2nd Aug 2006 07:00
Rotork PLC02 August 2006 Rotork p.l.c. 2006 Interim Results Highlights Excellent growth in all three divisions • Turnover at £101m up 29% (26% at constant currency) • Order intake up 28% year on year • Profit before tax at £23m up 38% (32% at constant currency) • Earnings per share up 39% to 17.6p • Order book at £79m is a new record • Interim dividend at 6.5p up over 10% • New Chinese production facility now operational • Successful integration of the new Italian Gears business since acquisition in January Chief Executive, Bill Whiteley, commenting on the results, said: "Rotork has again delivered a strong performance with the level of business inthe first half of the year exceeding our expectations. "With buoyant markets and a record order book, we anticipate delivering a strongperformance for the year as a whole, with, as indicated at the AGM, a moreevenly balanced first and second half result." For further information, please contact: Rotork p.l.c. Tel: 01225 733200Bill Whiteley, Chief ExecutiveBob Slater, Finance Director Financial Dynamics Tel: 020 7831 3113Susanne Walker / Sally Lewis REVIEW OF OPERATIONS Financial Results We are pleased to report particularly strong financial results for the firsthalf of 2006. Revenue increased by 29%, while operating profits increased by36% compared with the prior year. Rotork's innovative and comprehensive productportfolio, breadth of marketing and lean production structure allowed it to takefull advantage of increased investment in energy infrastructures around theworld. The results were enhanced by a stronger US dollar in the first quarterwhich meant that the first half rates were 1.80 against 1.85 in the comparativeperiod. The strong order intake at the start of the year coupled withincreased production capacity at the Bath plant meant that first half output wasnot affected by the same constraints as had been the case in the first halves of2005 and 2004. Operating Review Order intake was up 28%. Nearly all our end user and geographic markets werebusy. Middle Eastern oil and gas projects were particularly active whichresulted in business through valvemakers in Europe and elsewhere. The orderbook stood at £79m at the end of June, which was 24% above the start of the yearand 26% above the same point in 2005. Electric Actuators Electric input value was up 24% on the prior year and extends the period ofstrong growth we have seen in recent years. Order intake was particularly highin January which led to an exceptional first quarter. The biggest jump in inputunits was for those destined for the Middle East and Africa. As a percentage oftotal electric actuator input units this region increased from 8% in the firsthalf of 2005 to 13%. Business in Asia and the Far East remained at very highlevels but there was a decline in units destined for China, compared with theunsustainably high levels experienced in the first half of last year. This,together with the lack of the very large Singapore water project won in thefirst half of last year, meant that this region declined from 54% of our totaldestination units to 47%. Most other Asian and Far Eastern offices recordedgood increases in business. The Indian market, which is important to Rotork,recorded a near doubling of input from the excellent prior year figure. We sawmore activity from UK customers, particularly the water and power companies, andthe UK increased as a percentage of our total destination units from 8% to 9%.Additional Eastern European orders helped raise European business from 13% to14%. The increase in units for the Americas was mainly destined for US water &waste water plants with a reduction of units destined for South America. Thetotal Americas' share of business remained at 17%. In terms of end user industry, oil and gas increased from 34% to 38% mainly onthe back of significant Middle Eastern activity. Power remained a similarpercentage due to the increase in Indian business more than offsettingreductions in China. Shipments increased by 26% with profit from electricoperations increasing by 29%. Nearly all our profit centres performed well,most recording good increases in operating profits over the comparative period.The Bath production plant performed particularly well maintaining consistentlyhigh levels of output which allowed us to reduce our delivery times, in spite ofthe heavy levels of order intake. Continued increases in energy costs and raw materials costs such as copper andaluminium put pressure on the price of our components. However, these increasesare to a substantial extent being mitigated by our sourcing and engineering costreduction initiatives. The new Shanghai assembly plant has progressed on schedule, within budget and isnow operational. Production of gearboxes commenced in the second quarter andelectric actuators will commence, as planned, in the third quarter. Good progress has also been made within R&D. The new generation of Pakscan,our two wire actuator control system, will be launched in the third quarter,while the development of our new concept for the process control marketcontinues to advance. Rotork Fluid System This division continues to display exceptional growth levels. Order intake forthe six months is up 36% on the comparative period and the order book is up 36%on the start of the year. Revenue and operating profits are up 44% and 150%respectively against the relatively weak comparative period. Upstream oil and gas work, coupled with transmission and LNG projects, continueto drive this business which has benefited from Middle Eastern projects butunlike the comparative period the order input does not include a dominantproject. The Italian plant remains very busy while the PCI facility in Germany hasprovided us with important extra capacity. The business generated by theinternational sales subsidiaries continues to build and now represents asignificant contribution. The increase in size of this division in recent years has encouraged us tostrengthen the top management team in order to further develop this operationboth in terms of size and profitability. Recent recruitments have completed theprocess. Rotork Gears The Gears business has had a very successful first half year meeting itsmanagement goals and exceeding its financial targets. Order input was up 46%compared with the comparative period. Sales revenue and operating profits wereup 25% and 22% respectively. There has been a smooth management transition following the retirement of thedivisional managing director. Omag Srl, which became Rotork Gears Srl afterpurchase, has performed very well since its acquisition in January. Its rangeof large gearboxes complements our existing products and its relationship withimportant Italian valvemakers benefits our wider business. As already mentionedproduction of gearboxes has commenced in the new Shanghai plant on schedule.Progress has also been made in developing new business alliances withsignificant customers. Dividend The interim dividend is to be increased by 10% to 6.5p and will be payable on 28September 2006 to all shareholders on the register at 8 September 2006. During2006 Rotork has committed to an increased dividend, outside the regular interimand final dividends, totalling £10m to be paid in two instalments, in July andDecember 2006. Taken together with the 2005 final there will be four dividendspaid to shareholders during 2006. Outlook The level of business has exceeded our expectations in the first half of theyear. Most of our markets continue to be healthy with significant levels ofinvestment planned for the future. With buoyant markets and record order bookswe anticipate delivering a strong performance for the year as a whole.Nevertheless as indicated at the time of our AGM we continue to expect thefinancial results of the two halves of the current year to be more evenlybalanced than in the recent past. This view, which was based on the timing ofprojects and the improvements in productivity, has been reinforced by the recentmovement of the US dollar. Bill WhiteleyChief Executive2 August 2006 Consolidated Income StatementUnaudited First half First half Full year 2006 2005 2005 Notes £000 £000 £000 Revenue 2 101,255 78,324 174,839 Operating profit 2 22,030 16,224 36,530 Financial income 3 2,774 2,169 4,479Financial expenses 3 (2,265) (2,116) (4,352) ______ ______ ______ 509 53 127 ______ ______ ______Profit before tax 22,539 16,277 36,657 Tax expense UK (2,711) (2,052) (4,833)Overseas (4,639) (3,320) (7,210) ______ ______ ______ (7,350) (5,372) (12,043) ______ ______ ______Profit for the period 7 15,189 10,905 24,614 ====== ====== ====== pence pence pence Basic earnings per share 5 17.6 12.7 28.6Diluted earnings per share 5 17.5 12.6 28.4 Consolidated Statement of Recognised Incomeand Expense Unaudited First half First half Full year 2006 2005 2005 £000 £000 £000 Foreign exchange translation differences (2,165) 890 2,190 Cash flow hedges: effective portion of changes in fair value 470 (293) (487)Actuarial loss in pension scheme - - (3,452)Movement on deferred tax relating to actuarial loss - - 2,552 ______ ______ ______Net gain recognised directly in equity (1,695) 597 803 Profit for the period 15,189 10,905 24,614 ______ ______ ______Total recognised income and expense for the period 13,494 11,502 25,417 ______ Reclassification of preference shares (47) (47)Effective cash flow hedges at 1 January 2005 277 277 ______ ______ 11,732 25,647 ______ ______ Consolidated Balance SheetUnaudited Notes 30 June 30 June 31 Dec 2006 2005 2005 £000 £000 £000 Property, plant and equipment 16,978 17,644 17,214Intangible assets 22,627 21,536 22,038Deferred tax assets 6,898 5,905 9,115Other receivables 660 231 633 ______ ______ ______Total non-current assets 47,163 45,316 49,000 Inventories 6 31,535 26,310 26,697Trade receivables 38,520 31,094 36,492Income tax receivable 2,331 2,147 2,225Other receivables 5,006 3,887 2,560Cash and cash equivalents 26,912 20,502 27,878 ______ ______ ______Total current assets 104,304 83,940 95,852 ______ ______ ______Total assets 151,467 129,256 144,852 ====== ====== ====== Issued capital 7 4,314 4,308 4,310Share premium 7 5,841 5,498 5,609Reserves 7 712 1,299 2,405Retained earnings 7 75,640 61,299 68,241 ______ ______ ______Total equity 7 86,507 72,404 80,565 ______ ______ ______ Interest bearing loans and borrowings 769 1,415 236Employee benefits 20,545 22,023 25,078Deferred tax liabilities 416 989 1,164Provisions 748 531 654 ______ ______ ______Total non-current liabilities 22,478 24,958 27,132 Bank overdraft 19 268 698Interest bearing loans and borrowings 280 197 1,016Trade payables 19,008 13,909 14,937Income tax payable 6,916 7,062 5,620Other payables 14,318 9,396 13,129Provisions 1,941 1,062 1,755 ______ ______ ______Total current liabilities 42,482 31,894 37,155 Total liabilities 64,960 56,852 64,287 ______ ______ ______Total equity and liabilities 151,467 129,256 144,852 ====== ====== ====== Consolidated Statement of Cash FlowsUnaudited First half First half Full year 2006 2005 2005 £000 £000 £000 Profit for the period 15,189 10,905 24,614Amortisation of intangibles 55 169 179Amortisation of development costs 130 146 293Depreciation 1,235 1,357 2,671Equity settled share based payment expense 231 134 312Profit on sale of fixed assets (1) 42 22Financial income (2,774) (2,169) (4,479)Financial expenses 2,265 2,116 4,352Income tax expense 7,350 5,372 12,043 ______ ______ ______ 23,680 18,072 40,007Increase in inventories (5,326) (3,680) (3,359)(Increase) / decrease in trade and other receivables (4,029) 4,225 (685)Increase / (decrease) in trade and other payables 7,086 (1,551) 1,325Increase / (decrease) in provisions 322 (16) 709Difference between pension charge and cash contribution (4,379) (753) (3,243)(Decrease) / increase in other employee benefits (750) (794) 1,509 ______ ______ ______ 16,604 15,503 36,263Income taxes paid (4,791) (3,933) (11,296) ______ ______ ______Cash flows from operating activities 11,813 11,570 24,967 Purchase of tangible fixed assets (1,246) (738) (1,396)Development costs capitalised (151) (120) (291)Proceeds from sale of tangible fixed assets 48 11 94Acquisition of subsidiary net of cash acquired (1,590) (7,256) (7,227)Interest received 510 285 776 ______ ______ ______Cash flows from investing activities (2,429) (7,818) (8,044) Issue of ordinary share capital 236 513 626Purchase of ordinary share capital (700) (913) (2,236)Purchase of own preference shares (6) - -Interest paid (76) (75) (232)New loans less repayment of amounts borrowed (177) 1,184 677Repayment of finance lease liabilities (59) (53) (100)Dividends on ordinary shares (8,537) (8,342) (13,437) ______ ______ ______Cash flows from financing activities (9,319) (7,686) (14,702) Net increase / (decrease) in cash and cash equivalents 65 (3,934) 2,221 Cash and cash equivalents at 1 January 27,180 24,825 24,825Effect of exchange rate fluctuations on cash held (352) (657) 134 ______ ______ ______Cash and cash equivalents at end of period 26,893 20,234 27,180 ====== ====== ====== Notes to the Interim Report 1. Status of Interim Report and accounting policies The interim report was approved by the Directors on 1 August 2006. It should beread in conjunction with the 2005 Annual Report, which contains the most recentaudited financial statements. The financial information for the six months to 30 June 2006 and the comparativefigures for the six months to 30 June 2005 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 2005. The financial information for the year ended 31 December 2005 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 2006 2005 2005 2006 2005 2005 £000 £000 £000 £000 £000 £000 Revenue Operating profitAnalysis by operation Electrics 73,377 58,243 128,535 18,820 14,554 30,912Gears 11,660 9,339 19,063 2,261 1,857 3,825Fluid system 19,079 13,267 32,321 1,962 784 3,669Unallocated costs - - - (1,013) (971) (1,876)Inter-segmental elimination (2,861) (2,525) (5,080) - - - ______ ______ ______ ______ ______ ______ 101,255 78,324 174,839 22,030 16,224 36,530 ______ ______ ______ ______ ______ ______ Segment assets Segment liabilities Electrics 66,732 59,942 63,973 42,168 37,684 44,666Gears 15,756 13,025 12,964 4,032 2,681 2,743Fluid system 32,838 27,741 28,691 10,360 6,556 8,145Unallocated 36,141 28,548 39,224 8,400 9,931 8,733 ______ ______ ______ ______ ______ ______ 151,467 129,256 144,852 64,960 56,852 64,287 ______ ______ ______ ______ ______ ______ Revenue from external customers by location of customer First half First half Full year 2006 2005 2005 £000 £000 £000 Europe 44,117 33,761 73,967Americas 28,224 22,544 50,544Rest of world 28,914 22,019 50,328 ______ ______ ______ 101,255 78,324 174,839 ______ ______ ______ Segment assets by location of assets First half First half Full year 2006 2005 2005 £000 £000 £000 Europe 79,918 63,024 67,102Americas 19,726 23,608 23,578Rest of world 15,682 14,076 14,948Unallocated 36,141 28,548 39,224 ______ ______ ______ 151,467 129,256 144,852 ______ ______ ______ 3. Net financing income First half First half Full year 2006 2005 2005 £000 £000 £000 Interest income 512 309 599Expected return on assets in the pension schemes 2,204 1,828 3,770Foreign exchange gain 58 32 110 ______ ______ ______ 2,774 2,169 4,479 ______ ______ ______ Interest expense (101) (80) (221)Interest charge on pension scheme liabilities (2,149) (1,965) (4,048)Foreign exchange loss (15) (71) (83) ______ ______ ______ (2,265) (2,116) (4,352) ______ ______ ______ 4. Dividends First half First half Full year 2006 2005 2005 £000 £000 £000 The following dividends were paid in the period:9.9p (2005: 9.7p) per qualifying ordinary share 8,537 8,342 8,3425.9p per qualifying ordinary share - - 5,095 ______ ______ ______ 8,537 8,342 13,437 ______ ______ ______ The following dividends were declared / proposed at the balancesheet date:9.9p final dividend proposed - - 8,5216.5p (2005: 5.9p) interim dividend declared 5,603 5,095 -5.8p first additional dividend declared (payable in July) 5,000 - -5.8p second additional dividend declared (payable in December) 5,000 - - ______ ______ ______ 15,603 5,095 8,521 ______ ______ ______ 5. Earnings per share Earnings per share is calculated using the profit attributable to the ordinaryshareholders for the period and 86.1 million shares (six months to 30 June 2005:86.0 million; year to 31 December 2005: 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 and Long-Term Incentive Plan. 6. Inventories First half First half Full year 2006 2005 2005 £000 £000 £000 Raw materials and consumables 17,955 17,596 16,592Work in progress and finished goods 13,580 8,714 10,105 ______ ______ ______ 31,535 26,310 26,697 ______ ______ ______ 7. Capital and reserves Share Preference Share Translation Capital Hedging Retained Total Capital shares premium reserve redemption reserve earnings reserve 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 statement of recognisedincome and expense - - - (2,165) - 470 - (1,695)Equity settled transactions net of tax - - - - - - 213 213Share options exercised by employees 4 - 232 - - - - 236Own ordinary shares acquired - - - - - - (700) (700)Own ordinary shares awarded under shareschemes - - - - - - 1,234 1,234Own preference shares acquired - - - - 2 - - 2Dividends 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 2005 4,300 47 4,993 (1,212) 1,637 - 58,489 68,254Adoption of IAS32 and IAS39 - (47) - - - 277 - 230 ______ ______ ______ ______ ______ ______ ______ ______Restated equity at 1 January 2005 4,300 - 4,993 (1,212) 1,637 277 58,489 68,484Profit for the period - - - - - - 10,905 10,905Other items in the statement of recognisedincome and expense - - - 890 - (293) - 597Equity settled transactions net of tax - - - - - - 11 11Share options exercised by employees 8 - 505 - - - - 513Own ordinary shares acquired - - - - - - (913) (913)Own ordinary shares awarded under shareschemes - - - - - - 1,149 1,149Dividends to shareholders - - - - - - (8,342) (8,342) ______ ______ ______ ______ ______ ______ ______ ______Balance at 30 June 2005 4,308 - 5,498 (322) 1,637 (16) 61,299 72,404 ______ ______ ______ ______ ______ ______ ______ ______ Balance at 1 January 2005 4,300 47 4,993 (1,212) 1,637 - 58,489 68,254Adoption of IAS32 and IAS39 - (47) - - - 277 - 230 ______ ______ ______ ______ ______ ______ ______ ______Restated equity at 1 January 2005 4,300 - 4,993 (1,212) 1,637 277 58,489 68,484Profit for the period - - - - - - 24,614 24,614Other items in the statement of recognisedincome and expense - - - 2,190 - (487) (900) 803Equity settled transactions net of tax - - - - - - 562 562Share options exercised by employees 10 - 616 - - - - 626Own ordinary shares acquired - - - - - - (2,236) (2,236)Own ordinary shares awarded under shareschemes - - - - - - 1,149 1,149Dividends to shareholders - - - - - - (13,437) (13,437) ______ ______ ______ ______ ______ ______ ______ ______Balance at 30 December 2005 4,310 - 5,609 978 1,637 (210) 68,241 80,565 ______ ______ ______ ______ ______ ______ ______ ______ 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 plcRotork 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:
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