RNS Number : 2123Y
Rotork PLC
28 February 2012
 



 

Rotork p.l.c. 

 

2011 Full Year Results

 

 
2011
2010
% change
% change (organic constant currency)
Revenue
£447.8m
£380.6m
+17.7%
+15.9%
Adjusted* operating profit
£115.9m
£99.4m
+16.6%
+16.0%
Adjusted* profit before tax
£116.5m
£99.6m
+17.0%
+16.4%
Adjusted* return on sales
26.0%
26.2%
-20bps
+10bps
Basic earnings per share
93.0p
80.5p
+15.5%
 
Adjusted* basic earnings per share
96.2p
81.9p
+17.5%
 
Final dividend
22.75p

19.75p

+15.2%
 

 

* Adjusted figures are before the amortisation of acquired intangible assets

 


Key Points

 

·      Record revenue, profit and order intake in each division

·      Order intake up 20.9% (18.1% organic constant currency)

·      Year end order book of £157m, up 13.2%

·      Completion of six acquisitions in the year, including Fairchild

·      New Rotork Instruments division to address wider flow control market

·      Final dividend increased by 15.2%

 

 

"I am pleased to report another successful year, with each division achieving record results in terms of order intake, revenue and profit.

Rotork is well positioned in growth markets and the execution of our long-term strategy of expanding into the wider flow control market will provide further opportunities for growth. This year will see the introduction of several new products and we will also continue to look for suitable acquisition targets.

 

We continue to invest in our infrastructure, product development and sales coverage to support the growth projections of the business. Whilst mindful of the uncertain economic environment, the indications we are receiving from our customers are positive. The markets that we serve, combined with our extensive product portfolio, international presence and end-market exposure, provide the Board with confidence of achieving further progress in the coming year."





For further information, please contact:

 

Rotork p.l.c.

Tel:  01225 733200

Peter France, Chief Executive


Jonathan Davis, Finance Director




Financial Dynamics    

Tel:  020 7269 7291

Nick Hasell / Susanne Yule



Chairman's statement

 

I am pleased to report another year of strong growth for Rotork, with our order intake, revenue and profit all at record levels. During the year we completed six acquisitions and announced the formation of a new division, Rotork Instruments. Rotork Instruments will provide a platform for our expansion into the wider flow control market. While economic uncertainty affected activity levels in some countries in which we operate, the continued broadening of our geographic spread and end-market exposure limited the overall impact on the Group.

 

In addition to our increased spend on acquisitions, which amounted to £64.2m in the year, we continued to invest in our facilities and people in the locations and sectors where we see growth opportunities. Investment in product development was also higher in the year at £5.8m, an increase of 35% on 2010. This investment will result in an increased number of product launches in 2012, including the next generation of our IQ actuator range. We aim to extend our industry leadership position and consolidate Rotork's reputation for world-class innovation.

 

The Rotork brand continues to strengthen and customers who demand high quality products and services recognise that Rotork provides a superior solution to their automation needs, improving the reliability and operation of their plant.

 

Our continued success is due to the dedication of our people, whether in customer facing, operational or support roles. Their hard work has allowed Rotork to capitalise on the available opportunities and continue to provide excellent customer service.

 

Financial Highlights

 

Revenue of £447.8m was 17.7% higher than the previous year, with organic growth on a constant currency basis of 15.9%. Adjusted profit before tax* increased by 17.0% to £116.5m resulting in a return on sales on this basis of 26.0%, similar to the prior year. In aggregate, acquisitions reported a lower return on sales than the Group average, so when taken with a modest currency headwind, return on sales restated on an organic constant currency basis was 26.3%, slightly above 2010. Cash generation from operations was good and after returning £49.5m to shareholders in dividends and spending £64.2m on acquisitions, we finished the year with net cash of £48.5m.

 

Board Composition

 

The Board supports Lord Davies' recent report regarding 'Women on Boards' and has a stated aim that 25% of its non-executive directors will be women by the end of 2012. We have always believed that good corporate governance stems from a quality Board which has a wide range of experience and skills. We are actively recruiting a suitable member of the Board using our established formal appointment process. The successful candidate will bring the necessary level of expertise, questioning and debate and provide the required level of support to the executive team.

 

Board Performance

 

For a number of years we have appointed external consultants to conduct an independent appraisal of Board effectiveness and this year we repeated the process. Overall, the feedback from the review was positive and, having been discussed by the Board, this has led to a number of changes. The primary changes are: increasing the membership of the Management Board to cover Human Resources and Business Development roles; altering the format of Board meetings to allow more time for debate and discussion; and providing greater opportunities for non-executive directors to participate in discussion of the Group's strategic direction. It is clear that the breadth of experience and skills represented on the Board is an important factor in the Board's effectiveness. The open and inclusive discussions we enjoy ensure consideration is given to all points of view. Overall, I remain satisfied that the composition of the Board enables it to fulfill its expected role. The non-executive directors also reviewed my performance as Chairman and provided feedback via the senior independent director.

 

Corporate Governance

 

The Board sets the tone for the way in which Rotork operates and we remain committed to running the business in a responsible way. The Board considers current performance, strategy and acquisitions, risk management, the internal control framework and the other aspects of corporate governance throughout the year. Some of the discussions involve the wider Rotork Management Board. The executive management are then able to disseminate the values and standards of the Board throughout the Group and ensure these are embedded at all levels.

 

In response to the UK Corporate Governance Code 2010, all directors stood for re-election at the last Annual General Meeting and we intend to continue this practice in the future. 

 

Dividend

 

The Board recommends a final dividend of 22.75p per share which, taken together with the 2011 interim dividend, gives a payment of 37.25p per share (2010: 32.50p), representing a 14.6% increase. This dividend will be payable on 21 May 2012 to shareholders on the register on 13 April 2012.

 

Outlook

 

Rotork is well positioned in growth markets and the execution of our long-term strategy of expanding into the wider flow control market will provide further opportunities for growth. This year will see the introduction of several new products and we will also continue to look for suitable acquisition targets.

 

We continue to invest in our infrastructure, product development and sales coverage to support the growth projections of the business. Whilst mindful of the uncertain economic environment, the indications we are receiving from our customers are positive. The markets that we serve, combined with our extensive product portfolio, international presence and end-market exposure, provide the Board with confidence of achieving further progress in the coming year.  

 

 

Roger Lockwood

Chairman

27 February 2012

 

*References to adjusted profit throughout this document are defined as the IFRS profit, whether profit before tax or operating profit, with the amortisation of acquired intangibles added back.

 


Business Review

 

Our strategy for growth and value creation for our shareholders continues to deliver positive results. The momentum we experienced in 2010 continued into 2011, with each division achieving record results. The focus on developing our international sales channels, expanding our product portfolio and carefully managing our cost base provides a strong platform for further growth.

 

We are a global company with 19 manufacturing sites, 104 offices, direct employees in 31 countries, and sales channels in 89 countries. Our customers demand first-class after-sales support and our dedicated teams around the world are equipped to provide the local support they require.

 

This year we established a new division, Rotork Instruments, to strengthen our presence in the wider flow control market. The acquisition of Fairchild Industrial Products Company (Fairchild) forms the basis of this new business, and is the first step in developing another Rotork division with market leading products.

 

Rotork has a strong brand identity, international presence and technical capabilities that support our objective of providing our customers with high quality, technically advanced, innovative products and services. 

 

Highlights

 

I am pleased to report another successful year. Customer orders were weighted towards the end of 2011, and with the receipt of our largest ever order in December, a £8.9m pipeline project in Mexico, the fourth quarter was particularly strong. Overall, order intake for the year was £461.8m, up 20.9% compared with 2010. Removing the contribution from acquisitions and a small currency headwind, order intake was 18.1% ahead of the prior year.

 

Rotork offices benefit from both local business and international projects where the orders are often placed through valvemakers in their area. This means that our offices in mature markets can still experience significant growth due to export activity. This was evident during the year with strong export-led performances from countries such as the UK, USA, Korea and Italy. There was also strong domestic growth in countries such as Australia, China and India. Overall, Europe, Asia and the Americas all posted results higher than the prior year. Revenue was strong at £447.8m, 17.7% up on the prior year. Adjusted profit before tax margin was 26.0%, fractionally below the 26.2% achieved last year, but with the impact of acquisitions and currency reversed the adjusted margin was 26.3%.

 

The creation of a new division reflects the wider market ambitions of the Group in flow control, an area identified by the Board during our strategy discussions as having significant growth potential. The acquisition of Fairchild provides a strong foundation on which Rotork Instruments can build a product portfolio and access new end-markets as well as strengthening our presence in existing markets. Fairchild will also continue as a supplier to other parts of the Group and we will look to capitalise on this opportunity.

 

In addition to Fairchild, we completed a further five acquisitions in the year:

 

·      Rotork Servo Controles de Mexico S.A. de C.V. (RSCM) and Valco Valves & Automation AS, (VVA), based in Mexico and Norway respectively, strengthened our geographic coverage with their strong sales and service organisations. Both these new sales offices will focus mainly on Rotork Controls and Rotork Fluid Systems products.

 

·      Controls International Inc (K-Tork) a company based in the USA and Centork Valve Control S.L. (Centork) from Spain, provide product as well as sales channels to Rotork Fluid System and Rotork Controls respectively.

 

·      Prokits Limited (Prokits), a UK based valve adaption company, will be integrated into the Rotork Gears business.

 

Our growth strategy is focused on both organic and acquisition-led growth. The acquisitions completed in 2011 are all aligned with our acquisition criteria of expanding the product portfolio, strengthening or entering a new geography and strengthening or entering a new market. Integration of the new companies is going to plan and all of them are contributing to the Group in-line with the acquisition case.

 

To support the continued organic growth of the Group, we have also been investing in the infrastructure of the business. The most significant investments include a new factory in Chennai, India, that will be operational by April 2012 and a new facility very close to the existing Bath site that will provide room for expansion. In January 2011, we also inaugurated an additional plant in China for our Gears business.

 

Rotork Controls

 

£m

2011

2010

Change

OCC change

Revenue

278.0

243.4

+14.2%

+13.8%

Adjusted operating profit

92.1

78.8

+16.9%

+17.5%

Adjusted operating margin

33.1%

32.4%

+70bps

+100bps

 

Rotork Controls had an excellent year, reporting record revenue and operating profit, with double-digit growth in both. We also achieved record adjusted operating margins of 33.1%. The growth was broad based, with our offices in each region - the Americas, the Far East and Europe - all making progress in aggregate. We have continued to invest in our sales channels and have benefited from increased activity in a number of our end-markets. Downstream and midstream project activity in the oil & gas sector was particularly strong and in certain countries we benefited from increased investment in infrastructure, mainly power generation and water treatment plants. We continued to make progress with our Rotork Process Controls (RPC) products and the growth of these actuators, which include the CVA, exceeded the growth rate for the division as a whole.

 

Divisional revenue grew 14.2% in the year to £278.0m and with order intake increasing by 17.4%, the year end order book grew by 6.4%. Removing the contribution from acquisitions and restating this year at 2010 exchange rates, revenue growth was 13.8% and order intake growth 15.9%. Currency was a modest headwind for the division, principally driven by the weaker average US dollar rate in 2011, offset by a slight tailwind from the euro and other currencies. Adjusted operating profit increased 16.9% in the year to £92.1m, which represents a 33.1% margin compared with 32.4% in 2010. Cost pressures arising from commodity price increases during the year were successfully mitigated, with material costs remaining a near-constant proportion of sales compared with the prior year. At the same time, labour and overheads costs increased at a lower rate than revenue growth.

 

Three of this year's acquisitions benefited the division, albeit their contributions to profit in the year were modest. Centork brings a new actuator range which will allow us to better target certain segments of the electric actuator market, whilst the acquisitions in both Norway and Mexico enhance our geographic coverage. Both these countries already have a large installed base of Rotork actuators and the acquisitions provide an opportunity to strengthen our direct relationship with the end-users and grow our after-market service offering through Rotork Site Services (RSS). As well as increased acquisition activity we continue to invest in product development. We have significantly grown our engineering resource and the Rotork innovation and design centre (RIDEC), in India, is now operational and contributing to our development programme. The increased investment will benefit the business in 2012 and beyond as new products are introduced.

 

Rotork Fluid Systems

 

£m

2011

2010

Change

OCC change

Revenue

132.6

106.8

+24.1%

+20.4%

Adjusted operating profit

17.1

14.9

+14.5%

+12.8%

Adjusted operating margin

12.9%

14.0%

-110bps

-90bps

 

This year Rotork Fluid Systems (RFS) was once again the fastest growing division, with particularly strong trading in the second half of the year. Acquisitions have played a significant part in the growth of the division over the last ten years and this year we completed the acquisition of K-Tork in Dallas, USA, which brought a new product range and increased the exposure of RFS to the power and water markets. The acquisition of the businesses in Norway and Mexico also contributed to the results of the division. More importantly, they increase the future opportunities for RFS as we continue to grow our global aftermarket offering. The acquisition of Rotork Mexico and the development of our own service team in Mexico were instrumental in winning the largest ever single order for Rotork in December. The project is to supply the complete actuator solution for 47 pipelines in Mexico, with deliveries scheduled between now and 2014.

 

The integration and development of these acquisitions, and those completed in earlier years, remains key to our strategy. K-Tork's products have a very good reputation and, although predominantly focused on the US market, they are well suited to being sold through Rotork's worldwide sales offices. The education process to deliver increased sales outside of the USA is now underway. The scope for development of the Hiller product range remains significant, and our focus for the business in 2012 is to deliver an enhanced and fully certified solution for the next generation of nuclear power station projects. Development of our core product lines is also important, and this year we launched SI Pro, the latest generation of electro-hydraulic actuators. These specifiable emergency shutdown actuators are very much in demand in safety critical applications, and where increased diagnostics are required.

 

Order intake increased by 30.1% and the order book rose 24.3%, 8.4% of which was due to order book taken on with acquired businesses. On an organic constant currency basis, order intake was 25.0% higher. Annual revenue grew 24.1% to a record £132.6m, with the second half of £79.6m being 49.9% higher than the first half of the year. Revenue is often greater in the second half year in RFS but this year saw a higher than usual increase driven purely by customer delivery requirements. Removing the benefit of acquisitions and restating revenue at 2010 exchange rates, revenue growth would have been 20.4%. Adjusted operating profit was a record at £17.1m, 14.5% higher than the prior year with the second half representing 71% of the full year's profit. Adjusted operating margins, which, affected by the lower revenue, had been disappointing in the first half of the year at 9.2%, met the division's target in the second half at 15.3%, giving a full year average of 12.9%. On an organic constant currency basis full year margins were 13.1%.

 

Rotork Gears

 

£m

2011

2010

Change

OCC change

Revenue

46.6

39.2

+18.8%

+17.5%

Adjusted operating profit

10.3

9.2

+12.8%

+8.3%

Adjusted operating margin

22.2%

23.4%

-120bps

-190bps

 

Rotork Gears manufactures and sells manual and motorised gearboxes. We continue to increase our third party sales to the valve industry as a strategic objective and reduce our dependence on intercompany transactions. Around three quarters of revenue is now generated from sales to third party valve manufacturers. Whilst the sales to Rotork offices are often driven by project activity, the sales to valvemakers are very different in nature. The gearbox is seen as a component of the valve and with the majority of valves still being manually operated, most require a gearbox to provide the mechanical advantage necessary to operate the valve. All valvemakers therefore need a supply of gearboxes and although some make their own, our sales proposition is very attractive. We can provide a high quality, reliable gearbox and by virtue of our scale and buying power through our global supply chain, offer our gearboxes at a better rate than internally manufactured products.

 

Revenue in the year was £46.6m, an increase of 18.8% over 2010, order intake rose 15.6%, and our order book increased by 8.6%, all of which set new records for Gears. The acquisition of Prokits came too close to the end of the year to have a significant effect on the results, and the overall currency impact on revenue was negligible. Adjusted operating profit for the year was £10.3m, 12.8% higher than the prior year. There had been some margin pressure in the first half of the year, reducing operating margin to 21.7%. However during the second half the benefit of July price increases and higher revenue increased margins to 22.6%, resulting in a full year average of 22.2%. Gears has a very different currency exposure to the rest of the Group and purchases a greater proportion of its components in US dollars, such that, with a weaker US dollar this year, operating profit benefited from a currency tailwind. Restating adjusted operating profit at last year's exchange rates reduces the operating profit to £9.9m and the margin to 21.5%, compared with 23.4% in 2010.

 

Rotork Instruments

 

This newly formed division will ultimately contain a range of products which address the wider flow control market. Many of the products are sold into the same end-markets as actuators and are often used as part of the actuator control system but they are also used in areas not associated directly with actuation. We will retain our focus on high quality, high accuracy, high specification products, rather than on the commoditised end of this market where margins are generally lower.

 

Fairchild, which manufactures precision pneumatic and electro-pneumatic control products, was acquired in November. Fairchild's customers are spread across many end-markets, with the largest being oil & gas. Other important markets include tyre manufacture, automation, paper, chemicals and a wide variety of industrial applications. The 2011 divisional revenue of £1.4m and adjusted operating profit of £0.4m represent the six weeks of trading post acquisition. For the twelve months to December 2011, Fairchild's revenue was £15.1m with an adjusted operating profit of £4.8m, giving an operating margin of 31.6%. The lead times for sales in Fairchild are far shorter than the other divisions and the £1m order book at the end of the year is at a typical level.

 

 

 

Rotork Site Services

 

Rotork Site Services (RSS) is our after-sales and support activity which operates mainly within the Controls and Fluid Systems divisions. It is embedded within the divisions and as such is reported within the divisions' results. The development of RSS is a key part of our Group strategy and this year there has been progress on a number of fronts. In terms of geographic coverage, we have either opened new service workshops or expanded them in six locations around the world. The acquisitions in Mexico and Norway were important to RSS, as both former agents were responsible for servicing and maintaining the large installed base of actuators in their countries. Bringing this capability in-house will allow us to promote the full range of RSS activities and leverage this closer relationship to generate new sales for the full range of Rotork products.

 

We measure RSS performance against a number of key metrics to assess the rate of growth. The best measure of growth is the number of service engineers we employ, which has grown a further 18% in the year. Over the last three years, service engineer numbers have risen 44% whilst consistently high utilisation levels have been maintained. Our actuators are often required to work in arduous environments and customers demand a high level of certainty that they will operate when required. To this end we provide preventative maintenance contracts for our end customers and during the year we have seen the number of actuators under contract grow to 86,000 units, an increase of 21%. This still represents a very small proportion of the installed base and provides us with a substantial opportunity as we continue to grow our capability.

 

Research & Development

 

During 2011 we completed the development of our next generation, multi-turn electric actuator.  The product will be launched in the second quarter of 2012 and will be the successor to the current flagship IQ series.  This replacement product will introduce a number of new features that will help us to retain a market leading position.

 

Within the Process Controls product line-up we have extended the capability of the CVA series through the introduction of a larger linear unit and development is now underway of a larger quarter turn version that will complete the current family.  Further development of the complementary Compact Modulating Actuator (CMA) series was undertaken during the year and this product family is also due to be introduced to the market in the second quarter of 2012.

 

During the year, the Fluid Systems division established an R&D team and test capability within our Leeds facility.  The test facility will serve the needs of both the Gears and Fluid Systems divisions.  The new R&D team will be focused on the development of our Skilmatic range of electro-hydraulic actuators.  Elsewhere within the Fluid Systems division we have begun development of a range of rotary nuclear actuators qualified to the latest standard.  These actuators are based upon our successful CP and GH series and will complement the electric, multi-turn, nuclear qualified designs currently under development within the Controls division.  The design team in Lucca is undertaking development of a second generation of "gas over oil" actuators that are optimised for international markets and should herald a number of productivity improvements.  The design of this range has also been facilitated by our increased investment in 3D CAD tools.

 

The Gears division has had another successful year with the introduction of the declutchable ILGD family and the FB series of small manual operators.  The division has a strong pipeline of product introductions scheduled for 2012 and in common with the other divisions is actively working on a nuclear qualified range of products.

 

RIDEC, the Group's centralised development resource, based in Chennai, India, has continued to grow during 2011 and was engaged in joint developments with all divisions.  We are planning to double its size during 2012 following the move to the new building which will also include a dedicated test facility.

 

During the year the Group has also begun a project to evaluate computer based Product Lifecycle Management tools that together with our other CAD investments should bring improvements in efficiency and aid both cross-divisional and multi-site working.

 

Acquisitions

 

This year was a record for Rotork in terms of the number and value of acquisitions completed. Fairchild, acquired in November for £49.5m, was by far the largest, and forms the basis of the new Rotork Instruments division. With an asset-light business model similar to Rotork's, this acquisition generated £28.3m of goodwill and £25.8m of intangible assets, which together account for the majority of the increase in capital employed during the year. The five other acquisitions cost £14.7m in total. The acquired intangible assets for all this year's acquisitions were valued at £33.4m and gave rise to goodwill of £32.5m.

 

As a result of these acquisitions the amortisation charge - the writing down of acquired intangible assets of this and previous years' acquisitions - rose from £1.7m last year to £3.9m this year. With a full year effect of this year's acquisitions the charge is expected to rise to £7.1m next year. The income statement also includes acquisition-related costs of £0.8m, compared with £0.2m in 2010. With the acquisitions taking place throughout the year, the contribution to this year's results added £9.6m to revenue and £1.0m to adjusted operating profit. Had these businesses all contributed for the whole of 2011, they would have added £31.6m to revenue and £6.1m to adjusted operating profit.

 

Currency

 

A £2.7m revenue headwind was the result of a 5 cent weakening of the average US dollar rate, offset by modest strengthening of the euro and basket of other currencies. This was a combination of the translation of overseas companies' results and restating transactions within our businesses, as many sales are not denominated in the reporting currency of our operations making the sale. The net currency impact on operating profit was a headwind of £0.4m. The mix of currencies in which we source components is very different from the mix of currencies in which we sell, and the impact on the different divisions also varies.  With a greater proportion of US dollar denominated purchases, the Gears division actually benefited from the weakening US dollar, which improved operating profit by £0.4m relative to last year.

 

There is an element of natural hedging from trading within the Group but we generate surplus euros and US dollars and are net sellers of both these currencies. It is the net sale of these currencies which we principally address through our hedging policy, covering up to 75% of trading transactions in the next 12 months and up to 50% between 12 and 24 months. In order to estimate the impact of currency, at the current exchange rates we consider the effect of a 1 cent movement versus sterling. For both euro and US dollar a 1 cent movement now results in a £350,000 adjustment to profit. The growth in both euro and US dollar denominated revenues saw this adjustment increase from £250,000 and £300,000 respectively last year.

 

Return on capital employed

 

Rotork's asset-light manufacturing model and high profit margins have meant that our return on capital employed (ROCE) is high. Basing the calculation on adjusted operating profit and taking an average balance sheet position (using the opening and closing balance sheet), ROCE reduced from 90.3% in 2010 to 74.1% this year. The reduction in the metric was largely caused by the acquisition of Fairchild taking place so close to the year end.

 

Cash generation

 

Net cash at the end of the year was £48.5m, having reduced by £49.4m during the year. Our biggest cash outflows are always tax, dividends and acquisitions. The aggregate spend across these headings increased from £67.7m in 2010 to £137.2m this year, which accounts for the overall net cash outflow. Operating cash generation relative to adjusted operating profit was 89.6% this year compared with 95.7% in 2010.

 

Working capital as a function of annual sales increased from 23.2% to 27.0% but this is affected by the timing of sales and acquisitions.  Fourth quarter revenue was 33% higher than the final quarter of 2010 and working capital was still only 22.4% of revenue calculated from this base. Capital expenditure in the year was £10.0m as expected with the factory in India, new building in Bath and new subsidiary IT system accounting for the majority of the increased spend over the prior year.

 

Peter France

Chief Executive

27 February 2012

 


 

Consolidated Income Statement

for the year ended 31 December 2011

 


Notes

2011

2010



£000

£000





Revenue

2

447,833

380,560

Cost of sales


(236,359)

(199,742)

 


______

______

Gross profit


211,474

180,818

Other income


194

83

Distribution costs


(4,020)

(3,604)

Administrative expenses


(95,589)

(79,513)

Other expenses


(59)

(60)

 




Adjusted operating profit


115,921

99,442

Amortisation of acquired intangible assets


(3,921)

(1,718)

Operating profit

2

112,000

97,724





Financial income

4

7,590

6,931

Financial expenses

4

(7,040)

(6,800)

 


______

______

Profit before tax


112,550

97,855

Income tax expense

5

(32,149)

(28,334)

 


______

______

Profit for the year


80,401

=====

69,521

=====

 




 




 


Pence

Pence

Basic earnings per share

11

93.0
80.5

Adjusted basic earnings per share

11

96.2
81.9

Diluted earnings per share

11

92.6

80.2

 




 

 

 

 

 

Consolidated Statement of Comprehensive Income

for the year ended 31 December 2011

 

 


2011

2010

 


£000

£000

Profit for the year


80,401

69,521

 




Other comprehensive income




Foreign exchange translation differences


(2,484)

1,119

Actuarial (loss) / gain in pension scheme


(8,499)

1,095

Effective portion of changes in fair value of cash flow hedges


207

674

 


______

______

Income and expenses recognised directly in equity


(10,776)

2,888

 




Total comprehensive income for the year


69,625

=====

 

72,409

=====

 



Consolidated Balance Sheet

at 31 December 2011


Notes

2011

2010

 


£000

£000

Non-current assets




Property, plant and equipment


31,954

25,780

Intangible assets

6

106,784

43,990

Deferred tax assets


13,244

11,480

Derivative financial instruments


315

-

Other receivables

8

1,556

1,290

 


______

______

Total non-current assets


153,853

82,540





Current assets




Inventories

7

62,928

48,241

Trade receivables

8

96,734

70,362

Current tax

8

988

2,398

Derivative financial instruments


677

918

Other receivables

8

8,461

6,684

Cash and cash equivalents

9

48,557

97,881

 


______

______

Total current assets


 218,345

______

 226,484

______

Total assets


372,198

=====

309,024

=====

Equity




Issued equity capital

10

4,338

4,334

Share premium


7,835

7,389

Reserves


13,924

16,201

Retained earnings


198,072

175,927

 


           ______

           ______

Total equity


224,169

=====

203,851

=====

Non-current liabilities




Interest bearing loans and borrowings


229

127

Employee benefits


28,142

19,752

Deferred tax liabilities


12,782

3,165

Provisions

12

2,218

1,968

 


______

______

Total non-current liabilities


43,371

25,012

 




Current liabilities




Bank overdraft


38

-

Interest bearing loans and borrowings


85

49

Trade payables

13

38,742

30,447

Employee benefits


9,624

8,220

Current tax

13

13,225

10,821

Derivative financial instruments


614

294

Other payables

13

38,360

26,334

Provisions

12

3,970

3,996

 


______

______

Total current liabilities


104,658

80,161

 




Total liabilities


148,029

______

105,173

______

Total equity and liabilities


372,198

=====

309,024

=====



 

 

Issued equity

capital

 

Share

premium

 

 

Translation

reserve

 

 

Capital

redemption

reserve

Hedging reserve

Retained earnings

 

Total

 

Balance at 31 December 2009

4,330

7,033

12,981

1,642

(217)

140,402

166,171









Profit for the year

-

-

-

-

-

69,521

69,521

Other comprehensive income








Foreign exchange translation differences

 

-

 

-

 

1,119

 

-

 

-

 

-

 

1,119

Effective portion of changes in fair value of cash flow hedges

 

-

 

-

 

-

 

-

 

674

 

-

 

674

Actuarial gain on defined benefit pension plans net of tax

 

-

 

-

 

-

 

-

 

-

 

1,095

 

1,095

Total other comprehensive income

-

-

1,119

-

674

1,095

2,888

Total comprehensive income

-

-

1,119

-

674

70,616

72,409

Transactions with owners, recorded directly in equity








Equity settled share-based payment transactions net of tax

 

-

 

-

 

-

 

-

 

-

 

195

 

195

Share options exercised by employees

 

4

 

356

 

-

 

-

 

-

 

-

 

360

Own ordinary shares acquired

-

-

-

-

-

(2,876)

(2,876)

Own ordinary shares awarded under share schemes

 

-

 

-

 

-

 

-

 

-

 

3,506

 

3,506

Preference shares redeemed

-

-

-

2

-

(4)

(2)

Dividends

-

-

-

-

-

(35,912)

(35,912)

Balance at 31 December 2010

4,334

7,389

14,100

1,644

457

175,927

203,851









Profit for the year

-

-

-

-

-

80,401

80,401

Other comprehensive income








Foreign exchange translation differences

 

-

 

-

 

(2,484)

 

-

 

-

 

-

 

(2,484)

Effective portion of changes in fair value of cash flow hedges

 

-

 

-

 

-

 

-

 

207

 

-

 

207

Actuarial loss on defined benefit pension plans net of tax

 

-

 

-

 

-

 

-

 

-

 

(8,499)

 

(8,499)

Total other comprehensive income

-

-

(2,484)

-

207

(8,499)

(10,776)

Total comprehensive income

-

-

(2,484)

-

207

71,902

69,625

Transactions with owners, recorded directly in equity








Equity settled share-based payment transactions net of tax

 

-

 

-

 

-

 

-

 

-

 

(196)

 

(196)

Share options exercised by employees

 

4

 

446

 

-

 

-

 

-

 

-

 

450

Own ordinary shares acquired

-

-

-

-

-

(3,185)

(3,185)

Own ordinary shares awarded under share schemes

-

-

-

-

-

3,158

3,158

Dividends

-

-

-

-

-

(49,534)

(49,534)

Balance at 31 December 2011

4,338

7,835

11,616

1,644

664

198,072

224,169

Detailed explanations for equity capital, translation reserve, capital redemption reserve and hedging reserve can be seen in note 10.

for the year ended 31 December 2011

           


Notes

2011

2011

2010

2010

 


£000

£000

£000

£000

Cash flows from operating activities






Profit for the year


80,401


69,521


Adjustments for:






Amortisation of intangibles


3,921


1,718


Amortisation of development costs


732


639


Depreciation


4,479


3,972


Equity settled share-based payment expense


1,251


1,086


Profit on sale of property, plant and equipment

(129)


(12)


Financial income


(7,590)


(6,931)


Financial expenses


7,040


6,800


Income tax expense


32,149


28,334


 


______


______


 


122,254


105,127


(Increase) / decrease in inventories


(11,402)


489


Increase in trade and other receivables


(26,791)


(14,503)


Increase in trade and other payables


18,537


3,189


Difference between pension charge and cash contribution

(2,929)

 

(844)

 

(Decrease) / increase in provisions


(436)


385


Increase in other employee benefits

1,692


507




______


______




100,925


94,350


Income taxes paid


(27,754)


(26,186)


 


______


______


Cash flows from operating activities



73,171


68,164

 






Investing activities






Purchase of property, plant and equipment


(10,143)


(5,034)


Development costs capitalised


(1,328)


(1,018)


Sale of property, plant and equipment


274


154


Acquisition of businesses, net of cash acquired

3

(59,876)


(5,621)


Contingent consideration paid


(41)


-


Interest received


694


483




______


______


Cash flows from investing activities



(70,420)


(11,036)

 






Financing activities






Issue of ordinary share capital


450


360


Purchase of ordinary share capital


(3,185)


(2,876)


Purchase of preference shares treated as debt


-


(4)


Interest paid


(117)


(88)


Repayment of amounts borrowed


(421)


(464)


Repayment of finance lease liabilities


(54)


(102)


Dividends paid on ordinary shares


(49,534)


(35,912)


 


______


______


Cash flows from financing activities



(52,861)


(39,086)

 



______


______

Increase in cash and cash equivalents


(50,110)


18,042

 






Cash and cash equivalents at 1 January



97,881


78,676

Effect of exchange rate fluctuations on cash held



748

_____


1,163

______

Cash and cash equivalents at 31 December

9


48,519

=====


97,881

=====

 

 

 



Notes to the Financial Statements

for the year ended 31 December 2011

 

Except where indicated, values in these notes are in £000.

 

 

Rotork p.l.c. is a company domiciled in England. The consolidated financial statements of the Company for the year ended 31 December 2011 comprise the Company and its subsidiaries (together referred to as the 'Group').

 

1.             Accounting policies

 

Basis of preparation

The consolidated financial statements of Rotork p.l.c. have been prepared and approved by the directors in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU), IFRIC Interpretations and the Companies Act 2006 applicable to companies reporting under IFRS.

The consolidated financial statements have been prepared under the historical cost convention subject to the items referred to in the derivative financial instruments accounting policy below.


New accounting standards and interpretations

 

The following amendments to standards or interpretations are mandatory for the first time for the financial year ending 31 December 2011:

·     IAS 24 (Revised) - Related Party Disclosures

·     IFRIC 14 (Amendment) - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction

·     IFRIC 19 Extinguishing Financial Liabilities with  Equity Instruments

Application of these standards and interpretations has not had a material impact on the net assets or results of the Group.

Recent accounting developments

Standards, amendments or interpretations which have been issued by the International Accounting Standards Board or by the IFRIC, and application was not mandatory in the period are not expected to have a material impact on the Group. Subject to endorsement by the European Union, these standards, amendments or interpretations will be adopted in future periods.

 

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 financial statements. In forming this view, the directors have considered trading and cash flow forecasts, financial commitments, the significant orderbook with customers spread across different geographic areas and industries and the significant net cash position.

 

Consolidation

The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries for the year to 31 December 2011. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date control ceases. Intra-group balances and any unrealised gains or losses or income and expenses arising from intra-group transactions are eliminated in preparing the consolidated financial statements.

 

Status of this preliminary announcement

The financial information contained in this preliminary announcement does not constitute the Company's statutory accounts for the years ended 31 December 2011 or 2010. Statutory accounts for 2010, which were prepared under International Financial Reporting Standards as adopted by the EU, have been delivered to the registrar of companies, and those for 2011 will be delivered in due course. The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. Full financial statements for the year ended 31 December 2011, will shortly be posted to shareholders, and after adoption at the Annual General Meeting on 20 April 2012 will be delivered to the registrar.

 

 

 



 

 

2.             Operating segments

 

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 valve actuators

Fluid Systems - the design, manufacture and sale of pneumatic and hydraulic valve 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.

 

Geographic analysis

Rotork has a worldwide presence in all four operating segments through its subsidiary selling offices and through an agency network. A full list of locations can be found at www.rotork.com.

 

Analysis by Operating Segment:

 


 

Controls

2011

Fluid Systems

2011

 

Gears

2011

 

Instruments

2011

 

Elimination

2011

 

Unallocated

2011

 

Group

2011









Revenue from external customers

277,957

132,624

35,816

1,436

-

-

447,833

Inter segment revenue

-

-

10,777

-

(10,777)

-

-









Total Revenue

277,957

132,624

46,593

1,436

(10,777)

-

447,833









Adjusted operating profit

92,085

17,077

10,336

394

-

(3,971)

115,921

Amortisation of acquired intangibles

(890)

(2,277)

(18)

(736)

-

-

(3,921)

Operating profit

91,195

14,800

10,318

(342)

-

(3,971)

112,000









Net financing income







550

Income tax expense







(32,149)









Profit for year







80,401










 

Controls

2010

Fluid Systems

2010

 

Gears

2010

 

Instruments

2010

 

Elimination

2010

 

Unallocated

2010

 

Group

2010









Revenue from external customers

243,361

106,838

30,361

-

-

-

380,560

Inter segment revenue

-

-

8,844

-

(8,844)

-

-









Total Revenue

243,361

106,838

39,205

-

(8,844)

-

380,560









Adjusted operating profit

78,786

14,911

9,161

-

-

(3,416)

99,442

Amortisation of acquired intangibles

-

(1,659)

(59)

-

-

-

(1,718)

Operating profit

78,786

13,252

9,102

-

-

(3,416)

97,724









Net financing income







131

Income tax expense







(28,334)









Profit for year







69,521

 



 


Controls
Fluid Systems
Gears
Instruments
Unallocated d
Consolidated


2011

2011

2011

2011

2011

2011








Depreciation

3,026

1,205

229

19

-

4,479

Amortisation:

Other intangibles

Development costs

 

890

732

 

2,277

-

 

18

-

 

736

-

 

-

-

 

3,921

732

Non-cash items : equity settled share-based payments

 

543

 

205

 

129

 

-

 

374

 

1,251

Net financing income

-

-

-

-

550

550

Intangible assets acquired as part of a business combination

 

5,674

 

5,461

 

668

 

54,101

 

-

 

65,904

Capital expenditure

7,947

1,512

455

88

-

10,002

 

 


Controls
Fluid Systems
Gears
Instruments
Unallocated
Consolidated


2010

2010

2010

2010

2010

2010








Depreciation

2,634

1,124

214

-

-

3,972

Amortisation:

Other intangibles

Development costs

 

-

639

 

1,659

-

 

59

-

 

-

-

 

-

-

 

1,718

639

Non-cash items : equity settled share-based payments

 

609

 

129

 

111

 

-

 

237

 

1,086

Net financing expense

-

-

-

-

131

131

Intangible assets acquired as part of a business combination

 

-

 

4,102

 

-

 

-

 

-

 

4,102

Capital expenditure

3,953

940

179

-

-

5,072

 

Balance sheets are reviewed by operating subsidiary and operating segment balance sheets are not prepared, as such no further analysis of operating segments assets and liabilities are presented.

 

 

Geographical analysis:

UK

Rest of Europe

USA

Other Americas

Rest of the World

Consolidated


2011

2011

2011

2011

2011

2011








Revenue from external customers by location of customer

25,703

148,513

87,144

38,256

148,217

447,833








Non-current assets







- Intangible assets

8,704

20,315

71,960

1,756

4,049

106,784

- Property, plant and equipment

9,027

10,323

6,271

310

6,023

31,954

 

 


UK

Rest of Europe

USA

Other Americas

Rest of the World

Consolidated


2010

2010

2010

2010

2010

2010








Revenue from external customers by location of customer

24,277

121,595

71,036

39,488

124,164

380,560








Non-current assets







- Intangible assets

7,248

18,621

13,564

213

4,344

43,990

- Property, plant and equipment

6,423

10,618

4,363

230

4,146

25,780

 

 

3.             Acquisitions

 

(i)            Fairchild

On 15 November 2011 the Group acquired 100% of the share capital of Fairchild Inc. (Fairchild) for £49,532,000. Fairchild is a manufacturer of high precision pneumatic controls and power transmission products for a wide range of industries, based in Winston Salem, North Carolina, United States. The acquired business will be reported as a new division called Rotork Instruments. In the six weeks to 31 December 2011 Fairchild contributed £1,436,000 to Group revenue and £394,000 to consolidated operating profit before amortisation. The amortisation charge in the six week period from the acquired intangible assets was £736,000.

 

If the acquisition had occurred on 1 January 2011 the business would have contributed £15,132,000 to Group revenue and £4,777,000 to Group operating profit. It is not practicable to disclose profit before tax or profit attributable to equity shareholders as the Group manages its Treasury function on a Group basis.

 

(ii)           Other acquisitions

On 25 July 2011 the Group acquired 100% of the share capital of K-Tork International Inc. (K-Tork) for £6,518,000. K-Tork is a manufacturer of pneumatic valve actuators based in Dallas, Texas, United States. The acquired business will be reported within the Rotork Fluid System division.

 

On 15 July 2011 the Group acquired 100% of the share capital of Centork Valve Control S.L. (Centork) for £3,147,000. Centork is a manufacturer of electric actuators based near San Sebastian in Spain. The acquired business will be reported within the Rotork Controls division.

 

The Group also acquired 100% of the share capital of Rotork Servo Controles de Mexico S.A. de C.V. in Mexico (RSCM), Valco Valves & Automation AS in Norway (VVA), and Prokits Limited (Prokits) based in Mansfield, UK for a combined consideration of £4,991,000. RSCM and VVA were Rotork agents and the results of the acquired business will be reported in each of the divisions. Prokits designs and manufactures valve adaptor kits and accessories for the valve industry and will reported as part of the Gears Division.

 

In the period from acquisition to 31 December 2011 the businesses contributed £8,170,000 to Group revenue and £563,000 to consolidated operating profit before amortisation. The amortisation charge in respect of these acquisitions during the year was £1,464,000.

 

If these other acquisitions had occurred on 1 January 2011 the businesses would have contributed £16,488,000 to Group revenue and £1,309,000 to Group operating profit. It is not practicable to disclose profit before tax or profit attributable to equity shareholders as the Group manages its Treasury function on a Group basis.

 

(iii)          Acquisitions fair value table

The six acquisitions had the following effect on the Group's assets and liabilities.

 



Fairchild


Other acquisitions

Total


Book value

Adjustments

Fair value

Book value

Adjustments

Fair value

Fair value

Non-current assets








Property, plant and equipment

638

-

638

668

(140)

528

1,166

Intangible assets

-

25,811

25,811

-

7,545

7,545

33,356

Deferred tax assets

97

106

203

-

360

360

563









Current assets    








Inventory

1,821

(77)

1,744

2,745

(637)

2,108

3,852

Trade and other receivables

1,832

(26)

1,806

1,883

(148)

1,735

3,541

Cash

1,415

-

1,415

2,347

-

2,347

3,762









Current liabilities








Trade and other payables

(1,106)

(63)

(1,169)

(1,701)

(730)

(2,431)

(3,600)

Warranty provision

(35)

(136)

(171)

-

(198)

(198)

(369)

Loans and other borrowings

-

-

-

(205)

-

(205)

(205)









Non-current








Deferred tax liability

-

(9,034)

(9,034)

(131)

(850)

(981)

(10,015)

Loans and other borrowings

-

-

-

(411)

-

(411)

(411)









Total net assets

4,662

16,581

21,243

5,195

5,202

10,397

31,640









Goodwill



28,289



4,259

32,548

Purchase consideration



49,532



14,656

64,188









Paid in Cash



49,532



14,106

63,638

Contingent consideration



-



550

550




49,532



14,656

64,188









Purchase consideration



49,532



14,106

63,638

Cash held in subsidiary



(1,415)



(2,347)

(3,762)

Cash outflow on acquisition



48,117



11,759

59,876

 

 

The adjustments shown in the table above represent the alignment of accounting policies of the acquired businesses to Rotork Group policies and the fair value adjustments of the assets and liabilities at the acquisition date of each of the businesses.

 

Goodwill has arisen on these acquisitions as a result of the value attributed to staff expertise and the assembled workforce, which did not meet the recognition criteria for an intangible asset.

 

The intangible assets identified comprise customer relationships, brands, product design patents and acquired order books.

 

 

4.             Net financing income                                                       

 

Recognised in the income statement

2011

2010




Interest income

746

540

Expected return on assets in the pension schemes

6,739

6,141

Foreign exchange gains

105

______

250

______


7,590

=====

6,931

=====




Interest expense

116

79

Interest charge on pension scheme liabilities

6,468

6,289

Foreign exchange losses

456

______

432

______


7,040

=====

6,800

=====




Recognised in equity






Effective portion of changes in fair value of cash flow hedges

664

457

Fair value of cash flow hedges transferred to income statement

(457) 

217 

Foreign currency translation differences for foreign operations

(2,484)

______

1,119

______


(2,277)

=====

1,793

=====

Recognised in:



Hedging reserve

207

674

Translation reserve

(2,484)

______

1,119

______


(2,277)

=====

1,793

=====

 


 

 

5.             Income tax expense

                                                                               

 


2011

2011

2010

2010

Current tax:





UK corporation tax on profits for the year

9,737


8,645


Adjustment in respect of prior years

(120)

______


(417)

______




9,617


8,228






Overseas tax on profits for the year

23,086


18,787


Adjustment in respect of prior years

(210)

______


42

______




22,876


18,829



______


______

Total current tax


32,493


27,057






 

Deferred tax:





Origination and reversal of other temporary differences

57


1,477


Adjustment in respect of prior years

(401)

______

 


(200)

______

 


Total deferred tax


(344)


1,277



_____


_____

Total tax charge for year


32,149

=====


28,334

=====






Effective tax rate (based on profit before tax)


28.6%


29.0%






Profit before tax


112,550


97,855






Profit before tax multiplied by standard rate of corporation tax in the UK of 26.5% (2010: 28.0%)


29,826


27,399






Effects of:





Non deductible items


863


785

Utilisation of overseas tax holidays


(1,171)


(1,127)

Different tax rates on overseas earnings


3,362


1,852

Adjustments to tax charge in respect of prior years


(731)

______


(575)

______

Total tax charge for year


32,149

=====


28,334

=====

 

A tax charge of £168,000 (2010: credit £926,000) in respect of share-based payments has been recognised directly in equity in the year.

 

The Group continues to expect its effective rate of corporation tax to be higher than the standard UK rate due to higher rates of tax in the US, Canada, France, Germany, Italy, Japan and India.

 

There is an unrecognised deferred tax liability for temporary differences associated with investments in subsidiaries. Rotork p.l.c. controls the dividend policies of its subsidiaries and subsequently the timing of the reversal of the temporary differences. It is not practical to quantify the unprovided temporary differences as acknowledged within paragraph 40 of IAS 12.

 

 

  

 

6.             Intangible assets

 


Goodwill

 

 

 

2011

Development costs

 

2011

Other intangibles

 

 

2011

Total

 

 

 

2011

Goodwill

 

 

 

2010

Development costs

 

2010

Other intangibles

 

 

2010

Total

 

 

 

2010

Cost

Balance at 1 January

 

35,907

 

5,666

 

10,505

 

52,078

 

33,204

 

4,647

 

8,409

 

46,260

Exchange differences

4

-

199

203

230

-

468

698

Internally developed during the year

-

1,328

-

1,328

-

1,018

-

1,018

Acquisition through business combinations

32,548

 

______

-

 

______

33,356

 

______

65,904

 

______

2,473

 

______

-

 

______

1,629

 

______

4,102

 

_____

Balance at 31 December

68,459

6,994

44,060

119,513

35,907

5,665

10,506

52,078










Amortisation









Balance at 1 January

-

3,194

4,894

8,088

-

2,555

2,925

5,480

Exchange differences

-

-

(12)

(12)

-

-

251

251

Amortisation for the year

-

732

3,921

4,653

-

639

1,718

2,357


______

______

______

_____

______

______

______

_____

Balance at 31 December

-

 

----------------------------_____

3,926

 

_____

8,803

 

_____

12,729

 

_____

-

 

----------------------------_____

3,194

 

_____

4,894

 

_____

8,088

 

_____

Net book value at 31 December

 

Net book value at 31 December 2009

68,459

=====

 

 

3,068

=====

 

 

35,257

=====

 

 

106,784

=====

 

 

35,907

=====

 

33,204

2,471

=====

 

2,092

5,612

=====

 

5,484

43,990

=====

 

40,780

 

The amortisation charge in both years is recognised within administrative expenses in the income statement. Other intangibles include customer relationships, order books, intellectual property and brand names of acquired companies.

 

 

Impairment tests for goodwill

 

Goodwill is allocated to the Group's cash generating units (CGUs) identified according to business segment. A segment level summary of goodwill allocation is presented below.

 


2011

2010




Controls

8,967

6,828

Fluid Systems

23,020

21,436

Gears

7,793

7,643

Instruments

28,679

-


_____

_____


68,459

=====

35,907

=====

 

The recoverable amounts of all CGUs are based on value in use calculations. These calculations use cash flow projections and are based on actual operating results and the latest Group three year plan. The three year plan is based on management's view of the future and experience of past performance. Cash flows for the remainder of the next twenty years are extrapolated using a 2% growth rate which reflects the long-term nature of many of the markets the Group serves. This rate has been consistently bettered in the past so is believed to represent a prudent estimate.

 

The discount rate used is 9.8% (2010: 12.1%), this represents a reasonable rate for a market participant in this sector. The majority of the discount rate reduction is due to the movement in 10 year bond yields on which the risk free rate is based. The discount rate of each business segment is not materially different to 9.8%. For the Goodwill to become impaired in the CGU with the minimum headroom, the discount rate would have to increase to 25.8%. On this basis each business segment has sufficient headroom and therefore no impairment write downs are required.

 


 

 

7.             Inventories


2011

2010




Raw materials and consumables

40,609

30,345

Work in progress

13,209

11,411

Finished goods

9,110

______

6,485

______


62,928

=====

48,241

=====

Included in cost of sales was £175,352,000 (2010: £147,651,000) in respect of inventories consumed in the year. 

 

                                                                                                                                               

8.             Trade and other receivables


2011

2010

Non-current assets:



Insurance policy

1,298

1,158

Other

258

_____

132

_____

Other receivables

1,556

=====

1,290

=====




Current assets:



Trade receivables

98,779

72,208

Less provision for impairment of receivables

(2,045)

______

(1,846)

______

Trade receivables - net

96,734

=====

70,362

=====




Corporation tax

988

______

2,398

______

Current tax

988

=====

2,398

=====




Other non-trade receivables

4,357

3,943

Prepayments and accrued income

4,104

______

2,741

______

Other receivables

8,461

=====

6,684

=====

 

 

9.             Cash and cash equivalents

 




2011

2010






Bank balances



33,790

40,865

Cash in hand



82

95

Short-term deposits



14,685

______

56,921

______

Cash and cash equivalents



48,557

97,881

Bank overdraft



(38)

_____

 

-

____

Cash and cash equivalents in the Consolidated Statement of Cash Flows



48,519

=====

97,881

=====

 

 

  

10.          Capital and reserves

 

Share capital and share premium

 


5p Ordinary shares

Issued and fully paid up

£1 Non-redeemable preference shares

5p Ordinary shares

Issued and fully paid up

£1 Non-redeemable preference shares


2011

2011

2010

 

2010

At 1 January

4,334

40

4,330

42

Preference shares redeemed

-

-

-

(2)

Issued under employee share schemes

4

 

_____

-

 

_____

4

 

_____

-

 

_____

At 31 December

4,338

40

4,334

40


=====

=====

=====

=====






 Number of shares (000)

86,750

=====


86,682

=====


 

 

The ordinary shareholders are entitled to receive dividends as declared and are entitled to vote at meetings of the Company.

 

The Group received proceeds of £450,000 (2010: £360,000) in respect of the 68,264 (2010: 68,955) ordinary shares issued during the year: £4,000 (2010: £4,000) was credited to share capital and £446,000 (2010: £356,000) to share premium.

 

The preference shareholders take priority over the ordinary shareholders when there is a distribution upon winding up the Company or on a reduction of equity involving a return of capital. The holders of preference shares are entitled to vote at a general meeting of the Company if a preference dividend is in arrears for six months or the business of the meeting includes the consideration of a resolution for winding up the Company or the alteration of the preference shareholders' rights.

 

Within the retained earnings reserve are own shares held. The investment in own shares represents 227,575 (2010: 262,528) ordinary shares of the Company held in trust for the benefit of directors and employees for future payments under the Share Incentive Plan and Long Term Incentive Plan. The dividends on these shares have been waived.

 

Translation reserve

The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations.

 

Capital redemption reserve

The capital redemption reserve arises when the Company redeems shares wholly out of distributable profits.

 

Hedging reserve

The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments that are determined to be an effective hedge.

 

Dividends

The following dividends were paid in the year per qualifying ordinary share:

 


2011

Payment date


2011

2010

 





19.75p final dividend (2010: 17.25p)

6 May


17,097

14,928

14.5p interim dividend (2010: 12.75p)

23 September


12,543

11,033

2010 additional interim dividend of 11.5p paid

-


-

9,951

2011 additional interim dividend of 11.5p paid

24 June


9,948

-

2011 additional interim dividend of 11.5p paid

16 December


9,946

_____

-

_____




49,534

=====

35,912

=====

 



 

After the balance sheet date the following dividends per qualifying ordinary share were proposed by the directors. The dividends have not been provided for and there are no corporation tax consequences.

 


2011

2010

Final proposed dividend per qualifying ordinary share



22.75p

19,736

=====


19.75p


17,120

=====




Additional interim dividend of 11.5p per qualifying ordinary share proposed for 2011

 


10,000

=====

 

 

 

11.          Earnings per share

 

Basic earnings per share

Earnings per share is calculated for both the current and previous years using the profit attributable to the ordinary shareholders for the year. The earnings per share calculation is based on 86.5m shares (2010: 86.4m shares) being the weighted average number of ordinary shares in issue (net of own ordinary shares held) for the year.

 


2011

2010




Net profit attributable to ordinary shareholders

         80,401

=====

        69,521

=====

 

Weighted average number of ordinary shares

 

 
 

Issued ordinary shares at 1 January

86,419

86,250

Effect of own shares held

55

131

Effect of shares issued under Share option schemes / Sharesave plans

12

_____

24

_____

Weighted average number of ordinary shares during the year

86,486

=====

86,405

=====

 

Basic earnings per share                                                                                                                              93.0p                   80.5p

 

 

Adjusted basic earnings per share

Adjusted basic earnings per share is calculated for both the current and previous years using the profit attributable to the ordinary shareholders for the year after adding back the after tax amortisation charge.

 

 

 

2011
2010

Net profit attributable to ordinary shareholders

80,401

69,521

Amortisation

3,921

1,718

Tax effect on amortisation at effective rate

(1,120)

_____

(497)

_____

Adjusted net profit attributable to ordinary shareholders

83,202

=====

70,742

=====




Weighted average number of ordinary shares during the year

86,486

=====

86,405

=====

 

Adjusted basic earnings per share                                                                                                             96.2p                   81.9p

 

 

  

Diluted earnings per share

Diluted earnings per share is based on the profit for the year attributable to the ordinary shareholders and 86.8m shares (2010: 86.7m shares). The number of shares is equal to the weighted average number of ordinary shares in issue (net of own ordinary shares held) adjusted to assume conversion of all potentially dilutive ordinary shares. The Company has three categories of potentially dilutive ordinary shares: those share options granted to employees under the Share option scheme and Sharesave plan where the exercise price is less than the average market price of the Company's ordinary shares during the year and contingently issuable shares awarded under the Long Term Incentive Plan (LTIP).

 


2011

2010




Net profit attributable to ordinary shareholders

80,401

=====

69,521

=====

 

Weighted average number of ordinary shares (diluted)

 



Weighted average number of ordinary shares for the year

86,486

86,405

Effect of share options in issue

5

9

Effect of Sharesave options in issue

101

108

Effect of LTIP shares in issue

254

  _____

145

_____

Weighted average number of ordinary shares (diluted) during the year

86,846

=====

86,667

=====

 

Diluted earnings per share                                                                                                                           92.6p                    80.2p

 

 

12.          Provisions

 

 

Contingent

Consideration

 

 

Warranty

Provision

 

 

Total

 

 

Balance at 1 January 2011

-

5,964

5,964

Exchange differences

-

(49)

(49)

Increase as a result of business combinations

550

369

919

Provisions used during the year

(41)

(1,215)

(1,256)

Charged in the year

      -

610

610

Balance at 31 December 2011

509

5,679

6,188


=====

=====

=====





Maturity at 31 December 2011




Non-current

300

1,918

2,218

Current

209

_____

509

=====

3,761

_____

5,679

=====

3,970

_____

6,188

=====

Maturity at 31 December 2010




Non-current

-

1,968

1,968

Current

-

_____

-

=====

3,996

_____

5,964

=====

3,996

_____

5,964

=====

 

The warranty provision is based on estimates made from historical warranty data associated with similar products and services. The provision relates mainly to products sold during the last 12 months, the typical warranty period is now 18 months.

 

Contingent consideration relates to amounts outstanding in respect of the Rotork Servo Controles de Mexico S.A. de C.V. and Prokits Limited acquisitions. It is anticipated that £250,000 of the non-current balance will be settled in 2013 with the remaining £50,000 payable during 2014.

 



 

 

13.          Trade and other payables


2011

2010




Trade payables

38,502

30,447

Bills of exchange

240

______

-

______

Trade payables

38,742

=====

30,447

=====




Corporation tax

13,225

______

10,821

______

Current tax

13,225

=====

10,821

=====




Other taxes and social security

5,524

4,066

Payments on account

12,847

5,451

Non-trade payables and accrued expenses

19,989

16,817


______

______

Other payables

38,360

26,334


=====

=====

 

 

14.          Related parties

 

The Group has a related party relationship with its subsidiaries and with its directors and key management. Transactions between two subsidiaries for the sale and purchase of products or the subsidiary and parent Company for management charges are priced on an arms length basis.

 

Sales to subsidiaries and associates of BAE Systems plc, a related party by virtue of non-executive director IG King's directorship of that company, totalled £28,813 during the year (2010: £21,000) and no amount was outstanding at 31 December 2011 (2010: £nil).

 

Key management emoluments

The emoluments of those members of the management team, including directors, who are responsible for planning, directing and controlling the activities of the Group were:

 


2011

2010




Emoluments including social security costs

3,782

2,990

Post employment benefits

392

370

Share-based payments

844

_____

755

_____


5,018

=====

4,115

=====

 

 


This information is provided by RNS
The company news service from the London Stock Exchange