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Rotork PLC  -  ROR   

Rotork plc 2017 Half Year Results

Released 07:00 08-Aug-2017

RNS Number : 3376N
Rotork PLC
08 August 2017
 

 

 

Rotork plc

2017 Half Year Results

 

 

 
HY 2017
HY 2016
% change
OCC 2 % change
 
 
 
 
 
Revenue
£299.7m
£263.9m
+13.6%
0.0%
Adjusted1 operating profit
£54.4m
£50.7m
+7.3%
-3.7%
Adjusted1 operating margin
18.2%
19.2%
-100bps
-70bps
Adjusted1 profit before tax
£52.0m
£50.1m
+3.7%
-7.5%
Adjusted1 basic earnings per share
4.4p
4.3p
+4.2%
-7.3%
Profit before tax
£48.8m
£38.3m
+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 £213m 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 £212.8m, 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 £4.2m of savings from prior year initiatives. We continue to expect a £2m 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 £10m 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 £7.9m to £47.1m 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 £8.0m in capital expenditure, pay dividends of £27.4m and make tax payments of £11.5m.

 

Financial position

The balance sheet remains strong and at the period end included net debt of £47.1m (Dec 2016: £55.0m), with a net debt: adjusted EBITDA ratio of 0.4:1 (Dec 2016: 0.4:1). Committed facilities totalled £170m of which £107m were drawn at the period end. £35m of the committed facility expires in August 2017.

 

Net working capital at the period end was £175.9m, a reduction of £2.1m since the year end. On an OCC basis, net working capital would have reduced by £1.0m.

 

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 £58.5m at 31 December 2016 to £45.3m 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 £30.4m (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 €1.16 (H1 2016: €1.29), whilst the rates at 30 June 2017 were $1.30 and €1.14 (30 June 2016: $1.34 and €1.20).

 

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

£m

H1 2017

H1 2016

Change

OCC2

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

Adjusted1 operating profit

40.0

36.2

+10.2%

+1.1%

Adjusted1 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

£m

H1 2017

H1 2016

Change

OCC2

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

Adjusted1 operating profit

1.1

0.8

+35.2%

-3.3%

Adjusted1 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

£m

H1 2017

H1 2016

Change

OCC2

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

Adjusted1 operating profit

6.3

6.5

-3.2%

-12.9%

Adjusted1 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

£m

H1 2017

H1 2016

Change

OCC2

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

Adjusted1 operating profit

10.0

10.3

-2.8%

-15.8%

Adjusted1 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

£000

£000

£000

 

 

 

 

 

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

 

£000

£000

£000

 

 

 

 

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

£000

£000

£000

 

 

 

 

 

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 equity

capital

£000


Share

premium

£000


Translation

reserve

£000

Capital

redemption

reserve

£000

 

Hedging reserve

£000

 

Retained earnings

£000

Total

£000

 

 

 

 

 

 

 

 

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 equity

capital

£000


Share

premium

£000


Translation

reserve

£000

Capital

redemption

reserve

£000

 

Hedging reserve

£000

 

Retained earnings

£000

Total

£000

 

 

 

 

 

 

 

 

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 equity

capital

£000


Share

premium

£000


Translation

reserve

£000

Capital

redemption

reserve

£000

 

Hedging reserve

£000

 

Retained earnings

£000

Total

£000

 

 

 

 

 

 

 

 

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

 

£000

£000

£000

 

 

 

 

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

 

£000

£000

£000

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

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

 

£000

£000

£000

 

 

 

 

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

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:

 

30 June

2017

 

Currency adjustment

Impact of acquisitions

 

OCC

30 June

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

 

 

 

Controls

£000

Fluid
Systems
£000

 

Gears
£000

 

Instruments

£000

 

Elimination
£000

 

Unallocated
£000

 

Group
£000

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

 

 

Controls

£000

Fluid
Systems
£000

 

Gears
£000

 

Instruments

£000

 

Elimination
£000

 

Unallocated
£000

 

Group
£000

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

 

 

Controls
£000

Fluid
Systems
£000

 

Gears
£000

 

Instruments

£000

 

Elimination
£000

 

Unallocated
£000

 

Group
£000

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

 

£000

£000

£000

 

 

 

 

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 £10,000,000 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 £nil. Accordingly a £10,000,000 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

 

£000

£000

£000

 

 

 

 

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

 

£000

£000

£000

 

 

 

 

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

 

£000

£000

£000

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

 

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

-

 

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

2017

£000

30 June

2016

£000

31 Dec 2016

£000

 

 

 

 

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 £45,293,000 (30 June 2016: £41,230,000; 31 December 2016: £58,498,000) 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

2017

%

30 June

2016

%

31 Dec 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 £1.9 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 £1,158,000 (30 June 2016: £1,007,000; 31 December 2016: £1,019,000), 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 £157,000 (30 June 2016: £106,000). The weighted average market share price at the time of exercise was £2.45 (30 June 2016: £1.88) per share.

 

The share based payment charge for the period was £1,371,000 (30 June 2016: £1,471,000; 31 December 2016: £3,759,000).

 

 

13.       Loans and borrowings

 

The following loans and borrowings were issued and repaid during the six months ended 30 June 2017:
 

 

 

Carrying value

£000

 

 

 

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 £170,000,000 (First half 2016: £170,000,000; Full year 2016: £170,000,000), of which £107,000,000 (30 June 2016: £142,500,000; 31 December 2016: £115,500,000) 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

2017

£000

30 June

2016

£000

31 Dec

2016

£000

 

 

 

 

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 consideration

£000

Warranty provision

£000

Carrying value

£000

 

 

 

 

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
TSR condition

Equity Settled

EPS condition

Equity Settled

ROIC condition

 

 

 

 

Grant date

8 May 2017

8 May 2017

8 May 2017

Share price at grant date

£2.39

£2.39

£2.39

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

£1.14

£2.26

£2.26

 

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 £5,816,000 (30 June 2016: a net liability of £15,354,000; 31 December 2016: a net liability of £10,626,000). 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
 
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Rotork plc 2017 Half Year Results - RNS