Given its exposure to the energy sector, Rotork's (ROR) expectations for the first six months of 2016 weren't exactly sanguine. Thus management will be reasonably satisfied with a better-then-expected profit out-turn and expectations that cost-cutting initiatives will support full-year performance. But the engineer's exposure to the sector remains an issue, given that West Texas Intermediate, the US benchmark, had slipped to $40 a barrel at the time of writing.
Reported profits and earnings were down by a third and even the adjusted figures make for pretty grim reading. Obviously the relative decline in financial metrics had been foreshadowed but a 480 basis point contraction in the adjusted margin and a reduction in return on capital employed from 34.9 per cent to 19.6 per cent is some hit.
The good news is that the order book is up by 15.4 per cent from a year ago, and a cash generation rate of 131.5 per cent highlights strong treasury management. Intangibles and borrowings are up as the group has pursued strategic opportunities while some of its markets have been in downtrend, most notably that of Bifold, a manufacturer of pneumatic and hydraulic instrument valves, which remains Rotork's largest acquisition to date.
Prior to these figures broker Numis was expecting pre-tax profits of £111m for the year-end, giving rise to EPS of 9.4p, against £123m and 10.4p in 2015.
| ROTORK (ROR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 204p | MARKET VALUE: | £1.77bn | |
| TOUCH: | 203.8p-205p | 12-MONTH HIGH: | 229p | LOW: 150p |
| DIVIDEND YIELD: | 2.5% | PE RATIO: | 29 | |
| NET ASSET VALUE: | 48p* | NET DEBT: | 21% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 274 | 56.3 | 4.77 | 1.95 |
| 2016 | 264 | 38.3 | 3.25 | 1.95 |
| % change | -4 | -32 | -32 | - |
Ex-div: 25 Aug Payment: 23 Sep *Includes intangible assets of £365m, or 42p a share | ||||
