Rotork bounces back as supply chains normalise

Industrial equipment maker Rotork (ROR) has warned that the supply chain snarl-ups that plagued so many businesses last year have not entirely vanished. In its half-year results, the group reported seeing disruptions to the supply of semi-finished components, such as circuit boards, in the six months to the end of June.

However, by most measures, Rotork seems to have bounced back nicely following a period of instability. Its order intake was up almost 12 per cent compared with the first half of last year, thanks to growing sales volumes, resulting in a record order book at the period end. Revenue was up by more than 15 per cent on a constant-currency basis across each of Rotork’s three divisions – oil and gas; chemical, process and industrial; and water and power. 

Analysts at Peel Hunt said that foreign exchange is the major moving part that will determine whether the company reaches its full-year profit target. “Our sense is that the FX headwind will mean little change to consensus at £166mn Ebita,” they wrote in a note on 8 August. 

Other investment banks seem more concerned about the group’s adjusted operating margin of 19.5 per cent, which UBS said fell below consensus expectations by 30 basis points. “The shares have been quite weak recently, so expect a relatively muted share price reaction relative to peers,” they wrote. 

Reaction from investors was, in fact, reasonably positive – with the shares climbing 2 per cent by mid-afternoon. The group’s price/earnings multiple is still above 20 for the full year, meaning the shares aren’t actually at a bargain level. We’d like to see a few more quarters of consistent growth to justify that figure. Hold.

Last IC View: Hold, 328p, 28 February 2023