Interim Results

Rotork PLC 03 August 2005 3 August 2005 Rotork p.l.c INTERIM ANNOUNCEMENT Continued growth in turnover, operating profit and order book FINANCIAL HIGHLIGHTS • Turnover increased by 17% to £78.3m (2004: £66.8m) • Profit from operations increased by 17% to £16.2m (2004: £13.9m) • EPS 12.7p up 14% (2004: 11.1p) • Order intake 23% higher than first half of 2004 • Record order book up 29% since June 2004 excluding impact of PCI acquisition • Interim dividend of 5.9p up 10% (2004: 5.35p) • Interim Report and all comparative figures prepared under IFRS Chief Executive, Bill Whiteley, commenting on the results said: '2005 has started well and we are pleased to report further strong growth in each of our divisions. Our worldwide markets were generally favourable with a continued increase in projects requiring valve automation. The increase was broadly based with all three divisions increasing order intake and with most of our geographic and end user markets performing well. 'We are confident of meeting our growth expectations for 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 7224 Sally Lewis REVIEW OF OPERATIONS Financial Results We are pleased to report strong growth in all of our divisions. Turnover increased by 17% in a period little affected by exchange rate movements. Profit from operations increased by 17% compared with the 2004 results which have been restated under International Financial Reporting Standards. Order intake once again exceeded sales output leading to a new record order book level. Operating Review Our worldwide markets were generally favourable with a continued increase in projects requiring valve automation. The order input increase of over 23% was slightly flattered by two substantial orders being received towards the end of the second quarter. The increase was, however, broadly based with each of the three divisions increasing order intake and with most of our geographic and end user markets performing well. The largest increases came from the Asia and Far East region with order intake from China, India and Singapore being particularly strong. This was supported by good input in North America, RFS in Italy and the various UK activities. The order book, excluding acquisitions, at the end of the period was 29% up on the same period last year and 37% up on the end of last year. Although the impact of currencies was broadly neutral for the comparative period the order book benefited from the stronger dollar on 30th June 2005. Electric Actuators Electric actuator input value was up 22% on the prior year. Most operations benefited from increased activity albeit in some of these cases the increase in business was due to projects outside of their territories being placed through local OEM customers. The power market was particularly active and represented 33% of the input units in the period, up from 23% in the corresponding period. The main markets for these actuators are China and India which continued to show impressive growth. However we also had important contract wins in the Middle East/Africa region and the UK which further boosted this figure. Units ordered by the oil & gas sector increased by 15% with substantial increases again being seen in Asia and the Far East although as a percentage of total input it fell from 37% to 34%. We benefited from an increasing number of Chinese pipeline, tank farm and refinery projects in addition to a number of large contracts elsewhere in the region. Actuators being sold into the water market represented 25% of our total units with good levels of business in South East Asia and the U.S. Both the IQT and AWT ranges sold well above expectations in the period and had a positive impact on our ability to win major projects. Operating profit increased by over 19% in a period where, for once, there was a broadly neutral currency impact. Profits from the Bath plant were up as we continued to achieve increased output levels. The service & retrofit businesses, based in Bath and Leeds, were also very active. In Europe, good profit increases were achieved in Italy, Germany and Spain. The U.S. continued to see an impressive increase in its sales and profits as did nearly all of our Asian and Far Eastern operations. Material costs were kept under good control although some increases, due to high raw material and energy costs, came through into our component prices. Actions aimed at strengthening our supply chain were also responsible for some modest cost increases but a number of initiatives being worked upon at the moment will mean that savings in component costs should be re-established next year. Rotork Fluid System We continued to achieve rapid growth in this business with total order intake rising 41%. On a like for like basis, excluding PCI which was purchased during the first half of the year, order intake was up 29%. In addition to the continued growth of this business through our international network of sales companies, a number of large contracts were won by the Italian and U.S. operations. Due to the timing of these projects the order book climbed by 63% excluding PCI. The upstream oil and gas, transmission markets and projects connected with LNG production and shipments remain active. This means that we are confident that there will be good progress for the year as a whole in spite of the modest first half performance, when the return on sales was negatively impacted by losses in the U.S. and Canada. These operations were profitable in 2004 and are forecasting profits for the year as a whole. The acquisition of PCI in March has helped to add new high pressure products and new markets to this division. This business, which is based in Northern Germany, was purchased in March for €9.8m including deferred consideration. During our period of ownership it has contributed £2.1m of output with a net to sales return of 13% before adjustments for IFRS intangible amortisation. Rotork Gears Gears' input grew at 6% despite some weaknesses within its business. The order book, which tends to be shorter within this division due to the nature and application of its products, grew by 32%. During the half year sales output grew by 12% and operating profits by a particularly strong 23% due to good performances at both the Leeds and Losser plants, which have focussed on their costs of materials and operational efficiency. Dividend The interim dividend is to be increased by 10% to 5.9p, and will be payable on 27 September to all shareholders on the register at 2 September 2005. Outlook Many of our important geographic and end user markets remain active with continuing high levels of investment being planned. However we may not benefit from specific large project orders to the same extent as in the first half of the year. The output comparisons are flattered by a somewhat production constrained first half of 2004. Further production increases are anticipated in the second half, which are supported by the order book at the end of June. This makes us confident of meeting our growth expectations for the year. BILL WHITELEY Chief Executive 2 August 2005 Consolidated Income Statement Unaudited First half First half Full year 2005 2004 2004 Notes £000 £000 £000 Revenue 2 78,324 66,829 146,883 Profit from operations 2 16,224 13,871 30,432 Financial income 3 2,169 2,206 4,766 Financial expenses 3 (2,116) (1,829) (3,692) Profit before tax 16,277 14,248 31,506 Tax expense (5,372) (4,581) (10,508) Profit for the period 10,905 9,667 20,998 pence pence pence Basic earnings per share 4 12.7 11.1 24.5 Diluted earnings per share 4 12.6 11.0 24.3 Consolidated Statement of Recognised Income and Expense Unaudited First half First half Full year 2005 2004 2004 £000 £000 £000 Foreign exchange translation differences 890 (1,792) (1,212) Cash flow hedges: effective portion of changes (210) - - in fair value Actuarial loss in pension scheme - - (5,792) Movement on deferred tax relating to actuarial - - 237 loss Net gain / (loss) recognised directly in 680 (1,792) (6,767) equity Profit for the period 10,905 9,667 20,998 Total recognised income and expense for the 11,585 7,875 14,231 period Consolidated Balance Sheet Unaudited 30 June 30 June 31 Dec 2005 2004 2004 £000 £000 £000 Property, plant and equipment 17,644 14,091 13,877 Intangible assets 21,536 19,955 20,169 Deferred tax assets 5,905 6,500 6,988 Other receivables 231 493 489 Total non-current assets 45,316 41,039 41,523 Inventories 26,310 20,929 21,015 Trade receivables 31,094 27,566 34,060 Income tax receivable 2,147 1,194 2,176 Other receivables 3,887 3,485 2,525 Cash and cash equivalents 20,502 18,794 25,298 Total current assets 83,940 71,968 85,074 Total assets 129,256 113,007 126,597 Issued capital 4,308 4,297 4,300 Preference shares - 47 47 Share premium 5,498 4,871 4,993 Reserves 1,299 (155) 425 Retained earnings 61,299 57,098 58,489 Total equity 72,404 66,158 68,254 Interest bearing loans and borrowings 1,415 163 268 Employee benefits 22,023 17,985 23,569 Deferred tax liabilities 989 740 1,155 Provisions 531 427 521 Total non-current liabilities 24,958 19,315 25,513 Bank overdraft 268 - 473 Interest bearing loans and borrowings 197 61 253 Trade payables 13,909 12,623 15,609 Income tax payable 7,062 6,280 5,779 Other payables 9,396 7,715 9,674 Provisions 1,062 855 1,042 Total current liabilities 31,894 27,534 32,830 Total liabilities 56,852 46,849 58,343 Total equity and liabilities 129,256 113,007 126,597 Consolidated Statement of Cash Flows Unaudited First half First half Full year 2005 2004 2004 £000 £000 £000 Profit from operations 16,224 13,871 30,432 Amortisation of intangibles 169 47 70 Amortisation of development costs 146 161 322 Depreciation 1,357 1,181 2,577 Charge for share schemes 134 76 208 Loss / (profit) on sale of fixed assets 42 - (72) 18,072 15,336 33,537 Increase in inventories (3,680) (2,615) (2,600) Decrease / (increase) in trade and other receivables 4,225 (815) (6,228) (Decrease) / increase in trade and other payables (1,551) 220 4,130 Decrease in provisions (16) (443) (130) Difference between pension charge and cash contribution (753) (5,243) (5,633) (Decrease) / increase in other employee benefits (794) (191) 748 Income taxes paid (3,933) (3,609) (10,441) Cash flows from operating activities 11,570 2,640 13,383 Purchase of tangible fixed assets (738) (1,903) (3,099) Development costs capitalised (120) (51) (102) Proceeds from sale of tangible fixed assets 11 35 295 Acquisition of subsidiary net of cash acquired (7,256) (784) (912) Interest received 285 674 973 Cash flows from investing activities (7,818) (2,029) (2,845) Issue of ordinary share capital 513 333 458 Purchase of ordinary share capital (913) (691) (691) Purchase of own preference shares - (5) (5) Interest paid (75) (16) (136) Repayment of amounts borrowed (319) (33) 188 Repayment of finance lease liabilities (53) (34) (58) New borrowings 1,503 - - Dividends on ordinary shares (8,342) (13,157) (17,751) Dividends on preference shares - (2) (4) Cash flows from financing activities (7,686) (13,605) (17,999) Net decrease in cash and cash equivalents (3,934) (12,994) (7,461) Cash and cash equivalents at 1 January 24,825 32,134 32,134 Effect of exchange rate fluctuations on cash held (657) (346) 152 Cash and cash equivalents at end of period 20,234 18,794 24,825 Notes to the Interim Report 1. Status of Interim Report and accounting policies The interim report was approved by the Directors on 2 August 2005. It should be read in conjunction with the 2004 audited IFRS restated accounts announced on 21 June 2005, which contain the accounting policies adopted under IFRS and a reconciliation of the 2004 income statement and opening and closing balance sheets from UK GAAP to IFRS. The financial information for the six months to 30 June 2005 and the comparative figures for the six months to 30 June 2004 are unaudited and have been prepared on the basis of the accounting policies set out in the Group's audited IFRS restated accounts announced on 21 June 2005 for the year ended 31 December 2004. A reconciliation of the adjustments made to the June 2004 income statement and balance sheet is shown in note 6. The directors have assumed that the December 2004 amendment to IAS 19 - Employee Benefits and the 2005 amendments to IAS 39 will be adopted by the EU in sufficient time that they will be available for use in the IFRS financial statements for the year ending 31 December 2005. In addition, the adopted IFRSs that will be effective (or available for early adoption) in the financial statements are still subject to change and to additional interpretations and therefore cannot be determined with certainty. Accordingly the accounting policies for the year ended 31 December 2005 will be determined finally only when the financial statements for that year are prepared. As permitted by IFRS 1, the following standards: IFRS 5 - Non-current Assets Held for Sale and Discontinued Operations, IAS 32 - Financial Instruments: Disclosure and Presentation and IAS 39 - Financial Instruments: Recognition and Measurement have not been applied until 1 January 2005 and accordingly no adjustment has been made to the 30 June 2004 or 31 December 2004 numbers. The comparative figures for the financial year ended 31 December 2004 are not the Company's statutory accounts for that financial year. Those accounts, which were prepared under UK GAAP, have been reported on by the Company's auditors and delivered to the registrar of companies. The report of the auditors was unqualified and did not contain statements under section 237(2) or (3) of the Companies Act 1985. The IFRS financial information for the year ended 31 December 2004 is an abridged version of the accounts for that year which received an unqualified report from the auditors prior to their release on 21 June 2005. 2. Segmental reporting First half First half Full year First half First half Full year 2005 2004 2004 2005 2004 2004 £000 £000 £000 £000 £000 £000 Revenue Profit from operations Analysis by operation Electrics 58,243 50,574 109,345 14,554 12,179 26,054 Gears 9,339 8,334 17,806 1,857 1,507 3,203 Fluid system 13,267 9,976 23,802 784 967 3,016 Unallocated costs - - - (971) (782) (1,841) Inter-segmental elimination (2,525) (2,055) (4,070) - - - 78,324 66,829 146,883 16,224 13,871 30,432 Segment assets Segment liabilities Electrics 59,942 55,842 58,083 37,684 33,510 43,081 Gears 13,025 14,024 12,997 2,681 3,126 3,901 Fluid system 27,741 16,653 21,054 6,556 2,969 3,433 Unallocated 28,548 26,488 34,463 9,931 7,244 7,928 129,256 113,007 126,597 56,852 46,849 58,343 Revenue from external customers by location of customer First half First half Full year 2005 2004 2004 £000 £000 £000 Europe 33,761 29,630 66,036 Americas 22,544 19,877 41,704 Rest of world 22,019 17,322 39,143 78,324 66,829 146,883 Segment assets by location of assets First half First half Full year 2005 2004 2004 £000 £000 £000 Europe 63,024 52,983 58,494 Americas 23,608 21,513 20,139 Rest of world 14,076 12,023 13,501 Unallocated 28,548 26,488 34,463 129,256 113,007 126,597 3. Financial income / expenses First half First half Full year 2005 2004 2004 £000 £000 £000 Interest income 309 464 849 Expected return on assets in the pension schemes 1,828 1,738 3,477 Foreign exchange gain 32 4 440 2,169 2,206 4,766 Interest expense (80) (33) (136) Interest charge on pension scheme liabilities (1,965) (1,778) (3,556) Foreign exchange loss (71) (18) - (2,116) (1,829) (3,692) 4. Earnings per share Earnings per share is calculated using the profit attributable to the ordinary shareholders for the period and 86.0 million shares (six months to 30 June 2004: 85.7 million; year to 31 December 2004: 85.8 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 and Long-Term Incentive Plan. 5. Reconciliation of movements in equity Share Preference Share Translation Hedging Capital Retained Total shares premium reserve reserve redemption earnings Capital reserve Equity at 1 January 4,300 47 4,993 (1,212) - 1,637 58,489 68,254 2005 Reclassification of - (47) - - - - - (47) preference share capital as debt under IAS32 Hedging reserve at - - - - 194 - - 194 1 January 2005 on implementation of IAS39 Restated equity at 4,300 - 4,993 (1,212) 194 1,637 58,489 68,401 1 January 2005 Profit for the - - - - - - 10,905 10,905 period Other items in the - - - 890 (210) - - 680 statement of recognised income and expense Equity settled - - - - - - 11 11 transactions net of tax Share options 8 - 505 - - - - 513 exercised by employees Own ordinary shares - - - - - - (913) (913) acquired Own ordinary shares - - - - - - 1,149 1,149 awarded under share schemes Dividends to - - - - - - (8,342) (8,342) shareholders Equity at 30 June 4,308 - 5,498 (322) (16) 1,637 61,299 72,404 2005 Share Preference Share Translation Hedging Capital Retained Total Capital shares premium reserve reserve redemption earnings reserve Equity at 1 January 4,292 50 4,543 - - 1,634 60,567 71,086 2004 Profit for the - - - - - - 9,667 9,667 period Other items in the - - - (1,792) - - - (1,792) statement of recognised income and expense Equity settled - - - - - - 17 17 transactions net of tax Share options 5 - 328 - - - - 333 exercised by employees Own ordinary shares - - - - - - (691) (691) acquired Own ordinary shares - - - - - - 702 702 awarded under share schemes Own preference - (3) - - - 3 (5) (5) shares acquired Preference share - - - - - - (2) (2) dividends Dividends to - - - - - - (13,157) (13,157) shareholders Equity at 30 June 4,297 47 4,871 (1,792) - 1,637 57,098 66,158 2004 Share Preference Share Translation Hedging Capital Retained Total Capital shares premium reserve reserve redemption earnings reserve Equity at 1 January 4,292 50 4,543 - - 1,634 60,567 71,086 2004 Profit for the - - - - - - 20,998 20,998 period Other items in the - - - (1,212) - - (5,555) (6,767) statement of recognised income and expense Equity settled - - - - - - 228 228 transactions net of tax Share options 8 - 450 - - - - 458 exercised by employees Own ordinary shares - - - - - - (691) (691) acquired Own ordinary shares - - - - - - 702 702 awarded under share schemes Own preference - (3) - - - 3 (5) (5) shares acquired Preference share - - - - - - (4) (4) dividends Dividends to - - - - - - (17,751) (17,751) shareholders Equity at 31 4,300 47 4,993 (1,212) - 1,637 58,489 68,254 December 2004 6. Explanation of transition to IFRS An explanation of the impact of the transition to IFRS on the December 2004 financial statements was included in the audited 2004 accounts restated under IFRS announced on 21 June 2005. This note identifies the impact of restatement on the income statement for the six months to June 2004 and the balance sheet at 30 June 2004. Balance sheets 1 January 2004 30 June 2004 Notes Previous Effect of IFRS Previous Effect of IFRS GAAP transition to GAAP transition to IFRS IFRS Assets Property, plant and 13,640 - 13,640 14,091 - 14,091 equipment Intangible assets a, c 19,057 992 20,049 18,484 1,471 19,955 Deferred tax assets b - 6,605 6,605 - 6,500 6,500 Other receivables 486 - 486 493 - 493 _______ _______ _______ _______ _______ _______ Total non-current assets 33,183 7,597 40,780 33,068 7,971 41,039 Inventories 18,570 - 18,570 20,929 - 20,929 Trade receivables 28,973 - 28,973 27,566 - 27,566 Income tax receivable 1,226 - 1,226 - 1,194 1,194 Other receivables b, e 2,767 (954) 1,813 9,453 (5,968) 3,485 Cash and cash equivalents 32,253 - 32,253 18,794 - 18,794 _______ _______ _______ _______ _______ _______ Total current assets 83,789 (954) 82,835 76,742 (4,774) 71,968 _______ _______ _______ _______ _______ _______ Total assets 116,972 6,643 123,615 109,810 3,197 113,007 ======= ======= ======= ======= ======= ======= Equity Issued capital 4,292 - 4,292 4,297 - 4,297 Preference shares 50 - 50 47 - 47 Share premium 4,543 - 4,543 4,871 - 4,871 Reserves d 4,039 (2,405) 1,634 4,042 (4,197) (155) Retained earnings 49,569 10,998 60,567 47,393 9,705 57,098 _______ _______ _______ _______ _______ _______ Total equity 62,493 8,593 71,086 60,650 5,508 66,158 _______ _______ _______ _______ _______ _______ Liabilities Interest bearing loans 129 - 129 163 - 163 and borrowings Employee benefits e 13,653 9,113 22,766 13,511 4,474 17,985 Deferred tax liabilities f 128 665 793 108 632 740 Provisions e 1,612 (1,037) 575 1,618 (1,191) 427 _______ _______ _______ _______ _______ _______ Total non-current 15,522 8,741 24,263 15,400 3,915 19,315 liabilities Bank overdraft 119 - 119 - - - Interest bearing loans 118 - 118 61 - 61 and borrowings Trade payables 12,460 - 12,460 12,623 - 12,623 Income tax payable 5,020 - 5,020 5,086 1,194 6,280 Other payables e , g 20,090 (10,691) 9,399 15,135 (7,420) 7,715 Provisions 1,150 - 1,150 855 - 855 _______ _______ _______ _______ _______ _______ Total current liabilities 38,957 (10,691) 28,266 33,760 (6,226) 27,534 Total liabilities 54,479 (1,950) 52,529 49,160 (2,311) 46,849 _______ _______ _______ _______ _______ _______ Total equity and 116,972 6,643 123,615 109,810 3,197 113,007 liabilities ======= ======= ======= ======= ======= ======= Notes to the explanation of transition to IFRS Following completion of an actuarial valuation of the main defined benefit pension scheme in the second half of 2004, the Board decided that the accounting requirements of FRS17 should be adopted for the 2004 financial statements. This was reflected as a prior year adjustment in the 2004 accounts. In the 2004 accounts restated under IFRS announced on 21 June 2005 the adjustments arising from adopting FRS17 were included in the UK GAAP numbers for both 1 January and 31 December 2004. To ensure consistency the UK GAAP numbers for 30 June 2004 have also been restated from those announced last year to reflect FRS17, the impact of this prior year adjustment is: First half Full year 2004 2004 £000 £000 Increase in profit from operations 243 633 Increase in financial expenses (39) (79) Increase in tax expense (61) (137) Increase in retained profit 143 417 Increase in employee benefits (13,510) (13,885) a) Intangible assets No amortisation of goodwill is charged to the income statement in the period under IFRS. Under UK GAAP £636,000 was charged during the period so this has been reversed. Development costs of £992,000 at 1 January 2004 and £882,000 at 30 June 2004 that qualified for recognition as an intangible asset under IFRSs had not been recognised under UK GAAP. They are recognised under IFRS at the date of transition and at 30 June 2004 respectively. During the first half of 2004 £161,000 of development expenditure was amortised and £51,000 of costs expensed under UK GAAP were capitalised. Total adjustments to intangibles are made up as follows: 1 January 2004 30 June 2004 Reverse goodwill amortised through the income statement - 636 Capitalised development costs 992 882 Amortised intangible assets - (47) 992 1,471 b) Deferred tax assets Under UK GAAP the defined benefit pension scheme liability was reflected in the financial statements net of deferred taxation. On transition to IFRS this has been shown in the accounts as a deferred tax asset. The deferred tax asset on accumulated actuarial gains and losses at 1 January 2004 was £5,850,000, the tax credit in the period was £62,000 resulting in an asset of £5,788,000 at 30 June 2004. Deferred tax assets which were shown within debtors have been transferred to non-current assets and deferred tax has been provided on the share based payments and the amortisation of intangibles: 1 January 2004 Movement 30 June 2004 Deferred tax asset Previously in employee benefits under UK GAAP 5,850 (62) 5,788 Previously in other receivables under UK GAAP 954 14 968 Amortisation of intangibles - 14 14 Share based payments 155 (71) 84 Set off of tax (354) - (354) _____ _____ _____ Total 6,605 (105) 6,500 ===== ===== ===== c) Acquisition of subsidiary The acquisition of Deanquip Valve Automation in January 2004 has been restated under IFRS3. As a consequence of applying IFRS3 the acquisition has been re-examined with a view to identifying specific intangibles. As a result intangibles previously treated as goodwill and amortised over 20 years are now being held on the balance sheet and are amortised over their estimated useful lives. The intangible assets identified and the charge to the accounts in 2004 in respect of these intangibles is as follows: Intangible at Amortisation acquisition charge in 2004 Company name 31 10 Customer relationships 233 8 Order backlog at acquisition 25 25 Agency agreements 60 6 Currency adjustment - (2) _____ _____ 349 47 Goodwill 322 - _____ _____ 671 47 ===== ===== The intangible amortisation for the period has been charged partly in cost of sales (£37,000) and partly in administration expenses (£10,000). d) Reserves A number of reserves are required under IFRS which were not recorded under UK GAAP. The breakdown of this movement at 30 June 2004 is as follows: UK GAAP Adjustment IFRS Capital redemption reserve 1,637 - 1,637 Revaluation reserve 2,405 (2,405) - Translation reserve - (1,792) (1,792) _____ _____ _____ Total 4,042 (4,197) (155) ===== ===== ===== The revaluation reserve is eliminated under IFRS as on first time adoption the value at which the assets are held is deemed to be cost. The translation reserve historically under UK GAAP has been included in the retained earnings reserve. e) Employee benefits Rotork adopted FRS17 for the 2004 year end under UK GAAP. Liabilities under the Group defined benefit pension schemes were shown on the face of the balance sheet but were stated net of the associated deferred tax asset. Under IFRS the deferred tax has been transferred to non-current assets (see note b) and the pension liability shown gross under employee liabilities. At 1 January 2004 the gross liability was £19,503,000 and at 30 June 2004, £19,299,000. Under IFRS certain liabilities have been reclassified as employee benefits from payables and provisions. These are: 1 January 2004 Movement 30 June 2004 UK GAAP employee benefit (defined benefit 13,653 (142) 13,511 pension scheme deficit net of deferred tax) Transfer to deferred tax assets (see note b) 5,850 (62) 5,788 Transfer from other receivables - pension - (5,000) (5,000) lump sum contribution Transfer from provisions 1,037 154 1,191 Transfer from other payables - non share 1,447 9 1,456 based payment accruals Transfer from other payables - share based 1,102 375 1,477 payment accruals Adjustment of share based payments to IFRS (323) (115) (438) ______ ______ ______ Total 22,766 (4,781) 17,985 ====== ====== ====== f) Deferred taxation liabilities Under UK GAAP certain properties had been revalued. This revaluation was shown within reserves as a separate reserve but under IFRS this has been consolidated into retained earnings. On transition, following IFRS1 the past revaluations have been adopted as deemed cost. As a consequence deferred tax of £722,000 has been provided on the balance at 1 January and 30 June 2004. In addition, the capitalisation of development costs has led a reduction in the historic charge to the income statement and requires the creation of a deferred tax liability. The liability at 1 January 2004 was £297,000 reducing by £33,000 during the year to £264,000 at 30 June 2004. 1 January 2004 Movement 30 June 2004 Deferred tax liability UK GAAP deferred tax liabilities 128 (20) 108 Revaluation reserve tax liability 722 - 722 Capitalised development costs liability 297 (33) 264 Set off of tax (354) - (354) _____ _____ _____ Total 793 (53) 740 ===== ===== ===== g) Other payables Under UK GAAP dividends are accounted for once proposed but IFRS only reports dividends as a charge to the accounts once paid. Reversal of the proposed dividend has reduced other payables by £4,487,000. Together with the £2,933,000 transfer in respect of UK GAAP employee benefits noted above this accounts for the £7,420,000 reduction in other payables. Income statement Notes Previous Effect of IFRS GAAP transition to IFRS Revenue 66,829 - 66,829 Profit from operations a, c, h, j 13,346 525 13,871 Net financial income j 390 (13) 377 _______ _______ _______ Profit before tax 13,736 512 14,248 Tax expense i (4,616) 35 (4,581) _______ _______ _______ Net profit for the year 9,120 547 9,667 ======= ======= ======= Basic earnings per share 10.5p 0.6p 11.1p Diluted earnings per share 10.4p 0.6p 11.0p h) Employee share schemes The Group applied IFRS2 to its active share based payment arrangements at 1 January 2004 except for those granted before 7 November 2002 and not vested by date of transition or 1 January 2005. The effect of accounting for equity settled share based payment transactions at fair value is to increase profit from operations by £33,000. The increase in profit reflects the reversal of provisions made under UK GAAP for the Long-Term Incentive Plan offsetting the charges for the option and Save As You Earn schemes. i) Tax expense The income tax charge in the income statement has changed as a result by the tax effect of some of the UK GAAP to IFRS adjustments. The analysis of the net change is: Amortisation of intangibles (see note b) 14 Capitalised development costs (see note f) 33 Cash settled share based payments 13 Equity settled share based payments (25) _____ 35 ===== j) Exchange gains and losses Under UK GAAP exchange gains and losses were reported in operating profit. Under IFRS any gains and losses resulting from retranslation of currency deposits are shown in net financial income which has resulted in profit from operations being increased by £13,000 and net financial income being reduced by the same amount. 7. 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 8. Group information Secretary and registered office: Stephen Rhys Jones Rotork plc 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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