TIDMROR
RNS Number : 7759Q
Rotork PLC
02 March 2021
Rotork plc
2020 Full Year Results
Delivering resilience, investing for growth
OCC (3)
2020 2019 % change % change
---------- ---------- --------- ----------
Order intake(1) GBP590.2m GBP691.8m -14.7% -12.4%
Revenue GBP604.5m GBP669.3m -9.7% -7.4%
Adjusted (2) operating
profit GBP142.5m GBP151.0m -5.6% -3.8%
Adjusted (2) operating
margin 23.6% 22.6% +100bps +90bps
Profit before tax GBP122.0m GBP124.1m -1.6% +0.6%
Basic earnings per share 10.7p 10.8p -0.9% +0.6%
Adjusted (2) basic earnings
per share 12.5p 13.0p -3.8% -3.1%
Full year dividend 6.3p 6.2p +1.6%
Summary
-- Order intake declined in the period reflecting the impact of
COVID-19 on global economic activity. Orders in the final quarter,
whilst still down year-on-year, showed signs of recovery
-- Revenues were lower year-on-year due to subdued large project
activity, customer site access issues at Rotork Site Services and
disruption to production and logistics
-- Adjusted operating margins were 100bps ahead at 23.6%, with
all divisional margins higher, benefiting from savings generated by
the Growth Acceleration Programme
-- Flowthrough(5) of sales declines to adjusted operating profit
from 2019 was limited to just 12%, demonstrating the Group's
improved cyclical resilience
-- Year-end net cash, after the payment of the GBP33.9m dividend
in September, was GBP72.0m higher year-on-year at GBP178.1m. ROCE
increased 10bps to 31.9%
(1) Order intake represents the value of orders received during
the period.
(2) Adjusted (4) figures exclude the amortisation of acquired
intangible assets and restructuring costs (see note 4).
(3) OCC (4) is organic constant currency results excluding
discontinued businesses and restated at 2019 exchange rates.
(4) Adjusted and OCC figures are alternative performance
measures and are used consistently throughout these results. They
are defined in full and reconciled to the statutory measures in
note 2.
(5) Flowthrough calculated as change in OCC adjusted operating
profit as reported, divided into the change in OCC revenue.
Kevin Hostetler, Chief Executive, commenting on the results,
said:
"Rotork delivered a resilient performance in an unprecedented
period. Adjusted operating margins were 100 basis points higher
year-on-year, and ahead of consensus expectations, despite sales
being down on the prior period. Our Growth Acceleration Programme
continued to deliver planned benefits, despite the challenging
external environment, and we took the opportunity to bring forward
some actions scheduled for later years.
Whilst the outlook for our end markets is improving, COVID-19
related uncertainty remains. Our production facilities are
currently operating largely as normal, we have a solid order book
and the considerable flexibility provided by our strong balance
sheet. Our investments in IT systems, targeted geographies,
innovation and new product development, and aftermarket activities
are progressing well and yielding benefits. We continue to
strengthen our business and are well placed to benefit from
recovering demand. We remain committed to delivering sustainable
mid to high single digit revenue growth and mid 20s adjusted
operating margins over time."
Rotork plc Tel: +44 (0)1225 733 200
Kevin Hostetler, Chief Executive
Jonathan Davis, Finance Director
Andrew Carter, Investor Relations
Director
FTI Consulting Tel: + 44 (0)20 3727 1340
Nick Hasell / Susanne Yule
There will be a virtual meeting for analysts and institutional
investors at 9.00 am GMT today.
The webcast can be accessed at:
https://www.investis-live.com/rotork/602a49f2dd22a11400dbc962/gepe
Participants can alternatively dial-in on the following
numbers:
UK dial-in number: 0800 640 6441 or 020 3936 2999
All other locations: +44 203 936 2999
Access code: 111415
Please join the meeting a few minutes before 9.00am to complete
registration.
A recording of the meeting will be available until 9(th) March
2021. This can be accessed on the following numbers:
UK dial-in number: 020 3936 3001
All other locations: +44 203 936 3001
Access code: 517785
Business review
Group order intake in the period decreased 14.7% year-on-year,
or 12.4% on an OCC basis, to GBP590.2m. The reduction largely
reflected the impact of COVID-19 on global economic activity and
the subsequent effect on oil & gas markets. Orders were down
8.9% OCC year-on-year in the second half. Orders in the final
quarter, whilst still down year-on-year, showed signs of
recovery.
During the period, our customers continued to spend on
automation and environmental projects. Maintenance and upgrade
activities started to recover in the third quarter, having been
impacted by access issues in the summer. Larger capital projects we
are tracking experienced delays, and in a very few cases
cancellations. However, the majority of Rotork's activity is driven
by customers' operational rather than capital expenditure. We
estimate that maintenance, repair and small to mid-sized
automation/upgrade projects (individual orders less than GBP100k)
generate 75% of Group orders by value in a typical year, and that
orders above GBP1m represent only 5% of Group order intake.
Group revenue was 9.7% lower (7.4% OCC). Water & Power sales
grew year-on-year, with both end markets ahead. The division
reported an encouraging performance with sales driven by water
sector infrastructure investment as well as power sector
refurbishment activity. We currently expect the latter to continue
through 2021. Oil & Gas and Chemical, Process & Industrial
("CPI") sales declined, reflecting challenging trading conditions
and, particularly in the first half, COVID-19 disruption. Both
divisions saw a lower rate of revenue decline in the second
half.
By geography, Europe, Middle East & Africa ("EMEA") revenues
by destination were down slightly less year-on-year than for the
Group. In Asia Pacific, sales growth in the second half was not
quite sufficient to offset the decline in the first half and full
year revenues were slightly down. Sales fell double-digits in the
Americas reflecting the disposal of a distribution business at the
end of 2019 and a significant reduction in activity for the Oil
& Gas division. The rate of decline in Americas revenues was
lower in the second half although was still double-digit.
Rotork Site Services, our global service network and a key
differentiator in our industry, made good progress in the period
despite COVID-19 making access to customer sites challenging. Our
Lifetime Management and Reliability Services programmes have been
well received by customers. The number of actuators under annual
maintenance contract rose by 8%. We completed a number of important
product launches, including our latest Intelligent Asset Management
offering ("iAM"). Rotork Site Services is managed as a separate
unit within Rotork's divisions and continues to contribute a
significant proportion of Group sales (19% in 2020).
Adjusted operating profit was 5.6% down year-on-year (3.8% OCC)
reflecting reduced volumes and higher logistics costs which were
partly offset by Growth Acceleration Programme ("GAP") savings,
cost mitigation actions, reduced discretionary spend and temporary
cost reductions. Adjusted operating margins however increased 100
basis points to 23.6%, benefiting from the ongoing GAP initiatives.
Flowthrough of lower revenue to adjusted operating profit from 2019
was limited to just 12%, demonstrating improved cyclical
resilience. On an OCC basis, reported profit before tax was 0.6%
higher year-on-year.
Cash generation was good, with cash conversion of 130% (131%).
Return on capital employed remained at a high level at 31.9% (2019:
31.8%), with lower operating profit offset by capital employed
reduction reflecting lower net working capital and asset disposals.
Our balance sheet remains strong, with a net cash position of
GBP178m at the year end (2019: GBP106m). This provides us with
optionality in uncertain times and the financial flexibility to
execute our organic investment plans and our targeted M&A
strategy. It also enabled us to navigate the COVID-19 crisis
without taking government funding or seeking material payroll
support. In addition, we paid the delayed 2019 final dividend in
full in September.
Chairman's statement
I suspect few, if any, will view 2020 coming to an end with much
regret. The COVID-19 pandemic has caused untold grief and suffering
for so many. It has had a tumultuous impact on families, societies,
businesses, charities, nations and indeed the entire world. Its
after-effects will be felt for many years to come.
The response of team Rotork to these challenges has been
magnificent. Not only the efforts of our people, who have
demonstrated enormous fortitude, but also of our customers, our
suppliers, and the local communities in which we operate. I am
particularly proud of how Rotork team members have stepped up to
help those in their communities less fortunate than themselves,
providing support through distributing personal protective
equipment, food parcels and charitable donations. On behalf of the
Board, I would like to pass on my appreciation to every team member
for their continued commitment and support.
The safety and wellbeing of our employees is of utmost
importance to the Board and is discussed at every meeting. Over the
years, Rotork has had a good safety record, with recent
improvements in injury rates as a result of safety initiatives and
training. As disclosed in our People & Environment Report, in
July 2020 we were devasted to hear of a fatality of one of our
field service engineers. Our thoughts are with his family, friends
and colleagues. We thoroughly investigated the accident to
determine the root cause and identify any lessons to be learned.
The report of this investigation was reviewed in great depth by the
Board.
Our Purpose, keeping the world flowing for future generations,
could not have been more apposite than in 2020. Our products and
services are relied upon to keep critical processes operating -
from the water we drink, to the energy sources that keep us warm
and provide essential transportation, to industrial processes
providing critical consumer products and services. These are all
accomplished with a determined and passionate focus on safety,
efficiency and environmental sustainability.
I was particularly proud of Rotork's decision making during the
year. Difficult decisions involving fast changing priorities,
resource constraints, logistics challenges and employee welfare.
Decisions which hugely impacted our ability to keep customers
serviced, keep our people safe, and meet our financial commitments.
Some of these decisions required sacrifices, from employees and
shareholders alike, from salary freezes to delayed dividend
payments, and initiatives to support the broader cause by repaying
any monies received from government support or furlough schemes
wherever practicable to do so.
Throughout 2020 we have continued to pursue our Growth
Acceleration Programme, maintaining our transformation investment
programmes, and in some cases accelerating them, not yielding to
the temptation to sacrifice long term priorities for short term
gain. We have also maintained our commitment to long term
sustainability, which sits at the heart of our decision making, and
is a core part of our Purpose and Values.
Sustainability at Rotork
The concept of long-term sustainability sits at the heart of our
Purpose and has many guises. Building a lean, efficient, flexible,
and fastmoving business that can respond quickly to changes in the
external market is vital. We call this cyclical resilience, and as
a prerequisite for any aspirations for accelerated growth, it is
one of the cornerstones of our Growth Acceleration Programme.
Building a business that is closely attuned to the needs of
customers as they seek to play their part in a more environmentally
sustainable future, through the provision of innovative new
products, smart digital systems, and knowledgeable service, is
equally important.
Rotork is in a prime position to make a big difference here. We
are able to improve our customers' outcomes in high carbon
environments with smart products and services. Our environmental
'handprint', as we term it, is potentially very significant. Our
'footprint', how we impact through our own facilities and
operations, is much smaller but no less important. The importance
of these aspects of sustainability are firmly recognised by the
Board, and we established a formal Environmental, Social and
Governance ("ESG") Board Committee and appointed our first Head of
ESG and Sustainability during the year.
We have since conducted a full materiality assessment,
reflecting on our opportunity to truly impact ESG outcomes, and
taking into account not just our own views but those of all our
stakeholders. This assessment has featured strongly in the
development of a new sustainability framework, which prioritises a
select number of UN Sustainable Development Goals, in charting our
future focus and direction. This is covered in more detail in the
Chief Executive's report.
Unsurprisingly, the energy transition to a low carbon world
features highly in this materiality assessment. We see considerable
opportunities to assist our oil and gas customers to deliver
against their ambitious net zero commitments. For example,
substituting efficient electric actuators and controls for more
conventional pneumatic and hydraulic solutions to help customers
reduce gaseous emissions, venting and flaring, and their own energy
consumption. Additionally, our products enable the move to a low
carbon world, with applications in transition fuels such as LNG,
natural gas and biofuel. Similar opportunities present themselves
in the power, water and industrial markets. In the medium term we
also see opportunities to participate in fast developing new energy
sectors such as carbon capture, usage and storage and hydrogen.
Board update
The Rotork Board comprises two executive directors, five
independent non-executive directors and myself as non-executive
Chairman, in full compliance with the Governance Code 2018. More
than one third of the Board are female. We welcome the Parker
Review target for all FTSE 250 boards to have at least one director
from an ethnic minority background by 2024.
Sally James will be retiring from the Board at the conclusion of
the AGM on 30 April 2021, having completed nine years' service. She
leaves us with our best wishes and gratitude for her significant
contribution to Rotork over this period. Peter Dilnot will take
over the role of Senior Independent Director effective from 30
April 2021 and will also become a member of the Remuneration
Committee from the same date.
Corporate Governance
The Board continues to be committed to the highest standards of
governance and stakeholder considerations remain central to the
Board's decision making. During the year, the Board closely
monitored the progress being made against the Growth Acceleration
Programme targets.
Dividend
Rotork remains a highly cash generative business. We recognise
the importance of a growing dividend to our shareholders. We are
committed to a progressive dividend policy subject to satisfying
cash requirements, which can vary significantly from year to
year.
On 31 March 2020, due to the unprecedented level of uncertainty
presented by COVID-19, we announced the withdrawal of the
recommendation to pay the 2019 final dividend of 3.9 pence per
share. On 4 August 2020 we announced that we would pay in September
the deferred dividend and that, whilst we would not announce a
dividend in respect of the first half, we would consider the
dividend payable in respect of the whole of 2020 in March 2021.
The Board recommends a full year dividend of 6.3p per share for
2020, an increase of 1.6% from the 2019 full year dividend. This is
equivalent to 2.0 times cover based on adjusted earnings per share
(2019: 2.1 times). The full year dividend will be payable on 21 May
2021 to shareholders on the register on 9 April 2021.
Outlook
Whilst the outlook for our end markets is improving, COVID-19
related uncertainty remains. Our production facilities are
currently operating largely as normal, we have a solid order book
and the considerable flexibility provided by our strong balance
sheet. Our investments in IT systems, targeted geographies,
innovation and new product development, and aftermarket activities
are progressing well and yielding benefits. We continue to
strengthen our business and are well placed to benefit from
recovering demand. We remain committed to delivering sustainable
mid to high single digit revenue growth and mid 20s adjusted
operating margins over time.
Martin Lamb
Chairman
1 March 2021
Chief Executive's Statement
This year has been simply unlike any other. The COVID-19
pandemic has turned the world on its head and challenged resilience
everywhere, whether it be of families, businesses or governments. I
would like to, on behalf of the Board, express our deepest sympathy
to anyone who has been personally impacted by the crisis, and the
family, friends and colleagues of the Rotork employees who have
passed away. They will be sorely missed.
I would also like to thank my 3,400 Rotork colleagues for their
extraordinary efforts over the past year. Whether they have been
working in our factories, at our customers' sites, in our offices
or at home, where a large number are, they have embraced the
changing circumstances with the utmost professionalism. Whilst this
success clearly reflects individual efforts, it also reflects
Rotork's strong culture. We have a strong sense of teamwork, a
hard-working can-do mentality and increasingly a broad perspective
and an entrepreneurial approach. All of these were very apparent in
2020.
I'm sometimes asked how our Purpose, keeping the world flowing
for future generations, links to our strategic objectives of
accelerated growth and increased margins. In simple terms the
challenge the world faces is sustainably providing many more people
with a high quality of life. Rotork can help here, whilst driving
higher sales and margins, through providing innovative products and
services that enable further automation, electrification and
digitalisation, which together lift productivity and efficiency,
minimise environmental impact and assure safety.
Health, safety and wellbeing
The wellbeing of our people, partners and visitors is the number
one priority of everyone at Rotork. However, 2020 must rank as one
of the most challenging years the Group has ever faced. I am
extremely proud of our response to COVID-19. It was with the
greatest regret that I reported in October's People &
Environment Report that one of our employees met with a fatal
accident in July. Our thoughts remain with the family and friends
he leaves behind. This distressing event has served to reinforce
the focus of the PLC Board and the senior leadership team on health
& safety.
Environmental, Social & Governance
We are fully committed to improving our Environmental, Social
& Governance ("ESG") performance in all areas and we are
pleased with our early progress. In October we held the inaugural
meeting of our ESG sub-Committee and agreed our sustainability
vision, including ratifying the use of the United Nation's
Sustainable Development Goals (SDGs) to guide our strategy. We
subsequently undertook a mapping exercise to identify the most
relevant SDGs for Rotork to support and engaged with a broad range
of external stakeholders to gather their views on priority
sustainability issues.
We have targeted five main SDGs, aligned to topics where we have
the greatest potential to support the transition to a better and
more sustainable future for all. These are as follows:
-- Clean water and sanitation (UN SDG number 6)
-- Affordable and clean energy (7)
-- Industry, innovation and infrastructure (9)
-- Responsible consumption and production (12) and
-- Climate action (13).
We have also targeted two additional SDGs, gender equality
(number 5) and decent work and economic growth (number 8), to help
drive progress on these issues.
We have developed a new sustainability framework around our
chosen SDGs and priority sustainability risks and opportunities. We
already make a significant contribution towards our chosen Goals.
Our new framework, based on three pillars - Operating Responsibly,
Enabling a Sustainable Future and Making a Positive Social Impact -
will help guide our future activity and ensure that we continue to
create superior, sustainable value.
In October we published our People & Environment Report. In
this we provided additional information on our safety, diversity
and environmental performance and highlighted the many ways
Rotork's products and services are essential to our customers'
efforts to reduce their environmental impacts. We plan to build on
this progress and publish a fuller annual Sustainability Report
starting in 2021. This will include details of our current view of
climate-related risks and opportunities, in line with the
recommendations of the Task Force for Climate-related Financial
Disclosures (TCFD).
We are fully committed to reducing our environmental impact by
reducing our energy and water consumption, waste production and
preventing pollution. Generally, we operate an assembly-only
philosophy across the Group, meaning that our direct emissions are
relatively modest compared to peers. Nevertheless, we target
continuous improvement in our efficiency, as an integral part of
our focus on lean operations. This year, we reduced our carbon
emissions by 18%. On a normalised basis, emissions reduced by 9.5%
per GBP1 million of reported revenue, compared with the prior year.
Reduced office occupation (due to working-from-home initiatives)
made a modest contribution to the fall.
We were voted the number two ranked ESG company in the European
Small/Mid Cap Capital Goods sector by Institutional Investor. Our
collaboration with the various external ESG surveyors was
stepped-up in 2020 and our ranking improved in many of the ratings.
We were particularly pleased to have been awarded a B score for
Water Security by CDP, an improvement on the B- from last time. Our
Bloomberg ESG disclosure score of 46 is amongst the highest of our
peers.
Growth Acceleration Programme
Our Growth Acceleration Programme, which we began to implement
in the second half of 2018, is designed to deliver sustainable mid
to high single-digit revenue growth and mid-20s adjusted operating
margins over time. The 5-year programme is not about a fundamental
reinvention of Rotork, but rather refining how we do things,
building on our strong foundations, through people, processes and
systems.
Despite the challenging environment in which we found ourselves
in 2020, progress was once again encouraging. We delivered
significant (100bps) adjusted operating margin improvement
year-on-year and strong cash generation. Although Group revenues
overall declined, Water & Power's organic sales performance
demonstrated some of the opportunities available to us.
One of the most significant GAP initiatives is market
re-alignment, focusing our sales teams more closely on end-market
segments. We completed this transition early in the year, on time
and to budget, and reported under our new divisional structure for
the first time at the half-year stage. Rotork's new structure more
closely addresses customer needs and facilitates closer customer
relations through key account management. We are already seeing
clear benefits of this change, with customer surveys showing that
the organisation's ability to deliver better solutions has
improved, and that customers appreciate having a single point of
contact. We were proud to be publicly recognised by a major US
engineering, procurement and construction contractor as being a key
contributor to their project success in 2020.
Another important initiative is the reinvigoration - and
re-focus - of our new product development pipeline. I'm pleased to
note that social and environmental sustainability factors are now
firmly incorporated into our NPD process. The benefits of
improvements in this area do not come overnight, but we are now
seeing the launch of a greater number of more meaningful products,
and there will be more in 2021 and 2022, including in the important
digital space.
In the second quarter, recognising that 2020 was going to be a
very different year from the one we had expected, we took the
opportunity to revisit the phasing of our GAP initiatives.
Following this review, we decided to bring forward certain
projects, including the simplification of certain of our regional
back offices and two factory footprint rationalisation initiatives.
These projects, which will further improve our cyclical resilience
going forward, were completed to time and to budget.
Our supply chain optimisation work continues, and we are
planning additional focus on this area in the quarters ahead.
Purchasing savings during the year were GBP2.3m, in-line with our
targets which were re-visited as the severity of the pandemic
became apparent.
We have now passed the Growth Acceleration Programme's half-way
point. Whilst there is further hard work ahead, we are very much on
track. In addition to the successful realignment of our business to
market facing segments, since its 2018 inception GAP has delivered
GBP23m of margin improvement, GBP48m of working capital reduction
and a 690 basis point improvement in ROCE (to 31.9%). We believe
the programme has positioned us extremely well for when the
recovery comes. As well as further commercial and operational
excellence initiatives, the final years of the programme will see
an acceleration in our IT & Systems implementation and our ESG
agenda.
Divisional review
Oil & Gas
GBPm 2020 2019 Change OCC(1) Change
Revenue 292.2 330.0 -11.5% -10.1%
Adjusted operating
profit 67.9 75.5 -10.1% -8.7%
Adjusted operating
margin 23.3% 22.9% +40bps +40bps
The Oil & Gas division experienced volatile trading
conditions in 2020. COVID-19 disruption impacted Asia Pacific
activity early in the year before subsequently spreading to other
regions of the world.
The break-up of the OPEC+ consortium in March resulted in
volatility in hydrocarbon prices and in response many customers
announced they would revisit their capital investment plans. This
was felt most acutely in the Americas, the division's smallest
geographic region, and in the upstream sector. The downstream
sector, which represents over half of divisional sales, was less
effected.
Divisional revenues fell 11.5% year-on-year (10.1% OCC) with the
greatest decline seen in the Americas. EMEA sales were modestly
lower with upstream, midstream and downstream declining. Asia
Pacific sales were similarly down, but grew in the second half,
benefiting from increased downstream activity. Americas revenues
fell despite progress in Latin America. Adjusted operating profits
were GBP67.9m, 10.1% lower year-on-year. Adjusted margins rose 40
basis points to 23.3%, benefiting from mix, lower headcount and
reduced discretionary expenses.
Oil & Gas aims to outperform its markets through a number of
strategic initiatives, including leveraging the installed base
(through Rotork Site Services), helping our customers improve their
operational and environmental performance, and increased onboard
sensing and computational capabilities.
We consider the energy transition to be an opportunity for us.
The substantial majority of our revenues are linked to brownfield
spend which Wood Mackenzie forecast to remain stable for many years
to come. We expect that new segments, such as biofuel and carbon
capture and storage, will be actuator intensive and hence exciting
opportunities for us.
Our customers have set themselves challenging environmental
targets which they will strive to achieve regardless of economic
circumstances. Rotork believes that electrification has an
important role to play in the reduction of our customers' emissions
across their upstream, midstream and downstream processes, and that
we are well placed to assist them on this journey.
Water & Power
GBPm 2020 2019 Change OCC(1) Change
Revenue 157.8 154.9 +1.9% +4.0%
Adjusted operating
profit 47.0 45.1 +4.3% +5.7%
Adjusted operating
margin 29.8% 29.1% +70bps +40bps
Water & Power made encouraging progress during the year.
Whilst the division is not totally immune from COVID-19 related
disruption, its products and services and those of its customers
are generally considered essential, meaning activity largely
continued without any significant delays. The outlook for the
division is positive. We are now seeing the benefits of our
transition to an end-market alignment and of our re-focused new
product development. Additionally, the world's governments have
identified water infrastructure investment as a priority, not only
for population health and safety reasons but also for economic
development. The division is well placed to support these
efforts.
Revenues increased 1.9% year-on-year (4.0% OCC) with higher
sales in all geographic regions on an OCC basis. In Asia Pacific
the water segment saw strong growth, particularly in China.
Activity in India, including that related to the National Rural
Drinking Water Programme ("NRDWP"), was impacted by COVID-19 and
sales were lower. In the Americas, power sales were higher due to
refurbishment work, which was won in 2019, whilst water sales were
largely unchanged. The growth in EMEA sales was driven by
desalination projects in Iberia and a recovery in business with UK
water utilities. For the division, both water and power sales were
ahead year-on-year.
The division's adjusted operating profits were GBP47.0m, 4.3%
higher year-on-year. Adjusted margins were 29.8%, up 70bps
reflecting Growth Acceleration Programme initiatives and reduced
discretionary spend which more than compensated for a slightly
negative price/mix impact.
Water & Power aims to outperform its markets through an
optimised go-to-market strategy and focus on high growth regions
and digital solutions (including network management opportunities).
The division is focused on solving its customers' challenges. For
example, water customers rely on Rotork's technologies to achieve
higher water quality standards, lower operational costs, reduce
water leakage and increase the lifecycle of assets above- and
under- ground. In the traditional power generation segment, Rotork
teams are targeting emission reduction projects whilst seeking
refurbishment opportunities within the installed base.
Chemical, Process & Industrial ("CPI")
GBPm 2020 2019 Change OCC(1) Change
Revenue 154.6 184.4 -16.2% -12.4%
Adjusted operating
profit 38.6 42.0 -8.2% -5.7%
Adjusted operating
margin 24.9% 22.8% +210bps +170bps
CPI experienced challenging trading conditions in 2020,
particularly in the first half, resulting in lower revenues.
However, our Growth Acceleration Programme initiatives delivered
significantly higher adjusted margins year-on-year and early
successes in promising new markets.
Revenues fell 12.4% year-on-year on an OCC basis, with the
greatest decline seen in the Americas. Asia Pacific sales returned
to growth in the second half, driven by the process sector. EMEA
sales were lower year-on-year, with COVID-19 impacting customer
activity. The fall in Americas revenues reflects significantly
lower project business, including the non-repeat of mining projects
in South America, and a decline in book and ship activity, notably
to the tyre and auto plastics industries.
The process segment represents a substantial proportion of CPI
overall. Process revenues in EMEA were lower, largely the result of
COVID-19 disruption. In Asia Pacific we saw increased demand from
control valve OEMs in China. Continuing Americas process sales were
down double-digits. Amongst the division's other focus segments,
chemical revenues grew, whilst industrial sales were lower.
The division's adjusted operating profit was GBP38.6m, 8.2% down
year-on-year. Adjusted margins increased 210bps to 24.9% despite
the lower revenues, benefiting from positive price/mix, procurement
savings and lower headcount.
CPI is already seeing the early benefits of salesforce
re-alignment. Examples include increased customer wallet share
(e.g. in mining) and early success in new energy applications (e.g.
in hydrogen electrolysers).
CPI aims to outgrow its markets through focusing on high growth
regions and sectors, optimising its channel coverage and developing
the aftermarket. The division is targeting key sectors including
HVAC, chemicals, and basic materials. Across all of these, the
drive to lower CO2 emissions is gaining momentum. The
decarbonisation trend presents a key opportunity for CPI - through
the electrification of actuation and the substitution of high
maintenance and inefficient compressed air valve systems. New
energy technologies such as hydrogen are exciting medium-term
opportunities, and our project pipelines are building.
Capital deployment strategy
Rotork remains a highly cash generative business and our net
cash balance increased to GBP178m at year end. Our cash position
provides us with considerable financial flexibility in uncertain
times. The priorities for our cash remain unchanged: organic
development (new markets, new product development); our progressive
dividend policy; followed by targeted acquisitions. If we decide at
any point that we have surplus cash, we would look to return it to
shareholders.
Kevin Hostetler
Chief Executive Officer
1 March 2021
Financial review
Order intake for the year was GBP590.2m (2019: GBP691.8m), down
14.7% from the prior year or 12.4% on an Organic Constant Currency
(OCC) basis. Order intake in the second half was 3.6% lower than
the first half of the year and 8.9% lower than the second half of
2019 on an OCC basis. Orders in the final quarter, whilst still
down year-on-year, showed signs of recovery. Group revenue was 9.7%
lower (7.4% OCC). Water & Power sales grew year-on-year, with
both end markets ahead. The division reported an encouraging
performance, with sales driven by water sector infrastructure
investment as well as power sector refurbishment activity. We
currently expect the latter to continue through 2021. Oil & Gas
and CPI sales declined, reflecting challenging trading conditions
and, particularly in the first half, COVID-19 disruption. Both
divisions saw a lower rate of revenue decline in the second
half.
By geography, Europe, Middle East & Africa ("EMEA") revenues
by destination were down slightly less year-on-year than for the
Group. In Asia Pacific, sales growth in the second half was not
quite sufficient to offset the decline in the first half and full
year revenues were slightly down. Sales fell double-digits in the
Americas reflecting the disposal of a distribution business at the
end of 2019 and a significant reduction in activity for the Oil
& Gas division. The rate of decline in Americas revenues was
lower in the second half, although was still double-digit.
Gross margin increased 40 basis points to 47.0% driven by the
2019 disposal, productivity improvements, a positive divisional mix
and lower travel costs and other temporary savings. The 2019
disposal was a margin dilutive business so on an OCC basis the
increase in the year was 10 basis points. Adjusted operating profit
was GBP142.5m, a decrease of 5.6% over the prior year, with the
adjusted operating margin increasing 100 basis points to 23.6%
(2019: 22.6%). Operating profit was GBP122.6m, 3.5% lower
year-on-year. On an OCC basis, adjusted operating margin increased
90 basis points from 22.7% to 23.6%, the difference to the reported
numbers reflecting the disposal of the lower margin business at the
end of 2019. In addition to the improvements in gross margin,
overheads were tightly controlled and reduced by GBP16.5m on an OCC
basis. Personnel costs and travel were the two largest reductions.
When combined with the GBP7.8m cost savings above gross profit,
c.33% of the total GBP24.4m reduction might be considered temporary
and likely to reverse once travel and other COVID-19 related
restrictions reduce.
Net finance costs decreased by GBP2.5m to GBP0.5m as a result of
a lower interest payable and a more favourable impact of exchange
gains / losses.
The effect of lower corporate tax rates in regions where we
operate resulted in the adjusted effective tax rate reducing to
23.4%, with adjusted earnings per share of 12.5p, a decrease of
3.8%. Statutory earnings per share were 10.7p, a decrease of
0.9%.
Growth Acceleration Programme
We entered 2020 with a number of the workstreams under the
Growth Acceleration Programme (GAP) already underway and with
considerable momentum. Within the Commercial Excellence pillar,
during 2019 the customer-facing sales organisation was reorientated
to be end-market facing in two regions of the world and work in the
Americas was completed in the first quarter of 2020. Later in the
year, and as a result of COVID-19 disrupting some of the GAP
initiatives scheduled for 2020, we accelerated the work to
restructure the sales back office functions starting in EMEA. These
reorganisation activities account for the vast majority of the
GBP5.9m restructuring costs in the year, with a GBP3.0m in-year
benefit from the actions taken. The profit contribution of new
products launched in the last three years was GBP2.1m, a 40%
increase on 2019's GBP1.5m.
Within the Operational Excellence pillar the focus on managing
our factories through COVID-19 redirected efforts that might
otherwise have been spent on driving GAP initiatives. The global
strategic sourcing (GSS) team had to focus on managing our supply
base, as COVID-19 affected suppliers to varying degrees throughout
the year, to ensure we maintained the supply of components required
to meet customer deliveries. The challenges were both the
situations at our suppliers' facilities and the logistics of
getting the components to our factories. In spite of this the GSS
team delivered incremental net savings of GBP2.3m in the year.
Continuous improvement and lean initiatives continued throughout
the year with approximately 300 lean events completed. Nearly half
of these delivered financial benefits amounting to GBP1.5m of
savings in year. Lastly the footprint optimisation programme
continued with a further two factories closed during the year. The
benefits of these closures and the carry forward from 2019 closures
delivered GBP2.3m of incremental benefits.
In total the Growth Acceleration Programme generated GBP11.2m
compared with exceptional costs of GBP6.0m. This, together with the
savings achieved in 2018 and 2019 mean the cumulative impact on the
income statement of the Growth Acceleration Programme to date has
been GBP23.4m, which exceeds the cumulative GBP17.1m restructuring
costs. The cumulative cash benefits are now GBP19.7m, with an
additional GBP47.8m generated from reduced working capital.
Investment to date in IT and facilities was GBP23.6m. 2020 saw a
significant increase in spend to GBP18.2m on the new ERP
development as well as the investment to expand the Rochester (NY)
factory which completed in the year.
Adjusted items
Adjusted profit measures are presented alongside statutory
results as the Directors believe they provide a useful comparison
of business trends and performance from one period to the next.
The statutory profit measures are adjusted to exclude
amortisation of acquired intangibles and other items, comprising
the net restructuring costs resulting from the Growth Acceleration
Programme.
Adjusted earnings reconciliation
Statutory Restructuring Adjusted
GBPm results Amortisation costs results
------------------ --------- ------------ ------------- --------
Operating profit 122.6 14.1 5.9 142.5
Profit before tax 122.0 14.1 5.9 142.0
Tax (28.7) (3.0) (1.5) (33.2)
------------------ --------- ------------ ------------- --------
Profit after tax 93.3 11.1 4.4 108.8
------------------ --------- ------------ ------------- --------
The table above adjusts the statutory results for the
significant non-cash and other adjustments to give adjusted
results. Note 2 sets out the alternative performance measures used
by the Group and how these reconcile to the statutory results.
Further details of the restructuring costs are provided in note
4.
Return on capital employed (ROCE)
Our capital-efficient business model and strong 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. The average capital employed decreased 6.0%
over the year to GBP446.4m as there were no acquisitions during
2020 and we increased our net cash position. This resulted in an
increase in ROCE despite the reduction in adjusted operating profit
to 31.9% (2019: 31.8%).
Taxation
The Group's headline effective tax rate decreased from 24.1% to
23.5%. Removing the impact of the non-recurring adjustments
provides a more reliable measure and on this basis, the adjusted
effective tax rate is 23.4% (2019: 23.5%). The decrease is driven
by the impact of a reduction in Indian withholding tax rates which
is partially offset by an increase in the share of Group profits
arising in higher tax jurisdictions. The Group expects its adjusted
effective tax rate to remain higher than the standard UK rate due
to higher rates of tax in key jurisdictions.
The Group's 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
Our strong cash generation resulted in a net cash position of
GBP178.1m at the end of the year (2019: GBP106.1m). Our cash
conversion KPI shows a conversion of 129.5% of adjusted operating
profit into cash compared to the 131.4% reported in 2019. The Group
invested GBP25.3m in capital expenditure in 2020, an increase of
GBP8.0m, as we continue to invest in our IT infrastructure and
operating footprint as part of the Growth Acceleration Programme.
Our Research and Development (R&D) cash spend has decreased 2%
to GBP12.9m which represents 2.1% of revenue (2019: GBP13.2m and
2.0%). The most significant spend was associated with the expansion
of the IQT3 product range. Dividends of GBP33.9m and tax payments
of GBP30.8m were the two other major outflows.
Control of working capital as defined in the cash flow
statement, using average exchange rates and excluding disposals, is
key to achieving our cash generation KPI. The drive to reduce
inventory generated GBP12.6m whilst a reduction in trade
receivables generated a further GBP13.1m. Trade receivables
measured as days' sales outstanding reduced from 57 to 56 days. Net
working capital in the balance sheet decreased to 21.0% of revenue
compared with 24.2% in December 2019 and generated an GBP18.7m
inflow in the cash flow statement.
COVID-19, Brexit and geopolitical risk
In this report last year we highlighted three areas of risk that
we were monitoring and which could impact Rotork. It became
apparent shortly afterwards that one of these, COVID-19, was going
to have a significant impact globally. We established a COVID-19
Steering Committee in March 2020 which met daily to monitor the
impact of and determine our response to the pandemic as it spread
across the world, affecting the teams in our own facilities, our
suppliers and our customers.
In the second quarter, when uncertainty regarding the pandemic
was at its height, we carried out a series of risk assessments in
order to plan for a range of scenarios. These mirrored some of the
scenarios we include in our annual viability statement. Due to the
level of uncertainty, we took the decision in March to withdraw the
recommendation to pay a 2019 final dividend which had been declared
in the 2019 preliminary results announcement. We also applied to
the UK Government's Covid Corporate Funding Facility, although we
decided not to complete the process and did not utilise the
facility. We replaced our committed revolving credit facility which
was due to expire mid-2020. We took advantage of a number of
government backed schemes, such as furlough in the UK, to
temporarily reduce the cost to the business of non-productive
employees. Over the next few months, as the situation stabilised,
we repaid all UK government support and were left with an
immaterial benefit from other similar schemes globally. The benefit
of these is included in the assessment of temporary saving shown
above. At the mid-year we also decided to pay a 3.9p per share
interim dividend, equivalent to the 2019 final dividend that had
been proposed and then withdrawn. We also undertook to pay a
dividend in respect of the whole of 2020 in May 2021.
Whilst monitoring the external influences of COVID-19 on the
business, the COVID-19 Steering Committee also coordinated the
internal response. This included initially planning for a sudden
increase in numbers working from home for those employees who
could, introducing social distancing measures within our factories
and carrying out risk assessments so that they could continue to
work safely. Externally it meant coordinating with our suppliers
and logistics companies to ensure a consistent supply of components
and working with our customers to understand the changes to their
priorities. At the same time actions were taken to mitigate the
reduction in revenue and the impact this would have on the results
of the Group. A reduction in recruitment, postponing the majority
of salary increases at all levels and restricting discretionary
spend, plus the temporary savings, such as lower travel costs,
which were a direct consequence of the pandemic, helped contain
costs.
The more severe scenarios we considered in our exercise in the
second quarter did not transpire for 2020. The dedication of all
our employees, whether working from home or continuing to go to
work, has meant we have been able to deliver a resilient set of
results. The early actions to mitigate costs, combined with the
momentum in our Growth Acceleration Programme, has driven an
increase in adjusted operating margins once again despite a
reduction in revenue.
We entered 2020 expecting to see the final stages of the Brexit
negotiations and the terms on which the UK would trade with other
countries from 1 January 2021. The UK's decision to leave the EU
led to a higher level of uncertainty surrounding trading
conditions, particularly between the UK and the EU. Rotork
established a Brexit steering group following the referendum which
assessed and monitored the potential impact on the Group and it
still continues to manage the implementation of mitigation plans
and assess ongoing risks.
The following Brexit risks were identified as having a potential
impact on our business:
-- Economic conditions: Increased uncertainty including the
specific impacts on growth, inflation, interest and currency
rates.
-- Laws and regulations: Potential changes to UK and EU-based
law and regulation including product approvals, patents, duties and
import/ export tariffs.
-- Short term supply chain disruption: Potential changes in
customer buying patterns, delays in Customs for products shipped to
and from the EU and the rest of the world and border clearances and
uncertainty over UK and EU product approvals.
With the completion of the transition period of the EU:UK
Withdrawal Agreement on 31 December 2020 most of the risks around
tariffs and barriers to trade have diminished and should not be
material to our business. Whilst there has been some disruption to,
and increased cost of, entry and exit from the UK ports, logistics
issues and cost escalation relating to COVID-19 have been greater
than the impact of Brexit to date. Increased inventory levels and
extended lead-times have been effective ways to manage these risks
so far.
As a global business we continue to monitor the trade position
between China and the US, and between all locations where we are
based or have customers or suppliers. In particular, we consider
the potential impact of additional trade barriers between these
countries. We will take steps where necessary to mitigate any such
changes but continue to believe they will not materially impact the
Group's results.
Retirement benefits
The Group accounts for post-retirement benefits in accordance
with IAS 19, Employee Benefits. The balance sheet reflects the net
deficit of these schemes at 31 December 2020 based on the market
value of the assets at that date, and the valuation of liabilities
using year end AA corporate bond yields. We closed both the main
defined benefit pension schemes to new entrants; the UK scheme in
2003 and the US scheme in 2009 in order to reduce the risk of
volatility of the Group's liabilities. In 2018 we further reduced
the risk of volatility when we completed the closure to future
accrual of both the UK and US schemes. Members of the defined
benefit schemes were transferred onto the relevant defined
contribution plan operating in their country.
The most recent triennial valuation of the UK scheme took place
at 31 March 2019 and showed an actuarial deficit of GBP28.7m and a
funding level of 86%. A recovery plan was agreed with the Trustees
as part of the 2019 valuation, resulting in required annual
contributions from the Company of GBP6.8m with effect from 1 April
2020. The annual update to the actuarial valuation at 31 March 2020
showed the deficit had grown to GBP45.9m and funding level
decreased to 78%. This was due to the continued reduction in gilt
yields and the lower value of assets at what was the start of the
first COVID-19 lockdown (asset values have since recovered
strongly).
On an accounting basis the deficit in the schemes increased from
GBP29.6m to GBP38.5m during 2020 and the funding level decreased
from 87% to 85%. The Company paid total contributions of GBP10.3m
over the year and the schemes' assets increased in value by
GBP20.8m. However, this was more than offset by the GBP29.7m
increase in the value of the schemes' liabilities due to the much
lower discount rate at the year-end, which reflected the fall in
yields on AA corporate bonds over 2020.
The accounting deficit is different to the actuarial deficit as
on an accounting basis we are required to use AA-rated corporate
bond yields to value the liabilities. The UK scheme's actuarial
valuation uses gilt yields since this most closely matches the
investment strategy which is designed in part to hedge the interest
rate and inflation risks borne by the scheme. Cash contributions
are driven by the actuarial valuation.
Jonathan Davis
Group Finance Director
1 March 2021
Consolidated income statement
For the year ended 31 December 2020
2020 2019
Notes GBP000 GBP000
-------------------------------------------------- ----- --------- -----------
Revenue 3 604,544 669,344
Cost of sales (320,234) (357,718)
-------------------------------------------------- ----- --------- -----------
Gross profit 284,310 311,626
Other income 1,581 2,875
Distribution costs (5,271) (6,408)
Administrative expenses (157,336) (180,434)
Other expenses (710) (649)
-------------------------------------------------- ----- --------- -----------
Adjusted operating profit 2,3 142,543 151,005
Adjustments
* Amortisation of acquired intangible assets 3 (14,110) (18,841)
* Other adjustments 4 (5,859) (5,154)
-------------------------------------------------- ----- --------- -----------
Operating profit 2,3 122,574 127,010
Finance income 5 2,394 2,087
Finance expense 5 (2,931) (5,040)
-------------------------------------------------- ----- --------- -----------
Profit before tax 122,037 124,057
Income tax expense 6 (28,709) (29,957)
-------------------------------------------------- ----- --------- -----------
Profit for the year 93,328 94,100
-------------------------------------------------- ----- --------- -----------
Basic earnings per share 8 10.7p 10.8p
Adjusted basic earnings per share 8 12.5p 13.0p
Diluted earnings per share 8 10.7p 10.8p
Adjusted diluted earnings per share 8 12.5p 13.0p
-------------------------------------------------- ----- --------- ---------
Consolidated statement of comprehensive income
For the year ended 31 December 2020
2020 2019
GBP000 GBP000
------------------------------------------------------ -------- --------
Profit for the year 93,328 94,100
Other comprehensive income
Items that may be subsequently reclassified to the
income statement:
Foreign exchange translation differences (3,913) (12,643)
Effective portion of changes in fair value of cash
flow hedges net of tax (12) 2,081
------------------------------------------------------- -------- --------
(3,925) (10,562)
Items that are not subsequently reclassified to the
income statement:
Actuarial loss in pension scheme net of tax (14,836) (6,705)
------------------------------------------------------- -------- --------
Income and expenses recognised in other comprehensive
income (18,761) (17,267)
Total comprehensive income for the year 74,567 76,833
------------------------------------------------------- -------- --------
Consolidated balance sheet
At 31 December 2020
2020 2019
Notes GBP000 GBP000
-------------------------------------- ----- ------- -------
Non-current assets
Goodwill 223,537 222,052
Intangible assets 25,145 40,848
Property, plant and equipment 100,620 89,062
Deferred tax assets 16,624 14,582
Total non-current assets 365,926 366,544
Current assets
Inventories 61,467 73,905
Trade receivables 112,565 129,390
Current tax 7,180 4,830
Derivative financial instruments 1,582 2,196
Other receivables 25,868 27,558
Assets classified as held for sale 1,119 -
Cash and cash equivalents 187,204 117,612
Total current assets 396,985 355,491
-------------------------------------- ----- ------- -------
Total assets 762,911 722,035
-------------------------------------- ----- ------- -------
Equity
Issued equity capital 7 4,370 4,363
Share premium 16,826 14,521
Other reserves 20,934 24,859
Retained earnings 540,400 495,657
-------------------------------------- ----- ------- -------
Total equity 582,530 539,400
-------------------------------------- ----- ------- -------
Non-current liabilities
Interest bearing loans and borrowings 5,396 6,791
Employee benefits 9 42,846 33,576
Deferred tax liabilities 8,705 10,745
Derivative financial instruments - 124
Provisions 1,720 1,964
Total non-current liabilities 58,667 53,200
Current liabilities
Interest bearing loans and borrowings 3,754 4,752
Trade payables 33,560 41,195
Employee benefits 9 23,645 24,734
Current tax 14,765 13,270
Derivative financial instruments 168 52
Other payables 41,334 40,581
Provisions 4,488 4,851
-------------------------------------- ----- ------- -------
Total current liabilities 121,714 129,435
-------------------------------------- ----- ------- -------
Total liabilities 180,381 182,635
-------------------------------------- ----- ------- -------
Total equity and liabilities 762,911 722,035
-------------------------------------- ----- ------- -------
These financial statements were approved by the Board of
Directors and authorised for issue on 1 March 2021 and were signed
on its behalf by:
KG Hostetler and JM Davis , Directors.
Consolidated statement of changes in equity
Issued Capital
equity Share Translation redemption Hedging Retained
capital Premium Reserve reserve Reserve Earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------------- -------- -------- ----------- ----------- -------- --------- --------
Balance at 31 December 2018 4,358 13,024 34,930 1,644 (1,153) 460,825 513,628
Profit for the year - - - - - 94,100 94,100
Other comprehensive income
------------------------------------- -------- -------- ----------- ----------- -------- --------- --------
Foreign exchange translation
differences - - (12,643) - - - (12,643)
Effective portion of changes
in fair value of cash
flow hedges - - - - 2,548 - 2,548
Actuarial loss on defined benefit
pension plans - - - - - (8,058) (8,058)
Tax on other comprehensive income - - - - (467) 1,353 886
Total other comprehensive income - - (12,643) - 2,081 (6,705) (17,267)
------------------------------------- -------- -------- ----------- ----------- -------- --------- --------
Total comprehensive income - - (12,643) - 2,081 87,395 76,833
Transactions with owners, recorded
directly in equity
Equity settled share-based payment
transactions - - - - - (1,011) (1,011)
Tax on equity settled share-based
payment transactions - - - - - (8) (8)
Share options exercised by employees 5 1,497 - - - - 1,502
Own ordinary shares acquired - - - - - (5,287) (5,287)
Own ordinary shares awarded
under share schemes - - - - - 6,030 6,030
Dividends - - - - - (52,287) (52,287)
------------------------------------- -------- -------- ----------- ----------- -------- --------- --------
Balance at 31 December 2019 4,363 14,521 22,287 1,644 928 495,657 539,400
Profit for the year - - - - - 93,328 93,328
Other comprehensive income
------------------------------------- -------- -------- ----------- ----------- -------- --------- --------
Foreign exchange translation
differences - - (3,913) - - - (3,913)
Effective portion of changes
in fair value of cash
flow hedges - - - - 6 - 6
Actuarial gain on defined benefit
pension plans - - - - - (18,570) (18,570)
Tax on other comprehensive income - - - - (18) 3,734 3,716
Total other comprehensive income - - (3,913) - (12) (14,836) (18,761)
------------------------------------- -------- -------- ----------- ----------- -------- --------- --------
Total comprehensive income - - (3,913) - (12) 78,492 74,567
Transactions with owners, recorded
directly in equity
Equity settled share-based payment
transactions - - - - - (306) (306)
Tax on equity settled share-based
payment transactions - - - - - (65) (65)
Share options exercised by employees 7 2,305 - - - - 2,312
Own ordinary shares acquired - - - - - (3,645) (3,645)
Own ordinary shares awarded
under share schemes - - - - - 4,193 4,193
Dividends - - - - - (33,926) (33,926)
------------------------------------- -------- -------- ----------- ----------- -------- --------- --------
Balance at 31 December 2020 4,370 16,826 18,374 1,644 916 540,400 582,530
------------------------------------- -------- -------- ----------- ----------- -------- --------- --------
Detailed explanations for equity capital, the translation
reserve, capital redemption reserve and hedging reserve can be seen
in note 7.
Consolidated statement of cash flows
For the year ended 31 December 2020
2020 2020 2019 2019
Notes GBP000 GBP000 GBP000 GBP000
---------------------------------------------- ----- -------- -------- -------- ---------
Cash flows from operating activities
Profit for the year 93,328 94,100
Adjustments for:
Amortisation of acquired intangibles 14,110 18,841
Other adjustments 4 5,859 5,154
Amortisation and impairment of development
costs 2,967 2,874
Depreciation 16,313 16,359
Equity settled share-based payment expense 3,685 4,702
Loss on sale of property, plant and equipment 146 5
Finance income (2,394) (2,087)
Finance expense 2,931 5,040
Income tax expense 28,709 29,957
---------------------------------------------- ----- -------- -------- -------- ---------
165,654 174,945
Decrease in inventories 12,561 18,176
Decrease in trade and other receivables 14,672 7,198
Decrease in trade and other payables (7,195) (391)
Restructuring costs paid (6,437) (5,151)
Difference between pension charge and cash
contribution (10,109) (6,070)
Decrease in provisions (483) (347)
Decrease in employee benefits (622) (1,160)
---------------------------------------------- ----- -------- -------- -------- ---------
168,041 187,200
Income taxes paid (30,781) (32,769)
---------------------------------------------- ----- -------- -------- -------- ---------
Net cash flows from operating activities 137,260 154,431
Investing activities
Purchase of property, plant and equipment (25,279) (17,306)
Development costs capitalised (1,298) (1,937)
Sale of property, plant and equipment 272 663
Disposal of businesses 4 3,807 -
Settlement of hedging derivatives (3,157) (3,070)
Interest received 1,389 1,628
---------------------------------------------- ----- -------- -------- -------- ---------
Net cash flows from investing activities (24,266) (20,022)
Financing activities
Issue of ordinary share capital 2,312 1,501
Own ordinary shares acquired (3,645) (5,287)
Interest paid (954) (2,828)
Decrease in bank loans (69) (59,967)
Repayment of lease liabilities (5,168) (4,717)
Dividends paid on ordinary shares (33,926) (52,287)
---------------------------------------------- ----- -------- -------- -------- ---------
Net cash flows from financing activities (41,450) (123,585)
---------------------------------------------- ----- -------- -------- -------- ---------
Net increase in cash and cash equivalents 71,544 10,824
Cash and cash equivalents at 1 January 117,612 104,489
Effect of exchange rate fluctuations on
cash held (1,952) 2,299
---------------------------------------------- ----- -------- -------- -------- ---------
Cash and cash equivalents at 31 December 187,204 117,612
---------------------------------------------- ----- -------- -------- -------- ---------
Notes to the Group Financial Statements
For the year ended 31 December 2020
Except where indicated, values in these notes are in GBP000.
Rotork plc is a public company limited by shares, registered and
domiciled in England. The consolidated financial statements of the
Company for the year ended 31 December 2020 comprise the Company
and its subsidiaries (together referred to as the Group).
1. Accounting policies
The accounting policies applied in the preparation of these
consolidated financial statements are set out below. These policies
have been consistently applied to the years presented, unless
otherwise stated.
Basis of preparation
The consolidated financial statements of Rotork plc have been
prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006 and
International Financial Reporting Standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European
Union.
New accounting standards and interpretations
i. Amendments
A number of amended standards became applicable for the current
reporting period. The application of these amendments has not had
any material impact on the disclosures, net assets or results of
the Group.
New standards and interpretations not yet adopted
i. Amendments
Further narrow scope amendments have been issued which are
mandatory for periods commencing on or after 1 January 2021. The
application of these amendments will not have any material impact
on the disclosures, net assets or results of the Group.
Adjustments to profit
Adjustments to profit are items of income and expense which,
because of the nature, size and/or infrequency of the events giving
rise to them, merit separate presentation. These specific items are
presented on the face of the income statement to provide greater
clarity and a better understanding of the impact of these items on
the Group's financial performance. In doing so, it also facilitates
greater comparison of the Group's underlying results with prior
periods and assessment of trends in financial performance. This
split is consistent with how underlying business performance is
measured internally.
Adjustments to profit items may include but are not restricted
to: costs of significant business restructuring, significant
impairments of intangible or tangible assets, adjustments to the
fair value of acquisition related items such as contingent
consideration, acquired intangible asset amortisation and other
items due to their significance, size or nature, and the related
taxation.
Going concern
After carrying out a detailed review of the viability of the
business, 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 on-going impact of COVID-19 on the Group has
been considered. The directors have reviewed: the current financial
position of the Group, which has net cash of GBP178m and unused
committed debt facilities of GBP60m as at the period end; the
significant order book, which contains customers spread across
different geographic areas and industries; and the trading and cash
flow forecasts for the Group. The directors have reverse stress
tested the forecasts and are satisfied that the downside scenarios
are considered remote and that the Group would continue to have
headroom on existing facilities. The Group also has a number of
mitigating actions that it can take at short notice to preserve
cash, for example reduction in capital programmes, dividend
deferral and other reductions in discretionary spend.
Consolidation
The consolidated financial statements incorporate the financial
statements of the Company and its subsidiaries for the year to 31
December 2020. 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 2020 or 2019. Statutory accounts
for 2019, which were prepared under International Financial
Reporting Standards as adopted by the EU, have been delivered to
the registrar of companies. Those for 2020, which have been
prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006 and
International Financial Reporting Standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union,
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 2020 will shortly be available to shareholders,
and after adoption at the Annual General Meeting on 30 April 2021
will be delivered to the registrar.
2. Alternative performance measures
The Group uses adjusted figures as key performance measures in
addition to those reported under adopted IFRS, as management
believe these measures facilitate greater comparison of the Group's
underlying results with prior periods and assessment of trends in
financial performance.
The key alternative performance measures that the Group use
include adjusted profit measures and organic constant currency
(OCC). Explanations of how they are calculated and how they are
reconciled to IFRS statutory results are set out below.
a. Adjusted operating profit
Adjusted operating profit is the Group's operating profit
excluding the amortisation of acquired intangible assets and other
adjustments that are considered to be significant and where
treatment as an adjusted item provides stakeholders with additional
useful information to assess the trading performance of the Group
on a consistent basis. Further details on these adjustments are
given in note 4.
b. Adjusted profit before tax
The adjustments in calculating adjusted profit before tax are
consistent with those in calculating adjusted operating profit
above.
2020 2019
------------------------------------------- ------- -------
Profit before tax 122,037 124,057
Adjustments:
Amortisation of acquired intangible assets 14,110 18,841
(Gain)/loss on disposal of businesses - (2,539)
Redundancy and executive change costs 5,744 2,791
Other restructuring costs 115 4,902
Adjusted profit before tax 142,006 148,052
------------------------------------------- ------- -------
c. Adjusted basic and diluted earnings per share
Adjusted basic earnings per share is calculated using the
adjusted net profit attributable to the ordinary shareholders and
dividing it by the weighted average ordinary shares in issue (see
note 8). Adjusted net profit attributable to ordinary shareholders
is calculated as follows:
2020 2019
---------------------------------------------------------- ------- -------
Net profit attributable to ordinary shareholders 93,328 94,100
Adjustments:
Amortisation of acquired intangible assets 14,110 18,841
(Gain)/loss on disposal of businesses - (2,539)
Redundancy and executive change costs 5,744 2,791
Other restructuring costs 115 4,902
Tax effect on adjusted items (4,484) (4,908)
Adjusted net profit attributable to ordinary shareholders 108,813 113,187
---------------------------------------------------------- ------- -------
Diluted earnings per share is calculated by using the adjusted
net profit attributable to ordinary shareholders and dividing it by
the weighted average ordinary shares in issue adjusted to assume
conversion of all potentially dilutive ordinary shares (see note
8).
d. Adjusted dividend cover
Dividend cover is calculated as earnings per share divided by
dividends per share. Adjusted dividend cover is calculated as
adjusted earnings per share as defined in note 2c above divided by
dividends per share.
e. Total shareholder return
Total shareholder return is the movement in the price of an
ordinary share plus dividends during the year, divided by the
opening share price.
f. Return on capital employed
The return on capital employed ratio is used by management to
help ensure that capital is used efficiently.
2020 2019
-------------------------------------- --------- ---------
Adjusted operating profit 142,543 151,005
Capital employed
Shareholders' funds 582,530 539,400
Cash and cash equivalents (187,204) (117,612)
Interest bearing loans and borrowings 9,150 11,543
Pension deficit net of deferred tax 30,965 23,942
-------------------------------------- --------- ---------
Capital employed 435,441 457,273
-------------------------------------- --------- ---------
Average capital employed 446,357 474,647
-------------------------------------- --------- ---------
Return on capital employed 31.9% 31.8%
-------------------------------------- --------- ---------
Average capital employed is defined as the average of the
capital employed at the start and end of the relevant year.
g. Working capital as a percentage of revenue
Working capital as a percentage of revenue is monitored as
control of working capital is key to achieving our cash generation
targets. It is calculated as inventory plus trade receivables, less
trade payables, divided by revenue.
h. Flowthrough
Flowthrough is calculated as the change in OCC adjusted
operating profit as reported, divided into the change in OCC
revenue.
OCC OCC
31 December 31 December
2020 2019 Change
-------------------------- ------------ ------------ --------
Revenue 612,035 661,173 (49,138)
Adjusted operating profit 144,419 150,090 (5,671)
-------------------------- ------------ ------------ --------
Flowthrough 11.5%
-------------------------- ------------ ------------ --------
i. Organic constant currency (OCC)
OCC results remove the results of businesses acquired or
disposed of during the period that are not consistently presented
in both periods' results. The 2020 results are restated at 2019
exchange rates. There are no disposals or acquisitions in 2020 that
are not consistently presented in both periods.
Key headings in the income statement are reconciled to OCC as
follows:
OCC
31 December Currency 31 December
2020 adjustment 2020
--------------------------- ----------- ----------- ------------
Revenue 604,544 7,491 612,035
Cost of sales (320,234) (4,750) (324,984)
--------------------------- ----------- ----------- ------------
Gross margin 284,310 2,741 287,051
Overheads (141,767) (865) (142,632)
----------- ----------- ------------
Adjusted operating profit 142,543 1,876 144,419
Interest (537) (4) (541)
--------------------------- ----------- ----------- ------------
Adjusted profit before tax 142,006 1,872 143,878
--------------------------- ----------- ----------- ------------
Adjusted taxation (33,193) (438) (33,631)
--------------------------- ----------- ----------- ------------
Adjusted profit after tax 108,813 1,434 110,247
--------------------------- ----------- ----------- ------------
Impact of
31 December 2019 31 December
2019 disposals 2019
--------------------------- ----------- ---------- -----------
Revenue 669,344 (8,171) 661,173
Cost of sales (357,718) 6,044 (351,674)
--------------------------- ----------- ---------- -----------
Gross margin 311,626 (2,127) 309,499
Overheads (160,621) 1,212 (159,409)
----------- ---------- -----------
Adjusted operating profit 151,005 (915) 150,090
Interest (2,953) - (2,953)
--------------------------- ----------- ---------- -----------
Adjusted profit before tax 148,052 (915) 147,137
--------------------------- ----------- ---------- -----------
Taxation (34,865) 320 (34,545)
--------------------------- ----------- ---------- -----------
Adjusted profit after tax 113,187 (595) 112,592
--------------------------- ----------- ---------- -----------
3. Operating segments
The Group has chosen to move from a product focused structure to
an end market segment focused structure that more closely meets
customer needs. The three identifiable operating segments where the
financial and operating performance is reviewed monthly by the
chief operating decision maker are as follows:
-- Oil & Gas
-- Water & Power
-- Chemical, Process & Industrial
Each of our customers is allocated to a division. Sales to that
customer, along with all directly associated costs of that sale,
are reported under the division to which that customer is
allocated. Where some of our customers sell into multiple end
markets, a lead end market is identified. Sales to these customers
will generally be allocated to the lead end market unless the sale
is of significance and an alternative end market has been
identified, in which case it will be reported under the alternative
end market.
For all costs not directly attributed to a sale, these are
allocated across the three divisions within each of our businesses.
There are some costs which are directly attributable to a division,
but most support costs and facility costs are not directly
attributable to a division and are generally allocated based on
split of revenue. Amortisation of acquired intangible assets is
allocated based on the split of revenue of the entity to which the
asset relates.
Unallocated expenses comprise corporate expenses and remain the
same as they were under the previous product division
structure.
Segmental information has been restated for the year ended 31
December 2019 to reflect the change in Group structure.
Geographic analysis
Rotork has a worldwide presence in all 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:
Chemical,
Oil & Water Process
Gas & Power & Industrial Unallocated Group
2020 2020 2020 2020 2020
------------------------------------ -------- -------- ------------- ----------- --------
Revenue from external customers 292,173 157,766 154,605 - 604,544
Adjusted operating profit* 67,949 47,037 38,553 (10,996) 142,543
Amortisation of acquired intangible
assets (7,380) (945) (5,785) - (14,110)
-------------------------------------- -------- -------- ------------- ----------- --------
Segment result 60,569 46,092 32,768 (10,996) 128,433
Other adjustments (5,859)
-------------------------------------- -------- -------- ------------- ----------- --------
Operating profit 122,574
Net finance expense (537)
Income tax expense (28,709)
-------------------------------------- -------- -------- ------------- ----------- --------
Profit for the year 93,328
-------------------------------------- -------- -------- ------------- ----------- --------
Chemical,
Oil & Water Process
Gas & Power & Industrial Unallocated Group
2019 2019 2019 2019 2019
------------------------------------ -------- -------- ------------- ----------- --------
Revenue from external customers 330,049 154,880 184,415 - 669,344
Adjusted operating profit* 75,544 45,095 41,976 (11,610) 151,005
Amortisation of acquired intangible
assets (10,739) (2,638) (5,464) - (18,841)
-------------------------------------- -------- -------- ------------- ----------- --------
Segment result 64,805 42,457 36,512 (11,610) 132,164
Other adjustments (5,154)
-------------------------------------- -------- -------- ------------- ----------- --------
Operating profit 127,010
Net finance expense (2,953)
Income tax expense (29,957)
-------------------------------------- -------- -------- ------------- ----------- --------
Profit for the year 94,100
-------------------------------------- -------- -------- ------------- ----------- --------
*Adjusted operating profit is operating profit before the
amortisation of acquired intangible assets and other adjustments
(see note 4)
Chemical,
Oil Power Process
& Gas & Water & Industrial Unallocated Group
2020 2020 2020 2020 2020
-------------------------------------- ------- ------ -------- ------------- ----------- ------
Depreciation 7,884 4,296 4,184 - 16,313
Amortisation:
* Acquired intangible assets 7,380 945 5,785 - 14,110
* Development costs 1,204 565 673 - 2,442
Impairment of development cost assets - - 525 - 525
Chemical,
Oil Power Process
& Gas & Water & Industrial Unallocated Group
2019 2019 2019 2019 2019
---------------------------------- ------ -------- ------------- ----------- ------
Depreciation 8,023 3,785 4,507 44 16,359
Amortisation:
* Acquired intangible assets 10,739 2,638 5,464 - 18,841
* Development costs 1,417 665 792 - 2,874
Impairment of property, plant and
equipment - - - 1,935 1,935
Balance sheets are reviewed by subsidiary and operating segment
balance sheets are not prepared, therefore no further analysis of
operating segments assets and liabilities is presented.
Geographical analysis:
Revenue by location of subsidiary 2020 2019
---------------------------------- ------- -------
UK 66,077 70,779
Italy 62,176 68,448
Rest of Europe 106,940 121,118
USA 109,929 140,965
Other Americas 35,965 40,732
Rest of World 223,457 227,302
---------------------------------- ------- -------
604,544 669,344
---------------------------------- ------- -------
4. OTHER ADJUSTMENTS
The other adjustments are adjustments that management consider
to be significant and where separate disclosure enables
stakeholders to assess the underlying trading performance of the
Group on a consistent basis.
The other adjustments to profit included in statutory profit are
as follows:
2020 2019
-------------------------------------- ------- -------
Gain on disposal of businesses - 2,539
Redundancy and executive change costs (5,744) (2,791)
Other restructuring costs (115) (4,902)
-------------------------------------- ------- -------
(5,859) (5,154)
-------------------------------------- ------- -------
(5,859) (5,154)
-------------------------------------- ------- -------
Redundancy and executive change costs
A further GBP5,744,000 (2019: GBP1,578,000) redundancy and
executive change costs have been incurred as a result of the
progress made with the Growth Acceleration Programme which is in
year three of the five year programme. In 2019 the Group's
operations in Taunton, UK closed resulting in redundancy costs of
GBP798,000. The operations in Tulsa, USA also ceased in 2019 and
the production transferred to other manufacturing plants in the
USA. The closure of the Tulsa facility resulted in redundancy costs
of GBP415,000.
Gain on disposal of business
The gain on disposal of GBP2,539,000 in 2019 relates to the sale
of the Pittsburgh business. The assets of GBP1,639,000 disposed of
included goodwill (GBP452,000) and working capital (GBP1,187,000).
Other costs incurred totalled GBP93,000. Proceeds of GBP4,271,000
were contractually agreed and included in other receivables at the
2019 balance sheet date. The cash proceeds were received in
2020.
Other restructuring costs
Other restructuring costs of GBP115,000 in 2020 relate to
changes in operating footprint in the USA. 2019 costs included
GBP1,046,000 relating to the closure of the Taunton facility and
GBP2,096,000 relating to the closure of the Tulsa facility,
including asset write-downs of GBP1,657,000. GBP200,000 relates to
ending development and sales of products for the containment area
of nuclear power plants and GBP1,560,000 related to the ongoing
review of the global footprint, including a GBP413,000 loss on
disposal of a property.
Income statement disclosure
All adjustments are included in administrative expenses, with
the exception of the gain on disposal of business in 2019 which is
included in other income and the 2019 loss on disposal of property
is included in other expenses. The adjustments are taxable or tax
deductible in the country in which the expense is incurred.
5. finance Income and EXPENSE
Recognised in the income statement
2020 2019
----------------------------------- ----- -----
Interest income 1,517 1,803
Foreign exchange gains 877 284
----------------------------------- ----- -----
Finance income 2,394 2,087
----------------------------------- ----- -----
2020 2019
---------------------------------------------- ------- -------
Interest expense (872) (2,686)
Interest expense on lease liabilities (499) (431)
Interest charge on pension scheme liabilities (609) (750)
Foreign exchange losses (951) (1,173)
---------------------------------------------- ------- -------
Finance expense (2,931) (5,040)
---------------------------------------------- ------- -------
6. Income tax expense
2020 2020 2019 2019
-------------------------------------------------------- ------- ------- ------- -------
Current tax:
UK corporation tax on profits for the year 2,711 3,777
Adjustment in respect of prior years (966) (570)
-------------------------------------------------------- ------- ------- ------- -------
1,745 3,207
Overseas tax on profits for the year 28,034 28,082
Adjustment in respect of prior years (232) (235)
-------------------------------------------------------- ------- ------- ------- -------
27,802 27,847
-------------------------------------------------------- ------- ------- ------- -------
Total current tax 29,547 31,054
-------------------------------------------------------- ------- ------- ------- -------
Deferred tax:
Origination and reversal of other temporary differences 198 (1,135)
Impact of rate change (1,018) 173
Adjustment in respect of prior years (18) (135)
-------------------------------------------------------- ------- ------- ------- -------
Total deferred tax (838) (1,097)
-------------------------------------------------------- ------- ------- ------- -------
Total tax charge for year 28,709 29,957
-------------------------------------------------------- ------- ------- ------- -------
Profit before tax 122,037 124,057
Profit before tax multiplied by the blended standard
rate of corporation tax in
the UK of 19.0% (2019: 19.0%) 23,187 23,571
Effects of:
Different tax rates on overseas earnings 7,613 6,856
Permanent differences 595 1,537
Losses not recognised 292 (66)
Tax incentives (744) (1,174)
Impact of rate change (1,018) 173
Adjustments to tax charge in respect of prior
years (1,216) (940)
-------------------------------------------------------- ------- ------- ------- -------
Total tax charge for year 28,709 29,957
-------------------------------------------------------- ------- ------- ------- -------
Effective tax rate 23.5% 24.1%
-------------------------------------------------------- ------- ------- ------- -------
Adjusted profit before tax (note 2b) 142,006 148,052
Total tax charge for the year 28,709 29,958
Amortisation of acquired intangible assets 3,010 4,070
Defined benefit pension schemes (note 4) - -
Restructuring costs (note 4) 1,474 838
-------------------------------------------- ------- -------
Adjusted total tax charge for the year 33,193 34,866
-------------------------------------------- ------- -------
Adjusted effective tax rate 23.4% 23.5%
-------------------------------------------- ------- -------
A tax charge of GBP65,000 (2019: GBP8,000) in respect of
share-based payments has been recognised directly in equity in the
year.
The effective tax rate for the year is 23.5% (2019: 24.1%). The
adjusted effective tax rate is 23.4% (2019: 23.5%) and is lower
than the effective tax rate for the year principally because of the
tax treatment of expenses included in exceptional items.
The adjusted effective tax rate has fallen from 23.5% in 2019 to
23.4% in 2020, principally because of a reduction in the deferred
tax liability relating to unremitted earnings from India as a
result of a decrease in Indian withholding tax rates from 1 April
2020. The consequent fall in the adjusted effective tax rate has
been partially offset by an increase in the proportion of the Group
profits arising in higher tax jurisdictions internationally. The
Group expects its adjusted effective tax rate to continue to move
in line with the trends in corporate tax rates in the jurisdictions
where Rotork operates. However, the adjusted effective tax rate
will still be higher than the standard UK rate due to higher rates
of tax in China, the US, South Korea, Germany, India and
Australia.
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 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
GBP256,554,000 (2019: GBP312,364,000).
7. Capital and reserves
0.5p 0.5p
Ordinary Ordinary
shares GBP1 shares GBP1
issued Non- issued Non-
and fully redeemable and fully redeemable
paid preference paid preference
up shares up shares
2020 2020 2019 2019
------------------------------------ ---------- ----------- ---------- -----------
At 1 January 4,363 40 4,358 40
Issued under employee share schemes 7 - 5 -
------------------------------------ ---------- ----------- ---------- -----------
At 31 December 4,370 40 4,363 40
------------------------------------ ---------- ----------- ---------- -----------
Number of shares (000) 873,955 872,538
------------------------------------ ---------- ----------- ---------- -----------
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 GBP2,312,000 (2019: GBP1,501,000)
in respect of the 1,417,104 (2019: 912,549) ordinary shares issued
during the year: GBP7,000 (2019: GBP5,000) was credited to share
capital and GBP2,305,000 (2019: GBP1,497,000) 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 GBP2,937,000 (2019: GBP3,485,000)
and represents 997,000 (2019: 1,136,000) 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:
2020
Payment date 2020 2019
-------------------------------------------------- ------------- ------ ------
The 2019 final dividend was postponed (final
dividend for 2018: 3.70p) - - 32,248
3.90p interim dividend for 2020 (interim dividend
for 2019: 2.20p) 25 September 33,926 20,039
33,926 52,287
-------------------------------------------------- ------------- ------ ------
The recommendation to pay a 3.90 pence per share final dividend
in respect of 2019 was withdrawn on 31 March 2020 in response to
the uncertainty arising from the COVID-19 pandemic. The Board
decided to pay this dividend as an interim dividend of 3.90 pence
which was paid to shareholders on 25 September 2020.
After the balance sheet date the following dividends per
qualifying ordinary share were proposed by the directors. The
dividends have not been provided for.
2020 2019
----------------------------------------------------- ------ ------
Final proposed dividend per qualifying ordinary share
6.30p 55,059
----------------------------------------------------- ------ ------
3.90p 34,029
----------------------------------------------------- ------ ------
8. 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 871.7m shares (2019: 871.0m shares) being the weighted
average number of ordinary shares in issue (net of own ordinary
shares held) for the year.
2020 2019
----------------------------------------------------------- ------- -------
Net profit attributable to ordinary shareholders 93,328 94,100
----------------------------------------------------------- ------- -------
Weighted average number of ordinary shares
Issued ordinary shares at 1 January 871,401 870,238
Effect of own shares held 17 387
Effect of shares issued under Sharesave plans 244 401
----------------------------------------------------------- ------- -------
Weighted average number of ordinary shares during the year 871,662 871,026
----------------------------------------------------------- ------- -------
Basic earnings per share 10.7p 10.8p
----------------------------------------------------------- ------- -------
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
impact of the adjustments. The reconciliation showing how adjusted
net profit attributable to ordinary shareholders is derived is
shown in note 2.
2020 2019
----------------------------------------------------------- ------- -------
Adjusted net profit attributable to ordinary shareholders 108,813 113,187
----------------------------------------------------------- ------- -------
Weighted average number of ordinary shares during the year 871,662 871,026
----------------------------------------------------------- ------- -------
Adjusted basic earnings per share 12.5p 13.0p
----------------------------------------------------------- ------- -------
Diluted earnings per share
Diluted earnings per share is based on the profit for the year
attributable to the ordinary shareholders and 873.3m shares (2019:
873.6m 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 two categories of
potentially dilutive ordinary shares: those share options granted
to employees under the 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).
2020 2019
------------------------------------------------------------ ------- -------
Net profit attributable to ordinary shareholders 93,328 94,100
------------------------------------------------------------ ------- -------
Weighted average number of ordinary shares (diluted)
Weighted average number of ordinary shares for the year 871,662 871,026
Effect of Sharesave options 561 1,214
Effect of LTIP share awards 1,101 1,347
------------------------------------------------------------ ------- -------
Weighted average number of ordinary shares (diluted) during
the year 873,324 873,587
------------------------------------------------------------ ------- -------
Diluted earnings per share 10.7p 10.8p
------------------------------------------------------------ ------- -------
Adjusted diluted earnings per share
2020 2019
------------------------------------------------------------ ------- -------
Adjusted net profit attributable to ordinary shareholders 108,813 113,187
------------------------------------------------------------ ------- -------
Weighted average number of ordinary shares (diluted) during
the year 873,324 873,587
------------------------------------------------------------ ------- -------
Adjusted diluted earnings per share 12.5p 13.0p
------------------------------------------------------------ ------- -------
9. Employee benefits
2020 2019
------------------------------------------------------ --------- ---------
Recognised liability for defined benefit obligations:
* Present value of funded obligations 252,959 223,222
* Fair value of plan assets (214,442) (193,646)
------------------------------------------------------ --------- ---------
38,517 29,576
Other pension scheme liabilities 243 241
Employee bonuses 19,676 20,399
Long term incentive plan 560 542
Employee indemnity provision 2,474 2,227
Other employee benefits 5,021 5,325
66,491 58,310
------------------------------------------------------ --------- ---------
Non-current 42,846 33,576
Current 23,645 24,734
------------------------------------------------------ --------- ---------
66,491 58,310
------------------------------------------------------ --------- ---------
10. 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 arm's length basis.
Evoqua Water Technologies LLC is a related party of Rotork plc
by virtue of M Lamb's non-executive chairmanship. Sales to
subsidiaries and associates of Evoqua Water Technologies LLC
totalled GBPnil during the year (2019: GBP2,000), and there was no
outstanding debt at 31 December 2020 (2019: GBPnil).
Financial calendar
2 March 2021 Preliminary announcement of annual results for 2020
8 April 2021 Ex-dividend date for final proposed 2020 dividend
9 April 2021 Record date for final proposed 2020 dividend
30 April 2021 Announcement of trading update
30 April 2021 Annual General Meeting held at Rotork House,
Brassmill Lane, Bath, BA1 3JQ
3 August 2021 Announcement of interim financial results for 2021
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END
FR DKDBBCBKDFNK
(END) Dow Jones Newswires
March 02, 2021 02:00 ET (07:00 GMT)
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