TIDMROR
RNS Number : 0015L
Rotork PLC
06 August 2013
Rotork plc
2013 Half Year Results
HY 2013 HY 2012 % change OCC *(2)
% change
Revenue GBP276.1m GBP245.9m +12.3% +5.2%
Adjusted*(1) operating
profit GBP70.2m GBP61.7m +13.7% +5.6%
Adjusted operating margin 25.4% 25.1% +30 bps +10 bps
Profit before tax GBP63.6m GBP58.1m +9.5% +5.5%
Adjusted*(1) profit before
tax GBP69.4m GBP61.7m +12.3% +4.4%
Basic earnings per share 52.8p 47.8p +10.5% +6.5%
Adjusted*(1) basic earnings
per share 57.6p 50.8p +13.4% +5.5%
Interim dividend 18.05p 16.40p +10.1%
*(1) Adjusted figures are before the amortisation of acquired
intangible assets
*(2) OCC is organic constant currency
Highlights
-- Record first-half revenue and profit in each division
-- Order intake up 9.4%
-- Order book of GBP208m, up 15.1% from December
-- Successfully integrating Soldo and Schischek
-- Acquisitions of Flowco, GTA and Renfro
-- Continued expansion of product portfolio
-- Interim dividend increased by 10.1%
Peter France, Chief Executive, commenting on the results,
said:
"Our strategy of broadening our product offering and investing
in our infrastructure has enabled us to grow order intake, revenue
and profit all to record levels despite the weak economic
conditions in some of our regions.
We continue to invest for further growth and anticipate that, as
in previous years, the Group's performance in 2013 will be weighted
towards the second half. The order book, project activity in the
broad geographic regions we serve and our diverse end market
exposure provide the Board with confidence of achieving further
progress in the full year."
For further information, please contact:
Rotork plc Tel: 01225 733200
Peter France, Chief Executive
Jonathan Davis, Finance Director
FTI Consulting Tel: 020 7269 7291
Nick Hasell / Susanne Yule
Review of operations
Business Review
Rotork has performed well in the six months to 30 June 2013.
Order intake has continued to exceed revenue, resulting in a record
half year order book of GBP208.2m, 15.1% higher than last December.
Order intake was 9.4% higher than the comparative period, with
Rotork Fluid Systems showing the strongest growth (20.2%). Revenue
at GBP276.1m was up 12.3% and adjusted operating profit was 13.7%
higher at GBP70.2m.
Across the divisions, North America and parts of Asia have
performed particularly well, and this has resulted in record order
intake in the first half of 2013. Project visibility remains good
and quote activity in the second quarter was encouraging. Whilst
activity levels remain high for Rotork Fluid Systems, ongoing weak
economic conditions in certain markets have impacted Controls, our
electric actuator business, with weakness in some European markets
and the Indian power market being particularly affected.
We have managed our cost base effectively through the period,
the higher costs associated with product introductions, product
development and the investment in facilities being offset by lower
material costs and operational gearing. As a result, margins were
slightly ahead of the prior year.
The development of our new facility in Bath is on track and we
expect to move in during September. We are also expanding our
facilities in Singapore and moving to new sites in Spain, Mexico
and Malaysia in the second half of the year. Our Leeds based
business has experienced a delay in the development of the new site
and some of the costs are now likely to fall into 2014.
The integration of Schischek, acquired in January 2013, and
Soldo acquired in November 2012, is going well and both businesses
have made a positive contribution in the period. We have announced
two further acquisitions today. GT Attuatori Group expands our
pneumatic actuator portfolio, whilst Renfro Associates Inc provides
a US based valve adaption manufacturer, mirroring the service our
UK based Valvekits business offers in Europe.
Rotork Site Services, our after-sales and support activity,
continues to grow. Subsequent to the period-end, we also completed
the small acquisition of Flowco Ltd, a UK-based valve and actuator
service company, which will strengthen our presence in the water
utilities market in the south of England.
Financial results
Reported revenue rose by 12.3% to GBP276.1m, which included a
2.9% (GBP7.2m) benefit from currency and a 4.2% (GBP10.4m) benefit
from the acquisitions of Soldo and Schischek. Adjusted operating
profit grew 5.6% on an organic constant currency (OCC) basis to
GBP65.2m, with the acquisitions adding a further GBP3.5m between
them, and currency a benefit of GBP1.5m. This represents an OCC
margin of 25.2%, a 10 basis points improvement over the same point
last year. With the benefit of acquisitions and currency included,
adjusted operating profit is 13.7% higher at GBP70.2m, a 25.4%
margin.
The Group effective tax rate remains similar to full year 2012
at 28.0%. Adjusted basic earnings per share is 57.6p, a 13.4%
increase. The higher intangible amortisation charge following the
acquisition of Soldo and Schischek results in basic earnings per
share of 52.8p, an increase of 10.5%.
Net cash balances of GBP41.6m were GBP18.3m lower than December
2012, with the acquisitions of Schischek (GBP34.3m) and payment of
the final dividend (GBP23.1m) representing the largest outflows in
the period. Net working capital increased by GBP17.3m since
December 2012, a rise of 14.0%, of which GBP5.3m is currency
related. Net working capital represents 26.8% of annualised revenue
compared with 25.5% last year end and, given the anticipated
weighting of revenue to the second half of the year, this increase
is to be expected.
Operating Review
Delivery against our twin-track growth strategy is reflected in
these results with the benefit of the Soldo and Schischek
acquisitions supplementing the organic growth of our divisions. We
continue to look for opportunities to grow both organically and by
acquisition that will support our long-term strategic and financial
goals.
Rotork Controls
GBPm H1 2013 H1 2012 Change OCC*(2) Change
Revenue 152.6 146.2 +4.4% -3.3%
Adjusted*(1) operating
profit 49.0 46.6 +5.2% -2.2%
Adjusted operating
margin 32.1% 31.9% +20 bps +30 bps
Order intake rose by 2.3% against a strong prior year that
benefited from the active unconventional gas market in Australia
and shale oil and gas market in America. The lack of projects to
replace the large Australian orders will have an impact on order
intake in the year although revenue will benefit in the second half
as product is supplied. India has remained subdued due to the lack
of activity in the power sector. The USA market remains active with
the UK also performing well. The order book rose 7.9% to
GBP111.1m.
The new products introduced last year are gaining traction and
have been well received by customers. We continue to move
production from IQ2 to IQ3 as more model sizes within the IQ3 range
are launched and we gain certification in more geographic markets.
This transition is expected to gather pace in the second half of
2013 and the first half of 2014.
The integration of Schischek is going to plan and we are already
benefiting from an increased exposure to the heating, ventilation
and air conditioning market.
Rotork Fluid Systems
GBPm H1 2013 H1 2012 Change OCC*(2) Change
Revenue 89.2 71.4 +24.9% +21.1%
Adjusted*(1) operating
profit 14.2 9.2 +54.2% +50.0%
Adjusted operating
margin 15.9% 12.9% +300 bps +300 bps
Following on from a very strong performance last year Fluid
Systems has continued to grow at the fastest rate of all our
divisions. Revenue growth was 24.9% and order intake was 20.2%
ahead of the comparative period. The order book is a new high of
GBP82.3m, up 23.8% from December 2012.
Most regional businesses have seen strong demand for fluid
systems products with oil and gas still the dominant end-market.
Europe has been very strong and has been supported by the European
valve industry supplying global oil and gas infrastructure
projects. The USA and Latin America markets are also positive and
we are starting to make good progress in Asia, a target market for
Fluid Systems.
The operating margin was 15.9%, a 300 basis points improvement
on the comparable period, reflecting the benefit of operational
gearing and effective material cost management.
Rotork Gears
GBPm H1 2013 H1 2012 Change OCC*(2) Change
Revenue 27.1 25.3 +7.1% +4.5%
Adjusted*(1) operating
profit 6.1 5.6 +8.8% +7.0%
Adjusted operating
margin 22.3% 22.0% +30 bps +50 bps
Gears order intake was broadly flat compared with the record
first half of last year but did exceed output in the period. Our
sales effort remains focused on winning new customers in those
parts of the world with strong domestic valvemaker industries and
we have seen some success in this regard. With revenue 7.1% higher
at GBP27.1m, the order book increased by 28.3% to GBP12.7m.
Our European operations performed well, with our Italian
factory, where our subsea range is made, making progress and our
Spanish subsidiary growing as a result of more business from a key
account. Deliveries of subsea gearboxes ordered last year were one
of the drivers behind the growth in revenue in Europe whilst China
also saw a good improvement in revenue. We continue to invest in
our sourcing and R&D teams within the division. Material costs
are our largest expense and ensuring that these are controlled and,
where possible reduced, remains a key focus and, in this regard, we
continue to make progress in establishing our Indian supply chain.
The increase in our R&D resource last year has already resulted
in some new products which are helping broaden our addressable
market and the coming months will see the launch of further range
expansions and new developments.
Rotork Instruments
GBPm H1 2013 H1 2012 Change OCC*(2) Change
Revenue 12.4 8.3 +48.9% +10.4%
Adjusted*(1) operating
profit 3.9 2.7 +43.8% +3.7%
Adjusted operating
margin 31.4% 32.6% -120 bps -200 bps
Order intake was weighted to the first half in Instruments last
year and, against this background, Fairchild has grown 10.5%
organically. Inclusive of the initial contribution from Soldo,
purchased last November, total order input was 53.8% higher. As the
division with the shortest lead times, the order book in
Instruments is only GBP2.1m but this is a 31.8% increase since the
start of the year. Soldo has been fully integrated with Fairchild
in the USA and in the rest of the world the integration of the
sales teams is well underway. In addition to the increased
investment in sales resources, the engineering team has increased
as we look to accelerate product development initiatives. These
increased costs are the key factor behind the 120 basis point
margin reduction as we invest for future growth. With Soldo
generating 35.5% margins, the division as a whole achieved a margin
of 31.4%.
Principal risks and uncertainties
The Group has an established risk management process as part of
the corporate governance framework set out in the 2012 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 30 and 31 of the 2012
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
manage these risks. The Group has reviewed these risks and
concluded that they remain applicable to the second half of the
financial year. The principal risks and uncertainties are:
-- Competition on price as a result of a competitor moving to
manufacture in a lower cost area of the world;
-- Rotork not having the appropriate products, either in terms of features or costs;
-- Lower investment in Rotork's traditional market sectors;
-- Major in field product failure arising from a component
defect or warranty issue which might require a product recall;
-- Failure of a key supplier or a tooling failure at a supplier causing disruption to planned manufacturing;
-- Failure of an acquisition to deliver the growth or synergies
anticipated, due to incorrect assumptions or changing market
conditions, or failure to integrate an acquisition to ensure
compliance with Rotork's policies and procedures;
-- Failure of the centralised IT environment, or loss or theft of data;
-- Volatility of exchange rates;
-- Political instability in a key end-market;
-- Defined benefit pension scheme deficit.
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 plc are listed in the Rotork plc Annual
Report & Accounts for 31 December 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 10.1% to 18.05p per
ordinary share and will be paid on 27 September 2013 to
shareholders on the register at the close of business on 30 August
2013.
Outlook
We continue to invest for further growth and anticipate that, as
in previous years, the Group's performance in 2013 will be weighted
towards the second half. The order book, project activity in the
broad geographic regions we serve and our diverse end market
exposure provide the Board with confidence of achieving further
progress in the full year.
By order of the Board
Peter France
Chief Executive
5 August 2013
Independent Review Report to Rotork plc
Introduction
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2013 which comprises the Consolidated
Income statement, Consolidated Statement of Comprehensive Income
and Expense, Consolidated Balance sheet, Consolidated Statement of
Changes in Equity, Consolidated Statement of Cash flows and the
related explanatory notes. We have read the other information
contained in the half-yearly financial report and considered
whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of
financial statements.
This report is made solely to the company in accordance with the
terms of our engagement to assist the company in meeting the
requirements of the Disclosure and Transparency Rules ("the DTR")
of the UK's Financial Conduct Authority ("the UK FCA"). Our review
has been undertaken so that we might state to the company those
matters we are required to state to it in this report and for no
other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the company
for our review work, for this report, or for the conclusions we
have reached.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
The annual financial statements of the group are prepared in
accordance with IFRSs as adopted by the EU. The condensed set of
financial statements included in this half-yearly financial report
has been prepared in accordance with IAS 34Interim Financial
Reporting as adopted by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review 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 issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
(UK and Ireland) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Whilst the company has previously produced a half-yearly report
containing a condensed set of financial statements, those financial
statements have not previously been subject to a review by an
independent auditor. As a consequence, the review procedures set
out above have not been performed in respect of the comparative
period for the six months ended 30 June 2012.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2013 is not prepared, in all material respects, in accordance
with IAS 34 as adopted by the EU and the DTR of the UK FCA.
Philip Cotton
for and on behalf of KPMG Audit Plc
Chartered Accountants
100 Temple Street, Bristol, BS1 6AG
5 August 2013
Consolidated Income Statement
First half First half Full year
2013 2012 2012
Notes GBP000 GBP000 GBP000
---------- ---------- ---------
Revenue 2 276,051 245,871 511,747
Cost of sales (143,805) (129,992) (272,199)
---------- ---------- ---------
Gross profit 132,246 115,879 239,548
Other income 73 62 908
Distribution costs (2,688) (2,395) (4,214)
Administrative expenses (65,161) (55,416) (111,743)
Other expenses (4) (13) (32)
Operating profit before the amortisation
of
acquired intangible assets 70,210 61,745 131,866
Amortisation of acquired intangible
assets (5,744) (3,628) (7,399)
----------------------------------------- ----- ---------- ---------- ---------
Operating profit 2 64,466 58,117 124,467
Net finance expense 3 (856) (2) (273)
Profit before tax 63,610 58,115 124,194
Income tax expense 4
UK (4,327) (4,284) (8,686)
Overseas (13,500) (12,420) (26,193)
---------- ---------- ---------
(17,827) (16,704) (34,879)
Profit for the period 45,783 41,411 89,315
========== ========== =========
pence pence pence
Basic earnings per share 7 52.8 47.8 103.1
Adjusted basic earnings per share 7 57.6 50.8 109.3
Diluted earnings per share 7 52.6 47.6 102.6
Adjusted diluted earnings per share 7 57.3 50.6 108.7
Consolidated Statement of Comprehensive Income and Expense
First half First half Full year
2013 2012 2012
GBP000 GBP000 GBP000
Profit for the period 45,783 41,411 89,315
Other comprehensive income and expense
Items that may be subsequently reclassified
to the income statement:
Foreign currency translation differences 6,788 (3,015) (3,967)
Effective portion of changes in fair value
of cash flow
hedges net of tax (1,829) 591 399
---------- ---------- ---------
4,959 (2,424) (3,568)
Items that are not subsequently reclassified
to the income statement:
Actuarial loss in pension scheme net of tax - - (8,598)
---------- ---------- ---------
Income and expenses recognised directly in
equity 4,959 (2,424) (12,166)
Total comprehensive income for the period 50,742 38,987 77,149
========== ========== =========
Note: The June 2013 results are unaudited and have been subject
to review by KPMG. The June 2012 results are unaudited and have not
been subject to review. The December 2012 results have been audited
by KPMG.
Consolidated Balance Sheet
30 June 30 June 31 Dec
2013 2012 2012
Notes GBP000 GBP000 GBP000
------- ------- -------
Property, plant and equipment 44,521 36,379 38,445
Goodwill 105,547 67,664 80,729
Intangible assets 56,435 34,835 40,743
Deferred tax assets 13,549 12,993 12,984
Derivative financial instruments - 545 -
Other receivables 1,644 1,490 1,674
Total non-current assets 221,696 153,906 174,575
Inventories 8 86,723 72,239 71,100
Trade receivables 103,862 91,558 95,822
Current tax 2,162 1,841 1,946
Derivative financial instruments 582 1,592 2,254
Other receivables 12,554 9,814 9,662
Cash and cash equivalents 41,594 56,185 59,868
------- ------- -------
Total current assets 247,477 233,229 240,652
Total assets 469,173 387,135 415,227
======= ======= =======
Ordinary shares 9 4,341 4,338 4,340
Share premium 8,301 7,905 8,258
Reserves 15,315 11,500 10,356
Retained earnings 268,870 220,793 246,369
------- ------- -------
Total equity 296,827 244,536 269,323
------- ------- -------
Interest-bearing loans and borrowings 1,936 160 116
Employee benefits 30,727 24,798 32,060
Deferred tax liabilities 15,799 12,305 13,488
Provisions 1,881 2,246 2,701
------- ------- -------
Total non-current liabilities 50,343 39,509 48,365
Interest-bearing loans and borrowings 226 86 56
Trade payables 42,710 40,518 36,355
Employee benefits 10,312 6,502 10,742
Current tax 19,507 16,427 11,143
Derivative financial instruments 3,104 177 96
Other payables 41,576 34,979 35,212
Provisions 4,568 4,401 3,935
------- ------- -------
Total current liabilities 122,003 103,090 97,539
Total liabilities 172,346 142,599 145,904
Total equity and liabilities 469,173 387,135 415,227
======= ======= =======
Note: The June 2013 Balance sheet is unaudited and has been
subject to review by KPMG. The June 2012 balance sheet is unaudited
and has not been subject to review. The December 2012 balance sheet
has been audited by KPMG.
Consolidated Statement of Changes in Equity
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 currency translation
differences - - (3,015) - - - (3,015)
Effective portion of
changes in fair value
of cash flow hedges - - - - 782 - 782
Tax in other comprehensive
income - - - - (191) (191)
--------- --------- ------------- ------------ ---------- ----------- ---------
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 - - - - - (47) (47)
Tax on equity settled
share based payment
transactions - - - - - 11 11
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
Profit for the period - - - - - 47,904 47,904
Other comprehensive income
--------- --------- ------------- ------------ ---------- ----------- ---------
Foreign currency translation
differences - - (952) - - - (952)
Effective portion of
changes in fair value
of cash flow hedges - - - - (243) - (243)
Actuarial loss on defined
benefit pension plans
net of tax - - - - - (9,912) (9,912)
Tax in other comprehensive
income - - - - 51 1,314 1,365
--------- --------- ------------- ------------ ---------- ----------- ---------
Total other comprehensive
income - - (952) - (192) (8,598) (9,742)
--------- --------- ------------- ------------ ---------- ----------- ---------
Total comprehensive income - - (952) - (192) 39,306 38,162
Transactions with owners,
recorded directly in
equity
Equity settled share
based payment transactions
net of tax - - - - - 1,139 1,139
Tax on equity settled
share based payment
transactions - - - - - 116 116
Share options exercised
by employees 2 353 - - - - 355
Own ordinary shares acquired - - - - - (800) (800)
Own ordinary shares awarded
under share schemes - - - - - 21 21
Dividends - - - - - (14,206) (14,206)
--------- --------- ------------- ------------ ---------- ----------- ---------
Balance at 31 December
2012 4,340 8,258 7,649 1,644 1,063 246,369 269,323
========= ========= ============= ============ ========== =========== =========
Note: The June 2012 and December 2012 Statement of changes of
equity is unaudited and has not been reviewed. The Balance at 31
December 2012 has been audited by KPMG.
Consolidated Statement of Changes in Equity (continued)
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
2012 4,340 8,258 7,649 1,644 1,063 246,369 269,323
Profit for the period - - - - - 45,783 45,783
Other comprehensive income
--------- --------- ------------- ------------ ---------- ----------- ---------
Foreign currency translation
differences - - 6,788 - - - 6,788
Effective portion of
changes in fair value
of cash flow hedges - - - - (2,383) - (2,383)
Tax in other comprehensive
income - - - - 554 - 554
--------- --------- ------------- ------------ ---------- ----------- ---------
Total other comprehensive
income - - 6,788 - (1,829) - 4,959
--------- --------- ------------- ------------ ---------- ----------- ---------
Total comprehensive income - - 6,788 - (1,829) 45,783 50,742
Transactions with owners,
recorded directly in
equity
Equity settled share
based payment transactions - - - - - (1,301) (1,301)
Tax on equity settled
share based payment
transactions - - - - - 302 302
Share options exercised
by employees 1 43 - - - - 44
Own ordinary shares acquired - - - - - (3,601) (3,601)
Own ordinary shares awarded
under share schemes - - - - - 4,400 4,400
Dividends - - - - - (23,082) (23,082)
--------- --------- ------------- ------------ ---------- ----------- ---------
Balance at 30 June 2013 4,341 8,301 14,437 1,644 (766) 268,870 296,827
========= ========= ============= ============ ========== =========== =========
Note: The June 2013 Statement of changes of equity is unaudited
and has been subject to review by KPMG.
Consolidated Statement of Cash Flows
First half First half Full year
2013 2012 2012
GBP000 GBP000 GBP000
---------- ---------- ---------
Profit for the period 45,783 41,411 89,315
Amortisation of acquired intangible assets 5,744 3,628 7,399
Amortisation of development costs 602 464 924
Depreciation 3,130 2,567 5,452
Equity settled share based payment expense 1,037 877 2,030
Net profit on sale of property, plant and
equipment (40) (38) (859)
Net finance expense 856 2 273
Income tax expense 17,827 16,704 34,879
74,939 65,615 139,413
Increase in inventories (11,633) (10,456) (9,474)
(Increase) / decrease in trade and other receivables (5,409) 2,075 (2,220)
Increase / (decrease) in trade and other payables 7,910 1,183 (3,341)
Difference between pension charge and cash
contribution (285) (3,242) (7,211)
(Decrease) / increase in provisions (421) 494 (264)
(Decrease) / increase in employee benefits (1,021) (3,224) 1,711
---------- ---------- ---------
64,080 52,445 118,614
Income taxes paid (13,617) (14,442) (37,641)
---------- ---------- ---------
Cash flows from operating activities 50,463 38,003 80,973
Purchase of property, plant and equipment (4,453) (7,649) (12,564)
Development costs capitalised (714) (924) (2,075)
Proceeds from sale of property, plant and
equipment 91 74 1,007
Acquisition of subsidiaries, net of cash acquired (34,255) 280 (20,674)
Contingent consideration paid (200) (150) (200)
Interest received 469 403 623
---------- ---------- ---------
Cash flows from investing activities (39,062) (7,966) (33,883)
Issue of ordinary share capital 44 70 425
Purchase of ordinary share capital (3,601) (2,050) (2,850)
Interest paid (292) (20) (163)
Repayment of amounts borrowed (193) (49) (64)
Repayment of finance lease liabilities (7) (25) (68)
Dividends paid on ordinary shares (23,082) (19,718) (33,924)
Cash flows from financing activities (27,131) (21,792) (36,644)
Net (decrease) / increase in cash and cash
equivalents (15,730) 8,245 10,446
Cash and cash equivalents at 1 January 59,868 48,519 48,519
Effect of exchange rate fluctuations on cash
held (2,544) (579) 903
---------- ---------- ---------
Cash and cash equivalents at end of period 41,594 56,185 59,868
========== ========== =========
Note: The June 2013 Statement of cash flows is unaudited and has
been subject to review by KPMG. The June 2012 Statement of cash
flows is unaudited and has not been subject to review. The December
2012 Statement of cash flows has been audited by KPMG.
Notes to the Half Year Report
1. Status of condensed consolidated interim statements,
accounting policies and basis of significant estimates
General information
Rotork plc is a company domiciled in England and Wales.
The Company has its premium listing on the London Stock
Exchange.
The condensed consolidated interim financial statements for the
6 months ended 30 June 2013 are unaudited and the auditors have
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 comparative consolidated interim financial statements for
the 6 months ended 30 June 2012 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 2012 does
not constitute statutory accounts within the meaning of Section 435
of the Companies Act 2006, statutory accounts for the year ended 31
December 2012 were approved by the Board on 4 March 2013 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 2012 are available from the Company's registered
office or website, see note 16.
Basis of preparation
The condensed consolidated interim financial statements of the
Company for the six months ended 30 June 2013 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 2012, 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 2012.
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
2012.
New accounting standards and interpretations
The amendments to IAS19 Employee benefits have been applied from
1 January 2013. The principal change relates to the requirement to
use the schemes' discount rate to calculate the return on assets
rather than using a rate of return appropriate to the various asset
classes.
The application of the standard in the 2012 financial year would
have increased the net pension interest cost to GBP1,092,000 from
GBP390,000 (six months to 30 June 2012: increase to GBP546,000 from
GBP192,000), reducing the pre-tax profit by GBP702,000 (six months
to 30 June 2012: reducing by GBP354,000). The impact on basic
earnings per share would be a reduction of 0.6p to 102.5p (six
months to 30 June 2012: 0.3p to 47.5p). As a result of the
adjustments not being material to the income statement, balance
sheet or shareholders' equity prior year balances have not been
restated.
The following standards and amendments have also been applied
from 1 January 2013:
-- IFRS 10 Consolidated Financial Statements
-- IFRS 11 Joint Arrangements
-- IFRS 12 Disclosure of Interests in Other Entities
-- IFRS 13 Fair Value Measurement
-- IAS 1 Presentation of Financial Statements(amendments)
Application of these standards and amendments has not had any
material impact on the disclosures, net assets or results of the
Group.
Recent accounting developments
IFRS 9 Financial Instruments has been issued but is not yet
effective and has not been adopted as application was not mandatory
for the year. The directors anticipate that the adoption of this
standard will not have a material impact on the disclosures, net
assets or results of the Group.
2. Analysis by Operating Segment:
Half year to 30 June 2013
Fluid
Controls Systems Gears Instruments Elimination Unallocated Group
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------- --------- --------- -------------- -------------- -------------- ---------
Revenue from
external customers 152,619 89,241 22,051 12,140 - - 276,051
Inter segment
revenue - - 5,088 217 (5,305) - -
----------- --------- --------- -------------- -------------- -------------- ---------
Total revenue 152,619 89,241 27,139 12,357 (5,305) - 276,051
----------- --------- --------- -------------- -------------- -------------- ---------
Operating profit
before amortisation
of acquired
intangible assets 49,020 14,163 6,063 3,886 - (2,922) 70,210
Amortisation
of acquired
intangibles
assets (2,024) (810) (109) (2,801) - - (5,744)
Operating profit 46,996 13,353 5,954 1,085 - (2,922) 64,466
----------- --------- --------- -------------- -------------- -------------- ---------
Net financing
expense (856)
Income tax expense (17,827)
---------
Profit for the
period 45,783
---------
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
income (2)
Income tax expense (16,704)
---------
Profit for the
period 41,411
---------
Full year to 30 December 2012
Fluid
Controls Systems Gears Instruments Elimination Unallocated Group
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------- --------- --------- -------------- -------------- -------------- ---------
Revenue from
external customers 293,342 160,946 41,039 16,420 - - 511,747
Inter segment
revenue - - 11,844 - (11,844) - -
----------- --------- --------- -------------- -------------- -------------- ---------
Total revenue 293,342 160,946 52,883 16,420 (11,844) - 511,747
----------- --------- --------- -------------- -------------- -------------- ---------
Operating profit
before amortisation
of acquired
intangible assets 94,773 24,628 12,088 5,103 - (4,726) 131,866
Amortisation
of acquired
intangibles
assets (733) (2,249) (218) (4,199) - - (7,399)
Operating profit 94,040 22,379 11,870 904 - (4,726) 124,467
----------- --------- --------- -------------- -------------- -------------- ---------
Net financing
income (273)
Income tax expense (34,879)
---------
Profit for the
year 89,315
---------
2. Operating segments (continued)
Revenue from external customers by location of customer
First half First half Full year
2013 2012 2012
GBP000 GBP000 GBP000
UK 15,521 19,337 28,448
Rest of Europe 88,408 70,228 156,525
USA 58,621 54,869 106,027
Other Americas 26,059 21,784 53,323
Rest of the World 87,442 79,653 167,424
----------- ----------- ----------
276,051 245,871 511,747
----------- ----------- ----------
3. Net finance expense
Restated Restated
First half First half Full year
2013 2012 2012
GBP000 GBP000 GBP000
Interest income 469 349 616
Expected return on assets in the pension
schemes - - -
Foreign exchange gain 144 129 30
----------- ----------- ----------
613 478 646
----------- ----------- ----------
Interest expense (292) (59) (162)
Interest charge on pension scheme liabilities (584) (192) (390)
Foreign exchange loss (593) (229) (367)
----------- ----------- ----------
(1,469) (480) (919)
----------- ----------- ----------
Net finance expense (856) (2) (273)
----------- ----------- ----------
The comparatives balances for expected return from pensions
scheme assets have been reclassified to interest charge on pension
schemes to reflect the change in IAS19 which are explained in Note
1.
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 2013 is 28.0% (the effective
tax rate for the year ended 31 December 2012 was 28.1%).
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. Acquisitions
On 15 January 2013 the Group acquired 100% the entire share
capital of the operating companies of the Schischek group of
companies ("Schischek") for GBP35,865,000. Schischek designs and
manufactures explosion-proof electric actuators, principally for
the heating, ventilation, and air conditioning markets with its
main sites in Germany and Switzerland. The acquired business will
be reported within the Controls division. In the period since
acquisition Schischek has contributed GBP7,755,000 to Group revenue
and GBP2,497,000 to consolidated operating profit before
amortisation. The amortisation charge in the period since
acquisition from the acquired intangible assets was
GBP1,636,000.
If the acquisition had occurred on 1 January 2013 the results
would not have been materially different. It is not practicable to
disclose profit before tax or profit attributable to equity
shareholders as the Group manages its Treasury function on a Group
basis.
The acquisition had the following effect on the Group's assets
and liabilities.
Provisional Provisional
Book value Adjustments Fair values
Current assets
Inventory 1,353 (135) 1,218
Trade and other receivables 2,195 (81) 2,114
Cash 1,610 - 1,610
Current liabilities
Trade and other payables (2,308) (144) (2,452)
Loans and borrowings (295) - (295)
Corporation tax (745) (418) (1,163)
Non-current assets/liabilities
Property, plant and equipment 3,239 - 3,239
Loans and borrowings (1,824) - (1,824)
Intangible assets - 18,541 18,541
Deferred tax - (5,043) (5,043)
Total net assets 3,225 12,720 15,945
Goodwill 19,920
-------------
Purchase consideration paid in
cash 35,865
-------------
Purchase consideration 35,865
Cash held in subsidiary (1,610)
-------------
Cash outflow on acquisition 34,255
-------------
The provisional adjustments shown in the table above represent
the alignment of accounting policies to Rotork Group policies and
the fair value adjustments of the assets and liabilities at the
acquisition date.
Goodwill has arisen on the acquisition as a result of the value
attributed to staff expertise and the assembled workforce, which
did not meet the recognition criteria for a separate intangible
asset.
The intangible assets identified are customer relationships, the
Schischek brand, product design patents and the acquired order
book
6. Dividends
First half First half Full year
2013 2012 2012
GBP000 GBP000 GBP000
---------- ---------- ---------
The following dividends were paid in
the period per
qualifying ordinary share:
26.6p final dividend (2012: 22.75p) 23,082 19,718 19,718
16.4p interim dividend - - 14,206
23,082 19,718 33,924
---------- ---------- ---------
The following dividends per qualifying
ordinary share were declared / proposed
at the balance sheet date:
26.6p final dividend - - 23,091
18.05p interim dividend declared (2012:
16.4p) 15,670 14,229 -
15,670 14,229 23,091
---------- ---------- ---------
The interim dividend of 18.05 pence will be payable to
shareholders on 27 September 2013 to those on the register on 30
August 2013.
7. Earnings per share
Earnings per share is calculated using the profit attributable
to the ordinary shareholders for the period and 86.7m shares (six
months to 30 June 2012: 86.6m; year to 31 December 2012: 86.6m)
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 and diluted 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
2013 2012 2012
GBP000 GBP000 GBP000
---------- ---------- ---------
Net profit attributable to ordinary
shareholders 45,783 41,411 89,315
Amortisation 5,744 3,628 7,399
Tax effect on amortisation at effective
rate (1,610) (1,043) (2,078)
---------- ---------- ---------
Adjusted net profit attributable to
ordinary shareholders 49,917 43,996 94,636
---------- ---------- ---------
8. Inventories
30 June 30 June 31 Dec
2013 2012 2012
GBP000 GBP000 GBP000
Raw materials and consumables 56,478 43,832 48,279
Work in progress 14,577 12,146 11,474
Finished goods 15,668 16,261 11,347
-------- -------- --------
86,723 72,239 71,100
-------- -------- --------
9. Share capital and reserves
The number of ordinary 5p shares in issue at 30 June 2013 was
86,814,000 (30 June 2012: 86,763,000; 31 December 2012:
86,808,000).
The Group acquired 123,509 of its own shares through purchases
on the London Stock Exchange during the period, (30 June 2012:
101,010; 31 December 2012: 136,253). The total amount paid to
acquire the shares was GBP3,601,000 (30 June 2012: GBP2,050,000; 31
December 2012: GBP2,850,000), 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 100,589 and 101,706
shares respectively were transferred to employees.
Employee share options schemes: options exercised during the
period to 30 June 2012 resulted in 5,393 ordinary 5p shares being
issued (30 June 2012: 12,817 shares), with exercise proceeds of
GBP44,000 (30 June 2012: GBP70,000). The weighted average market
share price at the time of exercise was GBP27.19 (30 June 2012:
GBP20.14) per share.
10. Loans and borrowings
The following loans and borrowings were issued and repaid during
the six months ended 30 June 2013:
Carrying
Year of Interest value
maturity rate GBP000
Balance at 1 January 2013 172
Movement in the period:
Acquired as part of business combination 2017-32 2.12% 2,119
Repayment of loans 2013-32 1.95% (193)
Repayment of finance leases 2013-15 1.5% - 6.7% (7)
Exchange differences 71
Balance at 30 June 2013 2,162
---------
11. 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 2012 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 GBP49,253 during the period
to 30 June 2013 (First half 2012: GBP2,000; Full year 2012:
GBP34,000) and GBP16,032 was outstanding at 30 June 2013 ( 30 June
2012: GBP2,000; 31 December 2012: GBP15,000).
UBS Investment Bank are a related party by virtue of
non-executive director SA James' directorship of UBS Limited. UBS
Investment Bank provides the Group financial advice and
stockbroking services. The current arrangement with UBS Investment
Limited is that out of pocket expenses will be reimbursed and no
fees will be charged for their regular advisory or broking
services. Expenses of GBP3,000 have been reimbursed during the
period to 30 June 2013 (First half 2012: nil: Full year 2012:
GBP4,000) and no balance was outstanding at 30 June 2013 (30 June
2012: GBPnil; 31 December 2012: GBPnil).
12. 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
2013 2012 2012
GBP000 GBP000 GBP000
Emoluments including social security
costs 2,469 2,138 4,510
Post employment benefits 244 227 457
Share based payments 697 591 1,418
----------- ----------- ----------
3,410 2,956 6,385
----------- ----------- ----------
13. Share-based payments
A grant of shares was made on 7 March 2013 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 7 March 2013 7 March 2013
Share price at grant date GBP29.05 GBP29.05
Shares awarded under scheme 49,416 49,416
Vesting period 3 years 3 years
Expected volatility 25.7% 25.7%
Risk free rate 0.3% 0.3%
Expected dividends expressed as a dividend
yield 1.5% 1.5%
Probability of ceasing employment before
vesting 5% p.a. 5% p.a.
Fair value GBP17.02 GBP28.19
The basis of measuring fair value is consistent with that
disclosed in the 2012 Annual Report & Accounts.
14. Events Post Balance Sheet Date
On 5 July 2013 the Group acquired 100% of the share capital of
Flowco Limited, a valve and actuator service company based near our
headquarters in Bath, United Kingdom. The acquired business will be
reported within the Rotork Controls division.
On 2 August 2013 the Group acquired 100% of the share capital of
the GT Attuatori companies, a manufacturer of pneumatic actuators
with operations based in Italy and Germany. The acquired businesses
will be reported within the Rotork Fluid Systems division.
On 2 August 2013 the Group acquired 100% of the share capital of
Renfro Associates Inc, a valve adaption manufacturer based in
Broken Arrow, USA. The acquired business will be reported within
the Rotork Gears division.
The combined provisional consideration of the above acquisitions
is GBP13,900,000 of which GBP13,050,000 was paid in cash on
completion. If performance criteria are met a further GBP450,000
will be payable in 2014 and the remaining GBP400,000 in 2015. The
businesses will contribute to Group revenue and operating profit in
the second half of the year from the dates the individual
businesses were acquired.
The provisional net assets are GBP5,200,000, including net cash
of GBP300,000. If these acquisitions had occurred on 1 January 2013
the businesses would have contributed GBP7,200,000 to Group revenue
and GBP1,100,000 to Group operating profit in the six months to 30
June.
Due to the proximity of the acquisitions to the date of approval
of the interim financial statements the initial accounting for
these business combinations is incomplete and therefore the
disclosures regarding the fair value of the assets acquired and
liabilities assumed, the valuation of the goodwill and other
intangibles, the amount of goodwill expected to be deductible for
tax purposes, the fair value of contingent liabilities and assets
and the amount and treatment of acquisition costs cannot be
made.
15. 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
16. 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/
17. Financial Calendar
6 August 2013 Announcement of half year financial results for 2013
28 August 2013 Ex-dividend date for 2013 interim dividend
30 August 2013 Record date for 2013 interim dividend
27 September 2013 Payment date for 2013 interim dividend
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR UGUPPRUPWGMA
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