Rotork launches £50m share buyback after strong year

Rotork reported a robust performance in its preliminary results on Tuesday, as well as a promising outlook as it implemented its ‘Growth+’ strategy.

The FTSE 250 company reported an adjusted order intake of £723.7m for 2023, up 6.2% year-on-year, while revenue jumped 12% to £719.1m and adjusted operating profit reached £164.5m, ahead 14.8%.

Its adjusted operating margin saw an improvement of 60 basis points, standing at 22.9%.

Adjusted basic earnings per share rose 14.8% to 14.6p, while cash conversion soared to 120%, a substantial increase from 76% in 2022.

Reported highlights echoed the strength of the company's adjusted performance, with operating profit rising 20.4% to £148.8m.

The operating margin rocketed 140 basis points to 20.7%, while profit before tax reached £150.6m, up by 21.4%.

Basic earnings per share saw a significant rise of 21.7% to 13.2p, as Rotork announced a full-year dividend of 7.2p, up by 7.5%.

Key factors contributing to the strong performance included a 7.8% increase in order intake year-on-year, with all divisions experiencing growth.

Despite supply chain challenges, deliveries accelerated in the second half, leading to a normalisation of the order book, which remained robust at the end of the period.

Revenue growth of 12% was achieved despite significant foreign exchange headwinds, with sales increasing by 13.6% on an organic constant currency basis across all divisions.

Rotork said its commitment to environmental, social, and governance (ESG) factors was highlighted by its AAA rating in the MSCI ESG assessment, as well as an 11% reduction in scope one and two greenhouse gas emissions year-on-year.

The firm also strengthened its financial position, with closing net cash standing at £134.4m, up from £105.9m in December 2022.

Its return on capital employed (ROCE) improved to 33.9%, up 260 basis points.

Looking ahead, Rotork announced a £50m share buyback programme, saying that with a strong financial performance, a resilient order book, and strategic initiatives in place, it had entered 2024 with confidence in its ability to continue delivering sustainable growth and value creation.

“We continued to make significant progress in 2023 and delivered another year of strong organic sales growth, margin improvement and good cash flow performance,” said chief executive officer Kiet Huynh.

“Given the strength of our balance sheet we have today announced a £50m share buyback whilst retaining the financial flexibility to pursue strategic investments.

“The delivery of ‘Growth+’ continues and the benefits of the strategy are apparent, including in our organic sales growth performance in 2023.”

Huynh said target segment successes included upstream oil and gas electrification, including methane emissions reduction, as well as mining and metals processing with a focus on the battery value chain, and water infrastructure.

“Successes under customer value included further progress on our programme to improve efficiency, lead times and customer experience, and under innovative products and services, the launch of the IQ3 Pro and smartphone app.

“We remain confident of delivering our financial ambition of mid-to-high single digit sales growth and mid-20s adjusted operating margins over time and, based on momentum in the year so far and supported by the strength of our order book, we continue to expect 2024 to be another year of progress on an OCC basis.”

At 0916 GMT, shares in Rotork were up 3.29% at 326.6p.

Reporting by Josh White for Sharecast.com.