Tuesday 5th March 2024
Rotork
plc
2023 Preliminary
Results
Strong
delivery of Growth+ strategy; entering 2024 with
confidence
Adjusted highlights
|
2023
|
2022
|
% change
|
OCC3 %
change
|
Order intake1
|
£723.7m
|
£681.6m
|
+6.2%
|
+7.8%
|
Revenue
|
£719.1m
|
£641.8m
|
+12.0%
|
+13.6%
|
Adjusted2 operating profit
|
£164.5m
|
£143.2m
|
+14.8%
|
+17.3%
|
Adjusted2 operating margin
|
22.9%
|
22.3%
|
+60bps
|
+70bps
|
Adjusted2 basic earnings per
share
|
14.6p
|
12.7p
|
+14.8%
|
+17.0%
|
Cash conversion4
|
120%
|
76%
|
-
|
-
|
Reported highlights
|
2023
|
2022
|
% change
|
|
Revenue
|
£719.1m
|
£641.8m
|
+12.0%
|
|
Operating profit
|
£148.8m
|
£123.6m
|
+20.4%
|
|
Operating margin
|
20.7%
|
19.3%
|
+140bps
|
|
Profit before tax
|
£150.6m
|
£124.1m
|
+21.4%
|
|
Basic earnings per share
|
13.2p
|
10.9p
|
+21.7%
|
|
Full year dividend
|
7.20p
|
6.70p
|
+7.5%
|
|
Summary
·
Order intake was 7.8% higher year-on-year on an OCC basis
with orders ahead at all divisions
·
Deliveries accelerated in the second half as supply chain
challenges were overcome resulting in some normalisation of the
order book which remained strong at period end
·
Revenue increased 12.0% year-on-year despite a significant
foreign exchange headwind which strengthened through the second
half. On an OCC basis sales grew 13.6% year-on-year with all
divisions making strong progress
·
Adjusted operating margins were 60bps higher year-on-year at
22.9%. The reported operating margin was 20.7%
·
Rotork received a rating of AAA in the MSCI ESG ratings
assessment and reduced its scope 1 and 2 GHG emissions by 11%
year-on-year
·
Closing net cash was £134.4m (December 2022: £105.9m).
ROCE4 was 33.9% (up 260bps)
·
£50m share buyback programme announced
Kiet Huynh, Chief Executive, commenting on the results,
said:
"We continued to make significant
progress in 2023 and delivered another year of strong organic sales
growth, margin improvement and good cash flow performance. Given
the strength of our balance sheet we have today announced a £50m
share buyback whilst retaining the financial flexibility to pursue
strategic investments.
The delivery of Growth+ continues
and the benefits of the strategy are apparent, including in our
organic sales growth performance in 2023. Target Segments
successes included upstream oil & gas electrification
(including methane emissions reduction), mining and metals
processing (focused on the battery value chain) and water
infrastructure. Successes under Customer Value included further
progress on our programme to improve efficiency, lead times and
customer experience, and under Innovative Products & Services,
the launch of the IQ3 Pro and smartphone app.
We remain confident of delivering
our financial ambition of mid-to-high single digit sales growth and
mid-20s adjusted operating margins over time and, based on momentum
in the year so far and supported by the strength of our order book,
we continue to expect 2024 to be another year of progress on an OCC
basis."
1 Order intake represents the
value of orders received during the period.
2 Adjusted4
figures exclude
the amortisation of acquired intangible assets and other
adjustments (see note 4).
3 OCC4
is organic
constant currency results which exclude acquired businesses and are
restated at 2022 exchange rates.
4 Adjusted figures, organic
constant currency ('OCC') figures, cash conversion and ROCE are
alternative performance measures and are used consistently
throughout these results. They are defined in full and reconciled
to the 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 9.00am GMT today in the Library at
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/65c262c077117a0c00a288ad/ndhd.
Please join the
webcast a few minutes before 9.00am 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.
Health, safety & wellbeing
The safety of our people, partners
and visitors is our number one priority, and our vision for health
and safety is zero harm. In 2023, we recorded a lost-time injury
rate of 0.08, an improvement on the 0.13 recorded in 2022, partly
reflecting extensive work completed across the Group to implement
our Global Safety Standards. Our Total Recordable Injury Rate was
0.26 (2022: 0.53).
In many regions, a knock-on effect
of the invasion of Ukraine has been a further rise in consumer
price inflation, which had already increased in the aftermath of
Covid, particularly on essentials such as food, energy and housing
costs. While there are signs that inflation is being brought under
control by increased interest rates, it peaked later than
anticipated at higher levels and remained higher than expected for
a longer period. We took steps to assist affected colleagues
wherever we could, including through bringing forward salary
reviews.
Our employee engagement Pulse survey
took place in July. The participation rate increased to 79%, versus
December 2022's survey at 75%. As part of the engagement survey, we
ask employees to rate Rotork as a place to work between 1 and 10,
where 10 is highest. Engagement continues to improve, with the
score increasing to 7.4 in July, from 7.2 in December 2022 and 6.7
in June 2022. Reflecting the encouraging trend in our engagement
survey results and best practice, we moved to an annual survey
during 2023.
We have a committed team who are
proud to work at Rotork and determined to deliver on our ambitious
goals. We offer our thanks and appreciation for all their efforts
throughout 2023.
Environmental performance
Sustainability is a major focus for
Rotork. Whilst our impact in enabling our customers to improve
their environmental performance likely far exceeds our Company's
environmental footprint, the latter is no less important. Our
total scope 1 and 2 (market-based) emissions decreased by 11% in
2023 compared with 2022, reflecting the implementation of energy
efficiency projects and investment in on-site renewable
generation.
Our SBTi-validated near-term
greenhouse gas ("GHG") emissions reduction 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 the use of sold products 25% by 2030 from a 2020
base year
• that at least 25% of our suppliers
by emissions covering purchased goods and services will have
science-based targets by 2027
We target net-zero by 2035 for
scopes 1 and 2 and by 2045 for scope 3.
Underlining the importance we attach
to achieving our net-zero targets, scopes 1 and 2 greenhouse gas
reduction targets are included in our senior team's long-term
remuneration opportunity.
We were pleased to receive a rating
of AAA in the MSCI ESG ratings assessment (AA previously) and to
once again be recognised as one of the top performing companies
rated by Sustainalytics and included in their 2023 ESG Industry Top
Rated companies list.
Growth+ strategy
The starting point of our Growth+
strategy is our Purpose, 'keeping the world flowing for future
generations'. Our Purpose is a powerful motivator, and it drives
everything we do. It also recognises the role we play in making our
world a great place to live, and the role we play in helping
improve the safety, environmental and social performances of not
just ourselves but also 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 ensure safety, are
reliable, efficient, easy to use, and play a vital role in ensuring
the uptime of our end users' operations (including through
predictive and preventative maintenance).
Our ambition is mid to high
single-digit revenue growth and mid 20s adjusted operating margins
over time. Three powerful megatrends help drive our growth:
automation, electrification and digitalisation, as well as the
trends of sustainability, decarbonisation, energy security, water
scarcity, water quality and new energies. Our Growth+ strategy is
designed to drive our growth and to balance our investments with
margin progression. At the core of our strategy are three pillars:
Target Segments, Customer Value and Innovative Products &
Services, each underpinned by our focus on 'Enabling a Sustainable
Future'.
Our 'Target Segments' are key
segments within each of our divisions where we have the right to
play and where there are significant opportunities for profitable
growth. We are prioritising investment into these areas, helping us
to grow faster than our overall markets. We have already seen early
benefits from our focus on Target Segments which represented around
half of group sales in 2023 and grew 15% YoY OCC.
Successes in Oil & Gas include
in North America, where our IQTF range has established itself as
the leading electric actuator for the wellhead choke valve, and in
liquified natural gas (LNG) where we benefit from a significant
installed base and are well placed to support the industry's
planned liquefaction capacity expansion. We have further developed
the Target Segment 'methane emissions reduction' and now describe
this as 'upstream electrification'. The change reflects our
business development as well as the oil & gas industry's
commitment to electrification which was highlighted at COP28 in
December 2023 with companies representing more than 40% of global
oil production signing the Oil & Gas Decarbonization Charter.
The medium-term opportunity is potentially greater than we
originally calculated, with North America representing the majority
of the opportunity.
Chemical, Process & Industrial
(CPI) plays across various markets and sectors, and selectivity and
focus are key. We are focused on identifying growth opportunities
in structurally growing markets and through share gain in areas
where Rotork has historically been under-represented. Identifying
these opportunities requires an in-depth investigation of value
chains that are often in new markets. In 2023 we made good progress
in the Target Segments of HVAC, mining (focused on the battery
value chain), speciality chemicals and decarbonisation.
In Water & Power, we have made
excellent progress in our Target Segments of water infrastructure,
desalination, and alternative energy. Our teams take a
straightforward commercial approach to identifying the areas where
we have a clear 'right to play' and only then step up their pursuit
of projects in these areas. Examples include the exciting water
reuse sector, where network digitalisation and efficiency are
increasingly in focus, desalination, where electrification is a
structural trend, and the alternative energy sector. In the latter,
unmanned offshore high-voltage direct current ('HVDC') platforms
require the most reliable automation equipment with advanced
diagnostic features that allow predictive and preventative
maintenance techniques and which Rotork is ideally placed to
provide.
We are also making good progress on
our Customer Value pillar, which puts the customer at the forefront
of everything we do. One example is the implementation and
integration of common systems and processes throughout the Group.
This will improve efficiency and ultimately deliver improved lead
times and customer experience. We successfully deployed our new
Enterprise Resource Planning system during the first half at our
Bath (UK) site. The system will be implemented across all sites
over the next few years.
Our Innovative Products &
Services pillar also has good momentum. We launched the IQ3 Pro and
its accompanying smartphone app during the year. This offers
greater connectivity than its predecessor and the smartphone app
makes configuration and operation easier and more convenient. Our
enhanced Intelligent Asset Management ('iAM') condition monitoring
and analytics software has been well received by end-users who
appreciate its expanded diagnostic and predictive
functions.
In August, we acquired a small but
strategically important business, Hanbay Inc., adding a compact
high-torque electric valve actuator to our product
offering. The Hanbay acquisition is fully consistent with the
Growth+ strategy.
Market update
Energy security and the energy
transition were again major trends in 2023. Energy security became
a significantly increased global priority following the dramatic
change in the energy landscape triggered by the events in Ukraine
in February 2022 and the subsequent attack on the Nord Stream
pipeline as well as conflict in Israel/Palestine. While hydrocarbon
prices have fallen from the levels they reached immediately
following the Ukraine invasion, in most cases, they remain higher
than they have been for many years. The energy sector continues to
invest in traditional energy infrastructure, including in LNG, and
is seeking to catch up from earlier under-investment.
The year also saw the world's
hottest summer on record (according to NASA) and extreme weather
events such as wildfires and droughts across the globe. These
events remind us of the urgency of tackling carbon emissions and
adapting to climate change. It is apparent that tackling the
climate crisis and delivering a just energy transition at pace will
require a practical approach including a balance of technologies
with methane emissions reduction, LNG, carbon capture and storage,
hydrogen and direct air capture all having significant roles to
play.
Rotork has an important role to play
through its eco-transition portfolio which contributed 30% of group
sales in 2023. This consists of products and services
that:
·
Reduce (and in many cases eliminate) methane
emissions, through the electrification of the upstream oil &
gas sector;
·
Enable the energy transition, for example, through
applications in LNG, carbon capture and storage, biofuels, hydrogen
and offshore wind; and
·
Manage water and wastewater distribution and
treatment.
Rotork has had notable success in
upstream electrification, with the IQTF being established as the
leading electric actuator for upstream oil and gas choke valve
automation.
While some of these technologies are
still early in their commercialisation phase, we believe they will
grow significantly. Methane emissions reduction was a prominent
topic at COP28 in Dubai in December, with companies representing
more than 40% of global oil production committing to the Oil &
Gas Decarbonization Charter and to near-zero upstream methane
emissions by 2030 including through electrification. The United
States Environmental Protection Agency issued its 'final rule'
regarding methane emissions. This requires new and existing natural
gas-driven process controllers (i.e. pneumatic actuators) across
the USA to be zero emission, with few exceptions.
The growth in electric vehicle and
energy storage demand continues to boost the entire battery value
chain. For Rotork's CPI division, opportunities include metals and
minerals mining and processing, speciality chemicals and critical
HVAC controls in battery and vehicle production facilities. In the
semi-conductor fabrication and data centre markets, customers
increasingly recognise the benefits of Rotork's critical HVAC
product ranges and are switching to them.
Decarbonisation remains a
high-potential future market for all three of our divisions, and
recognising this we have moved to report decarbonisation activity
in each division rather than only in CPI. The United States'
Inflation Reduction Act and the European Union's similar
initiatives support the carbon capture and storage ('CCS'),
hydrogen and sustainable aviation fuel sectors. We saw a marked
increase in enquiries, engineering design and quotation activity in
the period, particularly concerning carbon capture. The Global CCS
Institute reported that the capacity of CCS projects in
construction and development grew 57% year-on-year in 2023 to 312
Mtpa CO2.
The outlook for water and wastewater
remains positive with continuing investment in new and existing
infrastructure. The market is focused on delivering water
availability, improving water quality, reducing leakage, efficient
water reuse, and automating and digitalising networks and
processes. Significant investment initiatives worldwide are
underway or set to begin, including in the US, China, the Middle
East and the UK. The desalination market remains active, with
projects underway worldwide and, most notably, in the Middle
East.
In traditional power, the focus
remains on plant modernisation, refurbishment, and life extension.
Whilst the new build market is quieter than it once was, there
continue to be new build opportunities, for example in China and
India. Renewable energy is playing an important role in delivering
energy security as well as the energy transition. According to the
IEA, the amount of renewable power capacity that will have been
added worldwide in 2023 will have been ca. 30% higher than in 2022.
Rotork products are specified for several applications in offshore
wind, including in HVDC transformer cooling systems, and in
concentrated solar.
Business performance
Group order intake increased 6.2%
year-on-year (7.8% on an OCC basis) to £723.7m. All three divisions
booked higher orders for the full year, with Water & Power and
Oil & Gas strongly ahead. CPI reported encouraging order growth
in the final quarter. Orders, which continue to be driven
predominantly by customers' operational spend, included more large
orders than seen for some time, particularly notably in the first
half.
Supply chain challenges held back
deliveries to customers in the first half of the year, resulting in
during the summer a record order book relative to sales. The supply
chain situation significantly improved during the second half
allowing some normalisation of the order book. The lead time of
semi-finished components such as circuit boards which had increased
substantially following Covid was the biggest of these supply chain
challenges.
Group revenue was 12.0% higher
year-on-year (13.6% higher OCC), benefitting from both higher
volumes and price increases. Oil & Gas sales rose 15.9% (16.6%
OCC), driven by strength in EMEA and the Americas and increased
upstream electrification activity. CPI sales were 7.7% ahead (9.7%
OCC), with all major geographic regions growing at similar rates.
Water & Power sales were up 10.5% (13.3% OCC), with both
segments achieving good growth.
By geography, Europe, Middle East
& Africa ('EMEA') sales by destination grew double digits (OCC)
and was Rotork's fastest growing region. Asia Pacific revenues grew
high-single digits year-on-year on an OCC basis with all divisions
ahead. Americas revenues were mid-teens ahead (OCC) with all
divisions in the region growing at similar rates.
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 (2022:
21%).
Adjusted operating profit was 14.8%
higher year-on-year (17.3% higher OCC) at £164.5m, reflecting
volume growth and positive net price / mix which were partly offset
by annual wage inflation and investment in our Growth+ strategy.
Adjusted operating margins recovered strongly in the second half
and full year margins were 60bps higher at 22.9% (70bps higher at
23.0% OCC) and reported profit before tax was £150.6m.
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 &
wastewater'; 'methane emissions reduction' and 'new energies &
technologies'. Eco-transition, water & wastewater and methane
emissions reduction sales grew faster than the Group year-on-year
in 2023 and represented 30% of group sales.
Return on capital employed was 33.9%
(2022: 31.3%), benefitting from a greater increase in adjusted
operating profit than the increase in capital employed. Cash
conversion was 120% (2022: 76%) as 2023 saw a more normal delivery
phasing and a reduction in inventory as supply chain issues
normalised.
Dividend and capital allocation
We retain a strong balance sheet and
had a net cash position of £134.4m at the period end (31 December
2022: £105.9m). This gives us 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 using buybacks and
dividends to deliver shareholder returns.
On 4 August, Rotork acquired
Montreal (Canada) headquartered Hanbay Inc. ('Hanbay'). Hanbay
designs and manufactures compact, high-torque electric valve
actuators for non-hazardous and hazardous applications. The
acquisition expands Rotork's electric actuator offering, is
consistent with all three pillars of the Growth+ strategy, and
increases the sales of our eco-transition portfolio.
Rotork recognises the importance of
a growing dividend to our shareholders. We are committed to a
progressive dividend policy, subject to satisfying the cash
requirements of the business.
The Board is recommending a final
dividend of 4.65p per share. With the 2023 interim dividend of
2.55p, the total dividend for the year is 7.20p, a 7.5% increase on
the 2022 full-year dividend. This equals 2.0 times cover based on
adjusted earnings per share (2022: 1.9 times). The final dividend
will be payable on 24 May 2024 to shareholders on the register on
19 April 2024. The last date to elect for the Dividend Reinvestment
Plan ('DRIP') is 3 May 2024.
The Rotork DRIP is provided by
Equiniti Financial Services Limited. The DRIP enables the Company's
shareholders to elect to have their cash dividend payments used to
purchase the Company's shares. More information can be found
at www.shareview.co.uk/info/drip.
Consistent with the Group's stated
capital allocation policy, the Board has decided to return a
prudent level of cash to shareholders while retaining a strong
balance sheet. As a result, Rotork will be commencing a share
buyback programme of up to £50m. Rotork's financial flexibility
enables it to pursue strategic investments and the Group remains
active in looking for suitable opportunities, consistent with the
Growth+ strategy. For further details see the separate announcement
today.
Board update
As announced on 12 September,
Jonathan Davis will be stepping down as Group Finance Director and
from the Board at the AGM in April 2024, after 21 years with the
company. Over his time at Rotork, Jonathan has overseen significant
profitable growth, and we all wish him well for his
retirement.
We are looking forward to welcoming
Ben Peacock to Rotork to be our Chief Financial Officer from 11th
March. Ben was previously Vice President of Finance & IT -
Minerals Division at The Weir Group PLC. Ben brings considerable
industry knowledge and a strong record of financial expertise
within complex businesses.
I would also like to thank Peter
Dilnot and Ann Christin Andersen for their considerable
contributions to Rotork over the last 5-6 years. Peter stepped down
as a Director of Rotork in December 2023, having been our Senior
Independent Non-executive Director, and we wish him all the best in
his role as Chief Executive Officer at Melrose Industries
Plc.
Rotork's ESG Committee Chair Ann
Christin will leave the Board following the Company's AGM in 2024.
We wish Ann Christin all the best in her new role as Chief
Executive Officer of Norwegian Energy Partners.
I am very much looking forward to
welcoming two new non-executive directors to Rotork. Andrew Heath
will join the Board on 1 April 2024. Andrew is currently Chief
Executive Officer of Spectris plc, a role he has held since
September 2018. He will be appointed Chair of the Safety and
Sustainability Committee from 1 May 2024, subject to
election. Vanessa Simms will join the Board on 21 June 2024.
Vanessa is currently Chief Financial Officer at Land Securities
Group plc. Andrew and Vanessa bring a wide range of listed company
expertise, experience in leading change and in delivering organic
and non-organic growth and will further strengthen the diverse mix
of skills and experience on the Board.
Outlook
We remain confident of delivering
our financial ambition of mid-to-high single digit sales growth and
mid-20s adjusted operating margins over time and, based on momentum
in the year so far and supported by the strength of our order book,
we continue to expect 2024 to be another year of progress on an OCC
basis
Divisional review
Oil
& Gas
|
|
|
|
|
£m
|
2023
|
2022
|
Change
|
OCC3 Change
|
Revenue
|
328.4
|
283.3
|
+15.9%
|
+16.6%
|
Adjusted operating profit
|
83.6
|
64.0
|
+30.7%
|
+32.7%
|
Adjusted operating margin
|
25.5%
|
22.6%
|
+290bps
|
+310bps
|
The recovery in oil & gas sector
activity experienced in 2022 continued through 2023. Hydrocarbon
prices have fallen from the levels reached immediately following
the invasion of Ukraine, however prices remain above investment
incentive levels and there is increased spend across most segments
and geographies on increasing output, improving productivity,
reducing emissions and on decarbonisation (including carbon capture
and storage and hydrogen). The work to increase LNG export capacity
in the USA and the Middle East continues on track, and in December
industry players committed to near-zero upstream methane emissions
by 2030 and to the electrification of upstream
operations.
Following a first half where
deliveries continued to be somewhat restricted by supply chain
challenges the second half saw a strong recovery and full year
divisional sales were ahead 16.6% year-on-year (OCC). All segments
grew and downstream sales represented 49% of the total (50% in
2022); upstream 27% (25%) and midstream 24% (25%).
The strongest growth in regional
sales by destination was in EMEA, driven by significantly increased
customer activity in Western Europe and the Middle East. All three
EMEA segments - downstream, upstream and midstream grew at similar
rates. APAC revenues were modestly ahead overall (OCC) despite
reduced activity in the midstream segment in China. Americas sales
were ahead mid-teens with all three segments growing in the region,
and upstream and midstream growing particularly strongly. Sales to
Mexico were lower due to a project completing.
The division's adjusted operating
profit was £83.6m, 30.7% up year-on-year. Higher volumes and
positive pricing more than offset increased people costs and
investment in the division's commercial teams and resulted in
adjusted operating margins rising 290 basis points to
25.5%.
Oil & Gas' focus on target
segments during the year delivered notable order wins in upstream
electrification, Asia Infrastructure, decarbonisation and Rotork
Site Services. Demand from choke valve manufacturers for the Rotork
IQTF electric actuator grew strongly year-on-year as North American
upstream operators sought to eliminate incomplete flaring
downstream of new and existing wellheads. Rotork electric actuators
and network control devices were selected to provide control and
safety at a major new multi-site tank farm development in India
(order secured with the help of Rotork Site Services and included a
five-year Lifetime Management contract). Rotork fluid power
actuators were also selected to control valves at an innovative new
blue hydrogen facility under construction in Louisiana (US). Blue
hydrogen is produced from reforming natural gas, with resulting
carbon dioxide captured and stored. The capture unit at the
Louisiana plant is designed to capture and permanently sequester
more than 5mn tonnes of carbon each year. Rotork actuators and
network control devices were specified in the upgrade of an
integrated refinery complex in Singapore. The upgrade enables
increased production of cleaner, low sulphur fuels and the
production of sustainable aviation fuel through processing waste
oils.
Chemical, Process & Industrial
|
|
|
|
|
£m
|
2023
|
2022
|
Change
|
OCC3 Change
|
Revenue
|
213.7
|
198.4
|
+7.7%
|
+9.7%
|
Adjusted operating profit
|
51.3
|
51.2
|
+0.1%
|
+1.8%
|
Adjusted operating margin
|
24.0%
|
25.8%
|
-180bps
|
-180bps
|
CPI is a supplier of specialist
actuators and instruments for niche critical applications in the
broad chemical, process industry and industrial sectors. The
division serves a wide range of end markets including specialty and
other chemicals, metals & mining, critical HVAC,
pharmaceutical, steel and cement. The automation, electrification,
digitalisation and decarbonisation megatrends are important growth
drivers for these markets. Rotork has historically been
under-represented in several of these markets and has the
opportunity to win market share in the years ahead.
The division delivered a good full
year sales performance, with revenues 9.7% higher year-on-year on
an OCC basis, despite economic weakness in a number of regions
including most notably China. The division's performance clearly
benefitted from the pursuit of its chosen Growth+ target segments
such as the focus on specialty chemicals and metals & mining
markets directly related to the fast-growing battery value chain
and critical HVAC including in data centres and semi-conductor
plants.
By destination, Asia Pacific sales
were ahead double digits on an OCC basis driven by strong growth in
India and South Asia. North Asia revenue was modestly ahead OCC.
EMEA sales grew high-single digits OCC, driven by the Middle
East/Africa region. Americas sales also grew high-single digits
OCC.
The division's adjusted operating
profit was £51.3m, 0.1% higher than the prior year. Adjusted
operating margins fell 180 basis points to 24.0%. Particularly
strong revenue growth in fluid power actuators contributed to a
negative product mix which even with improved direct labour
productivity meant a decline in gross margin. With overheads then
increasing below the Group average and in line with revenue, this
resulted in a 180bps adjusted operating margin
reduction.
Rotork's electric and fluid power
actuators and instruments were selected by innovative customers
across the battery value chain (mining, minerals processing and
battery production) for their robustness and reliability. Rotork's
electric and fluid power actuators and control systems are being
supplied to a major chemical project being built in China. Rotork
was selected in part due to the customer's preference for the
Rotork Pakscan field device control system. A privately-owned fine
chemicals company has chosen Rotork's YTC positioners for their
Indian plant expansion replacing a competitor's existing product.
Rotork's pneumatic actuators have also been selected to control
bottom door systems on 'aggregate hopper' rail wagons which will be
used on the UK's High Speed 2 rail project.
Water & Power
|
|
|
|
|
£m
|
2023
|
2022
|
Change
|
OCC3 Change
|
Revenue
|
177.0
|
160.2
|
+10.5%
|
+13.3%
|
Adjusted operating profit
|
46.4
|
40.3
|
+15.3%
|
+19.0%
|
Adjusted operating margin
|
26.2%
|
25.2%
|
+100bps
|
+120bps
|
Water & Power is a supplier of
premium actuators, predominantly electric, and gearboxes for
applications in the water, wastewater and treatment and power
generation sectors. Rotork has significant growth opportunities
including through helping solve customers' water quality and water
scarcity challenges as well as the automation, electrification and
digitalisation trends. Water and wastewater contributed 66% of
divisional sales in the year.
Full year divisional sales were
ahead 13.3% year-on-year (OCC). Following several years where water
and wastewater sector sales growth clearly outpaced the power
sector, both grew at similar rates in 2023. Asia Pacific sales were
ahead high-single digits year-on-year (OCC), with very strong
revenue growth in India partly offset by more modest sales growth
elsewhere. Americas sales grew strongly year-on-year driven by
water and wastewater. Power sector sales were slightly lower in the
region. EMEA was Water & Power's fastest growing geographic
region in 2023.
The division's adjusted operating
profit was £46.4m, 15.3% higher year on year. Water & Power is
the division with the highest proportion of electric actuator sales
and therefore was most impacted in recent years by the shortage of
chipsets and consequent cost increases. Availability started to
normalise in the year and the division therefore benefitted the
most. This, together with improved labour productivity, resulted in
adjusted operating margins increasing 100 basis points to
26.2%.
The division made good progress in
its target segments of water infrastructure, waste and wastewater
treatment, desalination and alternative energy during the year.
Rotork is supplying electric actuators and motorised gearboxes to
control the transportation and distribution of potable water to a
major new town in the Middle East. Rotork's market leading product
and service offering as well as our local presence (valve actuation
centre and service team) helped secure this high-profile order, one
of the largest in Rotork's history. Rotork is supplying electric
and fluid power actuators to a number of wastewater treatment
modernisation and improvement projects around the world which will
provide better quality water more efficiently, including projects
in India, Singapore and the USA (California and Illinois). Rotork's
IQ3 Pro electric actuators have been selected for critical control
duties on HVDC transformer platforms that will be used to transport
electricity generated by North Sea windfarms back to the UK. The
windfarms concerned have the generating capacity to power
approximately 5m homes.
By
order of the Board
Kiet Huynh
Chief Executive
4 March 2024
Financial review
Order
intake for the year was £723.7m (2022: £681.6m), up 6.2% from the
prior year or 7.8% on an organic constant currency (OCC) basis,
with all divisions ahead of the prior year.
Group revenue was £719.1m for the
year, 12.0% higher (+13.6% OCC) than 2022. Revenue for the second
half of the year was £384.4m, which was 14.9% higher than the first
half of the year. Revenue grew in all three divisions with O&G
reporting the strongest year-on-year growth. O&G finished the
year 15.9% ahead (+16.6% OCC), CPI grew 7.7% (+9.7% OCC) and
W&P grew 10.5% (+13.3% OCC). Within O&G, upstream sales
again increased the most, up by around a quarter OCC, sales to
midstream were up low-double digits OCC and downstream, still the
largest segment, increased mid-double digits OCC.
Rotork Site Services, our global
service network and a key differentiator in our industry, performed
strongly in the year with revenues growing 13.6% compared with
2022. Again, performance in the second half of the year was
considerably stronger than the first as the improved supply chain
situation allowed more retrofit projects to proceed. Revenue was
15.1% ahead of 2022 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% (2022: 21%) of Group revenue.
Gross margin increased 170 basis
points to 47.2% (+160bps OCC), in part driven by the increase in
revenue. Cost increases related to components were successfully
mitigated by the price increase at the beginning of the year with
both increases more modest than the prior two years.
Reported overheads increased by
£22.2m (+13.2%) compared with 2022, largely driven by investment in
people and commercial activities. Overheads as a percentage of
revenue increased marginally from 26.2% in 2022 to 26.5% in
2023.
Reported operating profit was
£148.8m, 20.4% higher year on year. Adjusted operating profit was
£164.5m, a 14.8% increase with adjusted operating margin increasing
60 basis points to 22.9% (2022: 22.3%). On an OCC basis, adjusted
operating profit increased 70 basis points to 23.0%.
Net finance income was £1.9m (2022:
income of £0.5m) benefitting from more favourable interest
rates.
Reported profit before tax was
£150.6m, an increase of 21.4% from £124.1m in 2022.
Adjusted basic earnings per share
was 14.6p (2022: 12.7p), an increase of 14.8%. Statutory basic
earnings per share was 13.2p (2022: 10.9p), an increase of
21.7%.
Adjusted earnings reconciliation
|
|
|
Gain
on
property
disposal
|
Business
Transformation
costs
|
|
|
Operating profit
|
148.8
|
2.1
|
(0.7)
|
13.1
|
1.2
|
164.5
|
Profit before tax
|
150.6
|
2.1
|
(0.7)
|
13.1
|
1.2
|
166.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The table above shows the
adjustments between the statutory results for the significant
non-cash and other adjustments and the 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 adjusting items are provided in note 4.
Organic constant currency rates
We also present OCC figures to
exclude the impacts of currency, acquisitions, business closures
and disposals.
|
|
|
Constant
currency
adjustment
(£m)
|
|
2023 at
2022
exchange
rate
(£m)
|
|
|
Organic
business at 2022 exchange rate (£m)
|
|
|
Revenue
|
|
719.1
|
11.9
|
|
731.0
|
(1.6)
|
|
729.4
|
|
641.8
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
47.2
|
339.0
|
5.7
|
47.2
|
344.7
|
(0.9)
|
47.1
|
343.8
|
45.5
|
291.7
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating
profit1
|
|
|
|
|
|
|
|
|
|
|
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 alternative profit measures are
adjusted to exclude amortisation of acquired intangibles, Business
Transformation costs associated with the implementation of a new
ERP system and integration with business processes, and other
adjustments that are considered to be significant and where
treatment as an adjusted item provides stakeholders with additional
useful information to assess the trading performance of the Group
on a consistent basis. Further details of adjusted items are
provided in note 4.
Currency
In 2023 we experienced a currency
tailwind in the first half which then switched to a significant
headwind in the second half. The major currencies affecting the
income statement are the US dollar and the euro. The US
dollar/sterling average rate of $1.24 (2022: $1.24) was a slight
headwind, whilst the euro/sterling average rate was €1.15 (2022:
€1.17), a 2 cent tailwind. However the average sterling rate across
the basket of other currencies, led by Chinese renminbi and Indian
rupee, weakened in 2023 and resulted in a £11.9m or 1.6% headwind
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 £150,000 (2022: £150,000) adjustment to
profit and for US dollar, and dollar-related currencies, a one cent
movement equates to approximately a £500,000 (2022: £550,000)
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 asset/liability, net of the related deferred tax. The
average capital employed increased 6.0% over the year to £485.5m,
driven largely by the retained profit for the year. However
adjusted operating profit increased more and as a result ROCE rose
260bps to 33.9% (2022: 31.3%).
Taxation
The Group's headline effective tax
rate decreased from 24.9% to 24.7%. Removing the impact of the
adjusted items provides a better indication of the underlying rate
and, on this basis, the adjusted effective tax rate is 24.5% (2022:
23.9%). 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, India 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.
Hanbay Inc. acquisition
On 4 August 2023, the Group
acquired 100% of the share capital of Hanbay Inc. ('Hanbay') for
£21.1m. Hanbay designs and manufactures precise, miniature electric
actuators which offer a compact profile and high torque design for
use with small valves and instrument valves in hazardous and
non-hazardous applications. It is headquartered in Montreal,
Canada. The acquisition expands the Group's electric actuator
offering and supports all three pillars of the Growth+ strategy and
increases the percentage sales contribution of the Group's
eco-transition portfolio.
Cash generation
We finished the year with a net
cash position of £134.4m (2022: £105.9m) which is a conversion of
120.3% of adjusted operating profit into cash, up significantly
from 75.9% reported in 2022. The higher cash conversion is largely
explained by improvements in working capital, including reductions
in inventory levels and an improvement in days' sales
outstanding2. Capital expenditure was £7.3m (2022:
£8.3m), plus £2.1m in capitalised software (2022: £2.1m) and £11.6m
in Business Transformation costs which were expensed in the period
(2022: £8.9m). Capital expenditure in 2023 included an initial
investment in our new facility in China which is expected to open
early in 2025.
Our Research and Development
(R&D) spend increased 3.2% to £13.9m which represents 1.9% of
revenue (2022: £13.4m and 2.1%). Dividends of £58.8m, tax payments
of £32.8m, pension contributions of £26.6m and the acquisition of
Hanbay Inc £18.4m (net of cash acquired) 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 decreased by
£8.3m as the need to tactically hold higher inventory to mitigate
supply chain disruption decreased. Higher year-on-year sales lead
to trade receivables increasing to £152.8m, however, this increase
was in part offset by an improvement in days' sales
outstanding2, which decreased from 58 to 55 days. Net
working capital in the balance sheet decreased to 27.3% of revenue
compared with 28.7% the year before, however working capital
movements generated a £11.9m outflow in the cash flow statement
driven by business growth.
Risk update
Geopolitical instability remains at
an elevated level with potential knock-on impacts to other risks
such as supply chain disruption. 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 models the impact of all of these current
uncertainties. The viability statement will be published in our
2023 annual report.
Supply chain disruption remained a
key risk during the year with component shortages and constraints
driving some delays in specific areas. This is a change to the
previous year where the shortages and constraints were more
widespread. Management actions to secure the supply of key
components have mitigated potentially more severe
outcomes.
Various strategic initiatives
continue to respond to the Group's risks and in the year the Group
has seen positive engagement on People and Health & Safety
risks in particular and has responded to the external threat of
increasingly sophisticated cyberattacks by investing in cyber
strategy.
We continue to monitor and review
emerging risks, which are those risks that are hard to determine
the severity. Risks under review include those in relation to
geo-political events, technological, social, environmental, climate
and sustainability risks.
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.
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 2023 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.
During the year the Group made a
special contribution of £20m to the Rotork Pension and Life
Assurance Scheme. This contribution, together with some of the
existing assets, was used to purchase a bulk annuity covering the
UK scheme's existing pensioner liabilities. This has been accounted
for as a buy-in.
The most recent triennial valuation
of the UK scheme took place at 31 March 2022 and showed an
actuarial deficit of £35.1m and a funding level of 84%. A recovery
plan was agreed with the Trustees as part of the 2022 valuation,
which, following the special contribution of £20m, resulted in
required monthly contributions from the Company of £0.6m until
September 2023 and £0.5m from October 2023 to August
2024.
On an accounting basis the schemes
moved from a deficit of £8.0m in 2022 to a £9.1m surplus in 2023
driven principally by the £20m special contribution. The funding
level increased from 94% to 106%. The Company paid total
contributions of £26.6m over the year. The schemes' assets
increased in value by £19.0m (2022: decrease of £89.1m) and the
schemes' liabilities increased by £1.8m (2022: decrease of
£88.7m).
The accounting surplus / deficit is
different to the actuarial position 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 4.65p per share. When taken together with the 2.55p
interim dividend paid in September 2023, the 7.20p (2022: 6.70p per
share) represents a 7.5% increase in dividends over the prior year.
This gives dividend cover of 2.0 times (2022: 1.9 times) based on
adjusted earnings per share.
Jonathan Davis
Group Finance Director
4 March 2024
1
Adjusted operating profit is before the amortisation of acquired
intangible assets and other adjustments (see note 4).
2
Days' sales outstanding is calculated on a count-back 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
2023
|
Notes
|
2023
£000
|
2022
£000
|
Revenue
|
3
|
719,150
|
641,812
|
Cost of sales
|
|
(380,054)
|
(350,079)
|
Gross profit
|
|
339,096
|
291,733
|
Other income
|
|
1,405
|
1,620
|
Distribution costs
|
|
(6,314)
|
(6,197)
|
Administrative expenses
|
|
(184,630)
|
(163,177)
|
Other expenses
|
|
(790)
|
(372)
|
Operating profit
|
2,3
|
148,767
|
123,607
|
Finance income
|
5
|
5,301
|
3,049
|
Finance expense
|
5
|
(3,430)
|
(2,554)
|
Profit before tax
|
|
150,638
|
124,102
|
Income tax expense
|
6
|
(37,150)
|
(30,901)
|
Profit for the year
|
|
113,488
|
93,201
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
Owners of the parent
|
|
113,135
|
93,243
|
|
Non-controlling interest
|
|
353
|
(42)
|
|
|
|
113,488
|
93,201
|
|
|
|
|
|
|
Basic earnings per share
|
8
|
13.2p
|
10.9p
|
|
Diluted earnings per share
|
8
|
13.2p
|
10.8p
|
|
|
|
|
|
|
Operating profit
|
2,3
|
148,767
|
123,607
|
Adjustments
- Amortisation of acquired intangible assets
|
3
|
2,110
|
7,051
|
- Other adjustments
|
4
|
13,598
|
12,587
|
Adjusted Operating profit
|
|
164,475
|
143,245
|
|
|
|
|
Adjusted basic earnings per share
|
2,8
|
14.6p
|
12.7p
|
Adjusted diluted earnings per share
|
2,8
|
14.6p
|
12.7p
|
Consolidated statement of comprehensive
income
For the year ended 31 December
2023
|
|
2023
£000
|
2022
£000
|
Profit for the year
|
|
113,488
|
93,201
|
Other comprehensive
income
|
|
|
|
Items that may be
subsequently reclassified to the income
statement:
|
|
|
|
Foreign exchange translation
differences
|
|
(20,271)
|
21,928
|
Effective portion of changes in fair
value of cash flow hedges net of tax
|
|
1,397
|
(1,627)
|
|
|
(18,874)
|
20,301
|
Items that are not
subsequently reclassified to the income
statement:
|
|
|
|
Remeasurement (loss) in pension
scheme net of tax
|
|
(7,722)
|
(4,932)
|
Income
and expenses recognised in other comprehensive income
|
|
(26,596)
|
15,369
|
Total comprehensive income for the
year
|
|
86,892
|
108,570
|
Attributable to:
|
|
|
|
Owners of the parent
|
|
86,609
|
108,561
|
Non-controlling interest
|
|
283
|
9
|
|
|
86,892
|
108,570
|
Consolidated balance sheet
At 31 December 2023
|
Notes
|
2023
£000
|
2022
£000
|
Non-current assets
|
|
|
|
Goodwill
|
|
231,703
|
228,005
|
Intangible assets
|
|
31,126
|
20,579
|
Property, plant and
equipment
|
|
74,411
|
78,726
|
Derivative financial
instruments
|
|
206
|
74
|
Defined benefit scheme
surplus
|
|
9,144
|
-
|
Deferred tax assets
|
|
15,454
|
15,965
|
Total non-current assets
|
|
362,044
|
343,349
|
Current assets
|
|
|
|
Inventories
|
|
83,963
|
92,306
|
Trade receivables
|
|
152,842
|
134,279
|
Current tax
|
|
4,187
|
7,877
|
Derivative financial
instruments
|
|
673
|
62
|
Other receivables
|
|
23,701
|
39,112
|
Assets classified as held for
sale
|
|
-
|
211
|
Cash and cash equivalents
|
|
146,372
|
114,770
|
Total current assets
|
|
411,738
|
388,617
|
Total assets
|
|
773,782
|
731,966
|
Equity
|
|
|
|
Issued equity capital
|
7
|
4,306
|
4,304
|
Share premium
|
|
21,004
|
19,959
|
Other reserves
|
|
13,465
|
32,269
|
Retained earnings
|
|
581,813
|
531,951
|
Equity attributable to owners of the
parent
|
|
620,588
|
588,483
|
Non-controlling interests
|
|
1,707
|
1,424
|
Total equity
|
|
622,295
|
589,907
|
Non-current liabilities
|
|
|
|
Interest bearing loans and
borrowings
|
|
8,826
|
5,405
|
Employee benefits
|
9
|
4,197
|
11,955
|
Deferred tax liabilities
|
|
3,872
|
4,028
|
Derivative financial
instruments
|
|
15
|
215
|
Provisions
|
|
1,371
|
1,439
|
Total non-current
liabilities
|
|
18,281
|
23,042
|
Current liabilities
|
|
|
|
Interest bearing loans and
borrowings
|
|
3,131
|
3,431
|
Trade payables
|
|
40,585
|
42,314
|
Employee benefits
|
9
|
29,754
|
15,200
|
Current tax
|
|
12,387
|
11,893
|
Derivative financial
instruments
|
|
538
|
2,729
|
Other payables
|
|
42,536
|
39,084
|
Provisions
|
|
4,275
|
4,366
|
Total current
liabilities
|
|
133,206
|
119,017
|
Total liabilities
|
|
151,487
|
142,059
|
Total equity and
liabilities
|
|
773,782
|
731,996
|
These financial statements were
approved by the Board of Directors and authorised for issue on 4
March 2024 and were signed on its behalf by:
K Huynh and JM Davis
Directors.
Consolidated statement of changes in equity
|
Issued
equity
capital
£000
|
Share
premium
£000
|
Translation
reserve
£000
|
Capital
redemption
reserve
£000
|
Hedging
reserve
£000
|
Retained
earnings
£000
|
Attributable to owners of the
parent
£000
|
Non-controlling
interest
£000
|
Total
£000
|
Balance at 31 December
2021
|
4,302
|
18,828
|
9,475
|
1,716
|
828
|
498,931
|
534,080
|
-
|
534,080
|
|
|
|
|
|
|
|
|
|
|
Profit/(loss) 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
income
|
-
|
-
|
-
|
-
|
440)
|
1,795
|
2,235
|
-
|
2,235
|
Total other comprehensive
income/(loss)
|
-
|
-
|
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 schemes
|
-
|
-
|
-
|
-
|
-
|
2,765)
|
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
|
|
|
|
|
|
|
|
|
|
|
Profit for the year
|
-
|
-
|
-
|
-
|
-
|
113,135
|
113,135
|
353
|
113,488
|
Other comprehensive
income
|
|
|
|
|
|
|
|
|
|
Foreign exchange translation
differences
|
-
|
-
|
(20,201)
|
-
|
-
|
-
|
(20,201)
|
(70)
|
(20,271)
|
Effective portion of changes in fair
value of cash
flow hedges
|
-
|
-
|
-
|
-
|
1,841
|
-
|
1,841
|
-
|
1,841
|
Actuarial loss on defined benefit
pension plans
|
-
|
-
|
-
|
-
|
-
|
(9,875)
|
(9,875)
|
-
|
(9,875)
|
Tax on other comprehensive
(loss)/income
|
-
|
-
|
-
|
-
|
(444)
|
2,153
|
1,709
|
-
|
1,709
|
Total other comprehensive
(loss)/income
|
-
|
-
|
(20,201)
|
-
|
1,397
|
(7,722)
|
(26,526)
|
(70)
|
(26,596)
|
Total comprehensive
(loss)/income
|
-
|
-
|
(20,201)
|
-
|
1,397
|
105,413
|
86,609
|
283
|
86,892
|
|
|
|
|
|
|
|
|
|
|
Transactions with owners, recorded
directly in equity
|
|
|
|
|
|
|
|
|
|
Equity settled share-based payment
transactions
|
-
|
-
|
-
|
-
|
-
|
2,282
|
2,282
|
-
|
2,282
|
Tax on equity settled share-based
payment transactions
|
-
|
-
|
-
|
-
|
-
|
43
|
43
|
-
|
43
|
Share options exercised by
employees
|
2
|
1,045
|
-
|
-
|
-
|
-
|
1,047
|
-
|
1,047
|
Own ordinary shares
acquired
|
-
|
-
|
-
|
-
|
-
|
(2,444)
|
(2,444)
|
-
|
(2,444)
|
Own ordinary shares awarded under
share schemes
|
-
|
-
|
-
|
-
|
-
|
3,388
|
3,388
|
-
|
3,388
|
Dividends
|
-
|
-
|
-
|
-
|
-
|
(58,820)
|
(58,820)
|
-
|
(58,820)
|
Balance at 31 December
2023
|
4,306
|
21,004
|
11,151
|
1,716
|
598
|
581,813
|
620,588
|
1,707
|
622,295
|
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
2023
|
Notes
|
2023
£000
|
2023
£000
|
2022
£000
|
2022
£000
|
Cash flows from operating
activities
|
|
|
|
|
|
Profit for the year
|
|
113,488
|
|
93,201
|
|
Adjustments for:
|
|
|
|
|
|
Amortisation of acquired
intangibles
|
|
2,110
|
|
7,051
|
|
Other adjustments
|
4
|
13,598
|
|
12,587
|
|
Amortisation and impairment of
software and development costs
|
|
2,352
|
|
1,436
|
|
Depreciation
|
|
13,533
|
|
14,933
|
|
Equity settled share-based payment
expense
|
|
5,670
|
|
4,601
|
|
Profit on sale of property, plant
and equipment
|
|
(342)
|
|
(159)
|
|
Finance income
|
|
(5,301)
|
|
(3,049)
|
|
Finance expense
|
|
3,430
|
|
2,554
|
|
Income tax expense
|
|
37,150
|
|
30,901
|
|
|
|
185,688
|
|
164,056
|
|
Decrease/(increase) in
inventories
|
|
5,490
|
|
(19,479)
|
|
Increase in trade and other
receivables
|
|
(10,488)
|
|
(32,591)
|
|
Increase/(decrease) in trade and
other payables
|
|
1,399
|
|
(2,902)
|
|
Operating cash flow impact of other
adjustments
|
4
|
(13,496)
|
|
(12,056)
|
|
Difference between pension charge
and cash contribution
|
|
(26,628)
|
|
(6,979)
|
|
Increase/(decrease) in
provisions
|
|
216
|
|
(383)
|
|
Increase in employee
benefits
|
|
15,538
|
|
67
|
|
|
|
157,719
|
|
89,733
|
|
Income taxes paid
|
|
(32,825)
|
|
(30,221)
|
|
Net cash flows from operating
activities
|
|
|
124,894
|
|
59,512
|
Investing activities
|
|
|
|
|
|
Purchase of property, plant and
equipment
|
|
(7,306)
|
|
(8,291)
|
|
Purchase of intangible
assets
|
|
(2,089)
|
|
(2,066)
|
|
Development costs
capitalised
|
|
(2,411)
|
|
(2,541)
|
|
Sale of property, plant and
equipment
|
|
1,883
|
|
4,629
|
|
Acquisition of business (net of cash
acquired)
|
|
(18,399)
|
|
-
|
|
Settlement of hedging
derivatives
|
|
937
|
|
9
|
|
Interest received
|
|
3,927
|
|
751
|
|
Net cash flows from investing
activities
|
|
|
(23,458)
|
|
(7,509)
|
Financing activities
|
|
|
|
|
|
Issue of ordinary share
capital
|
|
1,047
|
|
1,133
|
|
Own ordinary shares
acquired
|
|
(2,444)
|
|
(3,475)
|
|
Interest paid
|
|
(936)
|
|
(817)
|
|
Repayment of bank loans
|
|
-
|
|
(694)
|
|
Repayment of lease
liabilities
|
|
(3,699)
|
|
(3,966)
|
|
Dividends paid on ordinary
shares
|
|
(58,820)
|
|
(55,384)
|
|
Receipt from non-controlling
interest in newly established subsidiary
|
|
-
|
|
1,415
|
|
Net cash flows from financing
activities
|
|
|
(64,852)
|
|
(61,788)
|
Net decrease in cash and cash
equivalents
|
|
|
36,584
|
|
(9,785)
|
Cash and cash equivalents at 1
January
|
|
|
114,770
|
|
123,474
|
Effect of exchange rate fluctuations
on cash held
|
|
|
(4,982)
|
|
1,081
|
Cash and cash equivalents at 31
December
|
|
|
146,372
|
|
114,770
|
Notes to the Group Financial Statements
For the year ended 31 December
2023
Except where indicated, values in
these notes are in £000.
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 2023 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 2024. 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
macroeconomic conditions and the impact of geo-political
instability on the Group have been considered. The directors have
reviewed: the current financial position of the Group, which has
net cash of £134m and unused uncommitted overdraft facilities of
£24m 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. A reverse
stress test, where the Group's business model would become
unviable, has been performed and the directors believe there is no
reasonably possible scenario that would lead to the conditions
modelled in the reverse stress test.
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 2023. 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 2023 or 2022.
Statutory accounts for 2022, 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 2023, 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 2023 will shortly be available to
shareholders, and after adoption at the Annual General Meeting on
30 April 2024 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.
|
2023
|
2022
|
Profit before tax
|
150,638
|
124,102
|
Adjustments:
|
|
|
Amortisation of acquired intangible
assets
|
2,110
|
7,051
|
Gain on disposal of
property
|
(723)
|
(1,208)
|
Business Transformation
costs
|
13,097
|
8,868
|
Other costs
|
1,224
|
1,372
|
Russia market exit
|
-
|
3,555
|
Adjusted profit before tax
|
166,346
|
143,740
|
c. Adjusted basic and diluted earnings
per share
Adjusted basic earnings per share is
calculated using the adjusted net profit attributable to the
ordinary shareholders and dividing it by the weighted average
ordinary shares in issue (see note 8). Adjusted net profit
attributable to ordinary shareholders is calculated as
follows:
|
2023
|
2022
|
Net profit attributable to ordinary
shareholders
|
113,488
|
93,201
|
Adjustments:
|
|
|
Amortisation of acquired intangible
assets
|
2,110
|
7,051
|
Gain on disposal of
property
|
(723)
|
(1,208)
|
Business Transformation
costs
|
13,097
|
8,868
|
Other costs
|
1,224
|
1,372
|
Russia market exit
|
-
|
3,555
|
Tax effect on adjusted
items
|
(3,567)
|
(3,440)
|
Adjusted net profit attributable to ordinary
shareholders
|
125,629
|
109,399
|
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.
|
2023
|
2022
|
Adjusted operating profit
|
164,475
|
143,245
|
Capital employed
|
|
|
Shareholders' funds
|
622,295
|
589,907
|
Cash and cash
equivalents
|
(146,372)
|
(114,770)
|
Interest bearing loans and
borrowings
|
11,957
|
8,836
|
Pension (surplus)/deficit net of
deferred tax
|
(6,904)
|
6,065
|
Capital employed
|
480,976
|
490,038
|
Average capital employed
|
485,507
|
458,002
|
Return on capital employed
|
33.9%
|
31.3%
|
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 2023 results
are restated at 2022 exchange rates.
Key headings in the income statement
are reconciled to OCC as follows:
|
31 December
2023
|
Currency
adjustment
|
Acquisition adjustment
|
OCC
31 December
2023
|
Revenue
|
719,150
|
11,857
|
(1,599)
|
729,408
|
Cost of sales
|
(380,054)
|
(6,233)
|
714
|
(385,573)
|
Gross margin
|
339,096
|
5,624
|
(885)
|
343,835
|
Overheads
|
(174,621)
|
(1,454)
|
324
|
(175,751)
|
Adjusted operating profit
|
164,475
|
4,170
|
(561)
|
168,084
|
Interest
|
1,871
|
(268)
|
54
|
1,657
|
Adjusted profit before tax
|
166,346
|
3,902
|
(507)
|
169,741
|
Adjusted taxation
|
(40,717)
|
(956)
|
137
|
(41,536)
|
Adjusted profit after tax
|
125,629
|
2,946
|
(370)
|
128,205
|
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:
|
2023
|
2022
|
Adjusted operating cash flow
|
|
|
Operating cash flow
|
157,719
|
89,733
|
Operating cash flow impact of other
adjustments
|
13,496
|
12,056
|
Difference between pension charge
and cash contribution
|
26,628
|
6,979
|
Adjusted operating cash flow
|
197,843
|
108,768
|
Adjusted operating profit
|
164,475
|
143,245
|
Cash conversion
|
120%
|
76%
|
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:
|
Oil &
Gas
2023
|
Chemical, Process &
Industrial
2023
|
Water &
Power
2023
|
Unallocated
2023
|
Group
2023
|
Revenue from external
customers
|
328,391
|
213,712
|
177,047
|
-
|
719,150
|
Adjusted operating
profit*
|
83,627
|
51,253
|
46,445
|
(16,850)
|
164,475
|
Amortisation of acquired
intangible assets
|
(1,100)
|
(848)
|
(162)
|
-
|
(2,110)
|
Segment result
|
82,527
|
50,405
|
46,283
|
(16,850)
|
162,365
|
Other adjustments
|
|
|
|
|
(13,598)
|
Operating profit
|
|
|
|
|
148,767
|
Net finance income
|
|
|
|
|
1,871
|
Income tax expense
|
|
|
|
|
(37,150)
|
Profit for the year
|
|
|
|
|
113,488
|
|
Oil &
Gas
2022
|
Chemical,
Process & Industrial
2022
|
Water
& Power
2022
|
Unallocated
2022
|
Group
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
|
*Adjusted operating profit is
operating profit before the amortisation of acquired intangible
assets and other adjustments (see note 4).
|
Oil &
Gas
2023
|
Chemical, Process &
Industrial
2023
|
Water &
Power
2023
|
Unallocated
2023
|
Group
2023
|
Depreciation
|
6,180
|
4,022
|
3,331
|
-
|
13,533
|
Amortisation:
|
|
|
|
|
|
- Acquired intangible
assets
|
1,100
|
848
|
162
|
-
|
2,110
|
- Development costs
|
774
|
504
|
417
|
-
|
1,695
|
|
Oil &
Gas
2022
|
Chemical,
Process & Industrial
2022
|
Water
& Power
2022
|
Unallocated
2022
|
Group
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
|
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
|
2023
|
2022
|
UK
|
75,568
|
55,146
|
Italy
|
65,553
|
52,997
|
Rest of Europe
|
105,293
|
96,627
|
USA
|
141,046
|
129,499
|
Other Americas
|
59,419
|
44,161
|
China
|
102,133
|
120,188
|
Rest of World
|
170,138
|
143,194
|
|
719,150
|
641,812
|
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:
|
2023
|
2022
|
Gain on disposal of
property
|
723
|
1,208
|
Other costs
|
(1,224)
|
(1,372)
|
Business Transformation
costs
|
(13,097)
|
(8,868)
|
Russia market exit
|
-
|
(3,555)
|
Other adjustments
|
(13,598)
|
(12,587)
|
Gain on disposal of property
The £723,000 (2022: £1,208,000)
gain on disposal of property relates to the sales of property in
Ballarat, Australia and Radstock, UK. These disposals are the last
of the Growth Acceleration Programme operational footprint
actions.
Other costs
£1,224,000 (2022: £1,372,000) of
other costs have been incurred, largely in relation to acquisition
and pension buy-in advisory costs.
Business Transformation costs
During the year £13,097,000 (2022:
£8,868,000) of costs were incurred on Business Transformation. The
multi-year transformation includes the implementing and integrating
of common systems and processes throughout the Group, including a
new cloud-based ERP system. This brings the total expensed under
the programme to £44,920,000. These costs were expensed as they do
not meet the capitalisation criteria under IAS 38. Costs include an
allocation of personnel expenses in respect of employees directly
involved in the programme.
The new ERP system launched at the
Bath, UK factory in Q1 2023 and also went live at the Head Office
site in Q3 2023. These costs will continue to be reported in
adjusted items. Over the next 3 - 3.5 years we will deploy the
Business Transformation programme, including the new ERP system,
across all other Group entities at an estimated further cost of
£45m to £50m.
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 £13,496,000 (2022: £12,056,000) and a net
investing cash inflow of £955,000 (2022: £4,049,000).
5. finance Income and
EXPENSE
|
2023
|
2022
|
Interest income
|
4,203
|
1,235
|
Net interest income on pension
scheme liabilities
|
352
|
-
|
Foreign exchange gains
|
746
|
1,814
|
Finance income
|
5,301
|
3,049
|
|
2023
|
2022
|
Interest expense
|
(807)
|
(744)
|
Interest expense on lease
liabilities
|
(495)
|
(406)
|
Net interest charge on pension
scheme liabilities
|
-
|
(110)
|
Foreign exchange losses
|
(2,128)
|
(1,294)
|
Finance expense
|
(3,430)
|
(2,554)
|
6. Income tax expense
|
2023
|
2023
|
2022
|
2022
|
Current tax:
|
|
|
|
|
UK corporation tax on profits for
the year
|
4,865
|
|
3,173
|
|
Adjustment in respect of prior
years
|
435
|
|
(942)
|
|
|
|
5,300
|
|
2,231
|
Overseas tax on profits for the
year
|
32,091
|
|
30,242
|
|
Adjustment in respect of prior
years
|
146
|
|
(287)
|
|
|
|
32,237
|
|
29,955
|
Total current tax
|
|
37,537
|
|
32,186
|
Deferred tax:
|
|
|
|
|
Origination and reversal of other
temporary differences
|
1,187
|
|
(1,935)
|
|
Impact of rate change
|
(591)
|
|
252
|
|
Adjustment in respect of prior
years
|
(983)
|
|
398
|
|
Total deferred tax
|
|
(387)
|
|
(1,285)
|
Total tax charge for year
|
|
37,150
|
|
30,901
|
Profit before tax
|
|
150,638
|
|
124,102
|
Profit before tax multiplied by the
blended standard rate of
corporation tax in the UK of 23.5% (2022: 19.0%)
|
|
35,400
|
|
23,579
|
Effects of:
|
|
|
|
|
Different tax rates on overseas
earnings
|
|
4,552
|
|
9,339
|
Permanent differences
|
|
(118)
|
|
404
|
Losses not recognised
|
|
166
|
|
93
|
Tax incentives
|
|
(1,587)
|
|
(1,935)
|
Impact of rate change
|
|
(861)
|
|
252
|
Adjustments to tax charge in
respect of prior years
|
|
(402)
|
|
(831)
|
Total tax charge for year
|
|
37,150
|
|
30,901
|
Effective tax rate
|
|
24.7%
|
|
24.9%
|
Adjusted profit before tax (note
2b)
|
|
166,346
|
|
143,740
|
Total tax charge for the
year
|
|
37,150
|
|
30,901
|
Amortisation of acquired intangible
assets
|
|
286
|
|
1,109
|
Business Transformation
costs
|
|
3,220
|
|
2,217
|
Other adjustments (note
4)
|
|
61
|
|
114
|
Adjusted total tax charge for the year
|
|
40,717
|
|
34,341
|
Adjusted effective tax rate
|
|
24.5%
|
|
23.9%
|
A tax credit of £43,000 (2022:
charge of £987,000) in respect of share-based payments has been
recognised directly in equity in the year.
The effective tax rate for the year
is 24.7% (2022: 24.9%). The adjusted effective tax rate is 24.5%
(2022: 23.9%) 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 23.9% in 2022 to 24.5% in 2023, principally because
of an increase in the UK corporation tax rate. The UK
corporation tax rate increased from 19% to 25% on 1 April 2023
leading to a blended rate of 23.5% in the Accounting Period.
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 adjusted effective
tax rate will continue to be higher than the standard UK rate
principally due to higher rates of tax in China, the US, Germany
and India.
On 20 June 2023 legislation was
substantively enacted in the UK to introduce the OECD's Pillar Two
global minimum tax rules together with a UK qualified domestic
minimum top-up tax, with effect from 1 January 2024. Under
the legislation Rotork plc will be required to pay to the UK tax
authorities top-up tax on profits of its subsidiaries that are
taxed at an effective tax rate of less than 15 per cent.
Based on Pillar Two impact
assessments carried out on prior years' data, Rotork plc considers
that Pillar Two will not have a material impact on its current tax
expense in future years.
The Group has applied the mandatory
temporary IAS 12 exception from the accounting requirements for
deferred taxes in IAS 12, such that the group will not recognise or
disclose information on deferred tax assets and liabilities related
to Pillar Two income taxes.
The Group is continuing to assess
the impact of the Pillar Two income taxes legislation on its future
financial performance.
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 £320,839,000 (2022: £272,249,000).
7. Capital and reserves
|
0.5p
Ordinary
shares
issued
and fully
paid up
2023
|
£1 Non-
redeemable
preference
shares
2023
|
0.5p
Ordinary
shares
issued
and
fully
paid
up
2022
|
£1
Non-
redeemable
preference
shares
2022
|
At 1 January
|
4,304
|
40
|
4,302
|
40
|
Issued under employee share
schemes
|
2
|
-
|
2
|
-
|
Share buyback programme
|
-
|
-
|
-
|
-
|
At 31 December
|
4,306
|
40
|
4,304
|
40
|
Number of shares (000)
|
861,201
|
|
860,771
|
|
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
£1,047,000 (2022: £1,133,000) in respect of the 429,946 (2022:
494,972) ordinary shares issued during the year: £2,000 (2022:
£2,000) was credited to share capital and £1,045,000 (2022:
£1,131,000) to share premium.
Own shares held
Within the retained earnings reserve
are own shares held. The Group acquired 773,000 of its own shares
during the year (2022: 1,124,000). The total amount paid to acquire
the shares was £2,444,000 (2022: £3,475,000), and this has been
deducted from shareholders' equity. During the year, 1,038,000
(2022: 793,000) ordinary shares were released to satisfy share plan
awards. The investment in own shares held is £4,314,000 (2022:
£6,000,000) and represents 1,566,000 (2022: 1,831,000) 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.
7. Capital and reserves
(continued)
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:
|
2023
Payment
date
|
2023
|
2022
|
4.30p final dividend for 2022
(final dividend for 2021: 4.05p)
|
24
May
|
36,926
|
34,787
|
2.55p interim dividend for 2023
(interim dividend for 2022: 2.40p)
|
22
September
|
21,894
|
20,597
|
|
|
58,820
|
55,384
|
After the balance sheet date the
following dividends per qualifying ordinary share were proposed by
the directors. The dividends have not been provided for.
|
2023
|
2022
|
Final proposed dividend per qualifying ordinary
share
|
|
|
4.65p
|
40,046
|
-
|
4.30p
|
-
|
37,013
|
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 859.3m shares (2022: 858.9m shares) being
the weighted average number of ordinary shares in issue (net of own
ordinary shares held) for the year.
|
2023
|
2022
|
Net profit attributable to ordinary
shareholders
|
113,488
|
93,201
|
Weighted average number of ordinary shares
|
|
|
Issued ordinary shares at 1
January
|
858,940
|
858,776
|
Effect of own shares
held
|
198
|
6
|
Effect of shares issued under
Sharesave plans
|
122
|
167
|
Weighted average number of ordinary
shares during the year
|
859,260
|
858,949
|
Basic earnings per share
|
13.2p
|
10.9p
|
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.
|
2023
|
2022
|
Adjusted net profit attributable to
ordinary shareholders
|
125,629
|
109,399
|
Weighted average number of ordinary
shares during the year
|
859,260
|
858,949
|
Adjusted basic earnings per
share
|
14.6p
|
12.7p
|
Diluted earnings per
share
Diluted earnings per share is based
on the profit for the year attributable to the ordinary
shareholders and 862.4m shares (2022: 860.6m shares). The number of
shares is equal to the weighted average number of ordinary shares
in issue (net of own ordinary shares held) adjusted to assume
conversion of all potentially dilutive ordinary shares. The Company
has two categories of potentially dilutive ordinary shares: those
share options granted to employees under the Sharesave plan where
the exercise price is less than the average market price of the
Company's ordinary shares during the year and contingently issuable
shares awarded under the Long Term Incentive Plan
(LTIP).
|
2023
|
2022
|
Net profit attributable to ordinary
shareholders
|
113,488
|
93,201
|
Weighted average number of ordinary
shares (diluted)
|
|
|
Weighted average number of ordinary
shares for the year
|
859,260
|
858,949
|
Effect of Sharesave
options
|
730
|
562
|
Effect of LTIP share
awards
|
2,398
|
1,119
|
Weighted average number of ordinary shares (diluted) during
the year
|
862,388
|
860,630
|
Diluted earnings per share
|
13.2p
|
10.8p
|
Adjusted diluted earnings per
share
|
2023
|
2022
|
Adjusted net profit attributable to ordinary
shareholders
|
125,629
|
109,399
|
Weighted average number of ordinary shares (diluted) during
the year
|
862,388
|
860,630
|
Adjusted diluted earnings per share
|
14.6p
|
12.7p
|
9. Employee benefits
|
2023
|
2022
|
Recognised liability for defined
benefit obligations
|
-
|
8,006
|
Other pension scheme
liabilities
|
673
|
158
|
Employee bonuses
|
25,497
|
11,524
|
Employee indemnity
provision
|
2,016
|
1,925
|
Other employee benefits
|
5,765
|
5,542
|
|
33,951
|
27,155
|
Non-current
|
4,197
|
11,955
|
Current
|
29,754
|
15,200
|
|
33,951
|
27,155
|
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
5 March 2024
|
Preliminary announcement of annual
results for 2023
|
18 April 2024
|
Ex-dividend date for proposed final
2023 dividend
|
19 April 2024
|
Record date for proposed final 2023
dividend
|
24 May 2024
|
Payment date for proposed final 2023
dividend
|
30 April 2024
|
Announcement of trading
update
|
30 April 2024
|
Annual General Meeting to be held at
Bailbrook House Hotel, Eveleigh Avenue, London Road West, Bath,
Somerset, BA1 7JD
|
6 August 2024
|
Announcement of interim financial
results for 2024
|
20 November 2024
|
Announcement of trading
update
|