TIDMROR
RNS Number : 3186G
Rotork PLC
03 March 2015
Rotork plc
2014 Full Year Results
OCC *(2)
2014 2013 % change % change
Revenue GBP594.7m GBP578.4m +2.8% +3.8%
Adjusted*(1) operating
profit GBP157.2m GBP151.4m +3.8% +5.7%
Adjusted*(1) operating +20
margin 26.4% 26.2% bps +50 bps
Profit before tax GBP141.2m GBP138.0m +2.3% +8.1%
Adjusted*(1) profit
before tax GBP156.1m GBP150.1m +4.0% +5.9%
Basic earnings per
share 119.0p 114.8p +3.7% +9.4%
Adjusted*(1) basic
earnings per share 131.6p 124.9p +5.4% +7.0%
Full year dividend 50.10p 48.05p +4.3%
*(1) Adjusted figures are before the amortisation of acquired
intangible assets
*(2) OCC is organic constant currency
Key Points
-- Record order intake, revenue and profit
-- Order intake up 2.9% to GBP595.6m (OCC +4.0%)
-- Operating margin increased 20 bps to 26.4%
-- Sales to power market up 16%
-- Continued expansion of product portfolio
-- Three acquisitions completed in the year for GBP81.3m
Peter France, Chief Executive, commenting on the results,
said:
"2014 was another successful year for Rotork. The continued
expansion of our product portfolio, international sales channels
and our broad end-market exposure enabled us to achieve record
results.
In the year ahead we will continue to invest for growth,
increasing our international sales network and expanding our
product portfolio both organically and by acquisition to strengthen
our presence in the wider flow control market.
Whilst our end markets in the upstream oil and gas sector may
become more challenging in the near term, our other global markets
remain active. Our geographic reach, end market exposure and
diverse product portfolio provide the Board with confidence of
achieving further progress in the coming year."
For further information, please contact:
Rotork plc Tel: 01225 733200
Peter France, Chief
Executive
Jonathan Davis, Finance
Director
FTI Consulting Tel: 020 3727 1340
Nick Hasell / Susanne
Yule
Chairman's Statement
2014 was another successful year for Rotork. We continued to
grow by implementing our strategy of broadening our product
portfolio, end market exposure and geographic coverage whilst
remaining focused on our targeted segments of the flow control
market.
Financial Highlights
Currency remained a headwind throughout the year. On an organic
constant currency basis, order intake grew by 4.0% and revenue grew
by 3.8%. Adjusted* operating profit was 5.7% higher resulting in a
record margin of 26.7%, 50 basis points higher than 2013. We still
showed growth on a reported basis on all these measures as the
positive contribution from the acquisitions made in the year went
someway to offset the impact of currency.
Rotork has a strong track-record of making acquisitions and then
taking these businesses to their next phase of growth. This year we
acquired the Korean based Young Tech Corporation (YTC) in March and
a UK subsidiary of Xylem Inc, which we have renamed Rotork Midland,
in July. Both of these businesses now sit within the Instruments
division and bring additional products that enhance Rotork's
product portfolio. Integration of both businesses is progressing as
planned and they made a good contribution in their first year in
Rotork. In December we acquired Masso Industries, a small Italian
designer and manufacturer of pneumatic and hydraulic actuators and
control systems for use in the marine industry and in February 2015
the sales and service operations of our former agent in Turkey.
I would like to thank all of our employees for their continued
high level of commitment and professionalism. It is as a result of
their hard work that we have been able to deliver a record set of
results once again.
Board Composition
I am announcing today that I intend to retire as Chairman at the
close of the Annual General Meeting in April after working with
Rotork for 27 years, 17 of which as Chairman. It has been a great
privilege to play a part in the Group's strong progress over that
period and see it truly flourish. We are also announcing today that
Martin Lamb will take over as Chairman when I retire. Martin was
appointed a non-executive director in June 2014 and brings a wealth
of relevant experience from his 33 years at IMI plc. I wish him
every success in the role.
We were pleased to welcome two new non-executive directors
during the year. As mentioned above Martin Lamb joined in June and
Lucinda Bell joined the Board in July. Lucinda is the Finance
Director of The British Land Company PLC and her financial
experience in an unrelated industry brings a different perspective
to the Board.
Last April we announced that Graham Ogden, Group Research and
Development Director, would retire at the end of this month. I
would like to thank Graham personally for his contribution since
joining Rotork in 1985 and his appointment as an executive director
in 2005. During this period Graham has been closely involved and
latterly led the team in many key product developments including
all three evolutions of the award-winning IQ series.
The Board is compliant with the Corporate Governance Code at the
present time and will remain so following the changes noted above.
At the close of the AGM there will be three executive directors,
four independent non-executive directors and Martin Lamb as
Chairman. In addition, 25% of the Board are women compared with 11%
at the same time last year.
Board Performance
The evaluation of Board effectiveness was once again conducted
by a third party this year. The process of appointing new
non-executive directors, a new Chairman and new auditors were all
considered in the evaluation and overall comments received were
generally positive. The strong feeling of mutual respect and trust
which have been consistent characteristics of the Board was found
to be undiminished. The directors remain aware of the challenges
the growth of the business brings and the importance of managing
the change carefully in order to preserve the strengths of the
business and to continue to deliver shareholder value. The Board
was broadly united in its views on all the matters raised in the
process and, crucially, in its focus for 2015 and beyond. Reviewing
the strategy for achieving growth in the current economic climate,
the evolution of the internal control environment and risk
assessment processes and succession planning and talent development
within the executive management are among the key areas for the
coming year. Overall, I am satisfied that there is an appropriate
balance of skills, experience, independence and knowledge of the
Company to enable the directors to discharge their duties and
responsibilities effectively.
Corporate Governance
The Board is committed to high standards of governance, which we
view as central to delivering increasing shareholder value over the
long term. The Board considers all the aspects of the business
necessary to provide good governance and these are set out in the
Corporate Governance Report. I am pleased to be able to confirm
that Rotork complies with all aspects of the 2012 UK Corporate
Governance Code.
Dividend
The Board recommends a final dividend of 30.9p per share, a 3.0%
increase over the 2013 final dividend. Taken with the 2014 interim
dividend, the total dividend is 50.1p per share (2013: 48.05p),
representing a 4.3% increase in the total dividend on 2013. The
final dividend will be payable on 18 May 2015 to shareholders on
the register on 10 April 2015.
Outlook
In the year ahead we will continue to invest for growth,
increasing our international sales network and expanding our
product portfolio both organically and by acquisition to strengthen
our presence in the wider flow control market.
Whilst our end markets in the upstream oil and gas sector may
become more challenging in the near term, our other global markets
remain active. Our geographic reach, end market exposure and
diverse product portfolio provide the Board with confidence of
achieving further progress in the coming year.
Roger Lockwood
Chairman
2 March 2015
* References to adjusted profit throughout this document are
defined as the IFRS profit, whether operating profit or profit
before tax, with GBP14.9m (2013: GBP12.1m) of amortisation of
acquired intangibles added back.
Organic constant currency (OCC) results are the 2014 figures
restated at 2013 exchange rates and with the incremental
contribution from acquisitions removed.
Business Review
The continued expansion of our product portfolio, international
sales channels and our broad end-market exposure enabled us to
achieve record results in 2014.
Order intake for the year was GBP595.6m, up 2.9% on the prior
year. Currency was a headwind during the year and on an organic
constant currency (OCC) basis order intake was 4.0% ahead of
2013.
As in prior years, the fourth quarter was a record in terms of
shipments. Revenue for the full year was GBP594.7m, up 2.8% on the
prior year and up 3.8% on an OCC basis. The adjusted* operating
profit margin was 26.4%, a 20 basis point improvement on 2013.
Excluding the impact of acquisitions and currency, the adjusted*
operating margin was 26.7%.
During the year, through both organic development and
acquisitions, we have expanded our international presence and now
have 27 manufacturing sites, 65 national offices and 85 regional
locations in 37 countries. In total we have over 800 sales channels
in 99 countries. Building a strong international sales network to
support our customers remains a key element of our strategy.
In 2014, we invested GBP81.3m in acquisitions to drive further
growth and strengthen our market position. Through the acquisitions
of YTC, Midland, Masso and the operations of our sales agent in
Turkey, acquired in February 2015, we extended our product range in
attractive segments and increased and strengthened our geographic
reach. We will continue to pursue acquisition opportunities in 2015
to enhance and expand our offering to customers. We also opened 7
new sales and service offices during the year, completed the
expansion of our facilities in Singapore and relocated to larger
premises in Spain. In addition, we opened a new world-class factory
in Leeds and purchased a larger factory in Lucca which we will move
into during 2015. These key investments will ensure that Rotork
continues to be best placed to benefit from the anticipated growth
of the global flow control market.
The world economy is being shaped by long-term global trends
that include population growth, urbanisation and automation. These
trends are driving heightened demand for flow control products and
services to deliver cleaner energy, greater fuel efficiency and
improved resource utilisation. The Group benefits from
market-leading flow control expertise and remains well positioned
to support these growth opportunities.
Another positive trend is the increased focus by our customers
on cost reduction and stricter environmental regulations. As a
result, we are seeing good demand for energy-efficient products
across all our end markets.
As manufacturers focus on improved operational performance and
cost efficiencies, they are investing in automation and more
complex processes. Flow control, and valves in particular, are key
elements of this investment process. Given our broad geographic
exposure, participation in diverse industries and broad product and
service offering, Rotork is best placed to meet our customers'
needs as they make these investments. Whilst our actuators and flow
control instruments are used most intensively in the oil & gas,
power and water markets, the expansion of our product portfolio
means that we are increasingly able to address a widening range of
end markets.
The long-term global trends described above are all positive for
Rotork, however during the latter part of 2014, global energy
markets experienced a sharp decline in the oil price. Whilst we
have yet to see any noticeable impact in customer order activity,
we believe that the increased uncertainty created by this decline
will present Rotork with a more challenging market backdrop in the
oil & gas sector. Oil and gas represents 57% of Group revenue
with downstream the largest element at 27% and upstream and
midstream both at 15%.
We remain focused on responding quickly to any changes in
activity in our oil & gas-related business but we are confident
that our resilient competitive position, broad end-market exposure,
and global sales and servicing coverage will continue to provide us
with opportunities to grow.
Rotork Controls
GBPm 2014 2013 Change OCC change
-------------------- ------ ------ ------- -----------
Revenue 324.5 321.9 +0.8% +6.4%
-------------------- ------ ------ ------- -----------
Adjusted operating
profit 104.7 105.5 -0.7% +5.6%
-------------------- ------ ------ ------- -----------
Adjusted operating
margin 32.3% 32.8% -50bps -30bps
-------------------- ------ ------ ------- -----------
Controls delivered another year of growth in 2014. On an organic
constant currency (OCC) basis, order intake grew 7.1%, revenue by
6.4% and adjusted* operating profit by 5.6%. Acquisitions made only
a small contribution to the division during the year. The much
greater effect on the reported results came from currency, which
was felt throughout the year, and which resulted in a headwind
equating to around 6% of order intake, revenue and profit. This
meant reported order intake increased by 1.3% to GBP320.4m, revenue
by 0.8% to GBP324.5m and adjusted* operating profit declined by
0.7% to GBP104.7m. Adjusted* operating margin reduced by 30 basis
points to 32.5% on an OCC basis and a further 20 basis points as a
result of currency.
Over the course of 2014 some of the division's end markets were
challenging but we responded by enhancing our global capability and
further strengthening our customer relationships. Looking at the
end destination of our products, North America and Latin America
both showed strong growth. Whilst the Far East declined in total,
within this region China performed very well but Australia was
lower following a strong comparable period of activity last year
when we delivered a number of coal bed methane projects. In North
America and Latin America oil & gas remains our largest end
market, with downstream the largest sub-sector. This contrasts with
the Far East where our exposure is much more balanced and power,
led by China, is larger than oil & gas.
The division continues to pursue geographic expansion,
capitalising on our core competences and the strength of our brand
to move into new markets. We are focused on delivering long-term
profitable growth which we will achieve by expanding and deploying
our market-leading flow control expertise in end markets where we
can achieve leading positions and where there is long-term demand
for our products and services. Even in our more mature markets the
increased drive towards automation, with a requirement for
increased asset management information, provides opportunities to
grow.
During the year we invested in a number of facilities, the
largest of which was the new factory in Leeds. This multi-division
site houses the headquarters of our UK sales subsidiary, where our
northern UK service team is based. We also relocated our sales
subsidiary in Bilbao, Spain to a new larger facility having
outgrown the previous one due to the growth of our retrofit and
factory fit activities. In Poland we opened a new office and
workshop to serve and grow our customer base in Eastern Europe and
towards the end of the year we set up a small subsidiary in Chile.
Both these new offices are in locations where we have previously
operated through an agent but where we have now decided that the
time is right to have a direct presence.
Meanwhile, we continued to focus on technological advancements
and innovation and during the year we launched our new Centork
product range, Rotork's specialist offering for the water,
industrial and power markets. The product range features
modularity, easy selection, setting and mounting. We continue to
anticipate strong growth in the water and waste water industries,
driven by increased urbanisation in developing countries and
increased environmental and scarcity concerns globally.
We expect the recent fall in the oil price to mainly affect the
upstream sector of the oil & gas industry. Whilst 51% of the
division's sales are into the oil & gas industry, our market
exposure is diversified across various sub-sectors: large numbers
of our actuators are supplied into both midstream and downstream
applications, which have been more shielded from the recent soft
pricing environment. A significant proportion of our supply is also
retrofit, upgrade or replacement work, where spend is less
sensitive to oil spot prices.
Rotork Fluid Systems
GBPm 2014 2013 Change OCC change
-------------------- ------ ------ ------- -----------
Revenue 180.3 187.0 -3.6% -0.7%
-------------------- ------ ------ ------- -----------
Adjusted operating
profit 31.2 31.0 +0.5% +7.4%
-------------------- ------ ------ ------- -----------
Adjusted operating
margin 17.3% 16.6% +70bps +130bps
-------------------- ------ ------ ------- -----------
Following three years of double-digit growth, 2014 was a year of
consolidation at Rotork Fluid Systems (RFS). There were no major
acquisitions during the year but the integration of recent
acquisitions, product development and a drive on key component
sourcing initiatives all made good progress. The work we have
undertaken on sourcing was one of the key factors behind the 70
basis point improvement in adjusted* operating margin we achieved
in 2014.
Revenue was GBP180.3m, 3.6% lower than 2013 on a reported basis.
However, reversing the 5.4% currency headwind and adjusting for the
part-year contribution from acquisitions in 2013, this decline is
reduced to 0.7% on an organic constant currency (OCC) basis. Order
intake was similarly impacted, with the GBP184.6m being 4.7% below
2013 or 1.8% below the prior year excluding currency and
acquisitions. Although the currency headwind was even greater on
profit, the benefits of sourcing initiatives and an improved
product mix resulted in reported adjusted* operating profit of
GBP31.2m compared with GBP31.0m in 2013. This gave a margin of
17.3%, which was 70 basis points higher than last year. On an OCC
basis, this difference increased to 130 basis points and a 17.9%
margin.
Oil & gas remains the largest end-market for RFS,
representing 72% of the division's revenue in the year with the
overall split between upstream, midstream and downstream relatively
even. This is spread across many different applications within oil
& gas and across many geographic regions, ranging from shale in
North America to gas condensate projects in Central Asia. We
continued to see good business in the year on safety systems for
tank storage applications in the downstream market. Whilst oil
& gas is the largest end-market, it has diminished 5% compared
with 2013 as our exposure to water, general industrial and
particularly the power end markets has increased. The acquisition
of Masso Industries, based in Valduggia, Italy, in December 2014
introduces a further element of diversification to Fluid Systems.
Masso designs and manufactures hydraulic actuators and control
systems for use in shipboard applications and brings with it a
range of products and customers new to the division.
Mexico continued to be an important market where we won several
significant orders. We received a large order in June for the next
phase of the SCADA pipeline project, the first phase of which was
won in 2013. In addition, K-Tork, based in Dallas, won a large
power project for their Type K damper drive application. Both these
orders have multi-year delivery periods. Overall, Latin America was
the end destination which reported the strongest growth within RFS,
partly due to the completion of deliveries on the first phase of
the SCADA project. In contrast, Eastern Europe was the region which
reported the sharpest decline and this was driven by a combination
of project timing and, in the latter part of the year, the impact
of sanctions and the weaker rouble on Russian business. The GBP6m
impact we reported in the third quarter is higher than the expected
ongoing impact but this will remain a headwind into 2015.
We also continued to invest in our regional infrastructure to
ensure that we provide support locally to our customers, with
upgraded facilities in Leeds, UK, and Bilbao, Spain, and the new
offices in Poland and Chile all having an RFS capability. We also
invested in a new factory in Lucca, near our existing leased
facility. Not only will this recently purchased facility provide us
with security of tenure for the future but it will also allow us to
modify our production processes and bring greater efficiency to our
largest factory.
We achieved an improved margin this year mainly as a result of a
number of sourcing initiatives across the world. Volumes within the
division have risen rapidly in recent years which has now made
sourcing from low cost regions viable for some of our components.
For example, we reviewed the supply chain of our small scotch yoke
actuators manufactured in Sweden and the rack and pinion range we
acquired with GTA as they are able to share certain components.
Similar initiatives in the USA and Italy have already delivered
benefits and they will continue to do so in 2015.
We continued to invest in R&D and this is reflected in the
launch of our third generation of the SI actuator planned for 2015,
aimed at safety related Emergency Shutdown (ESD) and Remotely
Operated Shutoff Valve (ROSoV) duties. We also worked on extending
the K-Tork range ready for launch in 2015 and together with the GT
and RC ranges this has widened our portfolio aimed at the
industrial, power and petrochemical industries. We look forward to
further penetration of these markets in 2015.
Rotork Gears
GBPm 2014 2013 Change OCC change
-------------------- ------ ------ ------- -----------
Revenue 57.8 56.0 +3.2% +5.0%
-------------------- ------ ------ ------- -----------
Adjusted operating
profit 13.0 13.0 +0.3% +4.1%
-------------------- ------ ------ ------- -----------
Adjusted operating
margin 22.5% 23.1% -60bps -20bps
-------------------- ------ ------ ------- -----------
Gears made good progress in order intake, revenue and profit in
the year. Our performance continues to demonstrate the benefit of
our industry-leading expertise, gained over several decades working
at the forefront of manual and motorised gear technology for the
valve industries in the many market sectors that we serve.
Revenue of GBP57.8m was 3.2% higher than 2013 despite a 4.3%
currency headwind. On an organic constant currency (OCC) basis
revenue grew by 5.0% with the acquisition of Renfro in 2013
accounting for 2.5% of the growth. Order intake was similarly
affected by currency with reported growth of 0.2%, which at
constant currency and with the benefit of the acquisition increased
to 1.9%. Adjusted* operating profit was GBP13.0m, 0.3% ahead of
2013 which resulted in a 60 basis point reduction in operating
margin to 22.5%. On an OCC basis the growth in adjusted* operating
profit was 4.1% and the margin 22.9%. Each of the Gears factories
improved margins in the year, with the exception of the Leeds
operation, which was affected by the costs of moving into the new
facility and an increase in more competitive larger project sales
had a negative effect on margins in the period.
Central to our successful long-term track record are our
world-class sales and engineering teams, who provide our customers
with the latest innovative gearing technology using leading-edge
design methods. The sales process in Gears differs from Controls
and Fluid Systems and whilst there are project sales, often in
conjunction with other Rotork divisions, more typically we sell
directly to the valvemaker on an ongoing basis. Accordingly, our
objective is to build a relationship with the valvemaker so that
they use our gearboxes in conjunction with their valves when the
package is not being automated.
This year, following strong growth in the Far East, there was a
reasonably even spread of revenue across the key regions of the
Americas, Far East and Western Europe, although Western Europe
remained the largest, accounting for 37% of sales. Our factories
are located in these areas so that we are close to our customers.
The Middle East and Africa was the only region to report a marked
reduction in sales but this was after an unusually strong
performance in 2013. The end-market exposure of Gears is, like the
Group as a whole, weighted to oil & gas, which accounts for 57%
of sales, but these are spread across all segments of this market.
Water and waste water is the second largest end-market, where small
manual valves account for the majority of sales.
In line with our aim to become our customers' preferred partner,
we have a strong commitment to improving the efficiency of our
operations and those of our customers and suppliers. That aim was a
key factor in our move to a new state-of-the-art manufacturing
facility in Leeds during the year. The larger facility has given us
the opportunity to increase the dedicated research and development
team who are engaged in every aspect of new product design and
development, from concept to customer.
Rotork Gears provides innovative solutions that meet the
individual requirements of our valve gearbox and valve accessory
customers by drawing upon our unrivalled range of market-leading
products. During the year we strengthened our wide portfolio of
gearboxes with the launch of our New Manual HOB multi-turn product
range. This range offers our customers a more comprehensive
solution for multi-turn manual applications. Our new Leeds facility
also has extensive test facilities, including a comprehensive set
of test rigs for testing multi-turn and quarter-turn gearboxes
across a wide range of torques. Our R&D remains focused on
developing cost effective and innovative solutions that will
continue to provide Gears with access to new customers and new
market sectors.
Rotork Instruments
GBPm 2014 2013 Change OCC change
-------------------- ------ ------ ------- -----------
Revenue 46.0 24.9 +84.4% +8.6%
-------------------- ------ ------ ------- -----------
Adjusted operating
profit 14.4 7.8 +84.3% +2.3%
-------------------- ------ ------ ------- -----------
Adjusted operating
margin 31.4% 31.4% - -180bps
-------------------- ------ ------ ------- -----------
This was a year of strong growth for the Instruments division,
which saw the number of businesses double in 2014 following the
completion of two important acquisitions. We focused on delivering
our key priorities: continuing to widen our offering in flow
control and pressure control products by acquiring or developing
new technologies close to the actuator; the integration of
acquisitions; leveraging global sales synergies; and delivering
cost reduction and productivity improvements.
In March we acquired Young Tech Co (YTC), a Korean-based
manufacturer of valve positioners and accessories mainly associated
with pneumatic valve actuation. YTC has a wide range of positioners
and smart positioners which are complementary to Rotork's existing
portfolio of products. This acquisition not only enlarged our range
of instrumentation products and our addressable market but also
provided Instruments with a platform and sales channels in the
important Asia-Pacific market.
In July we acquired Xylem Flow Control based in Wolverhampton,
UK. This added the established brands of Midland-ACS, Alcon and
Landon Kingsway into Instruments, under what we now call 'Rotork
Midland'. This business brought with it a strong reputation for
delivering innovative solutions for a wide range of applications,
including control systems for pneumatic and hydraulic control
valves, electro-pneumatic and electro-hydraulic actuators, local
control panels, manifolds and components such as solenoid valves,
level controls, gas detection and fire-fighting equipment.
The financial results for the year were heavily influenced by
these acquisitions, both of which performed in line with our
expectations. Reported revenue increased by 84.4% despite a 5.1%
currency headwind but on an organic constant currency (OCC) basis
the increase was still 8.6%. The results for order intake were very
similar, in what is generally a short lead-time division, with the
headline increase of 83.0% reduced to 8.7% for Fairchild and Soldo
at constant currency. Adjusted* operating profit rose 84.3% to
GBP14.4m, a margin of 31.4%, the same as 2013. Unlike the other
divisions, currency improved reported margins for Instruments
because prior to the acquisition of Midland the division had no
sterling costs. Whilst acquisitions were accretive in total, OCC
adjusted* operating margin declined to 29.6%, a 180 basis point
reduction. This is largely due to the expansion of the divisional
executive team which has been required to support this pace of
growth and to ensure that the benefits of the acquisitions are
delivered.
The Midland product range, now within Instruments, complements
the high-precision pneumatic control devices and motion control
equipment manufactured by Fairchild, the Soldo range of control
accessories for valve automation, and YTC's market leading range of
valve positioners and accessories. We also have Instruments
companies located in Europe, the USA, and the Far East, and we are
integrating our international sales networks to support sales of
products of all four companies. By training our sales forces on all
of the new products and by using cross-selling techniques with
customers, we have been successful in penetrating new geographic
markets with our growing product portfolio. Similarly, we have been
using our strategically-located facilities to ensure local assembly
and inventory management for the entire range of our products,
ensuring fast, on-time delivery for our customers. For instance, we
are now using our Soldo facility in Italy as the European hub for
YTC products, whilst our Fairchild facility is ensuring access to
the USA market for the Soldo and YTC product ranges. Work to
qualify the full range of products to meet various national and
international certification standards is underway and 2015 will see
completion of this for the key products. This not only supports our
third party customers but also allows us to support the local
Rotork offices and factories where there are opportunities to use a
wide range of Instruments' products in automating pneumatic and
hydraulic actuators.
Each of the businesses have their own product development plans
and work has started to align these and create a single divisional
plan. Each business brings a level of expertise in its own product
lines and often complementary skills. During the year each business
has launched new variants of products and extensions to existing
ranges, either broadening the range of materials for a product or
the industries and applications for which it can be used.
Research and Development
Our investment in research and development increased further in
the year, up 18.3% to GBP9.9m. All divisions introduced new
products or extended product ranges to expand our product
portfolio. Our design teams have been working with the business
development teams on future products and developing product road
maps, and these activities support continued investment in our
infrastructure and engineers. Projects to which we dedicated
significant development time during the year included the nuclear
product range and the introduction of the Centork electric
actuator.
Rotork Site Services
We launched our Client Support Programme in 2014 which offers a
tailor-made service of planned preventative maintenance aimed at
the prevention of breakdowns and failures. The primary goal of our
Client Support Programme is to prevent the failure of equipment
before it occurs. This includes equipment checks, replacement of
worn components and partial or complete overhauls at specified
periods.
Planned preventative maintenance is a much better alternative to
risking a potentially damaging breakdown of equipment, and enables
our customers to realise the full potential of their business by
ensuring the maximum reliability and availability of our products.
Wherever our customers are in the world, Rotork is able to support
them. We have workshops strategically located around the world,
with trained staff and full test and maintenance facilities.
As part of the Client Support Programme, customers have 24/7
access to the Rotork Support Centres, with priority technical
assistance, backed by comprehensive website resources and priority
software support. With over 370 directly employed engineers and
more service technicians employed by our agents worldwide, we have
the infrastructure required to effectively support all of our
customers' needs.
Our People
Rotork is recognised by the majority of staff as a great place
to work. We foster an open and honest culture based on employee
involvement. Our annual employee satisfaction survey was completed
by the highest number of employees in its history although the
response rate slightly declined from the high of last year 79% to
75% this year. The overall satisfaction score remained the same as
last year at 3.6. The global results showed that people continue to
value the quality of our products and services; our approach and
concern for their well-being in terms of health and safety; our
open culture and ability to discuss issues with management; and job
security.
The Rotork family continues to grow and during 2014 our staff
numbers increased by 412 people to 3,460. 191 joined us as part of
the YTC, Xylem and Masso acquisitions and the rest were recruited
as part of our organic growth in various locations around the
world.
As announced in the Chairman's Statement, Roger Lockwood will
retire as Chairman at the conclusion of the AGM on 24th April, to
be succeeded by Martin Lamb. On behalf of the Board and Rotork
employees past and present. I would like to wish him the best for
the future and on a personal note, I would like to thank Roger for
the guidance and support he has given me over the years.
During the year there have been a number of changes to our
management team. Unfortunately Alex Busby, Divisional Managing
Director (DMD) for Rotork Fluid Systems (RFS), who has been
instrumental in the growth of the division over the last few years,
had to step down from his role on health grounds. Everyone at
Rotork wishes him well as he focuses on returning to full health.
Dave Littlejohns has been appointed as DMD for RFS. Dave joined
Rotork in 1986 and has most recently been in charge of the Gears
division. Pamela Bingham will take over from Dave as DMD Gears.
Pamela joined the company in 2012 as Group Business Development
director and has been heavily involved in a number of acquisitions
since joining. Dave and Pamela will continue to be members of the
Rotork Management Board.
Last year we also announced that Graham Ogden would be retiring
in March after 30 years of service. Graham was the first
electronics manager employed by Rotork and was instrumental in the
development of the electric actuator and especially in the
introduction of the IQ range of electric actuators that
revolutionised the market. In the last few years Graham was a
member of the Rotork Management Board and a PLC director. His
contribution to the success of the company cannot be underestimated
and he has left a strong legacy and a highly capable team to carry
on his work. On behalf of all the staff I would like to thank
Graham for his contribution to the company and wish him all the
best in retirement.
The success of Rotork continues to be driven by the dedication
and hard work of our staff. I would like to take this opportunity
to personally thank each of them for their contribution and for
making Rotork the world-class company it is.
Acquisitions
We spent more on acquisitions in 2014 than in any previous year.
The acquisition in March of Young Tech Co (YTC) for up to GBP64m is
Rotork's largest single acquisition to date. The purchase of
Xylem's UK based flow control subsidiary, now renamed Rotork
Midland, in July and Masso Industries in December increased the
total spend in the year to GBP81.3m. In addition, there is a
further potential GBP4.4m contingent consideration in relation to
the three acquisitions made in 2014. Rotork has a strategy of
growing through a combination of organic expansion and acquisitions
and we expect this to continue. Acquisitions are made on the basis
that they will provide a new product, improve our access to a
geographic or end-user market or some combination of these
objectives. Each of this year's acquisitions met one or more of
these criteria.
Taking all three acquisitions together, GBP32.4m of the
consideration was attributed to intangible assets which will be
amortised and GBP45.1m is goodwill which will be subject to an
annual impairment review. The increased value of acquisitions this
year and last year has led to a rise in the amortisation charge
related to acquired intangible assets to GBP14.9m (2013: GBP12.1m).
In order to adjust the income statement to show a like-for-like
period for each acquisition, 2014 revenue has to be reduced by
GBP27.4m and adjusted* operating profit by GBP7.6m. The profit
margin in the acquired business was slightly accretive in
aggregate, at 28.0%, with YTC the key contributor to this.
Currency
The relative strength of sterling throughout the year led to a
marked headwind for the reported results. The impact was most
significant in the first half of the year with revenue reduced by
GBP20.4m (7.4%) compared with a GBP12.6m (4.2%) reduction in the
second half. This was partly driven by the comparatives, as the US
dollar weakened progressively through that year. In 2014 whilst the
US dollar reversed the trend of 2013, and strengthened from
mid-year onwards, it was the euro's turn to weaken steadily through
the year. The average rate for both US dollar and euro was 5.3%
weaker than 2013 but by year-end the US dollar was 6.2% stronger
than it had started 2014 whilst the euro was 6.3% weaker. These two
currencies had the most significant impact on our results with US
dollar representing 41% of revenue and the euro 31%. Sterling was
11% of revenue and various other currencies made up the remaining
17%. Amongst the other 19 currencies that are home currencies for
one of our subsidiary offices, 9 weakened by more than 10% when the
average rate is compared with that for 2013.
The impact of currency is both in the form of translation and
transaction differences. Given the locations in which we have
operations and the international nature of our supply base and
sales currencies, the impact of transaction differences can be very
different from the translation impact. We are able to partially
mitigate the transaction impact through matching supply currency
with sales currency but ultimately we are still net sellers of both
US dollar and euros. It is the net sale of these currencies which
we principally address through our hedging policy, covering up to
75% of trading transactions in the next 12 months and up to 50%
between 12 and 24 months. Net of these mitigating actions adjusted*
operating profit was GBP10.6m (7.0%) lower than it would have been
at 2013 rates.
In order to estimate the impact of currency, at the current
exchange rates we consider the effect of a 1 cent movement versus
sterling. A 1 euro cent movement now results in approximately a
GBP325,000 adjustment to profit and for US dollar, and dollar
related currencies, a 1 cent movement equates to approximately a
GBP550,000 adjustment.
Return on capital employed (ROCE)
Our asset-light business model and high profit margins mean
Rotork generates a high ROCE. Our definition of ROCE is based on
adjusted* operating profit as a return on the average net assets
excluding net cash and the pension scheme liability net of the
related deferred tax. This means that as we make acquisitions our
capital base grows when the associated intangible assets and
goodwill are recognised. During the year intangibles and goodwill
increased by a net GBP63m in total which, after allowing for the
related deferred tax, accounts for more than 60% of the increase in
capital employed, which rose 35% to GBP379m. As a result of this,
ROCE reduced to 47.6% despite the improved profit margin and growth
in revenue this year.
Taxation
This year the Group's effective tax rate reduced from 27.9% to
26.9%. The mix of where profits are generated from within the 37
countries in which we have a presence has a major impact on the
Group effective tax rate. Where we pay tax the national effective
rates vary from 17% to 35%. There are also changes to tax within
some jurisdictions which are large enough to impact the Group
effective rate. The reduction of Chinese withholding tax rates,
from 10% to 5% was one such influence in the year, as was the
impact of the patent box reliefs in the UK. These two items
accounted for a reduction of 120 basis points with geographic mix
accounting for a 20 basis point increase. Our approach to tax
continues to be to operate on the basis of full disclosure and
co-operation with all tax authorities and, where possible, to
mitigate the burden of tax within the local legislation.
Cash generation
Net cash balances finished the year at GBP46.8m, GBP22.1m lower
than the start of the year. The three largest categories of cash
expenditure were: GBP81.3m on acquisitions, GBP43.0m of tax paid
and GBP42.7m of dividends paid. The increase in acquisition spend,
from GBP43.5m last year, was the largest increase and was partly
funded by a GBP19.4m net increase in loans during the year. Capital
expenditure was higher than the previous year with the completion
of the Leeds site project and the purchase of a new factory in
Lucca, Italy, the two largest items. The Lucca factory cost GBP3.4m
and will be developed during 2015 for the business to move into
late in the year.
Our cash generation KPI shows a conversion of 97.4% of operating
profit into operating cash. Control of working capital is key to
this performance and this year working capital increased to 28.5%
of revenue compared with 24.7% in December 2013. The weighting of
revenue to the last quarter of the year, which culminated in
December 2014 being a record monthly revenue, led to a GBP22.5m
increase in trade receivables between balance sheet dates of which
acquisitions accounted for GBP6.0m. Looking at this as days' sales
outstanding, this measure increased by 4 days to 60 days. The high
revenue had a positive impact on inventory which only increased
GBP2.2m on an OCC basis but with a further GBP4.8m from
acquisitions year-end inventory was GBP81.1m which represented
13.6% of annual revenue compared with 13.0% in 2013.
Share capital
Given the rise in the Company's share price over recent years,
the Directors consider that it is now appropriate to sub-divide the
shares into smaller units. At the forthcoming AGM in April the
Board is proposing a sub-division of the Company's share capital to
make the Company's shares more accessible, particularly to small
shareholders and our own employees. A sub-division may also improve
the liquidity and reduce the bid/offer spread of the Company's
ordinary shares. Therefore a 10 for 1 share split will be proposed
at the AGM which will mean the existing 5 pence ordinary shares
will become 0.5 pence ordinary shares.
Peter France
Chief Executive
2 March 2015
* References to adjusted profit throughout this document are
defined as the IFRS profit, whether operating profit or profit
before tax, with GBP14.9m (2013: GBP12.1m) of amortisation of
acquired intangibles added back.
Consolidated income statement
For the year ended 31 December 2014
2014 2013
Notes GBP000 GBP000
------------------------------------------- ----- --------- -----------
Revenue 2 594,739 578,440
Cost of sales (309,280) (304,066)
------------------------------------------- ----- --------- -----------
Gross profit 285,459 274,374
Other income 277 206
Distribution costs (5,466) (5,623)
Administrative expenses (137,832) (129,576)
Other expenses (211) (116)
------------------------------------------- ----- --------- -----------
Operating profit before the amortisation
of intangible assets 157,167 151,412
Amortisation of acquired intangible assets (14,940) (12,147)
------------------------------------------- ----- --------- -----------
Operating profit 2 142,227 139,265
Finance income 4 1,421 1,173
Finance expense 4 (2,483) (2,441)
------------------------------------------- ----- --------- -----------
Profit before tax 141,165 137,997
Income tax expense 5 (37,963) (38,488)
------------------------------------------- ----- --------- -----------
Profit for the year 103,202 99,509
------------------------------------------- ----- --------- -----------
Basic earnings per share 12 119.0p 114.8p
Adjusted basic earnings per share 12 131.6p 124.9p
Diluted earnings per share 12 118.5p 114.3p
Adjusted diluted earnings per share 12 131.0p 124.3p
------------------------------------------- ----- --------- ---------
Consolidated statement of comprehensive income
For the year ended 31 December 2014
2014 2013
GBP000 GBP000
--------------------------------------------- -------- -------
Profit for the year 103,202 99,509
Other comprehensive income
Items that may be subsequently reclassified
to the income statement:
Foreign exchange translation differences (869) (4,981)
Effective portion of changes in fair value
of cash flow hedges net of tax (1,810) 1,274
---------------------------------------------- -------- -------
(2,679) (3,707)
Items that are not subsequently reclassified
to the income statement:
Actuarial (loss) / gain in pension scheme
net of tax (15,341) 5,528
---------------------------------------------- -------- -------
Income and expenses recognised directly
in equity (18,020) 1,821
Total comprehensive income for the year 85,182 101,330
---------------------------------------------- -------- -------
Consolidated balance sheet
At 31 December 2014
2014 2013
Notes GBP000 GBP000
-------------------------------------- ----- ------- -------
Non-current assets
Goodwill 6 149,679 105,150
Intangible assets 7 72,270 53,481
Property, plant and equipment 64,050 45,871
Derivative financial instruments - 804
Deferred tax assets 15,703 11,778
Other receivables 9 1,976 1,532
-------------------------------------- ----- ------- -------
Total non-current assets 303,678 218,616
Current assets
Inventories 8 81,090 75,081
Trade receivables 9 128,472 105,976
Current tax 9 1,962 1,145
Derivative financial instruments 1,913 2,933
Other receivables 9 12,586 12,152
Cash and cash equivalents 10 46,816 68,873
-------------------------------------- ----- ------- -------
Total current assets 272,839 266,160
-------------------------------------- ----- ------- -------
Total assets 576,517 484,776
-------------------------------------- ----- ------- -------
Equity
Issued equity capital 11 4,346 4,344
Share premium 9,422 8,840
Reserves 3,970 6,649
Retained earnings 359,057 312,246
-------------------------------------- ----- ------- -------
Total equity 376,795 332,079
-------------------------------------- ----- ------- -------
Non-current liabilities
Interest bearing loans and borrowings 1,303 1,678
Employee benefits 13 38,864 22,705
Deferred tax liabilities 20,358 16,920
Provisions 14 1,913 2,628
-------------------------------------- ----- ------- -------
Total non-current liabilities 62,438 43,931
Current liabilities
Interest bearing loans and borrowings 20,274 532
Trade payables 15 40,162 38,019
Employee benefits 13 16,018 17,479
Current tax 15 15,200 14,836
Derivative financial instruments 1,119 32
Other payables 15 35,191 31,002
Provisions 14 9,320 6,866
-------------------------------------- ----- ------- -------
Total current liabilities 137,284 108,766
-------------------------------------- ----- ------- -------
Total liabilities 199,722 152,697
-------------------------------------- ----- ------- -------
Total equity and liabilities 576,517 484,776
-------------------------------------- ----- ------- -------
Consolidated statement of changes in equity
Issued Capital
equity Share Translation redemption Hedging Retained
capital premium reserve reserve reserve earnings Total
---------------------------------- -------- -------- ----------- ----------- -------- --------- --------
Balance at 31 December
2012 4,340 8,258 7,649 1,644 1,063 246,369 269,323
Profit for the year - - - - - 99,509 99,509
Other comprehensive income
---------------------------------- -------- -------- ----------- ----------- -------- --------- --------
Foreign exchange translation
differences - - (4,981) - - - (4,981)
Effective portion of
changes in fair value
of cash
flow hedges - - - - 1,598 - 1,598
Actuarial gain on defined
benefit pension plans - - - - - 7,669 7,669
Tax in other comprehensive
income - - - - (324) (2,141) (2,465)
Total other comprehensive
income - - (4,981) - 1,274 5,528 1,821
---------------------------------- -------- -------- ----------- ----------- -------- --------- --------
Total comprehensive income - - (4,981) - 1,274 105,037 101,330
Transactions with owners,
recorded directly in
equity
Equity settled share-based
payments transactions - - - - - 143 143
Tax on equity settled
share-based payment transactions - - - - - 632 632
Share options exercised
by employees 4 582 - - - - 586
Own ordinary shares acquired - - - - - (5,601) (5,601)
Own ordinary shares awarded
under share schemes - - - - - 4,401 4,401
Dividends - - - - - (38,735) (38,735)
---------------------------------- -------- -------- ----------- ----------- -------- --------- --------
Balance at 31 December
2013 4,344 8,840 2,668 1,644 2,337 312,246 332,079
Profit for the year - - - - - 103,202 103,202
Other comprehensive income
---------------------------------- -------- -------- ----------- ----------- -------- --------- --------
Foreign exchange translation
differences - - (869) - - - (869)
Effective portion of
changes in fair value
of cash
flow hedges - - - - (2,368) - (2,368)
Actuarial loss on defined
benefit pension plans - - - - - (19,832) (19,832)
Tax in other comprehensive
income - - - - 558 4,491 5,049
Total other comprehensive
income - - (869) - (1,810) (15,341) (18,020)
---------------------------------- -------- -------- ----------- ----------- -------- --------- --------
Total comprehensive income - - (869) - (1,810) 87,861 85,182
Transactions with owners,
recorded directly in
equity
Equity settled share-based
payments transactions - - - - - 2,799 2,799
Tax on equity settled
share-based payment transactions - - - - - (274) (274)
Share options exercised
by employees 2 582 - - - - 584
Own ordinary shares acquired - - - - - (6,300) (6,300)
Own ordinary shares awarded
under share schemes - - - - - 5,427 5,427
Dividends - - - - - (42,702) (42,702)
---------------------------------- -------- -------- ----------- ----------- -------- --------- --------
Balance at 31 December
2014 4,346 9,422 1,799 1,644 527 359,057 376,795
---------------------------------- -------- -------- ----------- ----------- -------- --------- --------
Detailed explanations for equity capital, the translation
reserve, capital redemption reserve and hedging reserve can be seen
in note 11.
Consolidated statement of cash flows
For the year ended 31 December 2014
2014 2014 2013 2013
Notes GBP000 GBP000 GBP000 GBP000
---------------------------------------- ----- -------- --------- -------- --------
Cash flows from operating activities
Profit for the year 103,202 99,509
Adjustments for:
Amortisation of intangibles 14,940 12,147
Amortisation of development costs 1,461 1,214
Depreciation 7,996 6,801
Equity settled share-based payment
expense 5,160 2,178
Profit on sale of property, plant
and equipment 88 (25)
Finance income (1,421) (1,173)
Finance expense 2,483 2,441
Income tax expense 37,963 38,488
---------------------------------------- ----- -------- --------- -------- --------
171,872 161,580
Increase in inventories (1,891) (1,740)
Increase in trade and other receivables (16,349) (10,786)
Decrease in trade and other payables (1,327) (1,778)
Difference between pension charge
and cash contribution (5,241) (534)
(Decrease) / increase in provisions (1,379) 863
Increase in employee benefits 2,176 2,621
---------------------------------------- ----- -------- --------- -------- --------
147,861 150,226
Income taxes paid (42,992) (39,866)
---------------------------------------- ----- -------- --------- -------- --------
Cash flows from operating activities 104,869 110,360
Investing activities
Purchase of property, plant and
equipment (17,518) (10,419)
Development costs capitalised (2,676) (2,033)
Sale of property, plant and equipment 224 159
Acquisition of businesses, net
of cash acquired 3 (81,263) (43,235)
Contingent consideration paid (1,463) (250)
Interest received 1,048 917
---------------------------------------- ----- -------- --------- -------- --------
Cash flows from investing activities (101,648) (54,861)
Financing activities
Issue of ordinary share capital 584 586
Own ordinary shares acquired (6,300) (5,601)
Interest paid (1,120) (653)
Increase / (decrease) in bank
loans 19,496 (618)
Repayment of finance lease liabilities (36) (34)
Dividends paid on ordinary shares (42,702) (38,735)
---------------------------------------- ----- -------- --------- -------- --------
Cash flows from financing activities (30,078) (45,055)
---------------------------------------- ----- -------- --------- -------- --------
(Decrease) / increase in cash
and cash equivalents (26,857) 10,444
Cash and cash equivalents at
1 January 68,873 59,868
Effect of exchange rate fluctuations
on cash held 4,800 (1,439)
---------------------------------------- ----- -------- --------- -------- --------
Cash and cash equivalents at
31 December 10 46,816 68,873
---------------------------------------- ----- -------- --------- -------- --------
Notes to the Financial Statements
For the year ended 31 December 2014
Except where indicated, values in these notes are in GBP000.
Rotork plc is a company domiciled in England. The consolidated
financial statements of the Company for the year ended 31 December
2014 comprise the Company and its subsidiaries (together referred
to as the 'Group').
1. Accounting policies
Basis of preparation
The consolidated financial statements of Rotork plc have been
prepared and approved by the directors in accordance with
International Financial Reporting Standards as adopted by the
European Union (IFRSs as adopted by the EU), IFRIC Interpretations
and the Companies Act 2006 applicable to companies reporting under
IFRS. The consolidated financial statements have been prepared
under the historical cost convention subject to the items referred
to in the derivative financial instruments accounting policy
below.
New accounting standards and interpretations
The following amendments have been applied from 1 January
2014:
-- Amendments to IAS32 - Offsetting Financial Assets and Financial liabilities
-- Amendments to IAS 36 - Recoverable Amount Disclosures for Non-Financial Assets
-- Amendments to IAS 39 - Novation of Derivatives and Continuation of Hedge Accounting
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
IFRS15 Revenue from contracts with customers has been issued but
is not yet effective and has not been adopted as application was
not mandatory for the year. The new standard requires the
separation of performance obligations within contracts with
customers and the contractual value to be allocated to the
performance obligations. Once a performance obligation is satisfied
revenue should be recognised on that element of the contract. The
introduction of the standard is likely to have some impact on
Rotork but this is unlikely to be material due to the relatively
straightforward contractual terms and conditions with customers. An
assessment will be carried to understand the impact of this
standard prior to it becoming effective in January 2017.
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.
The following narrow scope amendments which were issued as part
of the IFRS Annual improvement cycle are effective for the 2015
financial year:
-- Amendment to IAS19 Defined benefit plans - Employee contributions
-- IFRS2 Share-based payment - Definition of vesting condition
-- IFRS3 Business combination - Accounting for contingent consideration
-- IFRS8 Operating segments - Aggregation of operating segments
and Reconciliation of the total of reportable assets.
-- IFRS13 Fair value measurement - Short-term receivable and payables
-- IAS24 Related party disclosure - Key management personnel services
Application of these amendments has not had any material impact
on the disclosures, net assets or results of the Group.
Going concern
After making enquiries, the directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. For this reason,
they continue to adopt the going concern basis in preparing the
financial statements. In forming this view, the directors have
considered trading and cash flow forecasts, financial commitments,
the significant order book with customers spread across different
geographic areas and industries and the net cash position.
Consolidation
The consolidated financial statements incorporate the financial
statements of the Company and its subsidiaries for the year to 31
December 2014. The financial statements of subsidiaries are
included in the consolidated financial statements from the date
that control commences until the date control ceases. Intra-group
balances and any unrealised gains or losses or income and expenses
arising from intra-group transactions are eliminated in preparing
the consolidated financial statements.
Status of this preliminary announcement
The financial information contained in this preliminary
announcement does not constitute the Company's statutory accounts
for the years ended 31 December 2014 or 2013. Statutory accounts
for 2013, which were prepared under International Financial
Reporting Standards as adopted by the EU, have been delivered to
the registrar of companies, and those for 2014 will be delivered in
due course. The auditors have reported on those accounts; their
reports were (i) unqualified, (ii) did not include a reference to
any matters to which the auditors drew attention by way of emphasis
without qualifying their report and (iii) did not contain a
statement under section 498 (2) or (3) of the Companies Act 2006.
Full financial statements for the year ended 31 December 2014, will
shortly be posted to shareholders, and after adoption at the Annual
General Meeting on 24 April 2015 will be delivered to the
registrar.
2. Operating segments
The Group has chosen to organise the management and financial
structure by the grouping of related products. The four
identifiable operating segments where the financial and operating
performance is reviewed monthly by the chief operating decision
maker are as follows:
Controls - the design, manufacture and sale of electric
actuators
Fluid Systems - the design, manufacture and sale of pneumatic
and hydraulic actuators
Gears - the design, manufacture and sale of gearboxes, adaption
and ancillaries for the valve industry
Instruments - the manufacture of high precision pneumatic
controls and power transmission products for a wide range of
industries
Unallocated expenses comprise corporate expenses. Transfer
prices between business segments are set on an arm's length basis
in a manner similar to transactions with third parties.
Geographic analysis
Rotork has a worldwide presence in all four operating segments
through its subsidiary selling offices and through an agency
network. A full list of locations can be found at
www.rotork.com.
Analysis by operating segment:
Fluid
Controls Systems Gears Instruments Elimination Unallocated Group
2014 2014 2014 2014 2014 2014 2014
-------------------------- -------- -------- ------ ----------- ----------- ----------- --------
Revenue from external
customers 324,539 180,260 45,771 44,169 - - 594,739
Inter segment revenue - - 12,035 1,788 (13,823) - -
-------------------------- -------- -------- ------ ----------- ----------- ----------- --------
Total revenue 324,539 180,260 57,806 45,957 (13,823) - 594,739
-------------------------- -------- -------- ------ ----------- ----------- ----------- --------
Adjusted operating profit 104,709 31,180 13,011 14,433 - (6,166) 157,167
Amortisation of acquired
intangible assets (3,477) (1,585) (428) (9,450) - - (14,940)
-------------------------- -------- -------- ------ ----------- ----------- ----------- --------
Operating profit 101,232 29,595 12,583 4,983 - (6,166) 142,227
-------------------------- -------- -------- ------ ----------- ----------- ----------- --------
Net finance expense (1,062)
Income tax expense (37,963)
-------------------------- -------- -------- ------ ----------- ----------- ----------- --------
Profit for the year 103,202
-------------------------- -------- -------- ------ ----------- ----------- ----------- --------
Fluid
Controls Systems Gears Instruments Elimination Unallocated Group
2013 2013 2013 2013 2013 2013 2013
-------------------------- -------- -------- ------ ----------- ----------- ----------- --------
Revenue from external
customers 321,902 186,969 45,353 24,216 - - 578,440
Inter segment revenue - - 10,682 706 (11,388) - -
-------------------------- -------- -------- ------ ----------- ----------- ----------- --------
Total revenue 321,902 186,969 56,035 24,922 (11,388) - 578,440
-------------------------- -------- -------- ------ ----------- ----------- ----------- --------
Adjusted operating profit 105,472 31,010 12,972 7,833 - (5,875) 151,412
Amortisation of acquired
intangible assets (4,363) (1,920) (403) (5,461) - - (12,147)
-------------------------- -------- -------- ------ ----------- ----------- ----------- --------
Operating profit 101,109 29,090 12,569 2,372 - (5,875) 139,265
-------------------------- -------- -------- ------ ----------- ----------- ----------- --------
Net finance expense (1,268)
Income tax expense (38,488)
-------------------------- -------- -------- ------ ----------- ----------- ----------- --------
Profit for the year 99,509
-------------------------- -------- -------- ------ ----------- ----------- ----------- --------
Fluid
Controls Systems Gears Instruments Unallocated Group
2014 2014 2014 2014 2014 2014
-------------------------------- -------- -------- ----- ----------- ----------- -------
Depreciation 4,396 2,012 813 715 60 7,996
Amortisation:
* Other intangibles 3,477 1,585 428 9,450 - 14,940
* Development costs 1,342 20 44 55 - 1,461
Non-cash items : equity settled
share-based payments 2,779 1,162 574 181 464 5,160
Net financing expense - - - - (1,062) (1,062)
Acquired as part of business
combinations:
* Goodwill - 1,753 - 43,301 - 45,054
* Intangible assets - 1,346 - 31,042 - 32,388
Capital expenditure 6,082 6,820 3,875 613 2 17,392
-------------------------------- -------- -------- ----- ----------- ----------- -------
Fluid
Controls Systems Gears Instruments Unallocated Group
2013 2013 2013 2013 2013 2013
-------------------------------- -------- -------- ----- ----------- ----------- -------
Depreciation 4,353 1,692 427 329 - 6,801
Amortisation:
* Other intangibles 4,363 1,920 403 5,461 - 12,147
* Development costs 1,193 9 12 - - 1,214
Non-cash items : equity settled
share-based payments 881 427 271 35 563 2,177
Net financing expense - - - - (1,268) (1,268)
Acquired as part of business
combinations:
* Goodwill 19,766 3,688 1,398 - - 24,852
* Intangible assets 19,548 3,277 1,413 - - 24,238
Capital expenditure 7,108 2,350 581 281 - 10,320
-------------------------------- -------- -------- ----- ----------- ----------- -------
Balance sheets are reviewed by operating subsidiary and
operating segment balance sheets are not prepared, as such no
further analysis of operating segments assets and liabilities is
presented.
Geographical analysis:
Revenue by location of subsidiary 2014 2013
---------------------------------- ------- -------
UK 57,424 51,027
Italy 66,447 64,861
Rest of Europe 110,790 117,467
USA 144,366 147,039
Other Americas 36,327 38,201
Rest of the World 179,385 159,845
---------------------------------- ------- -------
594,739 578,440
---------------------------------- ------- -------
This disclosure has been restated to revenue by location of
subsidiary because this gives a better reflection of the geographic
distribution of where the sale occurred.
Rest Rest
of Other of
UK Europe USA Americas World Group
2014 2014 2014 2014 2014 2014
------------------------------------- ------ ------- ------ --------- ------ -------
Non-current assets:
* Goodwill 14,107 53,409 42,565 759 38,839 149,679
* Intangible assets 11,972 21,767 16,824 - 21,707 72,270
* Property, plant and equipment 21,770 18,257 7,265 801 15,957 64,050
------------------------------------- ------ ------- ------ --------- ------ -------
Rest Rest
of Other of
UK Europe USA Americas World Group
2013 2013 2013 2013 2013 2013
------------------------------------- ------ ------- ------ --------- ------ -------
Non-current assets:
* Goodwill 5,691 55,205 40,154 770 3,330 105,150
* Intangible assets 5,538 27,317 20,351 - 275 53,481
* Property, plant and equipment 16,304 15,176 6,706 768 6,917 45,871
------------------------------------- ------ ------- ------ --------- ------ -------
3. Acquisitions
i) YTC
On 31 March 2014 the Group acquired 100% of the share capital of
Young Tech Co. Ltd. ("YTC") for GBP68,379,000. YTC is a leading
manufacturer and supplier of valve positioners and accessories
which are certified for use in international markets, based in
Seoul, Korea. The acquired business is reported within the
Instruments division. In the nine months to 31 December 2014 YTC
contributed GBP13,873,000 to Group revenue and GBP5,580,000 to
consolidated operating profit before amortisation. The amortisation
charge in the thirty nine week period from the acquired intangible
assets was GBP3,254,000.
If the acquisition had occurred on 1 January 2014 the business
would have contributed GBP17,899,000 to Group revenue, GBP6,917,000
to Group operating profit and GBP5,330,000 to profit attributable
to equity shareholders.
ii) Other acquisitions
The Group acquired 100% of the share capital of Xylem Flow
Control Limited ("Midland") for GBP20,018,000 on 2 July 2014.
Midland is a leading manufacturer of solenoid valves and
instruments under the Midland-ACS, Alcon Solenoid Valves and Landon
Kingsway brands based in Wolverhampton, UK. The acquired businesses
is reported within the Instruments division.
The Group acquired 100% of the share capital of Masso Ind S.p.A.
("Masso") for GBP2,973,000 on 9 December 2014. Masso is a marine
valve remote control system manufacturer based in Valduggia, Italy.
The acquired business is reported within the Fluid Systems
division.
In the period from acquisition to 31 December 2014, Midland and
Masso contributed GBP6,286,000 to Group revenue and GBP1,202,000 to
consolidated operating profit before amortisation. The amortisation
charge in respect of these acquisitions during the year was
GBP1,049,000. If these other acquisitions had occurred on 1 January
2014 Midland and Masso would have contributed GBP14,990,000 to
Group revenue, GBP2,569,000 to Group operating profit and
GBP2,014,000 profit attributable to equity shareholders.
iii) Acquisitions fair value table
The three acquisitions had the following effect on the Group's
assets and liabilities.
YTC Other acquisitions Total
--------------------------------- --------------------------------- -----------
Provisional Provisional Provisional
Book Fair Book Fair Fair
value Adjustments value value Adjustments value value
------------------------------ ------- ----------- ----------- ------- ----------- ----------- -----------
Non-current assets
Property, plant and equipment 7,889 - 7,889 1,565 - 1,565 9,454
Intangible assets 226 23,976 24,202 - 8,186 8,186 32,388
Current assets
Inventory 3,158 (382) 2,776 2,367 (345) 2,022 4,798
Trade and other receivables 3,311 (254) 3,057 5,662 (41) 5,621 8,678
Cash 4,514 - 4,514 1,197 - 1,197 5,711
Current liabilities
Trade and other payables (1,099) (1,276) (2,375) (3,197) (32) (3,229) (5,604)
Employee benefits (40) - (40) (207) - (207) (247)
Warranty provision - (30) (30) (25) (132) (157) (187)
Corporation tax (292) (53) (345) (236) (48) (284) (629)
Non-current liabilities
Deferred tax liability - (6,154) (6,154) 16 (1,908) (1,892) (8,046)
Total net assets 17,667 15,827 33,494 7,142 5,680 12,822 46,316
Goodwill 34,885 10,169 45,054
------------------------------ ------- ----------- ----------- ------- ----------- ----------- -----------
Purchase consideration 68,379 22,991 91,370
Paid in cash 64,379 22,595 86,974
Contingent consideration 4,000 396 4,396
------------------------------ ------- ----------- ----------- ------- ----------- ----------- -----------
Purchase consideration 68,379 22,991 91,370
Purchase consideration
paid in cash 64,379 22,595 86,974
Cash held in subsidiary (4,514) (1,197) (5,711)
------------------------------ ------- ----------- ----------- ------- ----------- ----------- -----------
Cash outflow on acquisition 59,865 21,398 81,263
------------------------------ ------- ----------- ----------- ------- ----------- ----------- -----------
The adjustments shown in the table represent the alignment of
accounting policies of the acquired businesses to Rotork Group
policies and the fair value adjustments of the assets and
liabilities at the acquisition date of each of the businesses.
The contingent consideration in respect of YTC is payable in
April 2015 dependant on an EBIT target being achieved.
The Goodwill arising from the three acquisitions represents the
opportunity to grow by exploiting new routes to market via the
Rotork sales network and the technical expertise of the acquired
workforce. None of the goodwill recognised is expected to be
deductible for income tax purposes.
The intangible assets identified comprise customer
relationships, brands, product design patents and acquired order
books.
4. Finance Income and expense
Recognised in the income statement
2014 2013
----------------------------------- ----- -----
Interest income 1,057 917
Foreign exchange gains 364 256
----------------------------------- ----- -----
Finance income 1,421 1,173
----------------------------------- ----- -----
2014 2013
---------------------------------------------- ------- -------
Interest expense (1,159) (653)
Interest charge on pension scheme liabilities
(note 24) (788) (1,168)
Foreign exchange losses (536) (620)
---------------------------------------------- ------- -------
Finance expense (2,483) (2,441)
---------------------------------------------- ------- -------
Recognised in equity
2014 2013
------------------------------------------- ------- -------
Effective portion of changes in fair value
of cash flow hedges 667 3,035
Fair value of cash flow hedges transferred
to income statement (3,035) (1,437)
Foreign currency translation differences
for foreign operations (869) (4,981)
------------------------------------------- ------- -------
(3,237) (3,383)
------------------------------------------- ------- -------
Recognised in:
Hedging reserve (2,368) 1,598
Translation reserve (869) (4,981)
------------------------------------------- ------- -------
(3,237) (3,383)
------------------------------------------- ------- -------
5. Income tax expense
2014 2014 2013 2013
----------------------------------------- ------- ------- ------- -------
Current tax:
UK corporation tax on profits for
the year 6,122 7,986
Adjustment in respect of prior years (766) 156
----------------------------------------- ------- ------- ------- -------
5,356 8,142
Overseas tax on profits for the year 36,283 34,790
Adjustment in respect of prior years 229 (59)
----------------------------------------- ------- ------- ------- -------
36,512 34,731
----------------------------------------- ------- ------- ------- -------
Total current tax 41,868 42,873
----------------------------------------- ------- ------- ------- -------
Deferred tax:
Origination and reversal of other
temporary differences (3,650) (4,177)
Adjustment in respect of prior years (255) (208)
----------------------------------------- ------- ------- ------- -------
Total deferred tax (3,905) (4,385)
----------------------------------------- ------- ------- ------- -------
Total tax charge for year 37,963 38,488
----------------------------------------- ------- ------- ------- -------
Effective tax rate (based on profit
before tax) 26.9% 27.9%
Profit before tax 141,165 137,997
Profit before tax multiplied by the
blended standard rate of corporation
tax in
the UK of 21.5% (2013: 23.25%) 30,350 32,084
Effects of:
Different tax rates on overseas earnings 8,841 6,019
Permanent differences 1,444 1,398
Research and development credits (1,880) (901)
Utilisation of overseas tax holidays - (1)
Adjustments to tax charge in respect
of prior years (792) (111)
----------------------------------------- ------- ------- ------- -------
Total tax charge for year 37,963 38,488
----------------------------------------- ------- ------- ------- -------
A tax expense of GBP274,000 (2013: credit of GBP632,000) in
respect of share-based payments has been recognised directly in
equity in the year.
The reduction in the effective tax rate from 27.9% to 26.9% is
primarily due to the withholding tax rate on remitted dividends
from China reducing from 10% to 5% and the patent box relief
available in the UK being effective for a full year in 2014. The
Group continues to expect its effective rate of corporation tax to
be higher than the standard UK rate due to higher rates of tax in
the USA, Canada, France, Germany, Italy, Japan and India.
A credit of GBP4,214,000 (2013: GBP3,611,000) in respect of
acquired intangible asset amortisation is included in the deferred
tax credit of GBP3,905,000 (2013: GBP4,385,000).
There is an unrecognised deferred tax liability for temporary
differences associated with investments in subsidiaries. Rotork plc
controls the dividend policies of its subsidiaries and subsequently
the timing of the reversal of the temporary differences. The value
of temporary differences associated with unremitted earnings of
subsidiaries for which deferred tax has not been recognised is
GBP292,704,000 (2013: GBP249,208,000).
6. Goodwill
2014 2013
------------------------------------------ ------- -------
Cost
At 1 January 105,150 80,729
Acquisition through business combinations
(note 3) 45,054 24,852
Exchange adjustments (525) (431)
------------------------------------------ ------- -------
At 31 December 149,679 105,150
Provision for impairment
At 1 January and 31 December - -
------------------------------------------ ------- -------
Carrying amounts 149,679 105,150
------------------------------------------ ------- -------
Cash generating units
Goodwill acquired through business combinations have been
allocated to the lowest level of cash generating unit (CGU) and to
the division in which it is reported. Where the acquired entity's
growth into new markets is through the Group's existing sales
network the lowest level of CGU is considered to be at the
divisional level.
The carrying value of goodwill is allocated as follows:
2014 2013
---------------------------- ------- -------
Controls
Schischek 17,874 19,003
Other cash generating units 9,428 9,279
---------------------------- ------- -------
27,302 28,282
Fluid Systems
Rotork Fluid Systems 7,143 7,594
Rotork Sweden 5,965 6,796
Other cash generating units 13,786 11,978
---------------------------- ------- -------
26,894 26,368
Gears
Other cash generating units 8,991 9,069
---------------------------- ------- -------
8,991 9,069
Instruments
YTC 35,729 -
Fairchild 28,494 26,722
Soldo 13,853 14,709
Midland 8,416 -
---------------------------- ------- -------
86,492 41,431
Total Group 149,679 105,150
---------------------------- ------- -------
Impairment testing
Goodwill is not amortised but is tested annually for
impairment.
Value in use calculations are used to determine the recoverable
amount of goodwill allocated to each of the CGUs. These
calculations use cash flow projections based on actual operating
results and management forecasts.
The key assumptions in the annual impairment review which are
common to all CGUs are set out below:
i) Management forecasts
The three year plan is a bottom up process which takes place as
part of the annual budget process. The three year plan is prepared
by each reporting entity's management reflecting their view of the
local market, known projects and experience of past performance.
The annual budget and the three year plan are reviewed and approved
by the Board each year.
ii) Long term growth rates
In the period after the three year plan growth rates are
forecast at 6% per annum for the first two years and 2% thereafter
for each CGU (2013: all years post three year plan were forecast at
2%). The 6% rate reflects a more realistic market forecast for the
flow control market up until 2019. These rates are considered to be
prudent given the significant organic growth of the business over
the last 10 years.
iii) Discount rates
Discount rates for each of the CGUs have been based on the
geographic area in which the subsidiary is located and these rates
range between 9.2% and 10.3% (2013: group wide discount rate of
10.5%). Applying an area specific discount rate more accurately
reflects the risks and rewards for subsidiaries operating in
various geographic sectors around the world.
Sensitivity analysis
Sensitivity analysis has been undertaken for each CGU to assess
the impact of any reasonable change in assumptions. Using the key
assumptions above there is no reasonable change that would cause
the carrying values of any CGU to exceed the recoverable amount
apart from YTC and Schischek, the sensitivities for which are
explained below.
With regard to YTC, which has only been part of the Group for 9
months, downside sensitivities have been assessed. A decrease in
the growth rate by 6% in each of the next five years would result
in the goodwill being impaired. If the discount factor were to
increase by 2% to 12.2%, growth would need to reduce by 1% in each
of the next five years for the goodwill to become impaired. It is
anticipated that as YTC becomes more established within the Group
and leverages the sales network opportunities the long term growth
rate should comfortably exceed the growth rates assumed in the
forecast.
Schischek downside sensitivities have also been assessed. A
decrease in the growth rate of 7% per year over the next five years
would be required to result in an impairment. If the discount rate
were to increase by 2% to 12.3%, a decrease in the growth rate of
2% in each of the next five years would be required to result in a
goodwill impairment.
7. Intangible assets
Business combinations
acquired intangible
assets
------------------------------
Research
&
development Customer
costs Brands relationships Other Total
----------------------------- ------------ ------ -------------- ------ -------
Cost
1 January 2013 9,069 21,954 26,722 3,842 61,587
Acquisition through business
combinations - 7,968 12,298 3,972 24,238
Internally developed 2,033 - - - 2,033
Exchange adjustments (6) (242) (584) (84) (916)
----------------------------- ------------ ------ -------------- ------ -------
31 December 2013 11,096 29,680 38,436 7,730 86,942
Acquisition through business
combinations 226 4,808 22,579 4,775 32,388
Internally developed 2,746 - - - 2,746
Exchange adjustments 16 (135) 82 (77) (114)
----------------------------- ------------ ------ -------------- ------ -------
31 December 2014 14,084 34,353 61,097 12,428 121,962
----------------------------- ------------ ------ -------------- ------ -------
Amortisation
1 January 2013 4,850 4,110 8,792 3,092 20,844
Charge for the year 1,214 3,816 6,684 1,647 13,361
Exchange adjustments - (201) (456) (87) (744)
----------------------------- ------------ ------ -------------- ------ -------
31 December 2013 6,064 7,725 15,020 4,652 33,461
Charge for the year 1,461 4,188 8,255 2,497 16,401
Exchange adjustments 1 (38) (121) (12) (170)
----------------------------- ------------ ------ -------------- ------ -------
31 December 2014 7,526 11,875 23,154 7,137 49,692
----------------------------- ------------ ------ -------------- ------ -------
Net Book Value
31 December 2013 5,032 21,955 23,416 3,078 53,481
----------------------------- ------------ ------ -------------- ------ -------
31 December 2014 6,558 22,478 37,943 5,291 72,270
----------------------------- ------------ ------ -------------- ------ -------
Other acquired intangible assets represent order books and
intellectual property.
The amortisation charge is recognised within administrative
expenses in the income statement.
8. Inventories
2014 2013
------------------------------ ------ ------
Raw materials and consumables 58,590 51,844
Work in progress 10,088 8,445
Finished goods 12,412 14,792
------------------------------ ------ ------
81,090 75,081
------------------------------ ------ ------
Included in cost of sales was GBP206,104,000 (2013:
GBP205,092,000) in respect of inventories consumed in the year.
9. Trade and other receivables
2014 2013
--------------------------------------------- ------- -------
Non-current assets:
Other non-trade receivables 1,976 1,532
--------------------------------------------- ------- -------
Other receivables 1,976 1,532
--------------------------------------------- ------- -------
Current assets:
Trade receivables 130,819 107,801
Less provision for impairment of receivables (2,347) (1,825)
--------------------------------------------- ------- -------
Trade receivables - net 128,472 105,976
--------------------------------------------- ------- -------
Corporation tax 1,962 1,145
--------------------------------------------- ------- -------
Current tax 1,962 1,145
--------------------------------------------- ------- -------
Other non-trade receivables 2,161 1,833
Other taxes and social security 6,046 5,542
Prepayments 4,379 4,777
--------------------------------------------- ------- -------
Other receivables 12,586 12,152
--------------------------------------------- ------- -------
10. Cash and cash equivalents
2014 2013
---------------------------------------------- ------ ------
Bank balances 23,777 40,747
Cash in hand 45 43
Short term deposits 22,994 28,083
---------------------------------------------- ------ ------
Cash and cash equivalents 46,816 68,873
Bank overdraft - -
---------------------------------------------- ------ ------
Cash and cash equivalents in the Consolidated
Statement of Cash Flows 46,816 68,873
---------------------------------------------- ------ ------
11. Capital and reserves
Share capital and share premium
5p Ordinary 5p Ordinary
shares shares
Issued GBP1 Issued GBP1
and Non- and Non-
fully redeemable fully redeemable
paid preference paid preference
up shares up shares
2014 2014 2013 2013
------------------------------------ ----------- ----------- ----------- -----------
At 1 January 4,344 40 4,340 40
Issued under employee share schemes 2 - 4 -
------------------------------------ ----------- ----------- ----------- -----------
At 31 December 4,346 40 4,344 40
------------------------------------ ----------- ----------- ----------- -----------
Number of shares (000) 86,928 86,871
------------------------------------ ----------- ----------- ----------- -----------
The ordinary shareholders are entitled to receive dividends as
declared and are entitled to vote at meetings of the Company.
The Group received proceeds of GBP584,000 (2013: GBP586,000) in
respect of the 57,321 (2013: 62,904) ordinary shares issued during
the year: GBP2,000 (2013: GBP4,000) was credited to share capital
and GBP582,000 (2013: GBP582,000) to share premium.
The preference shareholders take priority over the ordinary
shareholders when there is a distribution upon winding up the
Company or on a reduction of equity involving a return of capital.
The holders of preference shares are entitled to vote at a general
meeting of the Company if a preference dividend is in arrears for
six months or the business of the meeting includes the
consideration of a resolution for winding up the Company or the
alteration of the preference shareholders' rights.
Within the retained earnings reserve are own shares held. The
investment in own shares held is GBP5,393,000 (2013: GBP4,520,000)
and represents 202,098 (2013: 162,518) ordinary shares of the
Company held in trust for the benefit of directors and employees
for future payments under the Share Incentive Plan and Long Term
Incentive Plan. The dividends on these shares have been waived.
Translation reserve
The translation reserve comprises all foreign exchange
differences arising from the translation of the financial
statements of foreign operations.
Capital redemption reserve
The capital redemption reserve arises when the Company redeems
shares wholly out of distributable profits.
Hedging reserve
The hedging reserve comprises the effective portion of the
cumulative net change in the fair value of cash flow hedging
instruments that are determined to be an effective hedge.
Dividends
The following dividends were paid in the year per qualifying
ordinary share:
2014
Payment date 2014 2013
-------------------------------------- -------------- ------ ------
30.0p final dividend (2013: 26.6p) 19 May 26,046 23,082
19.2p interim dividend (2013: 18.05p) 26 September 16,656 15,653
42,702 38,735
----------------------------------------------------- ------ ------
After the balance sheet date the following dividends per
qualifying ordinary share were proposed by the directors. The
dividends have not been provided for and there are no corporation
tax consequences.
2014 2013
----------------------------------------------- ------ ------
Final proposed dividend per qualifying ordinary
share
30.9p 26,861
----------------------------------------------- ------ ------
30.0p 26,061
----------------------------------------------- ------ ------
12. Earnings per share
Basic earnings per share
Earnings per share is calculated for both the current and
previous years using the profit attributable to the ordinary
shareholders for the year. The earnings per share calculation is
based on 86.7m shares (2013: 86.7m shares) being the weighted
average number of ordinary shares in issue (net of own ordinary
shares held) for the year.
2014 2013
------------------------------------------------- ------- ------
Net profit attributable to ordinary shareholders 103,202 99,509
------------------------------------------------- ------- ------
Weighted average number of ordinary shares
Issued ordinary shares at 1 January 86,708 86,638
Effect of own shares held 25 44
Effect of shares issued under Share option
schemes / Sharesave plans 7 9
------------------------------------------------- ------- ------
Weighted average number of ordinary shares
during the year 86,740 86,691
------------------------------------------------- ------- ------
Basic earnings per share 119.0p 114.8p
------------------------------------------------- ------- ------
Adjusted basic earnings per share
Adjusted basic earnings per share is calculated for both the
current and previous years using the profit attributable to the
ordinary shareholders for the year after adding back the after tax
amortisation charge.
2014 2013
------------------------------------------------- ------- -------
Net profit attributable to ordinary shareholders 103,202 99,509
Amortisation 14,940 12,147
Tax effect on amortisation at effective rate (4,018) (3,388)
------------------------------------------------- ------- -------
Adjusted net profit attributable to ordinary
shareholders 114,124 108,268
------------------------------------------------- ------- -------
Weighted average number of ordinary shares
during the year 86,740 86,691
------------------------------------------------- ------- -------
Adjusted basic earnings per share 131.6p 124.9p
------------------------------------------------- ------- -------
Diluted earnings per share
Diluted earnings per share is based on the profit for the year
attributable to the ordinary shareholders and 87.1m shares (2013:
87.1m shares). The number of shares is equal to the weighted
average number of ordinary shares in issue (net of own ordinary
shares held) adjusted to assume conversion of all potentially
dilutive ordinary shares. The Company has three categories of
potentially dilutive ordinary shares: those share options granted
to employees under the Share option scheme and Sharesave plan where
the exercise price is less than the average market price of the
Company's ordinary shares during the year and contingently issuable
shares awarded under the Long Term Incentive Plan (LTIP).
2014 2013
------------------------------------------------- ------- ------
Net profit attributable to ordinary shareholders 103,202 99,509
------------------------------------------------- ------- ------
Weighted average number of ordinary shares
(diluted)
Weighted average number of ordinary shares
for the year 86,740 86,691
Effect of Sharesave options in issue 112 103
Effect of LTIP shares in issue 238 277
------------------------------------------------- ------- ------
Weighted average number of ordinary shares
(diluted) during the year 87,090 87,071
------------------------------------------------- ------- ------
Diluted earnings per share 118.5p 114.3p
------------------------------------------------- ------- ------
Adjusted diluted earnings per share
2014 2013
------------------------------------------------- ------- -------
Net profit attributable to ordinary shareholders 103,202 99,509
Amortisation 14,940 12,147
Tax effect on amortisation at effective rate (4,018) (3,388)
------------------------------------------------- ------- -------
Adjusted net profit attributable to ordinary
shareholders 114,124 108,268
------------------------------------------------- ------- -------
Weighted average number of ordinary shares
(diluted) during the year 87,090 87,071
------------------------------------------------- ------- -------
Adjusted diluted earnings per share 131.0p 124.3p
------------------------------------------------- ------- -------
13. Employee benefits
2014 2013
------------------------------------------------------ --------- ---------
Recognised liability for defined benefit obligations:
* Present value of funded obligations 187,918 152,882
* Fair value of plan assets (151,786) (132,684)
------------------------------------------------------ --------- ---------
36,132 20,198
Other pension scheme liabilities 435 477
Employee bonuses 13,105 14,726
Long term incentive plan 404 576
Employee indemnity provision 1,971 1,833
Other employee benefits 2,835 2,374
54,882 40,184
------------------------------------------------------ --------- ---------
Non-current 38,864 22,705
Current 16,018 17,479
------------------------------------------------------ --------- ---------
54,882 40,184
------------------------------------------------------ --------- ---------
14. Provisions
Contingent Warranty
consideration provision Total
---------------------------------------------- -------------- ---------- -------
Balance at 1 January 2014 2,809 6,685 9,494
Exchange differences (85) 36 (49)
Increase as a result of business combinations 4,396 187 4,583
Provisions used during the year (1,463) (752) (2,215)
Credited to the income statement (164) (416) (580)
---------------------------------------------- -------------- ---------- -------
Balance at 31 December 2014 5,493 5,740 11,233
---------------------------------------------- -------------- ---------- -------
Maturity at 31 December 2014
Non-current - 1,913 1,913
Current 5,493 3,827 9,320
---------------------------------------------- -------------- ---------- -------
5,493 5,740 11,233
---------------------------------------------- -------------- ---------- -------
Maturity at 31 December 2013
Non-current 400 2,228 2,628
Current 2,409 4,457 6,866
---------------------------------------------- -------------- ---------- -------
2,809 6,685 9,494
---------------------------------------------- -------------- ---------- -------
The warranty provision is based on estimates made from
historical warranty data associated with similar products and
services. The provision relates mainly to products sold during the
last 12 months, the typical warranty period is 18 months.
Contingent consideration relates to amounts outstanding in
respect of the acquisitions of YTC, Flowco Limited, GTA Group and
Masso Ind S.p.A. All of these amounts are due to paid during
2015.
15. Trade and other payables
2014 2013
------------------------------------ ------ ------
Trade payables 40,162 38,019
------------------------------------ ------ ------
Corporation tax 15,200 14,836
------------------------------------ ------ ------
Current tax 15,200 14,836
------------------------------------ ------ ------
Other taxes and social security 8,123 6,922
Payments on account 7,617 7,995
Other payables and accrued expenses 19,451 16,085
------------------------------------ ------ ------
Other payables 35,191 31,002
------------------------------------ ------ ------
16. Related parties
The Group has a related party relationship with its subsidiaries
and with its directors and key management. Transactions between two
subsidiaries for the sale and purchase of products or the
subsidiary and parent Company for management charges are priced on
an arms length basis.
M Lamb became a non-executive director of Rotork plc during the
year. Severn Trent plc is a related party of Rotork plc by virtue
of M Lamb's non-executive directorship. Sales to subsidiaries and
associates of Severn Trent plc totalled GBP1,352,000 during the
year and GBP226,000 was outstanding at 31 December 2014.
UBS Investment Bank are a related party by virtue of
non-executive director SA James's 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 GBP8,000 have been reimbursed in the year
(2013: GBP4,000) and no balance was outstanding at 31 December 2014
(2013: GBPnil).
Key management emoluments
The emoluments of those members of the management team,
including directors, who are responsible for planning, directing
and controlling the activities of the Group were:
2014 2013
------------------------------------------- ----- -----
Emoluments including social security costs 4,594 4,816
Post employment benefits 298 287
Pension supplement 251 206
Share-based payments 1,134 1,465
------------------------------------------- ----- -----
6,277 6,774
------------------------------------------- ----- -----
17. Financial calendar
3 March Preliminary announcement of annual results
2015 for 2014
8 April Ex-dividend date for final proposed 2014 dividend
2015
10 April Record date for final proposed 2014 dividend
2015
24 April Annual General Meeting held at Rotork House,
2015 Brassmill Lane, Bath, BA1 3JQ
18 May Payment date for final proposed 2014 dividend
2015
4 August Announcement of interim financial results for
2015 2015
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SSEFAEFISESD
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