Investment Proposition

Rotork Investment Proposition

Rotork is the world leader in electric valve actuators and related network control systems. The market in which we operate has high barriers to entry and is relatively concentrated. Our products are highly specified and are used in demanding applications in tough environments. Actuators are generally considered inexpensive when compared to the high cost of a facility shutdown.

Exciting growth prospects

Rotork has a long history of growth. External drivers include global GDP growth, automation, electrification, digitalisation, energy efficiency and emissions reduction. Our ambitious Growth Acceleration Programme targets additional growth through being easier to work with, realigning our salesforce, accelerated new product development and investment in Asia Pacific and in Site Services. Additionally, we see significant opportunity for value-enhancing bolt-on acquisitions. 8.7% 20-year basic EPS growth (CAGR).

Over 50-year dividend track record

We have a strong dividend track record, increasing our annual ordinary dividend payment to shareholders every year for nearly 20 years, and paying extra or special dividends on six occasions. The Board proposes a 5.4% increase in the final dividend in 2019, which would make a 5.1% increase for the full year. 8.5% 20-year dividend growth (CAGR).

Strong cash generation and balance sheet

Rotork’s businesses are extremely cash generative. Cash conversion* averaged 119% over the last five years. This cashflow enables us to fund organic investments and pay a progressive annual dividend. Our policy is to maintain a strong balance sheet, giving us the flexibility to invest and to make acquisitions. At the end of 2019 we had a net cash balance of £106m.

High returns with room for upside

Our adjusted operating profit margin was 22.6% in 2019, up from 21.0% in 2018, amongst the highest in the industrial goods sector. We target a further increase in margin to the mid-20s over time. Our Return on Capital Employed (ROCE), at 31.8% in 2019, is also well above the average amongst our peers.

Strong values, performance culture

We are respected and admired for our products, people and performance. Rotork has long had a widely-admired culture with particular strength in sales, operations, Site Services and safety. Our new Purpose, Values and behaviours are driving a shift towards an even higher performance culture that will enable all employees to achieve their maximum potential. Our success flows from our commitment to engineering excellence, and that’s what we will always pursue, safely and sustainably. We are committed to improving our environmental performance and developing products that benefit the environment.

As per Report & Accounts 2019

* We define cash conversion as cash flow from operating activities before tax outflows, restructuring costs and the pension charge to cash adjustment as a percentage of adjusted operating profits.