TIDMROR
RNS Number : 4440R
Rotork PLC
30 June 2020
Rotork Plc
Pre-close update
30 June 2020
Rotork Plc, the global flow control and instrumentation Group,
issues the following update prior to entering our interim results
close period.
COVID-19 update
Our priority is the health and safety of our colleagues and
their families, our customers, suppliers and all other
stakeholders. We continue to take decisive actions to manage the
COVID-19 situation whilst following the instructions from
governments and health authorities.
Kevin Hostetler, Chief Executive said "I would like to recognise
the extraordinary fortitude and determination of all our people in
recent months, be they in our factories, in Rotork Site Services,
in our offices or currently working from home. Thanks to all their
hard work Rotork will emerge stronger than ever. I am also really
proud of their efforts supporting our local communities."
Since our trading update on 31 March the near-term outlook has
become a little clearer, but there remains considerable
uncertainty, including potential further COVID-19 impacts.
All our production facilities are currently open, albeit in a
small number of cases operating at below normal output levels, with
reconfigured layouts and processes and equipment to allow safe
distancing between our employees. Whilst we are planning to keep
our facilities open we will not hesitate to close them again if
required or if we believe there is any risk to our colleagues or
their families.
Trading update
Despite the unprecedented economic environment trading has held
up reasonably well.
Based on trading to mid June 2020 we anticipate that, subject to
the timing of receipt of expected orders, Group order intake in the
first half will be circa 16-18% lower than the previous year's
GBP362m on an OCC(1) basis, with Asia Pacific orders modestly lower
year on year (YoY) and demand in the EMEA region holding up better
than that in the Americas.
Oil & Gas orders are expected to be down slightly more than
the Group, with the upstream most impacted. Downstream orders are
likely to hold up better but still be down YoY.
Water & Power provides essential products and services and
we anticipate a resilient performance from the division. Incoming
orders are anticipated to be lower YoY reflecting the strong prior
year period.
Chemical, Process & Industrial ("CPI") orders are likely to
be down YoY, but less than the Group. Process demand is expected to
hold up better than other CPI end markets with the HVAC segment
particularly busy.
Group revenues are anticipated to have declined in the first
half, reflecting COVID-19 related disruption to our factories,
supply chains, logistics and to Rotork Site Services. This
disruption peaked in April and has reduced steadily since, albeit
we are not yet back to normal. In the April - May period, revenues
were down 14% YoY on an OCC basis equalised for working weeks. We
anticipate that, subject to no additional COVID-19 related
disruption, Group revenues in the first half will be circa 11-13%
down YoY, and whilst adjusted Group operating profits will be
lower, margins will be relatively resilient.
Update on mitigating actions
We announced on 31 March 2020 the mitigating actions we would be
taking to reduce the impact of COVID-19 on our business. These
actions included a recruitment freeze, postponing salary increases,
restricting discretionary spend, drawing on government wage
replacement schemes and flexibility with the workforce. These
benefited our performance in April and May.
We are in the process of accelerating some restructuring actions
that we had planned for the latter years of the Growth Acceleration
Programme. The cost of these restructuring actions is expected to
be circa GBP2m in the first half. We have also deferred the
commencement of some parts of our IT upgrade, reducing our planned
capital expenditure for this year by a similar amount.
Financial position and bank facility update
Rotork remains highly cash generative and we maintain a strong
balance sheet. The Group had GBP125.6m of net cash as at 31 May
2020. We recently entered into a new committed two-year revolving
credit facility with our banks. The facility, which is undrawn, is
for GBP60m.
Outlook
Due to the unprecedented level of uncertainty, on 31 March we
withdrew our forward guidance for the current year. Whilst the
near-term outlook has become a little clearer, there remains
considerable uncertainty, hence we retain this position. We are
confident however that we will successfully navigate the current
challenges and will be a stronger business going forward. Our
confidence comes in no small part from the success to date of our
Growth Acceleration Programme initiatives which have already
demonstrably increased Rotork's cyclical resilience.
We expect to publish our half-year results on Tuesday 4 August
2020.
A conference call for analysts and investors will be held at
8:00 BST today to discuss this statement.
The dial-in details are as follows:
UK dial-in number: 020 3936 2999
All other locations: +44 20 3936 2999
Access code: 396394
(1)OCC is organic constant currency results which exclude
discontinued businesses from 2019 results and 2020 results are
restated at 2019 exchange rates.
Historical results under our new divisional structure
Following the completion of the implementation of our new market
aligned structure, Rotork will now report under three divisions:
Oil & Gas, Water & Power, and Chemical, Process &
Industrial ("CPI"). This realignment is an important element of our
Growth Acceleration Programme and means our client facing teams now
sell to specific end markets. The new structure will more closely
address customer needs and facilitate closer customer relations
through key account management. Further information on our
restatement methodology will be provided with our half-year
results. The table below shows Rotork's historical results from
2017 onwards analysed by each new division.
GBPm 2017 2018 2019 H1 2019
Oil & Gas
------ ------ ------ --------
Revenue 306.7 345.7 330.0 158.1
------ ------ ------ --------
Adjusted operating profit 62.7 75.1 75.5 34.8
------ ------ ------ --------
Adjusted operating profit
margin 20.4% 21.7% 22.9% 22.0%
------ ------ ------ --------
Water & Power
------ ------ ------ --------
Revenue 172.7 159.8 154.9 69.1
------ ------ ------ --------
Adjusted operating profit 41.6 41.1 45.1 18.0
------ ------ ------ --------
Adjusted operating profit
margin 24.1% 25.7% 29.1% 26.0%
------ ------ ------ --------
Chemical, Process & Industrial
------ ------ ------ --------
Revenue 162.8 190.2 184.4 91.4
------ ------ ------ --------
Adjusted operating profit 33.8 40.7 42.0 19.8
------ ------ ------ --------
Adjusted operating profit
margin 20.8% 21.4% 22.8% 21.6%
------ ------ ------ --------
Unallocated costs -7.9 -10.9 -11.6 -5.4
------ ------ ------ --------
Group
------ ------ ------ --------
Revenue 642.2 695.7 669.3 318.6
------ ------ ------ --------
Adjusted operating profit 130.2 146.0 151.0 67.2
------ ------ ------ --------
Adjusted operating profit
margin 20.3% 21.0% 22.6% 21.1%
------ ------ ------ --------
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END
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