as well as changes to the tax rates within those
jurisdictions. We continue to see a general reduction in the rate
of corporation tax in a number of jurisdictions where we operate,
including the UK. Our approach to tax continues to be to operate on
the basis of full disclosure and co-operation with all tax
authorities and, where possible, to mitigate the burden of tax
within the local legislation.
Cash generation
Net cash balances finished the year at GBP68.9m, GBP9.0m higher
than the start of the year. The three largest categories of cash
expenditure were: GBP43.2m on acquisitions, GBP39.9m of tax paid
and GBP38.7m of dividends paid. These were all higher than the
previous year but the higher value of acquisitions, more than
double the GBP20.7m spent in 2012, represented the largest
increase. Capital expenditure of GBP10.4m was GBP2.2m lower than
the prior year, partly due to rescheduling of the investment in the
new Leeds factory, with the majority of the fit out spend deferred
to 2014.
Our cash generation KPI, which compares operating cash
generation with adjusted operating profit, improved again this year
to 99.6%(2012: 95.4%). Control of working capital is key to
improving this measure and working capital has reduced as a
function of revenue in the year despite a weighting of revenue to
the fourth quarter. Inventory, trade receivables and trade payables
have all reduced as a function of revenue with net working capital
as a whole falling from 25.5% of revenue to 24.7%. We measure our
performance for trade receivable collections using days' sales
outstanding and have reduced this a further day this year to 56
days.
Peter France
Chief Executive
3 March 2014
* References to adjusted profit throughout this document are
defined as the IFRS profit, whether operating profit or profit
before tax, with GBP12.1m (2012: GBP7.4m) of amortisation of
acquired intangibles added back.
Consolidated income statement
For the year ended 31 December 2013
2013 2012
Notes GBP000 GBP000
------------------------------------------- ----- --------- ---------
Revenue 2 578,440 511,747
Cost of sales (304,066) (272,199)
------------------------------------------- ----- --------- ---------
Gross profit 274,374 239,548
Other income 206 908
Distribution costs (5,623) (4,214)
Administrative expenses (129,576) (111,743)
Other expenses (116) (32)
------------------------------------------- ----- --------- ---------
Adjusted operating profits 151,412 131,866
Amortisation of acquired intangible assets (12,147) (7,399)
------------------------------------------- ----- --------- ---------
Operating profit 2 139,265 124,467
Net finance expense 4 (1,268) (273)
------------------------------------------- ----- --------- ---------
Profit before tax 137,997 124,194
Income tax expense 5 (38,488) (34,879)
------------------------------------------- ----- --------- ---------
Profit for the year 99,509 89,315
------------------------------------------- ----- --------- ---------
Basic earnings per share 12 114.8p 103.1p
Adjusted basic earnings per share 12 124.9p 109.3p
Diluted earnings per share 12 114.3p 102.6p
Adjusted diluted earnings per share 12 124.3p 108.8p
------------------------------------------- ----- --------- ---------
Consolidated statement of comprehensive income
For the year ended 31 December 2013
2013 2012
GBP000 GBP000
---------------------------------------------------- ------- --------
Profit for the year 99,509 89,315
---------------------------------------------------- ------- --------
Other comprehensive income
Items that may be subsequently reclassified to the
income statement:
Foreign exchange translation differences (4,981) (3,967)
Effective portion of changes in fair value of cash
flow hedges net of tax 1,274 399
Items that are not subsequently reclassified to the
income statement:
Actuarial gain / (loss) in pension scheme net of
tax 5,528 (8,598)
---------------------------------------------------- ------- --------
Income and expenses recognised directly in equity 1,821 (12,166)
Total comprehensive income for the year 101,330 77,149
---------------------------------------------------- ------- --------
Consolidated balance sheet
At 31 December 2013
2013 2012
Notes GBP000 GBP000
-------------------------------------- ----- ------- -------
Non-current assets
Property, plant and equipment 45,871 38,445
Goodwill 6 105,150 80,729
Intangible assets 7 53,481 40,743
Derivative financial instruments 804 -
Deferred tax assets 11,778 12,984
Other receivables 9 1,532 1,674
-------------------------------------- ----- ------- -------
Total non-current assets 218,616 174,575
Current assets
Inventories 8 75,081 71,100
Trade receivables 9 105,976 95,822
Current tax 9 1,145 1,946
Derivative financial instruments 2,933 2,254
Other receivables 9 12,152 9,662
Cash and cash equivalents 10 68,873 59,868
-------------------------------------- ----- ------- -------
Total current assets 266,160 240,652
-------------------------------------- ----- ------- -------
Total assets 484,776 415,227
-------------------------------------- ----- ------- -------
Equity
Issued equity capital 11 4,344 4,340
Share premium 8,840 8,258
Reserves 6,649 10,356
Retained earnings 312,246 246,369
-------------------------------------- ----- ------- -------
Total equity 332,079 269,323
-------------------------------------- ----- ------- -------
Non-current liabilities
Interest bearing loans and borrowings 1,678 116
Employee benefits 13 22,705 32,060
Deferred tax liabilities 16,920 13,488
Provisions 14 2,628 2,701
-------------------------------------- ----- ------- -------
Total non-current liabilities 43,931 48,365
Current liabilities
Interest bearing loans and borrowings 532 56
Trade payables 15 38,019 36,355
Employee benefits 13 17,479 14,065
Current tax 15 14,836 11,143
Derivative financial instruments 32 96
Other payables 15 31,002 31,889
Provisions 14 6,866 3,935
-------------------------------------- ----- ------- -------
Total current liabilities 108,766 97,539
-------------------------------------- ----- ------- -------
Total liabilities 152,697 145,904
-------------------------------------- ----- ------- -------
Total equity and liabilities 484,776 415,227
-------------------------------------- ----- ------- -------
Consolidated statement of changes in equity
Issued Capital
equity Share Translation redemption Hedging Retained
capital premium reserve reserve reserve earnings Total
------------------------------------- -------- -------- ----------- ----------- -------- --------- --------
Balance at 31 December 2011 4,338 7,835 11,616 1,644 664 198,072 224,169
Profit for the year - - - - - 89,315 89,315
Other comprehensive income
------------------------------------- -------- -------- ----------- ----------- -------- --------- --------
Foreign exchange translation
differences - - (3,967) - - - (3,967)
Effective portion of changes
in fair value of cash
flow hedges - - - - 539 - 539
Actuarial loss on defined benefit
pension plans - - - - - (9,912) (9,912)
Tax in other comprehensive income - - - - (140) 1,314 1,174
Total other comprehensive income - - (3,967) - 399 (8,598) (12,166)
------------------------------------- -------- -------- ----------- ----------- -------- --------- --------
Total comprehensive income - - (3,967) - 399 80,717 77,149
Transactions with owners, recorded
directly in equity
Equity settled share-based payments
transactions - - - - - 1,117 1,117
Tax on equity settled share-based
payment transactions - - - - - 102 102
Share options exercised by employees 2 423 - - - - 425
Own ordinary shares acquired - - - - - (2,850) (2,850)
Own ordinary shares awarded
under share schemes - - - - - 3,135 3,135
Dividends - - - - - (33,924) (33,924)
------------------------------------- -------- -------- ----------- ----------- -------- --------- --------
Balance at 31 December 2012 4,340 8,258 7,649 1,644 1,063 246,369 269,323
Profit for the year - - - - - 99,509 99,509
Other comprehensive income
------------------------------------- -------- -------- ----------- ----------- -------- --------- --------
Foreign exchange translation
differences - - (4,981) - - - (4,981)
Effective portion of changes
in fair value of cash
flow hedges - - - - 1,598 - 1,598
Actuarial loss on defined benefit
pension plans - - - - - 7,669 7,669
Tax in other comprehensive income - - - - (324) (2,141) (2,465)
Total other comprehensive income - - (4,981) - 1,274 5,528 1,821
------------------------------------- -------- -------- ----------- ----------- -------- --------- --------
Total comprehensive income - - (4,981) - 1,274 105,037 101,330
Transactions with owners, recorded
directly in equity
Equity settled share-based payments
transactions - - - - - 143 143
Tax on equity settled share-based
payment transactions - - - - - 632 632
Share options exercised by employees 4 582 - - - - 586
Own ordinary shares acquired - - - - - (5,601) (5,601)
Own ordinary shares awarded
under share schemes - - - - - 4,401 4,401
Dividends - - - - - (38,735) (38,735)
------------------------------------- -------- -------- ----------- ----------- -------- --------- --------
Balance at 31 December 2013 4,344 8,840 2,668 1,644 2,337 312,246 332,079
------------------------------------- -------- -------- ----------- ----------- -------- --------- --------
Detailed explanations for equity capital, the translation
reserve, capital redemption reserve and hedging reserve can be seen
in note 11.
Consolidated statement of cash flows
For the year ended 31 December 2013
2013 2013 2012 2012
Notes GBP000 GBP000 GBP000 GBP000
------------------------------------------------ ----- -------- -------- -------- --------
Cash flows from operating activities
Profit for the year 99,509 89,315
Adjustments for:
Amortisation of intangibles 12,147 7,399
Amortisation of development costs 1,214 924
Depreciation 6,801 5,452
Equity settled share-based payment expense 2,178 2,030
Profit on sale of property, plant and equipment (25) (859)
Net finance expense 1,268 273
Income tax expense 38,488 34,879
------------------------------------------------ ----- -------- -------- -------- --------
161,580 139,413
Increase in inventories (1,740) (9,474)
Increase in trade and other receivables (10,786) (2,220)
Decrease in trade and other payables (1,778) (3,341)
Difference between pension charge and cash
contribution (534) (7,211)
Increase / (decrease) in provisions 863 (264)
Increase in other employee benefits 2,621 1,711
------------------------------------------------ ----- -------- -------- -------- --------
150,226 118,614
Income taxes paid (39,866) (37,641)
------------------------------------------------ ----- -------- -------- -------- --------
Cash flows from operating activities 110,360 80,973
Investing activities
Purchase of property, plant and equipment (10,419) (12,564)
Development costs capitalised (2,033) (2,075)
Sale of property, plant and equipment 159 1,007
Acquisition of businesses, net of cash
acquired 3 (43,235) (20,674)
Contingent consideration paid (250) (200)
Interest received 917 623
------------------------------------------------ ----- -------- -------- -------- --------
Cash flows from investing activities (54,861) (33,883)
Financing activities
Issue of ordinary share capital 586 425
Purchase of ordinary share capital (5,601) (2,850)
Interest paid (653) (163)
Repayment of amounts borrowed (618) (64)
Repayment of finance lease liabilities (34) (68)
Dividends paid on ordinary shares (38,735) (33,924)
------------------------------------------------ ----- -------- -------- -------- --------
Cash flows from financing activities (45,055) (36,644)
------------------------------------------------ ----- -------- -------- -------- --------
Increase in cash and cash equivalents 10,444 10,446
Cash and cash equivalents at 1 January 59,868 48,519
Effect of exchange rate fluctuations on
cash held (1,439) 903
------------------------------------------------ ----- -------- -------- -------- --------
Cash and cash equivalents at 31 December 10 68,873 59,868
------------------------------------------------ ----- -------- -------- -------- --------
Notes to the Financial Statements
For the year ended 31 December 2013
Except where indicated, values in these notes are in GBP000.
Rotork plc is a company domiciled in England. The consolidated
financial statements of the Company for the year ended 31 December
2013 comprise the Company and its subsidiaries (together referred
to as the 'Group').
1. Accounting policies
Basis of preparation
The consolidated financial statements of Rotork plc have been
prepared and approved by the directors in accordance with
International Financial Reporting Standards as adopted by the
European Union (IFRSs as adopted by the EU), IFRIC Interpretations
and the Companies Act 2006 applicable to companies reporting under
IFRS. The consolidated financial statements have been prepared
under the historical cost convention subject to the items referred
to in the derivative financial instruments accounting policy
below.
New accounting standards and interpretations
The amendments to IAS19 Employee benefits have been applied from
1 January 2013. The principal change relates to the requirement to
use the schemes' discount rate to calculate the return on assets
rather than using a rate of return appropriate to the various asset
classes.
The amended standard also requires administration costs to be
recognised separately from the current service cost in the income
statement as they are incurred. Due to the Group already expensing
administration costs as they are incurred the current service cost
has been split to separately disclose the administration cost
comparative.
The application of the amended standard in the 2012 financial
year would have increased the net pension interest cost by
GBP588,000 from GBP390,000 to GBP978,000, reducing the pre-tax
profit by GBP588,000. The impact on the 2012 basic earnings per
share would be a reduction of 0.5p to 102.6p. As a result of the
adjustments not being material to the income statement, balance
sheet or shareholders' equity prior year balances have not been
restated.
The following standards and amendments have also been applied
from 1 January 2013:
-- IFRS 10 Consolidated Financial Statements
-- IFRS 11 Joint Arrangements
-- IFRS 12 Disclosure of Interests in Other Entities
-- IFRS 13 Fair Value Measurement
-- IAS 1 Presentation of Financial Statements(amendments)
Application of these standards and amendments has not had any
material impact on the disclosures, net assets or results of the
Group.
Recent accounting developments
IFRS 9 Financial Instruments has been issued but is not yet
effective and has not been adopted as application was not mandatory
for the year. The directors anticipate that the adoption of this
standard will not have a material impact on the disclosures, net
assets or results of the Group.
Going concern
After making enquiries, the directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. For this reason,
they continue to adopt the going concern basis in preparing the
financial statements. In forming this view, the directors have
considered trading and cash flow forecasts, financial commitments,
the significant order book with customers spread across different
geographic areas and industries and the significant net cash
position.
Consolidation
The consolidated financial statements incorporate the financial
statements of the Company and its subsidiaries for the year to 31
December 2013. The financial statements of subsidiaries are
included in the consolidated financial statements from the date
that control commences until the date control ceases. Intra-group
balances and any unrealised gains or losses or income and expenses
arising from intra-group transactions are eliminated in preparing
the consolidated financial statements.
Status of this preliminary announcement
The financial information contained in this preliminary
announcement does not constitute the Company's statutory accounts
for the years ended 31 December 2013 or 2012. Statutory accounts
for 2012, which were prepared under International Financial
Reporting Standards as adopted by the EU, have been delivered to
the registrar of companies, and those for 2013 will be delivered in
due course. The auditors have reported on those accounts; their
reports were (i) unqualified, (ii) did not include a reference to
any matters to which the auditors drew attention by way of emphasis
without qualifying their report and (iii) did not contain a
statement under section 498 (2) or (3) of the Companies Act 2006.
Full financial statements for the year ended 31 December 2013, will
shortly be posted to shareholders, and after adoption at the Annual
General Meeting on 25 April 2014 will be delivered to the
registrar.
2. Operating segments
The Group has chosen to organise the management and financial
structure by the grouping of related products. The four
identifiable operating segments where the financial and operating
performance is reviewed monthly by the chief operating decision
maker are as follows:
Controls - the design, manufacture and sale of electric valve
actuators
Fluid Systems - the design, manufacture and sale of pneumatic
and hydraulic valve actuators
Gears - the design, manufacture and sale of gearboxes, adaption
and ancillaries for the valve industry
Instruments - the manufacture of high precision pneumatic
controls and power transmission products for a wide range of
industries
Unallocated expenses comprise corporate expenses.
Geographic analysis
Rotork has a worldwide presence in all four operating segments
through its subsidiary selling offices and through an agency
network. A full list of locations can be found at
www.rotork.com.
Analysis by operating segment:
Fluid
Controls Systems Gears Instruments Elimination Unallocated Group
2013 2013 2013 2013 2013 2013 2013
------------------------------------- -------- -------- ------ ----------- ----------- ----------- --------
Revenue from external customers 321,902 186,969 45,353 24,216 - - 578,440
Inter segment revenue - - 10,682 706 (11,388) - -
------------------------------------- -------- -------- ------ ----------- ----------- ----------- --------
Total revenue 321,902 186,969 56,035 24,922 (11,388) - 578,440
------------------------------------- -------- -------- ------ ----------- ----------- ----------- --------
Adjusted operating profit 105,472 31,010 12,972 7,833 - (5,875) 151,412
Amortisation of acquired intangibles (4,363) (1,920) (403) (5,461) - - (12,147)
------------------------------------- -------- -------- ------ ----------- ----------- ----------- --------
Operating profit 101,109 29,090 12,569 2,372 - (5,875) 139,265
------------------------------------- -------- -------- ------ ----------- ----------- ----------- --------
Net finance expense (1,268)
Income tax expense (38,488)
------------------------------------- -------- -------- ------ ----------- ----------- ----------- --------
Profit for the year 99,509
------------------------------------- -------- -------- ------ ----------- ----------- ----------- --------
Fluid
Controls Systems Gears Instruments Elimination Unallocated Group
2012 2012 2012 2012 2012 2012 2012
------------------------------------- -------- -------- ------ ----------- ----------- ----------- --------
Revenue from external customers 293,342 160,946 41,039 16,420 - - 511,747
Inter segment revenue - - 11,844 - (11,844) - -
------------------------------------- -------- -------- ------ ----------- ----------- ----------- --------
Total revenue 293,342 160,946 52,883 16,420 (11,844) - 511,747
------------------------------------- -------- -------- ------ ----------- ----------- ----------- --------
Adjusted operating profit 94,773 24,628 12,088 5,103 - (4,726) 131,866
Amortisation of acquired intangibles (733) (2,249) (218) (4,199) - - (7,399)
------------------------------------- -------- -------- ------ ----------- ----------- ----------- --------
Operating profit 94,040 22,379 11,870 904 - (4,726) 124,467
------------------------------------- -------- -------- ------ ----------- ----------- ----------- --------
Net finance expense (273)
Income tax expense (34,879)
------------------------------------- -------- -------- ------ ----------- ----------- ----------- --------
Profit for the year 89,315
------------------------------------- -------- -------- ------ ----------- ----------- ----------- --------
Fluid
Controls Systems Gears Instruments Unallocated Group
2013 2013 2013 2013 2013 2013
------------------------------------------- -------- -------- ----- ----------- ----------- -------
Depreciation 4,353 1,692 427 329 - 6,801
Amortisation:
* Other intangibles 4,363 1,920 403 5,461 - 12,147
* Development costs 1,193 9 12 - - 1,214
Non-cash items : equity settled
share-based payments 881 427 271 35 563 2,177
Net financing expense - - - - (1,268) (1,268)
Acquired as part of business combinations:
* Goodwill 19,766 3,688 1,398 - - 24,852
* Intangible assets 19,548 3,277 1,413 - - 24,238
Capital expenditure 7,108 2,350 581 281 - 10,320
------------------------------------------- -------- -------- ----- ----------- ----------- -------
Fluid
Controls Systems Gears Instruments Unallocated Group
2012 2012 2012 2012 2012 2012
------------------------------------------- -------- -------- ----- ----------- ----------- ------
Depreciation 3,708 1,258 251 235 - 5,452
Amortisation:
* Other intangibles 733 2,249 218 4,199 - 7,399
* Development costs 924 - - - - 924
Non-cash items : equity settled
share-based payments 698 396 271 - 665 2,030
Net financing expense - - - - (273) (273)
Acquired as part of business combinations:
* Goodwill - - - 13,952 - 13,952
* Intangible assets - - - 9,668 - 9,668
Capital expenditure 8,656 2,113 1,295 372 - 12,436
------------------------------------------- -------- -------- ----- ----------- ----------- ------
Balance sheets are reviewed by operating subsidiary and
operating segment balance sheets are not prepared, as such no
further analysis of operating segments assets and liabilities are
presented.
Geographical analysis:
Rest of Other Rest of
UK Europe USA Americas World Group
2013 2013 2013 2013 2013 2013
------------------------------------- ------ ------- ------- --------- ------- -------
Revenue from external customers
by location of customer 31,765 180,865 117,346 59,112 189,352 578,440
Non-current assets:
* Goodwill 5,691 55,205 40,154 770 3,330 105,150
* Intangible assets 5,538 27,317 20,351 - 275 53,481
* Property, plant and equipment 16,304 15,176 6,706 768 6,917 45,871
------------------------------------- ------ ------- ------- --------- ------- -------
Rest of Other Rest of
UK Europe USA Americas World Group
2012 2012 2012 2012 2012 2012
------------------------------------- ------ ------- ------- --------- ------- -------
Revenue from external customers
by location of customer 28,448 156,525 106,027 53,323 167,424 511,747
Non-current assets:
* Goodwill 5,009 31,925 39,603 776 3,416 80,729
* Intangible assets 4,496 11,107 24,288 506 346 40,743
* Property, plant and equipment 13,944 10,529 6,005 622 7,345 38,445
------------------------------------- ------ ------- ------- --------- ------- -------
3. Acquisitions
2013
i) Schischek
On 15 January 2013 the Group acquired 100% of the share capital
of the Schischek Group of companies (Schischek) for GBP35,030,000.
Schischek is a leader in the design, manufacture and sale of
explosion-proof electric actuators, sensors, transmitters and
controller products for a wide range of industries, based in
Langenzenn, Bavaria, Germany. The acquired business is reported
within the Controls division. In the fifty weeks to 31 December
2013 Schischek contributed GBP15,109,000 to Group revenue and
GBP4,979,000 to consolidated operating profit before amortisation.
The amortisation charge in the fifty week period from the acquired
intangible assets was GBP3,322,000. If the acquisition had occurred
on 1 January 2013 the contribution made by the business would not
be materially different. It is not practicable to disclose profit
before tax or profit attributable to equity shareholders as the
Group manages its Treasury function on a Group basis.
ii) Other acquisitions
On 2 August 2013 the Group acquired 100% of the share capital
of:
- the GTA Group (GTA) for GBP8,064,000. GTA is a leading
manufacturer of rack and pinion pneumatic valve actuators and
is
principally based in Milan, Italy. The acquired businesses are
reported within the Rotork Fluid System division.
- Renfro (Renfro) for GBP2,786,000. Renfro is a valve adaptation
and accessories business based in Broken Arrow, Oaklahoma, USA. The
acquired business is reported within the Rotork Gears division.
On 5 July 2013 the Group acquired 100% of the share capital of
Flowco Limited (Flowco) based near Bath, UK for a consideration of
GBP2,151,000. Flowco is a valve and actuator service company and is
reported as part of the Controls division.
In the period from acquisition to 31 December 2013 the
businesses contributed GBP4,894,000 to Group revenue and GBP445,000
to consolidated operating profit before amortisation. The
amortisation charge in respect of these acquisitions during the
year was GBP896,000.
If these other acquisitions had occurred on 1 January 2013 the
businesses would have contributed GBP11,573,000 to Group revenue
and GBP1,178,000 to Group operating profit. It is not practicable
to disclose profit before tax or profit attributable to equity
shareholders as the Group manages its Treasury function on a Group
basis.
iii) Acquisitions fair value table
The four acquisitions had the following effect on the Group's
assets and liabilities.
Schischek Other acquisitions Total
----------------------------- ----------------------------- -------
Book Fair Book Fair Fair
value Adjustments value value Adjustments value value
------------------------------ ------- ----------- ------- ------- ----------- ------- -------
Non-current assets
Property, plant and equipment 3,238 - 3,238 1,745 (20) 1,725 4,963
Intangible assets - 18,541 18,541 - 5,697 5,697 24,238
Current assets
Inventory 1,353 (135) 1,218 3,198 (476) 2,722 3,940
Trade and other receivables 2,197 (81) 2,116 2,508 (91) 2,417 4,533
Cash 1,610 - 1,610 1,211 - 1,211 2,821
Current liabilities
Trade and other payables (2,211) - (2,211) (3,361) (142) (3,503) (5,714)
Warranty provision (97) (144) (241) - (148) (148) (389)
Corporation tax (745) (418) (1,163) (272) (157) (429) (1,592)
Loans and other borrowings (295) - (295) (840) - (840) (1,135)
Non-current liabilities
Deferred tax liability - (5,043) (5,043) (14) (1,567) (1,581) (6,624)
Loans and other borrowings (1,824) - (1,824) (38) - (38) (1,862)
------------------------------ ------- ----------- ------- ------- ----------- ------- -------
Total net assets 3,226 12,720 15,946 4,137 3,096 7,233 23,179
Goodwill 19,084 5,768 24,852
------------------------------ ------- ----------- ------- ------- ----------- ------- -------
Purchase consideration 35,030 13,001 48,031
Paid in cash 35,030 11,026 46,056
Contingent consideration - 1,975 1,975
------------------------------ ------- ----------- ------- ------- ----------- ------- -------
Purchase consideration 35,030 13,001 48,031
Purchase consideration paid
in cash 35,030 11,026 46,056
Cash held in subsidiary (1,610) (1,211) (2,821)
------------------------------ ------- ----------- ------- ------- ----------- ------- -------
Cash outflow on acquisition 33,420 9,815 43,235
------------------------------ ------- ----------- ------- ------- ----------- ------- -------
The adjustments shown in the table represent the alignment of
accounting policies of the acquired businesses to Rotork Group
policies and the fair value adjustments of the assets and
liabilities at the acquisition date of each of the businesses.
Goodwill has arisen on these acquisitions as a result of the
value attributed to staff expertise and the assembled workforce,
which did not meet the recognition criteria for an intangible
asset.
The intangible assets identified comprise customer
relationships, brands, product design patents and acquired order
books.
4. Net finance expense
Restated
Recognised in the income statement 2013 2012
------------------------------------------------- ------- --------
Interest income 917 616
Expected return on assets in the pension schemes - -
Foreign exchange gains 256 30
------------------------------------------------- ------- --------
1,173 646
------------------------------------------------- ------- --------
Interest expense (653) (162)
Interest charge on pension scheme liabilities (1,168) (390)
Foreign exchange losses (620) (367)
------------------------------------------------- ------- --------
(2,441) (919)
------------------------------------------------- ------- --------
Net Finance expense (1,268) (273)
------------------------------------------------- ------- --------
The comparative balances for expected return from pension scheme
assets have been reclassified to show a net interest charge on
pension scheme liabilities in line with the changes in IAS19 which
are explained in note1.
Recognised in equity 2013 2012
---------------------------------------------------------------- ------- -------
Effective portion of changes in fair value of cash flow
hedges 3,035 1,063
Fair value of cash flow hedges transferred to income statement (1,437) (664)
Foreign currency translation differences for foreign operations (4,981) (3,967)
---------------------------------------------------------------- ------- -------
(3,383) (3,568)
---------------------------------------------------------------- ------- -------
Recognised in:
Hedging reserve 1,598 399
Translation reserve (4,981) (3,967)
---------------------------------------------------------------- ------- -------
(3,383) (3,568)
---------------------------------------------------------------- ------- -------
5. Income tax expense
2013 2013 2012 2012
-------------------------------------------------------- ------- ------- ------- -------
Current tax:
UK corporation tax on profits for the year 7,986 9,017
Adjustment in respect of prior years 156 (295)
-------------------------------------------------------- ------- ------- ------- -------
8,142 8,722
Overseas tax on profits for the year 34,790 27,892
Adjustment in respect of prior years (59) 480
-------------------------------------------------------- ------- ------- ------- -------
34,731 28,372
-------------------------------------------------------- ------- ------- ------- -------
Total current tax 42,873 37,094
-------------------------------------------------------- ------- ------- ------- -------
Deferred tax:
Origination and reversal of other temporary differences (4,177) (2,531)
Adjustment in respect of prior years (208) 316
-------------------------------------------------------- ------- ------- ------- -------
Total deferred tax (4,385) (2,215)
-------------------------------------------------------- ------- ------- ------- -------
Total tax charge for year 38,488 34,879
-------------------------------------------------------- ------- ------- ------- -------
Effective tax rate (based on profit before tax) 27.9% 28.1%
Profit before tax 137,997 124,194
Profit before tax multiplied by standard rate
of corporation tax in
the UK of 23.25% (2012: 24.5%) 32,084 30,428
Effects of:
Different tax rates on overseas earnings 6,019 3,942
Permanent differences 497 14
Utilisation of overseas tax holidays (1) (6)
Adjustments to tax charge in respect of prior
years (111) 501
-------------------------------------------------------- ------- ------- ------- -------
Total tax charge for year 38,488 34,879
-------------------------------------------------------- ------- ------- ------- -------
A tax credit of GBP632,000 (2012: GBP102,000) in respect of
share-based payments has been recognised directly in equity in the
year.
The Group continues to expect its effective rate of corporation
tax to be higher than the standard UK rate due to higher rates of
tax in the USA, Canada, France, Germany, Italy, Japan and
India.
A credit of GBP3,611,000 (2012: GBP2,399,000) in respect of
acquired intangible asset amortisation is included in the deferred
tax credit of GBP4,385,000 (2012: GBP2,215,000).
There is an unrecognised deferred tax liability for temporary
differences associated with investments in subsidiaries. Rotork plc
controls the dividend policies of its subsidiaries and subsequently
the timing of the reversal of the temporary differences. It is not
practical to quantify the unprovided temporary differences as
acknowledged within paragraph 40 of IAS 12.
6. Goodwill
2013 2012
------------------------------------------ ------- -------
Cost
At 1 January 80,729 68,459
Acquisition through business combinations 24,852 13,952
Exchange adjustments (431) (1,682)
------------------------------------------ ------- -------
At 31 December 105,150 80,729
Provision for impairment
At 1 January and 31 December - -
------------------------------------------ ------- -------
Carrying amounts 105,150 80,729
------------------------------------------ ------- -------
Cash generating units
Goodwill acquired through business combinations have been
allocated to the lowest level of cash generating unit (CGU) and to
the division in which it is reported. Where the acquired entities'
growth into new markets is through the Group's existing sales
network the lowest level of CGU is considered to be at the
divisional level.
The carrying value of goodwill is allocated as follows:
2013 2012
---------------------------- ------- ------
Controls
Schischek 19,003 -
Other cash generating units 9,279 8,707
---------------------------- ------- ------
28,282 8,707
Fluid Systems
Rotork Fluid Systems 7,594 7,422
Rotork Sweden 6,796 6,837
Other cash generating units 11,978 8,611
---------------------------- ------- ------
26,368 22,870
Gears
Other cash generating units 9,069 7,709
---------------------------- ------- ------
9,069 7,709
Instruments
Fairchild 26,722 27,247
Soldo 14,709 14,196
---------------------------- ------- ------
41,431 41,443
Total Group 105,150 80,729
---------------------------- ------- ------
Impairment testing
Goodwill is not amortised but is tested annually for
impairment.
Value in use calculations are used to determine the recoverable
amount of goodwill allocated to each of the CGUs. These
calculations use cash flow projections on actual operating results
and management forecasts.
The key assumptions in the annual impairment review which cover
all CGUs are set out below:
i) Management forecasts
The three year plan is a bottom up process which takes place as
part of the annual budget process. The three year plan is prepared
by each reporting entities' management reflecting their view of the
local market, known projects and experience of past performance.
The annual budget and the three year plan are approved by the Board
each year.
ii) Long term growth rates
In the period after the three year plan growth rates are
forecast at 2% per annum for each CGU (2012: 2%). A rate of 2% is
considered to be prudent given the significant organic growth of
the business over the last 10 years.
iii) Discount rates
All Rotork divisions operate in the same industry sectors and
markets around the world. Therefore discount rates for each of the
CGUs are considered to be 10.5 % (2012: 10.4%) which represents a
reasonable rate for a market participant in this sector.
Sensitivity analysis
Sensitivity analysis has been undertaken for each CGU to assess
the impact of any reasonable change in assumptions. Using the key
assumptions above there is no reasonable change that would cause
the carrying values of any CGU to exceed the recoverable amount
apart from Soldo and Fairchild, the sensitivities for which are
explained below.
With regard to Soldo, which has only been part of the Group for
14 months, downside sensitivities have been assessed. An increase
in the discount rate to 14.9% would result in the goodwill being
impaired. If the long term growth rate was 3% rather than 2%, the
discount rate would need to increase to 15.7% for the goodwill to
become impaired.
With regard to Fairchild downside sensitivities have been
assessed and an increase in the discount rate to 15.0% (2012:
12.8%) would result in the goodwill being impaired. If the long
term growth rate was 3% rather than 2%, the discount rate would
need to increase to 15.8% (2012: 13.6%) for the goodwill to become
impaired.
It is anticipated that as Soldo and Fairchild become more
established within the Group and each of the companies leverage the
sales network opportunities the long term growth rate should
comfortably exceed the 2.0% growth rate assumed in the
forecast.
7. Intangible assets
Business combinations
acquired intangible
assets
-----------------------------
Research
&
development Customer
costs Brands relationships Other Total
------------------------------------------ ------------ ------ -------------- ----- -------
Cost
1 January 2012 6,994 17,678 22,593 3,789 51,054
Acquisition through business combinations - 4,808 4,706 154 9,668
Internally developed 2,075 - - - 2,075
Exchange adjustments - (532) (577) (101) (1,210)
------------------------------------------ ------------ ------ -------------- ----- -------
31 December 2012 9,069 21,954 26,722 3,842 61,587
Acquisition through business combinations - 7,968 12,298 3,972 24,238
Internally developed 2,033 - - - 2,033
Exchange adjustments (6) (242) (584) (84) (916)
------------------------------------------ ------------ ------ -------------- ----- -------
31 December 2013 11,096 29,680 38,436 7,730 86,942
------------------------------------------ ------------ ------ -------------- ----- -------
Amortisation
1 January 2012 3,926 1,912 4,203 2,688 12,729
Charge for the year 924 2,256 4,669 474 8,323
Exchange adjustments - (58) (80) (70) (208)
------------------------------------------ ------------ ------ -------------- ----- -------
31 December 2012 4,850 4,110 8,792 3,092 20,844
Charge for the year 1,214 3,816 6,684 1,647 13,361
Exchange adjustments - (201) (456) (87) (744)
------------------------------------------ ------------ ------ -------------- ----- -------
31 December 2013 6,064 7,725 15,020 4,652 33,461
------------------------------------------ ------------ ------ -------------- ----- -------
Net Book Value
31 December 2012 4,219 17,844 17,930 750 40,743
------------------------------------------ ------------ ------ -------------- ----- -------
31 December 2013 5,032 21,955 23,416 3,078 53,481
------------------------------------------ ------------ ------ -------------- ----- -------
Other acquired intangible assets represent order books and
intellectual property.
The amortisation charge is recognised within administrative
expenses in the income statement.
8. Inventories
2013 2012
------------------------------ ------ ------
Raw materials and consumables 51,844 48,279
Work in progress 8,445 11,474
Finished goods 14,792 11,347
------------------------------ ------ ------
75,081 71,100
------------------------------ ------ ------
Included in cost of sales was GBP217,697,000 (2012:
GBP199,710,000) in respect of inventories consumed in the year.
9. Trade and other receivables
2013 2012
--------------------------------------------- ------- -------
Non-current assets:
Insurance policy 1,465 1,368
Other 67 306
--------------------------------------------- ------- -------
Other receivables 1,532 1,674
--------------------------------------------- ------- -------
Current assets:
Trade receivables 107,801 97,635
Less provision for impairment of receivables (1,825) (1,813)
--------------------------------------------- ------- -------
Trade receivables - net 105,976 95,822
--------------------------------------------- ------- -------
Corporation tax 1,145 1,946
--------------------------------------------- ------- -------
Current tax 1,145 1,946
--------------------------------------------- ------- -------
Other non-trade receivables 7,333 5,196
Prepayments and accrued income 4,819 4,466
--------------------------------------------- ------- -------
Other receivables 12,152 9,662
--------------------------------------------- ------- -------
10. Cash and cash equivalents
2013 2012
-------------------------------------------------------- ------ ------
Bank balances 40,747 42,746
Cash in hand 43 101
Short term deposits 28,083 17,021
-------------------------------------------------------- ------ ------
Cash and cash equivalents 68,873 59,868
Bank overdraft - -
-------------------------------------------------------- ------ ------
Cash and cash equivalents in the Consolidated Statement
of Cash Flows 68,873 59,868
-------------------------------------------------------- ------ ------
11. Capital and reserves
Share capital and share premium
5p Ordinary 5p Ordinary
shares GBP1 shares GBP1
Issued Non- Issued Non-
and fully redeemable and fully redeemable
paid preference paid preference
up shares up shares
2013 2013 2012 2012
------------------------------------ ----------- ----------- ----------- -----------
At 1 January 4,340 40 4,338 40
Issued under employee share schemes 4 - 2 -
------------------------------------ ----------- ----------- ----------- -----------
At 31 December 4,344 40 4,340 40
------------------------------------ ----------- ----------- ----------- -----------
Number of shares (000) 86,871 86,808
------------------------------------ ----------- ----------- ----------- -----------
The ordinary shareholders are entitled to receive dividends as
declared and are entitled to vote at meetings of the Company.
The Group received proceeds of GBP586,000 (2012: GBP425,000) in
respect of the 62,904 (2012: 57,481) ordinary shares issued during
the year: GBP4,000 (2012: GBP2,000) was credited to share capital
and GBP582,000 (2012: GBP423,000) to share premium.
The preference shareholders take priority over the ordinary
shareholders when there is a distribution upon winding up the
Company or on a reduction of equity involving a return of capital.
The holders of preference shares are entitled to vote at a general
meeting of the Company if a preference dividend is in arrears for
six months or the business of the meeting includes the
consideration of a resolution for winding up the Company or the
alteration of the preference shareholders' rights.
Within the retained earnings reserve are own shares held. The
investment in own shares represents 162,518 (2012: 169,511)
ordinary shares of the Company held in trust for the benefit of
directors and employees for future payments under the Share
Incentive Plan and Long Term Incentive Plan. The dividends on these
shares have been waived.
Translation reserve
The translation reserve comprises all foreign exchange
differences arising from the translation of the financial
statements of foreign operations.
Capital redemption reserve
The capital redemption reserve arises when the Company redeems
shares wholly out of distributable profits.
Hedging reserve
The hedging reserve comprises the effective portion of the
cumulative net change in the fair value of cash flow hedging
instruments that are determined to be an effective hedge.
Dividends
The following dividends were paid in the year per qualifying
ordinary share:
2013
Payment date 2013 2012
-------------------------------------- -------------- ------ ------
26.6p final dividend (2012: 22.75p) 16 May 23,082 19,718
18.05p interim dividend (2012: 16.4p) 24 September 15,653 14,206
38,735 33,924
----------------------------------------------------- ------ ------
After the balance sheet date the following dividends per
qualifying ordinary share were proposed by the directors. The
dividends have not been provided for and there are no corporation
tax consequences.
2013 2012
----------------------------------------------------- ------ ------
Final proposed dividend per qualifying ordinary share
30.0p 26,061
----------------------------------------------------- ------ ------
26.6p 23,091
----------------------------------------------------- ------ ------
12. Earnings per share
Basic earnings per share
Earnings per share is calculated for both the current and
previous years using the profit attributable to the ordinary
shareholders for the year. The earnings per share calculation is
based on 86.7m shares (2012: 86.6m shares) being the weighted
average number of ordinary shares in issue (net of own ordinary
shares held) for the year.
2013 2012
--------------------------------------------------------------- ------ ------
Net profit attributable to ordinary shareholders 99,509 89,315
--------------------------------------------------------------- ------ ------
Weighted average number of ordinary shares
Issued ordinary shares at 1 January 86,638 86,523
Effect of own shares held 44 55
Effect of shares issued under Share option schemes / Sharesave
plans 9 14
--------------------------------------------------------------- ------ ------
Weighted average number of ordinary shares during the year 86,691 86,592
--------------------------------------------------------------- ------ ------
Basic earnings per share 114.8p 103.1p
--------------------------------------------------------------- ------ ------
Adjusted basic earnings per share
Adjusted basic earnings per share is calculated for both the
current and previous years using the profit attributable to the
ordinary shareholders for the year after adding back the after tax
amortisation charge.
2013 2012
----------------------------------------------------------- ------- -------
Net profit attributable to ordinary shareholders 99,509 89,315
Amortisation 12,147 7,399
Tax effect on amortisation at effective rate (3,388) (2,078)
----------------------------------------------------------- ------- -------
Adjusted net profit attributable to ordinary shareholders 108,268 94,636
----------------------------------------------------------- ------- -------
Weighted average number of ordinary shares during the year 86,691 86,592
----------------------------------------------------------- ------- -------
Adjusted basic earnings per share 124.9p 109.3p
----------------------------------------------------------- ------- -------
Diluted earnings per share
Diluted earnings per share is based on the profit for the year
attributable to the ordinary shareholders and 87.1m shares (2012:
87.0m shares). The number of shares is equal to the weighted
average number of ordinary shares in issue (net of own ordinary
shares held) adjusted to assume conversion of all potentially
dilutive ordinary shares. The Company has three categories of
potentially dilutive ordinary shares: those share options granted
to employees under the Share option scheme and Sharesave plan where
the exercise price is less than the average market price of the
Company's ordinary shares during the year and contingently issuable
shares awarded under the Long Term Incentive Plan (LTIP).
2013 2012
------------------------------------------------------------ ------ ------
Net profit attributable to ordinary shareholders 99,509 89,315
------------------------------------------------------------ ------ ------
Weighted average number of ordinary shares (diluted)
Weighted average number of ordinary shares for the year 86,691 86,592
Effect of Sharesave options in issue 103 106
Effect of LTIP shares in issue 277 343
------------------------------------------------------------ ------ ------
Weighted average number of ordinary shares (diluted) during
the year 87,071 87,041
------------------------------------------------------------ ------ ------
Diluted earnings per share 114.3p 102.6p
------------------------------------------------------------ ------ ------
Adjusted diluted earnings per share 124.3p 108.8p
------------------------------------------------------------ ------ ------
13. Employee benefits
Restated
2013 2012
------------------------------------------------------ --------- ---------
Recognised liability for defined benefit obligations:
* Present value of funded obligations 152,882 151,501
* Fair value of plan assets (132,684) (122,802)
------------------------------------------------------ --------- ---------
20,198 28,699
Other pension scheme liabilities 477 1,291
Employee bonuses 14,726 11,958
Long term incentive plan 576 620
Employee indemnity provision 1,833 1,329
Other employee benefits 2,374 2,228
40,184 46,125
------------------------------------------------------ --------- ---------
Non-current 22,705 32,060
Current 17,479 14,065
------------------------------------------------------ --------- ---------
40,184 46,125
------------------------------------------------------ --------- ---------
The comparatives of employee bonuses, other employee benefits
and other payables (note 15) have been reclassified to improve the
information provided in the disclosure. The effect of this
restatement is that the total current employee benefits have
increased by GBP3,323,000 to GBP14,065,000. This change has no
impact on the Consolidated income statements, the Consolidated
statement of changes in equity, the consolidated statement of cash
flows or the net assets of the Group.
14. Provisions
Contingent Warranty
consideration provision Total
---------------------------------------------- -------------- ---------- -------
Balance at 1 January 2013 1,122 5,514 6,636
Exchange differences (29) (117) (146)
Increase as a result of business combinations 1,975 389 2,364
Provisions used during the year (250) (978) (1,228)
Charged in the year (9) 1,877 1,868
---------------------------------------------- -------------- ---------- -------
Balance at 31 December 2013 2,809 6,685 9,494
---------------------------------------------- -------------- ---------- -------
Maturity at 31 December 2013
Non-current 400 2,228 2,628
Current 2,409 4,457 6,866
---------------------------------------------- -------------- ---------- -------
2,809 6,685 9,494
---------------------------------------------- -------------- ---------- -------
Maturity at 31 December 2012
Non-current 863 1,838 2,701
Current 259 3,676 3,935
---------------------------------------------- -------------- ---------- -------
1,122 5,514 6,636
---------------------------------------------- -------------- ---------- -------
The warranty provision is based on estimates made from
historical warranty data associated with similar products and
services. The provision relates mainly to products sold during the
last 12 months, the typical warranty period is now 18 months.
Contingent consideration relates to amounts outstanding in
respect of the acquisitions of Soldo srl, Flowco Limited and the
GTA Group. It is anticipated that the non-current balance will be
settled in 2015.
15. Trade and other payables
Restated
2013 2012
------------------------------------ ------ --------
Trade payables 38,019 36,355
------------------------------------ ------ --------
Corporation tax 14,836 11,143
------------------------------------ ------ --------
Current tax 14,836 11,143
------------------------------------ ------ --------
Other taxes and social security 6,922 5,795
Payments on account 7,995 9,108
Other payables and accrued expenses 16,085 16,986
------------------------------------ ------ --------
Other payables 31,002 31,889
------------------------------------ ------ --------
The comparatives of other payables and accrued expenses and
employee benefits (note 13) have been reclassified to improve the
information provided in the disclosure. The effect of this
restatement is that other payables and accrued expenses have
decreased by GBP3,323,000 to GBP16,986,000. This change has no
impact on the consolidated income statements, the consolidated
statement of changes in equity, the consolidated statement of cash
flows or the net assets of the Group.
16. Related parties
The Group has a related party relationship with its subsidiaries
and with its directors and key management. Transactions between two
subsidiaries for the sale and purchase of products or the
subsidiary and parent Company 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 GBP49,000 during the year
(2012: GBP34,000) and GBPnil was outstanding at 31 December 2013
(2012: GBP15,000).
UBS Investment Bank are a related party by virtue of
non-executive director SA James' directorship of UBS Limited. UBS
Investment Bank provides the Group financial advice and
stockbroking services. The current arrangement with UBS Investment
Limited is that out of pocket expenses will be reimbursed and no
fees will be charged for their regular advisory or broking
services. Expenses of GBP4,000 have been reimbursed in the year
(2012: GBP4,000) and no balance was outstanding at 31 December 2013
(2012: 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 were:
2013 2012
------------------------------------------- ----- -----
Emoluments including social security costs 4,816 4,510
Post employment benefits 287 270
Pension supplement 206 187
Share-based payments 1,465 1,418
------------------------------------------- ----- -----
6,774 6,385
------------------------------------------- ----- -----
17. Financial calendar
4 March 2014 Preliminary announcement of annual results for 2013
9 April 2014 Ex-dividend date for final proposed 2013 dividend
11 April 2014 Record date for final proposed 2013 dividend
25 April 2014 Annual General Meeting held at Rotork House, Brassmill Lane, Bath, BA1 3JQ
19 May 2014 Payment date for final proposed 2013 dividend
5 August 2014 Announcement of interim financial results for 2014
This information is provided by RNS
The company news service from the London Stock Exchange
END
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