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Annual Report 2023
Delivery
ofGrowth+
continues
Rotork is a market-leading global provider of mission-critical intelligent flow
control solutions for oil & gas, water and wastewater, power, chemical process
andindustrial applications. Rotork helps customers around the world to improve
efficiency, reduce emissions, minimise their environmental impact and assure
safety. The Group employs about 3,300 people, has assembly facilities in
17locations and serves 170 countries through a global service network.
Contents
Strategic report
1 Highlights of 2023
2 What we do
3 At a glance
4 Business model
6 Our market dynamics
8 Chair’s statement
10 Key performance indicators
12 Chief Executive Officer’s statement
16 Investment case
17 Strategy introduction
18 Target segments
22 Customer value
24 Innovative products & services
26 Divisional review
30 Sustainability review
64 Financial review
68 Risk management
73 Principal risks and uncertainties
80 Viability statement
82 Task Force on Climate-related
FinancialDisclosures
93 Non-financial and sustainability
informationstatement
Corporate governance
98 Chair’s governance overview
100 Governance highlights
102 Board of directors
104 Corporate governance report
118 ESG Committeereport
121 Audit Committee report
126 Nomination Committee report
129 Directors’ Remuneration report
154 Directors’ report
157 Statement of directors’ responsibilities
Financial statements
159 Independent auditor’s report
167 Consolidated income statement
Consolidated statement of
comprehensiveincome
168 Consolidated balance sheet
169 Consolidated statement of changes in equity
171 Consolidated statement ofcashflows
173 Notes to the Group financialstatements
200 Company balance sheet
Company statement of changes in equity
201 Notes to the Company financialstatements
206 Ten year trading history
207 Share register information
208 Corporate directory
Non-financial highlights
• We incorporated an emissions reduction
target linked to our SBTi targets into our
longterm incentive plan
• Our total scope 1 and market based scope 2
greenhouse gas emissions reduced by 11%
• The Rotork IQTF electric actuator was
established as the leading actuator for
upstream oil & gas choke valve applications
• Eco-transition portfolio sales grew faster
thanthe Group overall
ESG scores
• MSCI ESG: AAA
• Sustainalytics: ESG Industry Top Rated
• S&P CSA: Ranked in the top 10% globally
inthe Machinery and Electrical
Equipmentindustry
Strong delivery of Growth+ strategy
• Order intake was 7.8% higher year-on-year on
an OCC basis with orders ahead at all divisions
• Revenue increased 12.0% year-on-year
despite a significant foreign exchange
headwind which strengthened through the
second half. On an OCC basis sales grew
13.6% year-on-year
• Adjusted operating margins were 60bps
higher year-on-year at22.9%
+7.8%
Orders were 7.8% higher
year-on-year on an organic
constant currency (OCC) basis
724
682
614
23
22
21
719
642
569
23
22
21
14.6
12.7
10.8
23
22
21
151
124
106
23
22
21
7.2
6.7
6.4
23
22
21
Orders
(£m)
Profit before tax
(£m)
Financial highlights
Dividend per share
(p)
Revenues
(£m)
+13.6%
Revenues were 13.6% ahead
year-on-year (OCC)
Adjusted EPS
(p)
14.6p
Basic EPS was 13.2p
£151m
Profit before tax was
21%higher year-on-year
7.2p
Annual dividend increased
by7.5% year-on-year
Adjusted operating
profit (£m) and margin (%)
£164m
Reported operating profit
was £149m
Adjusted figures and organic constant currency (‘OCC’) figures are alternative performance measures and are used consistently throughout these results.
Theyaredefined in full and reconciled to the statutory measures in note 2 ofthe Financial Statements.
164 (22.9%)
143 (22.3%)
128 (22.5%)
23
22
21
rotork.com Rotork Annual Report 20231
Highlights of 2023
Strategic report Corporate governance Financial statements
Read more P.28 Read more P.26 Read more P.29
Rotork is a market-leading global
provider of mission-critical
intelligent flow control solutions
Divisional split
The leading supplier of electric
critical duty actuators and
related services to the global
Oil & Gas sector with the
largest installed base and site
services team. Our products
and services are used by
customers across their
upstream, midstream and
downstream segments to
automate and electrify
processes, assure safety and
eliminate fugitive emissions.
Oil & Gas
A supplier of specialist actuators
and instruments for niche
applications in the broad
chemical, process industry and
industrial sectors. The division
identifies and solves critical
reliability, efficiency and safety
challenges for customers across
a broad range of end markets
including speciality and other
chemicals, metals and mining,
critical HVAC, pharmaceutical,
steel andcement.
Chemical, Process & Industrial
Supplier of premium actuators,
predominantly electric, and
gearboxes for applications in
the water and power generation
sectors. Our products and
services are used to solve water
management, quality and scarcity
challenges and in climate change
adaptation and alternative
energy, aswellas to automate,
electrifyand digitalise
ourcustomers’ processes.
Water & Power
Global presence
Revenue
£214m +8%
Adjusted operating margin
24.0%
Revenue
£328m +16%
Adjusted operating margin
25.5%
Revenue
£177m +11%
Adjusted operating margin
26.2%
Offices Assembly facilities
Americas
Employees 534
Offices 11
Assembly facilities 4
Revenue
£201m
EMEA
Employees 1,773
Offices 24
Assembly facilities 9
Revenue
£280m
Asia Pacific
Employees 1,035
Offices 31
Assembly facilities 4
Revenue
£238m
Rotork Annual Report 2023 rotork.com2
What we do
Strategic report Corporate governance Financial statements
What makes Rotork a market leader?
Safety, productivity and efficiency
Extraction Processing Transportation Storage
Our products are used in
the extraction of high value
materials such as oil & gas,
metals and minerals
They are used to automate
material processing plants,
such as refineries and
chemical facilities
Rotork products provide
critical safety functions
during the transportation
offluids e.g. via pipelines
Controlling the flow offluids
in and out of storage tanks
and shutting them down
inan emergency
Rotork’s market position is driven by our technical capabilities,
the quality and reliability of our products and services and our
reputation in the market. Our products must satisfy challenging
and complex certification requirements which differ from
industry to industry and geography to geography, meaning
barriers to entry are relatively high
Offshore wind connections
IQ3 Pro electric actuators are used for critical
control duties on high-voltage direct current
transformer platforms in the UK’s North Sea.
Utilisation Heating and cooling Recovery Recycling
Our products are regularly
used in the utilisation
offluids – for example
producing hydrogen
fromwater
They are used in severe
service HVAC applications
such as in semiconductor
fabrication plants and
datacentres
Rotork products have an
important role to play in the
circular economy, e.g. carbon
capture and storage
They often play a key
roleinrecycling processes,
for example of reclaimed
and effluent water
3rotork.com Rotork Annual Report 2023
At a glance
Strategic report Corporate governance Financial statements
Rotork is a market-leading
globalprovider of mission-critical
intelligent flow control solutions
Operating
responsibly
Enabling a
sustainable
future
Making
a positive
social
impact
Identify our customers’
automation challenges
Our customers rely upon Rotork for
innovativesolutions to safely control the
flowoftheir liquids, gases and powders.
Weproactively seek out their product
andservice needs and develop solutions
thatoffer improved efficiency, assured
safetyand environmental protection and
aretailored to their precise requirements.
Innovation and development
of products and services
The innovative research and development
activities across Rotork ensure
cutting-edge products are available
for every application acrossthe markets
weserve. Our new product development
isparticularly focused on products
that help improve our customers’
efficiencyand environmental performance.
World class product
manufacturing
We are a global business with product
manufacturing sites located around the world.
Our factories operate to the highest
internationalstandards and supply our
qualityproducts to ourcustomers on time
andatshort notice ifrequired.
4
Lifecycle services
& support
We offer dedicated, expert service and
supportfrom initial inquiry, to product
installation, and through Rotork Site Services,
long-term aftersales care including planned
andpredictive maintenance and
end-of-lifedecommissioning.
5
Industry leading
application engineering
We have been widely acknowledged as the
market leader in flow control for over 60
years,recognised for our comprehensive,
high-quality range of products and solutions.
Our products are available with extensive
certifications, including for use in hazardous
areas and safety applications, and
asexplosionproof.
3
Commitment to a
sustainable future
Read more P.30
1 2
The customer is at the centre
ofeverything we do, from
firstenquiry to installation
toaftersalescare
Rotork Annual Report 2023 rotork.com4
Business model
Strategic report Corporate governance Financial statements
Own sales Our highly
experienced sales and
application engineering teams
Channel partners
Industrialdistributors and
manufacturer’s agents
Rotork Site Services
Ourmarket leading global
aftersales and service team
Specification approval
Understanding customer needs
and confirming our products
meet them
OEMs Customers who
incorporate Rotorkcomponents
into their products andsystems
EPCs, contractors and
integrators Third-party
infrastructure construction and
speciality automation partners
Our routes to market
The value we created in 2023
End users
20%
20%
Distributors
45%
10%
5%
OEMs/valve makers
EPCs
Specification approval
Key to direct or indirect sales
Own sales
Channel partners
Rotork Site Services
Our offering Employees Suppliers Communities The environment Shareholders
We launched 5 new
products and services
in2023. Sustainability is a
high priority for our teams
working in innovation and
product development.
We offer our employees a
safe working environment,
fair pay, terms and conditions,
equality and fairness in the
workplace and engagement
on important issues.
We have a sizeable supply
chain. Social, environmental
andethical considerations
are embeddedinto
ourGlobal Supplier
Excellence programme.
We endeavour to make a
positive social impact by
being a good corporate
citizen. We are pleased
topay taxes and contribute
to society in the countries
inwhich we operate.
We delivered a good set
ofresults across our key
environmental metrics
in2023, including a 11%
reduction in total scope 1
and market-based scope 2
tCO
2
e emissions.
We have a strong track
record of creating shareholder
value and have increased
our ordinary dividend each
year for more than 20 years.
5
no. of product launches
£187m
wages, salaries
etc. paid
£364m
spend with
external suppliers
£33m
corporation tax
cash paid
-11%
CO
2
emissions, YoY
£59m
dividends paid
rotork.com Rotork Annual Report 20235
Business model continued
Strategic report Corporate governance Financial statements
Digitalisation
Digitalisation is the use of digital
technologies to change a business
model and provide new value to
customers. Digitalisation is a major
theme in the markets we serve –
examples include condition monitoring
and remote diagnostics
Automation
Automation is the introduction of
automatic equipment into processes to
improve reliability, safety and efficiency.
We benefit from this powerful trend as
our end users upgrade from manual to
actuated valves
Electrification
Electrification is the conversion of a
machine or system to the use of electrical
power. Electrification is occurring across
many areas of industry, including flow
control, driven by emissions reduction
andimproved control
Global megatrends drivingourtop line growth
Our growth is driven by significant long-term megatrends, from
automation to new energies, aswell as our own self-help initiatives
Energy security
Energy security has risen up the global
priority list following Russia’s invasion of
Ukraine and has triggered an acceleration
in infrastructure spend including LNG
capacity expansions, storage investment
and life extensions
Challenge
>10%
The global industrial
automation and control
systems market is
forecast to grow at
10.5% p.a. from 2023
to 2030 (CAGR)
(Source: Grand
ViewResearch)
Opportunity
>90%
Over 90% of Rotork
sales are into the
industrial automation
and control
systemsmarket
Challenge
+7%
In the IEA’s Net Zero
emissions by 2050
scenario the electricity
share of total global
final energy
consumption rises to
27% in 2030 from 20%
in 2021
Opportunity
>50%
Electric powered valve
actuators represented
over 50% of Rotork
sales in 2023
Challenge
>50%
Global LNG demand is
estimated to rise by
>50% by 2040,
drivenby industrial
coal-to-gas switching
and economic growth
(Source: Shell LNG
outlook 2024)
Opportunity
£100m
LNG is a Rotork
targetsegment and
weestimate the
addressable market
could grow to £100m
in3–4 years time
Challenge
>23%
The global Industrial
Internet of Things
(“IIoT”) market is
forecast to grow at
23.2% p.a. from 2023
to 2030 (CAGR)
(Source: Grand
ViewResearch)
Opportunity
iAM
Rotork’s Intelligent
Asset Management
(“iAM”) system
analyses actuator
performance data and
uses this to provide
users with value
addedservices
Rotork Annual Report 2023 rotork.com6
Our market dynamics
Strategic report Corporate governance Financial statements
Sustainability
Sustainability is the societal goal of our
time – people safely co-existing over
thelong term. Sustainability is a major
opportunity for us, including through
methane emissions and flaring elimination
and low- and no-carbon fuels
New energies
New energies have a major part to play in
the energy transition and we see exciting
opportunities in LNG as a bridging fuel
aswell as in biofuels, carbon capture
utilisation and storage, green and blue
hydrogen and concentrated solar
Water quality
Water quality challenges are creating
opportunities globally, for example in
network infrastructure modernisation,
water treatment and desalination.
TheUSA’s Inflation Reduction Act included
significant funding for water quality
Global megatrends drivingourtop line growth continued
Water scarcity
Water scarcity is resulting in greater
investment in leak detection and
monitoring as well as water re-use and
recycling. Rotork is well placed to benefit,
for example through the recently launched
CK range of waterproof actuators
Challenge
50l
Water leakage across
England and Wales in
2020–21 was greater
than 50l of water per
person per day
(Source: Ofwat)
Opportunity
IQ3
Intelligent actuators
with remote operation
can be used to manage
network pressure
thereby reducing
anyleak rate
Challenge
>8%
The desalination
equipment market
isforecast to grow
at8.6% CAGR
over2023–33
(Source: Future
MarketInsights)
Opportunity
£150m
Desalination is a
Rotorktargets segment
and we estimate
theserviceable
addressable market at
approximately £150m
Challenge
>23%
Global energy
storageadditions are
forecast to grow at
23% p.a from 2022
to2030 (CAGR)
(Source: BloombergNEF)
Opportunity
CPI
Mining, chemical and
HVAC markets within
the battery value chain
are target segments of
the Rotork CPI division
Challenge
6%
Fugitive methane
emissions from
energyproduction
areestimated to
contribute ~6% of
global GHGemissions
(Source: Our World in Data)
Opportunity
CH
4
To eliminate or
reduceemissions the
oil and gas sector is
transitioning to electric
powered from
pneumatic powered
valve actuators
rotork.com Rotork Annual Report 20237
Our market dynamics continued
Strategic report Corporate governance Financial statements
Chair’s statement
2023 was the first full year of our Growth+
strategy and my first year as Rotork’s Chair.
Welaunched the strategy in 2022, designed
todeliver profitable growth by targeting the
right market segments, providing value to our
customers, innovating our products and services,
and enabling a sustainablefuture.
Solid progress has been made in delivering the
strategy. From 2021 to 2023, we delivered revenue
growth of 26% and EBITA growth of 29%. The
market response to our Target Segment strategic
pillar has been very encouraging. We have made
significant progress on Customer Value, increasing
our customer focus through investing in people
and rolling out new systems and processes.
In2023, our Chief Technology Officer implemented
a full review of our process for innovation of
products and services, resulting in a more agile
approach focused on customer needs and
delivering sustainable products. During the year,
we delivered important product and service
launches, including the latest release electric
actuator, the IQ3 Pro, and enhanced our
Intelligent Asset Management digital offerings.
Under our Innovation pillar, the acquisition
ofHanbay has expanded our technology
capabilities and strengthened our
decarbonisation product suite.
Energy transition & sustainability
Enabling the energy transition and delivering
sustainable products and operations is at the
heart of our Growth+ strategy.
During 2023, we made significant progress in
the North American upstream electrification
segment, with the IQTF range being established
as the leading electric actuator for choke valve
wellhead automation. Replacing a process
gas-powered pneumatic actuator with an
electric IQTF actuator eliminates any methane
emissions from operating the valve.
2023 was the first full year of
ourGrowth+ strategy and I’m
pleasedto report we have made
significant progress. The market
response to our Target Segment
strategic pillar has been
veryencouraging
Dorothy Thompson, CBE
Chair
Rotork Annual Report 2023 rotork.com8
Chair’s statement
Strategic report Corporate governance Financial statements
attach to achieving our net-zero targets, scopes
1 and 2greenhouse gas reduction targets are
included in our senior team’s long-term
remuneration opportunity.
Culture & purpose
Two factors that initially attracted me to Rotork
were its purpose and culture. Rotork is a purpose
and value-led business. Its purpose, keeping the
world flowing for future generations, remains
highly relevant today.
Rotork’s strong culture dates to the company’s
formation in the 1950s. Today it is underpinned
by its values: stronger together, always innovating
and trusted partner. During the year, Ivisited
Rotork sites in Bath (UK), Rochester (NY), Lucca
(Italy), Manchester (UK) and Leeds (UK) as well
as Hanbay in Montreal (Canada). On each visit,
itwas encouraging to see the belief in the
purpose and values and strong enthusiasm for
the Growth+ strategy. I was impressed by the
openness of all I met and the drive for continuous
improvement. The Board takes an active role in
understanding the culture and its development
through regular site visits by individual directors,
including roundtable meetings at each site to
which colleagues from all levels are invited.
These visits are co-ordinated by Tim Cobbold,
non-executive director responsible for
workforceengagement.
Energy transition & sustainability continued
According to the International Energy Agency,
energy-related methane emissions in North
America were over 20Mt in 2021 (around 5% of
global emissions from all sources). It has become
increasingly apparent that the medium-term
opportunity is upstream electrification, i.e. wider
than methane emissions reduction, and we have
broadened our commercial focus to reflect this
excitingdevelopment.
Recognising the important role of Rotork’s products
and services in supporting the energy transition,
wehave established a Product Sustainability team
within Product Engineering. Product sustainability
requirements are now firmly embedded within
our product development process, focusing on
increasing energy efficiency, minimising material
usage and maximising recycled/recyclable content.
We also stepped upinitiatives to fully understand
the entire lifecycle of our product portfolio,
including embodied carbon.
Whilst the impact we have enabling our
customers to improve their environmental
performance through the use of our products
likely far exceeds our own environmental footprint,
the latter is no less important. We emitted 9.9
tCO
2
e per £1m of revenue based on location-based
calculations, a reduction compared with 2022
of12%. Underlining the importance that we
Section 172 (1) Statement
Dividend and capital allocation
Rotork recognises the importance of a growing
dividend to our shareholders. We are committed
to a progressive dividend policy, subject to
satisfying the cash requirements of the business.
The Board is recommending a final dividend of
4.65p per share. With the 2023 interim dividend
of 2.55p, the total dividend for the year is 7.20p,
a 7.5% increase on the 2022 full-year dividend.
This equals 2.0 times cover based on adjusted
earnings per share (2022: 1.9 times). The final
dividend will be payable on 24 May 2024 to
shareholders on the register on 18 April 2024.
The last date to elect for the Dividend Reinvestment
Plan (‘DRIP’) is 3 May 2024.
Consistent with the Group’s stated capital allocation
policy, the Board has decided to return cash to
shareholders while retaining a strong balance sheet.
As a result, Rotork will be commencing a share
buyback programme of up to £50 million. Rotork’s
financial flexibility enables it to pursue strategic
investments and the Group remains active in
looking for suitable opportunities, consistent with
the Growth+ strategy.
Board update
I want to thank my fellow Directors for
welcoming me as their new Chair and for their
considerable support in my first year in the role.
During the year Jonathan Davis advised us that
he will be stepping down from the Board after
the 2024 AGM. Jonathan has been with the
company for 21 years and Rotork’s Group
Finance Director since 2010. I want to thank
himfor his significant contribution, including
supporting our Chief Executive in the first two
years of his role.
We are looking forward to welcoming Ben
Peacock to Rotork to be our Chief Financial
Officer from 11 March. Ben was previously Vice
President of Finance & IT – Minerals Division at
The Weir Group PLC. Ben brings considerable
industry knowledge and a strong record of
financial expertise within complex businesses.
I would also like to thank Peter Dilnot and
AnnChristin Andersen for their considerable
contributions to Rotork over the last 5-6 years.
Peter stepped down as a Director of Rotork
inDecember 2023, having been our Senior
Independent Non-executive Director, and we
wish him all the best in his role as Chief
Executive Officer at Melrose Industries Plc.
Rotork’s ESG Committee Chair Ann Christin
willleave the Board following the Company’s
AGM in 2024. We wish Ann Christin all the
bestinhernew role as Chief Executive Officer
ofNorwegian Energy Partners.
I am very much looking forward to welcoming two
new non-executive directors to Rotork. Andrew
Heath will join the Board on 1 April 2024. Andrew
is currently Chief Executive Officer of Spectris plc,
arole he has held since September 2018. He will
beappointed Chair of the Safety and Sustainability
Committee from 1 May 2024, subject to election.
Vanessa Simms will join the Board on 21 June 2024.
Vanessa is currently Chief Financial Officer at Land
Securities Group plc. Andrew and Vanessa bring a
wide range of listed company expertise, experience
in leading change and in delivering organic and
non-organic growth and will further strengthen the
diverse mix of skills and experience on the Board.
Post April’s AGM, our Board gender balance will
be 43%, exceeding the 40% female representation
target we seek to maintain. With two members
of the Board coming from minority ethnic
backgrounds, we exceed the Parker Review
target of at least one individual.
People
The Rotork Board knows that delivering the
Group’s purpose and strategy would not be
possible without its people. Our team isexceptional
and continually focused on delivering customer
value and innovation in everything they do.
I am proud of the support they have shown
toward our strategy and delivering the solid
results we have achieved this year.
On behalf of the Board, I would like to thank
allour employees for their dedication and
commitment in 2023.
Dorothy Thompson, CBE
Chair
4 March 2024
In accordance with Section 172 of the
Companies Act 2006, we as a Board, have
aduty to promote the success of Rotork for
thebenefit of our members. In doing so,
theBoard has regard for the interests of
ourpeople, the success of our relationships
withsuppliers and customers, the impact
ofour operations on thecommunity and the
environment, and the desirability of maintaining
a reputation for highstandards of business
conduct and the consequences of decisions
inthe long-term. Stakeholder considerations
are woven throughout all Board discussions
and decisions.
Further information on our stakeholder
engagement, can be found on pages 110
to112 of the Corporate Governance report.
Details on how we have engaged with our
stakeholders on our sustainability strategy
canbe found on page 36.
rotork.com Rotork Annual Report 20239
Chair’s statement continued
Strategic report Corporate governance Financial statements
Financial KPIs
Growth of the business, quality of earnings and efficient
use of resources are our key financial indicators
Performance
Revenue growth %
+12.0%
Adjusted operating margin %
22.9%
Cash conversion %
120.3%
Return on capital employed %
33.9%
Reasons
for choice
A key driver for the business that is
reportedfor each division and geography.
The measure enables us to track our overall
success and our progress in increasing our
market share by end market and by region.
This measure brings together the combined
effects of pricing, volume and procurement
as well as the leveraging of our operating
assets. It is also an important check on the
quality of revenuegrowth.
Our cash conversion demonstrates our
operational efficiency and enables us to
fund future growth. We consider 85%
conversion as abase level of achievement.
Itis also part of the senior management
reward system.
We use this KPI to monitor theefficiency of
our capital allocation. We also use this ratio
internally, to help Groupmanagement
monitorefficiency within Rotork’sdivisions.
How we
calculate
Increase in revenue year-on-year divided
byprior year revenue.
Adjusted operating profit shown as a
percentage of revenue. We use adjusted
operating profit as this aids comparison
yearto year.
Cash flow from operating activities
beforetax outflows, the cash impact
ofother adjustments (including Business
Transformation costs), and thepension
charge to cash adjustment, as a percentage
ofadjusted operating profit.
Adjusted operating profit as a percentage
ofaverage capital employed. Capital
employed is defined as shareholders’ funds
less net cash held, with the pension fund
surplus/deficit net of related deferred tax
deducted/added back.
Comments
on results
Group revenue was 12.0% higher year-on-year
despite a significant foreign exchange
headwind which strengthened through
thesecond half. Our ambition is to deliver
mid to high single digit revenue growth
year-on-year.
Adjusted operating margins were
60bpshigher year-on-year at 22.9%.
Thenon-adjusted operating margin
was20.7%. Ourambition is todeliver mid
20s adjusted operating margins over time.
Cash conversion in2023 reflects a strong
operating cashflow performance, largely
driven by improvements in working capital
including reductions in inventory and
improvements in days’ sales outstanding.
Return on capital employed increased during
the year. Average capital employed increased
by 6.0%, and adjusted operating profits
increased by 14.8%.
12.0
12.8
-5.9
23
22
21
22.9
22.3
22.5
23
22
21
120.3
76.0
108.0
23
22
21
33.9
31.3
30.1
23
22
21
Rotork Annual Report 2023 rotork.com10
Key performance indicators
Strategic report Corporate governance Financial statements
Performance
Adjusted EPS growth %
+14.8%
Performance
Lost-time injury rate (LTIR)
0.08
Carbon emissions tCO
2
e per £m
9.9
Reasons
for choice
Growth in EPS is a measure of our profit
performance, taking into account all aspects
of the income statement including the
management of our capital structure,
treasury and the Group’s tax rate.
Reasons
for choice
LTIR is used as one measure of the effectiveness
of our health and safety procedures.
Scopes 1 and 2 carbon emissions (tCO
2
e) per
£1m reported revenue. This KPI isabroad
measure of our environmental efficiency.
How we
calculate
Increase in adjusted basic EPS (based on
adjusted profit after tax) year-on-year divided
by the prior year adjusted basic EPS.
How we
calculate
LTIR is the number of reportable injuries resulting
in lost time divided by the number of hours
worked multiplied by 100,000.
Energy usage data (scope 1 and location-based
scope2) isconverted to equivalent tonnes of
CO
2
e and reported as a function of revenue.
Comments
on results
Adjusted earnings per sharewas 14.8%
higher year-on-year.
Comments
on results
LTIR for 2023 was 0.08, an improvement on the
0.13 in 2022. Our proactive approach is aimed
atcontinuously identifying weaknesses in our
safety processes and removing or mitigating
riskswhen they are identified.
Sourcing of renewable electricity and equipment
upgrades in some of our facilities resulted in a
11% reduction in our scope 1 andmarket-based
scope 2 emissions last year. Emissions per £1m
were 12% lower thanin the prior year.
Non-financial KPIs
We monitor non-financial areas such as the
environment and safety and health closely
14.8
13.2
-9.6
23
22
21
0.08
0.13
0.20
23
22
21
9.9
11.3
14.3
23
22
21
Financial KPIs continued
rotork.com Rotork Annual Report 202311
Key performance indicators continued
Strategic report Corporate governance Financial statements
Chief Executive Officer’s statement
2023 was another year of strong delivery
againstour strategy, and I am proud of all we
have achieved as a team. We improved our
safety andemissions performance, made excellent
progress on our Growth+ strategy, and increased
employee engagement. Our financial performance
underscores this, with revenues ahead double
digits on an organic constant currency basis
andadjusted operating profit margins further
improved. Our financial results were particularly
encouraging, given the supply chain challenges
early in the year.
Health, safety & wellbeing
The safety of our people, partners and visitors
isour number one priority, and our vision for
health and safety is zero harm. In 2023, we
recorded a lost-time injury rate of 0.08, an
improvement on the 0.13 recorded in 2022,
partly reflecting extensive work completed
across the Group to implement our Global
Safety Standards. Our Total Recordable Injury
Ratewas 0.26 (2022: 0.53).
In many regions, a knock-on effect of the
invasion of Ukraine has been a further rise in
consumer price inflation, which had already
increased in the aftermath of Covid, particularly
onessentials such as food, energy and housing
costs. While there are signs that inflation is
being brought under control by increased
interest rates, it peaked later than anticipated at
higher levels and remained higher than expected
for a longer period. We took steps to assist
affected colleagues wherever we could,
including through bringing forward
salaryreviews.
Our employee engagement Pulse survey took
place in July. The participation rate increased
to79%, versus December 2022’s survey at
75%.As part of the engagement survey, we
askemployees to rate Rotork as a place to
workbetween 1 and 10, where 10 is highest.
Engagement continues to improve, with the
score increasing to 7.4 in July, from 7.2 in
December 2022 and 6.7 in June 2022.
We continued to make significant
progress in 2023 and delivered
another year of strong organic sales
growth, margin improvement and
good cash flow performance.
Thedelivery of Growth+ continues
and the benefits of the strategy
areapparent, including in our sales
performance in the year
Kiet Huynh
Chief Executive Officer
12
Chief Executive Officer’s statement
Strategic report Corporate governance Financial statements
Rotork Annual Report 2023 rotork.com
Health, safety & wellbeing continued
Reflecting the encouraging trend in our
engagement survey results and best practice,
wemoved to an annual survey during 2023.
We have a committed team who are proud to
work at Rotork and determined to deliver on
ourambitious goals. We offer our thanks and
appreciation for all their efforts throughout2023.
Environmental performance
Sustainability is a major focus for Rotork. Whilst
our impact in enabling our customers to improve
their environmental performance likely far exceeds
our Company’s environmental footprint, the
latter is no less important. Our total scope 1 and
2 (market-based) emissions decreased by 11%
in2023 compared with 2022, reflecting the
implementation of energy efficiency projects
and investment in on-site renewable generation.
Our SBTi-validated near-term greenhouse gas
(GHG) emissions reduction targets are:
• to reduce our absolute scope 1 and 2
GHGemissions 42% by 2030 from a 2020
baseyear
• to reduce our absolute scope 3 GHG
emissions from the use of sold products
25%by 2030 from a 2020 base year
• that at least 25% of our suppliers by
emissions covering purchased goods and
services willhave science-based targets
by2027
We target net-zero by 2035 for scopes 1 and
2and by 2045 for scope 3.
Underlining the importance we attach to
achieving our net-zero targets, scopes 1
and2greenhouse gas reduction targets
areincluded inour senior team’s long-term
remunerationopportunity.
We were pleased to receive a rating of AAA in
the MSCI ESG ratings assessment (AA previously)
and to once again be recognised as one of the
top performing companies rated by Sustainalytics
and included in their 2023 ESG Industry Top
Rated companies list.
“ We were pleased to receive a
rating of AAA in the MSCI ESG
ratings assessment, up from AA
previously, and to once again
berecognised as one of the top
performing companies rated by
Sustainalytics and included in
their 2023 ESG Industry Top
Ratedcompanies list.”
Kiet Huynh
Chief Executive Officer
Growth+ strategy
The starting point of our Growth+ strategy is our
Purpose, ‘keeping the world flowing for future
generations’. Our Purpose is a powerful
motivator, and it drives everything we do. It also
recognises the role we play in making our world
a great place to live, and the role we play in
helping improve the safety, environmental and
social performances of not just ourselves but
also our end users, customers, suppliers
andcommunities.
Our vision is for Rotork to be the leader in
intelligent flow control. This recognises the
ever-increasing importance of connectivity to
ourend users. Today’s intelligent flow control
systems ensure safety, are reliable, efficient,
easyto use, and play a vital role in ensuring the
uptime of our end users’ operations (including
through predictive and preventative maintenance).
Our ambition is mid to high single-digit revenue
growth and mid 20s adjusted operating margins
over time. Three powerful megatrends help
driveour growth: automation, electrification
anddigitalisation, as well as the trends of
sustainability, decarbonisation, energy security,
water scarcity, water quality and new energies.
Our Growth+ strategy is designed to drive our
growth and to balance our investments with
margin progression. At the core of our strategy
are three pillars: Target Segments, Customer
Value and Innovative Products & Services, each
underpinned by our focus on ‘Enabling a
Sustainable Future’.
Our ‘Target Segments’ are key segments within
each of our divisions where we have the right to
play and where there are significant opportunities
for profitable growth. We are prioritising
investment into these areas, helping us to
growfaster than our overall markets.
Rotork colleagues at our Lucca (Italy) site attending a townhall meeting.
rotork.com Rotork Annual Report 202313
Chief Executive Officer’s statement continued
Strategic report Corporate governance Financial statements
Growth+ strategy continued
We have already seen early benefits from our
focus on Target Segments which represented
around half of Group sales in 2023 and grew
15% year-on-year OCC.
Successes in Oil & Gas include in North America,
where our IQTF range has established itself as
the leading electric actuator for the wellhead
choke valve, and in liquified natural gas (LNG)
where we benefit from a significant installed
base and are well placed to support the
industry’s planned liquefaction capacity
expansion. We have further developed the
Target Segment ‘methane emissions reduction’
and now describe this as ‘upstream
electrification’. The change reflects our business
development as well as the oil & gas industry’s
commitment to electrification which was
highlighted at COP28 in December 2023 with
companies representing more than 40% of
global oil production signing the Oil & Gas
Decarbonization Charter. The medium-term
opportunity is potentially greater than we
originally calculated, with North America
representing the majority of the opportunity.
Chemical, Process & Industrial (CPI) plays across
various markets and sectors, and selectivity and
focus are key. We are focused on identifying
growth opportunities in structurally growing
markets and through share gain in areas where
Rotork has historically been under-represented.
Identifying these opportunities requires an
in-depth investigation of value chains that are
often in new markets. In 2023 we made good
progress in the Target Segments of HVAC,
mining (focused on the battery value chain),
speciality chemicals and decarbonisation.
In Water & Power, we have made excellent
progress in our Target Segments of water
infrastructure, desalination, and alternative
energy. Our teams take a straightforward
commercial approach to identifying the areas
where we have a clear ‘right to play’ and only
then step up their pursuit of projects in these
areas. Examples include the exciting water reuse
sector, where network digitalisation and efficiency
are increasingly in focus, desalination, where
electrification is a structural trend, and the
alternative energy sector. In the latter, unmanned
offshore high-voltage direct current (HVDC)
platforms require the most reliable automation
equipment with advanced diagnostic features
that allow predictive and preventative
maintenance techniques and which Rotork
isideally placed to provide.
We are also making good progress on our
Customer Value pillar, which puts the customer
at the forefront of everything we do. One example
is the implementation and integration of common
systems and processes throughout the Group.
This will improve efficiency and ultimately deliver
improved lead times and customer experience.
We successfully deployed our new Enterprise
Resource Planning system during the first half at
our Bath (UK) site. The system will be implemented
across all sites over the next few years.
Our Innovative Products & Services pillar also has
good momentum. We launched the IQ3 Pro and
its accompanying smartphone app during the
year. This offers greater connectivity than its
predecessor and the smartphone app makes
configuration and operation easier and more
convenient. Our enhanced Intelligent Asset
Management (iAM) condition monitoring
andanalytics software has been well received
byend-users who appreciate its expanded
diagnostic and predictive functions.
Rotork colleagues at our Leeds (UK) site at their morning performance meeting.
from the levels they reached immediately
following the Ukraine invasion, in most cases,
they remain higher than they have been for
many years. The energy sector continues to
invest in traditional energy infrastructure,
including in LNG, and is seeking to catch up
from earlier under-investment.
The year also saw the world’s hottest summer
on record (according to NASA) and extreme
weather events such as wildfires and droughts
across the globe. These events remind us of
theurgency of tackling carbon emissions and
adapting to climate change. It is apparent that
tackling the climate crisis and delivering a just
energy transition at pace will require a practical
approach including a balance of technologies
with methane emissions reduction, LNG, carbon
capture and storage, hydrogen and direct air
capture all having significant roles to play.
Rotork has an important role to play through its
eco-transition portfolio which contributed 30%
of Group sales in 2023. This consists of products
and services that:
• Reduce (and in many cases eliminate)
methane emissions, through the electrification
of the upstream oil & gas sector
• Enable the energy transition, for example,
through applications in LNG, carbon capture
and storage, biofuels, hydrogen and
offshorewind
• Manage water and wastewater distribution
and treatment
Rotork has had notable success in upstream
electrification, with the IQTF being established
as the leading electric actuator for upstream oil
and gas choke valve automation.
While some of these technologies are still early in
their commercialisation phase, we believe they will
grow significantly. Methane emissions reduction
was a prominent topic at COP28 in Dubai in
December, with companies representing more
than 40% of global oil production committing
to the Oil & Gas Decarbonization Charter and
tonear-zero upstream methane emissions
by2030 including through electrification.
“ The safety of our people, partners
and visitors is our number one
priority, and our vision for health
and safety is zero harm. I want
tothank every member of our
committed team for their efforts
driving safety during the year.”
Kiet Huynh
Chief Executive Officer
In August, we acquired a small but strategically
important business, Hanbay Inc., adding a
compact high-torque electric valve actuator to
our product offering. The Hanbay acquisition
isfully consistent with the Growth+ strategy.
Market update
Energy security and the energy transition were
again major trends in 2023. Energy security
became a significantly increased global priority
following the dramatic change in the energy
landscape triggered by the events in Ukraine in
February 2022 and the subsequent attack on the
Nord Stream pipeline as well as conflict in Israel/
Palestine. While hydrocarbon prices have fallen
Rotork Annual Report 2023 rotork.com14
Chief Executive Officer’s statement continued
Strategic report Corporate governance Financial statements
Market update continued
The United States Environmental Protection
Agency issued its ‘final rule’ regarding methane
emissions. This requires new and existing natural
gas-driven process controllers (i.e. pneumatic
actuators) across the USA to be zero emission,
with few exceptions.
The growth in electric vehicle and energy
storage demand continues to boost the entire
battery value chain. For Rotork’s CPI division,
opportunities include metals and minerals
mining and processing, speciality chemicals and
critical HVAC controls in battery and vehicle
production facilities. In the semi-conductor
fabrication and data centre markets, customers
increasingly recognise the benefits of Rotork’s
critical HVAC product ranges and are switching
to them.
Decarbonisation remains a high-potential
futuremarket for all three of our divisions,
andrecognising this we have moved to report
decarbonisation activity in each division rather
than only in CPI. The United States’ Inflation
Reduction Act and the European Union’s similar
initiatives support the carbon capture and
storage (CCS), hydrogen and sustainable aviation
fuel sectors. We saw a marked increase in
enquiries, engineering design and quotation
activity in the period, particularly concerning
carbon capture. The Global CCS Institute
reported that the capacity of CCS projects
inconstruction and development grew 57%
year-on-year in 2023 to312 Mtpa CO
2
.
The outlook for water and wastewater remains
positive with continuing investment in new and
existing infrastructure. The market is focused on
delivering water availability, improving water
quality, reducing leakage, efficient water reuse,
and automating and digitalising networks and
processes. Significant investment initiatives
worldwide are underway or set to begin, including
in the US, China, the Middle East and the UK.
The desalination market remains active, with
projects underway worldwide and, most
notably, in the Middle East.
By geography, Europe, Middle East & Africa
(EMEA) sales by destination grew double digits
(OCC) and was Rotork’s fastest growing region.
Asia Pacific revenues grew high-single digits
year-on-year on an OCC basis with all divisions
ahead. Americas revenues were mid teens ahead
(OCC) with all divisions in the region growing at
similar rates.
Rotork Site Services, our global service network
and a key differentiator in our industry, performed
well with revenues growing faster than the
group overall. Our Lifetime Management and
Reliability Services programmes have good
momentum, as does our Intelligent Asset
Management predictive analytics system.
RotorkSite Services is managed as a separate
unit within our divisions and contributed 21%
ofGroup sales (2022: 21%).
Adjusted operating profit was 14.8% higher
year-on-year (17.3% higher OCC) at £164.5m,
reflecting volume growth and positive net price/
mix which were partly offset by annual wage
inflation and investment in our Growth+ strategy.
Adjusted operating margins recovered strongly
in the second half and full year margins were
60bps higher at 22.9% (70bps higher at
23.0%OCC) and reported profit before tax
was£150.6m.
Our eco-transition portfolio of products and
services that have particular environmental or
sustainability benefits, or which enable the
energy transition and decarbonisation, consists
of three sub-portfolios: ‘water & wastewater’;
‘methane emissions reduction’ and ‘new
energies & technologies’. Eco-transition, water
&wastewater and methane emissions reduction
sales grew faster than the Group year-on-year in
2023 and represented 30% of Group sales.
Return on capital employed was 33.9%
(2022:31.3%), benefitting from a greater
increase in adjusted operating profit than the
increase in capital employed. Cash conversion
was 120% (2022: 76%) as 2023 saw a more
normal delivery phasing and a reduction in
inventory as supply chain issues normalised.
In traditional power, the focus remains on plant
modernisation, refurbishment, and life extension.
Whilst the new build market is quieter than
itonce was, there continue to be new build
opportunities, for example in China and India.
Renewable energy is playing an important role
indelivering energy security as well as the energy
transition. According to the IEA, the amount
ofrenewable power capacity that will have
beenadded worldwide in 2023 will have been
ca.30% higher than in 2022. Rotork products
are specified for several applications in offshore
wind, including in HVDC transformer cooling
systems, and in concentrated solar.
Business performance
Group order intake increased 6.2% year-on-year
(7.8% on an OCC basis) to £723.7m. All three
divisions booked higher orders for the full year,
with Water & Power and Oil & Gas strongly
ahead. CPI reported encouraging order growth
in the final quarter. Orders, which continue to be
driven predominantly by customers’ operational
spend, included more large orders than seen for
some time, particularly notably in the first half.
Supply chain challenges held back deliveries to
customers in the first half of the year, resulting
in during the summer a record order book
relative to sales. The supply chain situation
significantly improved during the second half
allowing some normalisation of the order book.
The lead time of semi-finished components
suchas circuit boards which had increased
substantially following Covid was the biggest
ofthese supply chain challenges.
Group revenue was 12.0% higher year-on-year
(13.6% higher OCC), benefitting from both
higher volumes and price increases. Oil & Gas
sales rose 15.9% (16.6% OCC), driven by
strength in EMEA and the Americas and
increased upstream electrification activity. CPI
sales were 7.7% ahead (9.7% OCC), with all
major geographic regions growing at similar
rates. Water & Power sales were up 10.5%
(13.3% OCC), with both segments achieving
good growth.
Capital allocation
We retain a strong balance sheet and had a net
cash position of £134.4m at the period end
(31December 2022: £105.9m). This gives us
thefinancial flexibility to pursue our organic
investment plans, pay a progressive dividend and
execute our targeted M&A strategy. We regularly
review our capital needs in line with our capital
allocation strategy and have demonstrated
discipline and flexibility in usingbuybacks and
dividends to deliver shareholderreturns.
On 4 August, Rotork acquired Montreal (Canada)
headquartered Hanbay Inc (‘Hanbay’). Hanbay
designs and manufactures compact, high-torque
electric valve actuators for non-hazardous and
hazardous applications. The acquisition expands
Rotork’s electric actuator offering, is consistent
with all three pillars of the Growth+ strategy, and
increases the sales of our eco-transition portfolio.
Board update
As announced on 12 September, Jonathan Davis
will be stepping down as Group Finance Director
and from the Board at the AGM in April 2024,
after 21 years with the Company. Over his time
at Rotork, Jonathan has overseen significant
profitable growth, and we all wish him well for
his retirement.
Ann Christin will also be stepping down as a
non-executive director at the forthcoming AGM.
I’d like to thank her for her valued contribution
over the past few years, particularly with respect
to environmental and sustainability matters.
Outlook
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.
Kiet Huynh
Chief Executive Officer
4 March 2024
rotork.com Rotork Annual Report 202315
Chief Executive Officer’s statement continued
Strategic report Corporate governance Financial statements
Rotork: Keeping the world flowing for future generations
Our financial ambition is mid to high single-digit revenue growth and
mid20sadjusted operating margins over time. We will deliver this ambition
whilstperforming for our shareholders, our people and the environment
Ambitious
growthtargets
Strong operating
leverage
Leading
returns
Highly cash
generative
Committed to
sustainability
Disciplined
capitalallocation
Targeting mid to high single
digit revenuegrowth
We are the global leader
inhighly attractive growth
markets that have high
barriersto entry and are
relatively concentrated.
Ourserved markets are
benefitting fromthe
megatrends of automation,
electrification and digitalisation
that are transforming industry.
We aim to outgrow them
through the implementation
ofour Growth+ strategy.
Higher sales boost
profits significantly
Our business has a high gross
margin and relatively low
variable costs meaning high
operating leverage – higher
sales boost profits significantly
and quickly. As well as having
high margins and relatively low
fixed assets, the business has a
comparatively low level of net
working capital, meaning that
revenue growth need not
absorb significant cash.
Market leading returns
with room for upside
Our adjusted operating profit
margin was 22.9% in 2023,
amongst the highest in the
industrial goods & services
sector. We target a return
tothe mid-20s over time
through operational gearing,
continuous improvement
andsourcing and supply
chaininitiatives. We have an
asset-light business model and
our return on capital employed
(ROCE) was33.9% in 2023.
Balance sheet strength
Our group is highly cash
generative – cash conversion
averaged 114% over the last
five years. This cash flow
enables us to fund organic
investments, pay a progressive
annual dividend and gives us
the flexibility to make strategic
acquisitions. The higher cash
conversion of 120.3% in 2023is
largely driven by improvements
in working capital.
Enabling a
sustainable future
Our sustainability framework is
core to everything we do and
embedded in the Growth+
strategy through our ‘Enabling
a Sustainable Future’ initiative.
Every day we work to help
customers better their own
environmental performance,
including through our
‘eco-transition’ portfolio
ofproducts and services,
whilstalso working to
improveour own.
A clear capital
allocation framework
Our capital allocation
priorities are:
i) organic investment
(newproduct development,
innovation, new markets,
internal systems);
ii) ourprogressive
dividendpolicy;
iii) strategic investments;
followed by, in the event
inthe future we determine
we have excess cash; and
iv) return of cash.
Read more P.13 Read more P.64 Read more P.65 Read more P.66 Read more P.30 Read more P.15
Rotork Annual Report 2023 rotork.com16
Investment case
Strategic report Corporate governance Financial statements
rotork.com Rotork Annual Report 202317
Our Growth+ strategy
Growth+ is designed to deliver our ambition of mid to high single-digit
revenuegrowthand mid 20s adjusted operating margins over time
VISION
To be the leader in intelligent flow control
PURPOSE
Keeping the world
flowing for future generations
Enabling a Sustainable Future
Helping customers better their own environmental performance,
whilst at the same time working to improve our own
Target Segments
Innovative Products
& Services
Customer Value
Target Segments
How this fits with our growth ambition
These are carefully chosen segments,
where we have therightto play, and
where thereis significant growth
opportunity. Through prioritising these
areas we aimto grow faster than
theoverall market
Example
• Oil & Gas – upstream electrification,
Asia infrastructure growth, LNG
• CPI – decarbonisation, chemical,
HVAC, mining
• Water & Power – water
infrastructure, wastewater,
desalination, alternative energy
Customer Value
We believe that by putting thevalue we
provide toour customer at the forefront,
byquoting more quickly and being more
responsive, we canearn agreater share
ofourcustomers’ spend
• Go to market enhancement
• Global supply chainprogramme
• Improved customer experience
Innovative Products & Services
Innovation is the lifeblood of Rotork and
our development of new products and
services aims tostrengthen our market
positions as well as take usinto new
growth areas
• Target segment alignment
• Electrification
• Connected and digital
• Make-vs-buy/M&A
• Leverage Rotork Site Services
Strategy introduction
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Rotork Annual Report 2023 rotork.com18
Strategy
Our first Growth+ pillar is ‘target segments’.
Wehave identified key segments within each
ofour divisions where we have the right to play
and where there are significant opportunities for
profitable growth. We will prioritise investment
into these areas, helping us to grow faster than
our overall markets. The focusing on these
segments does not mean we will stop playing
inother areas where we anticipate there will
stillbemarket growth.
We estimate the combined market size of our
chosen target segments to be £3.7bn and their
market growth rate to be high single digits.
Ourtarget segments represent around half
ofgroup sales currently.
Chemical, Process & Industrial
• Decarbonisation
• Chemical
• HVAC
• Mining
Oil & Gas
• Upstream electrification
• Asia infrastructure growth
• LNG (energy transition bridge)
• Decarbonisation
• Brownfield opportunities
Water & Power
• Water infrastructure
• Water, wastewater & treatment
• Desalination
• Decarbonisation
• Alternative energy
Target segments
Identifying segments where we have the right to play where
there are significant opportunities for profitable growth
Target segments by division
“ We are already seeing benefits
from our target segments focus.
Successes include in upstream
electrification in North America,
where our IQTF range has
established itself as the leading
electric actuator for wellhead
choke valve control.”
Kiet Huynh
Chief Executive Officer
What we will do
• Extend our segment domain expertise.
Wehave significant domain expertise across
our target segments however we will build
on this, for example through tactical hires
and training
• Accelerate business development in these
target segments. Achieve this through
identifying and communicating the value
oursolutions can bring totarget segment
flow control challenges
• Work with industry associations.
Certaintargetsegments, for example
greenhydrogen, arerelatively immature
andthe commercialisation path is not
yetclear. Through working with industry
associations we can position ourselves
tobenefit aspaths form
Strategy introduction continued
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rotork.com Rotork Annual Report 202319
Target segments
Division: Oil & Gas
Segment: electrification of upstream oil & gas
Oil & Gas production companies are increasingly
looking to electrify their operations to reduce their
carbonintensity. There are two methods of electrification:
(i) replacing equipment running on hydrocarbon fuel
(e.g. diesel powered pumps) with equipment powered
by electricity; and/or (ii) converting pneumatic or
hydraulic powered systems to electrically powered ones.
The second of these also improvesenergy efficiency,
allows for more compact production infrastructure,
andimproves control. It can also reduce direct and/or
indirect methane emissions.
Why the focus on methane emissions? Fugitive methane
emissions from energy production are estimated to
contribute around 6% of global greenhouse gas
emissions annually (source: Our World in Data). Methane
is a potent greenhouse gas, significantly more powerful
than CO
2
at warming the atmosphere. There were two
related major announcements at COP28 in December
2023. The US Environmental Protection Agency
published its ‘controlling air pollution from oil & gas
operations’ rule. This requires that new and existing
process controllers (valve actuators) be zero emission.
On the same day the ‘Oil & Gas Decarbonization
Charter’, signed by companies representing more than
40% ofglobal oil production, was published. The
charter commits to near-zero upstream methane
emissions by 2030 through electrifying upstream
operations and the elimination of routine flaring.
Read more P.28
Choke valve automation
anditspart in methane
emissionsreduction
A typical oil & gas production wellhead utilises
a choke valve to control the flow and pressure
of hydrocarbons to the nextproduction
process step. Traditionally thechoke valve has
been controlled manually using a hand wheel.
A disadvantage of this method is the risk of
methane emissions downstream (e.g. through
incomplete flaring or emergency venting)
ifthere is an unplanned increase in flow or
pressure whilst the wellhead is unmanned.
Toeliminate or reduce this risk, wellhead
operators are increasingly requiring that
choke valves be controlled by electric
actuators which can be operated remotely
orautomatically (e.g. upon a signal from
apressure sensor). Rotork’s IQTF has
established itself as the leading electric
actuator for wellhead choke valve automation.
Target segments continued
Strategy introduction continued
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Rotork Annual Report 2023 rotork.com20
Target segments
Division: CPI
Segment: decarbonisation
Air travel is an integral part of society and an
essential means of connectivity and commerce.
However, aviation emits carbon – accounting
for between 2.5% and 3.5% of global CO
2
emissions according to Our World in Data.
With passenger flight demand forecast by
ATAG Waypoint to more than double between
2019 and 2050, a path to decarbonisation
isrequired. Whilst alternative technology
solutions such as electrification are planned,
one of the most significant near-term
opportunities to reduce carbon intensity
is‘Sustainable Aviation Fuel (‘SAF’). SAF can
be produced from various feedstocks including
biomass and waste and according to Airbus
could reduce the lifecycle CO
2
emissions
ofanaircraft by up to 80% compared
toconventional fuel.
Cleaner fuels in Singapore
Rotork is proud to be working closely with
partners on the expansion and upgrade of a
major refinery in Singapore. The focus of the
expansion is increased output of cleaner fuels
including low sulphur marine fuel and SAF.
Feedstock for the aviation fuel will be animal
fats, grease and waste cooking oil. Rotork
supplied network control equipment (Master
Stations and Pakscan units) as well as electric
actuators (IQ3 Pros) to the project, which is also
investigating opportunities to transform residue
from the site into hydrogen in the future.
JewelChangi Airport in Singapore pictured.
Read more P.26
Target segments continued
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20
21rotork.com Rotork Annual Report 202321
Target segments
Division: Water & Power
Segment: water infrastructure
There is strong demand for water infrastructure
across developed and developing markets
driven by health and safety, economic
development and population growth and
migration. Rotork’s intelligent flow control
systems are used in applications including
thetransportation of water, production of
potable water, treatment of waste water,
andclimate change adaptation including
managing the challenges posed by floods
anddroughts. Water quality and leak
detection are major focuses of the industry,
as is intelligent, digital, network control.
Water infrastructure for new
city in the Middle East
Rotork is supplying electric actuators
andmotorised gearboxes to control the
transportation and distribution of potable
water to a major new city in the Middle East.
Rotork’s market leading product and service
offering as well as its local presence (valve
actuation centre and service team) helped
secure this high-profile order, one of the
largest in Rotork’s history.
Read more P.29
Target segments continued
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Rotork Annual Report 2023 rotork.com22
Customer value initiatives
Strategy
We want to put the value we provide to our
customer at the forefront of everything we do.
To achieve this we need to further improve our
company-wide processes, to streamline these
and to break down silos. To deliver these
processes we need our highly trained teams –
wherever they are in the world – to be working
using one modern enterprise resource system.
We are working on three main areas. Go to
market enhancement is about strengthening
ourrelationships with customers and maximising
our opportunities with them. Our global supply
chain programme aims to enable us to improve
our delivery and lead times and respond to any
supply chain issues. Improved customer experience
is about improving our business processes,
allowing us to quote quicker and be more
responsive to our customers.
Progress during 2023
We made encouraging progress in 2023
although there remains much to do. Our key
account management and project pursuit pilots
have been successful, and the wider programme
implementation will shortly commence.
Wehavestepped-up our commercial training,
with ‘Brilliant Basics’ rolled-out to our sales
forceand other functions and more to follow.
We have made good progress reducing lead
times across our assembly sites, in some cases
reducing these to two weeks from eighteen.
Ourprocurement teams have worked to reduce
the risk of component shortages and there
wereno material shortages in the second
half.We have re-engineered our transportation
approach with a new global logistics partner
appointed. Our business process re-engineering
programme is well underway with Microsoft
Dynamics 365 successfully implemented at our
largest assembly site and at our Head Office.
Customer value
Our customer value vision:
a seamless customer experience
“ Modern digital processes, systems
and structures are a key enabler
ofRotork’sgrowth journey.”
Lyndsey Norris
Business Transformation Director
Go to market
enhancement
• Global key account
management
• Project pursuit
programme
• Sales force academy
• RSS network expansion
Global supply chain
programme
• Lead time reduction
programme
• Global transportation
programme
• Global shortages
programme
Improved customer
experience
• Business process
re-engineering
• Faster quotations;
on-time delivery
Strategy introduction continued
Strategic report Corporate governance Financial statements
ACE programme
Following the successful pilot of our
Achieving Customer Excellence (“ACE”)
programme at our Leeds (UK) site we are
rolling it out across the Group. 70% of Leeds’
products are now produced under the ACE
programme. Lead times on these products
have been reduced to two weeks (from
eighteen) and this reduction has significantly
helped Leeds to win new business. Inventory
has also been reduced by 25%.
Customer service training
Our new learning management system
offerscourses on customer service essentials,
knowledge and attitude and satisfying
challenging customers. Over 2,000 training
modules were completed during the year,
equipping our inside sales and contracts
engineers with the skills needed to deliver
aseamless customer experience. Feedback
was very positive and we have exciting new
training modules planned for 2024.
Read more P.58
Customer value continued
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Rotork Annual Report 2023 rotork.com24
Strategy
Innovation is the lifeblood of Rotork. Over the
last several years we have brought our teams
together and streamlined how we deliver
innovation and the development of new
products and services. Our teams are focused
onprojects which are aligned with our chosen
target segments, customer value and our
‘enabling a sustainable future’ principle.
Keyinnovation drivers include electrification,
connectivity, data analytics and product
efficiency. Additionally, our engineers remain
focused on product-in-use, and increasingly
life-cycle, emissions. Whilst we continue
toinnovate and develop new products
wearealways weighing ‘make versus buy’
arguments,recognising that in-house
productdevelopment is not always the
fastestroute to successfulcommercialisation.
Innovative products & services
Innovation is the lifeblood of Rotork
“ The team delivered a
step‑change in sustainable
innovation in 2023.”
Ross Pascoe
Chief Technology Officer
Progress during 2023
We have made encouraging progress on all main areas under innovative products & services:
• ‘Enabling a sustainable future’ alignment.
During 2023 we successfully incorporated
product and packaging sustainability
requirements into our Product Development
Process, focusing on energy and material
reduction and recycled/recyclable content.
We formed a Life Cycle Assessment (LCA)
team who are using product sustainability
LCA software to calculate embodied carbon
in our flagship products and to advise on
product design improvements. Our Sustainable
Packaging Team are exploring opportunities
to maximise the environmental performance
of our product packaging whilst continuing
to ensure that our products arrive to the
customer safely and in perfect condition.
• Connected and digital. We launched the
IQ3Pro Range and the Rotork App early
inthe year. The update of our flagship IQ3
intelligent electric actuator platform extends
its digital-connectivity, and the Rotork App
provides an improved user experience in
configuration and operation. The IQ3 Pro
features a more powerful processor enabling
features such as ethernet TCP/IP, wireless,
additional languages and easier export of
performance data to the Rotork cloud.
• Make‑vs‑buy/M&A. Hanbay designs and
manufactures compact, high torque electric
valve actuators for both non-hazardous and
hazardous applications. Having previously
sold Hanbay products under a white-label
arrangement we acquired the business in
August. The acquisition expands our electric
actuator offering.
Hanbay compact high torque electric valve actuators
Strategy introduction continued
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Skilmatic SI3 range launch
The Skilmatic SI3 hydro-electric spring-closed
actuator range was launched during the year.
It extends Rotork’s electric actuator offering
into critical safety applications requiring high
torque with “fail-safe” safety certification.
The range has applications in a number
ofareas including in methane emissions
elimination. It features elements common
with the IQ3 including the controller and
network interfaces and protocols providing
identical look-and-feel and a seamless
interface to the Rotork Master Station.
Innovative products & services continued
Strategy introduction continued
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rotork.com Rotork Annual Report 202325
The division delivered a good full year sales
performance, with revenues 9.7% higher
year-on-year on an OCC basis, despite economic
weakness in a number of regions including
mostnotably China. The division’s performance
clearly benefitted from the pursuit of its chosen
Growth+ target segments such as the focus on
speciality chemicals and metals & mining
markets directly related to the fast-growing
battery value chain and critical HVAC including
in data centres and semi-conductor plants.
Divisional highlights
• Sales clearly benefitted from the pursuit
ofchosen Growth+ Target Segments
• APAC was the fastest growing region
• EMEA sales grew high-single digits OCC
driven by the Middle East/Africa regions
• Americas sales grew
• Adjusted operating margins fell on
negativeproduct mix
£m 2023 2022 Change OCC Change
Revenue 213.7 198.4 +7.7% +9.7%
Adjusted operating profit 51.3 51.2 +0.1% +1.8%
Adjusted operating margin 24.0% 25.8% -180bps -180bps
By destination, Asia Pacific sales were ahead
double digits on an OCC basis driven by strong
growth in India and South Asia. North Asia
revenue was modestly ahead OCC. EMEA sales
grew high-single digits OCC, driven by the
Middle East/Africa region. Americas sales also
grew high-single digits OCC.
The division’s adjusted operating profit was
£51.3m, 0.1% higher than the prior year.
Adjusted operating margins fell 180 basis points
to 24.0%. Particularly strong revenue growth in
fluid power actuators contributed to a negative
product mix which even with improved direct
labour productivity meant a decline in gross
margin. With overheads then increasing below
the Group average and in line with revenue,
thisresulted in a 180bps adjusted operating
margin reduction.
Rotork’s electric and fluid power actuators and
instruments were selected by innovative customers
across the battery value chain (mining, minerals
processing and battery production) for their
robustness and reliability. Rotork’s electric and
fluid power actuators and control systems are
being supplied to a major chemical project being
built in China. Rotork was selected in part due to
the customer’s preference for the Rotork Pakscan
field device control system. A privately-owned
fine chemicals company has chosen Rotork’s
YTC positioners for their Indian plant expansion
replacing a competitor’s existing product.
Rotork’s pneumatic actuators have also been
selected tocontrol bottom door systems on
‘aggregate hopper’ rail wagons which will be
used on the UK’s High Speed 2 rail project.
% of Group revenue
30%
Chemical,
Process &
Industrial
CPI is a supplier of specialist actuators and
instruments for niche critical applications in
the broad chemical, process industry and
industrial sectors. The division serves a wide
range of end markets including speciality and
other chemicals, metals and mining, critical
HVAC, pharmaceutical, steel and cement. The
automation, electrification, digitalisation and
decarbonisation megatrends are important
growth drivers for these markets. Rotork has
historically been under-represented in several
of these markets and has the opportunity
towin market share in the years ahead.
Rotork Annual Report 2023 rotork.com26
Divisional review
Strategic report Corporate governance Financial statements
rotork.com Rotork Annual Report 202327
Specialised actuators and instruments
forniche critical process automation
• Industry-leading returns driven by our
ability to identify and solve reliability and
safety challenges
• Around 75% of sales growing faster than the
overall process automation market through
focus on structurally growing markets and
sharegain opportunities
• Significant growth opportunities driven by
automation, electrification and digitalisation
Note: Split of sales within chemical, process and industrial
segments are management estimates. Decarbonisation sales
are post transfer to other Rotork divisions in early 2023.
Chemical, Process & Industrial continued
Divisional revenue
split by end market
Divisional review continued
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Rotork Annual Report 2023 rotork.com28
Following a first half where deliveries continued
to be somewhat restricted by supply chain
challenges the second half saw a strong recovery
and full year divisional sales were ahead 16.6%
year-on-year (OCC). All segments grew and
downstream sales represented 49% of the total
(50% in 2022); upstream 27% (25%) and
midstream 24% (25%).
The strongest growth in regional sales by
destination was in EMEA, driven by significantly
increased customer activity in Western Europe
and the Middle East. All three EMEA segments
– downstream, upstream and midstream grew
atsimilar rates. APAC revenues were modestly
ahead overall (OCC) despite reduced activity in
the midstream segment in China. Americas sales
were ahead mid-teens with all three segments
Divisional highlights
• Revenue higher driven by spend on
increasingoutput, improving productivity
andreducing emissions
• EMEA was the fastest growing region
• APAC revenues were modestly ahead
• Americas sales were ahead mid-teens
• Margins rose 290bps to 25.5% on higher
volumes and positive pricing
£m 2023 2022 Change OCC Change
Revenue 328.4 283.3 +15.9% +16.6%
Adjusted operating profit 83.6 64.0 +30.7% +32.7%
Adjusted operating margin 25.5% 22.6% +290bps +310bps
growing in the region, and upstream and
midstream growing particularly strongly. Sales to
Mexico were lower due to a project completing.
The division’s adjusted operating profit was
£83.6m, 30.7% up year-on-year. Higher volumes
and positive pricing more than offset increased
people costs and investment in the division’s
commercial teams and resulted in adjusted
operating margins rising 290 basis points
to25.5%.
Oil & Gas’ focus on target segments during the
year delivered notable order wins in upstream
electrification, Asia Infrastructure, decarbonisation
and Rotork Site Services. Demand from choke
valve manufacturers for the Rotork IQTF electric
actuator grew strongly year-on-year as North
American upstream operators sought to
eliminate incomplete flaring downstream of new
and existing wellheads. Rotork electric actuators
and network control devices were selected
toprovide control and safety at a major new
multi-site tank farm development in India (order
secured with the help of Rotork Site Services and
included a five-year Lifetime Management
contract). Rotork fluid power actuators were also
selected to control valves at an innovative new
blue hydrogen facility under construction in
Louisiana (US). Blue hydrogen is produced from
reforming natural gas, with resulting carbon
dioxide captured and stored. The capture unit
atthe Louisiana plant is designed to capture and
permanently sequester more than 5mn tonnes
of carbon each year. Rotork actuators and
network control devices were specified in the
upgrade of an integrated refinery complex
inSingapore. The upgrade enables increased
production of cleaner, low sulphur fuels and
theproduction of sustainable aviation fuel
through processing waste oils.
% of Group revenue
46%
Oil &
Gas
The recovery in oil & gas sector activity
experienced in 2022 continued through 2023.
Hydrocarbon prices have fallen from the
levels reached immediately following the
invasion ofUkraine, however prices remain
above investment incentive levels and there
isincreased spend across most segments and
geographies on increasing output, improving
productivity, reducing emissions and on
decarbonisation (including carbon capture
and storage and hydrogen). The work to
increase LNG export capacity in the USA
andthe Middle East continues on track,
andin December industry players committed
to near-zero upstream methane emissions
by2030 and tothe electrification of
upstreamoperations.
Rotork Annual Report 2023 rotork.com28
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