(Alliance News) - Rotork PLC on Tuesday said trading managed to hold up "reasonably well" despite the ongoing pandemic, though order intake and revenue are expected to have fallen in the first half of 2020.
The flow control and instrumentation company, headquartered in Bath, is forecasting a drop of between around 16% to 18% in terms of order intake in the six months to June 30. This drop is from GBP362 million a year before and is on an organic constant-currency basis.
All of Rotork's production facilities are open, though some are operating at less than normal output levels. Rotork said that while it is planning to keep its facilities open, it would not hesitate to shut them again if necessary.
Revenue is expected to drop from the previous half-year figure of GBP318.6 million as a result of Covid-19 related disruption to the company's "factories, supply chains, logistics and to Rotork Site Services". Disruption was at its peak in April and has eased since then, although normality has not yet returned.
Revenue in April and May was 14% lower year-on-year on an organic constant currency basis equalised for working weeks.
With no further Covid-19 disruption, revenue in the first half is expected to be down by around 11% to 13% from the prior year, with adjusted operating profit also lower but margins "relatively resilient".
Rotork has undertaken "mitigation actions" including freezing recruitment, postponing salary rises, limited discretionary spending, and using government wage replacement schemes, which benefited April and May performance.
"We are in the process of accelerating some restructuring actions that we had planned for the latter years of the Growth Acceleration Programme. The cost of these restructuring actions is expected to be circa GBP2 million in the first half. We have also deferred the commencement of some parts of our IT upgrade, reducing our planned capital expenditure for this year by a similar amount," said Rotork.
As at May 31 the company has GBP125.6 million of net cash. It recently entered a new GBP60 million committed two-year credit facility with its banks, and this is currently undrawn.
In terms of outlook, Rotork said: "Due to the unprecedented level of uncertainty, on 31 March we withdrew our forward guidance for the current year. Whilst the near-term outlook has become a little clearer, there remains considerable uncertainty, hence we retain this position. We are confident however that we will successfully navigate the current challenges and will be a stronger business going forward. Our confidence comes in no small part from the success to date of our Growth Acceleration Programme initiatives which have already demonstrably increased Rotork's cyclical resilience."
Rotork expects to publish its interim results on August 4.
Shares in Rotork were down 2.7% at 278.00 pence in London on Tuesday morning.
By Anna Farley; annafarley@alliancenews.com
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Rotork (ROR)