REG - Rotork PLC - 2023 Interim Results
08/08/2023 07:00
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RNS Number : 5716I Rotork PLC 08 August 2023
Tuesday 8(th) August 2023
Rotork plc
2023 Interim Results
Good first half, expectations for the full year unchanged
Adjusted highlights H1 2023 H1 2022 % change OCC(3) % change
Order intake(1) £386.9m £340.1m +13.8% +11.9%
Revenue £334.7m £280.0m +19.5% +17.2%
Adjusted(2) operating profit £65.3m £53.3m +22.5% +20.2%
Adjusted(2) operating margin 19.5% 19.0% +50bps +50bps
Adjusted(2) basic earnings per share 5.8p 4.8p +21.9% +19.7%
Cash conversion(4) 116% 68% - -
Reported highlights H1 2023 H1 2022 % change
Revenue £334.7m £280.0m +19.5%
Operating profit £59.4m £44.0m +34.9%
Operating margin 17.7% 15.7% +200bps
Profit before tax £60.2m £44.6m +35.1%
Basic earnings per share 5.3p 3.9p +34.9%
Interim dividend 2.55p 2.40p +6.3%
Summary
· Order intake increased 11.9% year-on-year OCC, largely driven by
volume, resulting in a record order book at period end
· Revenue increased 17.2% year-on-year OCC against a more supply-chain
disrupted comparative period, and despite some supply-chain challenges
continuing. All divisions grew at rates consistent with the Group, with Target
Segments delivering premium growth as expected
· Good progress under all Growth+ pillars with new product and digital
services launched and a bolt-on technology platform acquisition
· Adjusted operating margins 50bps higher at 19.5% reflecting increased
volumes partly offset by Growth+ investments. The reported operating profit
margin was 17.7%
· ROCE(4) was 32.7% (up 570bps). Strong balance sheet retained with
closing net cash of £97.8m (December 2022: £105.9m) reflecting 116% cash
conversion and a £20m special pension contribution which facilitated a
buy-in, further de-risking the pension scheme
Kiet Huynh, Chief Executive, commenting on the results, said:
"I'm pleased with our performance in the first half, in particular with
double-digit year-on-year growth in orders and sales, the improvement in
operating margin and the progress made under the Growth+ strategy.
The outlook for all our divisions is positive and we entered the second half
with a record order book. Whilst mindful of residual supply chain challenges,
we anticipate delivering further progress in 2023 in line with expectations on
an OCC basis."
( )
(1) Order intake represents the value of orders received during the period.
(2) Adjusted(4) figures exclude the amortisation of acquired intangible assets
and other adjustments (see note 4).
(3) OCC(4) is organic constant currency results restated at 2022 exchange
rates.
(4) Adjusted figures, organic constant currency ('OCC') figures, cash
conversion and ROCE are alternative performance measures and are used
consistently throughout these results. They are defined in full and reconciled
to the reported measures in note 2.
Rotork plc Tel: +44 (0)1225 733 200
Kiet Huynh, 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 meeting for analysts and institutional investors at 9.30am GMT
today in the Library at the offices of JPMorgan Cazenove, 60 Victoria
Embankment, London EC4Y 0JP. The presentation will also be webcast, with
access via https://www.investis-live.com/rotork/64a8143a2be9e4130067c8af/sahka
(https://www.investis-live.com/rotork/64a8143a2be9e4130067c8af/sahka) . Please
join the webcast a few minutes before 9.30am to complete registration.
Summary
Purpose
Our Purpose and sustainability vision are one and the same: keeping the world
flowing for future generations. We want to help drive the transition to a
sustainable future where environmental resources are used responsibly. We have
a major role to play in new energies and technologies that will support the
transition to a low carbon economy, as well as helping preserve natural
resources such as fresh water and reducing energy sector methane emissions.
Performance
The safety of colleagues, partners and visitors is Rotork's number one
priority and the Group's vision for health and safety is zero harm. In the
first half of 2023 the lost-time injury rate was 0.07, an encouraging
improvement on the 0.20 in the first half of 2022, in part reflecting the
extensive work completed across the Group to implement its 12 Global Safety
Standards. The Total Recordable Injury Rate in H1 2023 was 0.20 (H1 2022:
0.39).
Order intake increased 13.8% year-on-year to £386.9m (11.9% on an organic
constant currency or OCC basis). All three divisions booked higher orders,
with Oil & Gas and Water & Power strongly ahead. Oil & Gas order
intake was the largest it has been in a six-month period since 2019. Orders,
which overall continue to be driven predominantly by customers' operational
spend, included more large orders than seen for some time.
Whilst the period saw benefits from supply chain improvement measures, the
supply chain challenges faced in recent years have not entirely disappeared.
During the period the Group experienced amongst other things disruption to the
supply of semi-finished components such as circuit boards. Rotork is working
together with its suppliers to improve availability and saw some improvement
in deliveries towards the end of the period.
Group revenue was 19.5% higher year-on-year (17.2% higher OCC), benefiting
from a lower level of supply chain challenges. Higher volumes contributed
around two-thirds of the Group sales increase. Oil & Gas sales rose 19.5%
(16.4% OCC), driven by the Americas and Europe, Middle East & Africa
('EMEA') regions. CPI sales were 19.0% ahead (17.2% OCC), with all geographic
regions higher. Water & Power sales were up 20.4% (18.7% OCC), with all
regions ahead and the Americas seeing a particularly strong improvement.
By geography, Asia Pacific revenues by destination grew mid-single digits
year-on-year on an OCC basis driven by solid performances from CPI and Water
& Power. EMEA sales grew double digits, benefiting from Oil & Gas
strength. Americas revenues were also ahead double digits (OCC) with all
divisions delivering strong growth.
Rotork Site Services, Rotork's global service network and a key differentiator
in the industry, performed well with revenue growth broadly in-line with the
Group overall. The recently launched enhanced Intelligent Asset Management
predictive analytics system has been well received by customers and has good
momentum.
Adjusted operating profit was 22.5% higher year-on-year (20.2% at OCC) at
£65.3m, reflecting volume growth and positive net price/mix which together
were partly offset by annual wage inflation, investment in our Growth+
strategy and the bringing forward of salary increases. Adjusted operating
margins were 50bps ahead year-on-year at 19.5%. Reported profit before tax was
£60.2m.
Return on capital employed was 32.7% (H1 2022: 27.0%), benefiting from the
increase in adjusted operating profit. Cash conversion was 116% (H1 2022:
68%). First half cash conversion benefited from the normalisation of
receivables balances which were unusually high at the December year-end.
Rotork's balance sheet remains strong, with a closing net cash position of
£97.8m after a £20m special pension contribution which facilitated a buy-in,
further de-risking the pension scheme.
Rotork is targeting net-zero by 2035 for scopes 1 and 2 and to encourage
achievement during the period incorporated near-term absolute scope 1 and 2
reduction targets into its long-term incentive plan. Good progress was made
securing renewable energy contracts and these are now in place at more than a
fifth of Rotork sites. Rotork is targeting net-zero by 2045 for scope 3. This
is a medium-term project and the foundations have been laid by building
sustainability goals into our product development process.
Market update
The outlook for the end markets we serve remains positive.
The recovery in oil & gas sector activity first experienced in the second
half of 2021 continued through the first half of 2023. Hydrocarbons will have
an important role in the world's energy mix for years to come and following an
extended period of industry under-investment a catch-up is now underway.
Whilst hydrocarbon prices have fallen from the highs of 2022, they remain
above incentive levels in most regions and large project activity remains
elevated. The events in Ukraine have also necessitated a reconsideration of
energy security risks with the result that LNG is having a larger role.
Methane emissions reduction remains an industry priority and our IQTF has been
established as the leading electric actuator for upstream oil & gas choke
valve applications. COP28, to be held in Dubai in November, is expected to
call for a step-up in policy and financing efforts directed at methane
emissions reduction.
The metals and mining sectors are major beneficiaries of the global mega
trends of electrification and decarbonisation, and significant new resources
and processing plants are scheduled to be commissioned in the next couple of
years. Metals benefiting from the transition include aluminium, cobalt,
copper, lithium and nickel.
The United States' Inflation Reduction Act and the European Union's similar
initiatives are supporting the carbon capture and storage and hydrogen sectors
and we saw a marked pick-up in enquiries and quotation activity in the period.
If passed, the United States' Environmental Protection Agency's proposed new
carbon pollution standards are expected to provide further stimulus,
particularly to the carbon capture sector.
The water and wastewater sector continues to increase investment in new and
existing infrastructure. The sector is focused on delivering water
availability, improving water quality, reducing leakage and climate change
adaptation. The desalination segment remains active, and new market
opportunities are presenting themselves (for example, desalination plants in
hydrogen facilities).
Growth+ strategy update
In November 2022 we presented our new Growth+ strategy at a Capital Markets
Event. The starting point of Growth+ is our purpose, 'keeping the world
flowing for future generations'. Our Purpose remains a powerful motivator, and
it drives everything we do. It recognises the important part that we play in
making our world a great place in which to live, but also the role we can play
helping improve the safety, environmental and social performances of not just
ourselves, but also those of our end users, customers, suppliers and
communities.
Our vision is for Rotork to be the leader in intelligent flow control. This
recognises the ever-increasing importance of connectivity to our end users.
Today's intelligent flow control systems not only ensure safety, they are also
reliable, efficient and easy to use and play a vital role in ensuring the
uptime of our end users' operations (including through predictive and
preventative maintenance).
Growth+ is designed to deliver our ambition of mid to high single-digit
revenue growth and mid 20s adjusted operating profit margins over time. The
levers are its three pillars of Target Segments, Customer Value and Innovative
Products & Services, each underpinned by our 'Enabling a Sustainable
Future' initiatives.
We made good progress in Target Segments, which delivered premium growth in
the period. Successes in Oil & Gas included in the North American upstream
methane emissions reduction segment, where our IQTF range has established
itself as the leading electric actuator for choke valve applications, and in
LNG where we won a sizeable order for actuation equipment destined for a major
liquefaction project in the United States. Successes in CPI included being
chosen to supply a large actuation package to a major nickel/cobalt processing
plant in Indonesia. Water & Power won a very significant network
automation project in the Middle East.
During the half year we accelerated our business transformation. We are
transforming Rotork through implementing and integrating common systems and
processes throughout the Group. This will improve efficiency and ultimately
deliver improved lead times and an enhanced customer experience. An important
milestone was passed in Q1 with the successful first deployment of our new
Enterprise Resource Planning system at our Bath site. The Microsoft Dynamics
365 based system integrates into our existing Group-wide Customer Relationship
Management application. Implementation across all sites will take place over
the next 3-4 years.
Our Innovative Products & Services pillar also has good momentum. During
the period we launched the IQ3 Pro and its accompanying smartphone app. The
new IQ3 offers greater connectivity than its predecessor and the smartphone
app enables intelligent configuration and operation. Our enhanced Intelligent
Asset Management condition monitoring and analytics software has been well
received by customers who appreciate its expanded diagnostic and predictive
functions. After the period end we made a small acquisition adding a compact
high torque electric valve actuator range to our product offering.
Capital allocation
We retain a strong balance sheet, with a net cash position of £97.8m at the
period end (31 December 2022: £105.9m). This, together with good cash
generation, provides us with the financial flexibility to pursue our organic
investment plans, pay a progressive dividend and execute our targeted M&A
strategy. We regularly review our capital needs, in line with our capital
allocation strategy, and have demonstrated discipline and flexibility in our
use of buybacks and dividends to deliver returns for shareholders. In the
event that in the future we determine we have surplus cash, we will return it
to shareholders via share buybacks.
On 4 August Rotork acquired Montreal (Canada) headquartered Hanbay Inc
("Hanbay"). Hanbay designs and manufactures compact, high torque electric
valve actuators for both non-hazardous and hazardous applications. The
acquisition expands Rotork's electric actuator offering and is fully
consistent with all three pillars of the Growth+ strategy and increases the
percentage sales contribution of our Eco-transition portfolio. Hanbay sales in
2023 are expected to be in the region of CAD10m with margins in-line with the
Rotork Group average.
We recognise the importance of a growing dividend to our shareholders and are
committed to a progressive dividend policy subject to satisfying cash
requirements. The Board is declaring an interim dividend of 2.55p per share
which is equivalent to 2.3 times cover based on adjusted earnings per share.
The interim dividend will be payable on 22 September 2023 to shareholders on
the register on 18 August 2023. The ex-dividend date is 17 August 2023.
The last date to elect for the Dividend Reinvestment Plan ('DRIP') is 4
September 2023.
Board update
Ann Christin Andersen has decided that due to other commitments she will not
seek re-election as a Director of Rotork at the AGM in April 2024. When Ann
Christin steps down she will have served Rotork for more than five years. We
thank Ann Christin for her service and will announce her replacement in due
course.
Outlook
The outlook for all our divisions is positive and we entered the second half
with a record order book. Whilst mindful of residual supply chain challenges,
we anticipate delivering further progress in 2023 in line with expectations on
an OCC basis.
Divisional review
Oil & Gas
£m H1 2023 H1 2022 Change OCC(3) Change
Revenue 146.1 122.3 +19.5% +16.4%
Adjusted operating profit 31.3 23.6 +33.0% +30.3%
Adjusted operating margin 21.4% 19.3% +210bps +230bps
Oil & Gas sales were 16% ahead year-on-year (OCC) against a supply-chain
disrupted comparative period. Divisional revenues benefited from both volume
and selling price increases. All segments grew and downstream sales
represented 47% of the total (52% in H1 2022); upstream 29% (24%) and
midstream 24% (24%).
The EMEA geographic region reported double-digit revenue growth year-on-year
(OCC), with all three segments (upstream, midstream and downstream) strongly
ahead, benefiting from increased activity in the Middle East. The Americas
reported the strongest growth with US upstream benefiting from the increase in
methane emissions reduction related sales. In APAC, double-digit year-on-year
revenue growth in the upstream segment was not sufficient to offset lower
downstream and midstream sales, reflecting the non-repeat of larger projects.
The division's adjusted operating profit was £31.3m, 33.0% up year-on-year.
Positive pricing more than offset adverse product mix and any impact of higher
material costs. The benefit of strong volume growth, improved labour
productivity and a slower rate of overhead growth resulted in adjusted
operating margins rising 210 basis points to 21.4%.
Oil & Gas' focus on target segments delivered notable successes during the
period. The Rotork IQTF established itself as the leading electric actuator
for wellhead choke valve methane emissions reduction applications in the North
American upstream market. In the LNG segment Oil & Gas received a major
actuation package order from a liquefaction project in Texas. In India the
Rotork team won a large order for electric actuators and controls systems,
together with a five-year maintenance and service contract, for a
multi-location tank farm automation project.
Chemical, Process & Industrial ("CPI")
£m H1 2023 H1 2022 Change OCC(3) Change
Revenue 110.4 92.8 +19.0% +17.2%
Adjusted operating profit 25.0 22.7 +10.0% +8.4%
Adjusted operating margin 22.7% 24.5% -180bps -180bps
CPI is a supplier of specialist actuators and instruments for niche
applications in the broad chemical, process industry and industrial sectors.
The division serves a broader range of end markets than Rotork's other
divisions and typically has a shorter order backlog.
The division delivered a good sales performance with revenues 19% higher
year-on-year. Asia Pacific sales grew year-on-year OCC, benefiting from our
coverage expansion initiative and growth in target segments including HVAC and
mining. EMEA revenue growth was in the mid-teens. The Americas was CPI's
fastest growing geographic region.
The division's adjusted operating profit was £25.0m, 10% higher than the
prior year. Adjusted operating margins fell 180 basis points to 22.7%.
Particularly strong revenue growth in fluid power actuators contributed to a
negative product mix which, even with improved direct labour productivity,
meant a decline in gross margin. With overheads then increasing slightly ahead
of the Group average this resulted in a 180bps reduction in adjusted operating
margin.
CPI is benefiting from the pursuit of its chosen Growth+ target segments such
as decarbonisation (hydrogen and carbon capture, usage and storage),
chemicals, HVAC (semi-conductor, lithium-ion battery and data centre) and
mining. Rotork's electric and fluid power actuators and MasterStation control
systems were selected to control fluids at a major new ethylene (chemical)
multi-phase project in China. Rotork Schischek explosion proof actuators were
specified as part of a HVAC upgrade at a pharmaceutical ingredient plant in
Switzerland. Rotork's electric actuators and emergency shutdown duty
fluid-powered actuators were chosen to automate a major nickel/cobalt
processing plant in Indonesia.
Water & Power
£m H1 2023 H1 2022 Change OCC(3) Change
Revenue 78.1 64.9 +20.4% +18.7%
Adjusted operating profit 17.0 13.4 +27.1% +25.6%
Adjusted operating margin 21.8% 20.7% +110bps +110bps
Water & Power is a supplier of premium actuators, predominantly electric,
and gearboxes for applications in the water, wastewater treatment and power
generation sectors. The water segment contributed 68% of divisional sales in
the period (66% in H1 2022).
Sales in the half were ahead 19% year-on-year (OCC) against a particularly
supply-chain disrupted comparative period. Asia Pacific sales were low-teens
ahead year-on-year (OCC). Sales in the Americas grew strongly year-on-year
driven by higher water sector activity and was the fastest growing geographic
region. EMEA sales grew year-on-year benefiting from higher power station
refurbishment revenues.
The division's adjusted operating profit was £17.0m, 27.1% higher year on
year. Volume accounted for more of the revenue increase in this division than
the other two and, with positive product mix, this more than covered any
material cost increases. This, together with improved labour productivity,
resulted in adjusted operating margins increasing 110 basis points to 21.8%
despite overheads growing fastest in this division.
The division made good progress in its target segments of water
infrastructure, waste and wastewater treatment, desalination and alternative
energy during the period. Rotork actuators were selected by a Middle Eastern
end user for a large water infrastructure network automation project. Rotork's
IQ3 electric actuator range was picked for a major upgrade project at a
drinking water purification plant in the United States Midwest. In the
alternative energy space, Rotork IQ series intelligent electric actuators were
chosen to control cooling circuits on HVDC platforms destined for North Sea
(UK) offshore wind farms.
By order of the Board
Kiet Huynh
Chief Executive
7 August 2023
Financial Key Performance Indicators (KPIs)
H1 2023 H1 2022 FY 2022
Revenue growth 19.5% -2.9% 12.8%
Adjusted operating margin 19.5% 19.0% 22.3%
Cash conversion 116.4% 68.1% 76.0%
Return on capital employed 32.7% 27.0% 31.3%
Adjusted EPS growth 21.9% -12.7% 13.2%
The KPIs are defined below:
· Revenue growth is defined as the increase in revenue divided by
comparative period revenue.
· Adjusted operating margin is defined as adjusted operating profit as
a percentage of revenue (note 2a).
· Cash conversion is defined as cash flow from operating activities
before tax outflows, payments for adjusted items and the pension charge to
cash adjustment as a percentage of adjusted operating profit (note 2g).
· Return on capital employed is defined as adjusted operating profit as
a percentage of average capital employed. Capital employed is defined as
shareholders' funds less net cash held and less the pension fund surplus net
of related deferred tax liability (note 2d).
· Adjusted EPS growth is defined as the increase/(decrease) in adjusted
basic EPS (based on adjusted profit after tax) divided by the comparative
period adjusted basic EPS (note 2c).
Adjusted items
Adjusted profit measures are presented alongside reported results as we
believe they provide a useful comparison of underlying business trends and
performance from one period to the next. The Group believes alternative
performance measures, which are not considered to be a substitute for, or
superior to, IFRS measures, provide stakeholders with additional helpful
information on the performance of the business.
The reported profit measures are adjusted to exclude amortisation of acquired
intangibles, business transformation costs associated with the implementation
of a new ERP system and integration with business processes, 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 of adjusted items are provided in note 4.
£m Reported results Amortisation Gain on property disposal Business transformation cost Other Adjustments
Adjusted results
Operating profit 59.4 0.6 (0.7) 5.9 0.1 65.3
Profit before tax 60.2 0.6 (0.7) 5.9 0.1 66.1
Tax (14.7) (0.1) 0.1 (1.4) - (16.1)
Profit after tax 45.5 0.5 (0.6) 4.5 0.1 50.0
Financial position
The balance sheet remains strong and we ended the period with net cash of
£97.8m (Dec 2022: £105.9m). Net cash comprises cash balances of £105.3m
less loans and borrowings and leases of £7.5m.
Net working capital (note 2e) has decreased by £10.8m since the year end to
£173.5m at the period end; this was largely driven by trade receivables.
December 2022 trade receivables were higher due to sales being weighted
towards the end of the year, and this has unwound driving part of the
reduction together with a reduction in days sales outstanding, which is two
days lower compared with the year end at 56 days. In total, net working
capital as a percentage of sales was 25.9% compared with 28.7% in December
2022 and 28.1% in June 2022. The decrease in working capital has resulted in
cash conversion of 116.4% of adjusted operating profit into operating cash, up
from 68.1% in the first half of 2022.
Taxation
The estimated effective tax rate used for the year ending 31 December 2023 is
24.5% (2022 actual rate: 24.9%). Removing the impact of the adjusted items
provides a more comparable measure and, on this basis, the adjusted effective
tax rate is 24.5% (2022: 23.9%).
Retirement benefits
The Group operates two defined benefit pension schemes, the larger of which is
in the UK. Both the UK and US schemes are closed to future accrual. During the
period the Group made a special contribution of £20m to the Rotork Pension
and Life Assurance Scheme. This contribution, together with some of the
existing assets, were used to purchase a bulk annuity covering the UK scheme's
existing pensioner liabilities. This has been accounted for as a buy-in. The
pension scheme has moved from a deficit of £8.0m at 31 December 2022 to a
surplus of £9.3m at 30 June 2023, principally due to the special
contribution.
Currency
Overall, currency tailwinds increased revenue by £6.6m (2.3%) compared with
the first half of 2022. The average US dollar rate was $1.23 (H1 2022: $1.30)
and the average Euro rate was €1.14 (H1 2022: €1.19), whilst the rates at
30 June 2023 were $1.27 and €1.16 respectively (30 June 2022: $1.22 and
€1.16).
Dividend
The Board has declared an interim dividend of 2.55p (H1 2022: 2.40p) per
ordinary share. The interim dividend will be paid on 22 September 2023 to
shareholders on the register at the close of business on 18 August 2023.
Principal risks and uncertainties
The Group has an established risk management process as part of the corporate
governance framework set out in the 2022 Annual Report and Accounts. The
principal risks and uncertainties facing our businesses are monitored on an
ongoing basis in line with the Corporate Governance Code. The risk management
process is described in detail on pages 86 to 89 of the 2022 Annual Report and
Accounts. The Group's principal risks and uncertainties were reviewed by the
Board and the Board have concluded that they remain applicable for the second
half of the financial year. A more detailed description of the Group's
principal risks and uncertainties is set out on pages 90 to 97 of the 2022
Annual Report and Accounts.
Risk update
Whilst there has been no change in the principal risks and uncertainties under
review by the business since the risks disclosed in the 2022 Annual Report,
the following risk updates are noted:
· Geopolitical instability - remains at an elevated level with
potential knock-on impacts to other risks such as supply chain disruption. The
Group continues to monitor potential impacts and where possible put in place
mitigations to reduce the impact in those underlying risks.
· Supply chain disruption - remains as one of our key risks with
component shortages and constraints driving delays in specific areas. This is
a change to prior periods where the shortages and constraints were more
widespread. Management actions to secure the supply of key components have
mitigated potentially more severe outcomes.
· Cybersecurity - we are responding to the external threat of
increasingly sophisticated cyberattacks by investing in our cyber strategy.
· Various strategic initiatives continue to respond to our risks and in
the period the Group has seen positive engagement on People and Health &
Safety risks in particular.
Emerging risks
We continue to monitor and review emerging risks, which are those risks that
are hard to determine the severity. Risks under review include those in
relation to geo-political events, technological, social, environmental,
climate and sustainability risks.
Principal risks and uncertainties
1. Decline in market confidence: A decline in government and private sector
confidence and spending will lead to cancellations of expected projects or
delays to existing expenditure commitments. This lower investment in Rotork's
traditional market sectors would result in a smaller addressable market, which
in turn could lead to a reduction in revenue from that sector.
2. Increased competition: Increased competition on price, product or
technology offering leading to a loss of sales globally or market share.
3. Geopolitical instability: Increasing social and political instability
results in disruption and increased protectionism in key geographic markets.
Business disruption could impact our sales and might ultimately lead to loss
of assets located in the affected region.
4. Health & Safety: The nature of Rotork's core business and geographical
locations involves potential risks to the health and safety of our employees
or other stakeholders.
5. Compliance with laws and regulations: Failure of our staff or third parties
who we do business with to comply with law or regulation or to uphold our high
ethical standards and values.
6. Climate commitments: We do not deliver against our commitment to enable a
sustainable future and Rotork is not recognised by our stakeholders as being
part of the solution, leading to reputational damage.
7. People: Our people, epitomised through our Stronger Together value, are
critical to delivering our culture and plans. An inability to attract, retain
and develop key and diverse talent could mean we fail to successfully deliver
our strategic goals.
8. Major in-field product failure: Major in-field failure of a new or existing
Rotork product potentially leading to a product recall, major on-site warranty
programme or the loss of an existing or potential customer.
9. Supply chain disruption: Supply chain disruption which may arise such as a
tooling failure at a key supplier, logistics issue, severe weather events
impacting key suppliers which would cause disruption to manufacturing at a
Rotork factory.
10. Critical IT system failure and cybersecurity: Failure to provide, maintain
and update the systems and infrastructure required by the Rotork business.
Failure to protect Rotork operations, sensitive or commercial data, technical
specifications and financial information from cybercrime.
11. Business change management: The delivery of our strategic initiatives
relies upon our ability to deliver a series of key change programmes without
causing business disruption or having a negative impact to our day-to-day
operations.
Statement of Directors' Responsibilities
The directors confirm that, to the best of their knowledge, this condensed
consolidated interim financial information has been prepared in accordance
with IAS 34 as adopted by the United Kingdom, the interim financial statements
give a true and fair view of the consolidated assets, liabilities, financial
position and profit of the Company and its group companies taken as a whole;
and that the interim management report includes a fair review of the
information required by DTR 4.2.7R and DTR 4.2.8R, namely:
· An indication of important events that have occurred during the first
six months and their impact on the condensed set of financial statements, and
a description of the principal risks and uncertainties for the remaining six
months of the financial year; and
· Material related-party transactions in the first six months, and any
material changes in the related-party transactions described in the last
annual report.
These interim financial statements and the interim management report are the
responsibility of, and have been approved by, the directors. A list of the
current directors can be found in the "About Us" section of the Rotork
website: www.rotork.com (http://www.rotork.com) .
By order of the Board
Kiet Huynh
Chief Executive
7 August 2023
Independent Review Report to Rotork plc
Conclusion
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
June 2023 which comprises the condensed consolidated income statement, the
condensed consolidated statement of comprehensive income and expense, the
condensed consolidated balance sheet, the condensed consolidated statement of
changes in equity, the condensed consolidated cash flow statement and related
notes 1 to 17.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2023 is not prepared, in all
material respects, in accordance with United Kingdom adopted International
Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410 "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" issued by the Financial Reporting
Council for use in the United Kingdom (ISRE (UK) 2410). A review of interim
financial information consists of making inquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with United Kingdom adopted international accounting
standards. The condensed set of financial statements included in this
half-yearly financial report has been prepared in accordance with United
Kingdom adopted International Accounting Standard 34, "Interim Financial
Reporting".
Conclusion Relating to Going Concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for Conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This Conclusion is based on the review procedures performed in accordance with
this ISRE (UK) 2410; however future events or conditions may cause the entity
to cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
In preparing the half-yearly financial report, the directors are responsible
for assessing the group's ability to continue as a going concern, disclosing
as applicable, matters related to going concern and using the going concern
basis of accounting unless the directors either intend to liquidate the
company or to cease operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial information
In reviewing the half-yearly financial report, we are responsible for
expressing to the group a conclusion on the condensed set of financial
statements in the half-yearly financial report. Our Conclusion, including our
Conclusion Relating to Going Concern, are based on procedures that are less
extensive than audit procedures, as described in the Basis for Conclusion
paragraph of this report.
Use of our report
This report is made solely to the company in accordance with ISRE (UK) 2410.
Our work has been undertaken so that we might state to the company those
matters we are required to state to it in an independent review report and for
no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company, for our review work,
for this report, or for the conclusions we have formed.
Deloitte LLP
Statutory Auditor
London, United Kingdom
7 August 2023
Condensed consolidated Income Statement
First half First half Full year
2023 2022 2022
Notes £000 £000 £000
Revenue 3 334,691 280,014 641,812
Cost of sales (182,890) (155,222) (350,079)
Gross profit 151,801 124,792 291,733
Other income 929 374 1,620
Distribution costs (2,922) (2,939) (6,197)
Administrative expenses (90,265) (78,160) (163,177)
Other expenses (144) (39) (372)
Operating profit 3 59,399 44,028 123,607
Finance income 5 3,235 1,791 3,049
Finance expense 6 (2,388) (1,229) (2,554)
Profit before tax 60,246 44,590 124,102
Income tax expense 7 (14,749) (10,882) (30,901)
Profit for the period 45,497 33,708 93,201
Attributable to:
Owners of the parent 45,687 33,741 93,243
Non-controlling interests (190) (33) (42)
45,497 33,708 93,201
Basic earnings per share 9 5.3p 3.9p 10.9p
Diluted earnings per share 9 5.3p 3.9p 10.8p
Operating profit 59,399 44,028 123,607
Adjustments:
- Amortisation of acquired intangible assets 618 3,096 7,051
- Other adjustments 4 5,277 6,179 12,587
Adjusted operating profit 65,294 53,303 143,245
Adjusted basic earnings per share 2 5.8p 4.8p 12.7p
Adjusted diluted earnings per share 2 5.8p 4.8p 12.7p
The KPIs are defined below:
· Revenue growth is defined as the increase in revenue divided by
comparative period revenue.
· Adjusted operating margin is defined as adjusted operating profit as
a percentage of revenue (note 2a).
· Cash conversion is defined as cash flow from operating activities
before tax outflows, payments for adjusted items and the pension charge to
cash adjustment as a percentage of adjusted operating profit (note 2g).
· Return on capital employed is defined as adjusted operating profit as
a percentage of average capital employed. Capital employed is defined as
shareholders' funds less net cash held and less the pension fund surplus net
of related deferred tax liability (note 2d).
· Adjusted EPS growth is defined as the increase/(decrease) in adjusted
basic EPS (based on adjusted profit after tax) divided by the comparative
period adjusted basic EPS (note 2c).
Adjusted items
Adjusted profit measures are presented alongside reported results as we
believe they provide a useful comparison of underlying business trends and
performance from one period to the next. The Group believes alternative
performance measures, which are not considered to be a substitute for, or
superior to, IFRS measures, provide stakeholders with additional helpful
information on the performance of the business.
The reported profit measures are adjusted to exclude amortisation of acquired
intangibles, business transformation costs associated with the implementation
of a new ERP system and integration with business processes, 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 of adjusted items are provided in note 4.
£m Reported results Amortisation Gain on property disposal Business transformation cost Other Adjustments
Adjusted results
Operating profit 59.4 0.6 (0.7) 5.9 0.1 65.3
Profit before tax 60.2 0.6 (0.7) 5.9 0.1 66.1
Tax (14.7) (0.1) 0.1 (1.4) - (16.1)
Profit after tax 45.5 0.5 (0.6) 4.5 0.1 50.0
Financial position
The balance sheet remains strong and we ended the period with net cash of
£97.8m (Dec 2022: £105.9m). Net cash comprises cash balances of £105.3m
less loans and borrowings and leases of £7.5m.
Net working capital (note 2e) has decreased by £10.8m since the year end to
£173.5m at the period end; this was largely driven by trade receivables.
December 2022 trade receivables were higher due to sales being weighted
towards the end of the year, and this has unwound driving part of the
reduction together with a reduction in days sales outstanding, which is two
days lower compared with the year end at 56 days. In total, net working
capital as a percentage of sales was 25.9% compared with 28.7% in December
2022 and 28.1% in June 2022. The decrease in working capital has resulted in
cash conversion of 116.4% of adjusted operating profit into operating cash, up
from 68.1% in the first half of 2022.
Taxation
The estimated effective tax rate used for the year ending 31 December 2023 is
24.5% (2022 actual rate: 24.9%). Removing the impact of the adjusted items
provides a more comparable measure and, on this basis, the adjusted effective
tax rate is 24.5% (2022: 23.9%).
Retirement benefits
The Group operates two defined benefit pension schemes, the larger of which is
in the UK. Both the UK and US schemes are closed to future accrual. During the
period the Group made a special contribution of £20m to the Rotork Pension
and Life Assurance Scheme. This contribution, together with some of the
existing assets, were used to purchase a bulk annuity covering the UK scheme's
existing pensioner liabilities. This has been accounted for as a buy-in. The
pension scheme has moved from a deficit of £8.0m at 31 December 2022 to a
surplus of £9.3m at 30 June 2023, principally due to the special
contribution.
Currency
Overall, currency tailwinds increased revenue by £6.6m (2.3%) compared with
the first half of 2022. The average US dollar rate was $1.23 (H1 2022: $1.30)
and the average Euro rate was €1.14 (H1 2022: €1.19), whilst the rates at
30 June 2023 were $1.27 and €1.16 respectively (30 June 2022: $1.22 and
€1.16).
Dividend
The Board has declared an interim dividend of 2.55p (H1 2022: 2.40p) per
ordinary share. The interim dividend will be paid on 22 September 2023 to
shareholders on the register at the close of business on 18 August 2023.
Principal risks and uncertainties
The Group has an established risk management process as part of the corporate
governance framework set out in the 2022 Annual Report and Accounts. The
principal risks and uncertainties facing our businesses are monitored on an
ongoing basis in line with the Corporate Governance Code. The risk management
process is described in detail on pages 86 to 89 of the 2022 Annual Report and
Accounts. The Group's principal risks and uncertainties were reviewed by the
Board and the Board have concluded that they remain applicable for the second
half of the financial year. A more detailed description of the Group's
principal risks and uncertainties is set out on pages 90 to 97 of the 2022
Annual Report and Accounts.
Risk update
Whilst there has been no change in the principal risks and uncertainties under
review by the business since the risks disclosed in the 2022 Annual Report,
the following risk updates are noted:
· Geopolitical instability - remains at an elevated level with
potential knock-on impacts to other risks such as supply chain disruption. The
Group continues to monitor potential impacts and where possible put in place
mitigations to reduce the impact in those underlying risks.
· Supply chain disruption - remains as one of our key risks with
component shortages and constraints driving delays in specific areas. This is
a change to prior periods where the shortages and constraints were more
widespread. Management actions to secure the supply of key components have
mitigated potentially more severe outcomes.
· Cybersecurity - we are responding to the external threat of
increasingly sophisticated cyberattacks by investing in our cyber strategy.
· Various strategic initiatives continue to respond to our risks and in
the period the Group has seen positive engagement on People and Health &
Safety risks in particular.
Emerging risks
We continue to monitor and review emerging risks, which are those risks that
are hard to determine the severity. Risks under review include those in
relation to geo-political events, technological, social, environmental,
climate and sustainability risks.
Principal risks and uncertainties
1. Decline in market confidence: A decline in government and private sector
confidence and spending will lead to cancellations of expected projects or
delays to existing expenditure commitments. This lower investment in Rotork's
traditional market sectors would result in a smaller addressable market, which
in turn could lead to a reduction in revenue from that sector.
2. Increased competition: Increased competition on price, product or
technology offering leading to a loss of sales globally or market share.
3. Geopolitical instability: Increasing social and political instability
results in disruption and increased protectionism in key geographic markets.
Business disruption could impact our sales and might ultimately lead to loss
of assets located in the affected region.
4. Health & Safety: The nature of Rotork's core business and geographical
locations involves potential risks to the health and safety of our employees
or other stakeholders.
5. Compliance with laws and regulations: Failure of our staff or third parties
who we do business with to comply with law or regulation or to uphold our high
ethical standards and values.
6. Climate commitments: We do not deliver against our commitment to enable a
sustainable future and Rotork is not recognised by our stakeholders as being
part of the solution, leading to reputational damage.
7. People: Our people, epitomised through our Stronger Together value, are
critical to delivering our culture and plans. An inability to attract, retain
and develop key and diverse talent could mean we fail to successfully deliver
our strategic goals.
8. Major in-field product failure: Major in-field failure of a new or existing
Rotork product potentially leading to a product recall, major on-site warranty
programme or the loss of an existing or potential customer.
9. Supply chain disruption: Supply chain disruption which may arise such as a
tooling failure at a key supplier, logistics issue, severe weather events
impacting key suppliers which would cause disruption to manufacturing at a
Rotork factory.
10. Critical IT system failure and cybersecurity: Failure to provide, maintain
and update the systems and infrastructure required by the Rotork business.
Failure to protect Rotork operations, sensitive or commercial data, technical
specifications and financial information from cybercrime.
11. Business change management: The delivery of our strategic initiatives
relies upon our ability to deliver a series of key change programmes without
causing business disruption or having a negative impact to our day-to-day
operations.
Statement of Directors' Responsibilities
The directors confirm that, to the best of their knowledge, this condensed
consolidated interim financial information has been prepared in accordance
with IAS 34 as adopted by the United Kingdom, the interim financial statements
give a true and fair view of the consolidated assets, liabilities, financial
position and profit of the Company and its group companies taken as a whole;
and that the interim management report includes a fair review of the
information required by DTR 4.2.7R and DTR 4.2.8R, namely:
· An indication of important events that have occurred during the first
six months and their impact on the condensed set of financial statements, and
a description of the principal risks and uncertainties for the remaining six
months of the financial year; and
· Material related-party transactions in the first six months, and any
material changes in the related-party transactions described in the last
annual report.
These interim financial statements and the interim management report are the
responsibility of, and have been approved by, the directors. A list of the
current directors can be found in the "About Us" section of the Rotork
website: www.rotork.com (http://www.rotork.com) .
By order of the Board
Kiet Huynh
Chief Executive
7 August 2023
Independent Review Report to Rotork plc
Conclusion
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
June 2023 which comprises the condensed consolidated income statement, the
condensed consolidated statement of comprehensive income and expense, the
condensed consolidated balance sheet, the condensed consolidated statement of
changes in equity, the condensed consolidated cash flow statement and related
notes 1 to 17.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2023 is not prepared, in all
material respects, in accordance with United Kingdom adopted International
Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410 "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" issued by the Financial Reporting
Council for use in the United Kingdom (ISRE (UK) 2410). A review of interim
financial information consists of making inquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with United Kingdom adopted international accounting
standards. The condensed set of financial statements included in this
half-yearly financial report has been prepared in accordance with United
Kingdom adopted International Accounting Standard 34, "Interim Financial
Reporting".
Conclusion Relating to Going Concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for Conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This Conclusion is based on the review procedures performed in accordance with
this ISRE (UK) 2410; however future events or conditions may cause the entity
to cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
In preparing the half-yearly financial report, the directors are responsible
for assessing the group's ability to continue as a going concern, disclosing
as applicable, matters related to going concern and using the going concern
basis of accounting unless the directors either intend to liquidate the
company or to cease operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial information
In reviewing the half-yearly financial report, we are responsible for
expressing to the group a conclusion on the condensed set of financial
statements in the half-yearly financial report. Our Conclusion, including our
Conclusion Relating to Going Concern, are based on procedures that are less
extensive than audit procedures, as described in the Basis for Conclusion
paragraph of this report.
Use of our report
This report is made solely to the company in accordance with ISRE (UK) 2410.
Our work has been undertaken so that we might state to the company those
matters we are required to state to it in an independent review report and for
no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company, for our review work,
for this report, or for the conclusions we have formed.
Deloitte LLP
Statutory Auditor
London, United Kingdom
7 August 2023
Condensed consolidated Income Statement
First half
First half
Full year
2023
2022
2022
Notes
£000
£000
£000
Revenue
3
334,691
280,014
641,812
Cost of sales
(182,890)
(155,222)
(350,079)
Gross profit
151,801
124,792
291,733
Other income
929
374
1,620
Distribution costs
(2,922)
(2,939)
(6,197)
Administrative expenses
(90,265)
(78,160)
(163,177)
Other expenses
(144)
(39)
(372)
Operating profit
3
59,399
44,028
123,607
Finance income
5
3,235
1,791
3,049
Finance expense
6
(2,388)
(1,229)
(2,554)
Profit before tax
60,246
44,590
124,102
Income tax expense
7
(14,749)
(10,882)
(30,901)
Profit for the period
45,497
33,708
93,201
Attributable to:
Owners of the parent
45,687
33,741
93,243
Non-controlling interests
(190)
(33)
(42)
45,497
33,708
93,201
Basic earnings per share
9
5.3p
3.9p
10.9p
Diluted earnings per share
9
5.3p
3.9p
10.8p
Operating profit
Adjustments:
59,399
44,028
123,607
- Amortisation of acquired intangible assets
618
3,096
7,051
- Other adjustments
4
5,277
6,179
12,587
Adjusted operating profit
65,294
53,303
143,245
Adjusted basic earnings per share
2
5.8p
4.8p
12.7p
Adjusted diluted earnings per share
2
5.8p
4.8p
12.7p
Condensed consolidated Statement of Comprehensive Income and Expense
First half First half Full year
2023 2022 2022
£000 £000 £000
Profit for the period 45,497 33,708 93,201
Other comprehensive income and expense
Items that may be subsequently reclassified to the income statement:
Foreign currency translation differences (22,669) 19,676 21,928
Effective portion of changes in fair value of cash flow 1,250 (1,786) (1,627)
hedges net of tax
(21,419) 17,890 20,301
Items that are not subsequently reclassified to the income statement:
Actuarial (loss)/gain in pension scheme net of tax (5,340) 11,412 (4,932)
Income and expenses recognised directly in equity (26,759) 29,302 15,369
Total comprehensive income for the period 18,738 63,010 108,570
Attributable to:
Owners of the parent 18,861 63,043 108,561
Non-controlling interests (123) (33) 9
18,738 63,010 108,570
Condensed consolidated Balance Sheet
30 June 30 June 31 Dec
2023 2022 2022
Notes £000 £000 £000
Goodwill 219,292 224,575 228,005
Intangible assets 21,022 24,337 20,579
Property, plant and equipment 70,260 79,507 78,726
Derivative financial instruments - - 74
Deferred tax assets 15,277 10,428 15,965
Other receivables 9 41 -
Defined benefit scheme surplus 11 9,317 11,233 -
Total non-current assets 335,177 350,121 343,349
Inventories 10 91,088 90,521 92,306
Trade receivables 125,019 108,117 134,279
Current tax 8,272 10,255 7,877
Derivative financial instruments 16 913 288 62
Other receivables 43,924 40,281 39,112
Assets classified as held for sale - - 211
Cash and cash equivalents 105,307 100,382 114,770
Total current assets 374,523 349,844 388,617
Total assets 709,700 699,965 731,966
Issued equity capital 12 4,304 4,302 4,304
Share premium 20,267 19,266 19,959
Other reserves 10,917 29,909 32,269
Retained earnings 536,487 509,810 531,951
Equity attributable to owners of the parent 571,975 563,287 588,483
Non-controlling interests 1,167 1,382 1,424
Total equity 573,142 564,669 589,907
Interest bearing loans and borrowings 13 5,280 6,454 5,405
Employee benefits 11 3,994 4,064 11,955
Deferred tax liabilities 4,101 2,696 4,028
Derivative financial instruments 16 21 403 215
Provisions 1,331 1,524 1,439
Total non-current liabilities 14,727 15,141 23,042
Interest bearing loans and borrowings 13 2,254 3,505 3,431
Trade payables 42,605 41,332 42,314
Employee benefits 14,239 10,771 15,200
Current tax 12,684 14,071 11,893
Derivative financial instruments 16 616 1,024 2,729
Other payables 45,352 45,902 39,084
Provisions 4,081 3,550 4,366
Total current liabilities 121,831 120,155 119,017
Total liabilities 136,558 135,296 142,059
Total equity and liabilities 709,700 699,965 731,966
Condensed consolidated Statement of Changes in Equity
Issued equity Share Translation Capital Attributable to owners of the parent Non-controlling interest Total
capital premium reserve redemption Hedging reserve Retained earnings £000 £000 £000
£000 £000 £000 reserve £000 £000
£000
Balance at 31 December 2022 4,304 19,959 31,352 1,716 (799) 531,951 588,483 1,424 589,907
Profit for the period - - - - - 45,687 45,687 (190) 45,497
Other comprehensive (expense)/income
Foreign currency translation differences - - (22,602) - - - (22,602) (67) (22,669)
Effective portion of changes in fair value of cash flow hedges - - - - 1,634 - 1,634 - 1,634
Actuarial loss on defined benefit pension plans - - - - - (6,501) (6,501) - (6,501)
Tax in other comprehensive (expense)/income - - - - (384) 1,161 777 - 777
Total other comprehensive (expense)/income - - (22,602) - 1,250 (5,340) (26,692) (67) (26,759)
Total comprehensive income - - (22,602) - 1,250 40,347 18,995 (257) 18,738
Transactions with owners, recorded directly in equity
Equity settled share-based payment transactions - - - - - (763) (763) - (763)
Tax on equity settled share-based payment transactions - - - - - 191 191 - 191
Shares issued to satisfy employee awards - 308 - - - - 308 - 308
Own ordinary shares acquired - - - - - (1,694) (1,694) - (1,694)
Own ordinary shares awarded under share schemes - - - - - 3,381 3,381 - 3,381
Dividends - - - - - (36,926) (36,926) - (36,926)
Balance at 30 June 2023 4,304 20,267 8,750 1,716 451 536,487 571,975 1,167 573,142
Issued equity Share Translation Capital Attributable to owners of the parent Non-controlling interest Total
capital premium reserve redemption Hedging reserve Retained earnings £000 £000 £000
£000 £000 £000 reserve £000 £000
£000
Balance at 31 December 2021 4,302 18,828 9,475 1,716 828 498,931 534,080 - 534,080
Profit for the period - - - - - 33,741 33,741 (33) 33,708
Other comprehensive (expense)/income
Foreign currency translation differences - - 19,676 - - - 19,676 - 19,676
Effective portion of changes in fair value of cash flow hedges - - - - (2,205) - (2,205) - (2,205)
Actuarial gain on defined benefit - - - - - 15,500 15,500 - 15,500
pension plans
Tax in other comprehensive (expense)/income - - - - 419 (4,088) (3,669) - (3,669)
Total other comprehensive (expense)/income - - 19,676 - (1,786) 11,412 29,302 - 29,302
Total comprehensive income - - 19,676 - (1,786) 45,153 63,043 (33) 63,010
Non-controlling interest on newly-established subsidiary - - - - - - - 1,415 1,415
Transactions with owners, recorded directly in equity
Equity settled share-based payment transactions - - - - - (869) (869) - (869)
Tax on equity settled share-based payment transactions - - - - - 164 164 - 164
Shares issued to satisfy employee awards - 438 - - - - 438 - 438
Own ordinary shares acquired - - - - - (1,600) (1,600) - (1,600)
Own ordinary shares awarded under share schemes - - - - - 2,818 2,818 - 2,818
Dividends - - - - - (34,787) (34,787) - (34,787)
Balance at 30 June 2022 4,302 19,266 29,151 1,716 (958) 509,810 563,287 1,382 564,669
Condensed consolidated Statement of Cash Flows
First half First half Full year
2023 2022 2022
Notes £000 £000 £000
Cash flows from operating activities
Profit for the period 45,497 33,708 93,201
Adjustments for: 7,051
Amortisation of acquired intangible assets 618 3,104
Other adjustments 4 5,277 6,179 12,587
Amortisation and impairment of other intangible assets 1,082 741 1,436
Depreciation 6,169 7,426 14,933
Equity settled share-based payment expense 3,125 2,118 4,601
Net profit on sale of property, plant and equipment (582) (60) (159)
Finance income (3,235) (1,791) (3,049)
Finance expense 2,388 1,229 2,554
Income tax expense 14,749 10,882 30,901
75,088 63,536 164,056
(Increase) in inventories (2,962) (16,852) (19,479)
(Increase) in trade and other receivables (2,551) (9,439) (32,591)
Increase/(decrease) in trade and other payables 7,621 2,514 (2,902)
Cash impact of other adjustments (4,662) (5,030) (12,056)
Difference between pension charge and cash contribution (23,490) (3,474) (6,979)
(Decrease)/increase in provisions (498) 341 (383)
(Decrease)/increase in employee benefits (685) (3,823) 67
Operating cash flow 47,861 27,773 89,733
Income taxes paid (12,758) (12,053) (30,221)
Net cash flows from operating activities 35,103 15,720 59,512
Investing activities
Purchase of property, plant and equipment (3,435) (3,887) (8,291)
Purchase of intangible assets (140) (1,041) (2,066)
Development costs capitalised (889) (1,327) (2,541)
Sale of property, plant and equipment 1,306 4,097 4,629
Settlement of hedging derivatives 886 (474) 9
Interest received 1,936 499 751
Net cash flows from investing activities (336) (2,133) (7,509)
Financing activities
Issue of ordinary share capital 308 438 1,133
Own ordinary shares acquired (1,694) (1,600) (3,475)
Interest paid (283) (440) (817)
Decrease in bank loans - (686) (694)
Repayment of lease liabilities (1,661) (2,536) (3,966)
Dividends paid on ordinary shares (36,926) (34,787) (55,384)
Receipt for non-controlling interest - 1,415 1,415
Net cash flows from financing activities (40,256) (38,196) (61,788)
Net decrease in cash and cash equivalents (5,489) (24,609) (9,785)
Cash and cash equivalents at 1 January 114,770 123,474 123,474
Effect of exchange rate fluctuations on cash held (3,974) 1,518 1,081
Cash and cash equivalents at end of period 105,307 100,383 114,770
Notes to the Half Year Report
1. Status of condensed consolidated interim statements,
accounting policies and basis of significant estimates
General information
Rotork plc is a company domiciled in England and Wales. The Company has its
premium listing on the London Stock Exchange.
The condensed consolidated interim financial statements for the six months
ended 30 June 2023 are unaudited and the auditor has reported in accordance
with International Standard on Review Engagements (UK and Ireland) 2410,
'Review of Interim Financial Information Performed by the Independent Auditor
of the Entity'.
The information shown for the year ended 31 December 2022 does not constitute
statutory accounts within the meaning of Section 435 of the Companies Act
2006. Statutory accounts for the year ended 31 December 2022 were approved by
the Board on 27 February 2023 and delivered to the Registrar of Companies. The
auditor's report on those financial statements was unqualified, did not
contain an emphasis of matter paragraph and did not contain any statement
under Section 498 (2) or (3) of the Companies Act 2006. The consolidated
financial statements of the Group for the year ended 31 December 2022 are
available from the Company's registered office or website.
Basis of preparation
The condensed consolidated interim financial statements of the Company for the
six months ended 30 June 2023 comprise the results for the Company and its
subsidiaries (together referred to as 'the Group'). These condensed
consolidated interim financial statements have been prepared in accordance
with the Disclosure and Transparency Rules of the Financial Services Authority
and with International Accounting Standard 34, 'Interim Financial Reporting'
as adopted by the United Kingdom. They do not include all of the information
required for full annual financial statements and should be read in
conjunction with the consolidated financial statements of the Group for the
year ended 31 December 2022, 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 (IFRSs)
adopted by the United Kingdom.
Going concern
The directors are satisfied that the Group has sufficient resources to
continue in operation for the foreseeable future, a period of not less than 12
months from the date of this report. Accordingly, we continue to adopt the
going concern basis in preparing the condensed consolidated interim financial
information.
In forming this view, the macroeconomic conditions, the impact of supply chain
disruption and geo-political instability on the Group has been considered. The
directors have reviewed: the current financial position of the Group, which
has net cash of £97.8m and unused overdraft facilities of £24m 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 are satisfied that the Group has
adequate resources to continue operating as a going concern for the
foreseeable future, and that no material uncertainties exist with respect to
this assessment. 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.
Critical accounting estimates and judgements
The Group makes estimates and assumptions regarding the future. Estimates and
judgements are continually evaluated based on historical experience and other
factors, including expectations of future events, that are believed to be
reasonable under the circumstances.
In the future, actual experience may deviate from these estimates and
assumptions. The estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying amounts of assets and
liabilities within the current financial year are discussed in the financial
statements for the year ended 31 December 2022.
Accounting policies
The accounting policies applied and significant estimates used by the Group in
these condensed consolidated interim financial statements are the same as
those applied by the Group in its consolidated financial statements for the
year ended 31 December 2022, except for the adoption of new standards
effective as of 1 January 2023. The Group has not early adopted any other
standard, interpretation or amendment that has been issued but is not yet
effective.
Non-controlling interests
Non-controlling interests in subsidiaries are identified separately from the
Group's equity therein. The interest of non-controlling shareholders is
initially measured at the non-controlling interests' proportion of the share
of the fair value of the acquiree's identifiable net assets. Subsequent to
acquisition, the carrying amount of non-controlling interests is the amount of
those interests at initial recognition plus the non-controlling interests'
share of subsequent changes in equity. Total comprehensive income is
attributed to non-controlling interests even if this results in the
non-controlling interests having a deficit balance.
New accounting standards and interpretations
Other 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
There are no further narrow scope amendments which have been issued where the
application of the amendments would have a material impact on the disclosures,
net assets or results of the Group.
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
provide stakeholders with additional useful information to facilitate greater
comparison of the Group's underlying results with prior periods and assessment
of trends in financial performance.
The Group believes alternative performance measures, which are not considered
to be a substitute for, or superior to, IFRS measures, provide stakeholders
with additional helpful information on the performance of the business. These
alternative performance measures are consistent with how the business
performance is planned and reported within the internal management reporting
to the Board. Some of these measures are also used for the purpose of setting
remuneration targets.
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
reported 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 as defined
below. 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 as a footnote to the
income statement to provide greater clarity and an enhanced 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 including any associated 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 considered to be significant due
to their nature or the expected infrequency of the events giving rise to them.
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.
First half First half Full year
2023 2022 2022
£000 £000 £000
Profit before tax 45,497 44,590 124,102
Adjustments:
Amortisation of acquired intangible assets 618 3,096 7,051
Gain on disposal of property (723) (1,209) (1,208)
Business transformation costs 5,925 3,549 8,868
Redundancy and other restructuring costs 75 283 1,372
Russia market exit - 3,555 3,555
Adjusted profit before tax 51,392 53,864 143,740
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.
Adjusted net profit attributable to ordinary shareholders is calculated as
follows:
First half First half Full year
2022
2023 2022
£000 £000 £000
Net profit attributable to ordinary shareholders 45,497 33,708 93,201
Adjustments:
Amortisation of acquired intangible assets 618 3,096 7,051
Gain on disposal of property (723) (1,209) (1,208)
Business transformation costs 5,925 3,549 8,868
Redundancy and other restructuring costs 75 283 1,372
Russia market exit - 3,555 3,555
Tax effect on adjusted items (1,488) (2,000) (3,440)
Adjusted net profit attributable to ordinary shareholders 49,904 40,982 109,399
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 9).
d. Return on capital employed
The return on capital employed ratio is used by management to help ensure that
capital is used efficiently.
First half First half Full year
2023 2022 2022
£000 £000 £000
Adjusted operating profit
As reported - - 143,245
Rolling 12 months 155,236 118,648 -
Capital employed
Shareholders' funds 573,142 564,669 589,907
Cash and cash equivalents (105,307) (100,382) (114,770)
Interest bearing loans and borrowings 7,534 9,959 8,836
Pension (surplus)/deficit net of deferred tax (7,254) (8,747) 6,065
Capital Employed 468,115 465,499 490,038
Average capital employed 474,551(1) 439,122(1) 458,002(2)
Return on capital employed 32.7% 27.0% 31.3%
(1) defined as the average of the capital employed at June 2022, December 2022
and June 2023 (2022: June 2021, December 2021, and June 2022).
(2) defined as the average of the capital employed at December 2021 and
December 2022.
e. 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.
f. 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
2023 half year results are restated using the average exchange rates applied
for the 2022 comparative period.
For businesses acquired, the full results are removed from the year of
acquisition. In the following year, the results for the number of months
equivalent to the pre-acquisition period in the prior year are removed. For
disposals and closure of businesses, the results are removed from the current
and prior periods.
There are no acquisitions or disposals in the current and prior periods.
Key headings in the income statement are reconciled to OCC as follows:
First half OCC First half
2023 Currency adjustment First half 2022
2023
Revenue 334,691 (6,561) 328,130 280,014
Cost of sales (182,890) 4,232 (178,658) (155,222)
Gross margin 151,801 (2,329) 149,472 124,792
Net overheads (86,507) 1,129 (85,378) (71,489)
Adjusted operating profit 65,294 (1,200) 64,094 53,303
Adjusted operating margin 19.5% 19.5% 19.0%
Adjusted profit before tax 66,141 (1,200) 64,941 53,865
Adjusted basic earnings per share 5.8p - 5.7p 4.8p
g. Cash conversion
Cash conversion is calculated as adjusted operating cash flow as a percentage
of adjusted operating profit. It is monitored to illustrate how efficiently
adjusted operating profits are converted into cash. Adjusted operating cash
flow is calculated as follows:
First half 2023 First half 2022 Full year 2022
£000 £000 £000
Adjusted operating cash flow
Operating cash flow 47,861 27,773 89,733
Operating cash flow impact of other adjustments 4,662 5,030 12,056
Difference between pension charge and cash contribution 23,490 3,474 6,979
Adjusted operating cash flow 76,013 36,277 108,768
Adjusted operating profit 65,294 53,303 143,245
Cash conversion 116% 68% 76%
3. Analysis by operating segment
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
· Chemical, Process & Industrial
· Water & Power
Unallocated expenses comprise corporate expenses.
Half year to 30 June 2023
Oil & Gas Chemical, Process & Industrial Water & Power Unallocated Group
£000 £000 £000 £000 £000
Revenue 146,138 110,406 78,147 - 334,691
Adjusted operating profit 31,328 25,010 17,041 (8,085) 65,294
Amortisation of acquired intangibles assets (444) (123) (51) - (618)
Segment result before other adjustments 30,884 24,887 16,990 (8,085) 64,676
Other adjustments (5,277)
Operating profit 59,399
Net financing income 847
Income tax expense (14,749)
Profit for the period 45,497
Half year to 30 June 2022
Oil & Gas Chemical, Process & Industrial Water & Power Unallocated Group
£000 l£000 £000 £000 £000
Revenue 122,287 92,813 64,914 - 280,014
Adjusted operating profit 23,560 22,730 13,405 (6,392) 53,303
Amortisation of acquired intangibles assets (2,195) (613) (288) - (3,096)
Segment result before other adjustments 21,365 22,117 13,117 (6,392) 50,207
Other adjustments (6,179)
Operating profit 44,028
Net financing income 562
Income tax expense (10,882)
Profit for the period 33,708
Full year to 31 December 2022
Oil & Gas Chemical, Process & Industrial Water & Power Unallocated Group
£000 £000 £000 £000 £000
Revenue 283,266 198,355 160,191 - 641,812
Adjusted operating profit 63,960 51,206 40,293 (12,214) 143,245
Amortisation of acquired intangibles assets (5,063) (1,410) (578) - (7,051)
Segment result 58,897 49,796 39,715 (12,214) 136,194
Other adjustments (12,587)
Operating profit 123,607
Net financing income 495
Income tax expense (30,901)
Profit for the year 93,201
Revenue by location of subsidiary
First half First half Full year
2023 2022 2022
£000 £000 £000
UK 34,501 25,120 55,146
Italy 34,073 23,855 52,997
Rest of Europe 47,911 44,750 96,627
USA 72,808 54,861 129,499
Other Americas 24,770 17,890 44,161
China 50,522 54,527 120,188
Rest of World 70,106 59,011 143,194
334,691 280,014 641,812
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 reported profit are as follows:
First half First half Full year
2023 2022 2022
£000 £000 £000
Gain on disposal of properties 723 1,209 1,208
Redundancy and other restructuring costs (75) (284) (1,372)
Business transformation costs (5,925) (3,549) (8,868)
Russia market exit - (3,555) (3,555)
(5,277) (6,179) (12,587)
The £723,000 (2022: £1,209,000) gain on disposal of properties relates to
the sale of two properties (2022: one property) in the period which were
exited as part of the Growth Acceleration Programme, footprint optimisation.
During the period £5.9m of costs were incurred on business transformation.
The multi-year transformation includes the implementing and integrating of
common systems and processes throughout the Group, including a new cloud-based
ERP system. This brings the total expensed under the programme to £37.7m.
These costs were expensed as they do not meet the capitalisation criteria
under IAS38.
The new ERP system launched at the Bath, UK factory in Q1 2023 and is due to
go live at the Head Office site in Q3 2023. The next phase of the programme is
the implementation of the new ERP system and integration of common business
processes across the other Group entities. It is estimated that a further
£50m to £55m will be incurred over the next 3 - 4 years to complete the
implementation. These costs will continue to be reported in adjusted items.
All adjustments are included in administrative expenses. The adjustments are
taxable or tax deductible in the country in which the expense is incurred.
5. Finance income
First half First half Full year
2023 2022 2022
£000 £000 £000
Interest income 2,163 592 1,235
Foreign exchange gains 1,072 1,199 1,814
Finance Income 3,235 1,791 3,049
6. Finance expense
First half First half Full year
2023 2022 2022
£000 £000 £000
Interest expense 386 370 744
Interest expense on lease liabilities 191 197 406
Interest charge on pension scheme liabilities 102 17 110
Foreign exchange losses 1,709 645 1,294
Finance Expense 2,388 1,229 2,554
7. Income taxes
Income tax expense is recognised based on management's best estimate of the
weighted average annual income tax rate expected for the full financial year.
The estimated effective tax rate used for the year ending 31 December 2023 is
24.5% (2022 actual: 24.9%).
The estimated adjusted effective tax rate for the year ending 31 December
2023, based on the adjusted profit before tax, is 24.5% (2022: 23.9%). The
adjusted effective tax rate has increased from 23.9% in 2022 to an estimated
24.5% principally because of the increase in the blended UK corporation tax
rate from 19% in 2022 to 23.5% in 2023.
The Group continues to operate in many jurisdictions where local profits are
taxed at their national statutory rates. As a result, the Group income tax
charge will be subject to fluctuation depending on the actual profit mix. The
Group continues to expect its effective tax rate to be higher than the blended
UK corporation tax rate of 23.5% due to higher tax rates in overseas
subsidiaries.
8. Dividends
First half First half Full year
2023 2022 2022
£000 £000 £000
The following dividends were paid in the period per
qualifying ordinary share:
4.30p final dividend (2022: 4.05p) 36,926 34,787 34,787
2.40p interim dividend - - 20,597
36,926 34,787 55,384
The following dividends per qualifying ordinary share were
declared/proposed after the balance sheet date:
4.30p final dividend proposed - - 37,013
2.55p interim dividend declared (2022: 2.40p) 21,906 20,613 -
21,906 20,613 34,780
9. Earnings per share
Earnings per share is calculated using the profit attributable to the ordinary
shareholders for the period and 859.0m shares (six months to 30 June 2022:
858.9m; year to 31 December 2022: 858.9m) being the weighted average ordinary
shares in issue.
Diluted earnings per share is based on the profit for the year attributable to
the ordinary shareholders and 862.3m shares (six months to 30 June 2022:
859.7m; year to 31 December 2022: 860.6m). 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.
10. Inventories
30 June 30 June 31 Dec 2022
2023 2022 £000
£000 £000
Raw materials and consumables 71,443 69,810 72,182
Work in progress 5,408 5,551 5,091
Finished goods 14,237 15,160 15,033
91,088 90,521 92,306
11. Defined benefit pension schemes
The defined benefit asset at 30 June 2023 of £9,317,000 (30 June 2022: asset
of £11,233,000 included within defined benefit asset; 31 December 2022:
liability of £8,006,000 included within employee benefits) is estimated based
on the latest full actuarial valuations at 31 March 2022 for UK and US plans.
The valuation of the most significant plan, namely the Rotork Pension and Life
Assurance Scheme in the UK, has been updated at 30 June 2023 by independent
actuaries to reflect updated assumptions regarding discount rates, inflation
rates and asset values.
30 June 30 June 31 Dec 2022
2023 2022 %
% %
Discount rate 5.2 3.8 4.8
Rate of inflation 3.2 3.0 3.1
The Group made a special contribution of £20m to the Rotork Pension and Life
Assurance Scheme in May 2023. In June 2023 the scheme used this contribution
and some existing assets to purchase a bulk annuity covering the UK scheme's
existing pensioner liabilities. This has been accounted for as a buy-in as it
is an investment decision to reduce risk of the scheme. The deferred member
pension liabilities remain outstanding under the scheme. In addition, the
defined benefit plan assets and liabilities have been updated to reflect the
£3.4 million regular contributions made.
12. Share capital and reserves
The number of ordinary 0.5p shares in issue at 30 June 2023 was 860,899,000
(30 June 2022: 860,467,000; 31 December 2022: 860,771,000). All issued shares
are fully paid.
The Group acquired 387,000 of its own shares during the period (30 June 2022:
482,000; 31 December 2022: 1,124,000). The total amount paid to acquire the
shares was £1,694,000 (30 June 2022: £1,600,000; 31 December 2022:
£3,475,000), and this has been deducted from shareholders' equity. At 30 June
2023 the number of shares held in trust for the benefit of directors and
employees for future payments under the Share Incentive Plan and Long-term
incentive plan was 1,325,000 (30 June 2022: 1,177,000; 31 December 2022:
1,831,000). In the period 1,036,000 shares were released to satisfy share plan
awards.
In respect of the SAYE scheme, options exercised during the period to 30 June
2023 resulted in 127,000 ordinary 0.5p shares being issued (30 June 2022:
190,000 shares), with exercise proceeds of £308,000 (30 June 2022:
£438,000). The weighted average market share price at the time of exercise
was £3.26 (30 June 2022: £3.13) per share.
The share-based payment charge for the period was £3,125,000 (30 June 2022:
£2,178,000; 31 December 2022: £4,601,000).
13. Loans and borrowings
The following loans and borrowings were issued and repaid during the six
months ended 30 June 2023:
Lease liabilities Preference shares Total
£000 £000 £000
Balance at 31 December 2022 8,796 40 8,836
Additions/drawdowns 807 - 807
Repayment (1,661) - (1,661)
Disposals (127) - (127)
Exchange differences (321) - (321)
Balance at 30 June 2023 7,494 40 7,534
Lease liabilities Preference shares Total
£000 £000 £000
Current 2,254 - 2,254
Non-current 5,240 40 5,280
Balance at 30 June 2023 7,494 40 7,534
14. Share-based payments
A grant of share options was made on 24 March 2023 to selected members of
senior management at the discretion of the Remuneration Committee. The key
information and assumptions from this grant were:
Equity Settled
TSR condition EPS condition ROIC condition Emissions condition
Grant date 24 March 2023 24 March 2023 24 March 2023 24 March 2023
Share price at grant date £3.07 £3.07 £3.07 £3.07
Shares awarded under scheme 462,945 462,945 462,945 154,313
Vesting period 3 years 3 years 3 years 3 years
Expected volatility 28.4% N/A N/A N/A
Risk free rate 3.3% N/A N/A N/A
Expected dividends expressed as a dividend yield nil nil nil nil
Probability of ceasing employment before vesting 5% p.a. 5% p.a. 5% p.a. 5% p.a.
Fair value £1.89 £3.05 £3.05 £3.05
The basis of measuring fair value is consistent with that disclosed in the
2022 Annual Report & Accounts.
15. Related parties
The Group has a related party relationship with its subsidiaries and with its
directors and key management. A list of subsidiaries is shown in the 2022
Annual Report and Accounts. Transactions between key subsidiaries for the sale
and purchase of products or between the subsidiary and parent for management
charges are priced on an arm's length basis.
There were no significant changes in the nature and size of related party
transactions for the period to those reported in the 2022 Annual Report and
Accounts.
16. Financial instruments fair value disclosure
The Group held forward currency contracts designated as hedge instruments in a
cash flow hedging relationship. At 30 June 2023 the fair value of these
contracts was a net asset of £276,000 (30 June 2022: a net liability of
£1,139,000; 31 December 2022: a net liability of £2,808,000). The fair value
was estimated using period end spot rates adjusted for the forward points to
the appropriate value dates, and gains and losses are taken to equity
estimated using market foreign exchange rates at the balance sheet date. All
derivative financial instruments are categorised at Level 2 of the fair value
hierarchy. There was no ineffectiveness to be recorded from the use of foreign
exchange contracts.
The other financial instruments, comprising trade and other
receivables/payables and contingent consideration, are classified as Level 3
in the fair value hierarchy and their carrying amount is deemed to reflect the
fair value. The Group had no derivative financial instruments in the current
or previous year with fair values that would be classified as Level 3 in the
fair value hierarchy.
17. Post balance sheet events
On 4 August 2023 Rotork acquired 100% of the equity interest in Hanbay Inc,
who are headquartered in Montreal, Canada. The acquisition expands Rotork's
electric actuator offering and is fully consistent with all three pillars of
the Growth+ strategy and increases the percentage sales contribution of our
Eco-transition portfolio.
Due to the proximity of the completion date of the acquisition and the issuing
of the condensed consolidated interim financial statements, the initial
accounting for the business combination is incomplete. Further information
will be provided in the consolidated financial statements of the Group for the
year ended 31 December 2023.
Shareholder information
The interim report and half year results presentation is available on the
Rotork website at www.rotork.com (http://www.rotork.com) .
General shareholder contact numbers:
Shareholder General Enquiry Number (UK): 0371 384 2280
International Shareholders - General Enquiries: (00) 44 121 415 7047
For enquires regarding the Dividend Reinvestment Plan (DRIP) contact:
The Share Dividend Team
Equiniti
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
Tel: 0371 384 2280
Group information
Secretary and registered office:
Stuart Pain
Rotork plc
Rotork House
Brassmill Lane
Bath
BA1 3JQ
Company website:
www.rotork.com (http://www.rotork.com)
Investors section:
http://www.rotork.com/en/investors/ (http://www.rotork.com/en/investors/)
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