Rotork H1 2025 Earnings Report

Rotork EPS Results

• Actual EPS: GBX 7.10
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Rotork Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Rotork Announcement Details

• Quarter: H1 2025
• Date: 8/5/2025
• Time: Before Market Opens
• Conference Call Date: Tuesday, August 5, 2025
• Conference Call Time: 3:00AM ET

Rotork (LON:ROR) 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. We help customers around the world to improve efficiency, reduce emissions, minimise their environmental impact and assure safety. Rotork employs about 3,200 people, has manufacturing facilities in more than 17 locations and serves 170 countries through a global service network. Its shares have a premium listing on the London Stock Exchange (symbol: ROR) and are a constituent of the FTSE 250 index. For more information please visit www.rotork.com.

Rotork H1 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Strong order growth of 6.3% on an OCC basis and improved sales momentum saw revenue rise 3.3% with a book-to-bill of 1.06.
• Positive Sentiment: Adjusted operating margins expanded to 22%, up 140 bps on an OCC basis, driving a 10% increase in OCC adjusted operating profit and a high ROCE of 37%.
• Positive Sentiment: Service sales reached 23% of group revenue, fueled by higher installed-base penetration and new offerings in Europe, India, and the Middle East.
• Negative Sentiment: Foreign exchange translation created a £10 m sales headwind and £3.4 m profit hit, while higher working capital for delivery phasing reduced cash conversion to 89%.
• Positive Sentiment: The group invested £40 m in the Noah acquisition, returned £30 m via share buybacks, maintained £43 m net cash with an undrawn £75 m RCF, and proposed an interim dividend up 7.3%.

[Kiet Huynh, CEO & Director at Rotork]

Good morning, everyone. Thank you for joining us today for our first half results presentation. Alongside me is Ben Peacock, our CFO. We're pleased to have the opportunity to talk through our performance in the period and will follow our normal format with Q and A at the end of the presentation. We've had a good start to 2025, continuing to execute well against our Growth Pass strategy.

[Kiet Huynh, CEO & Director at Rotork]

I'd like to thank all of my colleagues from around the world as these results are a direct reflection of their hard work and commitment. Order growth of 6.3 on an OCC basis was particularly pleasing, with strong growth in Water and Power and good growth in both CPI and Oil and Gas. Sales momentum improved through the first half, ending the period up 3.3% on an OCC basis with a book to bill of 1.06 due to delivery phasing. We also saw good progress in target segments and service sales, which I'll touch on in the next slide. Adjusted operating profit margins were very encouraging at 22%, up 140 basis points on an OCC basis.

[Kiet Huynh, CEO & Director at Rotork]

Margins were helped by mix and operational efficiencies led by the Oil and Gas division. Combined with sales growth, this resulted in a 10% OCC adjusted operating profit growth in the first half. Return on capital employed remained at a high level at 37%. Disciplined capital deployment remains a key focus for us. And as of the July, we have spent £40,000,000 of the £42,000,000 consideration for Noah and £30,000,000 on the share buyback announced at the full year results.

[Kiet Huynh, CEO & Director at Rotork]

Safety remains the top priority for everyone at Roadtalk. We've been making good progress on our continued safety initiatives. But in response to our first half performance, we are redoubling our efforts in this area to ensure the health and well-being of all our employees. The next slide highlights growth in two of our focus areas: Target segments and Roadtalk Service. In the first half, we continued to see good sales growth in our Target segments, up 7% markets were relatively mixed in a number of regions, we saw good growth in up and midstream electrification and LNG in oil and gas, mining and marine strength in CPI and good growth in the water infrastructure and treatment markets as well as the global power markets.

[Kiet Huynh, CEO & Director at Rotork]

Service is another strategic initiative for the business, which saw continued good growth in H1, reaching 23% of group sales. Here, we continue to drive penetration of the installed base, introduce new products and increase wallet share with existing customers. In the period, we had particular success in Europe, India and The Middle East. I'll come back to this slide later in the presentation to talk about strategy and outlook. But for now, I'll pass over to Ben, who will take you through the financial details.

[Ben Peacock, CFO & Director at Rotork]

Thank you, Gig, and good morning, everyone. I'm pleased to report that with the strong execution of our growth plus strategy, the group has delivered a solid set of financial results with good order growth and margin progression, together with continued high return on capital and returns to shareholders. In the following slides, I'll walk you through the highlights of our performance, but please note that the appendix contains some more specific details on our 2025 interim results. If we now turn to the numbers. Orders received at £391,000,000 were up 6.3% versus prior year on an organic constant currency or OCC basis, with all divisions delivering growth.

[Ben Peacock, CFO & Director at Rotork]

Revenue at £367,000,000 is 3.3% higher than prior year on an OCC basis and 1.6% ahead on a reported basis, impacted by a foreign exchange translation headwind of £10,000,000 From a divisional perspective, Water and Power achieved high single digit revenue growth on an OCC basis. This was offset by CPI, which was flat to prior year, and oil and gas, which increased by low single digits on an OCC basis, with sales momentum gaining strength through the second quarter. We are pleased with the initial contribution of Noah. In line with our original business plan, Noah contributed £4,300,000 worth of revenue in the period. Roadtalk service performed well with revenue continuing to grow faster than the group, and its contribution to group sales increased to 23%, consistent with full year 2024.

[Ben Peacock, CFO & Director at Rotork]

Adjusted operating profit of £80,800,000 is 10.1% higher versus prior year on an OCC basis and margins at 22%, up 140 basis points. Including the currency headwind of £3,400,000 reported operating margins are up 80 basis points. The group continued to be cash generative with cash conversion at 89%. This is down from prior year, reflecting increased working capital to support delivery phasing in H1 and investments to support the second half order book. We closed the period with net cash of £43,000,000 Our increased profitability resulted in adjusted earnings per share of 7.1p, which is an increase of 3.5% on a reported basis, and our high return on capital was maintained at 37%.

[Ben Peacock, CFO & Director at Rotork]

Finally, the proposed interim dividend of 2.95p per share is 7.3% higher than the prior year. If we now turn to the divisions and starting with Oil and Gas. Divisional sales grew 2.3% OCC with robust tire segment growth, particularly in Upstream Electrification and LNG. From a sector perspective, Upstream Markets delivered good growth in the first half, supported by strong electrification related revenues. Despite good growth in LNG, midstream markets were slightly down due to reduced spending in The U.

[Ben Peacock, CFO & Director at Rotork]

S, whilst downstream markets were stable year on year. From a regional perspective, the division experienced good growth in EMEA, offset by broadly flat performance in Asia Pacific and weaker performance in The Americas. Adjusted operating profit at £43,800,000 is up 17.3 on an OCC basis. The three thirty basis points adjusted operating margin improvement reflects strong target segment sales growth, a favorable product mix and operational efficiencies. Turning to CPI.

[Ben Peacock, CFO & Director at Rotork]

Revenues were 0.3% higher year on year on an OCC basis, with underlying momentum improving as the period progressed. On a reported basis, Noah made a good first contribution post acquisition, adding 3% to divisional sales in the period. By destination, Americas sales were particularly strong with good growth in The U. S. And Mexico.

[Ben Peacock, CFO & Director at Rotork]

Asia Pacific sales were up supported by India, whilst EMEA sales declined, which was largely from chemical and process markets in Europe. Adjusted operating profit at £23,700,000 is up 3.6% on an OCC basis, and adjusted operating margins were up 80 basis points to 23.4%. Moving to Water and Power. Sales were up 8.6% on an OCC basis, with both sectors growing strongly but with Power growing slightly faster than water. In target segments, we saw particularly strong growth in water infrastructure and wastewater treatment.

[Ben Peacock, CFO & Director at Rotork]

Asia Pacific was the fastest growing region in the period, driven by India and China. EMEA grew with good performance in gas power markets, whilst Americas sales were broadly flat. Adjusted operating profit for the division was £24,500,000 Excluding foreign exchange headwinds, adjusted operating profit is up 4.2% on an OCC basis. Despite operating leverage on higher volumes, mix effect and higher investment resulted in adjusted operating margins being lower at 25.4%. If we now move to the adjusted operating profit bridge.

[Ben Peacock, CFO & Director at Rotork]

This bridge shows solid profit growth of over 10% OCC versus prior year, driven by increased organic revenues and positive operating leverage. Price increases more than offset salary inflation. And following increased investment in 2024 to support the growth of our strategy, current period OpEx investments have been more limited. Reflecting our operating leverage and mix, adjusted operating margins grew 140 basis points to 22% on an OCC basis. The currency headwind to adjusted operating profit of £3,400,000 I mentioned earlier reduced the reported margin progression by 40 basis points.

[Ben Peacock, CFO & Director at Rotork]

If we now turn to the items below operating profit. Similar to last year, the majority of the adjusting items relate to our business transformation program. A further £12,600,000 was incurred in implementing the new ERP system and the associated systems processes throughout the group. This is in line with our previously disclosed guidance of £30,000,000 for the full year. Other costs largely relate to the previously reported relocation of our new facility in Changshu, China and £1,100,000 of acquisition costs for Noah.

[Ben Peacock, CFO & Director at Rotork]

Finally, tax. The reported effective tax rate and adjusted effective tax rate have both decreased 10 basis points on the prior period, with the adjusted effective tax rate at 25.2%. We expect a similar rate for the full year. Turning to cash flow. We continue to be cash generative, providing funding for organic growth, strategic investments and return to shareholders.

[Ben Peacock, CFO & Director at Rotork]

Operating cash conversion for the period was 89%, with working capital to sales of 26.4%, which is in line with the prior period and reflects the revenue momentum in second quarter. Free cash flow of £29,300,000 is down on the prior period, reflecting the working capital investment and business transformation costs, which are in line with our expectations. If we now move to capital allocation. During the period, we returned to shareholders dividends of £42,000,000 and over £21,000,000 in relation to the previously announced share buyback. Additionally, we completed the acquisition of Noah for £40,000,000 for total capital deployed of over £103,000,000 In relation to Noah, the group has also recorded £2,000,000 of contingent consideration during future years, bringing the total cost of the acquisition to GBP 42,000,000.

[Ben Peacock, CFO & Director at Rotork]

We finished the year with GBP 43,000,000 of net cash, comprising total cash and cash equivalents of £66,000,000 and lease liabilities of £23,000,000 The group also retains additional liquidity through our £75,000,000 revolving credit facility, which was undrawn at the period end. The group's balance sheet continues to remain strong and provides with strategic flexibility as we enter the second half of the year. And finally, on guidance for the current year. Based on current exchange rates, we currently estimate currency headwinds of 3% of sales versus our previous guidance of 2% to 3%. Spend on full year capital expenditure of £15,000,000 and investment in our business transformation program of £30,000,000 are tracking to expectations, and guidance for both is unchanged.

[Ben Peacock, CFO & Director at Rotork]

In summary, we entered the second half with encouraging order intake and an improved second quarter sales momentum. The group is well positioned to deliver another year of strong financial returns and cash generation, which will enable us to fund our capital allocation priorities. I will now hand you back to Gig.

[Kiet Huynh, CEO & Director at Rotork]

Thanks, Ben. In this section, I'd like to update you on some examples of our growth plus successes, our reinvestment strategy and the end market outlook. We launched the growth plus strategy in 2022, designed to deliver mid- to high single digit revenue growth margins over time. The strategy is structured around three pillars: target segments, customer value and innovative products and services. Our target segments approach sets out to identify niches niches in each division, which offer significant profitable growth opportunities above the broader end markets.

[Kiet Huynh, CEO & Director at Rotork]

We encourage the divisional teams to be agile and continually seek and develop new target segments to continue to build our growth momentum over time. Typically, automation, electrification and digitalization are core trends in these target segments, and we are actively investing in these areas to have the biggest impact. Roadtalk service is another key area of focus for us with our full product life cycle capabilities from field service and maintenance programs through to highly intelligent asset management offerings. We are excited about the opportunities Roadtalk service can bring and continue to believe we can increase the revenue potential of a product from 2x to 4x through our offerings over the fifteen to twenty year lifespan of a product. Growth plus continues to drive results with both target segments and Rotorb service growing above our broader end markets in H1, and we are confident that this will continue.

[Kiet Huynh, CEO & Director at Rotork]

I'd now like to share an example of our strategy at work within a niche of a broader market. The oil and gas industry is committed to halving its Scope one and two greenhouse gas emissions intensity by 02/1930, with one of the key levers being electrifying up and midstream processes. We have previously talked about our products being used in upstream methane reduction applications for wellheads in The U. S. This slide shows an example of an upstream gas electrification application in Europe.

[Kiet Huynh, CEO & Director at Rotork]

The next generation 1DS platform is the first fully electrified gas platform in the North Sea, which is automated and unmanned. It converts wet to dry gas to be exported via a pipeline. The platform targets near zero emissions in the future through the technology and processes being used. Rotor products support the electrification, automation and high reliability demand of the platform. We remain excited about the electrification and decarbonization opportunities in up and midstream oil and gas and expect sales to continue to grow within the oil and gas divisional mix.

[Kiet Huynh, CEO & Director at Rotork]

This slide shows another example of where we are targeting an area anticipated to show good medium term growth. In general, we expect water markets to grow above the group average, with the desalination segment expected to be a strong contributor. Industry forecasts are for increasing water scarcity, population growth and technological advances to result in a doubling of desalination CapEx by 02/1930. We anticipate several desalination mega projects in The Middle East, North Africa, China and Australia in the medium term. On this slide, we show an example of an order win at a large Australian project.

[Kiet Huynh, CEO & Director at Rotork]

The Alkermos seawater desalination project is designed to provide a sustainable water source for Western Australia. The project involves marine pipelines, a groundwater treatment plant and broader pipeline connections. Working closely with the end customer and EPC, we have supplied connected, automated and customized actuators, gears and instrumentation. We see a strong pipeline of projects in this market and expect to maintain and grow our good market position. Customer value is another pillar of our growth plus strategy.

[Kiet Huynh, CEO & Director at Rotork]

Here, we focus on go to market improvements, strengthening our global supply chain and improving the overall customer experience. We've made progress in a number of areas in the half, but this slide highlights an important go to market improvement with Rockwell, a global leader in industrial automation and digital transformation. In H1, we joined the Rockwell Technology Partner Program. As a partner, we will be included in Rockwell's product catalog and system design tools. This opens a new route to market into greenfield projects and improves our visibility with Rockwell's significant installed base in flow control markets.

[Kiet Huynh, CEO & Director at Rotork]

We are the only major electric actuator supplier in the partner network, which will help our positioning in several global markets. The first product to be included is our iQ3 Pro electric actuator with broad connectivity capabilities, but there are opportunities for the product offering to expand as more of our products become capable. Following on from Ben's comments on capital offering allocation, this slide is an update on our reinvestment strategy. It shows how we have steadily been increasing the amount of money being reinvested with the H1 run rate well above the levels achieved in previous years. We continue to see a good pipeline of acquisition opportunities.

[Kiet Huynh, CEO & Director at Rotork]

We are targeting businesses with end markets consistent with the Growth plus strategy, strategy, products that will expand our intelligent flow control capabilities, strong franchises and assets that have attractive financial returns as part of Roadtalk. This approach is best demonstrated by the Noah and Hanbei acquisitions, where we believe we are the best owner of these assets. Our preference is to deploy capital into M and A. However, we remain focused on strategic discipline and combined with the nature of the typical bolt on deals we are targeting, makes it difficult to time. As a result, we will continue to use share buybacks to manage our financial position.

[Kiet Huynh, CEO & Director at Rotork]

Year to date, we have spent £30,000,000 on share buybacks, with the remaining portion to be completed by the end of the year. As Ben highlighted, our balance sheet remains strong, and the underlying cash generation of the business means there is scope to continue to do both bolt on and buybacks. We don't see this as an eitheror decision. Now turning to the market outlook. The outlook for our end markets remains supportive with H2 growth underpinned by order book visibility and the project pipeline.

[Kiet Huynh, CEO & Director at Rotork]

Our growth plus strategy focused on target segments will continue to drive growth above the broader end markets despite the current mixed global environment. Service is also a tailwind as we continue to expand the product offering. At the divisional level, in Oil and Gas, we continue to see significant opportunities in up and midstream electrification, LNG and decarbonization target segments. We expect downstream markets to remain stable and enter H2 with a good book to bill. CPI remains focused on pivoting between the growth opportunities in its end markets.

[Kiet Huynh, CEO & Director at Rotork]

Like Oil and Gas, the division enters H2 with a good book to bill, and we expect CPI to continue to identify and expand into new and structural growth markets with a focus on specialty chemicals, mining, critical HVAC and marine markets. The outlook is positive for Water and Power. Stricter water regulations are expected to remain a key driver for the division, supported by tightening compliance requirements, growing demand for advanced treatment technologies and favorable funding cycles. Power markets are expected to remain supportive, and we see good momentum in Roadtalk service. In summary, I'm pleased to see a good set of first half results delivered through our Growth plus strategy.

[Kiet Huynh, CEO & Director at Rotork]

Orders have shown healthy growth across all three divisions. Sales momentum has improved through the period, and the good book to bill gives us confidence for H2. Margins have been strong, helped by mix and operational efficiencies, resulting in a 10% OCC adjusted operating profit growth. Capital discipline remains a key focus. We invested in Noah in the period, returned £30,000,000 of the planned £50,000,000 through a share buyback at the July and still maintain a very strong balance sheet.

[Kiet Huynh, CEO & Director at Rotork]

We expect the current buyback to conclude by the end of the year, but see the combination of bolt ons and buybacks as a formula we can continue given our financial position and underlying cash generation. Perhaps the most satisfying part of the first half was the target segment performance, up 7%. These parts of the business have clearly outperformed their broader end markets, which we expect to continue given the structural drivers behind them. We continue to anticipate 2025 to be another year of progress on an OCC basis with our full year expectations unchanged. Thank you for your interest today. We'll now open the floor to Q and A.

[Operator]

Are now happy to take your questions. Session. Our first question this morning comes from Lush Mahendra Raja from JPMorgan. Lush, go ahead.

[Lushanthan Mahendrarajah, Capital Goods Equity Research Analyst at JP Morgan]

I've got three, if that's okay. The first is just on The Americas. Of the three, I guess, regions of how you report it, it seems to have been the weakest, maybe oil and gas driving some of that, CPI stronger. I guess what you're seeing there, obviously, a lot of sort of headlines and geopolitics in the in The US at the moment. So just trying to think if if you've been seeing delays, etcetera, on on on the back of that.

[Lushanthan Mahendrarajah, Capital Goods Equity Research Analyst at JP Morgan]

So so, yeah, that's the first question. The second is on Roadtalk service. Good momentum in the first half. I guess you called out Europe, India and The Middle East in particular. Is there anything you're doing in those regions in particular that you're seeing growth there be faster?

[Lushanthan Mahendrarajah, Capital Goods Equity Research Analyst at JP Morgan]

Is it just a function of where you're seeing growth more generally? And then I guess just that comment of it going from sort of two times to four times just to guess what are sort of some of the big sort of drivers in terms of in terms of getting there? And then the third question is just on margins and and I guess mix in particular. I guess, in Oil and Gas, you've seen some quite positive mix drivers and then in Water and Power, maybe the reverse. I mean, can you just give us a bit more clarity on sort of what's driving those in the respective two divisions and then how we should think about that into the second half as well?

[Kiet Huynh, CEO & Director at Rotork]

Yes. Lush, thanks for the questions. I'll take the first and the second one, I'll hand over to Ben for the mix question. In terms of The U. S, just to clarify, overall, The U.

[Kiet Huynh, CEO & Director at Rotork]

S. Has grown for us. And actually, I should quantify, U. S. Is circa 18% of our sales, okay?

[Kiet Huynh, CEO & Director at Rotork]

So we've had we've actually had good growth in The U. S. From CPI. That's through our data center work in critical HVAC applications. So that's been positive for us.

[Kiet Huynh, CEO & Director at Rotork]

The U. S. Upstream, midstream market in oil and gas has been soft. However, with all of the work that we've done in our target segment in upstream and midstream electrification, we've actually been able to grow that portion. So overall, U.

[Kiet Huynh, CEO & Director at Rotork]

S. Is up, Softer markets in upstream and midstream, but we've done well with the electrification trend. Due to that, we're not seeing much impact on the tariffs ourselves, okay? We've done a lot of work to mitigate the risks. The impact for us is negligible.

[Kiet Huynh, CEO & Director at Rotork]

The teams involved have done a fantastic work. We've been absolutely agile on that. We put through our surcharge in May, consistent with the rest of the market, and we haven't seen demand drop off in that regard. We've also rediverted some supply chains. So Canada and LatAm are being supplied out of Europe.

[Kiet Huynh, CEO & Director at Rotork]

That's to mitigate any upcoming risks that we may see. So we've been really agile. And overall, we haven't seen an impact on that. So hopefully, answers your questions for The U. S.

[Kiet Huynh, CEO & Director at Rotork]

In terms of Roadtalk service, we're really pleased with the progress so far. We laid out a strategy to be able to grow from 2x to 2x, 4x. Essentially, what we're trying to do is increase the number of service intervals and increase the amount gained per interval. We've introduced services such as reliability services using our intelligent asset management capabilities. So we're very proactive in chasing up products that are due for service.

[Kiet Huynh, CEO & Director at Rotork]

And we've had good success over the last few years. And actually, I think over the last three years, service has grown ahead of the group, and service in the half was 23% of revenue. In terms of EU, India and The Middle East, look, these initiatives are global, and it's just where these markets are particularly good for us. So hopefully, that answers those. I'll hand you over to Ben to take on the mix.

[Ben Peacock, CFO & Director at Rotork]

Yes. So just on the margins point, Lush. On the oil and gas margins, which was up three thirty basis points, there's a number of moving parts. One is really a high as Gig said, in terms of target segments. There's more in Oil and Gas and particularly in Service and Spares.

[Ben Peacock, CFO & Director at Rotork]

Also, from a mix standpoint, we had a low amount of gear sold in the half. And then just on the margin side, we had some really good margins come through on our Fluid Power product. And then finally, operational efficiencies. A couple of factories actually serve our Oil and Gas division. We saw some operational efficiencies come through there.

[Ben Peacock, CFO & Director at Rotork]

So it's a mix of three or four things that have come through in the quarter. In terms of Water and Power, it was we had a couple of headwinds. Again, from a mix standpoint, if you look at the product line level, even though we sold the same amount of electric actuators at product line level, we had some headwinds in terms of the product mix. And then also, we've chosen to make some investments in water and power. I think we've been consistent in saying water for us is a real opportunity.

[Ben Peacock, CFO & Director at Rotork]

And I think given the medium term outlook for power, we've decided to put a bit of investment in that as well.

[Lushanthan Mahendrarajah, Capital Goods Equity Research Analyst at JP Morgan]

Just on the second half, sorry.

[Ben Peacock, CFO & Director at Rotork]

Yes. In terms of second half margins, so you should think about, I suppose oil and gas will be up H2H2, although that positive variance in the first half will not be the same in the second half. Similar to Water and Power, you will see H2 margins up on H2, but effectively, probably not the same. And then CPI, again, is 80 basis points up on a constant currency basis year over year. You will see that come through, but again, to a lesser extent in the second half.

[Ben Peacock, CFO & Director at Rotork]

And just to be clear, Water and Power is a negative variance in the first half, and I'll say positive. It'll actually be slightly down in the second half year over year.

[Operator]

The next question comes from Andrew Douglas at Jefferies.

[Andrew Douglas, Managing Director at Jefferies Financial Group]

The standard three questions, please. Can we talk about the book to ship that is required in the latter part of the year? I recognize that you've got a good order book, which probably gives you, what, three to four months visibility. So we're talking about the last couple of months. I'm asking a question for you.

[Andrew Douglas, Managing Director at Jefferies Financial Group]

Is that right? And how much do you have to do this year compared to the prior year? I was really interested in your Rockwell slide, clearly a lot of opportunities there. Is this kind of a one off in nature or do you have plenty more Rockwells in terms of what you can do in terms of joining their, I guess, rooster market and their lists? And then last but not least, on OpEx.

[Andrew Douglas, Managing Director at Jefferies Financial Group]

Ben, you talked about some OpEx being scaled back. Is that a long term thing? Or is that kind of a one off six month thing, which then reverts in the second half? Just wondering where we are on that kind of investment cycle. Clearly, we've had quite a lot over the last few years. Just wondering whether there's been a change in tone.

[Kiet Huynh, CEO & Director at Rotork]

Yes. Okay. On the book to ship, and you're absolutely right that we enter the second half with a good book to bill, point zero six. That does give us good flexibility. You mentioned the three to four months visibility, sorry, into the second half, which is about right.

[Kiet Huynh, CEO & Director at Rotork]

So that gives us an absolutely normal book to ship in the year. So absolutely normal to prior years, and that's why we're confident going into the second half. We've also started the second half encouragingly. So July was very encouraging for us, which underpins our confidence for the full year. In terms of the Rockwell partnership, we're really pleased to join that partnership.

[Kiet Huynh, CEO & Director at Rotork]

This is a joint partnership where we are the only electric actuator in their partner network program, what that does is it opens up a route to market into greenfield opportunities for us. So working with the end users, working together on combined packages, really beneficial for both parties. I think this is contextual. There's a few more potential partnerships. We'll do it if it's right for us, if it's the right commercial position for both parties.

[Kiet Huynh, CEO & Director at Rotork]

But this is an example of what we can do going forward. Do you want to take

[Ben Peacock, CFO & Director at Rotork]

on the Yes, on the OpEx. So I think on year over year, Andy, you'll see in the corporate cost, it has gone up slightly. As part of that is salary increases. I think we are still trying to invest in our people. But I think as we said at the year end in terms of what we do with CPI, we are very much managing the cost base in line with the top line, and we will continue to do that.

[Ben Peacock, CFO & Director at Rotork]

It's very disciplined around the costs. We have put cost into the business over the last twelve to twenty four months, and we've seen the benefits of that, particularly in the service and the business development teams across the divisions. But going forward, again, we will manage the cost base absolutely in line with the top line.

[Operator]

The next question comes from Jonathan Hearn at Barclays. Jonathan, please go ahead.

[Jonathan Hurn, Analyst at Barclays]

Hey guys, good morning. Yes, just three questions from me, please. Firstly, just on-site service, just looking forward on that business. Obviously, you're saying it's going to continue to outgrow the wider group. Just in terms of restrictions to delivering that growth, are there any?

[Jonathan Hurn, Analyst at Barclays]

Do you need to invest more in sort of headcount to deliver that growth? Sort of any comments there would be helpful. Secondly, it was just on CPI. Obviously, you're calling out some of those target segments. But I just wonder if you could just give us a little bit more color on how those segments are growing, maybe focusing on mining, HVAC and also sort of your penetration that you're getting into data centers there and the growth rate?

[Jonathan Hurn, Analyst at Barclays]

And then the third question, also end market focus, was just on nuclear. Obviously, it's a market that's growing. There's a long growth trajectory ahead. I think you pulled out of nuclear to an extent post Fukushima. How are you thinking about nuclear going forward?

[Jonathan Hurn, Analyst at Barclays]

Do you need to reinvest? Can you make acquisitions in that space? Just any thoughts there, please.

[Kiet Huynh, CEO & Director at Rotork]

Jonathan, good questions. Thank you. On the Roadtalk service, I mean there's nothing really holding us back in terms of structural. So you're absolutely right. As we grow more, we'll look to invest in number of heads and expand our coverage in the right geographical regions.

[Kiet Huynh, CEO & Director at Rotork]

So the regions where we think that there is good significant growth, we will invest and put in the additional heads that we need there. Other than that, other things are technology. So we are always improving our technology and introducing new technologies. So recently introduced the intelligent asset management. We've got our mobile app.

[Kiet Huynh, CEO & Director at Rotork]

We're always constantly updating. We've now got what we call integrated Ethernet IP, which is part of the technology required for the Rockwell partnership. So we are investing in R and D to be able to improve that service capability as well. So those are the two things that we've really been focusing on to grow service and we'll continue to focus on. In terms of CPI, I think if I break down the certain elements, the I piece, the industrial piece, very small for us, as I've said.

[Kiet Huynh, CEO & Director at Rotork]

In terms of chemicals, the chemicals market overall has been a weak market over the last two to three years. We actually have been able to grow the chemicals portion of our business over the last two years, really predominantly because we've been focusing on specialty chemicals. However, we do have some exposure to bulk chemicals. And in the half, we have grown specialty chemicals, but the bulk chemicals haven't grown, so which is why we're a little softer in the chemicals in CPI. In terms of the process markets, process markets are okay, I would say.

[Kiet Huynh, CEO & Director at Rotork]

So it's really up to us to generate and drive the growth, and we're absolutely doing that. So we've made good inroads in the data center initiatives. We've had very good growth in that initiative. I think if you think back to the results presentation, we highlighted opportunities where we said within one data center outside of the server rooms, there's circa 1,000 valves that we could look to electrify. So we're making really good progress in that area.

[Kiet Huynh, CEO & Director at Rotork]

Inside the server room is quite nascent at the moment, but we're doing a lot of work there to be able to be specified in should technologies take off. So that's the data center piece. The mining and marine piece have also been very good for us. And it's business that we already had, but with the focus and with the drive of the teams in CPI, they've been able to grow that. So I think the story of CPI is really encompassing the strategy.

[Kiet Huynh, CEO & Director at Rotork]

In difficult markets, we've been able to forge growth in our key target segment. And I know on a revenue level, we've been broadly flat and slightly up. But actually, an orders level, we are up. We've had good orders, and we enter H2 with a good book to bill in CPI as well. So that's CPI.

[Kiet Huynh, CEO & Director at Rotork]

In terms of Nuclear, you're absolutely right. We did take a decision to exit the Nuclear business. However, at the start of this year, we have taken the decision to reenter into nuclear inside containment and also outside containment. So there's not really that much reinvestment that we need We need to fire up our supply chains because the products that we have are still specified in the application.

[Kiet Huynh, CEO & Director at Rotork]

So actually, the nuclear target segment is something we look forward to in the coming years. Hopefully, that answers your questions.

[Jonathan Hurn, Analyst at Barclays]

Yes. Thanks very much. That's great.

[Kiet Huynh, CEO & Director at Rotork]

Thank you.

[Operator]

The next question this morning comes from Mark Davies Jones at Stifel. Mark, please go ahead.

[Mark Davies Jones, MD - Industrials at Stifel Financial]

Thank you very much. It seems to be compulsory to do three, so I'll do three. Firstly, obviously, segment is going very well indeed. You set out that list of focus areas a while back now. Just wanted to know how static that was or whether there were new target segments coming onto the horizon that might drive the next wave of growth.

[Mark Davies Jones, MD - Industrials at Stifel Financial]

The second one is around this sort of increased focus on M and A perhaps. Is there any divisional focus within that? Water and Power seems to be an area of considerable excitement. Is that a particular area you're looking at the moment? And then thirdly, just a sort of follow on question from tariffs, kind of indirect impacts.

[Mark Davies Jones, MD - Industrials at Stifel Financial]

Obviously, it's creating some shifts in global production patterns. Do you think you've got the right capacity in the right places for the way the world is becoming post that sort of tariff move?

[Kiet Huynh, CEO & Director at Rotork]

Mark, thanks for your questions. Yes, I think absolutely, we're really pleased with our target segments. It's going really well. That's probably the most pleasing thing for me in the first half. This is a moving thing.

[Kiet Huynh, CEO & Director at Rotork]

What we challenge our teams in all of the end markets is to continually identify potential new target segments then develop business within those target segments so that we kind of generate growth pipelines, and the pipelines are good. So it's not static. However, it doesn't change that much year on year. So I think we mentioned a few probably a few years ago, we've got potential in offshore wind in HVDC applications. That's coming through actually.

[Kiet Huynh, CEO & Director at Rotork]

So we've seen some wins in alternative energy water and power for offshore wind farms. That's really pleasing. We just mentioned nuclear. So that will be whilst it's not new for us, that will be a new target segment because we're going to reenter into that. And the CPI teams are always continually being agile and pivoting from growth opportunities.

[Kiet Huynh, CEO & Director at Rotork]

So the marine markets have been good for us. So the whole ethos is within markets that are subdued or when the tailwinds are not with you, how do you generate that growth? And you do that by picking pockets of niche markets within the broader markets to really try and execute. And I think we've done that really, really well. So really pleased.

[Kiet Huynh, CEO & Director at Rotork]

In terms of the M and A, you're absolutely right. The strategic view of our M and A pipeline is that we want the pipeline to be able to align to the target segment. And obviously, water is a really good target segment. It's got continued investment, and you've seen the growth of water over the last three years. So that is absolutely an area where we're focusing on.

[Kiet Huynh, CEO & Director at Rotork]

Just if I can expand in terms of technologies, we're also looking at core, which I would say electric actuation like a NOAH, but we're also looking at adjacent technologies, so instrumentation and sensing. But you're absolutely right, key target segments in Water and Power and CPI will be key for the pipeline. And then in terms of the tariffs, I think we are set up very well globally. We call it a local for local, but really, it's region for region. What we sell in that region, we typically build in that region.

[Kiet Huynh, CEO & Director at Rotork]

That has actually given us quite a lot of flexibility, and we built that up after the kind of COVID supply chain blockers. Actually, what that has allowed us to do is redivert supply chains to other continents. So for example, Canada can be supplied out of Europe. LATAM can be supplied out of Europe. So actually, we've got a really flexible model, and the teams have done a really great job being really agile and diverting supply chain.

[Kiet Huynh, CEO & Director at Rotork]

So we feel good about being well set up to handle anything that comes from the tariff changes.

[Mark Davies Jones, MD - Industrials at Stifel Financial]

Fantastic. Thank you.

[Kiet Huynh, CEO & Director at Rotork]

Thank you.

[Operator]

The next question this morning comes from Maggie Schooley at Redburn Atlantic. Maggie, please go ahead.

[Margaret Schooley, Equity Research Analyst at Redburn Atlantic]

Yes. Hi, guys. Hi, Kate. Hi, Ben. How are you?

[Margaret Schooley, Equity Research Analyst at Redburn Atlantic]

I only have one, but I wanted to go back to as it is multipart, sorry. I wanted to go back to the data center physical infrastructure piece within CPI. Can you give us I know it's hard, but can you give us some understanding about what level of contribution you have to that division from data center? And is it growing at the plus 25% that we're seeing from other other, companies that are participating in that area? And also as you move from, outside the server room to inside the server room, what products you have that to play in that market, particularly as liquid cooling starts to become more of a reality, a bigger market?

[Kiet Huynh, CEO & Director at Rotork]

Thanks, Maggie. Good question. I think for our data center growth, it has been good, okay? So it's we haven't disclosed it exactly, but it's been really, really good, if that translates into a number. But it's in line or greater than the kind of things that you're seeing there in terms of those numbers.

[Kiet Huynh, CEO & Director at Rotork]

Applications. There's outside server rooms, inside server rooms. We talked about the outside server rooms, and they will take Noah type products as they electrify. And they also take our Gears technology with that, and we've made really good inroads there. In terms of inside data centers, they will take our hand bay products, which is one of the reasons why hand bay was really attractive.

[Kiet Huynh, CEO & Director at Rotork]

So small electric actuation as inside data rooms, they look to isolate and flow so that they can isolate individual servers and take individual servers offline rather than taking the whole room offline. That's quite nascent at the minute, but we're doing a lot of work to become specified into designs. So that's to come, but we are excited about that. So that's where we are in the data center space.

[Margaret Schooley, Equity Research Analyst at Redburn Atlantic]

If I can ask one more. Yes, go In terms of the data, I mean, one of the clearest benefits of electric actuation is that the data comes from So when you're thinking about that feedback loop to these other players, what is HandBey or what technologies is HandBey offering in terms of that data transfer so that these guys can really understand the efficiency running within the server room?

[Kiet Huynh, CEO & Director at Rotork]

Yes. So typically, we don't run the DCS or the SCADA, okay? So the SCADA or the DCS will look for signals like, are you open? Are you closed? We can record data such as the torque we're pulling with the amount of energy that we've seen.

[Kiet Huynh, CEO & Director at Rotork]

So they boil it down to very simple. Are you open? Are you closed? Correctly? If I need to operate you, will you operate?

[Kiet Huynh, CEO & Director at Rotork]

They're the types of signals, I think, if I make it really simple, that we need to send to a SCADA or a DCS system to allow the operators to operate that, and we can do that.

[Margaret Schooley, Equity Research Analyst at Redburn Atlantic]

Okay. So and is that a competitive advantage for you versus others?

[Kiet Huynh, CEO & Director at Rotork]

It is. I mean if you look at our IQ Pro with intelligent asset management, we've got twenty years of data where we can process, and we can tell what's going on with the actuator and valve to say, are you running or is that application running at an optimal level, okay? We can we haven't yet, but we can bring that experience into the handbag products, which gives us a really good competitive advantage, which is why we win on Rotop service as well because we have that with our iQ platform.

[Margaret Schooley, Equity Research Analyst at Redburn Atlantic]

Thank you.

[Kiet Huynh, CEO & Director at Rotork]

Thanks.

[Operator]

The next question this morning comes from Alex O'Hanlon at Panmure Gordon sorry, Panmure Liberum.

[Alex da Silva O'Hanlon, Equity Analyst - Industrials at Panmure Liberum]

I really appreciate it. Just two for me, if I may. The first one is just you mentioned that you're still actively looking at M and A opportunities and have given us some really good color on that. But absent M and A, you say you'll use share buybacks to manage the financial position. Do you have a target level of cash or even net debt in mind?

[Alex da Silva O'Hanlon, Equity Analyst - Industrials at Panmure Liberum]

I guess, how should we think about buybacks and when they might occur? Or is it not that mechanical? And the second question is just on water. Where are we sitting in terms of the investment cycle? Should we expect revenues to be ramping up from investment from AMP8 in The UK and the Infrastructure Investment and Jobs Act in The U.

[Alex da Silva O'Hanlon, Equity Analyst - Industrials at Panmure Liberum]

S? I guess what I'm trying to get at is how should we think about the phasing of the water investment cycle over the next few years?

[Kiet Huynh, CEO & Director at Rotork]

Let me take waters first and then you want to Yes. Add the think for water, it has been consistently growing. There's been no inflection. It's just been a good gradient of growth, and that's what we expect to continue. So specifically, as you mentioned, in The U.

[Kiet Huynh, CEO & Director at Rotork]

K, we're just starting year one of AMP8, so we expect that to ramp up. But we've already had good growth in The U. K. From AMP7, So we expect continued growth there. In AMP8, they have nearly doubled that investment.

[Kiet Huynh, CEO & Director at Rotork]

So that's why we're confident we kind of anticipate growth over the next five years, let's say, in The UK with that AMP cycle. In other geographies, water and water infrastructure has continued investment. So in The U. S, there's continued investment to upgrade the infrastructures. Desalination on the West Coast is also really strong in The U.

[Kiet Huynh, CEO & Director at Rotork]

S. In The Middle East, desalination is really, really strong as well. And in Asia Pac, with migrations to big cities, again, a lot of infrastructure investment in there. So Water is actually consistently investing all the time. So there's going be no inflection.

[Kiet Huynh, CEO & Director at Rotork]

We're confident about Water. We expect it to continue to grow. Do you want to add Yes.

[Ben Peacock, CFO & Director at Rotork]

So on the leverage and the capital allocation, Alex, I mean we've been really consistent. I think the policy is clear. Where we can invest back in the business, we will, and we're doing that with ERP implementation. Progressive dividend, we've now paid, I think, over twenty years of a progressive dividend with the exception of one year in COVID. M and A, as Gig said, that is a priority for us to actually grow inorganically, but the timing of those acquisitions is unknown.

[Ben Peacock, CFO & Director at Rotork]

In the absence of doing any M and A, we've always said that we will return the cash back to the owners of the business. And we said, I think, at year end, we wanted to move the balance sheet to a more neutral position, and we will continue to do that. But again, that is, at this point in time, dependent on how the M and A pans out. So I think we're very consistent in the application. And like we said, if we don't do any M and A, we will return the cash to shareholders.

[Operator]

We have time for one last question this morning, which is a follow-up question from Andrew Douglas at Jefferies.

[Andrew Douglas, Managing Director at Jefferies Financial Group]

I noticed that you've recently been included on the Saudi Aramco supplier qualification system and AVL as local manufacturer. Is that important in terms of the growth potential? Or is that just something that you kind of need to kind of play in that market? And to be frank, I'm quite surprised you weren't on that list given that Saudi Aramco is a big customer. So if you can just explain that in more detail, if it's important, that would be great.

[Kiet Huynh, CEO & Director at Rotork]

Yes.

[Kiet Huynh, CEO & Director at Rotork]

That is important. It's part of our target segment investment. We have opened up a facility in Saudi Aramco. We have gained approvals. There are only three companies who will gain approval.

[Kiet Huynh, CEO & Director at Rotork]

We are one of the three. So it creates a good kind of barrier to entry. And it's really important for us to be able to grow in Saudi and The Middle East. Essentially, if you want to win business there, there's what we is called an IKTAVA score. That score kind of scores you in terms of how much in kingdom manufacturing that you can do.

[Kiet Huynh, CEO & Director at Rotork]

Now that we can manufacture our electric actuators in Saudi Arabia, that gives us a very good score. So it makes competitive in terms of growing our business in The Middle East. So very important for us. We're really, really pleased. The teams have done a fantastic job, and we are one of only three.

[Andrew Douglas, Managing Director at Jefferies Financial Group]

How big is that factory facility in Saudi? Does it compare with Bath or Luca or in The U. S?

[Kiet Huynh, CEO & Director at Rotork]

I mean, it's dependent on the volumes. So at the minute, it's geared up to facilitate the Saudi and the wider Middle East. As that business grows, we'll look to expand it. So it isn't as big as a Luka or a Barf, which is kind of a huge kind of center. It's a relatively smaller factory, but it is nonetheless state of the art to be able to build our IQs.

[Andrew Douglas, Managing Director at Jefferies Financial Group]

Superb. Thank you.

[Kiet Huynh, CEO & Director at Rotork]

Thanks, Andrew.

[Operator]

This concludes the Q and A session, and I would now like to hand back to Gig for any closing remarks.

[Kiet Huynh, CEO & Director at Rotork]

Yes. Look, thank you, everyone, for your interest. Thank you for dialing in today. If I can just summarize the call. We're really pleased with our first half performance.

[Kiet Huynh, CEO & Director at Rotork]

We've entered July with an encouraging start, so that's good to see. We, therefore, feel confident about the H2. For me, what's the most pleasing is our performance in the target segments and therefore, really shows that the growth plus strategy is really working and delivering the numbers. And we continue to have considerable financial flexibility to pursue opportunities that are value creative for our shareholders. So with that, thank you again, and have a good day. Thank you.

Participants

Executives

• Kiet Huynh, CEO & Director
• Ben Peacock, CFO & Director

Analysts

• Lushanthan Mahendrarajah, Capital Goods Equity Research Analyst at JP Morgan
• Andrew Douglas, Managing Director at Jefferies Financial Group
• Jonathan Hurn, Analyst at Barclays
• Mark Davies Jones, MD - Industrials at Stifel Financial
• Margaret Schooley, Equity Research Analyst at Redburn Atlantic
• Alex da Silva O'Hanlon, Equity Analyst - Industrials at Panmure Liberum