- Company sticks with 2022 guidance
- Seeing strong order intake
- Expects to start 2023 with record order book
Engineering outfit Rotork (ROR) was in demand as it pointed to successful management initiatives driving a strong recovery in revenue in recent months.
Headquartered in Bath, the company makes flow control solutions for a variety of industries including oil and gas, water and wastewater as well as the chemicals and industrials sector.
In the four-month period to 30 October organic revenue was up 19% year-on-year on a constant currency basis. This was achieved thanks to higher selling prices and improvements in the supply chain and investors reacted by marking Rotork 3.5% higher to 296p. The move extended its gains over the last month to 16%.
In order to address supply chain challenges the company has moved to purchasing semiconductors directly and doing forward buying of this critical component, some products have been reengineered and it has secured new logistics routes and built up inventory.
STRONG BALANCE SHEET AND RECORD ORDER BOOK
With activity driven by operational spend rather than big capital spending projects, Rotork pointed to 'encouraging' order intake in October 'solidly' ahead of the same month last year.
The company's balance sheet also remains strong with net cash as at 30 October of £79.4 million. The company expects 2022 profit in line with expectations and said it anticipates entering 2023 with a record order book which is significantly higher than the one it started the year with.
Shore Capital analyst Tom Fraine still has reservations about the business: ‘Rotork’s offering has historically been focused on the oil and gas sector, with a large portion of its current products primarily designed for the sector,' he said.
‘Many of them are, therefore, too sophisticated and expensive for applications in other markets, making volume growth at a group level difficult to achieve. This has been evidenced by group revenue in 2021 being below 2013, with earnings being materially lower than nine years ago.’
Fraine does see an opportunity to grow revenue thanks to the role of its electric actuators efforts to reduce methane emissions from oil wells in North America. ‘Clear evidence of early material growth from this revenue stream could lead us to change our stance on the stock,’ he added.
