TIDMROR
RNS Number : 8324I
Rotork PLC
31 July 2012
Rotork p.l.c.
2012 Half Year Results
HY 2012 HY 2011 % change OCC *(2)
% change
Revenue GBP245.9m GBP199.4m +23.3% +17.1%
Adjusted*(1) operating
profit GBP61.7m GBP50.3m +22.8% +17.0%
Profit before tax GBP58.1m GBP49.6m +17.2% +16.9%
Adjusted*(1) profit before
tax GBP61.7m GBP50.7m +21.9% +16.2%
Basic earnings per share 47.8p 40.9p +16.9% +17.1%
Adjusted*(1) basic earnings
per share 50.8p 41.7p +21.8% +16.5%
Interim dividend 16.40p 14.50p +13.1%
*(1) Adjusted figures are before the amortisation of acquired
intangible assets
*(2) OCC is organic constant currency
Key Points
-- Record first-half revenue and profit in each division
-- Order intake up 18.2%
-- Order book at a record high of GBP177.7m, up 13.0% from December
-- Successful integration of 2011 acquisitions
-- New product launches in each division, including IQ3 in Controls
-- Continued investment for growth
-- Interim dividend increased by 13.1%
Peter France, Chief Executive, commenting on the results,
said:
"Rotork has continued to perform well during these challenging
economic conditions. Order intake, revenue and profit are at record
levels. We continue to invest in our infrastructure, product
development and sales coverage to support the longer term growth
projections of the business and our continued expansion into the
wider flow control market.
Whilst recognising the challenging economic environment, our
record order book and diverse end market exposure provide the Board
with confidence of achieving further progress in the full year. We
are anticipating, as in previous years, that the Group's
performance in 2012 will be weighted towards the second half and
that margins will remain similar to those seen in 2011."
For further information, please contact:
Rotork p.l.c. Tel: 01225 733200
Peter France, Chief Executive
Jonathan Davis, Finance Director
FTI Consulting Tel: 020 7269 7291
Nick Hasell / Susanne Yule
Review of operations
Business Review
Rotork has performed well in the six months to 30 June 2012,
with each division achieving record order intake, revenue and
profit for a first half trading period. The order book is 13.0%
higher than last December at GBP177.7m. Order intake was 18.2%
higher than the comparator period, with the strongest growth in the
Gears division. Revenue at GBP245.9m was up 23.3% and adjusted
operating profit was 22.8% higher at GBP61.7m.
The global economic climate has impacted a number of our
businesses and we have seen a slowdown in order placement in
countries such as India and China. Nevertheless, we achieved record
order intake in the first half of 2012, with our diverse end-user
market and geographic coverage enabling us to focus on markets and
geographies where growth is the strongest. The visibility of
projects in the second half is good and we expect our markets in
the Middle East, South America, USA and Russia to remain
active.
Whilst revenues have been strong we have experienced some higher
costs. Continued upgrade and investment in facilities, product
launches and general inflationary pressures have all impacted the
profit margin. We have also experienced a headwind in terms of
currency in the period. This has been partially offset by
operational gearing and has resulted in an adjusted operating
margin of 25.1%. Revenue will be weighted to the second half of
2012 and for the full year we expect the adjusted operating margin
to be similar to 2011.
On 28 June 2012 we completed the purchase of a new factory in
Leeds that will house Rotork Gears and the main office of Rotork
UK, our sales and marketing operation. We are anticipating a total
capital cost, including purchase and fit-out of the building, to be
in the region of GBP6m, representing the major capital project in
the year. Due to this expansion, the refurbishment of our second
facility in Bath, and other projects, such as the roll out of our
new IT system, we anticipate capital spend for the year to be
higher than last year at GBP12-14m.
Rotork Site Services, our after-sales and support activity,
continues to grow. We have signed a number of preventative
maintenance contracts in the period and continue to pursue further
significant opportunities. We view investment in after-sales and
support as a key differentiator in our ability to provide our
customers with best in class products and services.
Rotork Instruments, the division created at the end of 2011
through the acquisition of Fairchild, has made a good start to the
year, and is performing in line with expectations.
Financial results
The impact of last year's acquisitions on these results is
significant, with GBP16m of incremental revenue in the period.
However currency has been a headwind, reducing reported revenue by
GBP4m. Our two main trading currencies have moved in opposite
directions compared with the first half of last year, with the euro
weakening 8% and the US dollar strengthening 2% relative to
sterling. Revenue growth excluding acquisitions and restated at the
exchange rates of the comparative period is therefore 17.1% rather
than the headline 23.3% reported. The combined impact of currency
and acquisitions on adjusted operating margin is minimal,
increasing it by 10 basis points to 25.2%.
Net cash balances of GBP56m are GBP8m higher than December 2011,
with the payment of the GBP20m final dividend the most significant
outflow. Capital expenditure is first half weighted this year with
GBP8m spent so far. Net working capital has increased GBP2m since
last December and represents 25% of annualised revenue compared
with 27% at the year end.
The Group effective tax rate remains similar to last year at
28.7%. Adjusted basic earnings per share is 50.8p, a 21.8% increase
but due to the higher intangible amortisation charge following last
year's acquisitions, the basic earnings per share is 47.8p, a 16.9%
increase.
Operating Review
The first half of 2012 saw the launch of a number of important
products which will fuel future organic growth. We also continued
the integration of the six acquisitions we completed last year.
Acquisitions remain an important part of our growth strategy and we
continue to look for suitable companies or products that will
support our long-term strategic and financial goals.
Rotork Controls
GBPm H1 2012 H1 2011 Change OCC*(2) Change
Revenue 146.2 129.4 +13.0% +11.4%
Adjusted*(1) operating
profit 46.6 42.9 +8.7% +8.2%
Adjusted operating
margin 31.9% 33.1% -120 bps -90 bps
Order intake was a record in the first half, 7.1% higher than
the first half of last year, resulting in an order book of
GBP95.9m, 5.1% ahead of last December. Growth in Asia and the Far
East has slowed as activity in India and China remained subdued in
the second quarter. However, there was stronger growth in our
markets in the USA, Latin America and Russia, whilst Australia has
started to see the benefit of unconventional gas projects, leading
to increased sales of Rotork Process Control (RPC) actuators. China
and India are traditionally strong power markets for Rotork, and as
we have seen this market slow, sales efforts in those countries
have switched to the more active oil and gas and water markets. At
the same time, there has been good growth in the water market in
the UK and USA.
During the period, we launched our next generation flagship
electric actuator, the IQ3, which brings a number of enhancements
to this key product. The RPC range has also been expanded with the
launch of the CMA, extending the family of process control
actuators. We have received the first orders for both these
products and deliveries will start in the second half. We have also
moved into our new plant in Chennai, India, with both the factory
and RIDEC (Rotork Innovation Design and Engineering Centre) teams
now housed together in a world-class facility.
Our investment in product development and launches, facilities
and people to support further growth has led to a reduction in
divisional operating margin compared with the previous year. These
investments are important for the long-term growth of the division
and will enable us to maintain our market leadership and
technological advantage by combining the most innovative product
range with unmatched local support.
Rotork Fluid Systems
GBPm H1 2012 H1 2011 Change OCC*(2) Change
Revenue 71.4 53.1 +34.6% +31.3%
Adjusted*(1) operating
profit 9.2 4.9 +88.0% +91.3%
Adjusted operating
margin 12.9% 9.2% +370 bps +420 bps
This division had the highest revenue growth in the period, up
34.6%, partly because 2011 was very second half weighted. Order
intake was 26.2% ahead of the comparative period and 14.2% ahead of
the second half of last year with the order book a record at
GBP69.0m, 21.0% higher than December.
The growth has been geographically broad based, with oil and gas
still the dominant end market. Russia and Australia have been
positive as has China, where our RFS sales channels are less well
developed. In Mexico we have made the first deliveries on the large
pipeline order which we won last year and Flow-Quip, our US liquid
pipelines business, has had a strong start to the year. K-Tork, the
business in Dallas, USA, which we purchased last July, has made a
positive contribution in the period and its products have now been
launched to our global sales teams. Overall, North America and Asia
Pacific were the fastest growing regions, with Asia Pacific
overtaking the Middle East as the largest end destination.
The operating margin for RFS was 12.9%, a 370 basis points
improvement on the comparable period last year. Investment in
facilities, product development and product launches in the period
have added cost but our target margin for this division remains
15%.
Rotork Gears
GBPm H1 2012 H1 2011 Change OCC*(2) Change
Revenue 25.3 21.5 +18.1% +17.5%
Adjusted*(1) operating
profit 5.6 4.7 +19.7% +18.6%
Adjusted operating
margin 22.0% 21.7% +30 bps +20 bps
Gears order intake was a record half year increasing 29.7%, with
all of our Gears operations experiencing good growth. This resulted
in a closing order book of GBP11.8m, a 49.4% increase from
December. The highest growth was in the domestic Chinese market,
supplied by our Shanghai factory, and for the subsea and larger
gearboxes supplied by our factory in Italy.
In Houston, because the Gears operation has already outgrown its
facility, additional space has now been taken on to allow further
development of the stocking and finishing centre to serve the US
market. This will provide the capacity to target new key accounts
whilst maintaining service levels. Elsewhere Gears has also been
expanding its sourcing team, which will ensure continued close
control of material costs, and increasing the number of R&D
engineers, which will accelerate the rate of product development. A
new manual gearbox range was launched in the period which will
generate new business in the second half.
Rotork Instruments
GBPm H1 2012
Revenue 8.3
Adjusted*(1) operating
profit 2.7
Adjusted operating
margin 32.6%
Rotork Instruments was created at the end of 2011 with the
acquisition of Fairchild and has made a good start to the year,
performing in line with expectations. With sales into a number of
end markets not served by the other divisions, the introduction of
Instruments accounts for the increase in sales to the range of end
markets we classify as Other. Integration of the business is
proceeding to plan and progress is being made in developing the
sales channels and supporting purchasing and product development
initiatives.
Principal risks and uncertainties
The Group has an established risk management process as part of
the corporate governance framework set out in the 2011 Annual
Report & Accounts. We regularly review the principal risks and
uncertainties facing our businesses and examine the potential
impacts on our processes and procedures. The risk management
process is described in detail on pages 26 and 27 of the 2011
Annual Report & Accounts. We identify risks in the form of
strategic, operational and financial risks and set out mitigations
and improvements to our processes and procedures as necessary to
adapt to these.
The Group has reviewed these risks and concluded that they
remain applicable to the second half of the financial year. The
risks identified include volatility of exchange rates and political
instability in a key end-market and in this context the Board
continues to carefully monitor developments in the Eurozone. Whilst
we do not have a direct presence in Greece, we do have facilities
in many other Eurozone countries, including Spain and Italy, and
the Eurozone represents an important customer base, with
approximately 30% of our revenues euro denominated. Our hedging
policy in respect of the euro is unchanged and we continue to cover
up to 75% of our forecast currency exposure using forward
contracts. However, we have reduced the cash we hold in euros,
returning this to the UK and converting to sterling.
We believe that the broad spread of geographic markets which we
serve limits the risks associated with instability in any given
territory and we will continue to monitor developments to ensure
that we are well-placed to mitigate the effects of any instability
if it arises.
The Board
In May 2012 we welcomed Sally James to the board of Rotork plc.
as a non-executive director. Sally is also a non-executive director
of UBS Limited and UBS Securities France SA, Towry Ltd and a
Governor of the College of Law London. She is an independent Member
of Council of the University of Sussex and chairs its Audit
Committee. Previously Sally held a number of senior legal roles in
Investment Banks in London and Chicago including Managing Director
and General Counsel for UBS Investment Bank. She has also held the
position of Bursar at Corpus Christi College, Cambridge. Sally is a
member of the Audit, Remuneration and Nomination Committees.
Statement of Directors' Responsibilities
The Directors confirm that this condensed consolidated interim
financial information has been prepared in accordance with IAS 34
as adopted by the European Union and that the interim management
report includes a fair review of the information required by DTR
4.2.7 and DTR 4.2.8, namely:
-- an indication of important events that have occurred during
the first six months and their impact on the condensed set of
financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
-- material related party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.
The Directors of Rotork p.l.c. are listed in the Rotork p.l.c.
Annual Report & Accounts for 31 December 2011 with the
exception of Sally James who joined the Board in May 2012. A list
of current directors is maintained in the About Us section of the
Rotork website: www.rotork.com.
Dividend
The interim dividend is to be increased by 13.1% to 16.4p per
ordinary share and will be paid on 28 September 2012 to
shareholders on the register at the close of business on 31 August
2012. Our dividend policy remains to grow core dividends generally
in line with earnings and then supplement core dividends with
additional dividends when projected cash requirements show we are
able to do so. The 2011 final dividend of 22.75p per ordinary share
was paid on 21 May at a cash cost of GBP19.7m.
Outlook
Whilst recognising the challenging economic environment, our
record order book and diverse end market exposure provide the Board
with confidence of achieving further progress in the full year. We
are anticipating as in previous years that the Group's performance
in 2012 will be weighted towards the second half and that margins
will remain similar to those seen in 2011.
By order of the Board
Peter France
Chief Executive
30 July 2012
Consolidated Income Statement
Unaudited
First half First half Full year
2012 2011 2011
Notes GBP000 GBP000 GBP000
---------- ---------- ---------
Revenue 2 245,871 199,415 447,833
Cost of sales (129,992) (104,846) (236,359)
---------- ---------- ---------
Gross profit 115,879 94,569 211,474
Other income 62 37 194
Distribution costs (2,395) (1,726) (4,020)
Administrative expenses (55,416) (43,651) (95,589)
Other expenses (13) (11) (59)
Operating profit before the amortisation
of
acquired intangible assets 61,745 50,273 115,921
Amortisation of acquired intangible
assets (3,628) (1,055) (3,921)
----------------------------------------- ----- ---------- ---------- ---------
Operating profit 2 58,117 49,218 112,000
Financial income 3 3,483 3,765 7,590
Financial expenses 3 (3,485) (3,381) (7,040)
Profit before tax 58,115 49,602 112,550
Income tax expense 4
UK (4,989) (3,939) (9,728)
Overseas (11,715) (10,324) (22,421)
---------- ---------- ---------
(16,704) (14,263) (32,149)
Profit for the period 41,411 35,339 80,401
========== ========== =========
pence pence pence
Basic earnings per share 6 47.8 40.9 93.0
Adjusted basic earnings per share 6 50.8 41.7 96.2
Diluted earnings per share 6 47.6 40.8 92.6
Consolidated Statement of Comprehensive Income and Expense
Unaudited
First half First half Full year
2012 2011 2011
GBP000 GBP000 GBP000
Profit for the period 41,411 35,339 80,401
Other comprehensive income and expense
Foreign exchange translation differences (3,015) 2,894 (2,484)
Actuarial loss in pension scheme net of tax - - (8,499)
Effective portion of changes in fair value
of cash flow hedges 591 (803) 207
---------- ---------- ---------
Income and expenses recognised directly in
equity (2,424) 2,091 (10,776)
Total comprehensive income for the period 38,987 37,430 69,625
========== ========== =========
Consolidated Balance Sheet
Unaudited
30 June 30 June 31 Dec
2012 2011 2011
Notes GBP000 GBP000 GBP000
------- ------- -------
Property, plant and equipment 36,379 27,143 31,954
Intangible assets 102,499 46,717 106,784
Deferred tax assets 12,993 11,594 13,244
Derivative financial instruments 545 - 315
Other receivables 1,490 1,339 1,556
Total non-current assets 153,906 86,793 153,853
Inventories 7 72,239 58,121 62,928
Trade receivables 91,558 76,126 96,734
Current tax 1,841 1,899 988
Derivative financial instruments 1,592 521 677
Other receivables 9,814 8,723 8,461
Cash and cash equivalents 56,185 90,202 48,557
------- ------- -------
Total current assets 233,229 235,592 218,345
Total assets 387,135 322,385 372,198
======= ======= =======
Ordinary shares 8 4,338 4,335 4,338
Share premium 7,905 7,431 7,835
Reserves 11,500 18,292 13,924
Retained earnings 220,793 184,518 198,072
------- ------- -------
Total equity 244,536 214,576 224,169
------- ------- -------
Interest-bearing loans and borrowings 160 125 229
Employee benefits 24,798 16,920 28,142
Deferred tax liabilities 12,305 3,719 12,782
Provisions 2,246 1,796 2,218
------- ------- -------
Total non-current liabilities 39,509 22,560 43,371
Bank Overdraft - - 38
Interest-bearing loans and borrowings 86 23 85
Trade payables 40,518 31,431 38,742
Employee benefits 6,502 5,005 9,624
Current tax 16,427 15,186 13,225
Derivative financial instruments 177 1,001 614
Other payables 34,979 28,610 38,360
Provisions 4,401 3,993 3,970
------- ------- -------
Total current liabilities 103,090 85,249 104,658
Total liabilities 142,599 107,809 148,029
Total equity and liabilities 387,135 322,385 372,198
======= ======= =======
Consolidated Statement of Changes in Equity
Unaudited
Issued Capital
equity Share Translation redemption Hedging Retained
capital premium reserve reserve reserve earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------- --------- ------------- ------------ --------- ---------- ---------
Balance at 31 December
2010 4,334 7,389 14,100 1,644 457 175,927 203,851
Profit for the period - - - - - 35,339 35,339
Other comprehensive
income
--------- --------- ------------- ------------ --------- ---------- ---------
Foreign exchange translation
differences - - 2,894 - - - 2,894
Effective portion of
changes in fair value
of cash flow hedges - - - - (803) - (803)
Total other comprehensive
income - - 2,894 - (803) - 2,091
--------- --------- ------------- ------------ --------- ---------- ---------
Total comprehensive
income - - 2,894 - (803) 35,339 37,430
Transactions with owners,
recorded directly in
equity
Equity settled share
based payment transactions
net of tax - - - - - (671) (671)
Share options exercised
by employees 1 42 - - - - 43
Own ordinary shares
acquired - - - - - (2,184) (2,184)
Own ordinary shares
awarded under share
schemes - - - - - 3,157 3,157
Dividends - - - - - (27,050) (27,050)
--------- --------- ------------- ------------ --------- ---------- ---------
Balance at 30 June
2011 4,335 7,431 16,994 1,644 (346) 184,518 214,576
Profit for the period - - - - - 45,062 45,062
Other comprehensive
income
--------- --------- ------------- ------------ --------- ---------- ---------
Foreign exchange translation
differences - - (5,378) - - - (5,378)
Effective portion of
changes in fair value
of cash flow hedges - - - - 1,010 - 1,010
Actuarial loss on defined
benefit pension plans
net of tax - - - - - (8,499) (8,499)
--------- --------- ------------- ------------ --------- ---------- ---------
Total other comprehensive
income - - (5,378) - 1,010 (8,499) (12,867)
--------- --------- ------------- ------------ --------- ---------- ---------
Total comprehensive
income - - (5,378) - 1,010 36,563 32,195
Transactions with owners,
recorded directly in
equity
Equity settled share
based payment transactions
net of tax - - - - - 476 476
Share options exercised
by employees 3 404 - - - - 407
Own ordinary shares
acquired - - - - - (1,001) (1,001)
Dividends - - - - - (22,484) (22,484)
--------- --------- ------------- ------------ --------- ---------- ---------
Balance at 31 December
2011 4,338 7,835 11,616 1,644 664 198,072 224,169
========= ========= ============= ============ ========= ========== =========
Consolidated Statement of Changes in Equity (continued)
Unaudited
Issued Capital
equity Share Translation redemption Hedging Retained
capital premium reserve reserve reserve earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------- --------- ------------- ------------ --------- ---------- ---------
Balance at 31 December
2011 4,338 7,835 11,616 1,644 664 198,072 224,169
Profit for the period - - - - - 41,411 41,411
Other comprehensive
income
--------- --------- ------------- ------------ --------- ---------- ---------
Foreign exchange translation
differences - - (3,015) - - - (3,015)
Effective portion of
changes in fair value
of cash flow hedges - - - - 591 - 591
Total other comprehensive
income - - (3,015) - 591 - (2,424)
--------- --------- ------------- ------------ --------- ---------- ---------
Total comprehensive
income - - (3,015) - 591 41,411 38,987
Transactions with owners,
recorded directly in
equity
Equity settled share
based payment transactions
net of tax - - - - - (36) (36)
Share options exercised
by employees - 70 - - - - 70
Own ordinary shares
acquired - - - - - (2,050) (2,050)
Own ordinary shares
awarded under share
schemes - - - - - 3,114 3,114
Dividends - - - - - (19,718) (19,718)
--------- --------- ------------- ------------ --------- ---------- ---------
Balance at 30 June
2012 4,338 7,905 8,601 1,644 1,255 220,793 244,536
========= ========= ============= ============ ========= ========== =========
Consolidated Statement of Cash Flows
Unaudited
First half First half Full year
2012 2011 2011
GBP000 GBP000 GBP000
---------- ---------- ---------
Profit for the period 41,411 35,339 80,401
Amortisation of acquired intangible assets 3,628 1,055 3,921
Amortisation of development costs 464 366 732
Depreciation 2,567 2,139 4,479
Equity settled share based payment expense 877 609 1,251
Net profit on sale of property, plant and
equipment (38) (26) (129)
Financial income (3,483) (3,765) (7,590)
Financial expenses 3,485 3,381 7,040
Income tax expense 16,704 14,263 32,149
65,615 53,361 122,254
Increase in inventories (10,456) (8,625) (11,402)
Decrease / (increase) in trade and other receivables 2,075 (5,538) (26,791)
Increase in trade and other payables 1,183 2,812 18,537
Difference between pension charge and cash
contribution (3,242) (2,490) (2,929)
Increase / (decrease) in provisions 494 (614) (436)
(Decrease) / increase in employee benefits (3,224) (4,365) 1,692
---------- ---------- ---------
52,445 34,541 100,925
Income taxes paid (14,442) (9,307) (27,754)
---------- ---------- ---------
Cash flows from operating activities 38,003 25,234 73,171
Purchase of property, plant and equipment (7,649) (3,319) (10,143)
Development costs capitalised (924) (492) (1,328)
Proceeds from sale of property, plant and
equipment 74 169 274
Acquisition of subsidiaries, net of cash acquired 280 (2,070) (59,876)
Contingent consideration paid (150) - (41)
Interest received 403 338 694
---------- ---------- ---------
Cash flows from investing activities (7,966) (5,374) (70,420)
Issue of ordinary share capital 70 42 450
Purchase of ordinary share capital (2,050) (2,184) (3,185)
Interest paid (20) (20) (117)
Repayment of amounts borrowed (49) - (421)
Repayment of finance lease liabilities (25) (35) (54)
Dividends paid on ordinary shares (19,718) (27,050) (49,534)
Cash flows from financing activities (21,792) (29,247) (52,861)
Net increase in cash and cash equivalents 8,245 (9,387) (50,110)
Cash and cash equivalents at 1 January 48,519 97,881 97,881
Effect of exchange rate fluctuations on cash
held (579) 1,708 748
---------- ---------- ---------
Cash and cash equivalents at end of period 56,185 90,202 48,519
========== ========== =========
Notes to the Half Year Report
1. Status of condensed consolidated interim statements,
accounting policies and basis of significant estimates
General information
Rotork p.l.c. is a company domiciled in England.
The Company has its primary listing on the London Stock
Exchange.
The condensed consolidated interim financial statements for the
6 months ended 30 June 2012 and 30 June 2011 are unaudited and the
auditors have not reported in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity'.
The information shown for the year ended 31 December 2011 does
not constitute statutory accounts within the meaning of Section 435
of the Companies Act 2006, statutory accounts for the year ended 31
December 2011 were approved by the Board on 27 February 2012 and
delivered to the Registrar of Companies. The Auditors' report on
those financial statements was unqualified, did not contain an
emphasis of matter paragraph and did not contain any statement
under Section 498 of the Companies Act 2006.
The consolidated financial statements of the Group for the year
ended 31 December 2011 are available from the Company's registered
office or website, see note 15.
Basis of preparation
The condensed consolidated interim financial statements of the
Company for the six months ended 30 June 2012 comprise the Company
and its subsidiaries (together referred to as 'the Group').
These condensed consolidated interim financial statements have
been prepared in accordance with the Disclosure and Transparency
Rules of the Financial Services Authority and with International
Accounting Standard 34, 'Interim Financial Reporting' as adopted by
the European Union. They do not include all of the information
required for full annual financial statements and should be read in
conjunction with the consolidated financial statements of the Group
for the year ended 31 December 2011, which have been prepared in
accordance with International Financial Reporting Standards (IFRSs)
as adopted by the European Union.
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
condensed consolidated interim financial information. 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.
1. Status of condensed consolidated interim statements,
accounting policies and basis of significant estimates
(continued)
Critical accounting estimates and judgements
The Group makes estimates and assumptions regarding the future.
Estimates and judgements are continually evaluated based on
historical experience, and other factors, including expectations of
future events that are believed to be reasonable under the
circumstances.
In the future, actual experience may deviate from these
estimates and assumptions. The estimates and assumptions that have
a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the current financial year
are discussed in the financial statements for the year ended 31
December 2011.
Accounting policies
The accounting policies applied and significant estimates used
by the Group in these condensed consolidated interim financial
statements are the same as those applied by the Group in its
consolidated financial statements for the year ended 31 December
2011.
New accounting standards and interpretations
The amendments to IFRS 7 Financial Instruments: disclosures are
applicable for the financial year ending 31 December 2012.
Application of this standard has not had any material impact on the
disclosures, net assets or results of the Group.
Recent accounting developments
The following standards and interpretations were issued but are
not yet effective and have not been adopted as application was not
mandatory for the year (and in some cases not yet endorsed for use
in the EU):
-- IFRS 9 Financial Instruments
-- IFRS 10 Consolidated Financial Statements
-- IFRS 11 Joint Arrangements
-- IFRS 12 Disclosure of Interests in Other Entities
-- IFRS 13 Fair Value Measurement
-- IAS 19 (amendment) - Employee benefits
-- IAS 1 Financial Statement presentation (amendments)
The directors anticipate that the adoption of these standards
and interpretations will not have a material impact on the net
assets or results of the Group.
2. Analysis by Operating Segment:
Half year to 30 June 2012
Fluid
Controls Systems Gears Instruments Elimination Unallocated Group
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------- --------- -------- ------------- ------------- ------------- ---------
Revenue from
external customers 146,221 71,438 19,915 8,297 - - 245,871
Inter segment
revenue - - 5,419 - (5,419) - -
---------- --------- -------- ------------- ------------- ------------- ---------
Total revenue 146,221 71,438 25,334 8,297 (5,419) - 245,871
---------- --------- -------- ------------- ------------- ------------- ---------
Operating profit
before amortisation
of acquired
intangible assets 46,611 9,182 5,575 2,702 - (2,325) 61,745
Amortisation
of acquired
intangibles
assets (368) (1,196) (109) (1,955) - - (3,628)
Operating profit 46,243 7,986 5,466 747 - (2,325) 58,117
---------- --------- -------- ------------- ------------- ------------- ---------
Net financing
expense (2)
Income tax expense (16,704)
---------
Profit for the
period 41,411
---------
Half year to 30 June 2011
Fluid
Controls Systems Gears Instruments Elimination Unallocated Group
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------- --------- -------- ------------- ------------- ------------- ---------
Revenue from
external customers 129,438 53,061 16,916 - - - 199,415
Inter segment
revenue - - 4,543 - (4,543) - -
---------- --------- -------- ------------- ------------- ------------- ---------
Total revenue 129,438 53,061 21,459 - (4,543) - 199,415
---------- --------- -------- ------------- ------------- ------------- ---------
Operating profit
before amortisation
of acquired
intangible assets 42,861 4,885 4,658 - - (2,131) 50,273
Amortisation
of acquired
intangibles
assets (80) (975) - - - - (1,055)
Operating profit 42,781 3,910 4,658 - - (2,131) 49,218
---------- --------- -------- ------------- ------------- ------------- ---------
Net financing
income 384
Income tax expense (14,263)
---------
Profit for the
period 35,339
---------
Year to 30 December 2011
Fluid
Controls Systems Gears Instruments Elimination Unallocated Group
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------- --------- -------- ------------- ------------- ------------- ---------
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
---------- --------- -------- ------------- ------------- ------------- ---------
Operating profit
before amortisation
of acquired
intangible assets 92,085 17,077 10,336 394 - (3,971) 115,921
Amortisation
of acquired
intangibles
assets (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 the
year 80,401
---------
2. Operating segments (continued)
Revenue from external customers by location of customer
First half First half Full year
2012 2011 2011
GBP000 GBP000 GBP000
UK 19,337 15,033 25,703
Rest of Europe 70,228 60,326 148,513
USA 54,869 38,082 87,144
Other Americas 21,784 16,609 38,256
Rest of the World 79,653 69,365 148,217
----------- ----------- ----------
245,871 199,415 447,833
----------- ----------- ----------
3. Net financial (expense) / income
First half First half Full year
2012 2011 2011
GBP000 GBP000 GBP000
Interest income 349 359 746
Expected return on assets in the pension
schemes 3,005 3,338 6,739
Foreign exchange gain 129 68 105
----------- ----------- ----------
3,483 3,765 7,590
----------- ----------- ----------
Interest expense (59) (29) (116)
Interest charge on pension scheme liabilities (3,197) (3,240) (6,468)
Foreign exchange loss (229) (112) (456)
----------- ----------- ----------
(3,485) (3,381) (7,040)
----------- ----------- ----------
4. Income taxes
Income tax expense is recognised based on management's best
estimate of the weighted average annual income tax rate expected
for the full financial year. The estimated average annual tax rate
used for the year ended 31 December 2012 is 28.7% (the effective
tax rate for the year ended 31 December 2011 was 28.6%).
The Group continues to expect its effective corporation tax rate
to be higher than the standard UK rate due to higher tax rates in
the US, China, Canada, France, Germany, Italy, Japan and India.
5. Dividends
First half First half Full year
2012 2011 2011
GBP000 GBP000 GBP000
---------- ---------- ---------
The following dividends were paid in
the period per
qualifying ordinary share:
22.75p final dividend (2011: 19.75p) 19,718 17,065 17,097
14.5p interim dividend - - 12,543
Additional interim dividend of 11.5p
paid June 2011 - 9,985 9,948
Additional interim dividend of 11.5p
paid December 2011 - - 9,946
---------- ---------- ---------
19,718 27,050 49,534
---------- ---------- ---------
The following dividends per qualifying
ordinary share were declared / proposed
at the balance sheet date:
22.75p final dividend - - 19,736
16.4p interim dividend declared (2011:
14.5p) 14,229 12,571 -
Additional dividend of 11.5p to be paid
in December 2011 - 10,000 -
---------- ---------- ---------
14,229 22,571 19,736
---------- ---------- ---------
The interim dividend of 16.4 pence will be payable to
shareholders on 28 September 2012 to those on the register on 31
August 2012.
6. Earnings per share
Earnings per share is calculated using the profit attributable
to the ordinary shareholders for the period and 86.6m shares (six
months to 30 June 2011: 86.5m; year to 31 December 2010: 86.5m)
being the weighted average ordinary shares in issue.
Diluted earnings per share is calculated using the profit
attributable to the ordinary shareholders for the period and the
weighted average ordinary shares in issue adjusted to assume
conversion of all potentially dilutive ordinary shares under the
Group's option schemes, Sharesave plan and Long-term incentive
plan.
Adjusted basic earnings per share is calculated using the profit
attributable to the ordinary shareholders for the year after adding
back the after tax amortisation charge.
First half First half Full year
2012 2011 2011
GBP000 GBP000 GBP000
---------- ---------- ---------
Net profit attributable to ordinary
shareholders 41,411 35,339 80,401
Amortisation 3,628 1,055 3,921
Tax effect on amortisation at effective
rate (1,043) (303) (1,120)
---------- ---------- ---------
Adjusted net profit attributable to
ordinary shareholders 43,996 36,091 83,202
---------- ---------- ---------
Weighted average number of ordinary
shares
during the year 86,571 86,476 86,486
---------- ---------- ---------
Adjusted basic earnings per share 50.8p 41.7p 96.2p
---------- ---------- ---------
7. Inventories
30 June 30 June 31 Dec
2012 2011 2011
GBP000 GBP000 GBP000
Raw materials and consumables 43,832 35,075 40,609
Work in progress 12,146 10,131 13,209
Finished goods 16,261 12,915 9,110
-------- -------- --------
72,239 58,121 62,928
-------- -------- --------
8. Share capital and reserves
The number of ordinary 5p shares in issue at 30 June 2012 was
86,763,000 (30 June 2011: 86,690,000; 31 December 2011:
86,750,000).
The Group acquired 101,010 of its own shares through purchases
on the London Stock Exchange during the period, (30 June 2011:
128,162; 31 December 2011: 193,261). The total amount paid to
acquire the shares was GBP2,050,000 (30 June 2011: GBP2,184,000; 31
December 2011: GBP3,185,000), and this has been deducted from
shareholders equity. The shares are held in trust for the benefit
of Directors and employees for future payments under the Share
Incentive Plan and Long-term incentive plan. All issued shares are
fully paid.
Awards under the Group's long-term incentive plan and share
investment plan vested during the period and 55,539 and 138,493
shares respectively were transferred to employees.
Employee share options schemes: options exercised during the
period to 30 June 2012 resulted in 12,817 ordinary 5p shares being
issued (30 June 2011: 8,731 shares), with exercise proceeds of
GBP70,000 (30 June 2011: GBP43,000). The weighted average market
share price at the time of exercise was GBP20.14 (30 June 2011:
GBP17.19) per share.
9. Interest-bearing loans and borrowings
The following loans and borrowings were issued and repaid during
the six months ended 30 June 2012:
Carrying
Year of Interest value
maturity rate GBP000
Balance at 1 January 2012 314
Movement in the period:
Loans 2012-16 0% (49)
Repayment of finance leases 2012-15 3% - 8% (25)
Exchange differences 6
Balance at 30 June 2012 246
---------
10. Related parties
The Group has a related party relationship with its subsidiaries
and with its directors and key management. A list of subsidiaries
is shown in the 2011 Annual Report & Accounts. Transactions
between key subsidiaries for the sale and purchase of products or
between the subsidiary and parent for management charges are priced
on an arms length basis.
Sales to subsidiaries and associates of BAE Systems plc, a
related party by virtue of non-executive director IG King's
directorship of that company, totalled GBP2,000 during the period
to 30 June 2012 (First half 2011: GBPnil; Full year 2011:
GBP29,000) and GBP2,000 was outstanding at 30 June 2012 ( 30 June
2011: GBPNil; 31 December 2011: GBPNil).
11. Key management emoluments
The emoluments of those members of the management team,
including directors, who are responsible for planning, directing
and controlling the activities of the Group are:
First half First half Full year
2012 2011 2011
GBP000 GBP000 GBP000
Emoluments including social security
costs 2,138 1,852 3,782
Post employment benefits 227 199 392
Share based payments 591 451 844
----------- ----------- ----------
2,956 2,502 5,018
----------- ----------- ----------
12. Share-based payments
A grant of shares was made on 1 March 2012 to selected members
of senior management at the discretion of the Remuneration
Committee. The key information and assumptions from this grant
were:
Equity Settled Equity Settled
TSR condition EPS condition
Grant date 1 March 2012 1 March 2012
Share price at grant date GBP20.71 GBP20.71
Shares / Share equivalents under scheme 59,993 59,993
Vesting period 3 years 3 years
Expected volatility 27.6% 27.6%
Risk free rate 0.5% 0.5%
Expected dividends expressed as a dividend
yield 2.4% 2.4%
Probability of ceasing employment before
vesting 5% p.a. 5% p.a.
Fair value GBP12.49 GBP19.36
The basis of measuring fair value is consistent with that
disclosed in the 2011 Annual Report & Accounts.
13. Events Post Balance Sheet Date
There have been no significant events after the 30 June 2012
which would materially impact either the Consolidated Income
statement or the Consolidated Balance Sheet.
14. Shareholder information
This interim report is being sent to shareholders who requested
it and copies are available to the public from the Registered
Office at the address below. The interim report is also available
on the Rotork website at www.rotork.com.
General shareholder contact numbers:
Shareholder General Enquiry Number (UK): 0871 384 2030
International Shareholders - General Enquiries: (00) 44 121 415 7047
For enquires regarding the Dividend Reinvestment Plan (DRIP)
contact:
The Share Dividend Team Equiniti Aspect House Spencer Road
Lancing West Sussex BN99 6DA
Tel: 0871 384 2268
15. Group information
Secretary and registered office:
Stephen Rhys Jones
Rotork plc
Rotork House
Brassmill Lane
Bath
BA1 3JQ
Company website:
www.rotork.com
Investor Section:
http://www.rotork.com/en/investors/index/
16. Financial Calendar
31 July 2012 Announcement of half year financial results for 2012
29 August 2012 Ex-dividend date for 2012 interim dividend
31 August 2012 Record date for 2012 interim dividend
28 September 2012 Payment date for 2012 interim dividend
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR WGUAAMUPPGWU
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