31st Jul 2007 07:01
Rotork PLC31 July 2007 31 July 2007 Rotork p.l.c. 2007 Interim Results Excellent growth in all three divisions Financial Highlights 2007 2006 % change % change (constant currency) Revenue £113.3m £101.3m +12% +18%Operating profit £26.0m £22.0m +18% +27%Profit before tax £26.9m £22.5m +19% +28%Earnings per share 21.3 p 17.6 p +21% +31% • Order intake up 10% year on year (15% at constant currency) • Record order book of £94m, up 23% on the start of year • Interim dividend at 7.7p up 18% Chief Executive, Bill Whiteley, commenting on the results, said: "We are pleased to report that the Group continued to make excellent progresswith revenue and profit before tax increasing by 12% and 19% against aparticularly strong first half in 2006. At constant currency the revenueincreased by 18% and profit before tax by 28%. Our end user industrial markets,the oil & gas, power and water sectors, are very active. Despite the weakness of the US dollar, the strength of all of our end usermarkets and the ability of our international sales and operational units toleverage these opportunities should ensure further growth in the second half ofthe year." For further information, please contact: Rotork p.l.c. Tel: 01225 733200Bill Whiteley, Chief ExecutiveBob Slater, Finance Director Financial Dynamics Tel: 020 7269 7291Susanne Yule / James Ottignon REVIEW OF OPERATIONS Financial Results We are pleased to report that the Group continued to make excellent progresswith revenue and profit before tax increasing by 12% and 19% respectivelyagainst a particularly strong first half in 2006. Margins increased from 22.3%to 23.7%. This was in spite of a negative currency background with the USdollar averaging 1.98 against 1.80 in the first half of last year. At constantcurrency the revenue increased by 18% and profit before tax by 28%. Operating Review Our end user industrial markets, the oil & gas, power and water sectors, arevery active. The activity has a wide geographical spread and benefited allthree of our businesses each of which expanded sales revenue, profit and marginsover the comparative period. Order intake was up 10%, 15% at constant currency.This resulted in the order book at 30 June being £94m, up 23% on the start ofthe year. Rotork Controls Revenue for our electric actuator division, Rotork Controls, increased by 8% to£79m whilst operating profit rose by 11% to £21m. At constant currencies theseresults would have been 14% and 20% respectively. The mix profile was beneficial and material costs were kept under control due tocost reduction and procurement initiatives. These factors resulted in anincreased gross margin despite currency impacts. As a result of this and theoperational gearing on the overheads, the operating margin increased to 26.3%from 25.6%. Strong demand resulting from new plant construction in Asia and the Far Eastmeant that actuator unit input from this region increased from 47% to 52% of thetotal. The substantial increase in destination of units to this area wasprincipally due to increased levels of oil & gas business. This wasparticularly evident in China where increased demand for units going into thissector and the continued strong demand for units for power generation resultedin increased business levels over the first half of 2006. In this region highlevels of growth in order intake were also seen in Malaysia, Taiwan, Australiaand Vietnam. Actuators with a UK destination increased from 9% to 10% of the total with asubstantial increase in business from the UK water companies, whilst unitsdestined for Continental Europe increased from 14% to 16% of the total input, asactivity in oil & gas and water & waste water increased significantly. TheMiddle East and Africa sector reduced from 13% to 8% due to a reduction of thevery high level of oil & gas projects which were entered in the first half of2006. However, activity levels in the Middle East remain encouraging for theyear as a whole. There was a small reduction in the number of units ordered for North Americandestination. However our US businesses benefited from additional orders fromdomestic valvemakers, who were more competitive on the world stage due to theweakness of the US dollar. High levels of oil & gas activity in Asia and Europe led to an increase in unitsales into this sector but it remained at 38% of the total units sold. Water &waste water increased their share of the total business to 23% with nearly allareas reporting increased activity, while power reduced as a share of the totalunits sold to 30% despite the quantity of units sold increasing. The Bath plant continued to perform well and nearly all the European and Asianprofit centres achieved growth. The US saw a 10% increase in profits in localcurrency but when translated into sterling the results were similar to theprevious year. Profits of the Canadian operations were down, impacted by lowerbusiness levels. Progress has been made in developing Rotork's Service and Support business. Aspreviously indicated this was restructured to create a single worldwidebusiness, reported predominantly within the Controls division of the Group.Rotork Site Services was created during the period and achieved revenues andprofits in the first half of 2007 of £17m and £5m respectively. The Control Valve actuator project continues to be the focus of our developmentwork. A project sales director has been selected to take responsibility for thecommercial aspects of the development. Meanwhile beta samples of the linearproduct are available which will allow us to further test the market reaction.Design of the remainder of the product range continues. An initial productlaunch in the second half of 2008 is anticipated. Rotork Fluid Systems This division continues to grow strongly and, we believe, increase its marketshare. Revenue increased by 19% to £23m and operating profits by 51% to £3m.Operating margin reached 13.1% for the half year, with the expectation that thetarget of 15% will be achieved for the year as a whole. The main plant in Italy was very busy and increased revenue by nearly 33% andprofits nearly 57%. The two other production plants, in Germany and the US,also saw substantial growth. The wholly owned 'Centres of Excellence', which provide locally engineeredsolutions and support for these products to customers around the world, alsoperformed well, with particularly good results from the UK, French and Spanishoperations. RFS has been at the forefront of developing actuators for high integrity safetyand protection systems. It has recently won a large contract for itsElectro-Hydraulic product range, which is designed to operate at SIL3, the mostdemanding of the recently introduced safety standards for valve actuators. Ithas also been successful in providing solutions for HIPPS, High IntegrityPressure Protection Systems, valves which are used in applications demandingguaranteed rapid operation. Rotork Gears Rotork Gears had a very successful six months' trading. Revenue was up 33% to£16m and operating profit up 55% to £3m on the comparative period. The stronggrowth was based on an active worldwide valvemaker market and strong demand fromthe in-house Controls Division where a high percentage of electric unitsrequired secondary reduction gearboxes. This division is also reaping thebenefits of the work it has put into reducing component costs and increasing theefficiency of its operations. Particularly strong performances were delivered from the Leeds plant and Gearsb.v. in The Netherlands. Dividend The interim dividend is to be increased by 18% to 7.7p and will be payable on 28September 2007 to all shareholders on the register at 7 September 2007. Rotorkhas already paid over £18m of dividends in the first half of 2007 (88% of itsfree cash flow in the period) with the £10m 2006 final dividend paid in May andan £8m additional dividend paid in June. Outlook The increasing weakness of the US dollar provides an unfavourable tradingbackdrop compared with 2006. However, the strength of all of our end usermarkets and the ability of our international sales and operational units toleverage these opportunities should ensure further growth in the second half ofthe year. Bill WhiteleyChief Executive30 July 2007 Consolidated Income StatementUnaudited First half First half Full year 2007 2006 2006 Notes £000 £000 £000 Revenue 2 113,346 101,255 206,709 Operating profit 2 25,969 22,030 45,089 Financial income 3 3,302 2,774 5,568Financial expenses 3 (2,370) (2,265) (4,596) ______ ______ ______ 932 509 972 ______ ______ ______Profit before tax 26,901 22,539 46,061 Tax expenseUK (3,386) (2,711) (6,690)Overseas (5,116) (4,639) (8,038) ______ ______ ______ (8,502) (7,350) (14,728) ______ ______ ______Profit for the period 7 18,399 15,189 31,333 ===== ===== ===== pence pence pence Basic earnings per share 5 21.3 17.6 36.4Diluted earnings per share 5 21.2 17.5 36.1 Consolidated Statement of Recognised Incomeand ExpenseUnaudited First half First half Full year 2007 2006 2006 £000 £000 £000 Foreign exchange translation differences (186) (2,165) (3,748) Effective portion of changes in fair value of 461 470 (80)cash flow hedgesActuarial gain in pension scheme - - 6,743 Movement on deferred tax relating to actuarial - - (2,023)gain ______ ______ _____Income and expenses recognised directly in 275 (1,695) 892equity Profit for the period 18,399 15,189 31,333 ______ ______ ______Total recognised income and expense for the 18,674 13,494 32,225period ===== ===== ===== Consolidated Balance SheetUnaudited Notes 30 June 30 June 31 Dec 2007 2006 2006 £000 £000 £000 Property, plant and equipment 16,722 16,978 16,616Intangible assets 22,288 22,627 22,225Deferred tax assets 4,606 6,898 5,739Other receivables 849 660 735 ______ ______ ______Total non-current assets 44,465 47,163 45,315 Inventories 6 34,434 31,535 29,027Trade receivables 40,961 38,520 37,385Current tax 2,107 2,331 1,219Other receivables 5,134 5,006 4,104Cash and cash equivalents 22,371 26,912 28,460 ______ ______ ______Total current assets 105,007 104,304 100,195 ______ ______ ______Total assets 149,472 151,467 145,510 ===== ===== ===== Issued equity capital 7 4,321 4,314 4,314Share premium 7 6,346 5,841 5,857Reserves 7 (1,146) 712 (1,421)Retained earnings 7 80,862 75,640 80,386 ______ ______ ______Total equity 7 90,383 86,507 89,136 ===== ===== ===== Interest-bearing loans and borrowings 178 769 180Employee benefits 5,002 17,829 8,186Deferred tax liabilities 1,203 416 1,225Provisions 1,016 748 941 ______ ______ ______Total non-current liabilities 7,399 19,762 10,532 Bank overdraft 314 19 62Interest-bearing loans and borrowings 90 280 526Trade payables 18,796 19,008 16,835Employee benefits 3,332 2,716 3,941Current tax 8,570 6,916 6,236Other payables 18,125 14,318 15,923Provisions 2,463 1,941 2,319 ______ ______ ______Total current liabilities 51,690 45,198 45,842 Total liabilities 59,089 64,960 56,374 ______ ______ ______Total equity and liabilities 149,472 151,467 145,510 ===== ===== ===== Consolidated Statement of Cash FlowsUnaudited First half First half Full year 2007 2006 2006 £000 £000 £000 Profit for the period 18,399 15,189 31,333Amortisation of intangibles 36 55 98Amortisation of development costs 154 130 259Depreciation 1,399 1,235 2,554Equity settled share based payment expense 327 231 496Profit on sale of fixed assets (42) (1) (33)Financial income (3,302) (2,774) (5,568)Financial expenses 2,370 2,265 4,596Income tax expense 8,502 7,350 14,728 ______ ______ ______ 27,843 23,680 48,463Increase in inventories (5,510) (5,326) (3,610)Increase in trade and other receivables (4,322) (4,029) (3,786)Increase in trade and other payables 5,450 7,083 6,691Increase in provisions 247 322 731Difference between pension charge and cash contribution (2,468) (4,379) (6,801)(Decrease) / increase in employee benefits (1,316) (750) 776 ______ ______ ______ 19,924 16,601 42,464Income taxes paid (5,819) (4,791) (11,247) ______ ______ ______Cash flows from operating activities 14,105 11,810 31,217 Purchase of tangible fixed assets (1,311) (1,246) (2,425)Development costs capitalised (328) (151) (372)Sale of tangible fixed assets 78 48 116Acquisition of subsidiary net of cash acquired - (1,589) (1,589)Interest received 474 510 876 ______ ______ ______Cash flows from investing activities (1,087) (2,428) (3,394) Issue of ordinary share capital 489 236 252Purchase of ordinary share capital (1,186) (700) (2,047)Purchase of own preference shares treated as debt - (4) (4)Interest paid (62) (76) (147)Repayment of amounts borrowed (430) (177) (467)Repayment of finance lease liabilities (31) (59) (212)Dividends paid on ordinary shares (18,087) (8,537) (24,140) ______ ______ ______Cash flows from financing activities (19,307) (9,317) (26,765) Net (decrease) / increase in cash and cash equivalents (6,289) 65 1,058 Cash and cash equivalents at 1 January 28,398 27,180 27,180Effect of exchange rate fluctuations on cash held (52) (352) 160 ______ ______ ______Cash and cash equivalents at end of period 22,057 26,893 28,398 ===== ===== ===== Notes to the Interim Report 1. Status of Interim Report and accounting policies The interim report was approved by the Directors on 30 July 2007. It should beread in conjunction with the 2006 Annual Report, which contains the most recentaudited financial statements. The financial information for the six months to 30 June 2007 and the comparativefigures for the six months to 30 June 2006 are unaudited and have been preparedapplying the accounting policies and presentation that were applied in thepreparation of the Company's published consolidated financial statements for theyear ended 31 December 2006. The financial information for the year ended 31 December 2006 is an abridgedversion of the full accounts for that year, which received an unqualified reportfrom the auditors and which have been filed with the Registrar of Companies. 2. Analysis of revenue, profit and net assets First half First half Full year First half First half Full year 2007 £000 2006 £000 2006 £000 2007 £000 2006 2006 £000 £000 Revenue Operating profitAnalysis by operation Controls 79,278 73,377 147,795 20,885 18,820 37,024Gears 15,535 11,660 24,282 3,494 2,261 4,638Fluid Systems 22,637 19,079 40,504 2,962 1,962 5,374Unallocated costs - - - (1,372) (1,013) (1,947)Inter-segmental elimination (4,104) (2,861) (5,872) - - - ______ ______ ______ ______ ______ ______ 113,346 101,255 206,709 25,969 22,030 45,089 ______ ______ ______ ______ ______ ______ Segment assets Segment liabilities Controls 68,759 66,732 67,969 33,815 42,168 34,557Gears 17,547 15,756 12,325 5,117 4,032 4,146Fluid Systems 34,082 32,838 29,796 9,802 10,360 9,442Unallocated 29,084 36,141 35,420 10,355 8,400 8,229 ______ ______ ______ ______ ______ ______ 149,472 151,467 145,510 59,089 64,960 56,374 ______ ______ ______ ______ ______ ______ Revenue from external customers by location of customer First half First half Full year 2007 2006 2006 £000 £000 £000 Europe 54,521 44,117 89,992Americas 27,295 28,224 58,398Rest of world 31,530 28,914 58,319 ______ ______ ______ 113,346 101,255 206,709 ______ ______ ______ Segment assets by location of assets First half First half Full year 2007 2006 2006 £000 £000 £000 Europe 81,948 79,918 72,810Americas 21,123 19,726 21,849Rest of world 17,317 15,682 15,431Unallocated 29,084 36,141 35,420 ______ ______ ______ 149,472 151,467 145,510 ______ ______ ______ 3. Net financing income First half First half Full year 2007 2006 2006 £000 £000 £000 Interest income 503 512 982Expected return on assets in the pension schemes 2,779 2,204 4,518Foreign exchange gain 20 58 68 ______ ______ ______ 3,302 2,774 5,568 ______ ______ ______ Interest expense (81) (101) (121)Interest charge on pension scheme liabilities (2,272) (2,149) (4,309)Foreign exchange loss (17) (15) (166) ______ ______ ______ (2,370) (2,265) (4,596) ______ ______ ______ 4. Dividends First half First half Full year 2007 2006 2006 £000 £000 £000The following dividends were paid in the period per qualifyingordinary share:11.65p (2006: 9.9p) final dividend 10,051 8,537 8,5376.5p interim dividend - - 5,6015.8p 2006 first additional dividend - - 5,0045.8p 2006 second additional dividend - - 4,9989.3p 2007 additional dividend 8,036 - - ______ ______ ______ 18,087 8,537 24,140 ______ ______ ______The following dividends per qualifying ordinary share were declared/ proposed at the balance sheet date:11.65p final dividend proposed - - 10,0197.7p (2006: 6.5p) interim dividend declared 6,654 5,603 -5.8p first additional dividend declared - 5,000 -5.8p second additional dividend declared - 5,000 -9.3p 2007 additional dividend declared - - 8,000 ______ ______ ______ 6,654 15,603 18,019 ______ ______ ______ 5. Earnings per share Earnings per share is calculated using the profit attributable to the ordinaryshareholders for the period and 86.2 million shares (six months to 30 June 2006:86.1 million; year to 31 December 2006: 86.1 million) being the weighted averageordinary shares in issue. Diluted earnings per share is calculated using the profit attributable to theordinary shareholders for the period and the weighted average ordinary shares inissue adjusted to assume conversion of all dilutive potential ordinary sharesunder the Group's option schemes, Sharesave plan and Long-Term Incentive Plan. 6. Inventories First half First half Full year 2007 2006 2006 £000 £000 £000 Raw materials and consumables 18,733 17,955 16,815Work in progress and finished goods 15,701 13,580 12,212 ______ ______ ______ 34,434 31,535 29,027 ______ ______ ______ 7. Capital and reserves Share Share Translation Capital Hedging Retained Total premium reserve redemption reserve earnings Capital reserve £000 £000 £000 £000 £000 £000 £000 Balance at 1 January 2007 4,314 5,857 (2,770) 1,639 (290) 80,386 89,136Profit for the period - - - - - 18,399 18,399Other items in the - - (186) - 461 - 275statement of recognisedincome and expenseEquity settled - - - - - 236 236transactions net of taxShare options exercised by 7 489 - - - - 496employeesTreasury shares purchased - - - - - (1,186) (1,186)Treasury shares issued - - - - - 2,007 2,007Loss on re-issue of - - - - - (893) (893)treasury sharesDividends to shareholders - - - - - (18,087) (18,087) ______ ______ ______ ______ ______ ______ ______Balance at 30 June 2007 4,321 6,346 (2,956) 1,639 171 80,862 90,383 ______ ______ ______ ______ ______ ______ ______ Balance at 1 January 2006 4,310 5,609 978 1,637 (210) 68,241 80,565Profit for the period - - - - - 15,189 15,189Other items in the - - (2,165) - 470 - (1,695)statement of recognisedincome and expenseEquity settled - - - - - 213 213transactions net of taxShare options exercised by 4 232 - - - - 236employeesTreasury shares purchased - - - - - (700) (700)Treasury shares issued - - - - - 1,238 1,238Own preference shares - - - 2 - (4) (2)acquiredDividends to shareholders - - - - - (8,537) (8,537) ______ ______ ______ ______ ______ ______ ______Balance at 30 June 2006 4,314 5,841 (1,187) 1,639 260 75,640 86,507 ______ ______ ______ ______ ______ ______ ______ Balance at 1 January 2006 4,310 5,609 978 1,637 (210) 68,241 80,565Profit for the period - - - - - 31,333 31,333Other items in the - - (3,748) - (80) 4,720 892statement of recognisedincome and expenseEquity settled - - - - - 915 915transactions net of taxShare options exercised by 4 248 - - - - 252employeesTreasury shares purchased - - - - - (2,047) (2,047)Treasury shares issued - - - - - 1,368 1,368Own preference shares - - - 2 - (4) (2)acquiredDividends to shareholders - - - - - (24,140) (24,140) ______ ______ ______ ______ ______ ______ ______Balance at 31 December 4,314 5,857 (2,770) 1,639 (290) 80,386 89,1362006 ______ ______ ______ ______ ______ ______ ______ 8. Shareholder information This interim report is being sent to all shareholders and copies are availableto the public from the Registered Office at the address below. The interimreport is also available on the Company's website at www.rotork.com. We offer shareholders a dividend reinvestment plan (DRIP) under whichshareholders can reinvest their cash dividends in the company, by buying sharesin the market at competitive dealing rates. If you have already elected to jointhe DRIP, there is no further action for you to take. If you would like to join for the first time, please contact our registrarsbelow. Lloyds TSB RegistrarsThe CausewayWorthingWest SussexBN99 6DA Share dividend helpline number - 0870 241 3018 9. Group information Secretary and registered office:Stephen Rhys JonesRotork p.l.c.Rotork HouseBrassmill LaneBath BA1 3JQ Company website:www.rotork.com This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Rotork