TIDMROR
RNS Number : 2165R
Rotork PLC
28 February 2023
Tuesday 28(th) February 2023
Rotork plc
2022 Preliminary Results
Strong growth, expecting a year of further progress
OCC(3)
Adjusted highlights 2022 2021 % change % change
----------------------------- ---------- ---------- --------- ----------
Order intake(1) GBP681.6m GBP614.1m +11.0% +6.8%
Revenue GBP641.8m GBP569.2m +12.8% +8.4%
Adjusted (2) operating
profit GBP143.2m GBP128.1m +11.8% +6.2%
Adjusted (2) operating
margin 22.3% 22.5% -20bps -40bps
Adjusted (2) basic earnings
per share 12.7p 11.3p +13.2% +7.5%
Cash conversion (4) 76% 108% - -
--------- ----------
Reported highlights 2022 2021 % change
----------------------------- ---------- ---------- ---------
Revenue GBP641.8m GBP569.2m +12.8%
Operating profit GBP123.6m GBP105.7m +16.9%
Operating margin 19.3% 18.6% +70bps
Profit before tax GBP124.1m GBP105.9m +17.2%
Basic earnings per share 10.9p 9.2p +17.6%
Full year dividend 6.70p 6.40p +4.7%
----------------------------- ---------- ---------- ---------
Summary
-- Group order intake increased 11.0% year-on-year with selling
prices and volumes higher. Fourth quarter orders rose high
single-digits year-on-year on an OCC basis
-- Successful supply chain improvement measures reduced disruption through the year
-- Revenue increased 12.8%, benefiting from the second half's strong recovery in deliveries
-- Adjusted operating margins recovered strongly in the second
half and full year margins were 20bps lower at 22.3%. The reported
operating margin was 19.3%
-- Price and volume successfully offset cost inflation and partially funded investments
-- We launched our Growth+ strategy which is designed to deliver
our ambition of mid to high single-digit revenue growth and mid 20s
adjusted operating profit margins over time
-- Closing net cash GBP105.9m (December 2021: GBP114.1m). ROCE(4) 31.3% (up 120bps)
Kiet Huynh, Chief Executive, commenting on the results,
said:
"I am pleased to report a resumption of organic sales growth and
a strong second half performance as expected. This was particularly
encouraging given 2022's highly challenging backdrop which included
significant supply chain disruption and a resurgence in
inflation.
The outlook for our end markets is positive and we entered the
year with a record opening order book. Our new Growth+ strategy has
momentum and we are already seeing early benefits from our focus on
our strategy pillars of Target Segments, Customer Value and
Innovative Products & Services. Whilst mindful of the uncertain
economic outlook, we expect a year of further progress in
2023."
(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
2021 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 statutory 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 8.30am 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/63cec7fd4aa86d1500117bdd/kwge
. Please join the webcast a few minutes before 8.30am 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 clean 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 eliminating energy sector methane emissions.
Business performance
Group order intake increased 11.0% year-on-year (6.8% on an
organic constant currency or OCC basis) to GBP681.6m. OCC order
growth resumed in the fourth quarter with orders having fallen
modestly in the third quarter reflecting the strength of the prior
year period. All three divisions booked higher orders for the full
year, with Chemical, Process & Industrial ('CPI') and Oil &
Gas strongly ahead. Our customers continue to spend on automation
and environmental projects as well as maintenance and upgrade
activities.
In response to the component cost inflation experienced during
the year we raised prices twice in 2022. We are all too aware of
the challenge of out-of-cycle price rises to customers and the
increases implemented were carefully designed to cover the higher
costs we experienced.
Our operational teams performed well in what continued to be a
difficult period, especially in the first half. As we reported on
29 April 2022, our important Shanghai facility was closed in
mid-April in accordance with local COVID-19 lockdown rules. The
facility resumed full production in June and made excellent
progress delivering delayed shipments to customers. Towards the end
of the first half we started to see the benefit of the supply chain
improvement measures we had implemented over the prior twelve
months. These initiatives included direct purchasing and forward
buying of semiconductors, re-certification and re-engineering of
products, securing of contracted logistics routes and tactical
inventory build.
Group revenue was 12.8% higher year-on-year (8.4% higher OCC),
benefiting from higher price realisation and as expected a strong
recovery in deliveries in the second half. Oil & Gas sales rose
8.9% (4.9% OCC), driven by a strong recovery in the Americas and
the upstream and increased methane emissions reduction activity.
CPI sales were 23.6% ahead (19.6% OCC), with Asia Pacific strong
but all major geographic regions growing. Water & Power sales
were up 7.8% (2.4% OCC), with good growth in the water segment
offset by a decline in power.
By geography, Asia Pacific revenues by destination grew
mid-single digits year-on-year on an OCC basis driven by a strong
CPI performance. Europe, Middle East & Africa ('EMEA') sales
grew mid-single digits (OCC), despite our exit from Russia, a high
single-digits headwind for the region. Americas revenues were high
teens ahead (OCC) driven by Oil & Gas but with all divisions
contributing to growth in the region.
Rotork Site Services, our global service network and a key
differentiator in our industry, performed well with revenues
growing faster than the group overall. Our Lifetime Management and
Reliability Services programmes have good momentum, as does our
Intelligent Asset Management predictive analytics system. Rotork
Site Services is managed as a separate unit within our divisions
and contributed 21% of Group sales (2021: 21%).
Adjusted operating profit was 11.8% higher year-on-year (6.2%
higher OCC) at GBP143.2m, reflecting higher volumes, price
increases and higher component costs, particularly in respect of
chipsets. Adjusted operating margins recovered strongly in the
second half although not sufficiently to fully offset the first
half margin decline and initial Growth+ related investment. The
latter included headcount, travel and marketing. Full year margins
were 20bps lower at 22.3% and statutory profit before tax was
GBP124.1m.
Our Eco-transition portfolio of products and services that have
particular environmental or sustainability benefits, or which
enable the energy transition and decarbonisation, consists of three
sub-portfolios: 'water & waste water'; 'methane emissions
reduction' and 'new energies & technologies'. Water & waste
water and methane emissions reduction sales grew faster than the
group year-on-year in 2022, however new energies & technologies
sales fell due to the non-repeat of waste-to-energy projects
completed in 2021. Overall, Eco-transition sales grew 10.0%
year-on-year in 2022.
Return on capital employed was 31.3% (2021: 30.1%), benefiting
from a greater increase in adjusted operating profit than the
increase in capital employed. Cash conversion was 76% (2021: 108%)
with the reduction expected and in large part due to the delivery
acceleration in the final months of the period. Our balance sheet
remains strong, with a net cash position of GBP105.9m at the period
end.
Market update
The events in Ukraine have necessitated a reconsideration of
energy security risks globally. A major change in approach is
underway, with countries looking to reduce their dependence on
energy imported from unpredictable countries (such as, but not
only, Russia). The events may have caused the shift to renewable
energies to accelerate but they have also strengthened the activity
in traditional energy as additional investment is required to
facilitate a secure energy transition. One area expected to see
significant investment is liquified natural gas (LNG) which was
already seen as an essential transition fuel but now also as a
means of helping provide energy security.
An important example of an initiative to drive investment into
the energy sector is the United States' Inflation Reduction Act.
This promotes amongst other things investments targeting the
reduction of methane emissions in the energy sector as well as
investment in hydrogen production and carbon capture, utilisation
and storage ('CCUS'). Rotork is well placed to benefit from
investment in these areas.
The outlook for the water and waste water sector remains
positive with increasing investment in new and existing
infrastructure. The sector is focused on delivering water
availability, improving water quality and reducing leakage.
Automation and digitalisation in this sector are important mega
trends benefiting Rotork. The Inflation Reduction Act includes
significant funding for water quality.
The lifting of China's COVID-19 restrictions and the reopening
of the country's economy has the potential to boost activity in
this important region and is expected to be positive for global
economic growth.
Growth+ strategy launch
In November we presented our new Growth+ strategy at our Capital
Markets Event held in London. The starting point of Growth+ is our
Purpose, 'keeping the world flowing for future generations'. Our
Purpose is unchanged. It 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 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 profits
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' initiative. It
builds on the great work completed under the Growth Acceleration
Programme which has embedded strong foundations into the business
and moves us on to the next leg of our journey.
To facilitate the delivery of Growth+ we have revisited certain
aspects of our organisational structure. Our revised structure aims
to foster increased collaboration, whilst eliminating complexity
and driving efficiencies.
Operational responsibility for our manufacturing facilities is
now managed by the divisional teams whilst a centralised operations
excellence team manages quality, supply chain and health and
safety. We have also created a new senior role, Business
Transformation Director. This Director is responsible for executing
the change programmes within the Growth+ strategy and further
developing our end-to-end business processes. Additionally, we have
recruited a Chief Technology Officer to deliver our new product
development and manage and co-ordinate our approach to
innovation.
We have already seen early benefits from our focus on target
segments. In methane emissions reduction we have made encouraging
early progress with our solutions positively received by the
market. We are also making good progress in carbon capture, usage
& storage with Rotork products selected for the world's first
open-source CO2 transport and storage infrastructure in Norway. In
wastewater treatment, another target segment, we have had success
winning plant modernisation and improvement projects across the
world.
We are also making good progress on our Customer Value
initiative, which is about putting the customer at the forefront of
everything we do. One example is our 'Achieving Customer
Excellence' ('ACE') pilot. Through ACE we have reduced product lead
times to two weeks (from 16 weeks previously) at two European
plants. We plan to roll-out ACE to other plants over the next
several years.
During 2022 significant engineering resource was allocated to
re-engineering and re-certifying product ranges impacted by reduced
semi-conductor activity. Alongside this essential work we continued
to innovate and develop new products and solutions aligned with our
chosen target segments and key drivers automation, electrification
and digitalisation. During the period we launched five new products
as well as important enhancements to Intelligent Asset Management
('iAM'), our condition monitoring and analytics software.
Environmental performance
Sustainability is a major focus for everyone at Rotork. Whilst
the impact we have enabling our customers to improve their
environmental performance likely far exceeds our own environmental
footprint, the latter is no less important. We emitted 11.3 tCO2e
per GBP1m of revenue based on location-based calculations which is
a reduction compared to 2021 of 21%.
Following the announcement of our Net Zero targets a year ago,
we were pleased to receive approval from the Science Based Targets
initiative for our near-term greenhouse gas ('GHG') emission
targets. Rotork was one of the first UK-based companies in our
sector to receive approval for near-term 1.5(o) C aligned targets.
Underlining the importance that we attach to achieving our Net Zero
targets, we are proposing the inclusion of scopes 1 and 2
greenhouse gas reduction targets into our senior team's long-term
remuneration opportunity starting 2023.
Our validated near-term targets are:
-- to reduce our absolute scope 1 and 2 GHG emissions 42% by 2030 from a 2020 base year
-- to reduce our absolute scope 3 GHG emissions from use of sold
products 25% by 2030 from a 2020 base year
-- that 25% of our suppliers by emissions covering purchased
goods and services will have science-based targets by 2027
We are targeting Net Zero by 2035 for scopes 1 and 2 and by 2045
for scope 3.
We made further progress in implementing the recommendations of
the Task Force on Climate-related Financial Disclosures ('TCFD'),
including our work to quantify the potential impacts of climate
risks and opportunities.
Whilst the Rotork team derives great motivation through its
Purpose of 'keeping the world flowing for future generations', it
is also pleasing to be recognised by external agencies. We were
particularly proud to be ranked by S&P Global in the top 5%
globally in the Machinery & Electrical Equipment industry in
its highly-regarded Corporate Sustainability Assessment and
included in the 2023 Sustainability Yearbook.
Health & safety
The safety of our people, partners and visitors is our number
one priority and our vision for health and safety is zero harm. In
2022 we recorded a lost-time injury rate of 0.13, an encouraging
improvement on 2021's 0.20, in part reflecting the roll-out of the
'Rotork Life Saving Rules'. Our Total Recordable Injury Rate was
0.53 (2021: 0.56).
Wellbeing and engagement
A knock-on effect of the invasion of Ukraine and of economies
emerging from the pandemic has been significant consumer price
inflation, particularly of essentials such as energy and food. We
responded to the 'cost of living crisis' by announcing an employee
benefits review, the result of which included additional support
for colleagues in more junior roles and bringing forward salary
increases.
We launched our first employee discount scheme (in the UK) and
based upon its success we are looking to launch similar schemes in
other countries. We also introduced electric-vehicle salary
sacrifice schemes in several countries, helping colleagues to
benefit from local financial incentives intending to accelerate the
take-up of pure electric and hybrid vehicles.
Rotork also provided short-term financial help to employees and
ex-employees facing hardship through Rotork Benevolent Support. The
scheme made more grants in 2022 than it did in 2021.
We completed two employee engagement pulse surveys during the
year, one in June and one in December. Participation was good in
both, at 75%. The engagement survey asks employees to rate Rotork
as a place to work between 1-10, where 10 is good. Engagement
continues to improve, with the score increasing to 7.2 in December
2022, from 6.7 in June and 6.4 the year before. We believe that the
effective communication of our Growth+ strategy and cost of living
actions have helped to improve our scores.
We have a committed workforce who are proud to be Rotork
employees and determined to deliver on our ambitious goals. We
offer our warmest thanks and appreciation for all their efforts
throughout 2022.
Capital allocation
We retain a strong balance sheet, with a net cash position of
GBP105.9m at the period end (31 December 2021: GBP114.1m). This
provides us with optionality in uncertain times and 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 continue to look to return it to
shareholders.
Board update
On behalf of everyone at Rotork I would like to offer our thanks
to Martin Lamb who will be stepping down as Chairman and from the
Board at the AGM in April 2023 after nine years of service. Martin
has provided excellent stewardship and overseen significant
development of the Group. We all very much look forward to working
with his successor as Chair, Dorothy Thompson CBE.
Outlook
The outlook for our end markets is positive and we entered the
year with a record opening order book. Our new Growth+ strategy has
momentum and we are already seeing early benefits from our focus on
our strategy pillars of Target Segments, Customer Value and
Innovative Products & Services. Whilst mindful of the uncertain
economic outlook, we expect a year of further progress in 2023.
Divisional review
Oil & Gas
GBPm 2022 2021 Change OCC(3) Change
Revenue 283.3 260.2 8.9% 4.9%
Adjusted operating
profit 64.0 56.3 13.5% 8.3%
Adjusted operating
margin 22.6% 21.7% +90bps +70bps
The increase in oil & gas sector activity first experienced
in the second half of 2021 continued through the year. Industry
capital expenditure grew, with the strongest recovery in the
upstream segment and in North America. Natural gas production rose,
responding to the restrictions placed on Russian gas exports.
Productivity and emissions reduction related spending grew. Looking
forward, China's reopening is forecast to be positive for global
oil & gas demand.
Following a challenging first half where deliveries were
restricted by supply chain challenges the second half saw a strong
recovery and full year divisional sales were ahead 4.9%
year-on-year (OCC). All segments grew and downstream sales
represented 50% of the total (51% in 2021); the upstream 25% (24%)
and the midstream 25% (25%).
EMEA sales were broadly unchanged year-on-year, largely
reflecting the exit from Russia. Downstream sales were higher,
benefiting from refinery work in the Middle East and North Africa,
whilst upstream and midstream revenues were lower. APAC revenues
declined overall despite strong growth in the small upstream
segment which benefited from offshore projects in China and gas
field developments in Australia. Americas benefited from recovering
markets as well as methane emissions reduction initiatives and was
the division's fastest growing geographic region in 2022. All three
Americas segments grew, with the midstream reporting the fastest
growth benefiting from increased MRO activity.
The division's adjusted operating profit was GBP64.0m, 13.5% up
year-on-year. Positive pricing plus volume growth contained the
impact of higher material costs, with product mix in the division
less weighted to those ranges where price increases were most
significant (due to higher electronic component content). With
improved labour productivity and other costs broadly flat, adjusted
operating margins rose 90 basis points to 22.6%.
Oil & Gas' focus on target segments delivered notable order
wins in emissions reduction, CCUS and LNG during the period. Demand
from choke valve manufacturers for the Rotork IQTF electric
actuator grew strongly year-on-year as North American upstream
operators sought to eliminate methane emissions from new and
existing wellheads. The division also supplied electric actuators,
which will replace methane emitting traditional 'gas over oil'
fluid power actuators, to pipeline operators in France, Italy and
Spain. The division is supplying over a hundred intelligent
actuators to China's first offshore carbon capture and storage
project. Once commissioned this will store each year the carbon
dioxide equivalent to the annual emissions of one million cars. In
the LNG segment we won several important actuation package orders
including a major Gulf of Mexico stage 3 expansion project.
Chemical, Process & Industrial ("CPI")
GBPm 2022 2021 Change OCC(3) Change
Revenue 198.4 160.5 23.6% 19.6%
Adjusted operating
profit 51.2 42.8 19.7% 15.2%
Adjusted operating
margin 25.8% 26.7% -90bps -100bps
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.
The division delivered a strong full year sales performance with
revenues 19.6% higher year-on-year on an OCC basis after a slow
start caused by supply chain disruption.
Asia Pacific was the CPI division's fastest growing geography
overall, despite COVID-19 related supply chain disruption,
benefiting from our coverage expansion initiative and growth in
target segments including HVAC, chemicals and mining. In EMEA,
sales growth accelerated in the second half after a slow start to
the year, resulting in full year revenue growth in the low teens
despite the loss of Russian business. Americas sales grew
mid-teens. Sales benefited from customer value improvements and
business wins in the mining, HVAC and marine end markets.
The division's adjusted operating profit was GBP51.2m, 19.7%
higher than the prior year. The combination of very strong volume
growth plus pricing meant CPI was the fastest growing division but
this increases its share of common costs. As a result of this, and
despite gross margins being held close to prior year levels,
adjusted operating margin fell 90 basis points to 25.8%.
CPI is clearly 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. Electric actuators
were selected for the first-of-its-kind Northern Lights carbon
capture and storage project in Norway. The customer chose Rotork's
robust, safe and reliable actuators due to their prior experience
of them in the oil & gas offshore environment. Rotork's
pneumatic actuators were chosen by innovative European and Asian
automotive battery manufacturers for use on their battery
production lines and as part of water and heating systems. Rotork's
IQ electric actuators have also been selected by the largest
manufacturer of high performance resin films in China. These resin
films (POE and EVA) are used in photovoltaic solar panels and the
customer has ambitious growth plans.
Water & Power
GBPm 2022 2021 Change OCC(3) Change
Revenue 160.2 148.6 7.8% 2.4%
Adjusted operating
profit 40.3 40.4 -0.3% -6.2%
Adjusted operating
margin 25.2% 27.2% -200bps -220bps
Water & Power is a supplier of premium actuators,
predominantly electric, and gearboxes for applications in the
water, wastewater and treatment and power generation sectors. The
water segment contributed 67% of divisional sales in the year.
Following a challenging first half where deliveries were
restricted by supply chain disruption the second half saw a strong
recovery and full year divisional sales were ahead 7.8%
year-on-year.
Despite a strong second half recovery, Asia Pacific sales were
lower year-on-year as a result of supply chain issues and reduced
power sector activity. Americas sales grew year-on-year driven by
higher water sector activity. EMEA was Water & Power's fastest
growing geographic region in 2022. The region benefited from a
strong second half and higher power station refurbishment revenues
year-on-year.
The division's adjusted operating profit was GBP40.3m, 0.3%
lower year on year. The impact of cost increases on electronics and
the availability of these components had a disproportionate impact
on the division as a result of its higher proportion of electric
actuator sales. Second half revenue grew sharply but with the
slower first half, and despite other costs only growing modestly,
adjusted operating margins fell 200 basis points to 25.2%.
The division made good progress in its target segments of water
infrastructure, waste and wastewater treatment, desalination and
alternative energy during the year. Rotork supplied electric and
fluid power actuators to numbers of wastewater treatment
modernisation and improvement projects around the world which will
provide better quality water more efficiently, including ones in
Singapore and Texas (US). In Malaysia, Rotork's IQ electric
actuators were selected to replace existing ageing, and
increasingly unreliable, actuators that provide flood defence
across the country. The solution includes Rotork iAM (intelligent
asset management) for diagnostics and predictive analytics. Rotork
colleagues worked with the innovation team at a major UK water
utility exploring ways to automate the 'flushing' of the utility's
water sample-taking equipment. The solution is currently being
trialled at multiple sites.
By order of the Board
Kiet Huynh
Chief Executive
27 February 2023
Financial review
Order intake for the year was GBP681.6m (2021: GBP614.1m), up
11.0% from the prior year or 6.8% on an organic constant currency
(OCC) basis. Order intake was split evenly between the first and
second half of the year.
Group revenue was GBP641.8m for the year, 12.8% higher (+8.4%
OCC) than 2021. Revenue for the second half of the year was
GBP361.8m, which was 29.2% higher than the first half of the year,
as expected. The first half of 2022 was impacted by supply chain
constraints, in particular the sourcing of components such as
chipsets and electronics and disrupted freight services, which had
started in the second half of 2021. Revenue grew in all three
divisions with CPI once again reporting the strongest year-on-year
growth. CPI finished the year 23.6% ahead (+19.6% OCC), Oil &
Gas (O&G) grew 8.9% (+4.9% OCC) and Water & Power (W&P)
grew 7.8% (+2.4% OCC) but having been most impacted by the supply
chain challenges in the first half, reported the strongest
sequential growth, up 46.8% in the second half of the year. Within
O&G, upstream sales increased the most, up low-double digits
OCC, sales to midstream were up mid-single digits OCC and
downstream, still the largest segment, increased low-single digits
OCC.
Rotork Site Services, our global service network and a key
differentiator in our industry, again made good progress in the
year growing 13.3% compared with 2021. Performance in the second
half of the year was considerably stronger than the first as both
COVID-19 restrictions eased and the improved supply chain situation
allowed more retrofit projects to proceed. Revenue was 9.5% ahead
of 2021 on an OCC basis and our lifetime management and reliability
services programmes performed well. Rotork Site Services is managed
as a separate unit within Rotork's divisions and contributed 21%
(2021: 21%) of Group revenue.
Gross margin reduced 70 basis points to 45.5% (-60bps OCC). Cost
increases relating to components, most acute for chipsets and
electronics but experienced in many components, were successfully
mitigated by price increases. Sales prices were increased twice in
the year. Elevated logistics costs continued to be offset by the
surcharge introduced in 2021.
Overheads increased by GBP10.4m (+7.8%) on an OCC basis compared
with 2021, driven by wage inflation (which continues into 2023), an
increase in global travel as restrictions ease, and investment in
commercial activities. Overheads as a percentage of revenue
decreased from 23.7% in 2021 to 23.1% in 2022.
Reported operating profit was GBP123.6m, 16.9% higher year on
year. Adjusted operating profit was GBP143.2m, an 11.8% increase
with adjusted operating margin decreasing 20 basis points to 22.3%
(2021: 22.5%). On an OCC basis, adjusted operating margin decreased
40 basis points to 22.1%.
Net finance income was GBP0.5m (2021: income of GBP0.2m)
benefiting from more favourable interest rates.
Statutory profit before tax was GBP124.1m, up from GBP105.9m in
2021.
Adjusted basic earnings per share was 12.7p (2021: 11.3p), an
increase of 13.2%. Statutory basic earnings per share was 10.9p
(2021: 9.2p), an increase of 17.6%.
Growth Acceleration Programme
2022 marked the final year of the Growth Acceleration Programme
(GAP) which delivered a fundamentally leaner and stronger Group
aligned with its end markets and well placed to deliver profitable
growth.
Within the Operational Excellence pillar of GAP, the focus was
on managing our factories through the continued impact of COVID-19
and the geo-political situation, and this meant efforts that might
otherwise have been spent on driving GAP initiatives needed to be
redirected. The procurement team had to prioritise managing our
existing supply chain to ensure we maintained the supply of
components required to meet customer deliveries. This impacted the
time available to drive improvements and cost saving initiatives.
Continuous improvement and lean initiatives continued, delivering
around GBP2.2m of savings in the year. The footprint optimisation
programme continued with the completion of the initiatives at the
Houston, San Sebastian and Cusago sites. The in-year benefit of
these transfers, and those completed part-way through 2021, was
GBP1.9m of incremental savings. New product development continued
to contribute positively to the Group, with GBP2.4m of benefits
recognised in 2022.
Reflecting on the five years of GAP there are areas of notable
success and some where our initial objectives have not been fully
achieved. Revenue growth has been hard to achieve in recent years,
as a result of business exits (including in response to
geopolitical events), COVID-19 and supply chain challenges, and
revenue is now very similar to the level it was in 2017. Despite
that, adjusted operating margin has improved 200 basis points
through a combination of footprint optimisation, lean and
productivity improvements and despite a supply chain which, rather
than reflecting the improvements of the early years of GAP, ended
up as a net headwind. Cumulatively GAP has driven GBP30m of profit
improvement. Return on capital employed has increased 640 basis
points to 31.3% over the course of GAP, reflecting both the
profitability improvements and footprint optimisation impact on net
assets.
Cash was the other focus area of GAP as we sought to make it a
self-funding programme. In the first four years the programme
generated a GBP40m working capital reduction but the much higher
weighting of revenue in the last quarter of 2022 and the tactical
inventory build has reduced this benefit to GBP4m (further
explanation below). Combined with the cash resulting from higher
profitability and disposal of surplus assets this has broadly
funded the investment in the ERP system to date.
Finally, GAP led a fundamental change of our divisional
structure and the focus on end market rather than product
divisions. In November we launched the Group's new strategy,
Growth+, which builds upon the progress made under GAP. Growth+ is
specifically designed to deliver profitable growth by targeting the
right end market segments, being close to our customers and
delivering innovation.
Adjusted items
Adjusted profit measures are presented alongside statutory
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 statutory profit measures are adjusted to exclude
amortisation of acquired intangibles, the net restructuring costs
resulting from GAP, IT transformation costs associated with the new
ERP development, Russia market exit costs 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.
Adjusted earnings reconciliation
Redundancy
Gain on and other Russia
Statutory property IT transformation restructuring market Adjusted
GBPm results Amortisation disposal costs costs exit results
================= ========= ============ ========== ================= ============== ======= ========
Operating profit 123.6 7.0 (1.2) 8.9 1.4 3.5 143.2
Profit before
tax 124.1 7.0 (1.2) 8.9 1.4 3.5 143.7
Tax (30.9) (1.1) 0.4 (2.2) (0.5) - (34.3)
================= ========= ============ ========== ================= ============== ======= ========
Profit after tax 93.2 5.9 (0.8) 6.7 0.9 3.5 109.4
================= ========= ============ ========== ================= ============== ======= ========
The table above adjusts the statutory results for the
significant non-cash and other adjustments to give adjusted
results. Note 2 sets out the alternative performance measures used
by the Group and how these reconcile to the statutory results.
Further details of the restructuring costs are provided in note
4.
Organic constant currency results
We also present OCC figures to exclude the impacts of currency,
acquisitions, business closures and disposals.
Constant 2022 at
2022 as currency 2021 exchange
GBPm reported adjustment rates 2021
=================== ===== ========= =========== ===== ============== ===== =======
Revenue 641.8 (25.0) 616.8 569.2
Cost of sales (350.1) 14.4 (335.7) (306.4)
=================== ===== ========= =========== ===== ============== ===== =======
Gross profit 45.5% 291.7 (10.6) 45.6% 281.1 46.2% 262.8
Overheads 23.1% (148.5) 3.4 23.5% (145.1) 23.7% (134.7)
=================== ===== ========= =========== ===== ============== ===== =======
Adjusted operating
profit(1) 22.3% 143.2 (7.2) 22.1% 136.0 22.5% 128.1
=================== ===== ========= =========== ===== ============== ===== =======
(1) Adjusted operating profit is before the amortisation of
acquired intangible assets and other adjustments (see note 4).
Currency
In 2022 we experienced a more pronounced currency impact than
for several years. The major currencies affecting the income
statement are the US dollar and the euro. The US dollar/sterling
average rate of $1.24 (2021: $1.38) was a 14-cent tailwind, whilst
the euro/sterling average rate was EUR1.17 (2021: EUR1.16), a 1
cent headwind. With the average sterling rate across the basket of
other currencies, particularly China and India, strengthening in
2022 it resulted in a GBP25.0m or 3.9% tailwind reported to
revenue.
The impact of currency on the Group is both translational and
transactional. Given the locations in which we operate and the
international nature of our supply chain and sales currencies, the
impact of transaction settlement differences can be very different
from the translation impact. We are able partially to mitigate the
transaction impact through matching supply currency with sales
currency, but ultimately we are net sellers of both US dollars and
euros. It is the net sale of these currencies which we principally
address through our hedging policy, covering up to 75% of net
trading transactions in the next 12 months and up to 50% between 12
and 24 months.
In order to estimate the impact of currency, at the current
exchange rates we consider the effect of a one cent movement versus
sterling. A one euro cent movement now results in approximately a
GBP150,000 (2021: GBP200,000) adjustment to profit and for the US
dollar, and dollar-related currencies, a one cent movement equates
to approximately a GBP550,000 (2021: GBP600,000) adjustment.
Return on capital employed (ROCE)
Our capital-efficient business model and strong profit margins
mean Rotork generates a high ROCE. Our definition of ROCE is based
on adjusted operating profit as a return on the average net assets
excluding net cash and the pension scheme liability, net of the
related deferred tax. The average capital employed increased 7.8%
over the year to GBP458.0m, driven largely by the profit for the
year and foreign exchange translation gains. Due to the increase in
adjusted operating profit, ROCE rose to 31.3% (2021: 30.1%).
Taxation
The Group's headline effective tax rate increased from 24.2% to
24.9%. Removing the impact of the adjusted items provides a more
reliable measure and, on this basis, the adjusted effective tax
rate is 23.9% (2021: 23.8%). The Group expects its adjusted
effective tax rate to remain higher than the standard UK rate due
to higher rates of tax in China, Germany, Australia and the US.
The Group's approach to tax continues to be to operate on the
basis of full disclosure and co-operation with all tax authorities
and, where possible, to mitigate the burden of tax within the local
legislation.
Cash generation
We finished the year with a net cash position of GBP105.9m
(2021: GBP114.1m) which leads to a cash conversion KPI of 75.9% of
adjusted operating profit into cash, down from 108.0% reported in
2021. The lower cash conversion is explained by the tactical
decision to build inventory levels to protect against further
supply chain disruption and the high relative weighting of revenue
in the final months of the year where the cash will be collected in
2023. Capital expenditure was GBP8.3m (2021: GBP13.2m), plus
GBP2.1m in capitalised software (2021: GBP5.2m) and GBP8.9m in IT
software transformation costs which were expensed in the period
(2021: GBP8.5m). Our Research and Development (R&D) cash spend
increased 6.4% to GBP13.4m which represents 2.1% of revenue (2021:
GBP12.6m and 2.2%). Dividends of GBP55.4m, tax payments of GBP30.2m
and pension contributions (above the charge recognised in the
income statement) of GBP7.0m were the other major outflows
excluding working capital.
Control of working capital as defined in the cash-flow
statement, using average exchange rates, is key to achieving our
cash generation KPI. Inventory increased by GBP23.9m, as we sought
to mitigate supply chain disruption. Trade receivables increased to
GBP134.3m reflecting the relative high weighting of sales in the
final months of the year, this led to an effective cash outflow of
GBP32.6m. Trade receivables measured as days' sales outstanding(1)
, only increased slightly from 57 to 58 days. Net working capital
in the balance sheet increased to 28.7% of revenue compared with
21.8% the year before and generated a GBP60.4m outflow in the cash
flow statement.
COVID-19 disruption and geopolitical risk
We have previously reported COVID-19 and geopolitical
uncertainty as two areas of risk that we were monitoring, and which
could impact Rotork. These mirror some of the scenarios we include
in our annual viability statement which will be published in our
2022 annual report. Our COVID-19 Committee continued to monitor the
external influences of COVID-19 on the business through the year,
and also coordinate the internal response.
Our teams in certain countries, especially China, were impacted
by COVID-19 during the year. Whilst we made every effort to keep
our production facilities open, we did not hesitate to shut them if
we believed there was any undue risk to our colleagues, and our
Shanghai facilities were closed or operating at limited capacity at
times during the year. Similar issues were also faced by some of
our component suppliers, causing supply chain delays and
disruption. Supply chain delays and disruption were further
compounded by the impact from the war in Ukraine. We have responded
by utilising our global network to mitigate supply chain disruption
and have continued to grow some tactical inventories where
appropriate. During the second half of the year, we started to see
evidence of the supply chain stabilising and upward pressure on
component costs easing.
Deliveries to Russia ceased at the end of February 2022. Rotork
had no manufacturing presence in Russia and has suspended the
activities of its sales and service operations in the country in an
orderly manner. A small number of employees are currently retained
to manage the process of exiting the business. The Russia, Ukraine
and Belarus region contributed around 3% to group sales in 2021.
The costs associated with exiting the Russian market and impairing
the assets have been recognised in other adjustments in the
year.
As a global business we continue to monitor the trade position
between all locations where we are based or have customers or
suppliers, and have considered the potential impact of additional
trade barriers between these countries. We will take steps where
necessary to mitigate any such changes but continue to believe they
will not materially impact the Group's results. We have included
scenarios in the viability assessment which model the impact of all
of these current uncertainties. The viability statement will be
published in our 2022 annual report.
Non-controlling interest
The Group invested GBP4.1m for 75% of the share capital in a
newly-established entity in Saudi Arabia during April 2022, with
the remaining 25% owned by a third party. Owing to this third-party
shareholding, a "Non-controlling interests" position is now
reported in the financial statements.
Credit management
The Group's credit risk is primarily attributable to trade
receivables, with the risk spread over a large number of countries
and customers, and no significant concentration of risk.
Creditworthiness checks are undertaken before entering into
contracts or commencing trade with new customers, and in companies
where insurance cover operates, the authorisation process works in
conjunction with the insurer, taking advantage of their market
intelligence. We maintained coverage of the credit insurance policy
during the year and have cover in place for virtually all of our
companies at an aggregate of 90% of receivables. Where appropriate,
we use trade finance instruments such as letters of credit to
mitigate any identified risk.
Treasury
The Group operates a centralised treasury function managed by a
Treasury Committee, chaired by me and also comprising the Group
Financial Controller and Group Treasurer. The Committee meets
regularly to consider foreign currency exposure, control over
deposits, funding requirements and cash management. The Group
Treasurer monitors compliance with the treasury policies and is
responsible for overseeing all of the Group's banking
relationships. A Subsidiary Treasury Policy restricts the actions
subsidiaries can take and the Group Treasury Policy and Terms of
Reference define the responsibilities of the Group Treasurer and
Treasury Committee.
The Group uses financial instruments where appropriate to hedge
significant currency transactions, principally forward exchange
contracts and swaps. These financial instruments are used to reduce
volatility which might affect the Group's cash or income statement.
In assessing the level of cash flows to hedge with forward exchange
contracts, the maximum cover taken is 75% of net forecast flows.
The Board receives treasury reports which summarise the Group's
foreign currency hedging position, distribution of cash balances
and any significant changes to banking relationships.
The GBP60m committed loan facility in place on 31 December 2021
expired on 25 June 2022 and the Group decided not to renew the
facility past this date given the strong cash position. Of the
GBP60m loan facility GBPnil was drawn down at 31 December 2021.
Retirement benefits
The Group accounts for post-retirement benefits in accordance
with IAS 19, Employee Benefits. The balance sheet reflects the net
assets of these schemes at 31 December 2022 based on the market
value of the assets at that date, and the valuation of liabilities
using year-end AA corporate bond yields. We closed both the main
defined benefit pension schemes to new entrants; the UK scheme in
2003 and the US scheme in 2009, in order to reduce the risk of
volatility of the Group's liabilities. In 2018 we further reduced
the risk of volatility when we completed the closure to future
accrual of both the UK and US schemes. Members of the defined
benefit schemes were transferred onto the relevant defined
contribution plan operating in their country.
The most recent triennial valuation of the UK scheme took place
at 31 March 2019 and showed an actuarial deficit of GBP28.7m and a
funding level of 86%. A recovery plan was agreed with the Trustees
as part of the 2019 valuation, resulting in required annual
contributions from the Company of GBP6.8m with effect from 1 April
2020. The 31 March 2022 valuation is ongoing.
On an accounting basis the deficit in the schemes remained
broadly flat at GBP8.0m compared to GBP7.6m in 2021 and the funding
level decreased from 97% to 94%. The Company paid total
contributions of GBP6.8m over the year. The schemes' assets
decreased in value by GBP89.1m (2021: increase of GBP11.1m) and the
schemes' liabilities reduced by GBP88.7m (2021: decrease of
GBP13.9m), mainly due to the 285 bps increase in discount rate at
the year-end to 4.8%, which reflected the increase in yields on AA
corporate bonds during 2022.
The accounting deficit is different to the actuarial deficit as
on an accounting basis we are required to use AA-rated corporate
bond yields to value the liabilities. The UK scheme's actuarial
valuation uses gilt yields since this most closely matches the
investment strategy which is designed in part to hedge the interest
rate and inflation risks borne by the scheme. Cash contributions
are driven by the actuarial valuation.
Dividends
The Board is proposing a final dividend of 4.30p per share. When
taken together with the 2.40p interim dividend paid in September
2022, the 6.70p (2021: 6.40p per share) represents a 4.7% increase
in dividends over the prior year. This gives dividend cover of 1.9
times (2021: 1.8 times) based on adjusted earnings per share.
Jonathan Davis
Group Finance Director
27 February 2023
(1) Days' sales outstanding is calculated on a countback method.
The sales value including local sales taxes is deducted from the
year end trade receivables to calculate the number of days' sales
outstanding.
Consolidated income statement
For the year ended 31 December 2022
2022 2021
Notes GBP000 GBP000
-------------------------------------------------- ----- --------- -----------
Revenue 3 641,812 569,160
Cost of sales (350,079) (306,394)
-------------------------------------------------- ----- --------- -----------
Gross profit 291,733 262,766
Other income 1,620 587
Distribution costs (6,197) (5,397)
Administrative expenses (163,177) (152,064)
Other expenses (372) (182)
-------------------------------------------------- ----- --------- -----------
Operating profit 2,3 123,607 105,710
Finance income 5 3,049 2,442
Finance expense 5 (2,554) (2,221)
-------------------------------------------------- ----- --------- -----------
Profit before tax 124,102 105,931
Income tax expense 6 (30,901) (25,686)
-------------------------------------------------- ----- --------- -----------
Profit for the year 93,201 80,245
-------------------------------------------------- ----- --------- -----------
Attributable to:
Owners of the parent 93,243 80,245
Non-controlling interest (42) -
-------------------------------------------------- ----- --------- ---------
93,201 80,245
-------------------------------------------------- ----- --------- ---------
Basic earnings per share 8 10.9p 9.2p
Diluted earnings per share 8 10.8p 9.2p
Operating profit 2,3 123,607 105,710
Adjustments
* Amortisation of acquired intangible assets 3 7,051 9,001
* Other adjustments 4 12,587 13,369
-------------------------------------------------- ----- --------- -----------
Adjusted Operating profit 143,245 128,080
Adjusted basic earnings per share 2,8 12.7p 11.3p
Adjusted diluted earnings per share 2,8 12.7p 11.2p
-------------------------------------------------- ----- --------- -----------
Consolidated statement of comprehensive income
For the year ended 31 December 2022
2022 2021
GBP000 GBP000
------------------------------------------------------ ------- -------
Profit for the year 93,201 80,245
Other comprehensive income
Items that may be subsequently reclassified to the
income statement:
Foreign exchange translation differences 21,928 (8,899)
Effective portion of changes in fair value of cash
flow hedges net of tax (1,627) (88)
------------------------------------------------------- ------- -------
20,301 (8,987)
Items that are not subsequently reclassified to the
income statement:
Remeasurement (loss)/gain in pension scheme net of
tax (4,932) 19,469
------------------------------------------------------- ------- -------
Income and expenses recognised in other comprehensive
income 15,369 10,482
Total comprehensive income for the year 108,570 90,727
Attributable to:
Owners of the parent 108,561 90,727
Non-controlling interest 9 -
------------------------------------------------------ ------- -------
108,570 90,727
Consolidated balance sheet
At 31 December 2022
2022 2021
Notes GBP000 GBP000
-------------------------------------------- ----- ------- -------
Non-current assets
Goodwill 228,005 216,778
Intangible assets 20,579 25,722
Property, plant and equipment 78,726 77,798
Derivative financial instruments 74 -
Deferred tax assets 15,965 10,183
Total non-current assets 343,349 330,481
Current assets
Inventories 92,306 68,447
Trade receivables 134,279 94,189
Current tax 7,877 9,558
Derivative financial instruments 62 1,896
Other receivables 39,112 35,824
Assets classified as held for sale 211 2,884
Cash and cash equivalents 114,770 123,474
-------------------------------------------- ----- ------- -------
Total current assets 388,617 336,272
-------------------------------------------- ----- ------- -------
Total assets 731,966 666,753
-------------------------------------------- ----- ------- -------
Equity
Issued equity capital 7 4,304 4,302
Share premium 19,959 18,828
Other reserves 32,269 12,019
Retained earnings 531,951 498,931
-------------------------------------------- ----- ------- -------
Equity attributable to owners of the parent 588,483 534,080
Non-controlling interests 1,424 -
-------------------------------------------- ----- ------- -------
Total equity 589,907 534,080
-------------------------------------------- ----- ------- -------
Non-current liabilities
Interest bearing loans and borrowings 5,405 5,464
Employee benefits 9 11,955 11,336
Deferred tax liabilities 4,028 1,580
Derivative financial instruments 215 106
Provisions 1,439 1,559
Total non-current liabilities 23,042 20,045
Current liabilities
Interest bearing loans and borrowings 3,431 3,872
Trade payables 42,314 38,800
Employee benefits 9 15,200 14,440
Current tax 11,893 12,226
Derivative financial instruments 2,729 -
Other payables 39,084 37,986
Provisions 4,366 5,304
-------------------------------------------- ----- ------- -------
Total current liabilities 119,017 112,628
-------------------------------------------- ----- ------- -------
Total liabilities 142,059 132,673
-------------------------------------------- ----- ------- -------
Total equity and liabilities 731,996 666,753
-------------------------------------------- ----- ------- -------
These financial statements were approved by the Board of
Directors and authorised for issue on 27 February 2023 and were
signed on its behalf by:
K Huynh and JM Davis
Directors.
Consolidated statement of changes in equity
Attributable
Issued Capital to owners
equity Share Translation redemption Hedging Retained of the Non-controlling
capital Premium Reserve reserve Reserve Earnings parent interest Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------- ------- ------- ----------- ---------- ------- -------- ------------ --------------- --------
Balance at 31
December 2020 4,370 16,826 18,374 1,644 916 528,624 570,754 - 570,754
Profit for the
year - - - - - 80,245 80,245 - 80,245
Other
comprehensive
income
---------------- ------- ------- ----------- ---------- ------- -------- ------------ --------------- --------
Foreign exchange
translation
differences - - (8,899) - - - (8,899) - (8,899)
Effective
portion of
changes
in fair value
of cash
flow hedges - - - - (109) - (109) (109)
Actuarial gain
on defined
benefit pension
plans - - - - - 24,040 24,040 - 24,040
Tax on other
comprehensive
income - - - - 21 (4,571) (4,550) - (4,550)
Total other
comprehensive
income - - (8,899) - (88) 19,469 10,482 - 10,482
---------------- ------- ------- ----------- ---------- ------- -------- ------------ --------------- --------
Total
comprehensive
income - - (8,899) - (88) 99,714 90,727 - 90,727
Transactions
with owners,
recorded
directly in
equity
Equity settled
share-based
payment
transactions - - - - - (1,982) (1,982) - (1,982)
Tax on equity
settled
share-based
payment
transactions - - - - - 633 633 - 633
Share options
exercised by
employees 4 2,002 - - - - 2,006 - 2,006
Own ordinary
shares acquired - - - - - (7,809) (7,809) - (7,809)
Own ordinary
shares awarded
under share
schemes - - - - - 5,455 5,455 - 5,455
Share buyback
programme (72) - - 72 - (50,324) (50,324) - (50,324)
Dividends - - - - - (75,380) (75,380) - (75,380)
---------------- ------- ------- ----------- ---------- ------- -------- ------------ --------------- --------
Balance at 31
December 2021 4,302 18,828 9,475 1,716 828 498,931 534,080 - 534,080
Profit for the
year - - - - - 93,243 93,243 (42) 93,201
Other
comprehensive
income
---------------- ------- ------- ----------- ---------- ------- -------- ------------ --------------- --------
Foreign exchange
translation
differences - - 21,877 - - - 21,877 51 ) 21,928
Effective
portion of
changes
in fair value
of cash
flow hedges - - - - (2,067) - (2,067) - (2,067)
Actuarial loss
on defined
benefit pension
plans - - - - - (6,727) (6,727) - (6,727)
Tax on other
comprehensive 440
income - - - - ) 1,795 2,235 - 2,235
Total other
comprehensive
income - - 21,877 - (1,627) (4,932) 15,318 51 15,369
---------------- ------- ------- ----------- ---------- ------- -------- ------------ --------------- --------
Total
comprehensive
income - - 21,877 - (1,627) 88,311 108,561 9 108,570
Non-controlling
interest on
newly
established
subsidiary - - - - - - - 1,415 1,415
Transactions
with owners,
recorded
directly in
equity
Equity settled
share-based
payment
transactions - - - - - 1,790 1,790 - 1,790
Tax on equity
settled
share-based
payment
transactions - - - - - (987) (987) - (987)
Share options
exercised by
employees 2 1,131 - - - - 1,133 - 1,133
Own ordinary
shares acquired - - - - - (3,475) (3,475) - (3,475)
Own ordinary
shares awarded
under share 2,765
schemes - - - - - ) 2,765 - 2,765
Dividends - - - - - (55,384) (55,384) - (55,384)
---------------- ------- ------- ----------- ---------- ------- -------- ------------ --------------- --------
Balance at 31
December 2022 4,304 19,959 31,352 1,716 (799) 531,951 588,483 1,424 589,907
---------------- ------- ------- ----------- ---------- ------- -------- ------------ --------------- --------
Detailed explanations for equity capital, the translation
reserve, capital redemption reserve and hedging reserve can be seen
in note 7.
Consolidated statement of cash flows
For the year ended 31 December 2022
2022 2022 2021 2021
Notes GBP000 GBP000 GBP000 GBP000
------------------------------------------------ ----- -------- -------- -------- ---------
Cash flows from operating activities
Profit for the year 93,201 80,245
Adjustments for:
Amortisation of acquired intangibles 7,051 9,001
Other adjustments 4 12,587 13,369
Amortisation of development costs 1,436 1,657
Depreciation 14,933 15,673
Equity settled share-based payment expense 4,601 3,333
Profit on sale of property, plant and equipment (159) -
Finance income (3,049) (2,442)
Finance expense 2,554 2,221
Income tax expense 30,901 25,686
------------------------------------------------ ----- -------- -------- -------- ---------
164,056 148,743
Increase in inventories (19,479) (8,330)
(Increase)/decrease in trade and other
receivables (32,591) 5,944
(Decrease)/increase in trade and other
payables (2,902) 2,583
Operating cash flow impact of other adjustments 4 (12,056) (13,346)
Difference between pension charge and cash
contribution (6,979) (7,562)
Decrease in provisions (383) (937)
Increase/(decrease) in employee benefits 67 (9,632)
------------------------------------------------ ----- -------- -------- -------- ---------
89,733 117,463
Income taxes paid (30,221) (32,021)
------------------------------------------------ ----- -------- -------- -------- ---------
Net cash flows from operating activities 59,512 85,442
Investing activities
Purchase of property, plant and equipment (8,291) (13,170)
Purchase of intangible assets (2,066) (5,174)
Development costs capitalised (2,541) (1,806)
Sale of property, plant and equipment 4,629 3,808
Settlement of hedging derivatives 9 4,102
Interest received 751 857
------------------------------------------------ ----- -------- -------- -------- ---------
Net cash flows from investing activities (7,509) (11,383)
Financing activities
Issue of ordinary share capital 1,133 2,006
Own ordinary shares acquired (3,475) (7,809)
Share buyback programme - (50,324)
Interest paid (817) (881)
Repayment of bank loans (694) (67)
Repayment of lease liabilities (3,966) (4,904)
Dividends paid on ordinary shares (55,384) (75,515)
Receipt from non-controlling interest in
newly established subsidiary 1,415 -
------------------------------------------------ ----- -------- -------- -------- ---------
Net cash flows from financing activities (61,788) (137,494)
------------------------------------------------ ----- -------- -------- -------- ---------
Net decrease in cash and cash equivalents (9,785) (63,435)
Cash and cash equivalents at 1 January 123,474 187,204
Effect of exchange rate fluctuations on
cash held 1,081 (295)
------------------------------------------------ ----- -------- -------- -------- ---------
Cash and cash equivalents at 31 December 114,770 123,474
------------------------------------------------ ----- -------- -------- -------- ---------
Notes to the Group Financial Statements
For the year ended 31 December 2022
Except where indicated, values in these notes are in GBP000.
Rotork plc is a public company limited by shares, registered and
domiciled in England. The consolidated financial statements of the
Company for the year ended 31 December 2022 comprise the Company
and its subsidiaries (together referred to as the Group).
1. Accounting policies
The accounting policies applied in the preparation of these
consolidated financial statements are set out below. These policies
have been consistently applied to the years presented, unless
otherwise stated.
Basis of preparation
The consolidated financial statements of Rotork plc have been
prepared in accordance with UK-adopted international accounting
standards and in conformity with the requirements of the Companies
Act 2006.
New accounting standards and interpretations
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
Further narrow scope amendments have been issued which are
mandatory for periods commencing on or after 1 January 2023. The
application of these amendments will not have any material impact
on the disclosures, net assets or results of the Group.
Adjustments to profit
Adjustments to profit are items of income and expense which,
because of the nature, size and/or infrequency of the events giving
rise to them, merit separate presentation. These specific items are
presented 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.
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 financial statements.
In forming this view, the on-going impact of COVID-19, 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 GBP106m and unused
uncommitted overdraft facilities of GBP32m as at the year 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.
Consolidation
The consolidated financial statements incorporate the financial
statements of the Company and its subsidiaries for the year to 31
December 2022. The financial statements of subsidiaries are
included in the consolidated financial statements from the date
that control commences until the date control ceases. Intra-Group
balances and any unrealised gains or losses or income and expenses
arising from intra-Group transactions are eliminated in preparing
the consolidated financial statements.
Status of this preliminary announcement
The financial information contained in this preliminary
announcement does not constitute the Company's statutory accounts
for the years ended 31 December 2022 or 2021. Statutory accounts
for 2021, which have been prepared in accordance with UK-adopted
international accounting standards and in conformity with the
requirements of the Companies Act 2006 have been delivered to the
registrar of companies. Those for 2022, will be delivered in due
course. The auditors have reported on those accounts; their reports
were (i) unqualified, (ii) did not include a reference to any
matters to which the auditors drew attention by way of emphasis
without qualifying their report and (iii) did not contain a
statement under section 498 (2) or (3) of the Companies Act 2006.
Full financial statements for the year ended 31 December 2022 will
shortly be available to shareholders, and after adoption at the
Annual General Meeting on 28 April 2023 will be delivered to the
registrar.
2. Alternative performance measures
The Group uses adjusted figures as key performance measures in
addition to those reported under adopted IFRS, as management
believe these measures 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 statutory results are set out below.
a. Adjusted operating profit
Adjusted operating profit is the Group's operating profit
excluding the amortisation of acquired intangible assets and other
adjustments as defined in note 1. 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.
2022 2021
=========================================== ======= =======
Profit before tax 124,102 105,931
Adjustments:
Amortisation of acquired intangible assets 7,051 9,001
Gain on disposal of property (1,208) (1,569)
IT transformation costs 8,868 8,493
Redundancy and other restructuring costs 1,372 6,445
Russia market exit 3,555 -
=========================================== ======= =======
Adjusted profit before tax 143,740 128,301
=========================================== ======= =======
c. Adjusted basic and diluted earnings per share
Adjusted basic earnings per share is calculated using the
adjusted net profit attributable to the ordinary shareholders and
dividing it by the weighted average ordinary shares in issue (see
note 8). Adjusted net profit attributable to ordinary shareholders
is calculated as follows:
2022 2021
========================================================== ======= =======
Net profit attributable to ordinary shareholders 93,201 80,245
Adjustments:
Amortisation of acquired intangible assets 7,051 9,001
Gain on disposal of property (1,208) (1,569)
IT transformation costs 8,868 8,493
Redundancy and other restructuring costs 1,372 6,445
Russia market exit 3,555 -
Tax effect on adjusted items (3,440) (4,785)
========================================================== ======= =======
Adjusted net profit attributable to ordinary shareholders 109,399 97,830
========================================================== ======= =======
Adjusted diluted earnings per share is calculated by using the
adjusted net profit attributable to ordinary shareholders and
dividing it by the weighted average ordinary shares in issue
adjusted to assume conversion of all potentially dilutive ordinary
shares (see note 8).
d. Adjusted dividend cover
Dividend cover is calculated as earnings per share divided by
dividends per share. Adjusted dividend cover is calculated as
adjusted earnings per share as defined in note 2c above divided by
dividends per share.
e. Total shareholder return
Total shareholder return is the movement in the price of an
ordinary share plus dividends during the year, divided by the
opening share price.
f. Return on capital employed
The return on capital employed ratio is used by management to
help ensure that capital is used efficiently.
2022 2021
====================================== ========= =========
Adjusted operating profit 143,245 128,080
Capital employed
Shareholders' funds 589,907 534,080
Cash and cash equivalents (114,770) (123,474)
Interest bearing loans and borrowings 8,836 9,336
Pension deficit net of deferred tax 6,065 6,023
====================================== ========= =========
Capital employed 490,038 425,965
====================================== ========= =========
Average capital employed 458,002 424,815
====================================== ========= =========
Return on capital employed 31.3% 30.1%
====================================== ========= =========
Average capital employed is defined as the average of the
capital employed at the start and end of the relevant year.
g. Working capital as a percentage of revenue
Working capital as a percentage of revenue is monitored as
control of working capital is key to achieving our cash generation
targets. It is calculated as inventory plus trade receivables, less
trade payables, divided by revenue.
h. 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 2022 results are restated at 2021
exchange rates. There are no disposals or acquisitions in 2022.
Key headings in the income statement are reconciled to OCC as
follows:
OCC
31 December Currency 31 December
2022 adjustment 2022
=========================== =========== =========== ============
Revenue 641,812 (24,999) 616,813
Cost of sales (350,079) 14,421 (335,658)
=========================== =========== =========== ============
Gross margin 291,733 (10,578) 281,155
Overheads (148,488) 3,356 (145,132)
=========================== =========== =========== ============
Adjusted operating profit 143,245 (7,222) 136,023
Interest 495 (63) 432
=========================== =========== =========== ============
Adjusted profit before tax 143,740 (7,285) 136,455
Adjusted taxation (34,341) 1,740 (32,601)
=========================== =========== =========== ============
Adjusted profit after tax 109,399 (5,545) 103,854
=========================== =========== =========== ============
i. 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:
2022 2021
======================================================== ======= =======
Adjusted operating cash flow
Operating cash flow 89,733 117,463
Operating cash flow impact of other adjustments 12,056 13,346
Difference between pension charge and cash contribution 6,979 7,562
Adjusted operating cash flow 108,768 138,371
======================================================== ======= =======
Adjusted operating profit 143,245 128,080
======================================================== ======= =======
Cash conversion 76% 108%
======================================================== ======= =======
3. Operating segments
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
Each of our customers is allocated to a division. Sales to that
customer, along with all directly associated costs of that sale,
are reported under the division to which that customer is
allocated. Where some of our customers sell into multiple end
markets, a lead end market is identified. Sales to these customers
will generally be allocated to the lead end market unless the sale
is of significance and an alternative end market has been
identified, in which case it will be reported under the alternative
end market.
For all costs not directly attributed to a sale, these are
allocated across the three divisions within each of our businesses.
There are some costs that are directly attributable to a division,
but most support costs and facility costs are not directly
attributable to a division and are generally allocated based on
split of revenue. Amortisation of acquired intangible assets is
allocated based on the split of revenue of the entity to which the
asset relates.
Unallocated expenses comprise corporate expenses.
Geographic analysis
Rotork has a worldwide presence in all three operating segments
through its subsidiary selling offices and through an agency
network. A full list of locations can be found at
www.rotork.com.
Analysis by operating segment:
Chemical,
Oil & Process Water
Gas & Industrial & Power Unallocated Group
2022 2022 2022 2022 2022
==================================== ======= ============= ======== =========== ========
Revenue from external customers 283,266 198,355 160,191 - 641,812
==================================== ======= ============= ======== =========== ========
Adjusted operating profit* 63,960 51,206 40,293 (12,214) 143,245
Amortisation of acquired intangible
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 finance income 495
Income tax expense (30,901)
==================================== ======= ============= ======== =========== ========
Profit for the year 93,201
==================================== ======= ============= ======== =========== ========
Chemical,
Oil & Process Water
Gas & Industrial & Power Unallocated Group
2021 2021 2021 2021 2021
==================================== ======= ============= ======== =========== ========
Revenue from external customers 260,153 160,454 148,553 - 569,160
==================================== ======= ============= ======== =========== ========
Adjusted operating profit* 56,342 42,775 40,430 (11,467) 128,080
Amortisation of acquired intangible
assets (6,381) (1,782) (838) - (9,001)
==================================== ======= ============= ======== =========== ========
Segment result 49,961 40,993 39,592 (11,467) 119,079
Other adjustments (13,369)
==================================== ======= ============= ======== =========== ========
Operating profit 105,710
Net finance income 221
Income tax expense (25,686)
==================================== ======= ============= ======== =========== ========
Profit for the year 80,245
==================================== ======= ============= ======== =========== ========
*Adjusted operating profit is operating profit before the
amortisation of acquired intangible assets and other adjustments
(see note 4)
Chemical,
Oil & Process Water
Gas & Industrial & Power Unallocated Group
2022 2022 2022 2022 2022
============================= ===== ============= ======== =========== ======
Depreciation 6,591 4,615 3,727 - 14,933
Amortisation:
- Acquired intangible assets 5,063 1,410 578 - 7,051
- Development costs 1,239 701 868 - 2,808
----------------------------- ----- ------------- -------- ----------- ------
Chemical,
Oil & Process Water
Gas & Industrial & Power Unallocated Group
2021 2021 2021 2021 2021
============================= ===== ============= ======== =========== ======
Depreciation 7,161 4,420 4,092 - 15,673
Amortisation:
- Acquired intangible assets 6,381 1,782 838 - 9,001
- Development costs 817 457 383 - 1,657
----------------------------- ----- ------------- -------- ----------- ------
Balance sheets are reviewed by subsidiary and operating segment
balance sheets are not prepared; therefore no further analysis of
operating segments assets and liabilities is presented.
Geographical analysis:
Revenue by location of subsidiary 2022 2021
================================== ======= =======
UK 55,146 55,971
Italy 52,997 49,150
Rest of Europe 96,627 102,501
USA 129,499 96,565
Other Americas 44,161 40,152
China 120,188 98,011
Rest of World 143,194 126,810
================================== ======= =======
641,812 569,160
================================== ======= =======
4. OTHER ADJUSTMENTS
Refer to note 1 for details on the adjustments to profit,
including an explanation of 'other adjustments'.
The other adjustments to profit included in statutory profit are
as follows:
2022 2021
========================================= ======== ========
Gain on disposal of property 1,208 1,569
Redundancy and other restructuring costs (1,372) (6,445)
IT transformation costs (8,868) (8,493)
Russia market exit (3,555) -
========================================= ======== ========
Other adjustments (12,587) (13,369)
========================================= ======== ========
Gain on disposal of property
The GBP1,208,000 (2021: GBP1,569,000) gain on disposal of
property relates to the sale of the property in Melle, Germany.
Redundancy and Other restructuring costs
A further GBP1,372,000 (2021: GBP6,445,000) of redundancy and
other restructuring costs have been incurred, largely as a result
of the progress made under the Growth Acceleration Programme.
IT transformation costs
During the year GBP8,868,000 (2021: GBP8,493,000) of
configuration costs were incurred on the development of cloud-based
software as part of the multi-year IT transformation programme,
this brings the total expensed as part of this programme to
GBP31,823,000. These costs were expensed as they do not meet the
capitalisation criteria under IAS 38. The new ERP system went live
in January 2023 at our Bath, UK factory. The next phase of the
programme is the roll out of the ERP system across the other Group
entities.
Russia market exit
The Russia market exit costs are in relation to the ceasing of
operations in Russia and the impairment of the gross assets of the
Russian entity.
Income statement disclosure
All adjustments are included in administrative expenses. The
adjustments are taxable or tax deductible in the country in which
the expense is incurred.
Cash flow statement disclosure
Other adjustments have a net operating cash outflow of
GBP12,056,000 (2021: GBP13,346,000) and a net investing cash inflow
of GBP4,049,000 (2021: GBP2,783,000).
5. finance Income and EXPENSE
2022 2021
======================= ===== =====
Interest income 1,235 1,123
Foreign exchange gains 1,814 1,319
======================= ===== =====
Finance income 3,049 2,442
======================= ===== =====
2022 2021
============================================== ======= =======
Interest expense (744) (818)
Interest expense on lease liabilities (406) (404)
Interest charge on pension scheme liabilities (110) (522)
Foreign exchange losses (1,294) (477)
============================================== ======= =======
Finance expense (2,554) (2,221)
============================================== ======= =======
6. Income tax expense
2022 2022 2021 2021
============================================ ======= ======= ======= =======
Current tax:
UK corporation tax on profits for the
year 3,173 2,029
Adjustment in respect of prior years (942) (615)
============================================ ======= ======= ======= =======
2,231 1,414
Overseas tax on profits for the year 30,242 26,277
Adjustment in respect of prior years (287) (295)
============================================ ======= ======= ======= =======
29,955 25,982
============================================ ======= ======= ======= =======
Total current tax 32,186 27,396
============================================ ======= ======= ======= =======
Deferred tax:
Origination and reversal of other temporary
differences (1,935) (1,170)
Impact of rate change 252 (592)
Adjustment in respect of prior years 398 52
============================================ ======= ======= ======= =======
Total deferred tax (1,285) (1,710)
============================================ ======= ======= ======= =======
Total tax charge for year 30,901 25,686
============================================ ======= ======= ======= =======
Profit before tax 124,102 105,931
Profit before tax multiplied by the blended
standard rate of
corporation tax in the UK of 19.0% (2021:
19.0%) 23,579 20,127
Effects of:
Different tax rates on overseas earnings 9,339 7,381
Permanent differences 404 1,591
Losses not recognised 93 (128)
Tax incentives (1,935) (1,835)
Impact of rate change 252 (592)
Adjustments to tax charge in respect
of prior years (831) (858)
============================================ ======= ======= ======= =======
Total tax charge for year 30,901 25,686
============================================ ======= ======= ======= =======
Effective tax rate 24.9% 24.2%
============================================ ======= ======= ======= =======
Adjusted profit before tax (note 2b) 143,740 128,301
Total tax charge for the year 30,901 25,686
Amortisation of acquired intangible assets 1,109 1,784
IT transformation costs 2,217 2,400
Other adjustments (note 4) 114 601
============================================ ======= ======= ======= =======
Adjusted total tax charge for the year 34,341 30,471
============================================ ======= ======= ======= =======
Adjusted effective tax rate 23.9% 23.8%
============================================ ======= ======= ======= =======
A tax charge of GBP987,000 (2021: credit of GBP631,000) in
respect of share-based payments has been recognised directly in
equity.
The effective tax rate for the year is 24.9% (2021: 24.2%). The
adjusted effective tax rate is 23.9% (2021: 23.8%) and is lower
than the effective tax rate for the year principally because of the
tax treatment of expenses included in other adjustments.
The adjusted effective tax rate has increased from 23.8% in 2021
to 23.9% in 2022, principally because of an increase in the
proportion of the Group profits arising in higher tax jurisdictions
internationally. The Group expects its adjusted effective tax rate
to continue to move in line with the trends in corporate tax rates
in the jurisdictions where Rotork operates. The UK corporation tax
rate will increase to 25% from 1 April 2023. However, the adjusted
effective tax rate will still be higher than the standard UK rate
due to higher rates of tax in China, Germany, Australia and the
US.
There is an unrecognised deferred tax liability for temporary
differences associated with investments in subsidiaries. Rotork plc
controls the dividend policies of its subsidiaries and the timing
of the reversal of the temporary differences. The value of
temporary differences associated with unremitted earnings of
subsidiaries for which deferred tax has not been recognised is
GBP272,249,000 (2021: GBP258,167,000).
7. Capital and reserves
0.5p Ordinary 0.5p Ordinary
shares GBP1 Non- shares GBP1 Non-
issued redeemable issued redeemable
and fully preference and fully preference
paid up shares paid up shares
2022 2022 2021 2021
==================================== ============= =========== ============= ===========
At 1 January 4,302 40 4,370 40
Issued under employee share schemes 2 - 4 -
Share buyback programme - - (72) -
At 31 December 4,304 40 4,302 40
==================================== ============= =========== ============= ===========
Number of shares (000) 860,771 860,276
==================================== ============= =========== ============= ===========
The ordinary shareholders are entitled to receive dividends as
declared and are entitled to vote at meetings of the Company.
Share issue
The Group received proceeds of GBP1,133,000 (2021: GBP1,528,000)
in respect of the 494,972 (2021: 816,422) ordinary shares issued
during the year: GBP2,000 (2021: GBP4,000) was credited to share
capital and GBP1,131,000 (2021: GBP1,524,000) to share premium.
Share buyback programme
In the year ending 31 December 2021, the group bought back a
total of 14,403,732 Ordinary shares of 0.5p each for a total value
of GBP50,324,000 including costs of GBP324,000. The average price
paid for these repurchased shares was 348.1p. These repurchased
shares were then cancelled in the same period.
Share forfeiture
During 2021 the Group had a share forfeiture programme following
the completion of a tracing and notification exercise to any
shareholders who have not had contact with the Company over the
past 12 years, in accordance with the provisions set out in the
Company's Articles of Association. Under the share forfeiture
programme, the shares and dividends associated with shares of
untraced members are forfeited and resold in the market, with the
resulting proceeds transferred to the Group. During 2021, the Group
received GBP478,000 proceeds from sale of untraced shares and
GBP135,000 write-back of unclaimed dividends on those shares, which
are reflected in share premium and retained earnings
respectively.
Own shares held
Within the retained earnings reserve are own shares held. The
Group acquired 1,124,000 of its own shares during the year
(2021:
2,154,000). The total amount paid to acquire the shares was
GBP3,475,000 (2021: GBP7,809,000), and this has been deducted
from
shareholders' equity. During the year, 793,000 (2021: 1,582,000)
ordinary shares were released to satisfy share plan awards. The
investment in own shares held is GBP6,000,000 (2021:
GBP5,291,000) and represents 1,831,000 (2021: 1,500,000) ordinary
shares of the Company held in trust for the benefit of directors
and employees for future payments under the Share Incentive Plan
and Long Term Incentive Plan. The dividends on these shares have
been waived.
Preference shares
The preference shareholders take priority over the ordinary
shareholders when there is a distribution upon winding up the
Company or on a reduction of equity involving a return of capital.
The holders of preference shares are entitled to vote at a general
meeting of the Company if a preference dividend is in arrears for
six months or the business of the meeting includes the
consideration of a resolution for winding up the Company or the
alteration of the preference shareholders' rights.
Translation reserve
The translation reserve comprises all foreign exchange
differences arising from the translation of the financial
statements of foreign operations.
Capital redemption reserve
The capital redemption reserve arises when the Company redeems
shares wholly out of distributable profits.
Hedging reserve
The hedging reserve comprises the effective portion of the
cumulative net change in the fair value of cash flow hedging
instruments that are determined to be an effective hedge.
Dividends
The following dividends were paid in the year per qualifying
ordinary share:
2022
Payment
date 2022 2021
================================================== ============= ====== ======
4.05p final dividend for 2021 (final dividend
for 2020: 6.30p) 20 May 34,787 54,996
2.40p interim dividend for 2022 (interim dividend
for 2021: 2.35p) 23 September 20,597 20,519
================================================== ============= ====== ======
55,384 75,515
================================================================ ====== ======
During 2021, the Company exercised its authority in accordance
with the provisions set out in the Company's Articles of
Association that the balance of unclaimed dividends over the past
12 years be forfeited. During 2021, GBP135,000 of unclaimed
dividends have been adjusted for in retained earnings, resulting in
a dividends movement in the statement of changes in equity of
GBP75,380,000.
After the balance sheet date the following dividends per
qualifying ordinary share were proposed by the directors. The
dividends have not been provided for.
2022 2021
===================================================== ====== ======
Final proposed dividend per qualifying ordinary share
4.30p 37,013 -
===================================================== ====== ======
4.05p - 34,780
===================================================== ====== ======
8. Earnings per share
Basic earnings per share
Earnings per share is calculated for both the current and
previous years using the profit attributable to the ordinary
shareholders for the year. The earnings per share calculation is
based on 858.9m shares (2021: 869.5m shares) being the weighted
average number of ordinary shares in issue (net of own ordinary
shares held) for the year.
2022 2021
====================================================== ======= =======
Net profit attributable to ordinary shareholders 93,201 80,245
====================================================== ======= =======
Weighted average number of ordinary shares
Issued ordinary shares at 1 January 858,776 872,958
Effect of own shares held 6 (28)
Effect of Share Buyback Programme - (3,694)
Effect of shares issued under Sharesave plans 167 220
====================================================== ======= =======
Weighted average number of ordinary shares during the
year 858,949 869,456
====================================================== ======= =======
Basic earnings per share 10.9p 9.2p
====================================================== ======= =======
Adjusted basic earnings per share
Adjusted basic earnings per share is calculated for both the
current and previous years using the profit attributable to the
ordinary shareholders for the year after adding back the after tax
impact of the adjustments. The reconciliation showing how adjusted
net profit attributable to ordinary shareholders is derived is
shown in note 2.
2022 2021
========================================================== ======= =======
Adjusted net profit attributable to ordinary shareholders 109,399 97,830
========================================================== ======= =======
Weighted average number of ordinary shares during the
year 858,949 869,456
========================================================== ======= =======
Adjusted basic earnings per share 12.7p 11.3p
========================================================== ======= =======
Diluted earnings per share
Diluted earnings per share is based on the profit for the year
attributable to the ordinary shareholders and 860.6m shares (2021:
870.5m shares). The number of shares is equal to the weighted
average number of ordinary shares in issue (net of own ordinary
shares held) adjusted to assume conversion of all potentially
dilutive ordinary shares. The Company has two categories of
potentially dilutive ordinary shares: those share options granted
to employees under the Sharesave plan where the exercise price is
less than the average market price of the Company's ordinary shares
during the year and contingently issuable shares awarded under the
Long Term Incentive Plan (LTIP).
2022 2021
======================================================== ======= =======
Net profit attributable to ordinary shareholders 93,201 80,245
======================================================== ======= =======
Weighted average number of ordinary shares (diluted)
Weighted average number of ordinary shares for the year 858,949 869,456
Effect of Sharesave options 562 711
Effect of LTIP share awards 1,119 372
======================================================== ======= =======
Weighted average number of ordinary shares (diluted)
during the year 860,630 870,539
======================================================== ======= =======
Diluted earnings per share 10.8p 9.2p
======================================================== ======= =======
Adjusted diluted earnings per share
2022 2021
========================================================== ======= =======
Adjusted net profit attributable to ordinary shareholders 109,399 97,830
========================================================== ======= =======
Weighted average number of ordinary shares (diluted)
during the year 860,630 870,539
========================================================== ======= =======
Adjusted diluted earnings per share 12.7p 11.2p
========================================================== ======= =======
9. Employee benefits
2022 2021
====================================================== ========= =========
Recognised liability for defined benefit obligations:
- Present value of funded obligations 144,381 233,135
- Fair value of plan assets (136,375) (225,510)
====================================================== ========= =========
8,006 7,625
Other pension scheme liabilities 158 261
Employee bonuses 11,524 10,717
Employee indemnity provision 1,925 2,033
Other employee benefits 5,542 5,140
====================================================== ========= =========
27,155 25,776
====================================================== ========= =========
Non-current 11,955 11,336
Current 15,200 14,440
====================================================== ========= =========
27,155 25,776
====================================================== ========= =========
10. Related parties
The Group has a related party relationship with its subsidiaries
and with its directors and key management. Transactions between two
subsidiaries for the sale and purchase of products or the
subsidiary and parent Company for management charges are priced on
an arm's length basis.
Financial calendar
28 February Preliminary announcement of annual results for 2022
2023
13 April Ex-dividend date for final proposed 2022 dividend
2023
14 April Record date for final proposed 2022 dividend
2023
28 April Announcement of trading update
2023
28 April Annual General Meeting held at Bailbrook House Hotel, Bath,
2023 Somerset, BA1 7JD
8 August Announcement of interim financial results for 2023
2023
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END
FR FFFSIFAIDFIV
(END) Dow Jones Newswires
February 28, 2023 02:00 ET (07:00 GMT)
Rotork (LSE:ROR)
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