TIDMROR
RNS Number : 3376N
Rotork PLC
08 August 2017
Rotork plc
2017 Half Year Results
OCC (2)
HY 2017 HY 2016 % change % change
---------- ---------- --------- ----------
Revenue GBP299.7m GBP263.9m +13.6% 0.0%
Adjusted(1) operating
profit GBP54.4m GBP50.7m +7.3% -3.7%
Adjusted(1) operating
margin 18.2% 19.2% -100bps -70bps
Adjusted(1) profit before
tax GBP52.0m GBP50.1m +3.7% -7.5%
Adjusted(1) basic earnings
per share 4.4p 4.3p +4.2% -7.3%
Profit before tax GBP48.8m GBP38.3m +27.4%
Basic earnings per share 4.3p 3.3p +32.1%
Interim dividend 2.05p 1.95p +5.1%
(1) Adjusted figures exclude the amortisation of acquired
intangible assets and adjustment for contingent consideration.
(2) Organic Constant Currency ("OCC") or underlying results
exclude acquisitions and are restated at 2016 exchange rates.
Summary
-- Improving order intake (+19.6%, OCC: +4.8%) reflects our
sales initiatives and slightly more favourable market trends
-- Order book of GBP213m increased 17.8% (OCC: +16.5%) from
December 2016, giving good visibility for H2
-- Adjusted operating margin lower due to phasing of revenue and inflationary cost increases
-- 11% currency tailwind in H1 on revenue and profit
-- Strong balance sheet and ongoing cash generation at 109%
-- Interim dividend increased 5.1% to 2.05p
-- Management expectations for the full year remain unchanged
Martin Lamb, Executive Chairman, commenting on the results,
said: "The slightly more favourable market trends seen towards the
end of 2016 continued in the first half of 2017. In oil and gas, we
have seen an improvement in levels of activity in upstream and
although the midstream and downstream sectors remain subdued, there
has been a gradual improvement in project activity levels. We saw
steady progress across the water, power and industrial process
markets.
As in prior years we anticipate a second half weighting and
consequently expect margins to be ahead of those in the first half.
Overall we anticipate that full year margins will be similar to the
prior year. Based on our project visibility, current order book and
its anticipated conversion to revenue, management expectations for
the full year remain unchanged."
Rotork plc Tel: +44 (0)1225 733 200
Martin Lamb, Executive Chairman
Jonathan Davis, Finance Director
Sarah Matthews-DeMers, Director of Strategy and Investor
Relations
FTI Consulting Tel: + 44 (0)20 3727 1340
Nick Hasell / Susanne Yule
There will be a meeting for analysts and institutional investors
at 8.30 am BST on 8 August 2017 at the offices of FTI Consulting,
200 Aldersgate, Aldersgate Street, London EC1A 4HD. The
presentation will also be webcast (audio only). Please register at
www.rotork.com.
Business Review
During the first half of the year we saw a continuation of the
slightly more favourable market trends seen towards the end of 2016
with modest recovery in certain markets and geographical areas.
Group order intake in the first half increased 19.6%, benefiting
from favourable exchange rates and the contribution from
acquisitions. Currency contributed 12.1%, with the contribution
from acquisitions being 2.7%. On an organic constant currency (OCC)
basis, order intake increased by 4.8%. OCC order intake increased
across each division. The order book at 30 June 2017 was GBP212.8m,
17.8% (16.5% OCC) higher than at 31 December 2016, giving good
visibility into the second half.
In the Group's oil and gas markets there has been some
improvement in market sentiment. The oil industry appears to be
stabilising around a lower oil price, with a gradual increase in
levels of project activity and sequential order intake growth.
While this takes time to convert into revenue, the benefit of this
activity is expected to be seen in the second half of the year.
Revenue increased by 13.6%, with currency contributing 11.5% and
the contribution from acquisitions being 2.1%. On an OCC basis,
revenue was flat, reflecting the traditional lag in order activity
flowing through to revenue.
Overall, oil and gas represented 48.5% (H1 2016: 51.2%) of
revenue with an increase in the percentage of upstream sales but a
decrease in midstream and downstream. In upstream, which accounted
for 17.0% of revenue, we saw good activity in North American
onshore and the Middle East. Midstream benefited from an increase
in gas pipeline activity and the extension of some LNG projects.
Although it has not yet converted into revenue, we are starting to
see more activity in downstream and we are well positioned to take
advantage of any recovery in this market.
In the water, power and industrial markets, underlying revenue
increased over the prior period by 10.2%, 4.2% and 13.2%
respectively, illustrating the resilience of our business and
demonstrating that our strategy of diversifying our end markets
continues to make progress.
Geographically, we saw growth in the Middle East and parts of
Asia and Europe while parts of North America and Latin America
remained subdued. We remain well placed internationally to benefit
from opportunities in all our key markets.
Rotork Site Services, our global service network, is a key
differentiator in our industry and continued to perform well as
customers look to manage their assets more efficiently and avoid
unplanned shutdowns. We continue to grow our Client Support
Programme which offers maintenance contracts tailored to our
customers' specific needs.
Adjusted operating profit increased 7.3% after a currency
tailwind of 11.0%. As anticipated in our first quarter trading
update, while our gross margins have held up well, operating
margins for the first half of 2017 were lower than those for the
comparative period at 18.2% (H1 2016: 19.2%). This was largely due
to inflationary cost increases which are spread evenly throughout
the year; whereas the expected increase in activity is
traditionally second half weighted, as are the additional cost
savings from our continuing cost management programme.
Cost control remains a priority as we look to mitigate
inflationary pressures through our operating base. We are on track
to deliver the savings we have previously announced for the full
year, anticipating GBP4.2m of savings from prior year initiatives.
We continue to expect a GBP2m benefit from the current year
initiatives, which will benefit the second half of the year
The Mastergear acquisition, completed in June 2016, expanded our
Gears portfolio, making our gears product range one of the most
comprehensive in the industry. The integration of the business into
existing Rotork facilities in China and the USA is now
complete.
The acquisition of Bifold in 2015 included a stretching GBP10m
earn-out. Given current market conditions, it is no longer
considered probable that this will become payable and therefore the
related provision has been released. We continue to seek
acquisitions that meet our stated acquisition criteria and support
the diversification of our portfolio.
Financial Key Performance Indicators (KPIs)
H1 2017 H1 2016 FY 2016
-------- -------- --------
Sales growth +13.6% -3.7% +8.0%
Return on sales +17.3% +19.0% +20.0%
Cash generation +108.5% +131.5% +130.1%
Return on capital employed +23.1% +23.8% +23.4%
Earnings per share growth +4.2% -21.9% -3.8%
-------- -------- --------
The KPIs are calculated in a consistent manner with those
presented at year end and are defined in the 2016 Annual Report
& Accounts, with the exception of Return on Capital Employed
(ROCE), for which a rolling 12 month calculation is used. Our
asset-light business model and strong profit margins mean Rotork
generates a high ROCE, which may reduce as we acquire new
businesses but increases as profits grow and intangible assets are
amortised, although it is also impacted by currency.
Cash flow
Our strong cash generation and disciplined working capital
management resulted in a reduction in net debt of GBP7.9m to
GBP47.1m at the end of the period. Our cash generation KPI shows a
conversion of 108.5% of operating profit into operating cash. This
allowed us to invest GBP8.0m in capital expenditure, pay dividends
of GBP27.4m and make tax payments of GBP11.5m.
Financial position
The balance sheet remains strong and at the period end included
net debt of GBP47.1m (Dec 2016: GBP55.0m), with a net debt:
adjusted EBITDA ratio of 0.4:1 (Dec 2016: 0.4:1). Committed
facilities totalled GBP170m of which GBP107m were drawn at the
period end. GBP35m of the committed facility expires in August
2017.
Net working capital at the period end was GBP175.9m, a reduction
of GBP2.1m since the year end. On an OCC basis, net working capital
would have reduced by GBP1.0m.
The Group operates two defined benefit pension schemes, the
larger of which is in the UK. Both schemes are closed to new
entrants. The deficit decreased from GBP58.5m at 31 December 2016
to GBP45.3m at 30 June 2017 due to a good performance from the
assets and changes to assumptions which impact the schemes'
liabilities.
Currency
Overall, currency added GBP30.4m (11.5%) to revenue compared
with the first half of 2016. The average US dollar rate was $1.26
(H1 2016: $1.43) and the average Euro rate was EUR1.16 (H1 2016:
EUR1.29), whilst the rates at 30 June 2017 were $1.30 and EUR1.14
(30 June 2016: $1.34 and EUR1.20).
Dividend
The Board has decided to increase the interim dividend by 5.1%
to 2.05p, reflecting confidence in progress for the full year. The
interim dividend of 2.05p per ordinary share will be paid on 22
September 2017 to shareholders on the register at the close of
business on 25 August 2017.
Operating Review
Rotork Controls
OCC(2)
GBPm H1 2017 H1 2016 Change Change
Order intake 164.7 138.8 +18.7% +6.3%
Order book 102.5 96.3 +6.4% +3.1%
Revenue 151.1 132.5 +14.1% +2.2%
Gross margin 51.4% 52.0% -60bps +60bps
Adjusted(1) operating
profit 40.0 36.2 +10.2% +1.1%
Adjusted(1) operating
margin 26.4% 27.4% -100bps -30bps
Controls performed well during the period, with order intake and
revenue increasing by 18.7% (OCC: 6.3%) and 14.1% (OCC: 2.2%)
respectively, driven by improvements in the water, power and
industrial markets and upstream oil and gas.
Underlying gross margins increased, reflecting material cost
saving initiatives while the adjusted operating margin was down 30
basis points on an OCC basis due primarily to increases in staff
costs.
In oil and gas, we saw good activity levels in upstream in both
the USA and the Middle East. Downstream remained challenging across
all geographies except Asia where we saw an increase in activity
due to investment in China. We also saw growth in the water market
in a number of areas with growing interest in our CK product range.
Activity in the power market also increased in a number of areas.
Industrial process solutions performed well in North America, Asia
and Europe.
Rotork Fluid Systems
OCC(2)
GBPm H1 2017 H1 2016 Change Change
Order intake 82.6 70.1 +17.8% +5.3%
Order book 81.6 84.2 -3.1% -6.8%
Revenue 68.1 61.8 +10.2% -1.8%
Gross margin 27.2% 27.5% -30bps -10bps
Adjusted(1) operating
profit 1.1 0.8 +35.2% -3.3%
Adjusted(1) operating
margin 1.6% 1.3% +30bps 0bps
Fluid Systems, which was the division impacted most by the
difficult oil and gas market, benefited from an increase in order
intake of 17.8% (OCC: 5.3%). Revenue increased by 10.2% on a
reported basis but decreased by 1.8% on an OCC basis as there is
traditionally a lag in improvement in order intake flowing through
to revenue. The increase in project activity and the level of the
order book gives good coverage for the second half of the year.
Underlying gross margins reduced by 10 basis points, reflecting
the impact of several lower margin projects in the first half of
2017. However, at an operating margin level, this was offset by
overhead savings from site consolidations in the second half of
last year.
Upstream oil and gas activity revenues increased in the Middle
East and Africa and also Eastern Europe. Midstream also benefited
from an increase in the Middle East and Africa while other areas
were down, as were most downstream markets. The water market was
broadly flat, while in the power market increases in the Middle
East and Africa were partially offset by a decline in North
America.
Rotork Gears
OCC(2)
GBPm H1 2017 H1 2016 Change Change
Order intake 45.4 33.0 +37.5% +3.3%
Order book 17.0 13.7 +23.4% +19.2%
Revenue 40.3 32.6 +23.3% -3.7%
Gross margin 33.4% 35.1% -170bps +160bps
Adjusted(1) operating
profit 6.3 6.5 -3.2% -12.9%
Adjusted(1) operating
margin 15.7% 20.0% -430bps -190bps
Gears order intake increased by 37.5% (OCC: 3.3%) and reported
revenue by 23.3% while OCC revenue fell by 3.7% due to the timing
of order conversion.
Underlying gross margin increased by 160 basis points,
reflecting material cost saving initiatives, while the adjusted
operating margin reduced by 190 basis points due to lower
underlying revenue and increases in staff costs. Reported margins
were impacted by one-off integration costs relating to
Mastergear.
In oil and gas, upstream remained flat, while midstream
increased, benefiting from the contribution from Mastergear.
Downstream revenues from North America grew modestly. There were
also modest increases across each of the power, water and
industrial process markets, with the biggest growth in North
America.
Rotork Instruments
OCC(2)
GBPm H1 2017 H1 2016 Change Change
Order intake 51.0 45.5 +12.0% +3.4%
Order book 11.8 8.8 +34.3% +32.0%
Revenue 48.6 45.0 +8.0% -0.5%
Gross margin 43.4% 44.2% -80bps -150bps
Adjusted(1) operating
profit 10.0 10.3 -2.8% -15.8%
Adjusted(1) operating
margin 20.5% 22.8% -230bps -350bps
Instruments saw an increase in order intake of 12.0% (OCC: 3.4%)
while revenue grew by 8.0% (OCC: -0.5%).
Underlying gross margin reduced by 150 basis points due to a
change in the mix of products sold with operating margins further
affected by inflationary cost increases combined with the lower
underlying revenue.
The division recorded double digit growth in the water, power
and industrial process markets across Asia and Europe. In the oil
and gas market, while midstream and downstream held up well,
upstream fell due to reduced activity in Europe.
Board changes
On 28 July 2017 we announced the resignation of Peter France as
Chief Executive. The Board has asked me to assume the role of full
time Executive Chairman on an interim basis until a successor can
be appointed.
The announcement followed a period of reflection by the Board,
together with Peter, on the steps required to foster a return to
higher growth and margin levels in what is likely to be a generally
lower growth macro environment. Such steps include accelerating
investment in key areas such as product innovation and customer
service whilst, at the same time, driving greater efficiencies
throughout the business. The Board is now focused on identifying
the right leader to deliver the greatest shareholder value from
this next phase in the Company's development.
The Board thanks Peter for all his efforts and achievements
throughout a long and successful career with the Company and wishes
him every success in the future.
We are also announcing the appointment of Peter Dilnot to the
Board as a non-executive director with effect from 1 September
2017. He will be a member of the Audit, Nomination and Remuneration
Committees of the Board. Peter is Chief Executive Officer of Renewi
plc, the international waste-to-product company created in 2017 by
the merger of Shanks Group plc and Van Gansewinkel Groep B.V.. We
are delighted to welcome Peter to the Board.
Outlook
As in prior years we anticipate a second half weighting and
consequently expect margins to be ahead of those in the first half.
Overall we anticipate that full year margins will be similar to the
prior year. Based on our project visibility, current order book and
its anticipated conversion to revenue, management expectations for
the full year remain unchanged.
Principal risks and uncertainties
The Group has an established risk management process as part of
the corporate governance framework set out in the 2016 Annual
Report & Accounts. The principal risks and uncertainties facing
our businesses are being monitored on an ongoing basis in line with
the Corporate Governance Code. The risk management process is
described in detail on pages 28 to 35 of the 2016 Annual Report
& Accounts. We identify risks and set out mitigations and
improvements to our processes and procedures as necessary to manage
these risks. The Group has reviewed these risks and concluded that
they remain applicable to the second half of the financial
year.
The principal risks and uncertainties are: decline in government
and private sector confidence and spending; increased competition
on price or product offering; increasing social and political
instability; increase in the defined benefit pension scheme
deficit; volatility of exchange rates; potential risks to the
health and safety of our employees and other stakeholders; major
in-field product failure; failure of a key supplier or a tooling
failure at a supplier; failure of an acquisition to deliver the
growth or synergies anticipated; failure to provide, maintain and
update the IT systems; failure of the IT security systems to
protect operations or sensitive data from cybercrime; and failure
to comply with law or regulation or to uphold our high ethical
standards and values.
Statement of Directors' Responsibilities
The Directors confirm that this condensed consolidated interim
financial information has been prepared in accordance with IAS 34
as adopted by the European Union and that the interim management
report includes a fair review of the information required by DTR
4.2.7R and DTR 4.2.8R, namely:
-- An indication of important events that have occurred during
the first six months and their impact on the condensed set of
financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
-- Material related-party transactions in the first six months, and any material changes in the related-party transactions described in the last annual report.
The Directors of Rotork plc are listed in the Rotork plc Annual
Report & Accounts for 31 December 2016. A list of current
directors is maintained in the "About Us" section of the Rotork
website: www.rotork.com.
By order of the Board
Martin Lamb
Executive Chairman
7 August 2017
Independent Review Report to Rotork plc
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2017 which comprises the Consolidated
Income Statement, the Consolidated Statement of Comprehensive
Income and Expense, the Consolidated Balance Sheet, the
Consolidated Statement of Changes in Equity, the Consolidated
Statement of Cash Flows and related notes 1 to 17. We have read the
other information contained in the half-yearly financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
This report is made solely to the company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Auditing Practices
Board. Our work has been undertaken so that we might state to the
company those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the company, for our review work, for this
report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, "Interim
Financial Reporting," as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2017 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Deloitte LLP
Statutory Auditor
London
7 August 2017
Consolidated Income Statement
First half First half Full year
2017 2016 2016
Notes GBP000 GBP000 GBP000
---------- ---------- ---------
Revenue 3 299,745 263,911 590,078
Cost of sales (169,059) (146,618) (328,410)
---------- ---------- ---------
Gross profit 130,686 117,293 261,668
Other income 4 10,332 416 629
Distribution costs (2,977) (2,357) (5,138)
Administrative expenses (86,504) (76,339) (163,165)
Other expenses (236) (84) (217)
Adjusted operating profit 2 54,430 50,716 120,588
Release of contingent consideration
provision 4 10,000 - -
Amortisation of acquired intangible
assets (13,129) (11,787) (26,811)
------------------------------------ ----- ---------- ---------- ---------
Operating profit 3 51,301 38,929 93,777
Finance income 5 646 1,264 1,744
Finance expense 6 (3,116) (1,866) (4,451)
Profit before tax 48,831 38,327 91,070
Income tax expense 7 (11,514) (10,134) (23,897)
Profit for the period 37,317 28,193 67,173
========== ========== =========
pence pence pence
Basic earnings per share 9 4.3 3.3 7.7
Adjusted basic earnings per share 2 4.4 4.3 10.0
Diluted earnings per share 9 4.3 3.2 7.7
Adjusted diluted earnings per share 2 4.4 4.2 10.0
Consolidated Statement of Comprehensive Income and Expense
First half First half Full year
2017 2016 2016
GBP000 GBP000 GBP000
---------- ---------- ---------
Profit for the period 37,317 28,193 67,173
Other comprehensive income and expense
Items that may be subsequently reclassified
to the income statement:
Foreign currency translation differences (21) 31,114 36,854
Effective portion of changes in fair value
of cash flow
hedges net of tax 2,789 (4,741) (6,414)
---------- ---------- ---------
2,768 26,373 30,440
Items that are not subsequently reclassified
to the income statement:
Actuarial gain / (loss) in pension scheme
net of tax 10,310 (17,465) (30,732)
---------- ---------- ---------
Income and expenses recognised directly in
equity 13,078 8,908 (292)
Total comprehensive income for the period 50,395 37,101 66,881
========== ========== =========
Consolidated Balance Sheet
30 June 30 June 31 Dec
2017 2016 2016
Notes GBP000 GBP000 GBP000
------- ------- -------
Goodwill 251,648 244,672 251,407
Intangible assets 95,707 120,640 109,019
Property, plant and equipment 82,675 81,782 83,766
Deferred tax assets 18,545 18,672 25,259
Other receivables 384 - 146
Total non-current assets 448,959 465,766 469,597
Inventories 10 91,767 100,347 85,772
Trade receivables 129,130 118,858 131,891
Current tax 2,552 5,177 4,349
Derivative financial instruments 550 - -
Other receivables 21,535 19,975 22,341
Cash and cash equivalents 60,690 56,641 61,423
------- ------- -------
Total current assets 306,224 300,998 305,776
Total assets 755,183 766,764 775,373
======= ======= =======
Ordinary shares 12 4,351 4,349 4,350
Share premium 10,638 10,124 10,482
Reserves 29,219 22,384 26,451
Retained earnings 413,250 381,683 392,803
------- ------- -------
Total equity 457,458 418,540 434,086
------- ------- -------
Interest-bearing loans and borrowings 13 60,857 93,372 51,303
Employee benefits 43,325 41,894 62,593
Deferred tax liabilities 18,606 23,756 24,848
Derivative financial instruments 1,038 3,784 2,483
Provisions 14 2,020 11,934 11,947
------- ------- -------
Total non-current liabilities 125,846 174,740 153,174
Interest-bearing loans and borrowings 13 46,951 50,196 65,108
Trade payables 44,949 42,112 39,652
Employee benefits 15,493 13,605 14,256
Current tax 14,335 12,392 13,352
Derivative financial instruments 5,328 11,570 8,143
Other payables 39,920 38,005 41,999
Provisions 14 4,903 5,604 5,603
------- ------- -------
Total current liabilities 171,879 173,484 188,113
Total liabilities 297,725 348,224 341,287
Total equity and liabilities 755,183 766,764 775,373
======= ======= =======
Consolidated Statement of Changes in Equity
Issued Capital
equity Share Translation redemption Hedging Retained
capital premium reserve reserve reserve earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------- --------- ------------- ------------ ---------- ----------- ---------
Balance at 31 December
2015 4,349 10,018 (4,712) 1,644 (921) 397,424 407,802
Profit for the period - - - - - 28,193 28,193
Other comprehensive income
--------- --------- ------------- ------------ ---------- ----------- ---------
Foreign currency translation
differences - - 31,114 - - - 31,114
Effective portion of
changes in fair value
of cash flow hedges - - - - (5,955) - (5,955)
Actuarial loss on defined
benefit pension plans - - - - - (22,112) (22,112)
Tax in other comprehensive
income - - - - 1,214 4,647 5,861
--------- --------- ------------- ------------ ---------- ----------- ---------
Total other comprehensive
income - - 31,114 - (4,741) (17,465) 8,908
--------- --------- ------------- ------------ ---------- ----------- ---------
Total comprehensive income - - 31,114 - (4,741) 10,728 37,101
Transactions with owners,
recorded directly in
equity
Equity settled share
based payment transactions - - - - - (914) (914)
Tax on equity settled
share based payment
transactions - - - - - 183 183
Share options exercised
by employees - 106 - - - - 106
Own ordinary shares acquired - - - - - (1,007) (1,007)
Own ordinary shares awarded
under share schemes - - - - - 2,202 2,202
Dividends - - - - - (26,933) (26,933)
--------- --------- ------------- ------------ ---------- ----------- ---------
Balance at 30 June 2016 4,349 10,124 26,402 1,644 (5,662) 381,683 418,540
========= ========= ============= ============ ========== =========== =========
Issued Capital
equity Share Translation redemption Hedging Retained
capital premium reserve reserve reserve earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------- --------- ------------- ------------ ---------- ----------- ---------
Balance at 31 December
2015 4,349 10,018 (4,712) 1,644 (921) 397,424 407,802
Profit for the year - - - - - 67,173 67,173
Other comprehensive income
--------- --------- ------------- ------------ ---------- ----------- ---------
Foreign currency translation
differences - - 36,854 - - - 36,854
Effective portion of
changes in fair value
of cash flow hedges - - - - (7,822) - (7,822)
Actuarial loss on defined
benefit pension plans - - - - - (37,923) (37,923)
Tax in other comprehensive
income - - - - 1,408 7,191 8,599
--------- --------- ------------- ------------ ---------- ----------- ---------
Total other comprehensive
income - - 36,854 - (6,414) (30,732) (292)
--------- --------- ------------- ------------ ---------- ----------- ---------
Total comprehensive income - - 36,854 - (6,414) 36,441 66,881
Transactions with owners,
recorded directly in
equity
Equity settled share
based payment transactions - - - - - 1,557 1,557
Tax on equity settled
share based payment
transactions - - - - - 74 74
Share options exercised
by employees 1 464 - - - - 465
Own ordinary shares acquired - - - - - (1,019) (1,019)
Own ordinary shares awarded
under share schemes - - - - - 2,202 2,202
Dividends - - - - - (43,876) (43,876)
--------- --------- ------------- ------------ ---------- ----------- ---------
Balance at 31 December
2016 4,350 10,482 32,142 1,644 (7,335) 392,803 434,086
========= ========= ============= ============ ========== =========== =========
Consolidated Statement of Changes in Equity
Issued Capital
equity Share Translation redemption Hedging Retained
capital premium reserve reserve reserve earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------- --------- ------------- ------------ ---------- ----------- ---------
Balance at 31 December
2016 4,350 10,482 32,142 1,644 (7,335) 392,803 434,086
Profit for the period - - - - - 37,317 37,317
Other comprehensive income
--------- --------- ------------- ------------ ---------- ----------- ---------
Foreign currency translation
differences - - (21) - - - (21)
Effective portion of
changes in fair value
of cash flow hedges - - - - 3,443 - 3,443
Actuarial gain on defined
benefit pension plans - - - - - 12,963 12,963
Tax in other comprehensive
income - - - - (654) (2,653) (3,307)
--------- --------- ------------- ------------ ---------- ----------- ---------
Total other comprehensive
income - - (21) - 2,789 10,310 13,078
--------- --------- ------------- ------------ ---------- ----------- ---------
Total comprehensive income - - (21) - 2,789 47,627 50,395
Transactions with owners,
recorded directly in
equity
Equity settled share
based payment transactions - - - - - (1,150) (1,150)
Tax on equity settled
share based payment
transactions - - - - - 218 218
Share options exercised
by employees 1 156 - - - - 157
Own ordinary shares acquired - - - - - (1,158) (1,158)
Own ordinary shares awarded
under share schemes - - - - - 2,301 2,301
Dividends - - - - - (27,391) (27,391)
--------- --------- ------------- ------------ ---------- ----------- ---------
Balance at 30 June 2017 4,351 10,638 32,121 1,644 (4,546) 413,250 457,458
========= ========= ============= ============ ========== =========== =========
Consolidated Statement of Cash Flows
First half First half Full year
2017 2016 2016
GBP000 GBP000 GBP000
---------- ---------- ---------
Profit for the period 37,317 28,193 67,173
Amortisation of acquired intangible assets 13,129 11,787 26,811
Amortisation of development costs 1,182 1,052 2,226
Depreciation 6,171 5,660 11,759
Equity settled share based payment expense 1,371 1,471 3,759
Release of contingent consideration provision (10,000) - -
Net gain on sale of property, plant and equipment 61 (209) (254)
Finance income (646) (1,264) (1,744)
Finance expense 3,116 1,866 4,451
Income tax expense 11,514 10,134 23,897
63,215 58,690 138,078
(Increase) / decrease in inventories (6,440) (2,654) 14,416
Decrease in trade and other receivables 3,109 11,784 2,511
Increase in trade and other payables 1,483 1,292 1,309
Difference between pension charge and cash
contribution (3,393) (4,542) (5,297)
Increase / (decrease) in provisions 293 (200) (496)
(Decrease) / increase in employee benefits (2,579) (2,216) 1,047
---------- ---------- ---------
55,688 62,154 151,568
Income taxes paid (11,464) (15,173) (32,876)
---------- ---------- ---------
Cash flows from operating activities 44,224 46,981 118,692
Purchase of property, plant and equipment (6,244) (8,443) (14,692)
Development costs capitalised (1,763) (1,294) (2,957)
Proceeds from sale of property, plant and
equipment 898 341 648
Acquisition of businesses, net of cash acquired - (16,851) (16,109)
Contingent consideration paid (921) (245) (257)
Settlement of hedging derivatives 1,152 (10,007) (25,867)
Interest received 378 415 180
---------- ---------- ---------
Cash flows from investing activities (6,500) (36,084) (59,054)
Issue of ordinary share capital 157 106 466
Purchase of ordinary share capital (1,158) (1,007) (1,019)
Interest paid (1,442) (1,176) (2,649)
(Decrease) / increase in borrowings (8,567) 23,444 (3,619)
Repayment of finance lease liabilities (66) (126) (253)
Dividends paid on ordinary shares (27,391) (26,933) (43,876)
Cash flows from financing activities (38,467) (5,692) (50,950)
Net (decrease) / increase in cash and cash
equivalents (743) 5,205 8,688
Cash and cash equivalents at 1 January 61,423 48,968 48,968
Effect of exchange rate fluctuations on cash
held 10 2,468 3,767
---------- ---------- ---------
Cash and cash equivalents at end of period 60,690 56,641 61,423
========== ========== =========
Notes to the Half Year Report
1. Status of condensed consolidated interim statements,
accounting policies and basis of significant estimates
General information
Rotork plc is a company domiciled in England and Wales. The
Company has its premium listing on the London Stock Exchange.
The condensed consolidated interim financial statements for the
six months ended 30 June 2017 are unaudited and the auditor has
reported in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, 'Review of Interim Financial
Information Performed by the Independent Auditor of the
Entity'.
The information shown for the year ended 31 December 2016 does
not constitute statutory accounts within the meaning of Section 435
of the Companies Act 2006, statutory accounts for the year ended 31
December 2016 were approved by the Board on 27 February 2017 and
delivered to the Registrar of Companies. The auditor's report on
those financial statements was unqualified, did not contain an
emphasis of matter paragraph and did not contain any statement
under Section 498 (2) or (3) of the Companies Act 2006. The
consolidated financial statements of the Group for the year ended
31 December 2016 are available from the Company's registered office
or website, see note 18.
Basis of preparation
The condensed consolidated interim financial statements of the
Company for the six months ended 30 June 2017 comprise the Company
and its subsidiaries (together referred to as 'the Group'). These
condensed consolidated interim financial statements have been
prepared in accordance with the Disclosure and Transparency Rules
of the Financial Services Authority and with International
Accounting Standard 34, 'Interim Financial Reporting' as adopted by
the European Union. They do not include all of the information
required for full annual financial statements and should be read in
conjunction with the consolidated financial statements of the Group
for the year ended 31 December 2016, which have been prepared in
accordance with International Financial Reporting Standards (IFRSs)
as adopted by the European Union.
Going concern
After making enquiries, the directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. For this reason,
they continue to adopt the going concern basis in preparing the
condensed consolidated interim financial information. In forming
this view, the directors have considered trading and cash flow
forecasts, financial commitments, the significant order book with
customers spread across different geographic areas and industries
and the significant net cash position.
Critical accounting estimates and judgements
The Group makes estimates and assumptions regarding the future.
Estimates and judgements are continually evaluated based on
historical experience, and other factors, including expectations of
future events that are believed to be reasonable under the
circumstances.
In the future, actual experience may deviate from these
estimates and assumptions. The estimates and assumptions that have
a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the current financial year
are discussed in the financial statements for the year ended 31
December 2016.
Accounting policies
The accounting policies applied and significant estimates used
by the Group in these condensed consolidated interim financial
statements are the same as those applied by the Group in its
consolidated financial statements for the year ended 31 December
2016.
1. Status of condensed consolidated interim statements,
accounting policies and basis of significant estimates
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.
Recent accounting developments
IFRS 15, 'Revenue from contracts with customers' has been issued
but is not yet effective and has not been adopted as application
was not mandatory for the year. The new standard requires the
separation of performance obligations within contracts with
customers and the contractual value to be allocated to the
performance obligations. Once a performance obligation is satisfied
revenue should be recognised on that element of the contract. The
introduction of the standard is likely to have some impact on
Rotork but this is unlikely to be material due to the relatively
straightforward contractual terms and conditions with customers.
Training of senior finance staff is in progress and the directors
continue to assess the impact of this standard before it becomes
effective in January 2018.
IFRS 9, 'Financial Instruments' has been issued but is not yet
effective and has not been adopted as application was not mandatory
for the year. The directors anticipate that the adoption of this
standard will not have a material impact on the disclosures, net
assets or results of the Group.
IFRS 16, 'Leases' has been issued but is not yet effective and
has not been adopted as application was not mandatory for the year.
The new standard will eliminate the classification of leases as
either operating or finance leases and result in operating leases
being treated as finance leases. This will result in previously
recognised operating leases being treated as property, plant and
equipment and a finance lease creditor. The introduction of the
standard will increase the value of property, plant and equipment
and the finance lease liability on the balance sheet but it is
unlikely to have a material impact on profit in any year. An
assessment is in progress to understand the full impact of the
standard before it becomes effective in January 2019.
Further narrow scope amendments have been issued which are
mandatory for periods commencing on or after 1 January 2018. The
application of these amendments will not have any material impact
on the disclosures, net assets or results of the Group.
IFRIC 22 Foreign currency transactions and advance consideration
which becomes effective on 1 January 2018 and IFRS 23 Uncertainty
over income tax treatments which becomes effective on 1 January
2019 are not expected to have any material impact on the
disclosures, net assets or results of the Group.
2. Alternative performance measures
The Group uses adjusted figures as key performance measures in
addition to those reported under adopted IFRS, as management
believe these measures enable management and stakeholders to assess
the underlying trading performance of the Group.
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
items 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. In 2017 we have included the release of
contingent consideration to arrive at adjusted operating profit as
this is a one off non-cash item and is explained in note 4.
A reconciliation of operating profit to adjusted operating
profit across the reportable segments is shown in note 3.
2. Alternative performance measures
b. Adjusted profit before tax
First half First half Full year
2017 2016 2016
GBP000 GBP000 GBP000
---------- ---------- ---------
Profit before tax 48,831 38,327 91,070
Adjustments:
Amortisation of acquired intangible assets 13,129 11,787 26,811
Release of contingent consideration provision (10,000) - -
Adjusted profit before tax 51,960 50,114 117,881
---------- ---------- ---------
The adjustments in calculating adjusted profit before tax are
consistent with those in calculating adjusted operating profit
above.
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 9). Adjusted net profit attributable to ordinary shareholders
is calculated as follows:
First half First half Full year
2017 2016 2016
GBP000 GBP000 GBP000
---------- ---------- ---------
Net profit attributable to ordinary shareholders 37,317 28,193 67,173
Adjustments:
Amortisation of acquired intangible assets 13,129 11,787 26,811
Release of contingent consideration provision (10,000) - -
Tax effect on adjusted items (1,965) (3,117) (7,035)
Adjusted net profit attributable to ordinary
shareholders 38,481 36,863 86,949
---------- ---------- ---------
Diluted earnings per share is calculated by using the adjusted
net profit attributable to ordinary shareholders and dividing it by
potentially dilutive ordinary shares (see note 9).
d. Organic constant currency (OCC)
OCC results exclude the incremental impact of acquisitions and
are restated at 2016 exchange rates. Key headings in the income
statement are reconciled to OCC as follows:
OCC
30 June Currency Impact of 30 June
2017 adjustment acquisitions 2017
---------- ------------- -------------- ----------
Revenue 299,745 (30,390) (5,438) 263,917
Cost of sales (169,059) 18,968 4,647 (145,444)
---------- ------------- -------------- ----------
Gross margin 130,686 (11,422) (791) 118,473
Net overheads (76,256) 5,831 779 (69,646)
---------- ------------- -------------- ----------
Adjusted operating profit 54,430 (5,591) (12) 48,827
---------- ------------- -------------- ----------
Adjusted operating margin 18.2% 18.5%
Adjusted profit before tax 51,960 (5,591) (12) 46,357
Adjusted basic earnings per
share 4.4p (0.5p) - 3.9p
---------- ------------- -------------- ----------
3. Analysis by operating segment
The Group has chosen to organise the management and financial
structure by the grouping of related products. The four
identifiable operating segments where the financial and operating
performance is reviewed monthly by the chief operating decision
maker are as follows:
-- Controls - the design, manufacture and sale of electric actuators
-- Fluid Systems - the design, manufacture and sale of pneumatic and hydraulic actuators
-- Gears - the design, manufacture and sale of gearboxes,
adaption and ancillaries for the valve industry
-- Instruments - the manufacture of high precision pneumatic
controls and power transmission products for a wide range of
industries
Unallocated expenses comprise corporate expenses.
Half year to 30 June 2017
Fluid
Controls Systems Gears Instruments Elimination Unallocated Group
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------- --------- --------- -------------- -------------- -------------- ---------
Revenue from
external customers 151,104 68,114 34,930 45,597 - - 299,745
Inter segment
revenue - - 5,333 2,985 (8,318) - -
----------- --------- --------- -------------- -------------- -------------- ---------
Total revenue 151,104 68,114 40,263 48,582 (8,318) - 299,745
----------- --------- --------- -------------- -------------- -------------- ---------
Adjusted operating
profit 39,951 1,099 6,313 9,976 - (2,909) 54,430
Amortisation
of acquired
intangibles
assets (1,424) (579) (1,032) (10,094) - - (13,129)
Release of contingent
consideration
provision - - - 10,000 - - 10,000
Operating profit 38,527 520 5,281 9,882 - (2,909) 51,301
----------- --------- --------- -------------- -------------- -------------- ---------
Net financing
expense (2,470)
Income tax expense (11,514)
---------
Profit for the
period 37,317
---------
Half year to 30 June 2016
Fluid
Controls Systems Gears Instruments Elimination Unallocated Group
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------- --------- --------- -------------- -------------- -------------- ---------
Revenue from
external customers 132,469 61,816 27,464 42,162 - - 263,911
Inter segment
revenue - - 5,180 2,822 (8,002) - -
----------- --------- --------- -------------- -------------- -------------- ---------
Total revenue 132,469 61,816 32,644 44,984 (8,002) - 263,911
----------- --------- --------- -------------- -------------- -------------- ---------
Adjusted operating
profit 36,244 814 6,522 10,260 - (3,124) 50,716
Amortisation
of acquired
intangibles
assets (1,848) (758) (498) (8,683) - - (11,787)
Operating profit 34,396 56 6,024 1,577 - (3,124) 38,929
----------- --------- --------- -------------- -------------- -------------- ---------
Net financing
expense (602)
Income tax expense (10,134)
---------
Profit for the
period 28,193
---------
3. Analysis by operating segment (continued)
Full year to 31 December 2016
Fluid
Controls Systems Gears Instruments Elimination Unallocated Group
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------- --------- --------- -------------- -------------- -------------- ---------
Revenue from
external customers 298,381 145,317 60,802 85,578 - - 590,078
Inter segment
revenue - - 11,577 5,592 (17,169) - -
----------- --------- --------- -------------- -------------- -------------- ---------
Total revenue 298,381 145,317 72,379 91,170 (17,169) - 590,078
----------- --------- --------- -------------- -------------- -------------- ---------
Adjusted operating
profit 87,293 6,181 14,051 20,130 - (7,067) 120,588
Amortisation
of acquired
intangibles
assets (3,860) (1,582) (1,698) (19,671) - - (26,811)
Operating profit 83,433 4,599 12,353 459 - (7,067) 93,777
----------- --------- --------- -------------- -------------- -------------- ---------
Net financing
expense (2,707)
Income tax expense (23,897)
---------
Profit for the
year 67,173
---------
Revenue by location of subsidiary
First half First half Full year
2017 2016 2016
GBP000 GBP000 GBP000
----------- ----------- ----------
UK 34,495 37,430 74,144
Italy 40,543 28,761 63,040
Rest of Europe 52,132 50,925 112,759
USA 71,633 64,631 145,473
Other Americas 13,203 11,120 27,365
Rest of World 87,739 71,044 167,297
----------- ----------- ----------
299,745 263,911 590,078
----------- ----------- ----------
4. Other Income
Included in the provision balance at 31 December 2016 is
GBP10,000,000 contingent consideration relating to the Bifold
acquisition. Due to the reduced likelihood of the challenging
EBITDA performance target being met in respect of the 2017
financial year, the fair value of the contingent consideration has
been reduced to GBPnil. Accordingly a GBP10,000,000 credit has been
recognised in the income statement in the period to 30 June 2017
reflecting the reduction in the fair value of the provision.
5. Finance income
First half First half Full year
2017 2016 2016
GBP000 GBP000 GBP000
----------- ----------- ----------
Bank interest income 254 346 727
Foreign exchange gain 154 800 810
Other interest income 238 118 207
----------- ----------- ----------
646 1,264 1,744
----------- ----------- ----------
6. Finance expense
First half First half Full year
2017 2016 2016
GBP000 GBP000 GBP000
Interest expense on bank loans and overdrafts 723 1,018 2,028
Interest charge on pension scheme liabilities 803 385 767
Foreign exchange loss 766 157 714
Other interest expense 824 306 942
----------- ----------- ----------
3,116 1,866 4,451
----------- ----------- ----------
7. Income taxes
Income tax expense is recognised based on management's best
estimate of the weighted average annual income tax rate expected
for the full financial year. The estimated average annual tax rate
used for the year ending 31 December 2017 is 23.6%. This is lower
than the effective tax rate for the year ended 31 December 2016 of
26.2%, primarily due to the release of the non-taxable contingent
consideration (see note 4). The estimated average annual tax rate
for the year ending 31 December 2017 before accounting for the
contingent consideration release is 25.9%.
The Group continues to operate in many jurisdictions where local
profits are taxed at their national statutory rates. As a result,
the Group income tax charge will be subject to fluctuation
depending on the actual profit mix. The Group continues to expect
its effective corporation tax rate to be higher than the standard
UK rate of 19.25% due to higher tax rates in the majority of
overseas subsidiaries.
8. Dividends
First half First half Full year
2017 2016 2016
GBP000 GBP000 GBP000
---------- ---------- ---------
The following dividends were paid in the
period per
qualifying ordinary share:
3.15p final dividend (2016: 3.10p) 27,391 26,933 26,933
1.95p interim dividend - - 16,943
27,391 26,933 43,876
---------- ---------- ---------
The following dividends per qualifying ordinary
share were
declared / proposed at the balance sheet
date:
3.15p final dividend - - 27,407
2.05p interim dividend declared (2016: 1.95p) 17,826 16,961 -
17,826 16,961 27,407
---------- ---------- ---------
The interim dividend of 2.05p pence will be payable to
shareholders on 22 September 2017 to those on the register on 25
August 2017.
9. Earnings per share
Earnings per share is calculated using the profit attributable
to the ordinary shareholders for the period and 869.3m shares (six
months to 30 June 2016: 868.5m; year to 31 December 2016: 868.7m)
being the weighted average ordinary shares in issue.
Diluted earnings per share is based on the profit for the year
attributable to the ordinary shareholders and 873.7m shares (six
months to 30 June 2016: 871.4m; year to 31 December 2016: 872.0m).
The number of shares is equal to the weighted average number of
ordinary shares in issue (net of own ordinary shares held) adjusted
to assume conversion of all potentially dilutive ordinary
shares.
10. Inventories
30 June 30 June 31 Dec
2017 2016 2016
GBP000 GBP000 GBP000
-------- -------- --------
Raw materials and consumables 62,466 69,576 59,398
Work in progress 10,020 9,987 10,211
Finished goods 19,281 20,784 16,163
-------- -------- --------
91,767 100,347 85,772
-------- -------- --------
11. Pension schemes - Defined benefit deficit
The defined benefit obligation at 30 June 2017 of GBP45,293,000
(30 June 2016: GBP41,230,000; 31 December 2016: GBP58,498,000) is
estimated based on the latest full actuarial valuations at 31 March
2016 for UK and US plans. The valuation of the most significant
plan, namely the Rotork Pension and Life Assurance Scheme in the
UK, has been updated at 30 June 2017 by independent actuaries to
reflect updated assumptions regarding discount rates, inflation
rates and asset values.
30 June 30 June
31 Dec
2017 2016 2016
% % %
-------- -------- -------
Discount rate 2.6 2.9 2.6
Rate of inflation 3.2 2.9 3.4
-------- -------- -------
In addition, the defined benefit plan assets and liabilities
have been updated to reflect the regular payments, the GBP1.9
million payment made in March 2017 in respect of past service and
the benefits earned during the period to 30 June 2017.
12. Share capital and reserves
The number of ordinary 0.5p shares in issue at 30 June 2017 was
870,139,000 (30 June 2016: 869,808,000; 31 December 2016:
870,051,000). All issued shares are fully paid.
The Group acquired 465,000 of its own shares through purchases
on the London Stock Exchange during the period (30 June 2016:
557,000; 31 December 2016: 557,000). The total amount paid to
acquire the shares was GBP1,158,000 (30 June 2016: GBP1,007,000; 31
December 2016: GBP1,019,000), and this has been deducted from
shareholders equity. At 30 June 2017 the number of shares held in
trust for the benefit of Directors and employees for future
payments under the Share Incentive Plan and Long-term incentive
plan was 566,000 (30 June 2016: 963,000; 31 December 2016:
963,000). In the period 862,000 shares were transferred from the
trust to employees in respect of the Share investment plan and the
Overseas profit linked share plan.
In respect of the SAYE scheme, options exercised during the
period to 30 June 2017 resulted in 88,000 ordinary 0.5p shares
being issued (30 June 2016: 70,000 shares), with exercise proceeds
of GBP157,000 (30 June 2016: GBP106,000). The weighted average
market share price at the time of exercise was GBP2.45 (30 June
2016: GBP1.88) per share.
The share based payment charge for the period was GBP1,371,000
(30 June 2016: GBP1,471,000; 31 December 2016: GBP3,759,000).
13. Loans and borrowings
The following loans and borrowings were issued and repaid during
the six months ended 30 June 2017:
Carrying
value
GBP000
---------
Balance at 1 January 2017 116,411
Movement in the period:
Repayment of Euro denominated loans (127)
Repayment of finance leases (66)
Movement on GBP denominated loans (8,440)
Exchange differences 30
Balance at 30 June 2017 107,808
---------
Current 46,951
Non-current 60,857
---------
107,808
---------
The Group has committed loan facilities of GBP170,000,000 (First
half 2016: GBP170,000,000; Full year 2016: GBP170,000,000), of
which GBP107,000,000 (30 June 2016: GBP142,500,000; 31 December
2016: GBP115,500,000) has been drawn down, the outstanding amount
attracts a blended interest rate of LIBOR plus 0.73%.
The maturity profile of the non-current debt is as follows:
30 June 30 June 31 Dec
2017 2016 2016
GBP000 GBP000 GBP000
-------- -------- --------
1-2 years 30,001 30,004 44,968
2-5 years 30,135 62,555 5,600
> 5 years 721 813 735
-------- -------- --------
60,857 93,372 51,303
-------- -------- --------
14. Provisions
Contingent Warranty Carrying
consideration provision value
GBP000 GBP000 GBP000
--------------- ----------- ---------
Balance at 1 January 2017 11,708 5,842 17,550
Exchange differences 15 (52) (37)
Utilisation of provision (921) (619) (1,540)
(Release) / additional provision in
the period (10,000) 950 (9,050)
Balance at 30 June 2017 802 6,121 6,923
--------------- ----------- ---------
Maturity at 30 June 2017
Non-current - 2,020 2,020
Current 802 4,101 4,903
--------------- ----------- ---------
802 6,121 6,923
--------------- ----------- ---------
Maturity at 31 December 2016
Non-current 10,000 1,947 11,947
Current 1,708 3,895 5,603
--------------- ----------- ---------
11,708 5,842 17,550
--------------- ----------- ---------
15. Share-based payments
A grant of shares was made on 8 May 2017 to selected members of
senior management at the discretion of the Remuneration Committee.
The key information and assumptions from this grant were:
Equity Settled Equity Settled Equity Settled
TSR condition EPS condition ROIC condition
--------------- --------------- ----------------
Grant date 8 May 2017 8 May 2017 8 May 2017
Share price at grant date GBP2.39 GBP2.39 GBP2.39
Shares awarded under scheme 472,208 472,208 472,212
Vesting period 3 years 3 years 3 years
Expected volatility 32.0% 32.0% 32.0%
Risk free rate 0.2% 0.2% 0.2%
Expected dividends expressed
as a dividend yield 2.1% 2.1% 2.1%
Probability of ceasing employment
before vesting 20% p.a. 20% p.a. 20% p.a.
Fair value GBP1.14 GBP2.26 GBP2.26
--------------- --------------- ----------------
A Return on Invested Capital (ROIC) performance criteria has
been introduced in the 2017 LTIP award, details of this performance
condition are shown in the 2016 Annual Report & Accounts.
The basis of measuring fair value for TSR and EPS is consistent
with that disclosed in the 2016 Annual Report & Accounts. The
fair value of the ROIC condition has been measured using the
Black-Scholes model.
16. Related parties
The Group has a related party relationship with its subsidiaries
and with its directors and key management. A list of subsidiaries
is shown in the 2016 Annual Report & Accounts. Transactions
between key subsidiaries for the sale and purchase of products or
between the subsidiary and parent for management charges are priced
on an arm's length basis.
17. Financial instruments fair value disclosure
The Group held forward currency contracts designated as hedge
instruments in a cash flow hedging relationship. At 30 June 2017
the fair value of these contracts was a net liability of
GBP5,816,000 (30 June 2016: a net liability of GBP15,354,000; 31
December 2016: a net liability of GBP10,626,000). The fair value
was estimated using period end spot rates adjusted for the forward
points to the appropriate value dates, and gains and losses are
taken to equity estimated using market foreign exchange rates at
the balance sheet date. All derivative financial instruments are
categorised at Level 2 of the fair value hierarchy. There was no
ineffectiveness to be recorded from the use of foreign exchange
contracts.
The other financial instruments, comprising trade and other
receivables/payables and contingent consideration, are classified
as Level 3 in the fair value hierarchy and their carrying amount is
deemed to reflect the fair value. The Group had no derivative
financial instruments in the current or previous year with fair
values that would be classified as Level 3 in the fair value
hierarchy.
18. Shareholder information
The interim report and half year results presentation is
available on the Rotork website at www.rotork.com.
General shareholder contact numbers:
Shareholder General Enquiry Number
(UK): 0371 384 2030
International Shareholders - General
Enquiries: (00) 44 121 415 7047
For enquires regarding the Dividend Reinvestment Plan (DRIP)
contact:
The Share Dividend Team
Equiniti
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
Tel: 0371 384 2268
19. Group information
Secretary and registered office:
Stephen Rhys Jones
Rotork plc
Rotork House
Brassmill Lane
Bath
BA1 3JQ
Company website:
www.rotork.com
Investor Section:
http://www.rotork.com/en/investors/index/
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR SSMFAWFWSELA
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