TIDMROR
RNS Number : 2123Y
Rotork PLC
28 February 2012
Rotork p.l.c.
2011 Full Year Results
2011 2010 % change % change
(organic
constant
currency)
Revenue GBP447.8m GBP380.6m +17.7% +15.9%
Adjusted* operating profit GBP115.9m GBP99.4m +16.6% +16.0%
Adjusted* profit before
tax GBP116.5m GBP99.6m +17.0% +16.4%
Adjusted* return on sales 26.0% 26.2% -20bps +10bps
Basic earnings per share 93.0p 80.5p +15.5%
Adjusted* basic earnings
per share 96.2p 81.9p +17.5%
Final dividend 22.75p 19.75p +15.2%
* Adjusted figures are before the amortisation of acquired
intangible assets
Key Points
-- Record revenue, profit and order intake in each division
-- Order intake up 20.9% (18.1% organic constant currency)
-- Year end order book of GBP157m, up 13.2%
-- Completion of six acquisitions in the year, including Fairchild
-- New Rotork Instruments division to address wider flow control market
-- Final dividend increased by 15.2%
Peter France, Chief Executive, commenting on the results,
said:
"I am pleased to report another successful year, with each
division achieving record results in terms of order intake, revenue
and profit.
Rotork is well positioned in growth markets and the execution of
our long-term strategy of expanding into the wider flow control
market will provide further opportunities for growth. This year
will see the introduction of several new products and we will also
continue to look for suitable acquisition targets.
We continue to invest in our infrastructure, product development
and sales coverage to support the growth projections of the
business. Whilst mindful of the uncertain economic environment, the
indications we are receiving from our customers are positive. The
markets that we serve, combined with our extensive product
portfolio, international presence and end-market exposure, provide
the Board with confidence of achieving further progress in the
coming year."
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 / Susanne Yule
Chairman's statement
I am pleased to report another year of strong growth for Rotork,
with our order intake, revenue and profit all at record levels.
During the year we completed six acquisitions and announced the
formation of a new division, Rotork Instruments. Rotork Instruments
will provide a platform for our expansion into the wider flow
control market. While economic uncertainty affected activity levels
in some countries in which we operate, the continued broadening of
our geographic spread and end-market exposure limited the overall
impact on the Group.
In addition to our increased spend on acquisitions, which
amounted to GBP64.2m in the year, we continued to invest in our
facilities and people in the locations and sectors where we see
growth opportunities. Investment in product development was also
higher in the year at GBP5.8m, an increase of 35% on 2010. This
investment will result in an increased number of product launches
in 2012, including the next generation of our IQ actuator range. We
aim to extend our industry leadership position and consolidate
Rotork's reputation for world-class innovation.
The Rotork brand continues to strengthen and customers who
demand high quality products and services recognise that Rotork
provides a superior solution to their automation needs, improving
the reliability and operation of their plant.
Our continued success is due to the dedication of our people,
whether in customer facing, operational or support roles. Their
hard work has allowed Rotork to capitalise on the available
opportunities and continue to provide excellent customer
service.
Financial Highlights
Revenue of GBP447.8m was 17.7% higher than the previous year,
with organic growth on a constant currency basis of 15.9%. Adjusted
profit before tax* increased by 17.0% to GBP116.5m resulting in a
return on sales on this basis of 26.0%, similar to the prior year.
In aggregate, acquisitions reported a lower return on sales than
the Group average, so when taken with a modest currency headwind,
return on sales restated on an organic constant currency basis was
26.3%, slightly above 2010. Cash generation from operations was
good and after returning GBP49.5m to shareholders in dividends and
spending GBP64.2m on acquisitions, we finished the year with net
cash of GBP48.5m.
Board Composition
The Board supports Lord Davies' recent report regarding 'Women
on Boards' and has a stated aim that 25% of its non-executive
directors will be women by the end of 2012. We have always believed
that good corporate governance stems from a quality Board which has
a wide range of experience and skills. We are actively recruiting a
suitable member of the Board using our established formal
appointment process. The successful candidate will bring the
necessary level of expertise, questioning and debate and provide
the required level of support to the executive team.
Board Performance
For a number of years we have appointed external consultants to
conduct an independent appraisal of Board effectiveness and this
year we repeated the process. Overall, the feedback from the review
was positive and, having been discussed by the Board, this has led
to a number of changes. The primary changes are: increasing the
membership of the Management Board to cover Human Resources and
Business Development roles; altering the format of Board meetings
to allow more time for debate and discussion; and providing greater
opportunities for non-executive directors to participate in
discussion of the Group's strategic direction. It is clear that the
breadth of experience and skills represented on the Board is an
important factor in the Board's effectiveness. The open and
inclusive discussions we enjoy ensure consideration is given to all
points of view. Overall, I remain satisfied that the composition of
the Board enables it to fulfill its expected role. The
non-executive directors also reviewed my performance as Chairman
and provided feedback via the senior independent director.
Corporate Governance
The Board sets the tone for the way in which Rotork operates and
we remain committed to running the business in a responsible way.
The Board considers current performance, strategy and acquisitions,
risk management, the internal control framework and the other
aspects of corporate governance throughout the year. Some of the
discussions involve the wider Rotork Management Board. The
executive management are then able to disseminate the values and
standards of the Board throughout the Group and ensure these are
embedded at all levels.
In response to the UK Corporate Governance Code 2010, all
directors stood for re-election at the last Annual General Meeting
and we intend to continue this practice in the future.
Dividend
The Board recommends a final dividend of 22.75p per share which,
taken together with the 2011 interim dividend, gives a payment of
37.25p per share (2010: 32.50p), representing a 14.6% increase.
This dividend will be payable on 21 May 2012 to shareholders on the
register on 13 April 2012.
Outlook
Rotork is well positioned in growth markets and the execution of
our long-term strategy of expanding into the wider flow control
market will provide further opportunities for growth. This year
will see the introduction of several new products and we will also
continue to look for suitable acquisition targets.
We continue to invest in our infrastructure, product development
and sales coverage to support the growth projections of the
business. Whilst mindful of the uncertain economic environment, the
indications we are receiving from our customers are positive. The
markets that we serve, combined with our extensive product
portfolio, international presence and end-market exposure, provide
the Board with confidence of achieving further progress in the
coming year.
Roger Lockwood
Chairman
27 February 2012
*References to adjusted profit throughout this document are
defined as the IFRS profit, whether profit before tax or operating
profit, with the amortisation of acquired intangibles added
back.
Business Review
Our strategy for growth and value creation for our shareholders
continues to deliver positive results. The momentum we experienced
in 2010 continued into 2011, with each division achieving record
results. The focus on developing our international sales channels,
expanding our product portfolio and carefully managing our cost
base provides a strong platform for further growth.
We are a global company with 19 manufacturing sites, 104
offices, direct employees in 31 countries, and sales channels in 89
countries. Our customers demand first-class after-sales support and
our dedicated teams around the world are equipped to provide the
local support they require.
This year we established a new division, Rotork Instruments, to
strengthen our presence in the wider flow control market. The
acquisition of Fairchild Industrial Products Company (Fairchild)
forms the basis of this new business, and is the first step in
developing another Rotork division with market leading
products.
Rotork has a strong brand identity, international presence and
technical capabilities that support our objective of providing our
customers with high quality, technically advanced, innovative
products and services.
Highlights
I am pleased to report another successful year. Customer orders
were weighted towards the end of 2011, and with the receipt of our
largest ever order in December, a GBP8.9m pipeline project in
Mexico, the fourth quarter was particularly strong. Overall, order
intake for the year was GBP461.8m, up 20.9% compared with 2010.
Removing the contribution from acquisitions and a small currency
headwind, order intake was 18.1% ahead of the prior year.
Rotork offices benefit from both local business and
international projects where the orders are often placed through
valvemakers in their area. This means that our offices in mature
markets can still experience significant growth due to export
activity. This was evident during the year with strong export-led
performances from countries such as the UK, USA, Korea and Italy.
There was also strong domestic growth in countries such as
Australia, China and India. Overall, Europe, Asia and the Americas
all posted results higher than the prior year. Revenue was strong
at GBP447.8m, 17.7% up on the prior year. Adjusted profit before
tax margin was 26.0%, fractionally below the 26.2% achieved last
year, but with the impact of acquisitions and currency reversed the
adjusted margin was 26.3%.
The creation of a new division reflects the wider market
ambitions of the Group in flow control, an area identified by the
Board during our strategy discussions as having significant growth
potential. The acquisition of Fairchild provides a strong
foundation on which Rotork Instruments can build a product
portfolio and access new end-markets as well as strengthening our
presence in existing markets. Fairchild will also continue as a
supplier to other parts of the Group and we will look to capitalise
on this opportunity.
In addition to Fairchild, we completed a further five
acquisitions in the year:
-- Rotork Servo Controles de Mexico S.A. de C.V. (RSCM) and
Valco Valves & Automation AS, (VVA), based in Mexico and Norway
respectively, strengthened our geographic coverage with their
strong sales and service organisations. Both these new sales
offices will focus mainly on Rotork Controls and Rotork Fluid
Systems products.
-- Controls International Inc (K-Tork) a company based in the
USA and Centork Valve Control S.L. (Centork) from Spain, provide
product as well as sales channels to Rotork Fluid System and Rotork
Controls respectively.
-- Prokits Limited (Prokits), a UK based valve adaption company,
will be integrated into the Rotork Gears business.
Our growth strategy is focused on both organic and
acquisition-led growth. The acquisitions completed in 2011 are all
aligned with our acquisition criteria of expanding the product
portfolio, strengthening or entering a new geography and
strengthening or entering a new market. Integration of the new
companies is going to plan and all of them are contributing to the
Group in-line with the acquisition case.
To support the continued organic growth of the Group, we have
also been investing in the infrastructure of the business. The most
significant investments include a new factory in Chennai, India,
that will be operational by April 2012 and a new facility very
close to the existing Bath site that will provide room for
expansion. In January 2011, we also inaugurated an additional plant
in China for our Gears business.
Rotork Controls
GBPm 2011 2010 Change OCC change
-------------------- ------ ------ ------- -----------
Revenue 278.0 243.4 +14.2% +13.8%
-------------------- ------ ------ ------- -----------
Adjusted operating
profit 92.1 78.8 +16.9% +17.5%
-------------------- ------ ------ ------- -----------
Adjusted operating
margin 33.1% 32.4% +70bps +100bps
-------------------- ------ ------ ------- -----------
Rotork Controls had an excellent year, reporting record revenue
and operating profit, with double-digit growth in both. We also
achieved record adjusted operating margins of 33.1%. The growth was
broad based, with our offices in each region - the Americas, the
Far East and Europe - all making progress in aggregate. We have
continued to invest in our sales channels and have benefited from
increased activity in a number of our end-markets. Downstream and
midstream project activity in the oil & gas sector was
particularly strong and in certain countries we benefited from
increased investment in infrastructure, mainly power generation and
water treatment plants. We continued to make progress with our
Rotork Process Controls (RPC) products and the growth of these
actuators, which include the CVA, exceeded the growth rate for the
division as a whole.
Divisional revenue grew 14.2% in the year to GBP278.0m and with
order intake increasing by 17.4%, the year end order book grew by
6.4%. Removing the contribution from acquisitions and restating
this year at 2010 exchange rates, revenue growth was 13.8% and
order intake growth 15.9%. Currency was a modest headwind for the
division, principally driven by the weaker average US dollar rate
in 2011, offset by a slight tailwind from the euro and other
currencies. Adjusted operating profit increased 16.9% in the year
to GBP92.1m, which represents a 33.1% margin compared with 32.4% in
2010. Cost pressures arising from commodity price increases during
the year were successfully mitigated, with material costs remaining
a near-constant proportion of sales compared with the prior year.
At the same time, labour and overheads costs increased at a lower
rate than revenue growth.
Three of this year's acquisitions benefited the division, albeit
their contributions to profit in the year were modest. Centork
brings a new actuator range which will allow us to better target
certain segments of the electric actuator market, whilst the
acquisitions in both Norway and Mexico enhance our geographic
coverage. Both these countries already have a large installed base
of Rotork actuators and the acquisitions provide an opportunity to
strengthen our direct relationship with the end-users and grow our
after-market service offering through Rotork Site Services (RSS).
As well as increased acquisition activity we continue to invest in
product development. We have significantly grown our engineering
resource and the Rotork innovation and design centre (RIDEC), in
India, is now operational and contributing to our development
programme. The increased investment will benefit the business in
2012 and beyond as new products are introduced.
Rotork Fluid Systems
GBPm 2011 2010 Change OCC change
-------------------- ------ ------ -------- -----------
Revenue 132.6 106.8 +24.1% +20.4%
-------------------- ------ ------ -------- -----------
Adjusted operating
profit 17.1 14.9 +14.5% +12.8%
-------------------- ------ ------ -------- -----------
Adjusted operating
margin 12.9% 14.0% -110bps -90bps
-------------------- ------ ------ -------- -----------
This year Rotork Fluid Systems (RFS) was once again the fastest
growing division, with particularly strong trading in the second
half of the year. Acquisitions have played a significant part in
the growth of the division over the last ten years and this year we
completed the acquisition of K-Tork in Dallas, USA, which brought a
new product range and increased the exposure of RFS to the power
and water markets. The acquisition of the businesses in Norway and
Mexico also contributed to the results of the division. More
importantly, they increase the future opportunities for RFS as we
continue to grow our global aftermarket offering. The acquisition
of Rotork Mexico and the development of our own service team in
Mexico were instrumental in winning the largest ever single order
for Rotork in December. The project is to supply the complete
actuator solution for 47 pipelines in Mexico, with deliveries
scheduled between now and 2014.
The integration and development of these acquisitions, and those
completed in earlier years, remains key to our strategy. K-Tork's
products have a very good reputation and, although predominantly
focused on the US market, they are well suited to being sold
through Rotork's worldwide sales offices. The education process to
deliver increased sales outside of the USA is now underway. The
scope for development of the Hiller product range remains
significant, and our focus for the business in 2012 is to deliver
an enhanced and fully certified solution for the next generation of
nuclear power station projects. Development of our core product
lines is also important, and this year we launched SI Pro, the
latest generation of electro-hydraulic actuators. These specifiable
emergency shutdown actuators are very much in demand in safety
critical applications, and where increased diagnostics are
required.
Order intake increased by 30.1% and the order book rose 24.3%,
8.4% of which was due to order book taken on with acquired
businesses. On an organic constant currency basis, order intake was
25.0% higher. Annual revenue grew 24.1% to a record GBP132.6m, with
the second half of GBP79.6m being 49.9% higher than the first half
of the year. Revenue is often greater in the second half year in
RFS but this year saw a higher than usual increase driven purely by
customer delivery requirements. Removing the benefit of
acquisitions and restating revenue at 2010 exchange rates, revenue
growth would have been 20.4%. Adjusted operating profit was a
record at GBP17.1m, 14.5% higher than the prior year with the
second half representing 71% of the full year's profit. Adjusted
operating margins, which, affected by the lower revenue, had been
disappointing in the first half of the year at 9.2%, met the
division's target in the second half at 15.3%, giving a full year
average of 12.9%. On an organic constant currency basis full year
margins were 13.1%.
Rotork Gears
GBPm 2011 2010 Change OCC change
-------------------- ------ ------ -------- -----------
Revenue 46.6 39.2 +18.8% +17.5%
-------------------- ------ ------ -------- -----------
Adjusted operating
profit 10.3 9.2 +12.8% +8.3%
-------------------- ------ ------ -------- -----------
Adjusted operating
margin 22.2% 23.4% -120bps -190bps
-------------------- ------ ------ -------- -----------
Rotork Gears manufactures and sells manual and motorised
gearboxes. We continue to increase our third party sales to the
valve industry as a strategic objective and reduce our dependence
on intercompany transactions. Around three quarters of revenue is
now generated from sales to third party valve manufacturers. Whilst
the sales to Rotork offices are often driven by project activity,
the sales to valvemakers are very different in nature. The gearbox
is seen as a component of the valve and with the majority of valves
still being manually operated, most require a gearbox to provide
the mechanical advantage necessary to operate the valve. All
valvemakers therefore need a supply of gearboxes and although some
make their own, our sales proposition is very attractive. We can
provide a high quality, reliable gearbox and by virtue of our scale
and buying power through our global supply chain, offer our
gearboxes at a better rate than internally manufactured
products.
Revenue in the year was GBP46.6m, an increase of 18.8% over
2010, order intake rose 15.6%, and our order book increased by
8.6%, all of which set new records for Gears. The acquisition of
Prokits came too close to the end of the year to have a significant
effect on the results, and the overall currency impact on revenue
was negligible. Adjusted operating profit for the year was
GBP10.3m, 12.8% higher than the prior year. There had been some
margin pressure in the first half of the year, reducing operating
margin to 21.7%. However during the second half the benefit of July
price increases and higher revenue increased margins to 22.6%,
resulting in a full year average of 22.2%. Gears has a very
different currency exposure to the rest of the Group and purchases
a greater proportion of its components in US dollars, such that,
with a weaker US dollar this year, operating profit benefited from
a currency tailwind. Restating adjusted operating profit at last
year's exchange rates reduces the operating profit to GBP9.9m and
the margin to 21.5%, compared with 23.4% in 2010.
Rotork Instruments
This newly formed division will ultimately contain a range of
products which address the wider flow control market. Many of the
products are sold into the same end-markets as actuators and are
often used as part of the actuator control system but they are also
used in areas not associated directly with actuation. We will
retain our focus on high quality, high accuracy, high specification
products, rather than on the commoditised end of this market where
margins are generally lower.
Fairchild, which manufactures precision pneumatic and
electro-pneumatic control products, was acquired in November.
Fairchild's customers are spread across many end-markets, with the
largest being oil & gas. Other important markets include tyre
manufacture, automation, paper, chemicals and a wide variety of
industrial applications. The 2011 divisional revenue of GBP1.4m and
adjusted operating profit of GBP0.4m represent the six weeks of
trading post acquisition. For the twelve months to December 2011,
Fairchild's revenue was GBP15.1m with an adjusted operating profit
of GBP4.8m, giving an operating margin of 31.6%. The lead times for
sales in Fairchild are far shorter than the other divisions and the
GBP1m order book at the end of the year is at a typical level.
Rotork Site Services
Rotork Site Services (RSS) is our after-sales and support
activity which operates mainly within the Controls and Fluid
Systems divisions. It is embedded within the divisions and as such
is reported within the divisions' results. The development of RSS
is a key part of our Group strategy and this year there has been
progress on a number of fronts. In terms of geographic coverage, we
have either opened new service workshops or expanded them in six
locations around the world. The acquisitions in Mexico and Norway
were important to RSS, as both former agents were responsible for
servicing and maintaining the large installed base of actuators in
their countries. Bringing this capability in-house will allow us to
promote the full range of RSS activities and leverage this closer
relationship to generate new sales for the full range of Rotork
products.
We measure RSS performance against a number of key metrics to
assess the rate of growth. The best measure of growth is the number
of service engineers we employ, which has grown a further 18% in
the year. Over the last three years, service engineer numbers have
risen 44% whilst consistently high utilisation levels have been
maintained. Our actuators are often required to work in arduous
environments and customers demand a high level of certainty that
they will operate when required. To this end we provide
preventative maintenance contracts for our end customers and during
the year we have seen the number of actuators under contract grow
to 86,000 units, an increase of 21%. This still represents a very
small proportion of the installed base and provides us with a
substantial opportunity as we continue to grow our capability.
Research & Development
During 2011 we completed the development of our next generation,
multi-turn electric actuator. The product will be launched in the
second quarter of 2012 and will be the successor to the current
flagship IQ series. This replacement product will introduce a
number of new features that will help us to retain a market leading
position.
Within the Process Controls product line-up we have extended the
capability of the CVA series through the introduction of a larger
linear unit and development is now underway of a larger quarter
turn version that will complete the current family. Further
development of the complementary Compact Modulating Actuator (CMA)
series was undertaken during the year and this product family is
also due to be introduced to the market in the second quarter of
2012.
During the year, the Fluid Systems division established an
R&D team and test capability within our Leeds facility. The
test facility will serve the needs of both the Gears and Fluid
Systems divisions. The new R&D team will be focused on the
development of our Skilmatic range of electro-hydraulic actuators.
Elsewhere within the Fluid Systems division we have begun
development of a range of rotary nuclear actuators qualified to the
latest standard. These actuators are based upon our successful CP
and GH series and will complement the electric, multi-turn, nuclear
qualified designs currently under development within the Controls
division. The design team in Lucca is undertaking development of a
second generation of "gas over oil" actuators that are optimised
for international markets and should herald a number of
productivity improvements. The design of this range has also been
facilitated by our increased investment in 3D CAD tools.
The Gears division has had another successful year with the
introduction of the declutchable ILGD family and the FB series of
small manual operators. The division has a strong pipeline of
product introductions scheduled for 2012 and in common with the
other divisions is actively working on a nuclear qualified range of
products.
RIDEC, the Group's centralised development resource, based in
Chennai, India, has continued to grow during 2011 and was engaged
in joint developments with all divisions. We are planning to double
its size during 2012 following the move to the new building which
will also include a dedicated test facility.
During the year the Group has also begun a project to evaluate
computer based Product Lifecycle Management tools that together
with our other CAD investments should bring improvements in
efficiency and aid both cross-divisional and multi-site
working.
Acquisitions
This year was a record for Rotork in terms of the number and
value of acquisitions completed. Fairchild, acquired in November
for GBP49.5m, was by far the largest, and forms the basis of the
new Rotork Instruments division. With an asset-light business model
similar to Rotork's, this acquisition generated GBP28.3m of
goodwill and GBP25.8m of intangible assets, which together account
for the majority of the increase in capital employed during the
year. The five other acquisitions cost GBP14.7m in total. The
acquired intangible assets for all this year's acquisitions were
valued at GBP33.4m and gave rise to goodwill of GBP32.5m.
As a result of these acquisitions the amortisation charge - the
writing down of acquired intangible assets of this and previous
years' acquisitions - rose from GBP1.7m last year to GBP3.9m this
year. With a full year effect of this year's acquisitions the
charge is expected to rise to GBP7.1m next year. The income
statement also includes acquisition-related costs of GBP0.8m,
compared with GBP0.2m in 2010. With the acquisitions taking place
throughout the year, the contribution to this year's results added
GBP9.6m to revenue and GBP1.0m to adjusted operating profit. Had
these businesses all contributed for the whole of 2011, they would
have added GBP31.6m to revenue and GBP6.1m to adjusted operating
profit.
Currency
A GBP2.7m revenue headwind was the result of a 5 cent weakening
of the average US dollar rate, offset by modest strengthening of
the euro and basket of other currencies. This was a combination of
the translation of overseas companies' results and restating
transactions within our businesses, as many sales are not
denominated in the reporting currency of our operations making the
sale. The net currency impact on operating profit was a headwind of
GBP0.4m. The mix of currencies in which we source components is
very different from the mix of currencies in which we sell, and the
impact on the different divisions also varies. With a greater
proportion of US dollar denominated purchases, the Gears division
actually benefited from the weakening US dollar, which improved
operating profit by GBP0.4m relative to last year.
There is an element of natural hedging from trading within the
Group but we generate surplus euros and US dollars and are net
sellers of both these currencies. 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 both euro and US
dollar a 1 cent movement now results in a GBP350,000 adjustment to
profit. The growth in both euro and US dollar denominated revenues
saw this adjustment increase from GBP250,000 and GBP300,000
respectively last year.
Return on capital employed
Rotork's asset-light manufacturing model and high profit margins
have meant that our return on capital employed (ROCE) is high.
Basing the calculation on adjusted operating profit and taking an
average balance sheet position (using the opening and closing
balance sheet), ROCE reduced from 90.3% in 2010 to 74.1% this year.
The reduction in the metric was largely caused by the acquisition
of Fairchild taking place so close to the year end.
Cash generation
Net cash at the end of the year was GBP48.5m, having reduced by
GBP49.4m during the year. Our biggest cash outflows are always tax,
dividends and acquisitions. The aggregate spend across these
headings increased from GBP67.7m in 2010 to GBP137.2m this year,
which accounts for the overall net cash outflow. Operating cash
generation relative to adjusted operating profit was 89.6% this
year compared with 95.7% in 2010.
Working capital as a function of annual sales increased from
23.2% to 27.0% but this is affected by the timing of sales and
acquisitions. Fourth quarter revenue was 33% higher than the final
quarter of 2010 and working capital was still only 22.4% of revenue
calculated from this base. Capital expenditure in the year was
GBP10.0m as expected with the factory in India, new building in
Bath and new subsidiary IT system accounting for the majority of
the increased spend over the prior year.
Peter France
Chief Executive
27 February 2012
Consolidated Income Statement
for the year ended 31 December 2011
Notes 2011 2010
GBP000 GBP000
Revenue 2 447,833 380,560
Cost of sales (236,359) (199,742)
______ ______
Gross profit 211,474 180,818
Other income 194 83
Distribution costs (4,020) (3,604)
Administrative expenses (95,589) (79,513)
Other expenses (59) (60)
Adjusted operating profit 115,921 99,442
Amortisation of acquired intangible assets (3,921) (1,718)
Operating profit 2 112,000 97,724
Financial income 4 7,590 6,931
Financial expenses 4 (7,040) (6,800)
______ ______
Profit before tax 112,550 97,855
Income tax expense 5 (32,149) (28,334)
______ ______
Profit for the year 80,401 69,521
===== =====
Pence Pence
Basic earnings per share 11 93.0 80.5
Adjusted basic earnings per share 11 96.2 81.9
Diluted earnings per share 11 92.6 80.2
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2011
2011 2010
GBP000 GBP000
Profit for the year 80,401 69,521
Other comprehensive income
Foreign exchange translation differences (2,484) 1,119
Actuarial (loss) / gain in pension scheme (8,499) 1,095
Effective portion of changes in fair value
of cash flow hedges 207 674
______ ______
Income and expenses recognised directly
in equity (10,776) 2,888
Total comprehensive income for the year 69,625 72,409
===== =====
Consolidated Balance Sheet
at 31 December 2011
Notes 2011 2010
GBP000 GBP000
Non-current assets
Property, plant and equipment 31,954 25,780
Intangible assets 6 106,784 43,990
Deferred tax assets 13,244 11,480
Derivative financial instruments 315 -
Other receivables 8 1,556 1,290
______ ______
Total non-current assets 153,853 82,540
Current assets
Inventories 7 62,928 48,241
Trade receivables 8 96,734 70,362
Current tax 8 988 2,398
Derivative financial instruments 677 918
Other receivables 8 8,461 6,684
Cash and cash equivalents 9 48,557 97,881
______ ______
Total current assets 218,345 226,484
______ ______
Total assets 372,198 309,024
===== =====
Equity
Issued equity capital 10 4,338 4,334
Share premium 7,835 7,389
Reserves 13,924 16,201
Retained earnings 198,072 175,927
______ ______
Total equity 224,169 203,851
===== =====
Non-current liabilities
Interest bearing loans and borrowings 229 127
Employee benefits 28,142 19,752
Deferred tax liabilities 12,782 3,165
Provisions 12 2,218 1,968
______ ______
Total non-current liabilities 43,371 25,012
Current liabilities
Bank overdraft 38 -
Interest bearing loans and borrowings 85 49
Trade payables 13 38,742 30,447
Employee benefits 9,624 8,220
Current tax 13 13,225 10,821
Derivative financial instruments 614 294
Other payables 13 38,360 26,334
Provisions 12 3,970 3,996
______ ______
Total current liabilities 104,658 80,161
Total liabilities 148,029 105,173
______ ______
Total equity and liabilities 372,198 309,024
===== =====
Consolidated Statement of Changes in Equity
Issued Share Translation Capital Hedging Retained Total
equity premium reserve redemption reserve earnings
capital reserve
Balance at 31 December
2009 4,330 7,033 12,981 1,642 (217) 140,402 166,171
Profit for the year - - - - - 69,521 69,521
Other comprehensive
income
--------- --------- ------------ ------------ --------- ---------- ---------
Foreign exchange translation
differences - - 1,119 - - - 1,119
Effective portion of
changes in fair value
of cash flow hedges - - - - 674 - 674
Actuarial gain on defined
benefit pension plans
net of tax - - - - - 1,095 1,095
--------- --------- ------------ ------------ --------- ---------- ---------
Total other comprehensive
income - - 1,119 - 674 1,095 2,888
--------- --------- ------------ ------------ --------- ---------- ---------
Total comprehensive
income - - 1,119 - 674 70,616 72,409
Transactions with owners,
recorded directly in
equity
Equity settled share-based
payment transactions
net of tax - - - - - 195 195
Share options exercised
by employees 4 356 - - - - 360
Own ordinary shares
acquired - - - - - (2,876) (2,876)
Own ordinary shares
awarded under share
schemes - - - - - 3,506 3,506
Preference shares redeemed - - - 2 - (4) (2)
Dividends - - - - - (35,912) (35,912)
--------- --------- ------------ ------------ --------- ---------- ---------
Balance at 31 December
2010 4,334 7,389 14,100 1,644 457 175,927 203,851
Profit for the year - - - - - 80,401 80,401
Other comprehensive
income
--------- --------- ------------ ------------ --------- ---------- ---------
Foreign exchange translation
differences - - (2,484) - - - (2,484)
Effective portion of
changes in fair value
of cash flow hedges - - - - 207 - 207
Actuarial loss on defined
benefit pension plans
net of tax - - - - - (8,499) (8,499)
--------- --------- ------------ ------------ --------- ---------- ---------
Total other comprehensive
income - - (2,484) - 207 (8,499) (10,776)
--------- --------- ------------ ------------ --------- ---------- ---------
Total comprehensive
income - - (2,484) - 207 71,902 69,625
Transactions with owners,
recorded directly in
equity
Equity settled share-based
payment transactions
net of tax - - - - - (196) (196)
Share options exercised
by employees 4 446 - - - - 450
Own ordinary shares
acquired - - - - - (3,185) (3,185)
Own ordinary shares
awarded under share
schemes - - - - - 3,158 3,158
Dividends - - - - - (49,534) (49,534)
--------- --------- ------------ ------------ --------- ---------- ---------
Balance at 31 December
2011 4,338 7,835 11,616 1,644 664 198,072 224,169
--------- --------- ------------ ------------ --------- ---------- ---------
Detailed explanations for equity capital, translation reserve,
capital redemption reserve and hedging reserve can be seen in note
10. Consolidated Statement of Cash Flows
for the year ended 31 December 2011
Notes 2011 2011 2010 2010
GBP000 GBP000 GBP000 GBP000
Cash flows from operating activities
Profit for the year 80,401 69,521
Adjustments for:
Amortisation of intangibles 3,921 1,718
Amortisation of development costs 732 639
Depreciation 4,479 3,972
Equity settled share-based payment
expense 1,251 1,086
Profit on sale of property, plant and
equipment (129) (12)
Financial income (7,590) (6,931)
Financial expenses 7,040 6,800
Income tax expense 32,149 28,334
______ ______
122,254 105,127
(Increase) / decrease in inventories (11,402) 489
Increase in trade and other receivables (26,791) (14,503)
Increase in trade and other payables 18,537 3,189
Difference between pension charge and
cash contribution (2,929) (844)
(Decrease) / increase in provisions (436) 385
Increase in other employee benefits 1,692 507
______ ______
100,925 94,350
Income taxes paid (27,754) (26,186)
______ ______
Cash flows from operating activities 73,171 68,164
Investing activities
Purchase of property, plant and
equipment (10,143) (5,034)
Development costs capitalised (1,328) (1,018)
Sale of property, plant and equipment 274 154
Acquisition of businesses, net
of cash acquired 3 (59,876) (5,621)
Contingent consideration paid (41) -
Interest received 694 483
______ ______
Cash flows from investing activities (70,420) (11,036)
Financing activities
Issue of ordinary share capital 450 360
Purchase of ordinary share capital (3,185) (2,876)
Purchase of preference shares treated
as debt - (4)
Interest paid (117) (88)
Repayment of amounts borrowed (421) (464)
Repayment of finance lease liabilities (54) (102)
Dividends paid on ordinary shares (49,534) (35,912)
______ ______
Cash flows from financing activities (52,861) (39,086)
______ ______
Increase in cash and cash equivalents (50,110) 18,042
Cash and cash equivalents at 1
January 97,881 78,676
Effect of exchange rate fluctuations 748 1,163
on cash held _____ ______
Cash and cash equivalents at 31 9 48,519 97,881
December ===== =====
Notes to the Financial Statements
for the year ended 31 December 2011
Except where indicated, values in these notes are in GBP000.
Rotork p.l.c. is a company domiciled in England. The
consolidated financial statements of the Company for the year ended
31 December 2011 comprise the Company and its subsidiaries
(together referred to as the 'Group').
1. Accounting policies
Basis of preparation
The consolidated financial statements of Rotork p.l.c. 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 following amendments to standards or interpretations are
mandatory for the first time for the financial year ending 31
December 2011:
-- IAS 24 (Revised) - Related Party Disclosures
-- IFRIC 14 (Amendment) - The Limit on a Defined Benefit Asset,
Minimum Funding Requirements and their Interaction
-- 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.
Recent accounting developments
Standards, amendments or interpretations which have been issued
by the International Accounting Standards Board or by the IFRIC,
and application was not mandatory in the period are not expected to
have a material impact on the Group. Subject to endorsement by the
European Union, these standards, amendments or interpretations will
be adopted in future periods.
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 orderbook 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 2011. 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 2011 or 2010. Statutory accounts
for 2010, which were prepared under International Financial
Reporting Standards as adopted by the EU, have been delivered to
the registrar of companies, and those for 2011 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 2011, will
shortly be posted to shareholders, and after adoption at the Annual
General Meeting on 20 April 2012 will be delivered to the
registrar.
Notes to the Financial Statements
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
2011 2011 2011 2011 2011 2011 2011
Revenue from external
customers 277,957 132,624 35,816 1,436 - - 447,833
Inter segment revenue - - 10,777 - (10,777) - -
Total Revenue 277,957 132,624 46,593 1,436 (10,777) - 447,833
---------- --------- ------- ------------- ------------- ------------- ---------
Adjusted operating
profit 92,085 17,077 10,336 394 - (3,971) 115,921
Amortisation of acquired
intangibles (890) (2,277) (18) (736) - - (3,921)
Operating profit 91,195 14,800 10,318 (342) - (3,971) 112,000
---------- --------- ------- ------------- ------------- ------------- ---------
Net financing income 550
Income tax expense (32,149)
---------
Profit for year 80,401
---------
Fluid
Controls Systems Gears Instruments Elimination Unallocated Group
2010 2010 2010 2010 2010 2010 2010
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
---------- --------- ------- ------------- ------------- ------------- ---------
Adjusted operating
profit 78,786 14,911 9,161 - - (3,416) 99,442
Amortisation of acquired
intangibles - (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 year 69,521
---------
Controls Fluid Gears Instruments Unallocated Consolidated
Systems d
2011 2011 2011 2011 2011 2011
Depreciation 3,026 1,205 229 19 - 4,479
Amortisation:
Other intangibles 890 2,277 18 736 - 3,921
Development costs 732 - - - - 732
Non-cash items : equity
settled share-based
payments 543 205 129 - 374 1,251
Net financing income - - - - 550 550
Intangible assets acquired
as part of a business
combination 5,674 5,461 668 54,101 - 65,904
Capital expenditure 7,947 1,512 455 88 - 10,002
Controls Fluid Systems Gears Instruments Unallocated Consolidated
2010 2010 2010 2010 2010 2010
Depreciation 2,634 1,124 214 - - 3,972
Amortisation:
Other intangibles - 1,659 59 - - 1,718
Development costs 639 - - - - 639
Non-cash items : equity
settled share-based
payments 609 129 111 - 237 1,086
Net financing expense - - - - 131 131
Intangible assets acquired
as part of a business
combination - 4,102 - - - 4,102
Capital expenditure 3,953 940 179 - - 5,072
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: UK Rest of USA Other Americas Rest of Consolidated
Europe the World
2011 2011 2011 2011 2011 2011
Revenue from external
customers by location
of customer 25,703 148,513 87,144 38,256 148,217 447,833
Non-current assets
- Intangible assets 8,704 20,315 71,960 1,756 4,049 106,784
- Property, plant
and equipment 9,027 10,323 6,271 310 6,023 31,954
UK Rest of USA Other Americas Rest of Consolidated
Europe the World
2010 2010 2010 2010 2010 2010
Revenue from external
customers by location
of customer 24,277 121,595 71,036 39,488 124,164 380,560
Non-current assets
- Intangible assets 7,248 18,621 13,564 213 4,344 43,990
- Property, plant
and equipment 6,423 10,618 4,363 230 4,146 25,780
3. Acquisitions
(i) Fairchild
On 15 November 2011 the Group acquired 100% of the share capital
of Fairchild Inc. (Fairchild) for GBP49,532,000. Fairchild is a
manufacturer of high precision pneumatic controls and power
transmission products for a wide range of industries, based in
Winston Salem, North Carolina, United States. The acquired business
will be reported as a new division called Rotork Instruments. In
the six weeks to 31 December 2011 Fairchild contributed
GBP1,436,000 to Group revenue and GBP394,000 to consolidated
operating profit before amortisation. The amortisation charge in
the six week period from the acquired intangible assets was
GBP736,000.
If the acquisition had occurred on 1 January 2011 the business
would have contributed GBP15,132,000 to Group revenue and
GBP4,777,000 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.
(ii) Other acquisitions
On 25 July 2011 the Group acquired 100% of the share capital of
K-Tork International Inc. (K-Tork) for GBP6,518,000. K-Tork is a
manufacturer of pneumatic valve actuators based in Dallas, Texas,
United States. The acquired business will be reported within the
Rotork Fluid System division.
On 15 July 2011 the Group acquired 100% of the share capital of
Centork Valve Control S.L. (Centork) for GBP3,147,000. Centork is a
manufacturer of electric actuators based near San Sebastian in
Spain. The acquired business will be reported within the Rotork
Controls division.
The Group also acquired 100% of the share capital of Rotork
Servo Controles de Mexico S.A. de C.V. in Mexico (RSCM), Valco
Valves & Automation AS in Norway (VVA), and Prokits Limited
(Prokits) based in Mansfield, UK for a combined consideration of
GBP4,991,000. RSCM and VVA were Rotork agents and the results of
the acquired business will be reported in each of the divisions.
Prokits designs and manufactures valve adaptor kits and accessories
for the valve industry and will reported as part of the Gears
Division.
In the period from acquisition to 31 December 2011 the
businesses contributed GBP8,170,000 to Group revenue and GBP563,000
to consolidated operating profit before amortisation. The
amortisation charge in respect of these acquisitions during the
year was GBP1,464,000.
If these other acquisitions had occurred on 1 January 2011 the
businesses would have contributed GBP16,488,000 to Group revenue
and GBP1,309,000 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 six acquisitions had the following effect on the Group's
assets and liabilities.
Fairchild Other acquisitions Total
Book value Adjustments Fair value Book value Adjustments Fair value Fair value
Non-current assets
Property, plant
and equipment 638 - 638 668 (140) 528 1,166
Intangible assets - 25,811 25,811 - 7,545 7,545 33,356
Deferred tax assets 97 106 203 - 360 360 563
Current assets
Inventory 1,821 (77) 1,744 2,745 (637) 2,108 3,852
Trade and other
receivables 1,832 (26) 1,806 1,883 (148) 1,735 3,541
Cash 1,415 - 1,415 2,347 - 2,347 3,762
Current liabilities
Trade and other
payables (1,106) (63) (1,169) (1,701) (730) (2,431) (3,600)
Warranty provision (35) (136) (171) - (198) (198) (369)
Loans and other
borrowings - - - (205) - (205) (205)
Non-current
Deferred tax liability - (9,034) (9,034) (131) (850) (981) (10,015)
Loans and other
borrowings - - - (411) - (411) (411)
Total net assets 4,662 16,581 21,243 5,195 5,202 10,397 31,640
Goodwill 28,289 4,259 32,548
----------- ----------- -----------
Purchase consideration 49,532 14,656 64,188
Paid in Cash 49,532 14,106 63,638
Contingent consideration - 550 550
----------- ----------- -----------
49,532 14,656 64,188
Purchase consideration 49,532 14,106 63,638
Cash held in subsidiary (1,415) (2,347) (3,762)
----------- ----------- -----------
Cash outflow on
acquisition 48,117 11,759 59,876
The adjustments shown in the table above 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 financing income
Recognised in the income statement 2011 2010
Interest income 746 540
Expected return on assets in the pension schemes 6,739 6,141
Foreign exchange gains 105 250
______ ______
7,590 6,931
===== =====
Interest expense 116 79
Interest charge on pension scheme liabilities 6,468 6,289
Foreign exchange losses 456 432
______ ______
7,040 6,800
===== =====
Recognised in equity
Effective portion of changes in fair value of
cash flow hedges 664 457
Fair value of cash flow hedges transferred to
income statement (457) 217
Foreign currency translation differences for foreign (2,484) 1,119
operations ______ ______
(2,277) 1,793
===== =====
Recognised in:
Hedging reserve 207 674
Translation reserve (2,484) 1,119
______ ______
(2,277) 1,793
===== =====
5. Income tax expense
2011 2011 2010 2010
Current tax:
UK corporation tax on profits
for the year 9,737 8,645
Adjustment in respect of prior (120) (417)
years ______ ______
9,617 8,228
Overseas tax on profits for the
year 23,086 18,787
Adjustment in respect of prior (210) 42
years ______ ______
22,876 18,829
______ ______
Total current tax 32,493 27,057
Deferred tax:
Origination and reversal of other
temporary differences 57 1,477
Adjustment in respect of prior (401) (200)
years ______ ______
Total deferred tax (344) 1,277
_____ _____
Total tax charge for year 32,149 28,334
===== =====
Effective tax rate (based on profit
before tax) 28.6% 29.0%
Profit before tax 112,550 97,855
Profit before tax multiplied by
standard rate of corporation tax
in the UK of 26.5% (2010: 28.0%) 29,826 27,399
Effects of:
Non deductible items 863 785
Utilisation of overseas tax holidays (1,171) (1,127)
Different tax rates on overseas
earnings 3,362 1,852
Adjustments to tax charge in respect (731) (575)
of prior years ______ ______
Total tax charge for year 32,149 28,334
===== =====
A tax charge of GBP168,000 (2010: credit GBP926,000) 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 US, Canada, France, Germany, Italy, Japan and India.
There is an unrecognised deferred tax liability for temporary
differences associated with investments in subsidiaries. Rotork
p.l.c. 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. Intangible assets
Goodwill Development Other Total Goodwill Development Other Total
costs intangibles costs intangibles
2011 2010
2011 2011 2011 2010 2010 2010
Cost
Balance at 1
January 35,907 5,666 10,505 52,078 33,204 4,647 8,409 46,260
Exchange
differences 4 - 199 203 230 - 468 698
Internally
developed
during the
year - 1,328 - 1,328 - 1,018 - 1,018
Acquisition 32,548 - 33,356 65,904 2,473 - 1,629 4,102
through
business ______ ______ ______ ______ ______ ______ ______ _____
combinations
Balance at 31
December 68,459 6,994 44,060 119,513 35,907 5,665 10,506 52,078
Amortisation
Balance at 1
January - 3,194 4,894 8,088 - 2,555 2,925 5,480
Exchange
differences - - (12) (12) - - 251 251
Amortisation
for the year - 732 3,921 4,653 - 639 1,718 2,357
______ ______ ______ _____ ______ ______ ______ _____
Balance at 31 - 3,926 8,803 12,729 - 3,194 4,894 8,088
December
----------------------------_____ _____ _____ _____ ----------------------------_____ _____ _____ _____
Net book 68,459 3,068 35,257 106,784 35,907 2,471 5,612 43,990
value ===== ===== ===== ===== ===== ===== ===== =====
at 31
December 33,204 2,092 5,484 40,780
Net book
value
at 31
December
2009
The amortisation charge in both years is recognised within
administrative expenses in the income statement. Other intangibles
include customer relationships, order books, intellectual property
and brand names of acquired companies.
Impairment tests for goodwill
Goodwill is allocated to the Group's cash generating units
(CGUs) identified according to business segment. A segment level
summary of goodwill allocation is presented below.
2011 2010
Controls 8,967 6,828
Fluid Systems 23,020 21,436
Gears 7,793 7,643
Instruments 28,679 -
_____ _____
68,459 35,907
===== =====
The recoverable amounts of all CGUs are based on value in use
calculations. These calculations use cash flow projections and are
based on actual operating results and the latest Group three year
plan. The three year plan is based on management's view of the
future and experience of past performance. Cash flows for the
remainder of the next twenty years are extrapolated using a 2%
growth rate which reflects the long-term nature of many of the
markets the Group serves. This rate has been consistently bettered
in the past so is believed to represent a prudent estimate.
The discount rate used is 9.8% (2010: 12.1%), this represents a
reasonable rate for a market participant in this sector. The
majority of the discount rate reduction is due to the movement in
10 year bond yields on which the risk free rate is based. The
discount rate of each business segment is not materially different
to 9.8%. For the Goodwill to become impaired in the CGU with the
minimum headroom, the discount rate would have to increase to
25.8%. On this basis each business segment has sufficient headroom
and therefore no impairment write downs are required.
7. Inventories
2011 2010
Raw materials and consumables 40,609 30,345
Work in progress 13,209 11,411
Finished goods 9,110 6,485
______ ______
62,928 48,241
===== =====
Included in cost of sales was GBP175,352,000 (2010:
GBP147,651,000) in respect of inventories consumed in the year.
8. Trade and other receivables
2011 2010
Non-current assets:
Insurance policy 1,298 1,158
Other 258 132
_____ _____
Other receivables 1,556 1,290
===== =====
Current assets:
Trade receivables 98,779 72,208
Less provision for impairment of receivables (2,045) (1,846)
______ ______
Trade receivables - net 96,734 70,362
===== =====
Corporation tax 988 2,398
______ ______
Current tax 988 2,398
===== =====
Other non-trade receivables 4,357 3,943
Prepayments and accrued income 4,104 2,741
______ ______
Other receivables 8,461 6,684
===== =====
9. Cash and cash equivalents
2011 2010
Bank balances 33,790 40,865
Cash in hand 82 95
Short-term deposits 14,685 56,921
______ ______
Cash and cash equivalents 48,557 97,881
Bank overdraft (38) -
_____ ____
Cash and cash equivalents 48,519 97,881
in the Consolidated Statement ===== =====
of Cash Flows
10. Capital and reserves
Share capital and share premium
5p Ordinary GBP1 Non-redeemable 5p Ordinary GBP1 Non-redeemable
shares preference shares preference
Issued shares Issued shares
and fully and fully
paid up paid up
2011 2011 2010 2010
At 1 January 4,334 40 4,330 42
Preference shares redeemed - - - (2)
Issued under employee share schemes 4 - 4 -
_____ _____ _____ _____
At 31 December 4,338 40 4,334 40
===== ===== ===== =====
Number of shares (000) 86,750 86,682
===== =====
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 GBP450,000 (2010: GBP360,000) in
respect of the 68,264 (2010: 68,955) ordinary shares issued during
the year: GBP4,000 (2010: GBP4,000) was credited to share capital
and GBP446,000 (2010: GBP356,000) 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 227,575 (2010: 262,528)
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:
2011 2011 2010
Payment date
19.75p final dividend (2010:
17.25p) 6 May 17,097 14,928
14.5p interim dividend (2010:
12.75p) 23 September 12,543 11,033
2010 additional interim dividend
of 11.5p paid - - 9,951
2011 additional interim dividend 24 June 9,948 -
of 11.5p paid
2011 additional interim dividend 16 December 9,946 -
of 11.5p paid _____ _____
49,534 35,912
===== =====
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.
2011 2010
Final proposed dividend per qualifying ordinary
share
22.75p 19,736
=====
19.75p 17,120
=====
Additional interim dividend of 11.5p per qualifying 10,000
ordinary share proposed for 2011 =====
11. 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 86.5m shares (2010: 86.4m shares) being the weighted
average number of ordinary shares in issue (net of own ordinary
shares held) for the year.
2011 2010
Net profit attributable to ordinary shareholders 80,401 69,521
===== =====
Weighted average number of ordinary shares
Issued ordinary shares at 1 January 86,419 86,250
Effect of own shares held 55 131
Effect of shares issued under Share option schemes 12 24
/ Sharesave plans _____ _____
Weighted average number of ordinary shares during 86,486 86,405
the year ===== =====
Basic earnings per share 93.0p 80.5p
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.
2011 2010
Net profit attributable to ordinary shareholders 80,401 69,521
Amortisation 3,921 1,718
Tax effect on amortisation at effective rate (1,120) (497)
_____ _____
Adjusted net profit attributable to ordinary 83,202 70,742
shareholders ===== =====
Weighted average number of ordinary shares during 86,486 86,405
the year ===== =====
Adjusted basic earnings per share 96.2p 81.9p
Diluted earnings per share
Diluted earnings per share is based on the profit for the year
attributable to the ordinary shareholders and 86.8m shares (2010:
86.7m 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).
2011 2010
Net profit attributable to ordinary shareholders 80,401 69,521
===== =====
Weighted average number of ordinary shares (diluted)
Weighted average number of ordinary shares for
the year 86,486 86,405
Effect of share options in issue 5 9
Effect of Sharesave options in issue 101 108
Effect of LTIP shares in issue 254 145
_____ _____
Weighted average number of ordinary shares (diluted) 86,846 86,667
during the year ===== =====
Diluted earnings per share 92.6p 80.2p
12. Provisions
Contingent Warranty Total
Consideration Provision
Balance at 1 January 2011 - 5,964 5,964
Exchange differences - (49) (49)
Increase as a result of business
combinations 550 369 919
Provisions used during the year (41) (1,215) (1,256)
Charged in the year - 610 610
Balance at 31 December 2011 509 5,679 6,188
===== ===== =====
Maturity at 31 December 2011
Non-current 300 1,918 2,218
Current 209 3,761 3,970
_____ _____ _____
509 5,679 6,188
===== ===== =====
Maturity at 31 December 2010
Non-current - 1,968 1,968
Current - 3,996 3,996
_____ _____ _____
- 5,964 5,964
===== ===== =====
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 Rotork Servo Controles de Mexico S.A. de C.V. and
Prokits Limited acquisitions. It is anticipated that GBP250,000 of
the non-current balance will be settled in 2013 with the remaining
GBP50,000 payable during 2014.
13. Trade and other payables
2011 2010
Trade payables 38,502 30,447
Bills of exchange 240 -
______ ______
Trade payables 38,742 30,447
===== =====
Corporation tax 13,225 10,821
______ ______
Current tax 13,225 10,821
===== =====
Other taxes and social security 5,524 4,066
Payments on account 12,847 5,451
Non-trade payables and accrued expenses 19,989 16,817
______ ______
Other payables 38,360 26,334
===== =====
14. 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 GBP28,813 during the year
(2010: GBP21,000) and no amount was outstanding at 31 December 2011
(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 were:
2011 2010
Emoluments including social security costs 3,782 2,990
Post employment benefits 392 370
Share-based payments 844 755
_____ _____
5,018 4,115
===== =====
This information is provided by RNS
The company news service from the London Stock Exchange
END
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