Rotork record results outweigh oil worries

3rd Mar 2015 08:34

Rotork comfortably beat expectations with its results for 2014 as the valve maker's ever broadening end-market exposure and stronger margins flowed through to record orders, revenues and profits.The FTSE 250 group, which makes valves to control the flow of liquids, gases and powders for numerous industrial and commercial applications, said it was yet to see any noticeable impact in customer order activity in the upstream oil industry as a result of the slump in oil prices but cautioned that the increased uncertainty will present it with a more challenging market backdrop in the sector.But chief executive Peter France stressed that Rotork's wide range of other global markets remained active and continued to be driven by strong long-term trends.He said this broad end-market exposure, which management were continuing to expand via a widening product portfolio and international sales channels, had led to the record results for 2014.Growth of 4% in order intake drove a 2.8% increase in revenue to £594.7m, which was boosted by another record fourth quarter of shipments and would have been even higher but for currency headwinds.Analysts were impressed with the 20 basis point increase in operating profit margin, as a result of sourcing from lower cost regions, which flowed through to a 2.3% uplift in profit before tax to £141.2m, or 8.1% at constant currencies, with earnings per share up 5.4%, or 7% at constant currencies.The full year dividend was hoisted 4.3% to 50.10p.France pointed to long-term global that include population growth, urbanisation and automation which were driving heightened demand for flow control products and services to deliver cleaner energy, greater fuel efficiency and improved resource utilisation."Another positive trend is the increased focus by our customers on cost reduction and stricter environmental regulations. As a result, we are seeing good demand for energy-efficient products across all our end markets."Broker Investec was impressed, noting that adjusted diluted earnings per share of 131.0p exceeded the highest estimate in the market as Rotork surprised those expecting a fall in margins."Having raised the base for 2015, upstream oil & gas - 15% of revenue in 2014 - is the focus of attention and Rotork has undertaken to react quickly to any deterioration, while it is still expecting to make progress this year. We expect some trimming to estimates today, but the scale is unlikely to scare investors."To counterbalance the oil and gas weakness in 2015, the broker noted that the power business is growing strongly and there is a better outlook for water, while currency should no longer be a drag.