Final Results - Part 1

Rotork PLC
02 March 2005

PART 1

2 March 2005

                                 Rotork p.l.c.

                            Preliminary Announcement



Excellent growth in all three divisions with strong closing order book.


Financial Highlights



  • Turnover up 8% to £146.9m (12.6% at constant currency)

  • EBIT before goodwill up 9.6% to £31.1m (19.6% at constant currency)
  • Year end order book up 11.5% year on year
  • Dividend for the year including special dividend up 42%



Operational review



  • Excellent growth in all three divisions

  • Good business levels in most markets
  • Strong take up of new IQT product line
  • Continued high levels of growth achieved by Rotork Fluid System





Chief Executive Bill Whiteley, commenting on the results said:



'2004 was characterised by a strengthening demand for our products in key
markets which allowed us to make good progress in spite of a strong currency
headwind.  The principal highlights were the excellent take up of our new IQT
actuator..... and the continued exceptional growth of our Fluid System 
division.'



For further information, please contact:


Rotork p.l.c.                                      Tel:  [phone]
Bill Whiteley, Chief Executive
Bob Slater, Finance Director

Financial Dynamics                                 Tel:  [phone]
Sally Lewis




Chairman's Statement



Introduction

Growth in all of Rotork's main business areas combined to achieve further
significant advances in overall sales, operating profit and earnings per share.
Despite a weak US dollar, Group turnover increased by 8.0% (12.6% at constant
currency) to £146.9m with operating profit before goodwill ahead 9.6% (19.6% at
constant currency) at £31.1m. The year end order book increased by 11.5% with
Rotork Fluid System now accounting for 20.0% of the total.



Business review

Order intake which started the year well continued on an upward trend and
resulted in an increased order book by the year end. These improved business
levels were evident throughout most of our geographic markets but were most
noticeable in the Far East and the USA where the latter recorded a 26% increase
in order intake in US dollars.



The IQT actuator, released at the end of 2003, has surpassed our expectations
although this success itself contributed to component availability issues as
vendors struggled to keep pace with demand. The Malaysian assembly facility
moved into profit in the second half. It is now a contributor to our Electrics
business and is seeing a widening interest in its product offering. Both of
these products assisted our strategy of increasing our penetration of the
worldwide water and power generation markets.



Our Fluid System business rewarded the confidence that we have placed in it. Its
turnover growth of 26% in the year (30% at constant currency) equated to 16% of
the Group's output and we predict further development of this increasingly
important business. The Deanquip business in Australia purchased in January has
traded well in the year and the management has successfully integrated it into
the division. Most of our overseas sales subsidiaries are now making a
meaningful contribution to Fluid System's performance.



Rotork Gears continued to perform well recording a 10% increase in operating
profit. It had a number of successes in the year including the establishment of
a small Far Eastern assembly facility to supply some product for this region.



Corporate governance

We continue to address the various corporate governance and corporate social
responsibility issues that are receiving increasing attention throughout
industry and beyond. The Rotork Board regularly reviews these matters,
collectively and through committees, and the Directors' report covers a number
of issues on these and related topics. We maintain strong internal controls
across the Group and support the work of our external auditors with an active
programme of internal audit visits to all business locations on a regular basis.



Directors

George Malcolm retires on 8 April, and I would like to thank him personally for
his considerable contribution to the business over the 21 years he has been with
Rotork and for the support and commitment he has given to the Board since he
joined it in 1997.  It is however with pleasure that we welcome Graham Ogden to
the Board from 1 January 2005. Since joining Rotork in 1985 Graham has been
closely involved in our product development programmes including the award
winning IQ series.



I am also pleased to welcome Ian King who joined the Board as our fourth
non-executive director in February 2005.  He is a qualified accountant and is
currently Group Managing Director, Customer Solutions and Support, BAe Systems
plc and is a member of that company's Executive Committee.



Dividend

Rotork has increased its dividend consistently throughout the last 30 years and
in the current year will distribute 90% of profit after taxation in the form of
dividend to shareholders. The directors propose a final dividend of 9.70p which
will be payable on 27 May to shareholders on the register on 6 May 2005. This,
taken with the core interim dividend and additional interim dividend already
paid for the year, gives a total dividend per share for 2004 of 20.90p, an
increase of 42% over 2003.



Outlook

Order intake in the first two months of the current year continued the positive
trend we experienced throughout 2004. That combined with the favourable
reception of our new products and the targeted growth opportunities for our
business gives us the confidence to look forward to further progress in 2005 in
spite of the difficulties caused by the current level of the US dollar.



Roger Lockwood

Chairman

1 March 2005




Operating and Financial Review



Business Strategy

The objective of Rotork p.l.c. is to increase shareholder value by developing
our leadership position in worldwide valve actuator activities  All of the
Group's activities are focused on the specialist area of valve automation.  The
origins of the company lie with the founder, Jeremy Fry, who developed an
electric valve actuator in 1952.  Over the years Rotork continued to build on
its reputation as an innovator of new concepts in this field and has provided
users with increasing levels of functionality, performance and assurance.



Recent strategy directions have focused on opportunities to leverage our
leadership position in heavy-duty electric actuation into other closely
associated areas of valve automation.  Today Rotork's business is split into
three actuation divisions; Rotork Electric, the original and largest activity
supplying high quality, state of the art products for controlling pipeline and
other valves; Rotork Fluid System, which supplies heavy-duty pneumatic and
hydraulic valve actuators for operation in emergency shut down and other
critical applications; Rotork Gears, involved in the supply of gearboxes,
adaptors and ancillaries for the valve industry. Key strategies relate to the
development of products, marketing initiatives, service revenue opportunities
and cost reduction initiatives relating to these businesses.



Year under review

2004 was characterised by a strengthening demand for our products in key markets
which allowed us to make good progress in spite of a strong currency headwind.
Order intake was up 11% in sterling terms and 16% on a like for like basis,
resulting in the order book ending 11% higher than the start of the year.
Turnover was up 8%, 13% on a like for like currency basis and pre-tax profits
before goodwill and the 2003 exceptional (which relates to the gain on the sale
of a building) were up 9.6%, 19.6% on a like for like currency basis.



The principal highlights were the excellent take up of our new IQT actuator, a
quarter turn variant of our world leading IQII flagship product line; the
strength of our Asian and Far Eastern operations, which allowed us to capitalise
on the region's growth opportunities; the growth of sales of the AWT product
manufactured in our new Malaysian plant, which opened up new non-hazardous
market opportunities for Rotork; and the continued exceptional growth of our
Fluid System division which is benefiting from its enhanced product ranges,
worldwide marketing and strong demand from its oil and gas customers at their
upstream and transmission operations.



The key drivers for the Group's businesses relate to investment in oil and gas,
water and waste water and power generation installations around the world with
demand being generated by new and expanded capacity, upgrades to existing
facilities and replacements.  This is often linked to projects which are aimed
at improving the efficiency, safety and environmental performance of plants.
Valve actuators are critical components and their long-term reliability and
performance is extremely important to users.  They also act as a key interface
between plant control systems and related hardware.  Rotork's reputation for
quality, worldwide support and technical innovation is crucial to its leadership
position in the field.  The broad geographic spread of our operations and
applications means that we have a large number of repeat customers around the
world and no one customer accounts for more than 5% of our turnover in any year.



All three divisions increased their order input, sales output and operating
profits in 2004.



Electric Actuators

The main markets for electric actuators are oil and gas, water and waste water
treatment, and power generation installations.  Of these the oil and gas
companies are Rotork's major end users.  It should be noted that the majority of
the actuators we sell into this sector go into downstream operations such as
refinery offsites, storage and distribution facilities.  Although capital
expenditure by the oil and gas companies remained at high levels the emphasis of
this expenditure has in the recent past been on upstream activities such as
exploration, production and transmission.   Hence, although the activity from
this sector was reasonably strong we would only expect to be a modest
beneficiary of this investment.



One of our key strategies is to expand our business in the worldwide water and
waste water markets as we consider that global demand for potable water and
improved waste water treatment provides a good growth opportunity.  New products
and marketing outlets have been developed in recent years to realise this
ambition.  In 2004 we saw a healthy increase in the number of actuators we sold
into this market despite a static UK market.  The new IQT and the AWT actuators
were instrumental in achieving this gain. We have also targeted the power
generation market as a key area in which to increase our market share.  Although
the North American and European markets remained subdued in terms of investment
levels we saw a big increase in the sale of units into this sector due to the
strength of the Asian and Far East markets and the attractiveness of our new
products.



UK Operations

There was a welcome, although modest, improvement in the UK domestic market in
2004, which was coupled with additional orders coming through UK valve makers
for overseas destinations.  AMP 4 was released towards the year end.  It is
difficult to predict the impact this will have on our UK business, however some
contractors are upbeat about its opportunities.



Rotork adheres to an in-house assembly only philosophy of manufacturing in which
we rely on high quality vendors for all of our components.  The main electric
actuator assembly plant is in the UK in Bath with satellite assembly plants in
Rochester N.Y., India and Malaysia.  The Bath plant achieved a good increase in
its sales and profits in spite of some difficulties with its supply chain.  A
number of suppliers experienced difficulties resulting either from re-locating
facilities or gearing up production.  Fortunately these problems abated allowing
us to achieve historically high output levels in the final two months of the
year.  The large increase in the price of some raw materials was mitigated by
our policy of developing more Far Eastern sources.  The IQT actuator launched in
the second half of 2003 sold well above our expectations in 2004 and meant that
we had to add additional component supply capacity during the year to keep up
with demand.



Europe

Our European sales subsidiaries performed well.  They were, in most cases,
boosted by the success of their local valve makers winning business outside
their territories rather than demand for actuators within Europe.  The demand
from Eastern Europe and Russia was lower than the very high prior year figures.
The French, Spanish and Dutch companies all comfortably exceeded expectations
and prior year profits.  The German subsidiary's profits were down on a very
strong 2003 performance due to reduced levels of Russian business, but met
expectations, while in Italy the results were below the prior year figure.  The
strength of the euro is of assistance to all of our European sales subsidiaries
as the majority of their purchases are from the UK plant.



The Americas

The US subsidiary based in Rochester, N.Y. saw strong growth in its order
intake, sales output and operating profit.  Of course the US dollar rate, moving
from an average of $1.66 in 2003 to an average of  $1.83 in 2004, took a toll on
these numbers when converted into sterling.  However there was still respectable
growth in sterling terms.  The company saw increased sales into all of its end
user markets, and it was particularly pleasing to see the strong rebound in our
municipal business, which we experienced in the second half of 2003, continue
throughout the year.  The weak dollar benefited the US valve makers and other
O.E.M.s in terms of their competitiveness on international business which
assisted our US business.  The results of our Canadian subsidiary and Jordan
Controls, based in Milwaukee, were disappointing.  Jordan Controls continued to
suffer from a weak domestic power market and reduced sales into Venezuela.  It
did however benefit from improved sales in the Far East and from a number of
breakthrough orders in the UK and Europe.  The Venezuelan subsidiary performed
well in a market that continues to be difficult.



The Far East and the Rest of the World

Rotork has a particularly strong sales infrastructure in Asia and the Far East.
This meant that we were able to capitalise on the good growth opportunities
which were present in many of these markets.  In particular we saw high levels
of activity in the Chinese and Indian economies.  However, our subsidiaries in
Singapore, Malaysia, Thailand, Korea, Japan and in particular Australia, all
also performed well.



The Malaysian manufacturing plant continued to increase its output in its second
year of operation.  By the second half of the year it was running profitably
creating a small profit for the year as a whole which was ahead of target.  The
plant manufactures the AWT range which sells through our worldwide sales
outlets.  Once the profitability of the sales of the equipment through these
channels is taken into account the output of the Malaysian plant made a good
contribution to overall profits and was in line with our general margins for
electric actuators.



Rotork Fluid System

Rotork Fluid System design, assemble and market heavy-duty fluid power valve
actuators, which are operated either pneumatically or hydraulically.  The
markets for these products are, in the main, oil and gas related and unlike
electric actuators the bulk of these products are destined either for upstream
applications of production or transmission.  These areas are benefiting from
increased investment by most of the international oil and gas companies.  The
principal assembly plant is based in Lucca, Italy with product also assembled in
Rochester N.Y.  The product is sold either direct to Italian valve makers or
through the Rotork worldwide sales outlets.  A number of these have specialist
packaging expertise and mount controls and other devices on actuators supplied
from the assembly plants.  A key strategy of the Group is to grow this activity
which is expected to reach 20% of Rotork's total turnover within two years.  The
margins from this business are less than those achieved by the remainder of the
business but continue to improve year on year.  This activity saw very good
growth levels in 2004.  Order intake was up 25%, sales output 26% and operating
profits 50%.  This result was particularly creditable as it was achieved without
the benefit of any one very large project as in the prior year and was achieved
in spite of the bulk of the cost being euro based.



The Lucca plant had another successful year and was supported by good growth at
the Leeds and Singaporean packaging centres.  The US operation achieved a
turnaround profit in spite of difficult currency issues due to the euro cost
base.  Deanquip Valve Automation Pty Ltd, a Melbourne based distributor of fluid
power actuators and control systems, which was acquired at the beginning of 2004
for A$2m made a good profit contribution in its first year ahead of our modest
expectations.  It has completed a name change to Rotork Fluid System Pty Ltd.
Recently developed new product ranges sold well and added to the attractiveness
of Rotork Fluid System's portfolio of products.  In addition to in-house
developments, acquisitions of companies with complementary products are being
pursued.



Rotork Gears

Rotork Gears saw healthy levels of demand for their products from most of their
markets.  Order intake recorded a 6% increase while sales output was up 9%.
Operating profits were up by 10%.  This division felt the impact of increasing
steel and iron prices more than the rest of the Group and it was also affected
by the currency transaction impact on its sales of gearboxes to the US market.
The benefits of work to improve its cost base through Far Eastern sourcing
helped control costs in the second half of the year.  Further initiatives to
reduce the cost base by design and sourcing are underway.  In addition to
revamped products a new range of sub-sea gearboxes was launched during the year
and has gained rapid acceptance amongst its specialist customer base.  The
purchase of the portion of the premises in Leeds which we did not own has
allowed the Gears operation to improve its workflow.



Research & Development

The R & D programme was directed towards the completion of the IQT range, which
has significantly added to the attractiveness of our quarter turn actuator
product offerings. Additionally the launch of the Skilmatic SI range of
actuators brings sophisticated IQ technology to the operation of
electro-hydraulic actuators for the first time, and we have updated all of our
open system digital control offerings and developed Ethernet and web based
options to our proprietary Pakscan control system.



The main focus of R & D expenditure in the current year will be the enhancement
of the electronics package in the flagship IQII product range which will further
increase the flexibility of the product for our customer base; the development
of a new generation of our proprietary actuation control system, which even in
the era of open systems, remains the most cost effective and robust means of
monitoring and controlling actuators in the field; and work on a major new range
of actuators which will extend the capabilities of our products into new
business areas.



Our Innovation Programme has provided us with a number of interesting approaches
to the development of our products and services which are being pursued as
either stand alone developments or as part of existing development programmes.



Quality

The main Bath site underwent a very successful LRQA re-certification audit
against ISO9001:2000 in February 2004.  The scope of approval was amended to
underscore the suitability of Rotork products for use in potentially hazardous
environments.  LRQA noted 'an evident commitment to improvement'.  Numerous
customer audits, often geared to specific product or end-user requirements, have
also noted the effectiveness of Rotork's well-established Quality Management
System.



The non-intrusive quarter turn product, IQT, is an excellent testimony to
Rotork's Quality philosophy.  Demand for the product has exceeded even the most
optimistic expectations.  The 'concept-to-market' time cycle was expedited by
deploying innovative techniques including analytical solid modelling, rapid
prototyping and concurrent engineering.  These state of the art techniques
enabled Key Design For Manufacture and Design For Assembly features to be
incorporated from the outset.  Casting design was optimized using leading edge
process simulation to predict potential trouble spots, resulting in very high
casting yields from the start.  Build statistics demonstrate clearly that IQT
assembly is highly intuitive and this, coupled with automated testing, makes for
an exceptionally consistent and accurate process.



Treasury

The Group's treasury function, based in Bath, manages financial risks to the
Group, as a result of our wide geographical spread, and maximises interest
income from cash deposits in all our subsidiary companies. The main exposure is
the currency risk from trading transactions undertaken by Rotork operations
around the world. With 30% of our income streams in US dollar and related
currencies this has a material effect on the Group in translation of our local
currency profits into sterling. In addition, the effect of transaction costs for
our customers, and our own companies in US dollar driven economies around the
world buying from the UK factory, is to dilute margins in territories where we
have to maintain a local currency price for the product.



Our weighted average rates for translation of the dollar over the last three
years have been:

2004 - $1.83    2003 - $1.66    2002 - $1.52



The euro - representing around 20% of our income streams in the year - has had a
mitigating effect overall. Our euro rates for translation comparable with the
above were:

2004 - €1.46    2003 - €1.44    2002 - €1.58



As a guide, a one cent average annual appreciation or depreciation of the US$
can have around a £140k effect on operating profit over a year and one cent
movement in the euro can have a £120k effect on profit over a year on the same
basis. These figures are based on the current geographic spread of the business
and will vary from year to year depending on the dynamics of business around the
world.



An increasingly important relationship to us is the euro-dollar due to the
increased amount of Rotork Fluid System product shipped from our factory in
Lucca, Italy to the US. We have mitigated this to some extent by increasing the
number of Fluid System products assembled in the US.



Purchase of components into the UK from overseas has increased over the last few
years and now over 25% of our components are sourced this way. The production
units outside the UK are sourced primarily in their own currencies. This
provides some natural hedging of our currency exposure, and the trend toward Far
East sourcing of appropriate components is continuing.  The main production
facility in the US sources from the UK and these transactions are hedged.  Our
active policy of currency management has helped defer the effects of currency
movements in the year. Only underlying trading transactions are covered,
normally using simple forward contract or option instruments.  The treasury
policy in operation within the Group requires the hedging of a proportion of all
actual and reasonably expected transaction exposures. The Group treasury
function does not operate as a profit centre. The impact of IAS 39 is expected
to be negligible for Rotork.



At constant currency the Group turnover would have shown a figure of £153.0m,
which is an increase of 13% over the 2003 comparative, rather than the 8% shown
by the results. Similarly operating profit would have shown an improvement of
20% over the prior year in constant currency terms.



Cash

Rotork is a cash generative Group, and converts a large part of its operating
profit into cash. There have however been a number of issues in the past year
which have led to an increase in working capital. Shipments in the last two
months were very strong which led to the year closing with high receivables,
despite a further reduction in days sales outstanding from 67 days last year to
a very creditable 58 days. Inventory has increased in the year due in part to
the effect of legacy products in the transition period while introducing the
IQT. In addition supply shortages disrupted production, increasing our inventory
holdings. The growing Fluid System business has had a need for higher working
capital.



There have also been two large outflows of cash, both in the first half of the
year. An extra dividend payment was made in May, costing £5 million. Total cash
distributed to shareholders in dividend was £17.8 million in the year. An
additional contribution to the UK defined benefit pension fund of £5 million was
made in March. The Deanquip acquisition at the beginning of the year also
consumed a modest amount of cash.



Pensions

The triennial actuarial valuation of the UK defined benefit pension scheme was
undertaken in 2004, and approved by the trustee in September. This is the
largest scheme funded by the Group, and has been closed to new entrants since 1
January 2003. In addition to being closed to new members, existing members have
generally increased their rate of contribution to the scheme from 5% of salary
in 2003, to 6.5% from January 2004, and to 8% from January 2005. There is a
defined contribution scheme in place for people joining after January 2003 but
this is not managed within the existing scheme trustee structure.

The actuary states in his triennial report that the funding level for the UK
defined benefit scheme, which had been 97% at March 2001, had deteriorated to
84% at March 2004. The company contribution has therefore been increased from 1
October 2004, and the actuary expects this to extinguish the past service
deficit in 9 years. The main reason for the increased deficit is stated in the
report as being due to investment returns being 'significantly below those
assumed in the 2001 valuation'. The MFR funding level at the 2004 valuation date
was 107%.



As a result of the timing of the actuarial valuation, the Board has decided to
adopt the accounting provisions of FRS17 for 2004 onwards. The 2003 comparatives
have been restated which has increased profit before taxation for that year by
£97k. The size of the deficit under FRS17 has however increased in the year due
principally to the effect of the movement in bond rates on the scheme's
liabilities.



The accounting provisions of FRS17 take a fundamentally different view of
liabilities than the actuarial valuation. The absolute calculation of the scheme
liabilities under this standard, being dependant on average AA bond rates, will
show more volatility than would be seen in the actuarial valuation, or under
SSAP24. AA bond discount rates used for this calculation are shown in note 23
and have fallen by 0.15% over the last year. This alone is estimated to have
added £2.8m to the theoretical calculation of the scheme deficit under FRS17
since the last annual report.  The charge to the accounts for all pension
schemes in the Group for the year was £2.0m (2003: restated £1.9m).



Tax

The effective tax rate on profit before goodwill amortisation was 33.3% (2003:
32.1%). The prior year benefited from the gain on disposal of the property in
Luton (£597k) which was effectively tax free due to capital losses brought
forward. Overall 55% of the Group's profits are earned outside the UK and a
number of these jurisdictions have higher corporate tax rates than the UK. We
have benefited from increasing profits from some lower tax areas in the Far
East. We anticipate the rate of tax in 2005 to be broadly similar to 2004.



Dividend

Shareholders on the register during the whole period of eligibility for the year
will receive a total of three dividends. On May 28, 2004 a special interim
dividend of 5.85p was paid. On 27 September an interim dividend of 5.35p was
paid, which, taken with the final of 9.70p to be paid on 27 May 2005 makes an
increase of 2% over the dividend paid in 2003 excluding the special dividend.
With the special payment added, the 2004 dividend at 20.9p represents an
increase of 42% over 2003.



International accounting standards

We have in place procedures to enable us - as required - to adopt international
accounting standards for the interim results 2005. We do not anticipate there
being significant adjustments as a result of this, but areas that may have some
impact and record changes to comparative numbers are:

  • Pension accounting (note FRS 17 adopted this year)
  • Restatement of 2004 acquisition
  • Goodwill amortisation
  • Share based payments

The Interim 2005 results will record the transition to International Accounting
Standards.



Environment

Rotork remains fully committed to the principles laid down for inclusion in the
FTSE4Good Index.  The Group Environmental Policy has been published on the
company web site since early 2002 and is reviewed annually.  As in previous
years, the Group Environmental Report, to be published on the web site in late
Spring 2005, will include global reporting of environmental data for the 2004
trading year.



Further details of the Group's environmental performance during the year under
review are contained in the Corporate Responsibility Statement.



Employees

I would like to make special mention of the dedication and enthusiasm of our
entire worldwide workforce.  There were many challenging issues which had to be
addressed on a daily basis in order to achieve these results and I very much
admire the level of commitment that everyone showed in serving our customers
which is the basis of our financial success.



Bill Whiteley

Chief Executive

1 March 2005




Board of Directors

Executive



WH Whiteley (Chief Executive)

Bill (56) joined Rotork in 1974 and was President of Rotork's North American
operations from 1979 until he became Managing Director of Rotork Actuation in
1988.  He has been a member of the Rotork p.l.c. Board since 1984 and was
appointed Group Chief Executive in 1996.  He is a member of the Nomination
Committee.  Bill is a non-executive director of Roxboro Group plc and
Spirax-Sarco Engineering plc.



RE Slater

Bob (53) joined Rotork in 1989 as Finance Director of the Actuation Division,
and was appointed to the Board of Rotork p.l.c. as Group Finance Director in
1998.  He has previously held finance positions in mining, building controls and
the engineering industry.



GE Malcolm

Since joining Rotork in 1984, George (59) had been Engineering Director of the
Actuation Division prior to becoming a member of the Rotork p.l.c. Board in
1997.  He is currently Operations Director of the Actuation Division.  His
previous appointments were in industrial controls, aerospace and shipbuilding
companies.



RH Arnold

Bob (53), who became a member of the Rotork p.l.c. Board in 2001, is a graduate
engineer.  Previously with Westinghouse in the USA, he joined Rotork Controls
Inc. as Engineering Manager subsequently becoming Vice President, Engineering
and since 1988 President of Rotork Controls Inc.  Bob has responsibility for all
Rotork's interests in the Americas.



GM Ogden

Graham (48), holds a Phd and 1st class honours degree in electronic engineering
from Bristol University and has been with Rotork since 1985. Since joining
Graham has been closely involved in product development including our award
winning IQ series. He was appointed to the Actuation division operating board in
1997 as Research and Development Director and joined the Board of Rotork p.l.c.
in January 2005.



Non-Executive



RC Lockwood (Chairman)

Roger (59) has been a non-executive director of Rotork since joining the Board
in 1988 and became non-executive Chairman in November 1998.  He is Chairman of
the Nomination Committee.  He is Chairman of Colston Manufacturing (Engineering)
Co Ltd and Hydro International plc and has previously held CEO roles in
automotive and engineering businesses.



JW Matthews

John (60) has been a non-executive director of Rotork since joining the Board in
November 1998.  He is Chairman of Crest Nicholson plc and Regus plc.  He has
previously held senior positions in banking and industrial companies.  He is
Chairman of the Audit and Remuneration Committees and a member of the Nomination
Committee, and is the senior independent non-executive director.



A Walker

Alex (58), who joined the Board as a non-executive director in January 2001, has
been Chief Executive of Yule Catto & Co. plc since 1986.  He is a member of the
Audit, Remuneration and Nomination Committees.



IG King

Ian (48) joined the Board in February 2005 as a non-executive director.  He is
currently Group Managing Director, Customer Solutions and Support, BAe Systems
plc and is a member of that Company's Executive Committee.  Ian has previously
held senior financial and general management positions at Marconi.  He is a
member of the Audit, Remuneration and Nomination Committees.




Report of the Directors



The directors submit their report and the audited accounts for the year ended 31
December 2004 as set out on pages 24 to 48.



Principal Activities

Rotork p.l.c. is a holding Company.  The principal activities of the Rotork
Group are the design, manufacture and support of actuators, systems and related
products worldwide.



Rotork Actuation provides a range of products, systems and services for the
motorisation and manual operation of and adaption to industrial valves and
dampers for isolation duty and process control applications.  It does this
through its Electric Actuator, Gears and Fluid System operations.  Actuated
valves are major control elements in refineries, pipelines, power stations,
water distribution systems and effluent treatment plants and in all industries
in which liquids or gases are transported through pipes.



Reviews of the Group's activities and business development including future
development of the business and research and development are set out in the
Operating and Financial Review on pages 4 to 8.



Dividends

The directors recommend a final dividend of £8,303,000 for the year, payable on
27 May 2005 to shareholders on the register on 6 May 2005.  This represents
9.70p per share (2003: 9.50p) which, with the interim dividend of 5.35p per
share (2003: 5.25p) and the additional interim dividend of 5.85p per share will
produce a total dividend per ordinary share of 20.90p (2003: 14.75p).



Shares issued or purchased

Details of the ordinary shares issued and the preference shares purchased during
2004 are given in note 19 and 20.



Substantial shareholdings

As at 1 February 2005 the Company had been formally notified that the following
have material interests in 3% or more of the issued ordinary share capital of
the Company:  Figures given below are for the total material and non-material
interests of these shareholders.


                                                                                  No.            %

Aviva plc                                                                   6,336,659        7.39%

Legal & General plc                                                         3,541,090        4.13%

Prudential plc                                                              3,033,373        3.53%

Scottish Widows Investment Partnership Ltd.                                 3,030,351        3.53%


Research and development

Total Group expenditure on research and development in the year was £2,424,000
(2003: £2,071,000) further details of which are contained in the Operating and
Financial Review on pages 4 to 8.



Charitable donations

During the year the Group made charitable donations of £35,000 (2003: £30,000).



There were no political donations made in the year or the prior year.



Directors

The names of the directors in office throughout the  year and their biographical
and other details including the other significant commitments of the Chairman
are as shown on page 9.  Post year end, on 1st January 2005, GM Ogden was
appointed an executive director and on 17th February 2005, IG King was appointed
a non-executive director.  The Company has consented to GE Malcolm's early
retirement on 8th April 2005.  The interests of the directors in office at the
end of the financial year in the shares of the Company are as shown in note 9 to
the financial statements.



WH Whiteley, GE Malcolm, RE Slater, RH Arnold and GM Ogden have service
agreements and details of these are contained in the Remuneration Report on
pages 17 to 22.



At the Annual General Meeting ('AGM'), in accordance with the Articles of
Association, RH Arnold, RC Lockwood and RE Slater will retire by rotation and,
being eligible, will offer themselves for re-election.  GM Ogden and IG King
will both offer themselves for election it being their first opportunity since
appointment.



The Senior Independent Director, JW Matthews has, following a formal performance
evaluation of the Chairman, confirmed to the Board that RC Lockwood continues to
be effective in and committed to his role as Chairman.  A letter to similar
effect has been circulated to shareholders ahead of the AGM.



Statement of directors' responsibility for preparing the financial statements

The following statement, which should be read in conjunction with the auditors'
Statement of Auditors' Responsibilities, included in the audit report, is made
with a view to distinguishing for shareholders the respective responsibilities
of the directors and of the auditors in relation to the financial statements.



Company law requires the directors to prepare financial statements for each
financial year which give a true and fair view of the state of affairs of the
Company and the Group as at the end of the financial year and of the profit or
loss for that period.



The directors consider that in preparing the financial statements on pages 24 to
48, the Company has selected suitable accounting policies which have been
consistently applied and supported by reasonable and prudent judgements and
estimates, and that all accounting standards which they consider to be
applicable have been followed subject to any explanations and any material
departures disclosed in the notes to the financial statements.  The directors
are required to use a going concern basis in preparing the financial statements
unless this is inappropriate.  After making enquiries, the directors have a
reasonable expectation that the Company and the Group have 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.



The directors have responsibility for ensuring that the Company keeps accounting
records which disclose with reasonable accuracy the financial position of the
Company and which enable them to ensure that the financial statements comply
with the Companies Act 1985.



The directors have general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the Group and to prevent and
detect fraud and other irregularities.



Creditor payment policy

While there is no formal code or standard, it is Company and Group policy to
settle terms of payment with creditors when agreeing the terms of each
transaction and to abide by creditors' terms of payment provided that the
supplier is also complying with all relevant terms and conditions.  There are no
creditors subject to special arrangements outside suppliers' terms and
conditions.  The Company does not have any trade suppliers so that a creditor
day payment period is not appropriate.



Auditors

Resolutions to re-appoint KPMG Audit Plc as auditors and to authorise the
directors to determine their remuneration are to be proposed at the forthcoming
Annual General Meeting.



Annual General Meeting

The Annual General Meeting of the Company will be held at the Company's offices
at Rotork House, Brassmill Lane, Bath BA1 3JQ on Friday, 22 April 2005 at 12
noon.  A separate circular containing the Notice of the Meeting is sent to
shareholders with this Annual Report.



On behalf of the Board



Stephen Rhys Jones, Secretary

1 March 2005

Bath




Corporate Governance



Set out within this section is a commentary on how the Company applies the main
and supporting principles of the Combined Code on Corporate Governance July 2003
('the Code').   Specific disclosures required within the provisions of the Code
are also made within this section.



Code Compliance Statement

GE Malcolm who retires on 8th April 2005 has a two year notice period from the
Company contained in his service contract.  All other serving executive
directors have one year notice service contracts.  Following the appointment of
IG King,  currently there are three independent non-executives on the Board.
However, during the year under review given that under the Code it is implied
that a Chairman cannot be considered independent then the composition of the
Audit and Remuneration Committees was non-compliant in that one of its members
was the Chairman of the Board and the Nomination Committee was non-compliant as
a majority of its members were not independent.  As Rotork p.l.c. is considered
a large Company by the  Code it is recognised that for full compliance,  a
further independent non-executive would need to be appointed so that half the
Board excluding the Chairman comprised non-executive directors.   The
appointment of IG King is considered by the Board to be a significant step
towards full compliance in respect of the relevant Code provision, concerning
Board composition, in addition to facilitating full compliance for Committee
membership.  As explained later in this report the Board has developed a formal
process for performance evaluation which will be fully implemented during 2005.
  Subject to the matters referred to in this paragraph the Company considers
that it has throughout the year complied with the provisions of the Code.



Internal Control

The Company has during the year operated procedures necessary to comply with the
guidance issued in the 'Turnbull Report', and by reporting in accordance with
that guidance.



The Board has ultimate responsibility for the Company's system of internal
control and is required to set appropriate policies and to review its
effectiveness.  The role of management is to implement Board policies.



The system of internal control is designed to reduce but cannot eliminate the
risks of failure to meet business objectives.  Internal control therefore can
only provide reasonable but not absolute assurance in meeting such business
objectives or against material misstatement or loss.



A continuous process for identifying, evaluating and managing the significant
risks faced by the Company continued to be applied and developed during the year
under review and operated up to the date of approval of the annual report and
accounts.  Senior managers with responsibility across all functions participate
in the risk management process that identifies and evaluates the key risks
(including social and environmental) facing the Company's businesses.   Their
deliberations are reported regularly to the Audit Committee and Board.  This
process is based on senior managers' detailed knowledge and understanding of key
risks within and external to the business based on formal management information
and reports and their interaction and daily dealings with those reporting
directly to them, their colleagues and external parties.  Internal financial
audits are undertaken on a regular basis by a selected group of accountants
drawn from head office across the divisional businesses and geographic centres.
All these accountants have received relevant and specific training in internal
audit, best practice and control procedures.  Work will continue to further
embed internal control and risk management in the operations of the business and
to further enhance and add to the relevant processes including consideration of
social and environmental risks.



The processes that are used by the Board to review the effectiveness of this
system of internal control include the following:



During the year the Audit Committee:



• Monitors and reviews the effectiveness of internal audit activities;

• Reviews and monitors external auditor independence and objectivity and the
  effectiveness of the audit process;

• Considers reports from management, internal and external audit on the
  system of internal financial control and any material control weaknesses;

• Receives reports on Health and Safety and environmental issues;

• Discusses with management the range of actions taken on problem areas
  for the business identified by Board members or in the internal and external
  audit reports.



Additionally:


• The Board receives copies of the minutes of all Audit Committee meetings;

• The Board reviews the role of insurances in managing risk across the
  Group;

• The Board regularly receives written and oral reports from management on
  all aspects of production, operations, financial and risk management
  matters.



Prior to the year end the full Board following discussion at the Audit Committee
formally reviews the effectiveness of the Group's system of internal control.



The Board

The Board currently has nine members comprising the Chairman, who is
non-executive and whom the Board considers to be independent, the three
independent non-executive directors as defined by the Code, and five executive
directors, (one of whom as referred to above retires on 8th April 2005).   On
appointment directors receive a suitable and tailored induction.  There is a
clear division of responsibility approved by the Board in writing between the
Chairman, RC Lockwood, and the Chief Executive, WH Whiteley, that ensures that
there is a balance of power and authority between the running of the Board and
the executive responsibility for the running of the Company's business.  JW
Matthews is the Senior Independent non-executive Director.



The full Board had nine meetings spread appropriately over the course of the
year under review.  During the year RC Lockwood, JW Matthews, A Walker, WH
Whiteley, RE Slater and GE Malcolm attended every Board meeting.   RH Arnold
attended six Board meetings in person and two by video-link for part of the
meeting.  During the year Board meetings are scheduled at manufacturing sites
other than the Company's headquarters in Bath.  This allows in particular
non-executive directors to meet management at these sites and receive
presentations from them.  During the year under review the full Board visited
and held Board meetings at the Rotork Controls Inc. manufacturing plant in
Rochester, New York State and the Exeeco Limited facility in Leeds, England.



The Chairman ensures through the Company Secretary that the Board Agenda and all
relevant information is provided to the Board sufficiently in advance of
meetings.  The Chairman and Company Secretary discuss the Agenda ahead of every
meeting.  At meetings the Chairman ensures that all directors are able to make
an effective contribution throughout meetings and every director is encouraged
to participate and provide opinions for each Agenda item.  The Chairman always
seeks to achieve unanimous decisions of the Board following due discussion of
Agenda items.  The Schedule of Reserved Matters details those matters
specifically reserved for Board decision.  The types of decision which are
reserved for Board decision relate to matters which cannot or the Board
considers should not be delegated to the Chief Executive and executive
management.  They include approval of Group commercial strategy and succession
planning, approval of Group annual operating and capital expenditure budgets and
recommendations for payment of final dividend and decisions for interim
dividends and dividend policy, approval of the Annual Report and financial
statements and announcements of final and interim results, ensuring sound
internal control and risk management, executive director remuneration, corporate
governance matters including Board and Committee performance appraisals, Board
and Committee membership.  The Board regularly considers and discusses future
strategy, following submissions by management, at Board meetings and separate
strategy meetings.  The non-executive directors constructively challenge and
help develop proposals on strategy at those meetings.  The decisions which are
left to management are all those related to the successful operation and
management of the Company's business and in implementing the commercial strategy
within the limits set by the Board annually for overall operational budgets and
capital expenditure.



The Chairman ensures that meetings of non-executives without the executives
present are held.  The Company maintains appropriate directors' and officers'
insurance cover.



Performance Evaluation

The Board has during the year under review developed a formal process for
performance evaluation of the Board, its Committees and individual directors
which will be fully implemented during 2005.  The Chairman will during the
evaluation consult individually with all directors addressing a consistent set
of pre notified matters covering Board, Board Committees and individual
director's effectiveness.  The collective results of these structured dialogues
will be reviewed by the Chairman, consulting with others as appropriate.  An
overall summary of the evaluation results will be tabled at an appropriate Board
meeting.  The effectiveness of the evaluation process will then be assessed and
form the basis for subsequent development action.  The Senior Independent
Director has led the performance evaluation of the Chairman through consultation
with all the directors followed by a meeting he chaired with the other
non-executive directors to consider all responses received and at which the
performance of the Chairman was formally evaluated.



Appointments to the Board

The Nomination Committee's four members during the year under review were RC
Lockwood (who chairs the committee), JW Matthews, A Walker and WH Whiteley.  The
Committee meets regularly to undertake its duties in relation to succession
planning and in recommending specific appointments to the Board.  During the
year the Committee undertook a search for an additional independent
non-executive director with recent and relevant financial experience culminating
in the appointment to the Board of IG King who was introduced through an
external consultant.  Prior to the appointment of IG King the Nomination
Committee considered a range of suitable candidates making use of external
search consultants and other contacts.  A short list of those available
candidates considered most suitable when compared with the criteria drawn up by
the Committee, which included recent and relevant financial experience, were
then interviewed by the Committee.   Following further consideration by the
Committee, and meetings with all the executive directors, IG King was
recommended to the Board by the Committee.  IG King has undertaken to the
Company that he will have sufficient time to meet what is expected of him as set
out in his letter of appointment.



The Committee also recommended to the Board GM Ogden's appointment as an
executive director.  In making the appointment the Board considered the balance
of skills, knowledge and experience on the Board.  GM Ogden's appointment
ensures that following the retirement of GE Malcolm, an executive director with
not only senior management experience but also engineering and product
development expertise, particularly in relation to electric and other types of
actuator, is a member of the Board.



The Nomination Committee met formally twice during the year.   RC Lockwood, JW
Matthews and WH Whiteley attended both meetings of the Committee.  A Walker
attended one meeting.



Following the appointment of the third independent non-executive director, IG
King, the Nomination Committee now comprises three independent directors, the
Chief Executive and Chairman.   A majority of the members of the Nomination
Committee are therefore independent non-executive directors.  The Terms of
Reference of the Nomination Committee can be accessed on the Company's website
in the Investors' section.



Audit Committee

The Audit Committee is now comprised of the three independent non-executive
directors, JW Matthews (Chairman), A Walker and IG King.  It usually meets three
times a year to review published financial information, the effectiveness of
both external and internal audit and internal financial and other controls.  The
Finance Director, Chief Executive and the external auditors normally attend
meetings and there is a meeting at least once a year between the Committee and
the external auditors at which management is not present.  During the year under
review and prior to the appointment of IG King, RC Lockwood was a member of the
Committee.   He stood down following IG King's appointment.



The matter of auditor independence is considered by the Committee.  The Auditor
does provide non-audit services.  Auditor objectivity and independence is
safeguarded by ensuring all non-audit services are managed and directed by the
Company executive management and by ensuring disclosure of non-audit fees to the
Audit Committee.  For significant general consulting projects more than one
service delivery provider is considered.  Categories of non-audit work provided
by the auditor with fees are set out in note 5.  Within the Audit Committee's
Terms of Reference is a requirement for the Committee to assess the independence
of the external auditor ensuring key partners are rotated at appropriate
intervals and to ensure that the provision of non-audit services does not impair
the external auditors' independence or objectivity.  This assessment was
undertaken by the Committee during the year.  The Terms of Reference of the
Audit Committee is available to view on the Company's website in the Investors'
section.



All of the members of the Audit Committee, during the year under review being,
RC Lockwood, JW Matthews and A Walker attended all three meetings of the
Committee.   RE Slater and WH Whiteley attended all three meetings of the
Committee by invitation.  The internal audit function is undertaken by members
of the Company's finance department who all have other distinct posts.  The
Group Finance Director is also Head of Internal Audit.



Remuneration Committee

The work of the Remuneration Committee is described in the Remuneration Report
on pages 17 to 22.  RC Lockwood, JW Matthews and A Walker attended the four
formal meetings of the Remuneration Committee during the year under review.
The Chief Executive was invited to attend the four formal meetings for parts of
those meetings.



Relations with Shareholders

Communication with shareholders is given high priority.  All members of the
Board receive copies of all analysts' reports of which the Company is made
aware.  The Chief Executive reports at each Board meeting upon his meetings with
analysts, fund managers and shareholders.  The Company Secretary has recently
written on behalf of the Board to the Company's major shareholders offering
meetings with the non-executive directors and requesting shareholders to confirm
they are content with current Board level contact with the Company and
communication to non-executives.



Individual shareholders have an opportunity to put questions to the Chairman at
the AGM and individual shareholder enquiries are dealt with throughout the year
by the Company Secretary's department.  For the AGM all proxy votes are counted
and (except in the event of a poll being called) at the AGM the balance for and
against the resolution and the number of abstentions is displayed for
shareholders after it has been dealt with on a show of hands.  Prior to the AGM
the Company Secretary reports to the Board on the results of the proxy returns
and on the comments and analysis undertaken by voting agencies.


Corporate Social Responsibility



The Company has considered the guidelines on Social Responsibility published by
the Association of British Insurers and takes full account of the significance
of environmental and ethical matters in the conduct of its business and in its
risk assessment processes.  Rotork remains fully committed to the principles
laid down for its inclusion in the FTSE4Good Index and the 10 Principles of the
UN Global Compact of which it is a signatory.



Environment

The Group Environmental policy, which is reviewed annually, includes commitments
to the prevention of pollution, compliance with all relevant legal and other
regulatory requirements and to the continuous improvement of environmental
performance.  The Environmental policy applies to all manufacturing sites in the
Group worldwide.  The complete policy may be found at www.rotork.com under '
Environment'.



In its 2004 Environmental Report the Group reported that it had maintained its
commitment to managing and improving its environmental performance and to
communicating this performance to its stakeholders through the publication of
its Environmental Report for 2004 which can be accessed in full at
www.rotork.com under 'Environment'.   The 2005 Environmental Report will be
available on the Company's website in late Spring 2005.



The Group has identified its key environmental impacts to include the use of
energy, water, and disposal of waste.  The Group is continually developing
policies and procedures on these issues to minimise its impact on the
environment.



Rotork considers it contributes to sustainable development and environmental
improvement through the products and services it sells.  The Company's products
are used around the world in all environments, including those which are
hazardous and in many types of industries, including water purification, sewage,
food processing, marine, irrigation, power generation and oil and gas.  Rotork
products help reduce human error and thus potential environmental disasters,
whilst saving energy and resource.  With the launch in late 2003 of the new
Intelligent Quarter Turn (IQT) range of actuators, which consume a tenth of the
energy of their predecessors, Rotork is continuing to develop and produce energy
efficient products with improved performance.



Environmental Management System

Rotork will, through its Environmental Management System:



• Allocate formal environmental responsibilities to ensure compliance
  with legislation.

• Support a culture of consultation with employees, key stakeholders and
  other interested parties.

• Provide environmental information, guidance and, where necessary
  provide training that meets best practice.

• Monitor, measure, audit and seek continuous improvement in its
  environmental performance.

• Work with external agencies and bodies to ensure continued adoption of
  best practice solutions in environmental management.

• Communicate best practice and publish internal and external
  information detailing is aims and achievements.

• Foster open communication with employees, customers, suppliers and
  other stakeholders via both electronic publishing and face-to-face discussion.



The project to fully implement an Environmental Management System at the Bath
manufacturing site has continued to progress.  Waste to landfill has been
identified as the biggest environmental site impact and challenge.  To turn this
impact into an environmental 'win' required the redevelopment of the site
facilities to accommodate the recycling systems necessary to reduce the impact.
Recycling processes were established for wood, cardboard and IT equipment.
Other waste streams are now being separated to facilitate further recycling
opportunities.  Within the 2004 Environmental Report at www.rotork.com
information and data can be accessed about how Rotork managed its key
environmental impacts.  The data includes waste to landfill, incineration and
authorised disposal plants, CO2 emissions, water consumption and use of
hydrocarbons and volatile organic compounds.  For the first time the data is
included from the other manufacturing sites as well as Bath.



The Aspects and Impacts Assessment is currently being reviewed in the light of
new processes introduced in 2004.  This will provide the springboard for setting
objectives for the year ahead.  An audit to verify compliance with ISO 14001 by
an external agency is scheduled for March 2005.



Ethics and Values

Rotork is a signatory to the United Nations Global Compact and its 10 Universal
Principles around human rights, labour, environment, bribery and corruption.
These Principles are derived from the Universal Declaration of Human Rights and
the International Labour Organisation's Declaration of Fundamental Principles
and Rights at Work.  In particular, Rotork supports all United Nations' efforts
to ensure the effective abolition of child forced compulsory labour and will
never use any such labour in any of its operations worldwide.  At Rotork the
rights of every employee are respected.  The Company acts in ways that ensure
all employees are treated with openness, mutual trust, dignity and respect.
Everyone working at Rotork will be treated fairly and without discrimination on
the basis of race, gender, language or religion.



Rotork's Ethics and Values Statement can be accessed at Rotork's website
www.rotork.com under the 'Investors' section, sub-section 'Responsibilities and
Ethics'.  Additionally at that part of the website can be accessed the Rotork '
Doing the Right Thing' document which describes some of the benefits Rotork
provides for employees and the wider community.



Suppliers

Business integrity and fair dealing is key to the Group's relationships with
suppliers and contractors.  Many of the Group's suppliers have long-term
relationships with the Group.  Most key suppliers are registered to ISO 9000.
Supplier development is ongoing and involves elements (developed in the motor
industry) of the QS 9000 system.



Employees

Employees in the UK and many overseas offices enjoy participation in
long-standing Rotork profit sharing and share schemes.



At the Bath plant, an Employee Committee sits regularly to discuss staff issues
and suggests improvements in working conditions and practices.  All issues are
reviewed by directors and acted on as appropriate.



An Equal Opportunities policy is applied throughout the Group and in almost all
cases, it is nationals from those countries in which the Company operates who
manage those companies locally.



Financial support for training and learning programmes directly related to
employees working roles are provided.  There are two full time training officers
at the Bath site who co-ordinate product training initiatives for employees and
customers.  Four year apprenticeship programmes underline the commitment to
staff development for the long term.



Health and Safety

The Group has Health and Safety policies in place.  The Group is working towards
a global Health and Safety policy compliant with Occupational Health and Safety
Management System (OHSAS) for the benefit of employees and those they interact
with worldwide.



Community Involvement

For many years Rotork has pursued a policy of community involvement through
financial support and fostering partnership with local charitable and voluntary
organisations, trusts and local support groups.  A Charity Committee made up of
employees at all levels considers local community charitable and similar
requests at the Bath site.  Projects are then followed through with visits and
reports by employees and feedback to the Charity Committee.  Sponsorship is also
given to local youth and sporting clubs and to cultural and social events.
There is also direct engagement in community issues.  For example in Bath a
representative of the Company sits on a local group supporting local initiatives
for cultural, social and economic development.



The Charity Committee normally matches monies raised by employees who undertake
appropriate charitable events personally.



In 2004, the Charity Committee awarded a grant of £30,000 over three years to
the Research Institute for the Care of the Elderly to provide a Rotork room in a
new research facility to be built at the Royal United Hospital in Bath.  The
room will be one of four examination rooms that will be used on a daily basis
for the Institute's research projects and memory clinics.  The memory clinics
provide a much valued service to people in the Bath area.  Like Rotork, the
Institute is committed to research as a means of progress in finding solutions
to practical problems.  With the ageing of the population, research to improve
the care of older people is of growing importance and Rotork is pleased to be
involved with this initiative.



Other charitable organisations to benefit from Rotork's Charity Committee during
the year included:


Hope and Homes for Children                       Bath Institute of Medical Engineering
Action Medical Research                           Weston Day Club, Nr. Bath
Childrens Heart Foundation                        Dorothy House Hospice, Bath
Farmborough Playgroup, Nr. Bath                   Bath & Wansdyke Soc for Blind
Age Concern                                       Larkrise School Fund, Bath
Bath Charities Fayre                              The Charter Trustees of the City of Bath
Children in Need                                  Chernobyl Children Life Line
Little Sisters of the Poor                        Bath Junior Gateway Club
Macmillan Cancer Relief                           Heartline
Spencer Dayman Meningitis Trust                   Bath Charities Fayre



Remuneration Report



This report is presented to shareholders by the Board and sets out the Board's
remuneration policy and details of the remuneration of each director.



The Remuneration Committee  (the Committee) of the Board is currently comprised
of three independent non-executive directors, JW Matthews, A. Walker and IG King
During the year under review JW Matthews chaired the Committee , and RC
Lockwood and A Walker were members.  RC Lockwood stood down from membership of
the Committee in February 2005 following the appointment to the Committee of IG
King.  The Committee makes recommendations to the Board on the Company's
framework of executive remuneration and its costs and determines on the Board's
behalf the individual salaries and other terms and conditions of employment for
the executive directors.  It also determines the individual salaries of other
members of senior management.  The Committee determines the terms of any
discretionary share schemes in which executive directors may be invited to
participate.



During the year the Committee received salary and remuneration advice from their
appointed adviser, Towers Perrin, for executive directors and senior management.
The Chairman of the Committee consults the Chief Executive on the
remuneration of the other executive directors and senior managers.  The Company
Secretary participates in Remuneration Committee discussions and advises the
Committee.



For the year under review, the Board considered that it was critical that the
Company had remuneration policies that enabled it to retain, motivate and, when
required, recruit high quality management.  In recommending the level of
remuneration for executive directors, the Remuneration Committee took account of
the size and nature of the Company, including its international scope, using
data from a number of sources including Towers Perrin's own survey and
proprietary data.  The Committee considers it important that a significant
proportion of executive directors' potential total remuneration is performance
related.  This is demonstrated by the maximum percentage of salary potentially
payable as cash or share awards respectively under the annual cash bonus scheme
and long term incentive plan.   The Committee confirms that Towers Perrin do not
have any other connection with the Company.  For the year 2005 and subsequent
years the directors' current intention is to continue with the remuneration
policy referred to above.



As reported last year, WH Whiteley agreed to reduce the two years' notice
required to be given by either party under his service contract to one year from
the Company and to six months from WH Whiteley.  Following the reduction in his
service contract to one year's notice WH Whiteley's contract now contains a
statement that on early termination of his contract by the Company, or by WH
Whiteley in circumstances where he is entitled to do so including on a change of
control, he would receive a payment by way of liquidated damages equivalent to
one year's salary and other benefits on an annualised basis.  The other
executive directors' contracts do not provide any specific provision for
compensation payable upon early termination.   GE Malcolm's service contract
continues to include a provision for two years notice however the Company has
consented to WH Malcolm's early retirement in April 2005.  RE Slater's service
contract and RH Arnold's service contract are both rolling service contracts
with a one year notice period.  For future executive director appointments, the
Board's intention will be to continue to limit service contracts to one year on
a rolling basis.  GM Ogden's service contract therefore contains a one year
notice period.


 Name of executive   Date of service Notice period from     Notice period     Normal Retirement Date
          director          contract            Company     from director

       WH Whiteley          1/2/1996             1 year          6 months                 25/10/2008
         RE Slater          1/6/1998             1 year            1 year                  10/4/2011
         RH Arnold         28/5/2002             1 year            1 year                  18/8/2016
        GE Malcolm         20/3/1997            2 years           2 years                16/10/20051

          1The Company has consented to GE Malcolm's early retirement on 8th April 2005.


           Name of Date of letter of Notice period from     Notice period Unexpired term as at 31/12
     non-executive       appointment            Company              from                        /04
          director                                          non-executive
                                                                 director

       RC Lockwood        01/01/2003           3 months          3 months                  12 months
       JW Matthews        14/10/2004           3 months          3 months                  34 months
          A Walker        07/01/2003           3 months          3 months                  11 months



The fees of the non-executive directors, other than the Chairman, are determined
by a Board Committee which includes the Chief Executive and Chairman. Following
the appointment of IG King as the third independent non-executive member of the
Committee, future changes to the Chairman's fees will be decided by the
Committee as stated in the Terms of Reference of the Remuneration Committee
available on the Company's website. Previously the fees of the Chairman were set
by a Committee of the Chief Executive and Senior Independent Director.
Non-executive directors are offered engagement agreements of three years
duration, subject to earlier termination by either party on three months notice,
with no provision for any compensation payment on termination.



None of the executive directors has any external directorships with the
exception of WH Whiteley, who is a non-executive director of Roxboro Group PLC
(fees for this directorship which are £20,000 per annum are payable to Rotork
p.l.c.) and Spirax-Sarco Engineering plc (fees for this directorship, which are
£24,000 per annum are payable to WH Whiteley) and a director of the British
Valve and Actuator Manufacturers Association Limited for which no fee is paid.



The remuneration packages of each individual director currently include basic
salary, an annual bonus, benefits in kind (car and fuel, or car and fuel
allowance, and private medical insurance), membership of the all employee Rotork
Share Incentive Plan (SIP) or Overseas Profit-Linked Share Scheme (OPLSS) (see
below), discretionary Rotork Long-Term Incentive Plan (LTIP) and participation
in a Rotork Group pension scheme.  Further details of all elements of each
individual director's remuneration package are set out elsewhere in this report.
  Salary and benefits including pension and car and fuel, or car and fuel
allowance, constitute fixed pay.



From its inception in 2000 to 2003 the LTIP plan provided executive directors
with an annual opportunity for shares to vest to a maximum 50% of basic salary
and a minimum of zero dependent on performance as described below.



During 2004 and prior to the fifth annual discretionary awards under the LTIP
plan, the Committee reviewed the performance of the plan to date and the level
of contingent benefits it provided to executive directors after taking account
of available and recent remuneration data concerning the levels of LTIP awards
and advice provided by Towers Perrin.  Following the review the Committee
decided to increase contingent annual awards to executive directors to 100% of
basic salary being the maximum level of award under the plan rules as approved
by shareholders in May 2000.  The Committee noted in survey data that a 4 year
performance period continued to be far less common than a 3 year performance
period.  The Committee decided that it would not recommend a reduction to a
three year performance period but in future it would not seek to formally
enforce a one year holding period for the share based LTIP.  The Committee
considered that the comparator group of companies continued to be the
appropriate primary measurement of performance and noted that this was
underlined by the Association of British Insurers in its 'Principles and
Guidelines on Remuneration' document dated December 2004.



The annual cash bonus operated during 2004 for executive directors provides an
opportunity to earn a cash payment which is substantially dependent on increased
profits in a financial year when compared to a relevant prior year based on a
scale.  The bonus also contains a personal performance element.   The total
annual bonus payment is capped at 50% of basic salary.



Following a review of the current executive director bonus plan during 2004 the
Committee has approved a revised annual cash bonus plan for 2005 which will
continue to reward increases in profit, when compared to the average profit over
the three immediately preceding years but will additionally reward high levels
of free cash generation and growth in earnings per share together with the
achievement of budgeted targets.   The total annual bonus payment will be capped
at 60% of basic salary.



The Committee has during the year given consideration to the implications of the
legislative changes to pensions in the UK which come fully into effect from
April 2006.  The Committee has agreed to pay reasonable professional fees for
the UK executive directors who will be affected by these changes to obtain
individual advice.  The Committee has decided that any alternative offers to
current pension provision for executive directors would only be considered on
the basis that they do not increase the benefit cost to the employer.




The auditors are required to report on the information contained in the
following sections of this report:



Directors' emoluments


                            Salary and fees           Bonus       Benefits1              20041           20031
                                                                                         Total           Total

Executive directors

GE Malcolm                              140              26              15                181             170
RE Slater                               150              35              15                200             187
WH Whiteley                             235              48              15                298             271
RH Arnold*                              127              24               8                159             165

Non-executive directors

A Walker**                               24               -               -                 24              24
RC Lockwood                              50               -               -                 50              50
JW Matthews                              30               -               -                 30              27
                                     ______          ______          ______             ______          ______
                                        756             133              53                942             894
                                     ______          ______          ______             ______          ______



*   RH Arnold is paid in United States dollar currency.

** Fees for the provision of A Walker's services are payable to Yule Catto & Co.
   plc.



1 These columns include the cash value on allocation of SIP and OPLSS share
awards as appropriate.  For further details see page 20.




Rotork Long-Term Incentive Plans (LTIP)

Following shareholder approval of the LTIP at the Company's Annual General
Meeting on 18 May 2000, awards over shares were made to executive directors and
senior managers every year from 2000.  Those LTIP awards still outstanding at
the time of publication of this report made to executive directors are set out
below.


                            Outstanding share or    Share or cash unit     Outstanding share or
                                       cash unit    awards made during      cash unit awards at
                                  awards made to                 20041         31 December 2004
                                  1 January 2004                          

GE Malcolm                                61,407                36,175                   97,582
RE Slater                                 63,432                38,759                  102,191
WH Whiteley                               99,260                60,723                  159,983
RH Arnold2                                60,101                33,106                   93,207



1The market price of shares in the Company at the date of Award was £3.87p.

2RH Arnold, a United States citizen and resident, is awarded cash units of a
monetary value equivalent to share awards under the LTIP.



The LTIP is a performance, share or cash unit plan under which shares or cash
units are conditionally allocated to selected members of senior management at
the discretion of the Remuneration Committee on an annual basis.  No shares or
cash units will normally be released to participants unless they are still in
the Group's service following completion of four year performance periods and
the Company's relative TSR against a comparator group of companies places it in
at least the 50th percentile position in the comparator group at the end of the
relevant performance period.  TSR measures the change in value of a share and
reinvested dividends over the period of measurement.   The actual number of
shares or cash units transferred will be determined by the number of shares or
cash units initially allocated multiplied by a vesting percentage which will be
40% at the 50th percentile rising to 100% at the 75th percentile with each
percentile position above the 50th adding 2.4% to the vesting percentage.  The
Company's earnings per share is also monitored during the relevant performance
period to ensure it meets a minimum average annual growth equal to the rise in
the Retail Price Index plus 2% per annum.  Failure to meet the 'RPI' requirement
will result in nil vesting.  The relative TSR against a comparator group
performance measure was chosen as it enabled the Remuneration Committee to
select a comparator group considered to be sufficiently challenging given the
historic performance of the Company.



The comparator companies used for the LTIP are listed below:


Babcock International plc                 Renishaw plc
Brammer plc                               Senior plc
BSS plc                                   Smith Group plc
Delta plc                                 Spectris plc
FKI plc                                   Spirax-Sarco Engineering plc
IMI plc                                   TT Electronics plc
Invensys plc                              Volex plc
Meggitt plc                               Weir Group plc



Directors' share options outstanding as at 31 December 2004 under the Rotork
Sharesave Scheme


Name of Director    Date of Grant   Number of Options        Performance  Option Price   Date of Exercise
                                              Granted         Conditions

RE Slater               8/10/2004               5,170     Not applicable        £3.196          1/12/2009


Interests in shares

The interests of the directors in the ordinary share capital of the Company are
set out in note 9.  In common with all eligible employees, UK based executive
directors receive an entitlement to ordinary shares under The Rotork Share
Incentive Plan (SIP) which is approved by the Inland Revenue.  Under the SIP and
Rotork Overseas Profit-Linked Share Scheme (OPLSS) an aggregate total of up to
5% of profits are distributed to employees each year in the form of ordinary
shares.  The distribution is calculated by reference to years of service and
salary subject, for the SIP, to Inland Revenue limits.


Details of free share awards under the SIP and OPLSS made to executive directors
in 2004 are set out below.


GE Malcolm                                         779
RE Slater                                          779
WH Whiteley                                        779
RH Arnold                                        1,164



Free shares awarded to all three UK executive directors under the SIP are
subject to the Inland Revenue upper limit of £3,000 by value.



RH Arnold, in common with other eligible overseas employees, participates in the
OPLSS.  The Scheme Trustee is based in Guernsey, Channel Islands.



Pension disclosures required under the Listing Rules of the UK Listing Authority

The following table shows the executive directors' entitlements earned during
the year (net of inflation) and the accumulated entitlement at the year end.


                                           Age at                Increase in                   Accumulated
                                 31 December 2004            accrued pension            accrued pension at
                                                               over the year              31 December 2004
                                                                    (Note 1)                      (Note 2)

                                                                           £                             £

G E Malcolm                                    59                      5,604                        85,335
R E Slater                                     53                      6,703                        67,116
W H Whiteley                                   56                    (2,764)                       151,366
R H Arnold                                     53                    (1,147)                        36,917




Notes:



1. The figures shown for the increase in accrued pension over the year exclude
any increase for inflation.



2. The accumulated accrued pension is that which would be paid annually on
retirement from normal pension age, based on service to 31 December 2004.



3. A lump sum death benefit of 4 times basic annual salary is payable on death
in service.



4. A dependant's pension of one-half of prospective pension is payable on death
in service, and of one-half of pre-commutation pension on death in retirement.



5. Post-retirement increases are applied at the rate of increase of the Index of
Retail Prices up to a maximum of 5% per annum, except that for pension benefits
in respect of pensionable service up to 15 May 2000 the minimum inflationary
increase is 4.5% per annum.



6. WH Whiteley was entitled to an immediate pension from age 55 of two-thirds of
his final pensionable salary. He has now passed age 55 and on his eventual
retirement his pension will be uplifted to reflect its later commencement date.
To the extent that the payment of such pension from the Scheme is restricted by
Inland Revenue limits, the Company will pay the shortfall under a separate
pension promise.



7. For WH Whiteley, the accrued pension as at 31 December 2004 above allows for
his six month notice period to the Company.  Prior to January 2004, WH
Whiteley's notice period to the Company was two years.  The effect of this
change acts to decrease his accrued pension.



8. The figures shown for RH Arnold are in respect of his membership of the
Rotork Controls Inc. pension scheme, which is a defined benefit scheme.
Additionally, and to alleviate the effect of the pension salary cap applicable
in the United States, RH Arnold benefits from funded split dollar life insurance
plans which are targeted to supplement his pension such that, in aggregate, the
pension arrangements for RH Arnold will deliver a pension of at least 60% of
uncapped basic salary at age 65.



9. Note that the increase in accrued pension over the year for RH Arnold is
negative due to movements in the US dollar relative to sterling. In dollars, the
accrued pension increased from $65,897 per annum as at 31 December 2003 to
$71,103 per annum at 31 December 2004.



Pension disclosures required under the Directors' Remuneration Report
Regulations 2002



The following table shows the executive directors' entitlements earned during
the year and their value at the start and end of the year.


                       Increase in Transfer value     Transfer   Transfer value      Increase in Adjusted Increase
                                       of accrued     value of       of accrued   transfer value                in
                   accrued pension     pension at      accrued       pension at    over the year
                   during the year       31.12.03   pension at         31.12.04                     transfer value
                                                      01.01.04                                       over the year
                          (Note 1)                                                                        (Note 3)


                                 £          £'000        £'000            £'000            £'000             £'000

G E Malcolm                  8,226          1,531        1,531            1,824              293               293
R E Slater                   8,689            832          832            1,051              219               219
W H Whiteley                 2,304          3,144        3,499            3,713              569               214
R H Arnold                     105            213          213              236               23                23

Notes:



1. The figures shown for the increase in accrued pension over the year
incorporate the increase for inflation.



2. The transfer values have been calculated in accordance with the Actuarial
Guidance Note GN 11 published by the Institute of Actuaries and the Faculty of
Actuaries. The increases in transfer values over the year are net of directors'
contributions (if any).



3. These figures show the increase in transfer value over the year excluding the
impact of a change in notice period for WH Whiteley which was reported in last
year's accounts. WH Whiteley's notice period to the Company was reduced from two
years to six months with effect from January 2004. As noted in last year's
accounts, this change in notice period had an immediate, one-off, impact on his
transfer value.



4. The increase in accrued pension and the increase in transfer value over the
year for RH Arnold are relatively small due to movements in the US dollar
relative to sterling. In dollars, the accrued pension increased from $65,897 per
annum as at 31 December 2003 to $71,103 per annum at 31 December 2004 and the
transfer value increased from $382,000 as at 31 December 2002 to $454,000 at 31
December 2004.



JW Matthews

Chairman

Remuneration Committee

1 March 2005




Independent auditors' report to the members of Rotork p.l.c.



We have audited the financial statements on pages 24 to 48.  We have also
audited the information in the directors' remuneration report that is described
as having been audited.

This report is made solely to the Company's members, as a body, in accordance
with section 235 of the Companies Act 1985.  Our audit work has been undertaken
so that we might state to the Company's members those matters we are required to
state to them in an auditor's 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 and the Company's members as a body, for our audit work,
for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditors

The directors are responsible for preparing the Annual Report and the directors'
remuneration report. As described on page 11, this includes responsibility for
preparing the financial statements in accordance with applicable United Kingdom
law and accounting standards.  Our responsibilities, as independent auditors,
are established in the United Kingdom by statute, the Auditing Practices Board,
the Listing Rules of the Financial Services Authority, and by our profession's
ethical guidance.



We report to you our opinion as to whether the financial statements give a true
and fair view and whether the financial statements and the part of the
directors' remuneration report to be audited have been properly prepared in
accordance with the Companies Act 1985.  We also report to you if, in our
opinion, the directors' report is not consistent with the financial statements,
if the Company has not kept proper accounting records, if we have not received
all the information and explanations we require for our audit, or if information
specified by law regarding directors' remuneration and transactions with the
Group is not disclosed.

We review whether the corporate governance statement on pages 12 to 14 reflects
the Company's compliance with the nine provisions of the 2003 FRC Code specified
for our review by the Listing Rules, and we report if it does not.  We are not
required to consider whether the Board's statements on internal control cover
all risks and controls, or form an opinion on the effectiveness of the Group's
corporate governance procedures or its risk and control procedures.

We read the other information contained in the Annual Report, including the
corporate governance statement and the unaudited part of the directors'
remuneration report, and consider whether it is consistent with the audited
financial statements.  We consider the implications for our report if we become
aware of any apparent misstatements or material inconsistencies with the
financial statements.

Basis of audit opinion

We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board.  An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the financial statements and
the part of the directors' remuneration report to be audited.  It also includes
an assessment of the significant estimates and judgements made by the directors
in the preparation of the financial statements, and of whether the accounting
policies are appropriate to the Group's circumstances, consistently applied and
adequately disclosed.



We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
and the part of the directors' remuneration report to be audited are free from
material misstatement, whether caused by fraud or other irregularity or error.
In forming our opinion we also evaluated the overall adequacy of the
presentation of information in the financial statements and the part of the
directors' remuneration report to be audited.

Opinion

In our opinion:

•         the financial statements give a true and fair view of the state of
affairs of the Company and the Group as at 31 December 2004 and of the profit of
the Group for the year then ended; and

•         the financial statements and the part of the directors' remuneration
report to be audited have been properly prepared in accordance with the
Companies Act 1985.



KPMG Audit Plc

Bristol

Chartered Accountants

Registered Auditor

1 March 2005


Consolidated Profit and Loss Account
for the year ended 31 December 2004
                                                                                           2004              2003

                                                                        Notes                            restated
                                                                                          £'000             £'000

Turnover - continuing operations                                            2           146,883           135,964
Cost of sales                                                                          (79,030)          (72,046)

                                                                                          _____             _____
Gross profit                                                                             67,853            63,918

Distribution costs                                                                      (1,816)           (1,768)
Administrative expenses                                                                (36,720)          (35,302)
Other operating income                                                                      540               262
                                                                                       ---_____             _____

Operating profit - continuing operations                                    2            29,857            27,110


Operating profit before amortisation of goodwill                                         31,150            28,415

Amortisation of goodwill                                                                (1,293)           (1,305)

                                                                                          _____             _____

Operating profit                                                                         29,857            27,110

Profit on disposal of fixed assets - discontinued operations                3                 -               597

Interest receivable and similar income                                      4               849               841
Interest payable and similar charges                                        4             (136)              (80)
Other finance costs                                                         4              (79)             (300)

                                                                                          _____             _____
Profit on ordinary activities before taxation                               5            30,491            28,168

Tax on profit on ordinary activities                                        6          (10,591)           (9,469)

                                                                                          _____             _____
Profit for the financial year                                                            19,900            18,699

Dividends - including non-equity                                            7          (17,955)          (12,592)

                                                                                          _____            ______

Retained profit for the financial year                                     20             1,945             6,107
                                                                                          _____            ______


                                                                                          Pence             Pence

Basic earnings per share                                                    8              23.2              21.8

Basic earnings per share before goodwill amortisation                       8              24.7              23.3

Diluted earnings per share                                                  8              23.0              21.7


Details of the restated items are shown in note 24.




Balance Sheets
at 31 December 2004
                                                                      Group       Group     Company     Company
                                                                       2004        2003        2004        2003
                                                      Notes                    restated                restated
                                                                      £'000       £'000       £'000       £'000
Fixed assets

Intangible assets                                            10      18,174      19,057           -           -

Tangible assets                                              11      13,877      13,640       1,287         670
Investments                                                  12           -           -       1,057       1,057
                                                                      _____       _____       _____       _____
                                                                     32,051      32,697       2,344       1,727

                                                                      _____       _____       _____       _____

Current assets

Stocks                                                       13      21,015      18,570           -           -
Debtors due within one year                                  14      39,678      32,966      36,136      15,641
Debtors due after more than one year                         14         489         486           -          99
Cash at bank and in hand                                     15      25,298      32,253      13,776      25,274
                                                                      _____       _____       _____       _____
                                                                     86,480      84,275      49,912      41,014

                                                                      _____       _____       _____       _____

Creditors:
Amounts falling due within one year                          16    (43,767)    (37,807)    (16,705)    (14,012)
                                                                      _____       _____       _____       _____
Net current assets                                                   42,713      46,468      33,207      27,002

                                                                      _____       _____       _____       _____

Total assets less current liabilities                                74,764      79,165      35,551      28,729

Creditors:

Amounts falling due after more than one year                 17       (268)       (129)           -           -


Provisions for liabilities and charges                       18     (2,476)     (2,890)       (277)       (277)
                                                                      _____       _____       _____       _____
Net assets excluding pension liabilities                             72,020      76,146      35,274      28,452

Pension liabilities                                          23    (13,885)    (13,653)           -           -

                                                                      _____       _____       _____       _____

Net assets including pension liabilities                      2      58,135      62,493      35,274      28,452

                                                                       ====        ====        ====        ====
Capital and reserves

Called up share capital                                      19       4,347       4,342       4,347       4,342

Share premium account                                        20       4,993       4,543       4,993       4,543

Revaluation reserve                                          20       2,405       2,405           -           -

Capital redemption reserve                                   20       1,637       1,634       1,637       1,634

Profit and loss account                                      20      44,753      49,569      24,297      17,933

                                                                      _____       _____       _____       _____

Rotork shareholders' funds                                           58,135      62,493      35,274      28,452

                                                                       ====        ====        ====        ====


Equity                                                               58,088      62,443      35,227      28,402

Non-equity                                                               47          50          47          50

Shareholders' funds                                                  58,135      62,493      35,274      28,452



Details of the restated items are shown in note 24.


These financial statements were approved by the Board of directors on 1 March
2005 and were signed on its behalf by WH Whiteley and RE Slater, Directors.


Statement of Group Cash Flow
for the year ended 31 December 2004
                                                                                              2004          2003
                                                                               Notes                    restated
                                                                                             £'000         £'000

Net cash inflow from operating activities                                         15        23,460        33,181


Returns on investments and servicing of finance

Interest and similar income received                                                           973           729
Interest paid                                                                                (136)          (80)
Dividends paid on non-equity preference shares                                                 (4)           (5)
                                                                                             _____         _____
                                                                                               833           644
                                                                                             _____         _____
Taxation

UK corporation tax paid                                                                    (4,161)       (3,804)
Overseas tax paid                                                                          (6,280)       (5,427)
                                                                                             _____         _____
                                                                                          (10,441)       (9,231)
                                                                                             _____         _____
Capital expenditure and financial investments

Purchase of tangible fixed assets                                                          (3,099)       (2,287)
Sale of tangible fixed assets                                                                  295            89
Sale of tangible fixed assets - exceptional                                                      -         1,675
                                                                                             _____         _____
                                                                                           (2,804)         (523)
                                                                                             _____         _____
Acquisitions and disposals

Purchase of business                                                              22         (912)             -
                                                                                             _____         _____
                                                                                             (912)             -
                                                                                             _____         _____


Dividends paid on equity ordinary shares                                                  (17,751)      (12,068)

                                                                                             _____         _____

Net cash (outflow) / inflow before management of liquid resources and                      (7,615)        12,003
financing
                                                                                              ====          ====


Management of liquid resources

Decrease / (increase) in term deposits                                                       9,485      (11,301)



Financing

Issue of ordinary share capital                                                                458           516

Purchase of ordinary share capital                                                           (691)       (1,253)

Award of shares under employee share schemes                                                   702           647

Purchase of own preference shares                                                              (5)           (2)

Increase / (decrease) in amounts borrowed                                                      188         (132)

Repayment of capital element of finance lease                                                 (58)          (67)

                                                                                             _____         _____

                                                                                               594         (291)



Increase in cash in the year                                                      15         2,464           411

                                                                                              ====          ====


Statement of the Group's Total Recognised Gains and Losses
for the year ended 31 December 2004
                                                                                        2004               2003
                                                                                                       restated
                                                                                       £'000              £'000


Profit for the financial year                                                         19,900             18,699

Exchange differences                                                                 (1,212)              (554)

Actuarial loss recognised on pension schemes                                         (5,792)            (3,000)

Movement on deferred tax relating to actuarial loss                                      237                900

                                                                                       _____              _____
Total recognised gains and losses for the year                                        13,133             16,045

                                                                                                           ====
Prior year adjustments (note 24)                                                    (13,653)

                                                                                       _____
Total gains and losses recognised  since last annual report                            (520)
                                                                                        ====


Note on the Group's Historical Cost Profits and Losses
for the year ended 31 December 2004


Reported profit on ordinary activities before taxation                                30,491             28,168

Revaluation element of depreciation charge                                                63                 19

                                                                                       _____              _____
Historical cost profit on ordinary activities before taxation                         30,554             28,187

                                                                                        ====               ====
Historical cost retained profit for the financial year                                 2,008              6,126

                                                                                        ====               ====


Reconciliation of Movements in Group Shareholders' Funds
for the year ended 31 December 2004


Profit for the financial year                                                   19,900              18,699

Preference dividends on non-equity shares                                          (4)                 (5)

Ordinary dividends on equity shares                                           (17,951)            (12,587)

                                                                                 _____               _____
Retained profit for the financial year                                           1,945               6,107

Exchange differences                                                           (1,212)               (554)

New ordinary share capital issued                                                  458                 516

Purchase of own ordinary share capital                                           (691)             (1,253)

Purchase of own preference shares                                                  (5)                 (2)

Other recognised gains and losses relating to pensions                         (5,555)             (2,100)

Shares awarded under employee share schemes                                        702                 647

                                                                                 _____               _____
Net additions to shareholders' funds                                           (4,358)               3,361

Shareholders' funds at beginning of the year (restated - see note 24)           62,493              59,132

                                                                                 _____               _____
Shareholders' funds at end of the year                                          58,135              62,493

                                                                                  ====                ====


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