Rotork plc Preliminary Results - 2009...• Continued investment in new products and markets Rotork...

Established Leaders in Valve Actuation

Rotork plc Preliminary Results - 2009

2nd March 2010

Presented by Chief Executive Officer - Peter France

Group Finance Director - Bob Slater

Chairman - Roger Lockwood

www.rotork.com

Rotork plcPreliminary Results - 2009

2nd March 2010

Presented by Chief Executive Officer - Peter FranceGroup Finance Director - Bob SlaterChairman - Roger Lockwood

www.rotork.comSlide 2

Year Under Review

• Strong Growth in Rotork Controls• Acquisition of Flow-Quip• Opening of new Indian factory in Bangalore• New Middle East office established• Disciplined management with focused investment• Improved working capital management• Strong cash generation • Increase in ROCE

www.rotork.com

Financial Review

Group Finance Director - Bob Slater


Financial Highlights

• Order intake down 5.2% (-14.0% organic c.c.)

• Sales revenue up 10.4% (0.0% organic c.c.)

• Year end order book £129m down 20.3% (-17.4% organic c.c.)

• Profit before tax up 20.0% (4.1% at adjusted organic c.c.)

• Basic EPS was 74.2p, up 19.7% (4.5% c.c.)

• Final dividend of 17.25p• Special dividend of 11.50p

Note: Adjusted is before the amortisation of acquired intangible assets and property disposalOrganic figures have the Flow-Quip acquisition removedCC = constant currency


Reconciliation of ‘Adjusted’ figures

Operating Profit Profit before tax

£m £m

As reported on a statutory basis 91.5 90.9

Disposal of property (0.6) (0.6)

Amortisation of acquired intangible assets 1.2 1.2

Adjusted – as used in this presentation 92.1 91.5


Impact of Flow-Quip Acquisition

• Acquisition of Flow-Quip in November for $8.0m

• Flow-Quip contribution for the 2 months 2009:• Revenue £1.38m• EBIT £0.16m• Margin 11.8%

• Amortisation for 2009 was £0.2m (2010: £0.3m)


Sales Revenue by half year


Sales Revenue 2009 at CC

020406080

100120140160180

H1 2004

H2 2004

H1 2005

H2 2005

H1 2006

H2 2006

H1 2007

H2 2007

H1 2008

H2 2008

H1 2009

H2 2009

£m


Sales Revenue

• Growth…….• 10.4% for year as reported • 0.5% at constant currency• Asia strong• The Americas good• Europe flat


Adjusted Operating Profit

05

101520253035404550

H1 2004

H2 2004

H1 2005

H2 2005

H1 2006

H2 2006

H1 2007

H2 2007

H1 2008

H2 2008

H1 2009

H2 2009

£m


Adjusted Operating Profit

• Growth…….• 21.2% for year as reported • 6.3% at constant currency• 6.1% at organic cc• Margins improved


Controls Division

• Revenue up 11.2% • Order book £84.7m, down 14.9% on December ’08• Operating Profit* up 25.3% on 2008 (31.5% before RPC)• Operating Margin* was 31.7%, up from 28.1% in ’08

* Adjusted

£m 2009 2008 % inc

Group Sales Revenue 353.5 320.2 10.4

Controls Sales Revenue 227.3 204.5 11.2

Group Operating Profit* 92.1 76.0 21.2

Controls Operating Profit* 72.0 57.5 25.3


Fluid Systems Division

£m 2009 2008 % inc


RFS Sales Revenue 99.7 88.6 12.6


RFS Operating Profit* 15.3 13.1 16.5

• Revenue up 12.6%• Order book £39.2m, down 29.8% on December ’08• Operating Profit* up 16.5% on 2008• Operating Margin* 15.4%, last year 14.8%

* Adjusted


Gears Division

£m 2009 2008 % inc


Gears Sales Revenue 36.8 36.8 0.1


Gears Operating Profit* 8.1 8.7 (6.8)

• Revenue flat• Order book £5.2m, down 21.7% on December ’08• Operating Profit* down 6.8% on 2008 • Operating Margin* 22.0% down from 23.6% in 2008

* Adjusted


Group Income Statement

£m 2009 2008 inc %

Revenue 353.5 320.2 10.4

Operating Profit 91.5 74.9 22.2

Adjusted PBT 91.5 76.9 19.0

PBT as reported 90.9 75.8 20.0

Effective tax rate 29.6% 29.5%

Adjusted EPS 74.9p 63.3p 18.2

EPS as reported 74.2p 62.0p 19.7


Currency Rates

US$ Euro

Year end closing 2008 rates: 1.44 1.03

Average rates:

Full year 2008 1.81 1.24

H1 2009 1.46 1.12

H2 2009 1.64 1.13

Full Year 2009 1.54 1.13

Year end closing rate 1.61 1.13


Currency Rates

US Dollar H1 H2 Year2009 1.46 1.64 1.54

2008 1.98 1.72 1.81

Movement 52 cents 8 cents

Euro2009 1.12 1.13 1.13

2008 1.29 1.19 1.24

Movement 17 cents 6 cents

Total Movement 69 cents 14 cents

This gives £11million profit impact in 2009 over 2008 (incl. transaction)


£m Group as reported

Adjust to get to CC

Group at 2008 Rates

Remove Flow Quip

Organic Business at 2008 Rates

2008

Revenue 353.5 (31.8) 321.7 (1.4) 320.3 320.2

Cost of Sales (187.6) 14.9 (172.7) 1.1 (171.6) (176.0)

Gross Profit 165.9 46.9% (16.9) 149.0 46.3% (0.3) 148.7 46.4% 144.2 45.0%

Overheads (73.8) 5.6 (68.2) 0.1 (68.1) (68.2)

Operating profit* 92.1 26.1% (11.3) 80.8 25.1% (0.2) 80.6 25.2% 76.0 23.7%

Constant Currency Analysis

*Adjusted


Dividend for 2009

Final dividend for 2009 of 17.25 pence (£14.9m)recommended to be paid in May 2010

Interim dividend of 11.15 pence (£9.6m)was paid in September 2009

Interim and final dividend total of 28.4 pence (up 9.2%)

An additional dividend of 11.5p (£9.9m) Will be paid in July 2010

Cover for the three dividends is 1.86


Balance Sheet

• CAPEX in the period was £4.3m• The impact of Flow-Quip was to add assets and working capital

• Working capital as a percentage of revenue– 2009 21%

– 2008 28%

– 2007 25%

– 2006 24%

– 2005 28%

– Within this, receivables were 60 days (2008 64 days), and inventory decreased by £13m

• Year end cash balance £78.7m


Cash Flow Summary -Inflows

£m 2009 2008Operating Profit 91.5 74.9Add back depreciation & amortisation 5.1 4.8Less pension charge versus cash paid (1.4) (0.8)Cash inflow from operating activities 95.2 78.9Working capital movement 12.5 (5.1)Cash flows from finance - 0.1Other 0.3 0.1Cash inflows 108.0 74.0


Cash Flow Summary -Outflows

£ m 2009 2008Cash inflows 108.0 74.0OUTFLOWS

Taxation (27.5) (22.5)Capital Expenditure (5.0) (5.8)Purchase/issue own shares under share schemes (3.7) (3.5)

Net cash flow 71.8 42.2Issue of shares 0.4 0.1Acquisitions (4.9) (12.7)Dividends (24.1) (30.0)Net cash Inflow (outflow) 43.2 (0.4)

Cash balances 78.7 41.4

www.rotork.com

Operating Review

Chief Executive Officer - Peter France


The Rotork Group

• 53 years of providing actuation solutions• 3 Divisions

– Controls– Fluid Systems– Gears

• Approximately 1,800 employees worldwide• 15 manufacturing centres• 350 sales offices

– Direct operations: 96 locations in 29 countries– Representation: 254 locations in 83 countries


Results• Growth in Controls and Fluid Systems divisions

• Growth in all territories except Latin America

• Power market flat, water market down

Group Results

£0

£20

£40

£60

£80

£100

£120

£140

N. America exc. Mexico

Asia Pacific/Far

East

E.Europe Europe Latin America Middle East/Africa

UK

Millions

Group Rev enue by End Destination 2009 vs 2008

2008 2009

£0

£50

£100

£150

£200

£250

Controls Fluid Systems Gears

Millions

Rev enue 2009 vs 2008

2008 2009

£0

£20

£40

£60

£80

£100

£120

£140

£160

£180

£200

H/Carbs Water Power Industrial Other

Millions

Group Rev enue by End User Market 2009 vs 2008

2008 2009

Source –Rotork Internal Data


Market Share by Division 2009

Controls market £1.275bnRotork Share 18%

Fluid Systems market £680mRotork Share 15%

Gears market £136mRotork Share 19%

Total market £2.091bn Rotork Share 17%

Source –Rotork Internal Data

Controls market £1.5bnRotork Share 13%

Gears market £170mRotork Share 16%

Fluid Systems market £850mRotork Share 10%

2008 Data

Total market £2.52bn Rotork Share 13%


Rotork Controls

Year under review• Strong growth in core business• Challenging trading environment for RPC• Positive material cost management• Strong demand from the Americas and Australasia

• New Indian factory

Business Opportunities• Nuclear• Brazil, Russia, India and China with the Middle East

• Continued investment in new products and markets

• Rotork Process Controls including CVA

Results• Revenue £227.3m up 11.2%• Operating profit £72.0m up 25.3%• Operating margin up from 28.1% to 31.7%

• Order book £84.7m down 14.9%


Rotork Fluid SystemsResults• Revenue £99.7m up 12.6%• Operating profit £15.3 up 16.5%• Operating margin up from 14.8% to 15.4%

• Order book £39.2m down 29.8%

Business Opportunities• Transmission and distribution• Increased investment by NOCs• Expected increased Upstream capexspend

• New products and broader market focus• Nuclear• Safety and information diagnostics

Year under review • Improved operating margin• Strong results from USA, UK, Germany andSpain

• Acquisition of Flow‐Quip• Delays in Upstream projects• Challenging trading environment in Italy• Successful product development• Opening of Middle East office


Flow-Quip Acquisition

Financial Highlights• USD 14.6 million annual revenue• Adjusted operating profit USD 1.8 million• Adjusted operating margin 12.4%

Benefits• New Products– Hydraulic power unit – Self contained / Single shot hydraulic actuator– Variable speed Drive actuator (fast acting double

acting applications)• Access to new markets – Latin America– US Liquid Pipelines

Details• Established in Tulsa, Oklahoma, in 1967• 24 employees• 1,893m2 (20,381 sqft) building complex• Acquisition price USD 8 million


Rotork GearsResults• Revenue £36.8m up 0.1%• Operating Profit £8m down 6.8%• Operating margin 22% down from 23.6%• Order book £5.2m down 21.7%

Year under review• Margin pressure• Improved profitability of Chinese plant• Established Indian manufacturing base• Strengthened R&D team• Introduction of 5 new products• Over £900k from new customers

Business Opportunities• Russia, India and China• USA AWWA market• European and USA Fire Safety FM/UL market (Fireball)

• Safety Override Market• Trend for larger gearboxes • Acquisition(s)


Activities• Preventative Maintenance• Retrofitting• Factory Fitting• Workshop Overhaul• Technical support• Field service• Training

Rotork Site Services

Business Opportunities• End user cost reduction initiatives• Increased focus on plant safety• Optimisation of plant• New service centres• Development of product offering

Year under review• Number of actuators on PM contracts up 12%• No of workshop overhauls up 52%• Retrofit volumes up 24%• Factory fit volumes up73%• New service centres opened in India, Middle East, USA and Russia

• Number of service engineers increased by 11%• High utilisation rates


Expenditure

Research & Development

0.00

1.00

2.00

3.00

4.00

5.00

2004 2005 2006 2007 2008 2009

£ M

illion

s 17.8%11.8% -0.8% 13.3%

18.5% 0.1%


Project Activity

Source: Rotork Internal Data Source: Rotork Internal Data

• Project activity up across all industry sectors and geographic regions.

• New project activity was strong in Q3 2009 but generally less so in Q4 2009.

• Downstream, midstream, power and renewable markets all seeing more new projects in Q4 2009 compared with Q4 2008.

• India and China are the focus of power project activity.

0

500

1000

1500

2000

2500

3000

3500

4000

H/Carbs Water Power Other

Num

ber o

f RSM

S Pr

ojec

ts

Project Activity: Industry Type

31st December 2008 31st December 2009

10%

39%27%

24%

Project Activity: End Destination

Africa Asia & Australia Europe The Americas

Number of New Energy Projects

Source: EIC Data Monitor


Quote Activity

Source: Rotork Internal Data Source: Rotork Internal Data

Q4 2009 v Q4 2008• Controls quotes made ‐ up by 17.8%• Controls units quoted ‐ up by 36.5%• Fluid Systems quotes made ‐ up by 41.2%• Fluid Systems units quoted ‐ up by 17.7%

Controls Actuators Fluid Systems Actuators

No.

of Q

uote

s M

ade

Quotes Made

Q4 2008

Q4 2009

Controls Actuators Fluid Systems Actuators

No.

of U

nits

Quo

ted

Units Quoted

Q4 2008

Q4 2009


Market Drivers• Oil & Gas

– Expected increase in midstream and upstream expenditure. Rig count now 20% higher than May 2009.

– Downstream growth expected to return in 2010 after an 8% decline in 2009. – LNG demand forecast to grow 40% by 2020.– Refining projections in Latin America have been revised up.

• Power– Renewable energy spend to increase.– Nuclear activity accelerating.

• Water & Wastewater– Global water / wastewater market to return to growth levels of 6-8%.– The USA alone will require $500bn over the next 20 years.– Southeast Asia still only accounts for around 4% of total spend and this is

expected to grow significantly in the next few years.


StrategyRotork focuses on valve actuation and associated activities, principallywherever there is a need to control the movement of fluids or gases. Asworld market leader our aim is to provide high quality, technicallyadvanced, innovative products and services that support our customers’activities around the world through our extensive and continually expandingnetwork of offices and manufacturing plants.

We operate an asset light business model which is highly cash generative.We seek to deliver quality margins, consistent year on year growth inrevenues, profit and core dividends through organic growth and acquisitions.

We develop and train our people to deliver our strategy and satisfy ourcustomers’ requirements while maintaining high ethical and safety standardsacross the group and acting as a responsible international corporate entity


Group Strategy

Acquisitions

Productdevelopment

Sales

Procurement

Manufacturing and Facilities

Controls + RSS RFS + RSS

Strategies common across all divisions

HR Systems CSR

Mission Vision Objectives Financial

Acquisitions

Productdevelopment

Procurement


Gears

Acquisitions

Productdevelopment

Sales

Procurement


Sales


Top 10 objectives in 2010Within the Group Strategy, the following objectives have been identified as the Key Objectives for 2010:

Objective Description

Sales Growth Continue efforts to ensure all divisions and subsidiaries sell actively and enthusiastically to grow market share and enter new geographic markets and sectors thereby underpinning achievement of financial targets, with additional emphasis on BRIC (Brazil, Russia, India, China) countries.

New Products Increased investment in product development.

Acquisitions Execute acquisition of identified suitable opportunities.

Health & Safety Continue to drive improvements in safety performance group wide.

Material Cost Management

Leverage global supply chain.


Top 10 objectives in 2010(Cont’d)

Objective Description

Development of RSS Continue progress with RSS offering worldwide and further develop our site services capability under a recognisable global brand.

IT Implement a management system for subsidiary sales and service offices.

People Development Identify and develop key talent.

Processes and Ethics Continue to embed a high performance culture including delivery of our Corporate Responsibility agenda.

Nuclear Expanding resource and product portfolio.


Summary of Business Opportunities

• Increased product portfolio• Focus on developing markets• Expectation of increased availability of acquisition

targets• Purchasing initiatives to further improve our cost

base• Rotork Site Services• Still potential to grow and increase market share


Outlook StatementRotork benefits from a focused long term strategy. Our breadth of productoffering, strong balance sheet and international presence provide us witha solid platform for growth.

Although market conditions remain unsettled we continue to benefit frominvestment in product development, new facilities, expanded servicecapabilities and improved market penetration.

Quotation activity and the number of projects on our internal trackingsystem remain at high levels and whilst uncertainty remains on the timingof projects, we anticipate continued improvement in infrastructure andenergy related markets.

The Board looks forward with confidence to 2010.

www.rotork.com

Appendix


Appendix -Major Cash Outflows in 2009

In summary – 2009 major cash outflows included:

• 2008 final dividend of £14.5m in May• Interim dividend in September of £9.6m• Acquisition of Flow-Quip in November £4.9m ($8.0m)


Adjusted Operating Profit to Revenue %

Appendix -Adjusted Operating Profit

£m 2009 2008 % increaseControls 72.0 57.5 25.3

Fluid Systems 15.3 13.1 16.5Gears 8.1 8.7 (6.8)Unallocated (3.3) (3.3)

Total 92.1 76.0 21.2

% 2009 2008

Controls 31.7 28.1Fluid Systems 15.4 14.8

Gears 22.0 23.6

Group 26.1 23.7


Appendix -Cash Flow Statement - Inflows

2009 2009 2008 2008£000 £000 £000 £000

Profit for the Year 64,032 53,420Financial income (5,784) (7,073)Financial expenses 6,405 6,211Income tax expense 26,884 22,331Operating profit 91,537 74,889Amortisation of intangibles 1,153 1,125Amortisation of development costs 402 352Depreciation 3,549 3,281Add back depreciation 5,104 4,758 Difference between pension charge and cash (1,350) (823)Cash inflow from operating activities 95,291 78,824Inventories 9,680 (8,621)Trade and other receivables 5,967 (4,293)Trade and other payables (4,032) 5,955Provisions (257) 1,554Employee benefits 272 (299)Working capital movements 11,630 (5,704)Interest received 270 564Interest paid (175) (295)Cash flows from finance 95 269Cash inflow from operations 107,016 73,389


Appendix -Cash Flow Statement - Outflows

2009 2009 2008 2008£000 £000 £000 £000

Cash inflow from operations 107,016 73,389Additional pension contributions 0 0Taxation (27,548) (22,547)Capital expenditure (inc intangible) (4,238) (5,019)Issue of ordinary share capital 371 149Purchase order capital (3,700) (3,517)Purchase preference shares - (5)Purchase/issue shares (3,329) (3,373)Acquisitions (4,892) (12,714)Dividends (24,102) (29,970)Equity settled share based payment expense 872 718Loss / (Profit) on sale of f ixed assets (598) 25Development costs capitalised (768) (817)Sale of f ixed assets 908 90Increase in borrow ings (27) (82)Repayment of f inance leases (94) (87)Effect of exchange rate f luctuations (5,914) 3,524Other (5,621) 3,371

37,246 3,137Opening cash 41,390 38,253Closing cash 78,676 41,390


Appendix -Adjusted Operating Profit by Segment

£m 2009 2009Adjustments

2009Adjusted

2008Adjusted

% increase

Operating profit 91.5 0.6 92.1 76.0 21.2

By Division:Controls 72.6 (0.6) 72.0 57.5 25.3

Fluid Systems 14.2 1.1 15.3 13.1 16.5Gears 8.0 0.1 8.1 8.7 (6.8)Unallocated costs (3.3) - (3.3) (3.3) -

Total 91.5 0.6 92.1 76.0 21.2

www.rotork.com

A full listing of our worldwide sales and service network is available on our website.

UKRotork plctel +44 (0)1225 733200fax +44 (0)1225 333467email [email protected]

Electric Actuators and Control Systems

Fluid Power Actuators and Control Systems

Gearboxes and Gear Operators

Projects, Services and Retrofit

Rotork plc Preliminary Results - 2009...• Continued investment in new products and markets Rotork...

Documents

Transcript of Rotork plc Preliminary Results - 2009...• Continued investment in new products and markets Rotork...