As management warned, poor macroeconomic conditions began to weigh on Rotork (ROR) in the first six months of 2019. Sales were down 4.3 per cent on an organic constant-currency basis, while order intake dropped 1.3 per cent to £363m. Orders did improve quarter on quarter, but the group warned the “pattern of order intake remains uncertain and the market environment uncertain”.
The adjusted operating margin increased 130 basis points to 21.1 per cent in the period, which is encouraging given the group is 18 months into its “growth acceleration programme” which it hopes will bring margins up into the mid-20s. Progress in the year was largely due to procurement and productivity improvements in the controls business – 51 per cent of sales. Sanctions placed on countries such as Venezuela in the period harmed sales in the fluid systems business, although this also served to reduce the division’s drag on group margins.
The group has also been stripping out non-core parts of the business. It disposed of its nuclear actuator business last year and is on track to close three manufacturing facilities this year, further reducing costs. Management is expecting margins to show “clear progress” year on year at the full-year results. Broker UBS is forecasting adjusted EPS of 12.95p for 2019, up from 12.54p in 2018.
| ROTORK (ROR) | ||||
| ORD PRICE: | 307p | MARKET VALUE: | £2.68bn | |
| TOUCH: | 306.9-307.2p | 12-MONTH HIGH: | 361p | LOW: 233p |
| DIVIDEND YIELD: | 2% | PE RATIO: | 30 | |
| NET ASSET VALUE: | 58p* | NET CASH: | £43m | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018 | 331 | 54.7 | 4.70 | 2.20 |
| 2019 | 319 | 52.2 | 4.60 | 2.30 |
| % change | -4 | -5 | -2 | +5 |
| Ex-div: | 29 Aug | |||
| Payment: | 27 Sep | |||
| *Includes intangible assets of £281m, or 32p a share | ||||
