Interim Results

Rotork PLC 31 July 2007 31 July 2007 Rotork p.l.c. 2007 Interim Results Excellent growth in all three divisions Financial Highlights 2007 2006 % change % change (constant currency) Revenue £113.3m £101.3m +12% +18% Operating profit £26.0m £22.0m +18% +27% Profit before tax £26.9m £22.5m +19% +28% Earnings per share 21.3 p 17.6 p +21% +31% • Order intake up 10% year on year (15% at constant currency) • Record order book of £94m, up 23% on the start of year • Interim dividend at 7.7p up 18% Chief Executive, Bill Whiteley, commenting on the results, said: 'We are pleased to report that the Group continued to make excellent progress with revenue and profit before tax increasing by 12% and 19% against a particularly strong first half in 2006. At constant currency the revenue increased by 18% and profit before tax by 28%. Our end user industrial markets, the oil & gas, power and water sectors, are very active. Despite the weakness of the US dollar, the strength of all of our end user markets and the ability of our international sales and operational units to leverage these opportunities should ensure further growth in the second half of the year.' For further information, please contact: Rotork p.l.c. Tel: 01225 733200 Bill Whiteley, Chief Executive Bob Slater, Finance Director Financial Dynamics Tel: 020 7269 7291 Susanne Yule / James Ottignon REVIEW OF OPERATIONS Financial Results We are pleased to report that the Group continued to make excellent progress with revenue and profit before tax increasing by 12% and 19% respectively against a particularly strong first half in 2006. Margins increased from 22.3% to 23.7%. This was in spite of a negative currency background with the US dollar averaging 1.98 against 1.80 in the first half of last year. At constant currency the revenue increased by 18% and profit before tax by 28%. Operating Review Our end user industrial markets, the oil & gas, power and water sectors, are very active. The activity has a wide geographical spread and benefited all three of our businesses each of which expanded sales revenue, profit and margins over the comparative period. Order intake was up 10%, 15% at constant currency. This resulted in the order book at 30 June being £94m, up 23% on the start of the year. Rotork Controls Revenue for our electric actuator division, Rotork Controls, increased by 8% to £79m whilst operating profit rose by 11% to £21m. At constant currencies these results would have been 14% and 20% respectively. The mix profile was beneficial and material costs were kept under control due to cost reduction and procurement initiatives. These factors resulted in an increased gross margin despite currency impacts. As a result of this and the operational gearing on the overheads, the operating margin increased to 26.3% from 25.6%. Strong demand resulting from new plant construction in Asia and the Far East meant that actuator unit input from this region increased from 47% to 52% of the total. The substantial increase in destination of units to this area was principally due to increased levels of oil & gas business. This was particularly evident in China where increased demand for units going into this sector and the continued strong demand for units for power generation resulted in increased business levels over the first half of 2006. In this region high levels of growth in order intake were also seen in Malaysia, Taiwan, Australia and Vietnam. Actuators with a UK destination increased from 9% to 10% of the total with a substantial increase in business from the UK water companies, whilst units destined for Continental Europe increased from 14% to 16% of the total input, as activity in oil & gas and water & waste water increased significantly. The Middle East and Africa sector reduced from 13% to 8% due to a reduction of the very high level of oil & gas projects which were entered in the first half of 2006. However, activity levels in the Middle East remain encouraging for the year as a whole. There was a small reduction in the number of units ordered for North American destination. However our US businesses benefited from additional orders from domestic valvemakers, who were more competitive on the world stage due to the weakness of the US dollar. High levels of oil & gas activity in Asia and Europe led to an increase in unit sales into this sector but it remained at 38% of the total units sold. Water & waste water increased their share of the total business to 23% with nearly all areas reporting increased activity, while power reduced as a share of the total units sold to 30% despite the quantity of units sold increasing. The Bath plant continued to perform well and nearly all the European and Asian profit centres achieved growth. The US saw a 10% increase in profits in local currency but when translated into sterling the results were similar to the previous year. Profits of the Canadian operations were down, impacted by lower business levels. Progress has been made in developing Rotork's Service and Support business. As previously indicated this was restructured to create a single worldwide business, reported predominantly within the Controls division of the Group. Rotork Site Services was created during the period and achieved revenues and profits in the first half of 2007 of £17m and £5m respectively. The Control Valve actuator project continues to be the focus of our development work. A project sales director has been selected to take responsibility for the commercial aspects of the development. Meanwhile beta samples of the linear product are available which will allow us to further test the market reaction. Design of the remainder of the product range continues. An initial product launch in the second half of 2008 is anticipated. Rotork Fluid Systems This division continues to grow strongly and, we believe, increase its market share. Revenue increased by 19% to £23m and operating profits by 51% to £3m. Operating margin reached 13.1% for the half year, with the expectation that the target of 15% will be achieved for the year as a whole. The main plant in Italy was very busy and increased revenue by nearly 33% and profits nearly 57%. The two other production plants, in Germany and the US, also saw substantial growth. The wholly owned 'Centres of Excellence', which provide locally engineered solutions and support for these products to customers around the world, also performed well, with particularly good results from the UK, French and Spanish operations. RFS has been at the forefront of developing actuators for high integrity safety and protection systems. It has recently won a large contract for its Electro-Hydraulic product range, which is designed to operate at SIL3, the most demanding of the recently introduced safety standards for valve actuators. It has also been successful in providing solutions for HIPPS, High Integrity Pressure Protection Systems, valves which are used in applications demanding guaranteed rapid operation. Rotork Gears Rotork Gears had a very successful six months' trading. Revenue was up 33% to £16m and operating profit up 55% to £3m on the comparative period. The strong growth was based on an active worldwide valvemaker market and strong demand from the in-house Controls Division where a high percentage of electric units required secondary reduction gearboxes. This division is also reaping the benefits of the work it has put into reducing component costs and increasing the efficiency of its operations. Particularly strong performances were delivered from the Leeds plant and Gears b.v. in The Netherlands. Dividend The interim dividend is to be increased by 18% to 7.7p and will be payable on 28 September 2007 to all shareholders on the register at 7 September 2007. Rotork has already paid over £18m of dividends in the first half of 2007 (88% of its free cash flow in the period) with the £10m 2006 final dividend paid in May and an £8m additional dividend paid in June. Outlook The increasing weakness of the US dollar provides an unfavourable trading backdrop compared with 2006. However, the strength of all of our end user markets and the ability of our international sales and operational units to leverage these opportunities should ensure further growth in the second half of the year. Bill Whiteley Chief Executive 30 July 2007 Consolidated Income Statement Unaudited First half First half Full year 2007 2006 2006 Notes £000 £000 £000 Revenue 2 113,346 101,255 206,709 Operating profit 2 25,969 22,030 45,089 Financial income 3 3,302 2,774 5,568 Financial expenses 3 (2,370) (2,265) (4,596) ______ ______ ______ 932 509 972 ______ ______ ______ Profit before tax 26,901 22,539 46,061 Tax expense UK (3,386) (2,711) (6,690) Overseas (5,116) (4,639) (8,038) ______ ______ ______ (8,502) (7,350) (14,728) ______ ______ ______ Profit for the period 7 18,399 15,189 31,333 ===== ===== ===== pence pence pence Basic earnings per share 5 21.3 17.6 36.4 Diluted earnings per share 5 21.2 17.5 36.1 Consolidated Statement of Recognised Income and Expense Unaudited First half First half Full year 2007 2006 2006 £000 £000 £000 Foreign exchange translation differences (186) (2,165) (3,748) Effective portion of changes in fair value of 461 470 (80) cash flow hedges Actuarial gain in pension scheme - - 6,743 Movement on deferred tax relating to actuarial - - (2,023) gain ______ ______ _____ Income and expenses recognised directly in 275 (1,695) 892 equity Profit for the period 18,399 15,189 31,333 ______ ______ ______ Total recognised income and expense for the 18,674 13,494 32,225 period ===== ===== ===== Consolidated Balance Sheet Unaudited Notes 30 June 30 June 31 Dec 2007 2006 2006 £000 £000 £000 Property, plant and equipment 16,722 16,978 16,616 Intangible assets 22,288 22,627 22,225 Deferred tax assets 4,606 6,898 5,739 Other receivables 849 660 735 ______ ______ ______ Total non-current assets 44,465 47,163 45,315 Inventories 6 34,434 31,535 29,027 Trade receivables 40,961 38,520 37,385 Current tax 2,107 2,331 1,219 Other receivables 5,134 5,006 4,104 Cash and cash equivalents 22,371 26,912 28,460 ______ ______ ______ Total current assets 105,007 104,304 100,195 ______ ______ ______ Total assets 149,472 151,467 145,510 ===== ===== ===== Issued equity capital 7 4,321 4,314 4,314 Share premium 7 6,346 5,841 5,857 Reserves 7 (1,146) 712 (1,421) Retained earnings 7 80,862 75,640 80,386 ______ ______ ______ Total equity 7 90,383 86,507 89,136 ===== ===== ===== Interest-bearing loans and borrowings 178 769 180 Employee benefits 5,002 17,829 8,186 Deferred tax liabilities 1,203 416 1,225 Provisions 1,016 748 941 ______ ______ ______ Total non-current liabilities 7,399 19,762 10,532 Bank overdraft 314 19 62 Interest-bearing loans and borrowings 90 280 526 Trade payables 18,796 19,008 16,835 Employee benefits 3,332 2,716 3,941 Current tax 8,570 6,916 6,236 Other payables 18,125 14,318 15,923 Provisions 2,463 1,941 2,319 ______ ______ ______ Total current liabilities 51,690 45,198 45,842 Total liabilities 59,089 64,960 56,374 ______ ______ ______ Total equity and liabilities 149,472 151,467 145,510 ===== ===== ===== Consolidated Statement of Cash Flows Unaudited First half First half Full year 2007 2006 2006 £000 £000 £000 Profit for the period 18,399 15,189 31,333 Amortisation of intangibles 36 55 98 Amortisation of development costs 154 130 259 Depreciation 1,399 1,235 2,554 Equity settled share based payment expense 327 231 496 Profit on sale of fixed assets (42) (1) (33) Financial income (3,302) (2,774) (5,568) Financial expenses 2,370 2,265 4,596 Income tax expense 8,502 7,350 14,728 ______ ______ ______ 27,843 23,680 48,463 Increase in inventories (5,510) (5,326) (3,610) Increase in trade and other receivables (4,322) (4,029) (3,786) Increase in trade and other payables 5,450 7,083 6,691 Increase in provisions 247 322 731 Difference between pension charge and cash contribution (2,468) (4,379) (6,801) (Decrease) / increase in employee benefits (1,316) (750) 776 ______ ______ ______ 19,924 16,601 42,464 Income taxes paid (5,819) (4,791) (11,247) ______ ______ ______ Cash flows from operating activities 14,105 11,810 31,217 Purchase of tangible fixed assets (1,311) (1,246) (2,425) Development costs capitalised (328) (151) (372) Sale of tangible fixed assets 78 48 116 Acquisition of subsidiary net of cash acquired - (1,589) (1,589) Interest received 474 510 876 ______ ______ ______ Cash flows from investing activities (1,087) (2,428) (3,394) Issue of ordinary share capital 489 236 252 Purchase of ordinary share capital (1,186) (700) (2,047) Purchase of own preference shares treated as debt - (4) (4) Interest paid (62) (76) (147) Repayment of amounts borrowed (430) (177) (467) Repayment of finance lease liabilities (31) (59) (212) Dividends paid on ordinary shares (18,087) (8,537) (24,140) ______ ______ ______ Cash flows from financing activities (19,307) (9,317) (26,765) Net (decrease) / increase in cash and cash equivalents (6,289) 65 1,058 Cash and cash equivalents at 1 January 28,398 27,180 27,180 Effect of exchange rate fluctuations on cash held (52) (352) 160 ______ ______ ______ Cash and cash equivalents at end of period 22,057 26,893 28,398 ===== ===== ===== Notes to the Interim Report 1. Status of Interim Report and accounting policies The interim report was approved by the Directors on 30 July 2007. It should be read in conjunction with the 2006 Annual Report, which contains the most recent audited financial statements. The financial information for the six months to 30 June 2007 and the comparative figures for the six months to 30 June 2006 are unaudited and have been prepared applying the accounting policies and presentation that were applied in the preparation of the Company's published consolidated financial statements for the year ended 31 December 2006. The financial information for the year ended 31 December 2006 is an abridged version of the full accounts for that year, which received an unqualified report from the auditors and which have been filed with the Registrar of Companies. 2. Analysis of revenue, profit and net assets First half First half Full year First half First half Full year 2007 £000 2006 £000 2006 £000 2007 £000 2006 2006 £000 £000 Revenue Operating profit Analysis by operation Controls 79,278 73,377 147,795 20,885 18,820 37,024 Gears 15,535 11,660 24,282 3,494 2,261 4,638 Fluid Systems 22,637 19,079 40,504 2,962 1,962 5,374 Unallocated costs - - - (1,372) (1,013) (1,947) Inter-segmental elimination (4,104) (2,861) (5,872) - - - ______ ______ ______ ______ ______ ______ 113,346 101,255 206,709 25,969 22,030 45,089 ______ ______ ______ ______ ______ ______ Segment assets Segment liabilities Controls 68,759 66,732 67,969 33,815 42,168 34,557 Gears 17,547 15,756 12,325 5,117 4,032 4,146 Fluid Systems 34,082 32,838 29,796 9,802 10,360 9,442 Unallocated 29,084 36,141 35,420 10,355 8,400 8,229 ______ ______ ______ ______ ______ ______ 149,472 151,467 145,510 59,089 64,960 56,374 ______ ______ ______ ______ ______ ______ Revenue from external customers by location of customer First half First half Full year 2007 2006 2006 £000 £000 £000 Europe 54,521 44,117 89,992 Americas 27,295 28,224 58,398 Rest of world 31,530 28,914 58,319 ______ ______ ______ 113,346 101,255 206,709 ______ ______ ______ Segment assets by location of assets First half First half Full year 2007 2006 2006 £000 £000 £000 Europe 81,948 79,918 72,810 Americas 21,123 19,726 21,849 Rest of world 17,317 15,682 15,431 Unallocated 29,084 36,141 35,420 ______ ______ ______ 149,472 151,467 145,510 ______ ______ ______ 3. Net financing income First half First half Full year 2007 2006 2006 £000 £000 £000 Interest income 503 512 982 Expected return on assets in the pension schemes 2,779 2,204 4,518 Foreign exchange gain 20 58 68 ______ ______ ______ 3,302 2,774 5,568 ______ ______ ______ Interest expense (81) (101) (121) Interest charge on pension scheme liabilities (2,272) (2,149) (4,309) Foreign exchange loss (17) (15) (166) ______ ______ ______ (2,370) (2,265) (4,596) ______ ______ ______ 4. Dividends First half First half Full year 2007 2006 2006 £000 £000 £000 The following dividends were paid in the period per qualifying ordinary share: 11.65p (2006: 9.9p) final dividend 10,051 8,537 8,537 6.5p interim dividend - - 5,601 5.8p 2006 first additional dividend - - 5,004 5.8p 2006 second additional dividend - - 4,998 9.3p 2007 additional dividend 8,036 - - ______ ______ ______ 18,087 8,537 24,140 ______ ______ ______ The following dividends per qualifying ordinary share were declared / proposed at the balance sheet date: 11.65p final dividend proposed - - 10,019 7.7p (2006: 6.5p) interim dividend declared 6,654 5,603 - 5.8p first additional dividend declared - 5,000 - 5.8p second additional dividend declared - 5,000 - 9.3p 2007 additional dividend declared - - 8,000 ______ ______ ______ 6,654 15,603 18,019 ______ ______ ______ 5. Earnings per share Earnings per share is calculated using the profit attributable to the ordinary shareholders for the period and 86.2 million shares (six months to 30 June 2006: 86.1 million; year to 31 December 2006: 86.1 million) being the weighted average ordinary shares in issue. Diluted earnings per share is calculated using the profit attributable to the ordinary shareholders for the period and the weighted average ordinary shares in issue adjusted to assume conversion of all dilutive potential ordinary shares under the Group's option schemes, Sharesave plan and Long-Term Incentive Plan. 6. Inventories First half First half Full year 2007 2006 2006 £000 £000 £000 Raw materials and consumables 18,733 17,955 16,815 Work in progress and finished goods 15,701 13,580 12,212 ______ ______ ______ 34,434 31,535 29,027 ______ ______ ______ 7. Capital and reserves Share Share Translation Capital Hedging Retained Total premium reserve redemption reserve earnings Capital reserve £000 £000 £000 £000 £000 £000 £000 Balance at 1 January 2007 4,314 5,857 (2,770) 1,639 (290) 80,386 89,136 Profit for the period - - - - - 18,399 18,399 Other items in the - - (186) - 461 - 275 statement of recognised income and expense Equity settled - - - - - 236 236 transactions net of tax Share options exercised by 7 489 - - - - 496 employees Treasury shares purchased - - - - - (1,186) (1,186) Treasury shares issued - - - - - 2,007 2,007 Loss on re-issue of - - - - - (893) (893) treasury shares Dividends to shareholders - - - - - (18,087) (18,087) ______ ______ ______ ______ ______ ______ ______ Balance at 30 June 2007 4,321 6,346 (2,956) 1,639 171 80,862 90,383 ______ ______ ______ ______ ______ ______ ______ Balance at 1 January 2006 4,310 5,609 978 1,637 (210) 68,241 80,565 Profit for the period - - - - - 15,189 15,189 Other items in the - - (2,165) - 470 - (1,695) statement of recognised income and expense Equity settled - - - - - 213 213 transactions net of tax Share options exercised by 4 232 - - - - 236 employees Treasury shares purchased - - - - - (700) (700) Treasury shares issued - - - - - 1,238 1,238 Own preference shares - - - 2 - (4) (2) acquired Dividends to shareholders - - - - - (8,537) (8,537) ______ ______ ______ ______ ______ ______ ______ Balance at 30 June 2006 4,314 5,841 (1,187) 1,639 260 75,640 86,507 ______ ______ ______ ______ ______ ______ ______ Balance at 1 January 2006 4,310 5,609 978 1,637 (210) 68,241 80,565 Profit for the period - - - - - 31,333 31,333 Other items in the - - (3,748) - (80) 4,720 892 statement of recognised income and expense Equity settled - - - - - 915 915 transactions net of tax Share options exercised by 4 248 - - - - 252 employees Treasury shares purchased - - - - - (2,047) (2,047) Treasury shares issued - - - - - 1,368 1,368 Own preference shares - - - 2 - (4) (2) acquired Dividends to shareholders - - - - - (24,140) (24,140) ______ ______ ______ ______ ______ ______ ______ Balance at 31 December 4,314 5,857 (2,770) 1,639 (290) 80,386 89,136 2006 ______ ______ ______ ______ ______ ______ ______ 8. Shareholder information This interim report is being sent to all shareholders and copies are available to the public from the Registered Office at the address below. The interim report is also available on the Company's website at www.rotork.com. We offer shareholders a dividend reinvestment plan (DRIP) under which shareholders can reinvest their cash dividends in the company, by buying shares in the market at competitive dealing rates. If you have already elected to join the DRIP, there is no further action for you to take. If you would like to join for the first time, please contact our registrars below. Lloyds TSB Registrars The Causeway Worthing West Sussex BN99 6DA Share dividend helpline number - 0870 241 3018 9. Group information Secretary and registered office: Stephen Rhys Jones Rotork p.l.c. Rotork House Brassmill Lane Bath BA1 3JQ Company website: www.rotork.com This information is provided by RNS The company news service from the London Stock Exchange

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