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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
Strategic report Corporate governance Financial statements
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
Page title
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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.com Rotork Annual Report 202323
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
Strategic report Corporate governance Financial statements
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
Strategic report Corporate governance Financial statements
D
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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
Divisional review continued
Strategic report Corporate governance Financial statements
Full year divisional sales were ahead 13.3%
year-on-year (OCC). Following several years
where water and wastewater sector sales
growth clearly outpaced the power sector, both
grew at similar rates in 2023. Asia Pacific sales
were ahead high-single digits year-on-year
(OCC), with very strong revenue growth in
Indiapartly offset by more modest sales growth
elsewhere. Americas sales grew strongly
year-on-year driven by water and wastewater.
Power sector sales were slightly lower in the
region. EMEA was Water & Power’s fastest
growing geographic region in 2023.
Divisional highlights
• Sales grew double-digits withwater &
wastewater and power sector sales growing
at similar rates
• APAC sales grew high-single digits OCC
withvery strong growth in India
• Americas sales grew strongly driven by
water& wastewater
• Adjusted operating margins benefitted from
improved chipset costs and productivity
£m 2023 2022 Change OCC Change
Revenue 177.0 160.2 +10.5% +13.3%
Adjusted operating profit 46.4 40.3 +15.3% +19.0%
Adjusted operating margin 26.2% 25.2% +100bps +120bps
The division’s adjusted operating profit was
£46.4m, 15.3% higher year on year. Water &
Power is the division with the highest proportion
of electric actuator sales and therefore was most
impacted in recent years by the shortage of
chipsets and consequent cost increases.
Availability started to normalise in the year and
the division therefore benefitted the most. This,
together with improved labour productivity,
resulted in adjusted operating margins increasing
100 basis points to 26.2%.
The division made good progress in its target
segments of water infrastructure, waste and
wastewater treatment, desalination and
alternative energy during the year. Rotork is
supplying electric actuators and motorised
gearboxes to control the transportation and
distribution of potable water to a major new
town in the Middle East. Rotork’s market leading
product and service offering as well as our local
presence (valve actuation centre and service
team) helped secure this high-profile order, one
of the largest in Rotork’s history. Rotork is
supplying electric and fluid power actuators to a
number of wastewater treatment modernisation
and improvement projects around the world
which will provide better quality water more
efficiently, including projects in India, Singapore
and the USA (California and Illinois). Rotork’s IQ3
Pro electric actuators have been selected for
critical control duties on HVDC transformer
platforms that willbe used to transport
electricity generated byNorth Sea windfarms
back to the UK. Thewindfarms concerned have
the generating capacity to power approximately
5m homes.
% of Group revenue
24%
Water &
Power
Water & Power is a supplier of premium
actuators, predominantly electric, and
gearboxes for applications in the water,
wastewater and treatment and power
generation sectors. Rotork has significant
growth opportunities including through
helping solve customers’ water quality and
water scarcity challenges as well as the
automation, electrification and digitalisation
trends. Water and wastewater contributed
66% of divisional sales in the year.
rotork.com Rotork Annual Report 202329
Divisional review continued
Strategic report Corporate governance Financial statements
30Rotork Annual Report 2023 rotork.com
Sustainability
review
Our business and products can enable
thetransition to net-zero while positively
impacting our people and local communities
Contents
32 Our progress and forward-looking statement
33 ESG and sustainability governance, integration and measurement
36 Materiality overview
37 Sustainability framework
38 Operating responsibly
51 Enabling a sustainable future
56 Making a positive social impact
63 Sustainability Accounting Standards Board (‘SASB’) Index
A leader in sustainability
MSCI:
AAA (leader)
Sustainalytics ESG:
Low Risk, Industry Top Rated
S&P Global CSA:
90th percentile in Machinery
&Electrical Equipment sector
CDP Climate: B
CDP Water Security: B
FTSE4Good:
Constituent of the FTSE4Good index,
80th percentile
Our mission Progress in 2023
Operating responsibly
To run safe, efficient and
sustainable operations.
32% reduction in
operational emissions vs 2020.
Enabling a
sustainable future
To help drive the transition to a
cleaner future where environmental
resources are used responsibly.
30% of revenue from
our eco-transition portfolio.
Making a positive
social impact
To support thriving, fair and
resilientcommunities.
Colleague engagement score
increased to 7.4.
Sustainability review
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31rotork.com Rotork Annual Report 2023
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Our progress and forward-looking statement
Our purpose enables us to support the net-zero transition while creating
a positive impact on our people and communities
Our progress
We continued to deliver against our key ESG
priorities in 2023 and were delighted to see
these result in an upgraded ‘AAA’ ESG rating
inMSCI. We also retained our strong ratings in
other key benchmarks, rated 90th percentile in
S&P Global’s Machinery & Electrical Equipment
industry, ‘Low Risk’ in Sustainalytics ESG Risk
Ratings, and ‘B’ in CDP Climate and Water. The
proportion of total sales from our eco-transition
portfolio increased to 30% in 2023 (28% in 2022).
2023 was a year of strong operational performance.
Our health and safety team continued to deliver
its audit, training and engagement programmes
while another year-on-year decline in total
reportable incident rate (TRIR) was achieved.
Our2023 operational emissions reduced to 32%
below our 2020 baseline through our increased
use of renewable power and from improvements
in the energy performance of our facilities.
Wealso reduced waste-to-landfill (vs pre-COVID
levels) and installed several rainwater
harvestingsystems.
Our focus on managing and reducing value
chain emissions continued this year. To manage
emissions resulting from the manufacturing and
use of our products, we recruited sustainable
product and lifecycle analysis specialists to join
our Product Sustainability team, who are focused
on incorporating our nine key sustainability criteria
for product design into our processes for new
product development. Likewise, our procurement
team has engaged with 84 suppliers – through
four interactive webinars and targeted one-to-one
workshops – on the topics of measuring emissions
and setting reduction targets. Both workstreams
are critical for our longer-term aims of improving
value chain data quality and achieving our
science-based scope 3 reduction targets.
Weprovide examples of the role that Rotork’s
products play in reducing environmental
impacton pages 43 to45, using case studies
toillustrate the scale of our opportunity to
enable asustainable future.
2023 was an exciting year for our people.
Our12-month leadership training programme
– focused on developing leaders’ capabilities –
was launched, and we saw a year-on-year increase
in our colleague engagement score. We also held
workshops for colleagues on diversity & inclusion
and a facilitated session on cross-cultural awareness
to build greater understanding of inclusive
cultures. We also donated £147,000 toour
global charity partners this year.
Priorities for the year ahead
• Develop our Climate Transition Plan
• Undertake a hybrid (double)
materialityassessment
• Expand the rollout of our redesigned health
and safety audit programme
• Increase the use of renewable power
whiledelivering further improvements
inenergy performance
• Continue engagement with suppliers on
emissions data sharing and collaboration
onemissions reduction
• Launch our new development programme
forpeople managers
• Implement our Rotork Employee Value
Proposition (EVP) for employees and
futureemployees
Climate action will remain a key topic in 2024.
Our Climate Transition Plan will further develop
our climate strategy and our approach to climate
risks and opportunities. Following COP28, we
expect to see greater focus on reducing methane
emissions and high demand for products that
directly or indirectly prevent its leakage. We will
continue to assess our products’ ability to avoid
emissions and to highlight these benefits to
ourcustomers.
As regulatory reporting requirements on ESG
expand in scope, we intend to undertake a
‘hybrid’ materiality assessment in 2024 – that
will cover requirements of both ‘double’ and
‘single’ materiality assessments – to enable
alignment with the EU Corporate Sustainability
Reporting Directive (CSRD) and the International
Sustainability Standards Board (ISSB). Following
this assessment, we will review the assurance
readiness of the material issues identified by
theprocess.
Supporting our people and communities will
remain a key priority in 2024. This work will
include the delivery of further development
programmes on people management and
diversity & inclusion. We also expect further
involvement with our charity partner Pump
Aidand their Female Mechanics Programme,
supported by our Rotork engineering and
serviceteams.
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ESG and sustainability governance, integration and measurement
We use several approaches to integrate ESG
objectives into our approach to business. This
includes tying the successful delivery of social
and environmental objectives to management’s
remuneration. It also includes standardising
ourapproach by formalising sustainability
considerations and expectations within key
management and decision-making processes.
We employ a range of published codes and
policies which guide our approach. We also
commit to measuring our performance and
reporting transparently on our progress.
ESG governance
Rotork plc Board oversight
To ensure the appropriate level of governance in
this key area, the scope of the Board Committee
which oversees the implementation of Rotork’s
sustainability strategy was reviewed to enable
anenhanced focus on our selected Sustainable
Development Goals. As a result, our ESG
Committee, which was established in October
2020, was reconstituted as the Safety and
Sustainability Committee, with effect from
1January 2024.
The Board receives an update on our ESG
andsustainability agenda from our CEO
ateverymeeting.
The Chairs of our Safety and Sustainability
Committee and Nomination Committee also
provide an update on the activities of the
Committees following their meetings.
TheBoardreviewed and approved this
report,prior to publication.
Roles of the Safety and Sustainability
Committee (formerly the ESG Committee)
andthe Nomination Committee
ESG topics are overseen by the Safety and
Sustainability Committee (formerly the ESG
Committee) and the Nomination Committee.
TheSafety and Sustainability Committee
oversees the Group’s safety and sustainability
strategy, performance, and disclosures. The
Company’s Diversity and Inclusion policy, strategy
and implementation of initiatives is overseen by
the Nomination Committee. Prior to this change,
the ESG Committee formally met three times
in2023.
As part of the reconstitution of the ESG
Committee, the Safety and Sustainability
Committee terms of reference were updated and
are published on our website at the following
address: https://www.rotork.com/en/documents/
publication/24904. The updated Nomination
Committee terms of reference arealso published
on our website: https://www.rotork.com/en/
documents/publication/5553.
Safety and Sustainability Committee members
comprise independent non-executive directors
Ann Christin Andersen (Chair), Tim Cobbold,
(Non-executive Director for Workforce
Engagement) and Karin Meurk-Harvey with
ourCEO having a standing invitation to attend
meetings. Other directors, the Investor Relations
Director, the Head of ESG and Sustainability,
theGroup Human Resources Director and the
Global Head of HSE may also attend meetings
byinvitation. Nomination Committee members
include non-executive directors Dorothy Thompson
(Chair), Ann Christin Andersen, Tim Cobbold,
Janice Stipp and Karin Meurk-Harvey.
Rotork Management Board
Members of the Rotork Management Board
(RMB) take responsibility for elements of our
ESG agenda as follows:
• Our Chief Executive Officer has overall
responsibility for the delivery of our ESG
agenda. The CEO is also responsible for the
environmental strands of our agenda and
integration of ESG within procurement.
• Our Group Human Resources Director
isresponsible for the people and
communitystrands.
• Our Group Finance Director is responsible for
financial and non-financial reporting, including
compliance with disclosure requirements.
• Our Chief Information Officer is responsible
for information and cybersecurity.
• The managing directors of the Oil & Gas,
Water & Power and Chemical, Process &
Industrial divisions are responsible for ensuring
our sustainability objectives are embedded
within their respective divisional strategies.
Management Board members also have specific
responsibilities for climate-related matters,
including to support the delivery of our
science-based emissions reduction targets.
Seeour TCFD report on pages 82 to 92 for
further details.
Group-wide policies
We have an extensive suite of ESG policies
whichgovern our approach. The key policies are
published on our website, at www.rotork.com/
en/environmental-social-governance/esg-
reports-and-policies. Our policies set out our
commitments to responsible and sustainable
business practices. They apply Group-wide.
We provide training to ensure employees
understand and implement our policies.
Wealsomonitor compliance with our policies,
for example through audits of higher risk
suppliers. See page 49 for more information
about employee compliance and ethics training.
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Our governance structure
Rotork plc Board
Nomination
Committee
Safety and Sustainability
Committee
Rotork Management Board (RMB)
ESG integration
Key performance indicators
We measure the Group’s performance against
five financial performance indicators and two
non-financial performance indicators: carbon
emissions per £1 million revenue and lost time
incident rates (see pages 10 and 11 of
thisreport).
Link to remuneration
Our performance against these non-financial
KPIs has been linked to executive directors’ and
senior leaders’ remuneration.
Annual bonus – ESG measures
• Lost time injury rate
• Environmental innovation (measured
throughevidence of greater positive
environmental impact through our products
and increased customer engagement on
sustainability issues)
• Culture and engagement scores
In 2023 non-financial performance represented
a 10% share of the bonus opportunity for
executive directors. In order to drive increased
focus, incentives for the entire senior leadership
population (around 100 people) are also formally
linked to thesemeasures.
Depending on their role, some individuals also
have additional sustainability targets included
intheir strategic personal objectives for the year
(15% of the bonus opportunity).
Long Term Incentive Plan – ESG measure
In 2023, remuneration linked performance
metrics were expanded to include scope 1 and 2
emissions reduction into the LTIP (see page 152).
Integration into strategy and
businessprocesses
We are continuing to drive deeper integration of
ESG into our strategy and core business processes.
Corporate strategy
We have integrated ESG and sustainability-related
market dynamics into our Growth+ strategy.
Thisincludes embedding requirements to enable
us to meet our science-based emissions
reduction targets.
New product development
We are also creating product development
roadmaps to reduce emissions associated with
use of our sold products, to meet our emissions
reduction target and customer demand for
lower energy use/emissions products. We have
also included sustainability considerations
ateach of the important checkpoints in the
Rotork Development and Launch Process for
new products. In 2023, we launched a Product
Sustainability Sharepoint site as a resource for
colleagues. See pages 41 and 42 for details
about our emissions reduction targets.
Governance
Another way we are integrating ESG into the
way we run our business is by formalising the
integration of social, environmental and ethical
considerations into our key governance documents.
These are available at https://www.rotork.com/
en/environmental-social-governance/esg-reports-
and-policies.
Our communications and ratings
We are committed to measuring our ESG
performance and reporting transparently on
progress. We report on the delivery of our
sustainability programme through the Annual
Report, our website and we actively engage
withthe ESG indices (latest ratings on page 30).
ESG and sustainability governance, integration and measurement continued
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ESG and sustainability governance, integration and measurement continued
Basis of preparation
This report has been prepared in accordance
with the Global Reporting Initiative (GRI)
Standards: Core option. We have also provided
disclosures against the Sustainability Accounting
Standards Board (SASB) framework to support
our communication of financially material
sustainability information. In 2024, we will
review the most appropriate set of sustainability
reporting framework(s) for Rotork, which will
include a review of the GRI Universal Standards
and consideration of the future requirements
ofthe EU Corporate Sustainability
ReportingDirective.
We shall publish our GRI index on our website
inthe first half of 2024.
Further information
Sustainability Accounting Standards Board
We have provided disclosures against the SASB
framework to support our communication of
financially material sustainability information
onpage 63.
ESG commitments
We have been a signatory to the United
NationsGlobal Compact since 2003. We work
tomeet its Principles. This report contributes
toward our United Nations Global Compact
Communication on Progress requirements.
Weare a member of the 30% Club, which
aimsto achieve at least 30% representation
ofwomen on all boards and C-suites globally.
Asat 31 December 2023, there were four
females on Rotork’s Board, equating to
44%female Board representation.
Get in touch
We welcome any feedback on this report and
our sustainability agenda. Get in touch via:
esg@rotork.com.
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Rotork Annual Report 2023 rotork.com36
Materiality overview
Our materiality assessment was refreshed in
2023 to monitor changes in our stakeholders’
views on the relative importance of major
sustainability issues. Effective management of
the issues identified through this process plays
an important role in the management of risks to
our business as well as identifying opportunities
to support growth and efficiency.
Key findings from our assessment
The noteworthy finding from this year’s exercise
was that both internal and external stakeholders
rated most categories as more material in 2023
Operating responsibly
1
Circular economy,
including Products in Use
2
Climate change
3
Culture, ethics
andgovernance
4
Cyber and
informationsecurity
5
Geopolitical risk
6
Safety, health
andwellbeing
7
Supply chain, including
suppliers’ GHG emissions
Enabling a sustainable future
8
Customer and
enduserrelationships
9
Energy security
10
Energy transition
(net-zerofuture)
11
Environmental benefits
ofproducts
12
Infrastructure, investment
and modernisation
13
Innovation and new
product development
14
New end markets
andapplications
Making a positive
socialimpact
15
Brand and reputation
16
Diversity and inclusion
17
Safety benefits of products
18
Cost of living,
socialcontribution
19
Stakeholder engagement
20
Talent attraction
andretention
21
Training and development
than in 2022, reflecting the increased relevance
of sustainability overall.
It was also interesting to find that one stakeholder
placed significant emphasis on the importance
of demonstrating the ‘avoided emissions’
resulting from our products, a topic we will
continue to investigate in 2024.
Stakeholder feedback
The following topics have increased the most
inimportance to stakeholders, compared
withlast year:
• Cyber and information security
• Diversity & inclusion
• Energy security
Materiality matrix
Moderate High
Internal
Moderate High
Moderate High
Internal
Moderate High
External
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
17
20
21
16
18
19
Updating our 2023 materiality assessment
The 2023 review assesses the same sustainability
topics as our 2022 assessment. However, for
theclarity of the participants, we have adjusted
the titles and definitions of six topics:
• ‘Energy transition’ was changed to
‘Energytransition (net-zero future)’
• ‘Circular economy’ was changed to
‘Circulareconomy, including Products inUse’
• ‘Climate change: net-zero future’
waschanged to ‘Climate change’
• ‘Innovation’ was changed to
‘Innovation&new product development’
• ‘Social contribution’ was changed to
‘CostofLiving, social contribution’
• ‘Supply chain management’ was changed
to‘Supply chain, including suppliers’
GHGemissions’
Going forward, our approach to materiality
willevolve with the requirements of emerging
standards such as the EU’s Corporate Sustainability
Reporting Directive (CSRD) and the ISSB. In 2024,
we will undertake a hybrid materiality assessment
which incorporates the double materiality
requirements of CSRD as well as the requirements
of the International Sustainability Standards
Board (ISSB).
External
2022 2023
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rotork.com Rotork Annual Report 202337
Sustainability framework
Operating responsibly
Our mission: to run safe, efficient and sustainable operations.
Enabling a sustainable future
Our mission: to help drive the transition to a cleaner future
where environmental resources are used responsibly.
Making a positive social impact
Our mission: to support thriving, fair and
resilientcommunities.
Our commitments
SDG targets:
12.2, 12.5, 12.6
We will reduce our lost time injury rate each year and
strivefora zero-harm workplace.
We will embed social, ethical andenvironmental considerations
into our Global Supplier ExcellenceProgramme.
SDG targets:
13.1, 13.3
We will reduce our carbon emissions. We have intensity,
interim and net-zero targets:
• Reduce emissions per £1 million revenue year-on-year
• To reduce scope 1 and 2 by 42% and scope 3 by 25%
by2030
• Net-zero for scope 1 and 2 by 2035 and for scope 3
by2045
Our commitments
SDG targets:
6.4
We will enable sustainable management of water resources
and greater water efficiency for our customers.
SDG targets:
7.3
We will support customers’ energy and emissions reduction
andenable them to incorporate renewable energy into
theiroperations.
SDG targets:
9.1, 9.4
We will play our part to enable theglobal energy transition
andsupport a cleaner, more sustainable future.
Our commitments
SDG targets:
5.5
We will develop and deliver initiatives to drive
greatergenderand ethnic diversity.
SDG targets:
8.5, 8.7
We will contribute to a fairer society more broadly,
includingbyensuring 100% of employees are covered byour
FairPay Framework.
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3838Rotork Annual Report 2023 rotork.com
Operating
responsibly
Our mission
We aim to run safe, efficient
andsustainable operations.
Our commitments
• We will aim to reduce our lost
time injury rate each year and
strive for a zero-harm workplace
• We will embed social, ethical and
environmental considerations
intoour Global Supplier
Excellence Programme
• We will reduce carbon emissions
generated per £1 million of
revenue and work to implement
our net-zero roadmap
In this section
• Safety, health and wellbeing
• Climate change and environment
• Circular economy and
productresponsibility
• Supply chain management
• Culture, ethics and governance
SDGs we will progress
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rotork.com Rotork Annual Report 202339
Safety, health and wellbeing
We remain committed to the safety, health and
wellbeing for our people and for ourwider
stakeholders. We have a ‘zero-harm’ vision for
health and safety. This applies to our broader
agenda of health and safety, environment and
product safety.
Safety above all
Rotork continues to focus on actions to maintain
and enhance the effectiveness of the safety
processes and procedures for every Rotork
working environment. Our objectives are to:
• Reduce the lost time and total recordable
injury rates (LTIR & TRIR)
• Reduce our work-related ill-health incidents
(included in TRIR calculation, but excludes
work related stress cases)
• Have zero avoidable severe road incidents
Measuring our progress
We monitor and report on key workplace safety
metrics in line with industry practice. Our
performance is measured using several KPIs
including Total Recordable Incident rate (TRIR),
which follows the OHSA structure for incident
reporting and is a requirement of the SASB
framework. Lost Time Incident Rate (LTIR), which is
any injury that results in a day or more from work
and we record the number of first aid injuries in the
workplace. We also measure a Near Miss Frequency
Rate (NMFR), which is also a requirement of the
SASB framework for safety reporting.
Operating responsibly continued
Global annual audit programme
In 2023 we re-designed the annual HSE audit
programme to incorporate the requirements
ofthe Global Safety Standards. The new
programme uses a three-level maturity
rankingprocess to identify any weaknesses
inRotork’s HSE programme. The programme
hasbeen externally audited, with only minor
recommendations to improve the programme.
Those recommendations will be implemented
during 2024. Six audits were completed in 2023
using the new audit programme and in 2024 we
will significantly increase the auditing coverage
with 15 planned for 2024.
Employee wellbeing
Our focus on the wellbeing and mental health of
our employees continued in 2023. Anincreasing
number of our colleagues serve asMental Health
First Aiders across our global sites, rising to 98 in
2023. Ann Christin Andersen (Non-executive
Director) joined some of our Mental Health First
Aiders to discuss mental health at Rotork on
World Mental Health Day. We also signed the
Pledge for Global Business Collaboration for
Better Workplace Mental Health. This pledge
reinforces our commitment to the health, safety
and wellbeing of our workforce. We have also
introduced new learning modules on our
learning@rotork platform on mental health
awareness and continue to provide a Global
Employee Assistance Programme, which includes
support for mental health as well as counselling
24/7 in colleagues’ local languages. We also
launched specific training and support for
Menopause at Work.
Our TRIR performance in 2023 was 0.26 which
isa 51% reduction from 2022’s performance
of0.53. We also achieved a reduction against
2022’s LTIR performance, from 0.13 to 0.08 in
2023. Our NMFR increased in 2023 compared
with 2022 by 14%, 2023’s NMFR was 3.97.
OurFirst Aid injuries also increased in 2023
by11% in 2023 (88) compared with 2022 (79)
performance. We are pleased to report that
there were no workplace fatalities in 2023.
Preventing incidents
During 2023, we fully implemented our 12 Global
Safety Standards. The Global Safety Standards
focus on the business’s safety risk profile and are
designed to control our critical risks as well as
ensuring that risk assessments are in place for
allRotork working activities. The Standards also
set out competency and training frameworks
and clearly define roles and responsibilities.
Completing the Global Standard implementation
has been the biggest contributor to the reduction
of injuries during 2023.
We complete regular trend analysis of both
leading and lagging data to help us identify
focus areas to work on. Once identified we use
safety campaigns to increase awareness and
improve control measures for a potential issue.
The campaigns include safety communications,
corrective actions including engineering control
and tools to help reduce the risk of injury in the
workplace. In 2023 we completed two safety
campaigns, one on ‘hand safety’ and the other
on ‘racking safety’. See case study on page 40.
Another preventative tool that we use is
completing Safety Gemba walks at our facilities.
Gemba is a ‘lean’ term for ‘the place where the
value is created’. From a safety perspective, this
equates to ‘where the work takes place’ – on the
factory floor – and how our safety requirements
are followed in practice. In 2023 we completed
1,770 Gemba safety walks across all Rotork
facilities, a 20% increase year-on-year.
We undertake health and safety risk identification
and assessment in a collaborative manner.
Aligned with our Global Safety Standards, our
assessment process informs prevention and
mitigation strategies to reduce risks in our
operational environments. We also encourage
employee engagement in hazard identification
through our Safety Spot system. This proactively
drives awareness and continuous improvement
by capturing hazards, minor near miss events
and behavioural requirements before they result
in an incident.
One of our key safety principles is to learn from
our incidents and we apply a standard approach
to incident investigation. At Rotork we use a
standard format for incident investigation which
is completed by trained, competent colleagues.
This enables us to understand incident cause
andto develop Group-wide corrective action
inorder to prevent re-occurrence across Rotork
working environments.
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Rotork Annual Report 2023 rotork.com40
Safety, health and wellbeing continued
Priorities for 2024
• Focus on safety culture by embedding
safetybehaviours
• Development of technology upgrades
fortheHSE Management systems
• Run a minimum of three global
safetycampaigns
2023 performance highlights
0.26
Total Recordable Incident Rate (TRIR)
51%
Decrease in TRIR from 2022 to 2023
0.08
Lost Time Incident Rate
Operating responsibly continued
0.26
0.53
0.56
23
22
21
Total Recordable Incident Rate
TRIR
0.08
0.13
0.24
0.20
0.25
23
22
21
20
19
Lost Time Incident Rate
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Focus on health and safety
At the beginning of 2023, Rotork deployed
aglobal ‘hand safety’ campaign in response
to a rise in workplace hand injuries. Focused
on raising awareness and the promotion
ofpreventive measures, the ‘hand safety’
campaign aimed to reduce hand injuries,
strengthen risk control and improve
safetyculture.
Through a combination of interactive
sessions, widespread distribution of campaign
materials and the sharing of best practices,
the campaign was successfully delivered
across the Group.
As a result, there was a notable decline in
hand injuries across Rotork’s operations,
reflecting the implementation of safer
working practices. The ‘hand safety’
campaign’s success demonstrates our
commitment to proactive safety measures
and collaborative efforts to reduce risk
tosafety.
rotork.com Rotork Annual Report 202341
Climate change and environment
We remain committed to playing our part in
tackling climate change, and we are making
progress against our science-based climate targets.
Our approach to the environment
Environmental considerations are an integral part
of our strategy and the way we operate. Efficient
use of natural resources is a commercial imperative,
as well as an environmental one. We set high
standards of environmental conduct for our
business and supply chain. We are committed to
reducing our emissions, energy and water usage,
and waste to landfill.
We have set science-based targets to underpin
our ambition, covering scopes 1, 2 and 3. We are
targeting net-zero by 2035 for scopes 1 and 2
and net-zero by 2045 across scopes 1, 2 and 3.
Energy and emissions performance
Overview
In 2023, we reduced our scope 1 and scope 2
(location-based) emissions by 1% compared
with the previous year. Our total scope 1 and
2(market-based) emissions decreased by 11%
in2023 compared with 2022, reflecting the
implementation of several energy efficiency
projects and continued investment in renewable
electricity. Our 2023 emissions and energy
consumption data was prepared by specialist
consultants and was separately assured by MakeUK.
Performance against targets
We have a science-based target to reduce
ourscope 1 & 2 market-based carbon emissions
by 42% by 2030, from a 2020 baseline. Wealso
measure our progress in this area by tracking our
location-based carbon intensity per £1 million
revenue. In 2023, our intensity figure reduced by
12%, from 11.3tCO
2
e per £1 million ofrevenue
to 9.9tCO
2
e per £1 million of revenue.
Operating responsibly continued
Energy efficiency and renewable energy
generation projects were the main contributors
to our emissions reduction. We increased our
renewable energy consumption by 20% from
2022. Gas consumption reduced by 10%,
or15% compared with our baseline year of
2020. As a summary, our like-for-like energy
consumption decreased by 9% in2023, but
appears increased due to the addition of diesel
and petrol in 2023 within the Energy table.
Science-based targets 2023
2030
target
Scope 1 and 2 reduction
vs2020
32% 42%
Scope 3 (Products in Use)
reduction vs 2020
14% 25%
2023
2027
target
Scope 3 (Purchased Goods
&Services) proportion
ofsuppliers with
science-basedtargets
Engagement
ongoing
See pg. 47
25%
Our greenhouse gas emissions and
associated energy use
Scope 1 and 2 greenhouse gas (GHG) emissions
(market-based) were 11% lower year-on-year.
Scope 1 emissions were 2% higher in 2023, due
to a fugitive release of refrigerant gas at one of
our facilities and an increase in transport related
emissions. Other than those that are reported
here, the Group has no other material GHG
emissions sources (such as methane, N2O,
sulphur hexafluoride, HFCs or PFCs) to report.
The changes in our emissions from Products
inUse was primarily driven by the different
ratioof specific products sold in 2023 vs 2022.
Energy
Unit of measure 2023 2022 2021
Electricity kWh 11,624,714 12,255,270 12,458,000
Gas m
3
866,307 962,983 982,287
Other fuels and steam GJ 21,726* 5,840 nr
Total energy consumption GJ 96,477 88,241 89,481
Emissions
Scope 1 and 2 emissions
Unit of measure 2023 2022 2021
Scope 1 Metric tonnes CO
2
e 3,197 3,132 3,686
Scope 2 location-based Metric tonnes CO
2
e 3,953 4,122 4,464
Scope 2 market-based Metric tonnes CO
2
e 3,113 3,920 4,839
Total Scope 1 & 2 (LB) Metric tonnes CO
2
e 7,150 7,25 4 8,150
Total Scope 1 & 2 (MB) Metric tonnes CO
2
e 6,310 7,052 8,525
Emissions intensity tCO
2
e per £1m revenue 9.9 11.3 14.3
* Diesel and petrol are included in this table from 2023, which represents the increase versus 2022.
Our commitments
Scope 1 and 2 tCO
2
e absolute reduction: we will continue to achieve significant progress against
our emissions reduction target. In 2024, we will commence asmart-metering rollout across the
largest manufacturing sites within the business, which will continue into 2025. Energy efficiency
initiatives and capital projects will be delivered to reduce ourenergy consumption and emissions
throughout 2024. Installing on-site renewable electricity will help us to achieve a 42% reduction
from our 2020 baseline by 2030.
Scope 3 tCO
2
e absolute reduction: weare committed to reducing the emissions resulting
fromourProducts in Use and our Purchased Goods & Services. As these are the emissions of our
customers and suppliers, achieving reductions will involve both product design and engagement
with these stakeholders.
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Strategic report Corporate governance Financial statements
Rotork Annual Report 2023 rotork.com42
Operating responsibly continued
2023 performance highlights
Headline targets
11%
decrease in total scope 1
and scope 2 (market-based)
tCO
2
e emissions
9.9
tCO
2
e per £1 million revenue
(location-based)
Resource management
10%
reduction in gas usage
in 2023
33%
reduction in waste to landfill
vs pre-COVID years
Renewable power
44%
of electricity from
renewablesources
7
solar PV systems at our sites
On-site initiatives
6
rainwater harvesting systems
installed in 2023
112
electric forklifts
Climate change and environment continued
Emissions continued
Scope 3 emissions
Category Unit of measure 2023 2022
Purchased goods and services Metric tonnes CO
2
e 85,386 93,879
Capital goods Metric tonnes CO
2
e 600 271
Fuel and energy related activities Metric tonnes CO
2
e 1,687 1,958
Upstream transportation and distribution Metric tonnes CO
2
e 28,881 24,108
Waste generation in operations Metric tonnes CO
2
e 209 205
Business travel Metric tonnes CO
2
e 5,707 4,106
Employee commuting Metric tonnes CO
2
e 1,870 1,894
Use of sold products Metric tonnes CO
2
e 248,465 285,588
End of life treatment of products Metric tonnes CO
2
e 1,045 638
Downstream leased assets Metric tonnes CO
2
e 365 nr*
Total Scope 3 GHG emissions Metric tonnes CO
2
e 374,215 412,747
GHG accounting methodology
For Streamlined Energy and Carbon Reporting (SECR), we report on the emission
sources required under the Companies Act 2006 (Strategic Report and Directors’
Reports) Regulations 2013 and the Companies (Directors’ Report) and Limited
Liability Partnerships (Energy and Carbon Report) Regulations 2018 (‘the 2018
Regulations’). For scope 1–3 emissions, we have followed the principles of the World
Resources Institute Greenhouse Gas (GHG) Protocol, which comprises the coverage
of carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons
and sulphur hexafluoride. The location-based method calculates emissions using
theaverage emission intensity of local electricity grids serving Rotork’s facilities.
Themarket-based method captures the impact of Rotork’s contractual arrangements
to procure renewable or low-carbon energy and energy certificates.
The UK Government GHG Conversion Factors for Company Reporting have been
applied, where relevant, to calculate emissions across all scopes. We have used
additional regional emissions factors for non-UK sites, such as those from the
International Energy Agency (IEA), the Association of Issuing Bodies (AIB)
European Residual Mixes, the US Environmental Protection Agency and Green-e,
to calculate our scope 1 & 2 Market footprint. We continue to reviewour
reporting in light of any changes in business structure, calculation methodology
and the accuracy or availability of data.
Rotork’s scope 1 emissions come from the use of: natural gas, diesel (on-site
and off-site), liquified petroleum gas, fuel oil, petrol and refrigerants. Rotork’s
scope 2 emissions come from the purchase of electricity and steam. We track
the consumption of energy in our facilities each month and, in line with best
practice, report both our market-based and location-based GHG emissions
onacarbon dioxide-equivalent basis.
2020 is the baseline against which we set our targets. 2023 market-based
scope 2 emissions have been verified by MakeUK as part of their assurance
ofscope 1 and 2 emissions and our energy usage presented above.
Annual energy consumption (kWh) is obtained from both actual sources
(invoices and meter readings) and estimated sources (some office energy
ratesincluded in monthly charge). Where conversion of units to kWh is required,
the latest conversion factors from the UK Government are used. In line with the
SECR requirement to disclose the proportion of carbon emissions and energy
associated with the United Kingdom, we estimate that 19% of emissions and
26% of energy usage relates to our UK operations.
Scope 3 PG&S and Capital Goods were estimated based on mapping spend
data against the US EPA’s Environmentally Extended Economic Input Output
(EEIO) model.
Fuel and energy-related scope 3 emissions were calculated by applying WTT
and T&D emission factors to Rotork’s energy consumption data. Emissions
fromdownstream leased assets, instances of leasing machinery or vehicles,
were calculated in line with fuel and electricity calculations for scope 1 and 2.
Upstream transportation and distribution was calculated by applying BEIS
emission factors to tonne-kilometre data. This was supplemented with ‘marginal’
emission factors from US EPA’s EEIO model applied to spend data.
Scope 3 Waste & Water has been calculated by applying BEIS emission factors
to consumption data collected by our facilities management team.
Business travel emissions have been calculated using a combination of BEIS
conversion factors and the US EPA’s EEIO model, applied to distance and nights
away data for hotels, air and rail transport and spend data for hire cars and
other business travel related activities. Commuting and Teleworking emissions
were estimated using FTEs, the ratio of home-working to office-working by site
and national averages relating to commuting and energy consumption.
Use of Sold Products has been calculated using BEIS, US EPA, NGAF and IEA
emissions factors applied to the average operational energy usage of products
over their lifetime.
End of Life Treatment has been calculated using BEIS emissions factors applied
to the number of products sold by the business during the reporting period.
* Data not available and ‘not reported’ in prior years.
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43rotork.com Rotork Annual Report 2023
Operating responsibly continued
Reducing our scope 1 emissions
in Holland
One of our areas of focus is identifying
opportunities to transition from natural gas
heating systems to low-carbon alternatives.
In2023 we installed a fully-electric heat
pump at our Rotterdam (Holland) facility. This
system both heats and cools the site, removing
19tCO
2
e from its annual footprint. We will
pursue similar cost-effective and innovative
solutions as we progress the delivery of our
scope 1 emissions reduction strategy.
Reducing our scope 2 emissions
in South Korea
Our Gimpo (South Korea) site is one of our six
largest electricity consumers. In the second
half of 2023, we installed a 337m
2
solar array
at this 10,542m
2
site which employs nearly
100 people. The installation is on two roofs
– the main building and the warehouse –
andwill save 28tCO
2
e on an annual basis.
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44Rotork Annual Report 2023 rotork.com
Climate change and environment continued
Progress in 2023
Our site in Wolverhampton (UK) installed LED
lightingto all of the internal factory and office
areas,contributing to an 18% reduction in electricity
consumption at this facility compared to the previous
year. Other LED lighting projects in Langanzenn
(Germany) and Falun (Sweden) contributed to a
further 75MWh saving in electrical consumption,
alongside creating an improved colleague
environment and workspace. In Bergamo (Italy), we
replaced an inefficient aircompressor, leading to a
reduction in our energy consumption at this facility.
During 2023 we benefitted from the first full year
ofgeneration from our Manchester (UK) facility’s
solar panel array. The 2023 installation of solar
panels at our Gimpo facility in South Korea will
contribute towards our 2030 reduction target.
Water management and use
Water consumption across Rotork’s own sites
isrelatively small, predominantly comprised of
domestic and sanitary requirements. Some of
our usage is attributed to operational activities
such as paint processes, cleaning of products
and pressure testing of Rotork’s products
beforeshipping to our customers.
Whilst most of the water we withdraw is
discharged, that which is used in our production
processes is removed by licensed contractors
forpre-treatment before disposal, in line with
regulations at a local scale.
Our water withdrawal decreased by 2%
in2023in comparison to 2022. This year
weimplemented corrective actions which
successfully reduced instances of water leaks
atour sites. We also installed six rainwater
harvesting systems across our estate in India
during 2023, which improve the local area’s
water security.
We have made significant performance
improvement compared to pre-COVID years
with2023 usage down 14% against 2019.
2023 2022 2021
Total water
withdrawal
(in cubic metres)
33,269 34,045 32,200
Water stress and preservation
We completed our annual water stress risk
assessment in Q1 2023, to identify locations
whichshould be prioritised for water-use reduction
projects. We also examined risks associated
withwater scarcity, flooding, water quality and
ecosystem services and determined that only a
limited number of sites are exposed to water risks.
Mitigation plans are also in place to protect our
people, operations and the environment.
Our role in water preservation
Demand for water infrastructure is strong across
both developing and developed markets. Leak
detection and water quality are a major focus of
thewater industry and shortages are driving the
development of smart grids. The water network
infrastructure also requires modernisation in many
countries. Increasing regulations relating to water
quality, water re-use and sludge treatment are
driving water-related capital expenditure across
industry. Water scarcity isresulting in greater need
for recycling and desalination, driving investment in
these processes. Rising water levels are necessitating
flood defence investment. There are applications for
Rotork’s products in all these processes.
Operating responsibly continued
Water reduction in Italy
Our Lucca facility is located in the Tuscany
region of Italy which suffered from extreme
drought conditions in summer 2023.
Toreduce Rotork’s potable water usage,
thesite installed water flow regulators on
thetap of every bathroom sink. The team
also incorporated a shut-off system as a
wayof isolating water flow at the end of
theworking day to eliminate the risk of
hidden leaks. These initiatives are simple,
effective and have contributed to a 4%
reduction in water consumption.
44
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45rotork.com Rotork Annual Report 2023
Climate change and environment continued
Waste management
We encourage all our sites to minimise the
volume of waste they produce and promote
asustainable method of waste disposal
wherepossible.
In 2023, total waste generated increased by
14% across all operations, resulting from the
growth that Rotork achieved. Despite the overall
increase in waste produced, we improved
performance in waste management, recycling
72% of our waste in 2023, compared with 69%
in the prior year. Additionally, waste sent to
landfill decreased by 1% compared to 2022.
At our Langanzenn (Germany) facility, waste
segregation and collection was improved,
through the availability of separate containers
for each material, promoting safe waste disposal
and recycling on the factory floor.
Waste sent to landfill decreased by 1%
compared to 2022. In 2024, we will continue
tofocus on improving the segregation of
on-sitewaste streams.
Unit of measure
inmetrictonnes 2023 2022 2021
Total waste 2,363 2,068 2,545
Waste recycled 1,712 1,428 1,709
Sent to landfill 396 401 471
Of which hazardous 46 56 60
Sent to energy recovery 256 239 365
Operating responsibly continued
Rainwater harvesting in India
Operating in drought-affected areas such
asIndia has encouraged us to implement
innovative approaches to reduce the impact
of our water consumption on the local area.
Our facilities in Chennai and Bangalore have
installed Ground Penetration Rainwater
Harvesting Systems which collect water from
periods of significant rainfall and replenish
ground water table levels, improving water
availability for the local area.
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Rotork Annual Report 2023 rotork.com46
Circular economy and
productresponsibility
We are committed to enabling a sustainable
future, meeting our science-based emissions
reduction targets andcontributing to a
low-carbon economy through our intelligent
products andservices.
Materials use
We generally operate an assembly-only
philosophy across the Group, meaning that most
of the manufacturing processes to produce our
products are undertaken by our suppliers. The
main components of our products – aluminium,
steel and copper – are highly recyclable.
Components vary by product family, depending
on how they are operated – electrically
pneumatically, or hydraulically. The weight of
material inputs also vary by product across our
portfolio. Our IQ3 actuator, one of our flagship
products, provides an example of the typical
materials we use in our electric actuator product
range. These are: metals, glass, electrical and
electronic equipment, batteries, plastics, oil/
grease and rubber.
We have significantly reduced the weight of
several products in our portfolio in recent years.
Through this, we have reduced the environmental
impacts of materials used, as well as impacts
associated with transportation and logistics.
There is also increased part commonality
withother product ranges, improving our
overallefficiency.
All suppliers – including component suppliers
– are required to adhere to our Supplier Code
ofConduct. This covers our expectations of
social, ethical and environmental conduct.
Wealso expect suppliers to apply our principles
to their own supply chains. The Supplier Code
ofConduct requirements include an expectation
that suppliers calculate and publish emissions
associated with their manufacturing activities.
Our suppliers are also required to certify their
compliance with RoHS and REACH regulations.
RoHS restricts the use of specific hazardous
materials found in electrical and electronic
products, while REACH concerns chemicals
andtheir safe use. We seek compliance from
suppliers globally.
Product safety
Rotork products play an important role
insupporting customers’ safety objectives.
Manyof our products are certified to externally
recognised safety standards. Approximately
50%of the products in our portfolio are
certified for use in hazardous areas. Around
10% are certified to the highest safety standards
for applications such as safe plant operation
andemergency shutdown.
Product stewardship
Environmental criteria are considered as an
integral part of our product development
process. We aim to reduce the impact of our
products through the consideration of nine
sustainability performance features: (i) in-use
energy, (ii) standby energy, (iii)recycled content,
(iv) material reduction, (v)recyclable content,
(vi)recycled packaging, (vii) recyclable
packaging, (viii) disassembly and recovery,
(ix)paint reduction.
We are particularly focused on the environmental
performance of products in their use phase, where
we have the greatest opportunity to support a
positive environmental impact. We calculated
emissions associated with the use of our sold
products during the year, as part of the calculation
of our scope 3 inventory on page 42. We have
set a science-based target to reduce those
emissions by 25% by 2030 and are building
thisinto our product development roadmaps.
See page 34 for details.
Lifetime Management
Rotork’s Lifetime Management offering is a suite
of services provided by Rotork Site Services to
help customers manage their assets efficiently.
Itis a full life-cycle asset programme that enables
customers’ critical assets to operate at peak
performance level, ensuring wider site uptime
and productivity, improved safety and reduced
environmental impacts. One of the products
within the Lifetime Management suite, Reliability
Services, offers a service contract model that
supports customers towards better maintained
assets delivering greater process uptime.
Intelligent Asset Management is a cloud-based
platform that collects information from the data
logs held within intelligent electric actuators,
offering anomaly detection and accurate asset
health reporting that allow a user to understand
the condition of their assets. This conditional
insight supports both predictive and preventative
maintenance strategies.
Service and maintenance programmes can be
designed several ways. One way of approaching
maintenance is to service assets on a regular
schedule, regardless of age or usage. However,
the age of a device is not the best predictor of
the likelihood of actuator or valve failure; the
precise condition of an asset is much more
accurate. Some actuators are not frequently
operated, instead providing testing or
Emergency Shutdown (ESD) capabilities.
Conversely, some offer constant modulating
control in harsh environments.
Specific condition monitoring, using data from
each actuator in the field, provides information
about the actual operational characteristics of
each asset. Data can be collected, analysed and
then used to optimise the delivery of maintenance.
This proactive analysis of data is key. It enables
earlier failure prediction, reduced failure risk
andcost, and a maintenance programme that
isscheduled to match risk levels. Longevity of
data capture is also important; the longer an
asset is monitored for, the richer the data it
provides becomes. By keeping a site running at
an optimum level, customers are able to make
the most efficient use of environmental resources.
Responsible disposal at end of life
Our product manuals provide end user advice
ondisposal when an asset reaches the end of
life stage, in accordance with environmental
standards. We provide specific guidance on the
disposal of batteries, electrical and electronic
equipment, glass, metals, plastics oil/grease
andrubber. The majority of these are readily
recyclable, with others recyclable by specialists.
Our manuals also include detailed health
andsafety advice for the installation and
operation of products. We publish manuals
onourwebsitein numerous languages.
See:www.rotork.com/en/documents.
Due to their nature, our products typically
havealong lifespan and are replaced
infrequently. Generally customers take
responsibility for disposal at end of life.
Operating responsibly continued
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rotork.com Rotork Annual Report 202347
Operating responsibly continued
Supply chain management
We expect our suppliers to maintain high
standards of ethical conduct – aligned with our
environmentalandsocialaims – to maximise
value created for us, those working in our supply
chain, ourcommunities and the environment.
Rotork has a long-standing reputation for
integrity, fair dealing, ethical behaviour and
paying on time. As part of our Growth+
strategy, we are working to rationalise our
supply base and concentrate our spend with
strategic supply partners. We spent over £360m
with suppliers in 2023. Approximately 75%
ofour spend in 2023 was with around 300
suppliers. Our spend on product assembly
andsupply can be grouped into three main
categories, as shown by the pie chart on the
next page.
We have comprehensive quality assurance
procedures for suppliers. These include supplier
approval and component qualification processes,
supplemented by supplier visits and a vendor
rating system, to measure their performance.
Our approach
All suppliers are expected to comply with
ourSupplier Code of Conduct. This describes
expected standards, including promoting
equalopportunities, human rights, freedom
ofassociation, labour rights, environmental
protection and our zero-tolerance approach to
bribery and corruption. It applies to all suppliers
globally and their own supply chains. We will
take appropriate action against any supplier that
fails to adhere to our Code, which can include
the termination of their contract.
We undertake due diligence on prospective
suppliers and assessments of existing suppliers
to manage modern slavery risks in oursupply
chain. We engage an independent intelligence
provider to help analyse our supply base and
follow up with audits when necessary.
Our Supplier Code of Conduct
Our Supplier Code of Conduct sets out our
expectations of suppliers on environmental,
social and governance topics. This includes
aclause providing an express right of audit,
incorporating a requirement to make supplier
premises and personnel accessible to Rotork.
TheCode is applicable to all suppliers and
thirdparties globally.
Our Code includes an explicit requirement for
suppliers to pursue efforts to publicly report
greenhouse gas emissions. In addition, it expressly
sets out our requirement for suppliers to pay
wages and benefits that meet or exceed
nationalminimum requirements and to adhere
to working time regulations; to comply with
applicable laws and regulations relating to
faircompetition, money-laundering and the
non-facilitation of tax evasion; and to adhere
toboth the spirit and the letter of our Conflict
Minerals Policy. The Code also encourages
suppliers to align with internationally recognised
social standards, such as SA8000. The Code
isembedded in all new supplier contracts.
We have a defined, Group-wide process
tovalidate that suppliers are meeting the
requirements of our Supplier Code of Conduct
and upholding Rotork’s commitments to social,
environmental and ethical standards in the
supply chain. The process outlines our approach
to assessment of social, environmental and ethical
risks, which includes supplier self-assessment,
enhanced surveys for suppliers scored as
medium or high risk, and site audits for
medium- and high-risk suppliers.
Our risk scores are developed through a
combination of factors, including scores relating
to their country of operation, with country-based
index scores for human freedom, child labour,
corruption and health and safety, drawing on
internationally recognised indices provided by
organisations such as the International Labour
Organization. The process also documents
ourescalation procedures for any concerns
identified, with significant concerns to be
reported to the Legal Department.
Supply chain emissions
One of our three science-based climate targets
isa supplier engagement target which ultimately
aims to reduce the emissions associated with
ourpurchased goods and services. We are
committed to engaging with suppliers on the
topic of emissions measurement and data
sharing, with a target that 25% of our suppliers
(by estimated emissions) will set science-based
targets by 2027. In 2023, our procurement team
engaged 84 suppliers through four interactive
webinars and targeted one-to-one workshops
which introduced the topics of emissions
measurement, reduction and target-setting.
Risk management
As an international group with a predominantly
out-sourced manufacturing model, our supply
chain is key to us delivering our purpose of
‘Keeping the world flowing for future generations’.
Supply chain disruption is identified as a principal
risk to the business. As a result, we monitor
oursupply chain very closely. Disruption could
arise for a number of reasons; for example as
aresultof a tooling failure at a key supplier, a
transportation issue, or a severe weather event
impacting a key supplier.
We identify critical suppliers and components
through our formal risk assessment process
andfocus our risk management efforts on the
suppliers that present the greatest risk to our
business. Criticality is determined via a number
of criteria, including business dependency,
criticality of the commodity supplied and
financial considerations, such as spend and
contribution to revenue. In 2023, the risk
framework we use for the assessment of
supplierrisk was expanded to include a
widerrange of risk domains and elements.
Wehave several workstreams on supply chain
resilience underway which we will update on
innext year’s annual report.
We have historically required suppliers to complete
sustainability self-assessments annually. In 2023,
we transitioned to a risk-based approach to focus
on (i) key Group suppliers and (ii) highest risk
suppliers. We use a third-party software platform to
support management of supplier self-assessments
and ensure their timely completion. The platform
also includes additional ESG and compliance
modules that we ask suppliers to complete on
specific topics, such as greenhouse gas emissions
reporting and cybersecurity management. The
software automates the collection and collation
of suppliers’ responses to support our effective
oversight and management of ESG issues in the
supply chain.
Our supplier assessment and onboarding process
ensures that potential suppliers that do not meet
the minimum standards criteria are eliminated
early from any formal tendering or engagement
process. We also provide feedback to any
companies we have assessed, even if they are
unsuccessful, to provide them with potentially
valuable development opportunities. Our Group
vendor approval questionnaire was updated in
early 2022 to include new questions aligned to
our updated Supplier Code of Conduct. We have
also incorporated sustainability audits in our
routine on-site supplier assessments; sustainability
elements are now a mandatory part of all local
site procedures.
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Rotork Annual Report 2023 rotork.com48
Product assembly and supply spend (2023)
Mechanical components 55%
Electronic and electrical components 16%
Other indirect categories 21%
Transportation and logistics 5%
Packaging 2%
Conflict minerals
Rotork does not purchase raw materials from
orworkdirectly with smelters or refineries –
wepurchase components several tiers removed
from smelters in the value chain. Our approach is
therefore based on engaging with our suppliers
to identify, manage and correct any risks.
Wereport transparently on our engagement
andrisk management procedures to support
stakeholders’ understanding of our approach.
Our Conflict Minerals Policy sets out our
commitment to not use tantalum, tin, tungsten
and gold (3TG) that directly or indirectly
finances, or benefits, armed groups in the
Democratic Republic of the Congo or adjoining
countries. The scope of the Conflict Minerals
Policy also includes other Conflict Affected
andHigh Risk Areas (CAHRAs). Management
responsibility for the policy lies with our CEO.
The policy is published on our website at
www.rotork.com/environmental-social-governance.
We exercise due diligence based on the
‘Responsible Minerals Initiative’ (RMI) guidance,
by mapping our supply chain using their reporting
templates and following up any concerns raised via
a corrective action management process. Group-
wide procedures define our risk management
process and support the commitments made
inour Conflict Minerals Policy. We describe
in-scope commodities; supplier communications
approach (including the requirement for an
annual supplychain conflict minerals survey,
based onthe template provided by the RMI);
and the management approach in the event
ofsupplier non-conformance.
Our Group-wide conflict minerals management
procedure also describes our definition of ‘high
risk’ smelters, to guide colleagues in interpreting
the results of the supplier conflict minerals
survey, which collects information on the
smelters used by our suppliers and minerals’
country of origin.
We have a dedicated conflict minerals section
onour employee intranet to help drive awareness
of conflict minerals, the problems associated
with them, how to identify the risk of these in
the supply chain and how to respond to requests
forRotork’s conflict minerals declaration.
We also educate suppliers of commodities that
could contain 3TG about conflict minerals risks
when we request their responses to our annual
survey. If we identify and confirm that a supplier
is using a high-risk smelter, our process is to
engage with our supplier to request that they
change their source, and ultimately we may
re-source to a supplier that does not use
high-risk smelters.
Modern slavery awareness training
Our training programme aims to raise employee
awareness of modern slavery and human
trafficking risks in our business and supply chain.
It includes mandatory human rights eLearning
for our global online population, designed to
build knowledge of, and capability to identify
and manage, modern slavery risks. In 2024,
weplan to deliver bespoke training to relevant
Rotork employees, on the Supplier Code of
Conduct and monitoring supplier compliance.
See page 49 for further information
aboutourapproach to mitigating modern
slavery and human rights risks in our business
and supply chain.
Priorities for 2024
• Engage further suppliers onthesubject
ofemissions reduction andscience-based
target setting
• Embedding our updated risk and
resilienceframework
Operating responsibly continued
Supply chain management
continued
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rotork.com Rotork Annual Report 202349
Culture, ethics and governance
We strive to act ethically in the way that we
dobusiness. Our values – Stronger Together,
AlwaysInnovatingand Trusted Partner –
werechosen by our people. They are rooted
inourcultureandreflected in our Code of
Conduct (the ‘Code’).
Our Code applies to anyone acting on Rotork’s
behalf, including all permanent employees,
temporary workers and contractors. Weexpect
everyone to follow the Code and actwith
integrity at all times.
We have a number of policies that sit beneath
our Code of Conduct, covering Confidentiality,
Conflicts of Interest, Speak-Up, Fair Competition,
Gifts and Hospitality, Anti Bribery and Corruption,
Data Protection, Trade Sanctions and Modern
Slavery. These policies apply to our operations
globally, including to subsidiary companies and
joint ventures.
We continue to embed our corporate Values
andCode of Conduct across our organisation
worldwide. In 2024, we intend to introduce
anupdated version of the Code, accompanied
by new training content.
Compliance and ethics training
Employee training and awareness is one of the
core elements of our Compliance programme.
New joiners are introduced to our values
andexpected behaviours during formal
induction sessions.
We have an eLearning platform that enables a
range of legal compliance training to be provided
to employees and provides full auditability.
Thisincludes mandatory training on a variety
oftopics, which is available in several languages.
As well as foundation Code of Conduct modules,
and Speak Up training that re-emphasises both
the importance of speaking up if wrongdoing
issuspected and Rotork’s no-retaliation policy,
in2023 we extended ournew joiners training
programme to the full suite of courses previously
delivered to legacy employees, including
anti-bribery and corruption, conflicts of interest,
fair competition, modern slavery, and gifts and
hospitality. A new mandatory data protection
course was launched in 2023 for existing
employees, and is also included in the new
joiners training programme.
As part of our commitment to good governance,
our mandatory compliance certification, launched
each year in January, asks colleagues to complete
a statement confirming compliance with our
Code of Conduct and associated policies, the
completion of all mandatory training, and any
actual or potential conflicts ofinterest. Any
conflicts of interest declared arereviewed and
assessed and are addressed where necessary.
Human rights and modern slavery
Rotork continually looks for ways to support the
promotion of human rights within our operations
and our sphere of influence. We obey the laws,
rules and regulations of every country in which
we operate. We respect internationally recognised
human rights, as set out in the United Nations
International Bill of Human Rights and the
International Labour Organization’s Declaration
on Fundamental Principles and Rights at Work.
These cover freedom of association, the abolition
of forced labour, equality and the elimination
ofchild labour.
Our Modern Slavery Policy includes a range of
key performance indicators (KPIs), to monitor the
risk-based actions we take to mitigate risk and to
assess the effectiveness of our control measures.
We review the KPIs annually to ensure they
remain relevant and appropriate.
The policy is supported by a training programme
that aims to raise employee awareness of modern
slavery and human trafficking risks in our business
and supply chain.
In 2023, all employees who have access to the
eLearning platform, and were hired after the
original 2022 launch, received our mandatory
modern slavery course. At the same time, the
course was introduced as part of our mandatory
eLearning programme for new joiners. The course
content includes what modern slavery is, its
forms and key indicators, how to identify and
respond to modern slavery risks, key risk areas,
and how to report concerns. The course also
provides targeted content for directors and our
Procurement and Human Resources functions
who require specialised knowledge.
In July 2023, we marked ‘World Day Against
Trafficking in Persons’ with a global communication,
serving to highlight the extent of human trafficking
and forced labour, the harm it causes, and the
importance of remaining alert and pro-actively
raising concerns. Colleagues were invited to watch
a video, ‘Supporting Human Rights: The Ethical and
Legal Choice’, which was made available in our core
languages and addressed some of the warning
signs, particularly within a company’s supply chain.
Our Supplier Code of Conduct sets out our
minimum expectations regarding human and
labour rights, among other requirements.
Weassess potential slavery and human trafficking
risks arising from supplier relationships using
anumber of different methods. These include
assessing new and existing suppliers and
conducting supplier site visits. In the event
thatan issue is identified, we will undertake
appropriate remedial action. This might include
placing appropriate contractual obligations on
asupplier; working together with a supplier
onacorrective action plan; or ceasing to work
with a supplier altogether.
Further information about the steps we take
toaddress modern slavery risk is set out in our
Modern Slavery Statement at www.rotork.com/
en/investors/modern-slavery-statement.
Anti-bribery and corruption
Rotork has a zero-tolerance policy towards
bribery and corruption worldwide, irrespective
ofcountry or business culture. Both our Code of
Conduct and Anti-Bribery and Corruption Policy
prohibit the offering, paying or solicitation of
bribes in any form. Additionally, our Gifts and
Hospitality Policy provides guidance on the rules
relating to the giving and receiving of gifts and
hospitality. Requests to offer or accept gifts or
hospitality (over a de minimis threshold) are
recorded in our automated register, together
with whether approval has been granted.
Third-party risks
We have procedures in place to manage
third-party risks (including bribery risk) across
our operations, through each of the selection,
appointment and monitoring stages. In 2023,
we performed a risk based review of our channel
partner (agents, distributors and resellers)
population. During 2024, the findings from
thereview will be used to enhance our
existingprogramme.
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Rotork Annual Report 2023 rotork.com50
Culture, ethics and governance
continued
Trade sanctions
Rotork has in place an established sanctions
compliance programme that seeks to mitigate
risk relating to trade and financial sanctions,
including through due diligence screening and
the monitoring of changes in legislation for
restrictions on products, doing business in certain
territories or with third parties. The sanctions
policy was updated in 2023 to address the
continuously evolving sanctions risk in a changing
geopolitical climate. To further enhance the
programme, a sanctions risk assessment was
carried out during 2023 and the sanctions
processes and procedures documentation was
updated to fully record the changes made to the
programme in the prior year. A training programme
to further embed these procedures will be rolled
out during the course of 2024.
Fair competition
In 2023, we completed a competition law
riskassessment, updated our Fair Competition
Policy and related guidance, and commenced
aprogramme of targeted, risk-based training
torelevant personnel. The strengthening of
ourFair Competition programme will continue
during 2024.
Our policy on political donations
Rotork is a politically neutral organisation.
Wehave a policy of not making political
donations in any part of the world.
Nopoliticaldonations were made
duringtheyear.
Encouraging colleagues to ‘Speak Up’
Rotork has an open and transparent culture
underpinned by our Speak Up policy.
Our Speak Up policy encourages colleagues to
report suspected wrongdoing as soon as possible
and without fear of detrimental treatment as
aresult of raising a concern. It applies to all
individuals working within, for, or with Rotork,
including suppliers.
We offer a range of channels for colleagues to
raise concerns. Our policy encourages colleagues
to contact their line managers, our Group HR
Director or our Group General Counsel & Company
Secretary. We also offer an independent, global
and multi-lingual external reporting service
managed by Safecall. This service allows
concerns to be raised anonymously if preferred.
The service is available to employees, external
stakeholders and the public and is operated
24hours a day, seven days a week. Reports can
be made to a local freephone number or submitted
via Safecall’s website. All concerns raised are
investigated promptly.
In 2023, we continued to promote the
importance of speaking up and our different
Speak Up mechanisms, through mandatory
eLearning and other communication channels.
Priorities for 2024
Aiming to continuously improve, we plan to:
• refresh our current Code of Conduct and
associated training
• continue training on specific topics from
theCode of Conduct, supplemented by
newrefresher microlearning videos
• enhance our third-party risk
managementprogramme
• formally launch our updated Fair
CompetitionPolicy and related guidance
andcontinue with our targeted training
Board-level oversight
The Board received a detailed presentation
fromthe Group General Counsel & Company
Secretary on Rotork’s ethics and compliance
programme at its August 2023 meeting,
together with further updates at other meetings
during the year as necessary. The Board reviews
concerns reported about suspected wrongdoing,
and, where required, agrees actions to be taken
to prevent a potential reoccurrence. The Board is
updated on the compliance training undertaken
and planned during the year, together with
completion statistics. It also reviews the results
of our employee ‘pulse’ survey, to help identify
any areas where employees feel that there is a
divergence between their experience and our
stated culture. The findings and recommended
actions arising from audits and risk assessments
are shared with the Board or Audit Committee.
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rotork.com Rotork Annual Report 202351
Our mission
To help drive the transition to a low carbon
future where environmental resources are
used responsibly.
Our commitments
• We play our part to enable the
global energy transition and support
a cleaner, more sustainable future
• We support customers’ energy and
emissions reduction and enable
them to incorporate renewable
energy into their operations
• We enable sustainable management
of water resources and greater
waterefficiency for our customers
In this section
• Electrifying upstream oil and gas
• Hydrogen’s role in net-zero
• Renewable power infrastructure
• Supporting the battery value chain
SDGs we will progress
Enabling a
sustainable future
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52Rotork Annual Report 2023 rotork.com
Enabling a sustainable future continued
The transition to net-zero will require the
widespreadadoption of new technologies.
Ourproducts and services are alreadyused in a range
of these low carbon technologies andapplications
Electrifying upstream oil and gas
To reduce emissions in line with the IEA’s ‘Net
Zero Emissions by 2050’ scenario, the oil and gas
sector’s operational emissions intensity will need
to halve by 2030. 15% of global energy-related
emissions result from oil and gas operations.
TheIEA highlights five measures for reducing
operational emissions – reducing fugitive methane
emissions, reducing flaring, electrification of
operations, use of CCUS, and use of hydrogen.
1
Our products are utilised in all five.
At December’s COP28 in Dubai, companies
representing more than 40% of global oil
production committed to the Oil & Gas
Decarbonization Charter. These signatories
commit to ‘Net Zero Operations’ on or before
2050, which will include electrifying their
upstream operations. Also in December, the
USEPA announced new methane emissions
Decarbonising the wellsite
We are working with a major oil and gas
equipment and services company to develop
the next generation of electric powered
wellsite equipment. Electric equipment can
significantly reduce the exploration and
production industry’s scope 1 & 2 emissions
whilst improving safety and control and
enabling a smaller wellsite.
standards for oil and gas operations. These rules
will require new and existing ‘process controllers’
(i.e. pneumatic actuators) to be zero emission.
The EPA also announced it will impose a waste
emissions charge on eligible petroleum and
natural gas facilities, starting at $900 per tonne
and rising to $1,500 by 2026.
Rotork is well placed to support and to
benefitfrom the transition away from the
methane-emitting pneumatic actuators
usedextensively inthe oil and gas industry.
Forexample, the use of our electric IQTF
actuator on the wellhead choke can help
eliminate flaring downstream. And as noted
bythe IEA, these upstream electrification
opportunities may be accompanied by further
downstream opportunities such aselectrifying
LNG liquefaction.
1
1 For more information, see the IEA’s special report ‘Emissions from Oil and Gas Operations in Net Zero Transitions’
(May 2023), https://www.iea.org/reports/emissions-from-oil-and-gas-operations-in-net-zero-transitions.
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rotork.com Rotork Annual Report 202353
Hydrogen’s role in net-zero
Hydrogen plays an important role in most
decarbonisation scenarios as an energy source
and a feedstock in industrial processes, particularly
for ‘hard-to-abate’ sectors.
The global pipeline of hydrogen projects continues
to grow with $570 billion of direct investments
announced through 2030.
1
The current pipeline
would deliver 45 million tonnes of clean hydrogen.
2
If future policies align with the IEA’s ‘Net Zero
by2050’ trajectory, this production could rise
to70 million tonnes by 2030.
1,2
Rotork has opportunities in hydrogen equipment
and hydrogen applications across our end markets.
In most cases, our existing product range is
already ideally suited to, and certified for, use
inhydrogen applications. One application is in
electrolysers, which convert water to hydrogen.
Each electrolyser requires the type of highly-
certified control equipment which Rotork
produces. The Hydrogen Council projects that
the 2030 global electrolysis capacity will rise
to305 GW, from today’s 1.1 GW ofinstalled
capacity, and Rotork is well placed tosupport
this capacity expansion.
1
Enabling a sustainable future continued
Potential uses for clean hydrogen
• Refining
• Ammonia
andmethanol
synthesis
• Direct reduced
iron (DRI)
forsteel
production
• Flexible power
generation
• Off-grid
power supply
• Large-scale
energy storage
• Renewable
gases
• Synthetic fuels
• Ammonia
• Industrial
heating
• Residential and
commercial
heating
• Road
transport
• Trains
• Aviation
• Shipping
H
2
Feedstock
applications
Industrial
processes
Power-to-fuel Heating Transport
Energy
applications
Power sector
Rotork supplying
innovative blue
hydrogen project
Rotork fluid power actuators were
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
5million tonnes of carbon each year.
Hydrogen in the
maritime value chain
Rotork is supplying electric
actuators to a project developing
hydrogen fuel cell propulsion
technologies for zero emission
passenger ships.
Rotork actuators, positioners and
switch boxes were selected to
control the high pressure hydrogen
delivery system as part of a mobility
project inAustralia.
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1 Hydrogen Council. ‘Hydrogen Insights 2023 December Update’.
https://hydrogencouncil.com/wp-content/uploads/2023/12/Hydrogen-Insights-Dec-2023-Update.pdf.
2 IEA. ‘Global Hydrogen Review 2023’.
https://iea.blob.core.windows.net/assets/ecdfc3bb-d212-4a4c-9ff7-6ce5b1e19cef/GlobalHydrogenReview2023.pdf.
Rotork Annual Report 2023 rotork.com54
Enabling a sustainable future continued
Green hydrogen applications
Rotork is supplying a project using green
hydrogen and waste CO
2
to produce green
methanol in China. We are also supplying
asteel facility in Sweden that will use green
hydrogen instead of coal for the reduction
ofiron ore, with the potential to dramatically
reduce steel production emissions versus
traditional methods.
Hydrogen for load balancing
We are supplying an offshore wind pilot project
in Norway which will convert excess wind
energy into green hydrogen. This hydrogen will
be stored, and during periods where energy
demand exceeds supply, the hydrogen can be
converted back into electricity by fuel cells.
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Renewable power infrastructure
Offshore wind is an established supply of
electricity in countries including China, the UK
and Germany. The potential however is far
greater. An assessment by the IEA demonstrated
that – inregions including the EU, US and Japan
– the potential energy supply from offshore wind
is several times greater than the total electricity
demand of thesecountries.
1
To realise the potential of wind power, reliable,
cost-effective transmission of the power is required.
Our products have critical applications in energy
transmission and converter stations.
Electricity demand
Offshore wind potential
Source: IEA, Offshore wind technical potential andelectricity
demand, 2018, IEA, Paris https://www.iea.org/data-and-
statistics/charts/offshore-wind-technical-potential-and-
electricity-demand-2018, IEA. Licence: CC BY 4.0.
rotork.com Rotork Annual Report 2023
Enabling a sustainable future continued
Enabling offshore power
Our IQ electric actuators were selected for
critical control duties on high-voltage direct
current (HVDC) transformer platforms that
willbe used to transport electricity generated
by North Sea (UK) windfarms back to the
mainland. The windfarms have the generating
capacity topower c.5 million homes.
Supplying the battery industry
In 2023, we supplied a range of customers
across the battery value chain. Our actuators
and positioners supported customers involved
in raw material mining and the manufacturing
of both battery cells and the actual batteries.
Supporting the battery industry
Energy storage is an important enabler of the
low-carbon transition. In the power sector,
generation from renewable energy sources
likesolar and wind are dependent on external
factors like the weather or the time of day.
Energy storage technologies play the important
role of storing excess energy when supply
exceeds demand and releasing this energy back
into the system duringperiods where demand
exceeds supply. Battery storage already plays a
role in the energy systems of China, India, the
US, Spain and Norway, and the US Inflation
Reduction Act provides further financial support
for new battery storage projects. In the
transportation sector, battery storage plays a
critical role in the transition to electric vehicles,
with the demand for lithium-ion batteries rising
65% year-on-year in 2022.
2
Rotork’s products have applications across the
battery value chain, including battery-related
mineral mining and processing, midstream salt
evaporation and recovery, cellmanufacturing,
downstream battery packproduction, and
critical HVAC.
1 IEA. ‘Wind – Offshore wind has remarkable potential.’
https://www.iea.org/energy-system/renewables/wind.
2 IEA, Global EV Outlook 2023. https://www.iea.org/
reports/global-ev-outlook-2023/trends-in-batteries.
European Union
United States
Japan
China
India
30,000
40,000
0
10,000
20,000
TWh
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56
Making a positive
social impact
Our mission
To support thriving, fair
andresilientcommunities.
Our commitments
Diversity
• We develop and deliver initiatives
to drive greater representation
from diverse groups including
gender and ethnic diversity
Fair Pay
• We contribute to a fairer society
more broadly, including by
ensuring 100% of employees are
covered by our Fair Pay Framework
In this section
• Brand and reputation
• Our people and culture
• Delivering safety solutions
• Our social contribution
SDGs we will progress
Rotork Annual Report 2023 rotork.com
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rotork.com Rotork Annual Report 202357
We aim to support thriving,
fairandresilient communities
We endeavour to make a positive social impact
on people, supply chain and communities.
Wemake a significant contribution through the
high-quality employment we provide. We engage
proactively and fairly with all stakeholders to
understand and meet their needs. We seek to
extend the direct positive impact of our business
through our support forcharitable causes
aligned with our sustainability goals and
colleagues’ interests.
We aim to be a fair employer and promote
equalopportunity and equality. We also strive
tohelp tackle societal inequality through our
role as an employer. As part of this, we are
particularly conscious of supporting progress
forunderrepresented groups. Atthe same time,
we recognise the valuable contribution that
diversity, in its broadest sense, can make to
ouroverall business success and seek to nurture
talent from a broad range of backgrounds.
This section describes how we engage with
andsupport our people and communities
tohave apositive impact on individuals and
society asawhole.
Brand and reputation
Rotork’s brand is well-recognised and highly
respected globally. It stands for innovative,
quality, dependable products, and market
leading customer service.
Our ‘brand and reputation’ is consistently ranked
among our materiality assessment’s most important
sustainability issues. Our sustained success rests
on building on Rotork’s well-recognised and
well-respected brand among existing customers,
new customers and potential future employees.
Attracting, developing and retaining a diverse
range of talented people by being an employer
of choice, providing fair and equal pay and
benefits, and demonstrating our commitment
todiversity and inclusion is central to our ability
to maintain our market leadership position and
seize new opportunities to grow our business.
Throughout this section, we describe how
ourpeople play a crucial part in achieving our
strategic objectives and the wider positive social
contribution we make through our innovative,
cutting-edge solutions, positive stakeholder
engagement and direct investment in local
communities worldwide.
Our people and culture
Rotork strives to be a great place to work. Engaged,
committed people are key to successfully delivering
our strategy and sustainable business growth.
We are committed to nurturing an inclusive and
respectful culture. We want our people to feel
they belong and can deliver at their best.
Our Group purpose, ‘Keeping the world flowing
for future generations’, and our three Values –
Stronger Together, Always Innovating and
Trusted Partner – define what Rotork does and
how we operate.
Our values were selected by our people and are
essential in creating a culture we can be proud
of. They help to make Rotork a great place to
work and give us a competitive edge.
Culture
Our people policies and systems underpin
ourvalues and aim to engage and motivate
colleagues and protect their rights. We strive
toensure fair and equitable treatment across
ourbusiness whilst ensuring we create an
environment where our employees have a voice,
are encouraged to innovate, are motivated and
have opportunities for development, growth and
progression. Our Head of Culture & Inclusion
leads our agenda in these topics and our Board
ensures that our culture is fit for purpose.
We also understand the impact of change on
our people and our culture and look to equip
our employees by understanding and supporting
them. As well as our significant communications
and engagement plans around change, we
provide change workshops locally before
embarking on any programme. We also use
change diagnostics tools to understand how
change is embedding, how our colleagues feel
about it and the impact on their work and our
Rotork culture.
Read more P.105
Talent management and
successionplanning
Attracting, recruiting, developing and retaining
talented people is key to successfully delivering
our strategy.
We complete a talent review process involving
both the Rotork Management Board and the
Board. The focus is on the skills and capabilities
needed for our future success. We review the
top three management levels, as well as
colleagues identified as future talent for
succession planning purposes. Our top leaders
also complete a personal profile which is reviewed
by our Boards as part of our talent management
process. Personal profiles (which include a
comprehensive development plan), enable us
tobetter understand in detail our talent pipeline
and ensure the right development is in place for
key individuals. 30% of our senior leaders are
new in their role in 2023 with around half
ofthose being internal promotions.
Our approach to performance management
ensures that colleagues have regular, structured
performance and development conversations
with their managers at least 3-4 times a year
and can focus not just on what we do but
howwe do it; this is aligned with our values.
In2024, we intend to digitalise our performance
management process to enhance the experience
for our people and managers and ensure that
allemployees have objectives aligned with
delivering our strategy. We will also conduct
refresher training on performance management
when we launch thenew system.
Making a positive social impact continued
Our values
Stronger Together
Always Innovating
Trusted Partner
We are committed to our inclusive, people-
focused culture; our values are embedded in
our Code of Conduct and form an integral
part of our business.
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Rotork Annual Report 2023 rotork.com58
Our people and culture continued
Talent management and succession
planning continued
In 2023 we introduced a new applicant tracking
system for use by our managers and recruitment
team, helping us to more easily source talented
candidates to join us, to enhance the candidate
experience and to enable us to develop a talent
pool for future requirements.
2023 also saw the second intake of our
Graduate and Internship Programmes as we
continue our commitment to developing early
talent. We have set a target that at least 50% of
participants in our schemes are diverse; female,
ethnic minority or from other groups currently
underrepresented in our business to increase
thediversity of our talent pipeline. We exceeded
this target in 2023 (60%). We relaunched our
Apprenticeship Programme, focusing on our
Operations and Service functions.
We again donated unused funds from our UK
apprenticeship levy in 2023 to organisations in
other industries supporting young people to
develop new skills and capabilities.
We are proud to have a good mix of long serving
and newer employees. 37% of employees have
been with Rotork for more than 10 years, while
the percentage who joined in the last five years
has increased to 49%, reflecting the change
inthe labour market and our recruitment over
2023. We believe the mix of Rotork experience
and new external experience is integral to
oursuccess.
Training and development
We recognise that a strong learning culture is
essential, and we are focused on ensuring that
our people have the right skills and experience
to deliver the Group’s strategy.
In 2023, we launched our Leadership Programme
for our senior leadership population. This 12-month
programme focused on developing leadership
capabilities through a set of newly developed
leadership behaviours that align with our Rotork
Values. In 2024, we intend to build on this
Programme to deploy a new Management
Development Programme for our people managers.
In 2023, we also launched our new learning@rotork
learning management system, which offers
virtual training programmes on various topics,
inlocal languages. This has enabled us to deliver
an increased number of additional courses in
2023, to build our capabilities to deliver Growth+
and also for employees in support oftheir
development. All line managers also complete
Performance and Reward workshops, focused
on achieving results in line with our values and
aligning reward with high performance.
We also ran workshops for every employee on
our Growth+ strategy and how theirrole and
activities contribute to this.
Employee engagement
Employee feedback is critical in ensuring our
employees’ views are considered in decisions
made at the Board and management levels.
These insights also mean we can respond to
anyconcerns promptly and understand what
matters most to our people.
We use employee ‘pulse’ surveys to gain insight
and feedback on various topics across our
business. In 2023, 79% of employees
participated in our survey (2022: 75%).
Whilst we include additional questions relevant
at the time on particular topics, certain questions
recur in each survey so that we can track progress.
In 2023, our ‘Rotork as a place to work’ score,
which we use as our measure of engagement,
was 7.4/10 (2022: 7.2).
As in previous years, for 2023, a portion of the
management and leadership population’s bonus
opportunity is linked to maintaining high levels
of employee engagement.
We also provide a ‘working@rotork’ email
address, enabling colleagues to ask questions on
various topics, including HR matters. Colleagues
can also contact Tim Cobbold (Designated
Non-executive Director for Workforce Engagement)
via our ‘working@rotork’ email address.
Wellbeing and mental health
We have a strong focus on our employees’
wellbeing and mental health. We continue to
increase the number of Mental Health First
Aiders we have trained around the world,
risingto 98 in 2023. Ann Christin Andersen
(Non-executive Board Director) joined some of
our Mental Health First Aiders on World Mental
Health Day to discuss mental health at Rotork
and the support that they require to undertake
their support role to colleagues. We also signed
the Pledge forGlobal Business Collaboration for
Better Workplace Mental Health, reinforcing our
commitment to our workforce’s health, safety
and wellbeing in every site in which we operate.
We have also introduced new learning modules
on mental health awareness on our learning@
rotork platform. We provide a Global Employee
Assistance Programme, which includes mental
health support and counselling 24/7 in
colleagues’ local languages. In 2023, we also
launched our Menopause at Work guidelines and
offered training programmes, raising awareness
and discussing the support available.
Fair pay and benefits
We believe that all colleagues should be
appropriately and fairly rewarded for their
contribution. We launched our Fair Pay
Framework in 2020. It includes five focus
areasto guide our reward policies, procedures,
systems anddecision making to support fair
andcompetitive remuneration.
Our original Framework included a commitment
to pay a real living wage (rather than the
minimum wage) where this exists in a country.
In2021, we increased our commitment, and
now ensure that we pay more than the living
wage published in a country. Rotork is accredited
as a Living Wage Employer by the Living
WageFoundation.
In 2022 we brought forward the annual pay
review from April to January for all employees
bar senior leaders and enabled additional money
to be available for those in our lowest paid roles.
Feedback from our employees indicated that the
cost of living was still having a significant impact
in 2023 so again we made the decision to bring
forward the annual pay review from April to
January for a second year.
Rotork is proud to have well above average
employee share ownership, with the majority
ofemployees owning shares. Colleagues in many
of our locations receive a gift of Rotork shares
each year, wherever practicable. This gives our
people an additional personal and financial stake
in our success.
All permanent employees participate in the
Rotork bonus scheme, regardless of their role
orlevel in the organisation, after 3 months
ofservice. We link performance to reward,
ensuring we recognise those who make the
most significant contribution in line with our
values. We benchmark our reward and benefits
arrangements externally in every country we
operate. We also provide pension arrangements
based on local laws and practices.
Making a positive social impact continued
Sustainability review continued
Strategic report Corporate governance Financial statements
rotork.com Rotork Annual Report 202359
Our people and culture continued
2023 achievements
• Colleague engagement increased from 7.2/10
to 7.4/10
• Relaunched our apprenticeship programme
• Commenced our Leadership Training
Programme to help deliver Growth+
• Established our Menopause at Work
guidelines and training
• Launched our learning@rotork – learning
managementsystem
• Signed the Pledge for Global Business
Collaboration for Better Workplace
MentalHealth
• Introduced an Applicant Tracking System
toenable strong talent attraction
andmanagement
• Met our Early Careers diversity targets for
ourGraduate and Internship Schemes
• Annual Pay Review brought forward due
tocontinued cost of living concerns (for all
employees bar senior leaders)
Collective bargaining
We uphold colleagues’ freedom of association
and recognise their right to collective bargaining.
There are collective bargaining arrangements in
several sites and countries where we operate.
Around 7% of our employees globally are
covered by union agreements. We are committed
to open and constructive engagement with our
employees and their representatives.
Diversity and inclusion
We are committed to fostering an inclusive and
diverse workforce. We recognise the strategic
advantage of valuing diverse perspectives
andcontributions. We continue to drive our
commitment to diversity and inclusion and build
this into the way we work. 62% of our Board are
diverse (gender or ethnicity) signalling our focus
and commitment to diversity. Our Board diversity
policy is available to view at https://www.rotork.
com/en/documents/publication/24261.
In 2023, we hosted a series of virtual Equity,
Diversity and Inclusion (ED&I) conversations,
inviting people across our business to participate
discussing key topics and what ED&I means for
Rotork and our people. Our Head of Culture and
Inclusion hosted these sessions, and Tim Cobbold
(Designated Non-executive Director for
Workforce Engagement) also attended one of
these sessions. The output from these sessions
has fed into our future inclusion roadmap.
As part of our Leadership Programme all our
senior leaders attended an externally facilitated
workshop on cross-cultural awareness to
buildawareness and understanding of how
tobuild inclusive cultures. We also introduced
training for managers and employees on
Stopping SexualHarassment at Work.
For International Women in Engineering Day in
June we created a virtual wall and many of our
female colleagues in STEM-related roles shared
their experiences and thoughts. We again
celebrated Pride Week, encouraging colleagues
to adopt a rainbow version of the Rotork logo
intheir email signatures or to use a rainbow
background in their Teams calls.
We re-launched our graduate and internship
scheme in 2022 setting a target to ensure we
reflect the diversity of the communities in which
we operate. We have set a target that atleast
50% of participants in our schemes are female,
from ethnic minorities or from other groups
currently underrepresented in our business to
increase the diversity of our talent pipeline.
Weexceeded this in 2023 (60%).
In our ‘pulse’ survey this year, employees scored
Rotork as 7.8/10 in believing we offer an inclusive
culture (2022: 7.6/10). Our Head of Culture and
Inclusion drives our diversity initiatives as a key
focus of the role.
Our Respect at Work and Equality of Opportunity
policy reflects our approach to being a responsible
employer. This aims to promote fair and objective
treatment across recruitment and employment,
regardless of any protected characteristic.
Read more P.61
Gender diversity
We are committed to increasing the number of
women in our organisation at all levels. Females
comprise 23.7% of our workforce (2022: 23.1%).
In 2023, females comprised 50% (2022: 44%) of
our Board and 23.7% of the Rotork Management
Board (our Executive Committee) and its direct
reports (2022: 23.1%).
Our 2023 Gender Pay Report shows that our
mean pay gap in the UK of -3.3% (2022: -8.3%)
continues to favour women, and our median
average pay gap is 7.2% (2022: 5.5%). This
compares to the UK’s national gender pay gap
figure of 14.3% and reflects our continued
workin this area. Our Gender Pay Report 2023
will be published in April 2024 and available
onour website.
We are a member of the 30% Club, which
aimsto achieve at least 30% representation
ofwomen on all boards and C-suites globally.
Inaddition, we participate in the Bloomberg
Gender Reporting Framework, a voluntary
disclosure of gender-related metrics, demonstrating
our commitment to transparency and the pursuit
of gender equality. We are also a partner of the
Women in Engineering Society (WES), which
aims to inspire women to achieve as engineers,
scientists and leaders.
We are proud to have achieved the target in
theHampton-Alexander review of 33% female
representation on our Board. We also meet the
requirement for at least one of either the Chair,
Senior Independent Director (SID), CEO or CFO
to be female. Any new appointment to the
Board is made with consideration to our
BoardDiversity and Inclusion Policy. The Board
iscommitted to ensuring its membership has
diversity in its broadest sense, and we work with
search firms that are signed up to the Voluntary
Code of Conduct.
Making a positive social impact continued
Sustainability review continued
Strategic report Corporate governance Financial statements
Rotork Annual Report 2023 rotork.com60
Our people and culture continued
Ethnic diversity
We already exceed the Parker Review target for
all FTSE 250 boards to have at least one member
from an ethnic minority background by 2024.
We are making efforts to increase ethnic
diversity at our Executive Committee (Rotork
Management Board) and their direct reports
levels. We believe this is important in providing
senior-level role models from diverse backgrounds.
We are unable to obtain full accurate global
ethnicity data for our senior population from
alljurisdictions in which we operate which
hasprevented us from stating afuture senior
diversity target at this stage.
As set out on page 127, we consider diversity
inour talent management process. We actively
review decisions around performance, talent
andremuneration to ensure fairness. We have
set a target that at least 50% of our early
careers programme participants are from diverse
and under-represented groups in our business.
Since 2019, we have published our UK Ethnicity
Pay Report alongside our UK Gender Pay Report.
Our mean pay gap is -13.1% (2022: -28.1%) in
favour of ethnic minorities, and our median pay
gap is 3.5% (2022: 9.9%). The full details can
befound in our Gender Pay Report for 2023,
which will be published in April 2024 and will
beavailable on our website.
Gender pay data
Gender pay gap reporting compares the hourly
pay of men and women on a specific date,
irrespective of their role or level in the organisation.
A negative percentage figure indicates an outcome
in favour of women.
The mean (average) gender pay gap uses
employees’ hourly pay to calculate the difference
between the average hourly pay of men and
women’s average hourly pay. Mean averages
give a useful overall indication of differences
inpay; however, a small number of highly paid
individuals can significantly impact the figure.
The median pay gap is calculated by comparing
the pay of people in the middle of the lists
ofhourly pay for men and women.
Rotork’s mean average pay gap in the UK has
favoured women since 2019 and our figures
remain well below the national average gender
pay gap in the UK of 14.3%.
Making a positive social impact continued
Gender pay reporting
All Rotork employees in the UK:
At 5 April 2023 2022 2021
Mean Gender Pay Gap
across all Rotork
employees in the UK
(3.3)% (8.3)% (5.2)%
Median Gender Pay
Gapacross all Rotork
employees in the UK
7.2% 5.5% 1.0%
UK’s National Gender
Pay Gap*
14.3% 14.9% 15.4%
* Source: Office of National Statistics 2023.
Sustainability review continued
Strategic report Corporate governance Financial statements
rotork.com Rotork Annual Report 202361
Age profile
(Group, as at 31 December 2023)
30 to 49 58%
50 and over 31%
Under 30 11%
Ethnic origin
(Based on those who declared theirinformation)
White 53.2% Black 3.1%
Asian 35.9% Other 1.7%
Hispanic 4.9% Mixed 1.2%
Senior leaders’ ethnicity
(As at 31 December 2023, includes RMB members
andtheirdirectreports where declared)
Gender profile
(Group, as at 31 December 2023)
Early careers diversity
Male 76.3%
Female 23.7%
Non diverse 40%
Diverse 60%
Registered disability
(Based on those who declared theirinformation)
No 99%
Yes 1%
Employees
White 78.7% Hispanic 1.6%
Asian 14.9% Mixed 1.6%
Black 1.6% Other 1.6%
Making a positive social impact continued
Our people and culture continued
Sustainability review continued
Strategic report Corporate governance Financial statements
Rotork Annual Report 2023 rotork.com62
Making a positive social impact continued
Delivering safety solutions
Our product portfolio includes products that
arefire-safe, water-safe and playakey role
indelivering customers’ health and safety
performance. There are some great examples
ofRotork products that deliver safety benefits
including our Skilmatic SI3, a sophisticated,
certified emergency shutdown device
(discussedon page 25).
Our social contribution
Rotork strives to make a positive contribution
tothe communities in which we operate around
the world. This is integral to our commitment
tobeing a good corporate citizen. Our ethos is
grounded in our values and behaviours and is
part of what makes Rotork a great place to work.
We are committed to making a positive contribution
to the communities in which we operate around
the world. We target an annual contribution of
0.1% of profits to our nominated charity partners
and a similar percentage to local charitable
causes. Local teams are empowered to decide
how to distribute funds and support their
localcommunities.
Charity partner selection process
We partner with international charities aligning
closely with Rotork’s purpose, values and
UNSDGs. We select charity partners using
fourkey parameters:
1 Accountability requirements
How will donations be used, how readily
areaccounts available and what proportion
reaches recipients?
2 Fit. Do key causes align, and what’s the
global reach?
Do they align with our business and support
our purpose of ‘Keeping the world flowing
for future generations’?
3 Do they empower for the long term?
Are they involved in supporting communities
longer term?
4 How are they funded?
Are they an established and registered
charity, non-political and non-religious?
Our global charity partners
We donated £147,000 to our global charity
partners (Renewable World, Pump Aid and
WeForest) in 2023, increasing the donations
toour global charities compared to the
previousyear.
Rotork’s donations to Renewable World will
support the delivery of a sustainable and reliable
source of clean solar energy to a health centre
inKenya serving 5,000 people. This renewable
energy source will support the Centre’s 24/7
healthcare delivery, including neonatal care
andtelemedicine.
We continue to support WeForest, which will
plant 48,000 trees to help regenerate the forests
of Mara, Tanzania.
We have a strong partnership with the
UK-Malawi charity Pump Aid. Pump Aid
supports access to safe water for 30 rural
communities and improvements to the climate
resilience of 20communities. Restoring access
tosafe water requires repairs to non-functional
water points, undertaken by teams of female
pump mechanics trained to deliver repair and
maintenance services. Rotork is supporting the
training of seven female pump mechanics.
Thework of each mechanic will ensure reliable
access to safe water for over87,500 people.
In 2024, we plan to broaden our relationship
with Pump Aid and its female pump mechanics
programme with support from our Rotork
engineering and service teams.
Sustainability review continued
Strategic report Corporate governance Financial statements
rotork.com Rotork Annual Report 202363
Sustainability Accounting Standards Board (SASB) Index
Table 1. Sustainability disclosure topics & accounting metrics
Topic Metric – Quantitative Unit 2023 2022
Energy
management
Electricity GJ 41,849 4 4,119
Natural gas* GJ 32,902 38,282
Diesel and petrol GJ 16,475 nr**
LPG* GJ 3,736 4,674
Steam GJ 1,515 1,166
Total energy consumed GJ 96,477 88,241
Percentage grid electricity % from grid
% on-site generation
98%
2%
98%
2%
Percentage renewable electricity % renewable
% non-renewable
44%
56%
34%
66%
Workforce health
and safety
Total recordable
incidentrate(TRIR)
Rate 0.26 0.53
Fatality rate Rate 0 0
Near miss frequency rate (NMFR) Rate 3.97 3.49
Topic Discussion and analysis
Materials sourcing Description of the
management of risks
associated with the use
ofcritical materials
n/a Annual
Report
2023,
p. 47–50
Annual
Report
2022,
p. 52–54
Table 2. Activity metrics
Activity metric Unit 2023 2022
Number of units
produced by
productcategory
Quantitative Commercially sensitive,
not disclosed
Number of
employees
Quantitative, as at year-end 3,342 3,234
Table 3. Sustainability disclosure topics & accounting metrics that are non-applicable
toRotork
Topic Metric – Quantitative
Fuel economy
&emissions
inusephase
Sales-weighted fleet fuel efficiency for medium- and heavy-duty vehicles
Sales-weighted fuel efficiency for non-road equipment
Sales-weighted fuel efficiency for stationary generators
Sales-weighted emissions of (1) nitrogen oxides (NOx) and (2) particulate matter
(PM) for: (a) marine diesel engines, (b) locomotive diesel engines, (c) on-road
medium- and heavy-duty engines, and (d) other non-road diesel engines
Remanufacturing
design & services
Revenue from remanufactured products and remanufacturing services
* In 2023, the calculation of GJ transitioned to using the UK DEFRA energy conversion rates. While not material, the
year-on-year percentage change of natural gas and LPG consumption in GJ differs slightly from the percentage change
intheir original units (e.g. in cubic metres of gas).
** Data not available and ‘not reported’ in prior years.
Page title
Strategic report Corporate governance Financial statements
Sustainability review continued
Strategic report Corporate governance Financial statements
Jonathan Davis
Group Finance Director
I am particularly pleased
thisyearto report another year
ofstrong growth, resulting in
record orders, revenue and
adjusted operating profit
Revenue
£719m
Adjusted operating profit
£164m
Adjusted operating profit margin
22.9%
Profit before tax
£151m
Order intake for the year was £723.7m
(2022:£681.6m), up 6.2% from the prior year
or7.8% on an organic constant currency (OCC)
basis, with all divisions ahead of the prior year.
Group revenue was £719.1m for the year, 12.0%
higher (+13.6% OCC) than 2022. Revenue for
the second half of the year was £384.4m, which
was 14.9% higher than the first half of the year.
Revenue grew in all three divisions with O&G
reporting the strongest year-on-year growth.
O&G finished the year 15.9% ahead (+16.6%
OCC), CPI grew 7.7% (+9.7% OCC) and W&P
grew 10.5% (+13.3% OCC). Within O&G,
upstream sales again increased the most, up
byaround a quarter OCC, sales to midstream
were up low-double digits OCC and downstream,
still the largest segment, increased mid-double
digitsOCC.
Rotork Site Services, our global service network
and a key differentiator in our industry, performed
strongly in the year with revenues growing
13.6% compared with 2022. Again, performance
in the second half of the year was considerably
stronger than the first as the improved supply
chain situation allowed more retrofit projects to
proceed. Revenue was 15.1% ahead of 2022 on
an OCCbasis and our lifetime management and
reliability services programmes performed well.
Rotork Site Services is managed as a separate
unit within Rotork’s divisions and contributed
21% (2022: 21%) of Group revenue.
Gross margin increased 170 basis points to
47.2% (+160bps OCC), in part driven by the
increase in revenue. Cost increases related to
components were successfully mitigated by the
price increase at the beginning of the year with
both increases more modest than the prior
twoyears.
Reported overheads increased by £22.2m (+13.2%)
compared with 2022, largely driven by investment
in people and commercial activities. Overheads
asa percentage of revenue increased marginally
from 26.2% in 2022 to 26.5% in2023.
64Rotork Annual Report 2023 rotork.com
Financial review
Strategic report Corporate governance Financial statements
“ Orders and revenue grew
inallthree divisions.”
Jonathan Davis
Group Finance Director
Reported operating profit was £148.8m, 20.4%
higher year on year. Adjusted operating profit
was £164.5m, a 14.8% increase with adjusted
operating margin increasing 60 basis points
to22.9% (2022: 22.3%). On an OCC basis,
adjusted operating profit increased 70 basis
points to 23.0%.
Net finance income was £1.9m (2022: income
of£0.5m) benefitting from more favourable
interestrates.
Reported profit before tax was £150.6m, an
increase of 21.4% from £124.1m in 2022.
Adjusted basic earnings per share was 14.6p
(2022: 12.7p), an increase of 14.8%. Statutory
basic earnings per share was 13.2p (2022: 10.9p),
an increase of 21.7%.
Adjusted items
Adjusted profit measures are presented alongside
statutory results as we believe they provide a
useful comparison of underlying business trends
and performance from one period to the next.
The Group believes alternative performance
measures, which are not considered to be a
substitute for, or superior to, IFRS measures,
provide stakeholders with additional helpful
information on the performance of the business.
The alternative profit measures are adjusted to
exclude amortisation of acquired intangibles,
Business Transformation costs associated with
the implementation of a new ERP system and
integration with business processes, and other
Adjusted earnings reconciliation
£m
Statutory
results Amortisation
Gain on
property
disposal
Business
Transformation
costs
Other
costs
Adjusted
results
Operating profit 148.8 2.1 (0.7) 13.1 1.2 164.5
Profit before tax 150.6 2.1 (0.7) 13.1 1.2 166.3
Tax (37.1) (0.3) 0.1 (3.2) (0.2) (40.7)
Profit after tax 113.5 1.8 (0.6) 9.9 1.0 125.6
The table above shows the adjustments between the statutory results for the significant non-cash and other adjustments and the adjusted results.
Note2 sets out the alternative performance measures used by the Group and how these reconcile to the statutory results. Further details of the
adjustingitems are provided in note 5.
adjustments that are considered to be significant
and where treatment as an adjusted item provides
stakeholders with additional useful information
to assess the trading performance of the Group
on a consistent basis. Further details of adjusted
items are provided in note 5.
Currency
In 2023 we experienced a currency tailwind in
the first half which then switched to a significant
headwind in the second half. The major currencies
affecting the income statement are the US dollar
and the euro. The US dollar/sterling average rate
of $1.24 (2022: $1.24) was a slight headwind,
whilst the euro/sterling average rate was €1.15
(2022: €1.17), a 2 cent tailwind. However the
average sterling rate across the basket of other
currencies, led by Chinese renminbi and Indian
rupee, weakened in 2023 and resulted in a
£11.9m or 1.6% headwind reported to revenue.
The impact of currency on the Group is both
translational and transactional. Given the locations
in which we operate and the international nature
of our supply chain and sales currencies, the
impact of transaction settlement differences can
be very different from the translation impact.
We are able partially to mitigate the transaction
impact through matching supply currency with
sales currency, but ultimately we are net sellers
of both US dollars and euros. It is the net sale
ofthese currencies which we principally address
through our hedging policy, covering up to 75%
of net trading transactions in the next 12 months
and up to 50% between 12 and 24 months.
Taxation
The Group’s headline effective tax rate decreased
from 24.9% to 24.7%. Removing the impact of
the adjusted items provides a better indication of
the underlying rate and, on this basis, the adjusted
effective tax rate is 24.5% (2022: 23.9%). The
Group expects its adjusted effective tax rate to
remain higher than the standard UK rate due to
higher rates of tax in China, Germany, India and
the US.
The Group’s approach to tax continues to be
tooperate on the basis of full disclosure and
co-operation with all tax authorities and, where
possible, to mitigate the burden of tax within
thelocal legislation.
Hanbay Inc. acquisition
On 4 August 2023, the Group acquired 100%
ofthe share capital of Hanbay Inc. (‘Hanbay’)
for£21.1m. Hanbay designs and manufactures
precise, miniature electric actuators which offer
a compact profile and high torque design for
usewith small valves and instrument valves
inhazardous and non-hazardous applications.
Itis headquartered in Montreal, Canada.
Theacquisition expands the Group’s electric
actuator offering and supports all three pillars
ofthe Growth+ strategy and increases the
percentage sales contribution of the Group’s
eco-transition portfolio. Further details are
provided in note 4 of the Financial Statements.
In order to estimate the impact of currency,
atthe current exchange rates we consider the
effect of a one cent movement versus sterling.
Aone euro cent movement now results in
approximately a £150,000 (2022: £150,000)
adjustment to profit and for US dollar, and
dollar-related currencies, a one cent movement
equates to approximately a £500,000
(2022:£550,000) adjustment.
Return on capital employed (ROCE)
Our capital-efficient business model and strong
profit margins mean Rotork generates a high
ROCE. Our definition of ROCE is based on adjusted
operating profit as a return on the average net
assets excluding net cash and the pension scheme
asset/liability, net of the related deferred tax.
The average capital employed increased 6.0%
over the year to £485.5m, driven largely by the
retained profit for the year. However adjusted
operating profit increased more and as a result
ROCE rose 260bps to 33.9% (2022: 31.3%).
rotork.com Rotork Annual Report 202365
Financial review continued
Strategic report Corporate governance Financial statements
Organic constant currency rates
We also present OCC figures to exclude the impacts of currency, acquisitions, business closures and disposals.
%
2023 as
reported
(£m)
Constant
currency
adjustment
(£m) %
2023 at 2022
exchange
rate
(£m)
Acquired
business
(£m) %
Organic business
at 2022
exchange
rate
(£m) %
2022
(£m)
Revenue 719.1 11.9 731.0 (1.6) 729.4 641.8
Cost of sales (380.1) (6.2) (386.3) 0.7 (385.6) (350.1)
Gross profit 47.2 339.0 5.7 47.2 344.7 (0.9) 47.1 343.8 45.5 291.7
Overheads 24.3 (174.5) (1.5) 24.1 (176.0) 0.3 24.1 (175.7) 23.1 (148.5)
Adjusted operating profit
1
22.9 164.5 4.2 23.1 168.7 (0.6) 23.0 168.1 22.3 143.2
1 Adjusted operating profit is before the amortisation of acquired intangible assets and other adjustments (see note 5).
Cash generation
We finished the year with a net cash position of
£134.4m (2022: £105.9m) which is a conversion
of 120.3% of adjusted operating profit into
cash, up significantly from 75.9% reported in
2022. The higher cash conversion is largely
explained by improvements in working capital,
including reductions in inventory levels and an
improvement in days’ sales outstanding². Capital
expenditure was £7.3m (2022: £8.3m), plus
£2.1m in capitalised software (2022: £2.1m) and
£11.6m in Business Transformation costs which
were expensed in the period (2022: £8.9m).
Capital expenditure in 2023 included an initial
investment in our new facility in China which
isexpected to open early in 2025.
OurResearch and Development (R&D) spend
increased 3.2% to £13.9m which represents 1.9%
of revenue (2022: £13.4m and 2.1%). Dividends
of £58.8m, tax payments of £32.8m, pension
contributions of £26.6m and the acquisition
ofHanbay Inc £18.4m (net of cash acquired)
were the other major outflows excluding
working capital.
Control of working capital as defined in the cash
flow statement, using average exchange rates,
iskey to achieving our cash generation KPI.
Inventory decreased by £8.3m as the need to
tactically hold higher inventory to mitigate supply
chain disruption decreased. Higher year-on-year
sales led to trade receivables increasing to
£152.8m, however, this increase was in part
offset by an improvement in days’ sales
outstanding
2
, which decreased from 58 to 55
days. Net working capital in the balance sheet
decreased to 27.3% of revenue compared with
28.7% the year before, however working capital
movements generated a £11.9m outflow in the
cash flow statement driven by business growth.
2 Days’ sales outstanding is calculated on a count-back
method. The sales value including local sales taxes is
deducted from the year-end trade receivables to calculate
the number of days salesoutstanding.
Risk update
Geopolitical instability remains at an elevated
level with potential knock-on impacts to other
risks such as supply chain disruption. As a global
business we continue to monitor the trade
position between all locations where we are
based or have customers or suppliers, and have
considered the potential impact of additional
trade barriers between these countries. We will
take steps where necessary to mitigate any such
changes but continue to believe they will not
materially impact the Group’s results. We have
included scenarios in the viability assessment
which models the impact of all of these current
uncertainties. The viability statement can be
found on page 80.
Supply chain disruption remained a key risk
during the year with component shortages and
constraints driving some delays in specific areas.
This is a change to the previous year where the
shortages and constraints were more widespread.
Management actions to secure the supply of key
components have mitigated potentially more
severe outcomes.
Various strategic initiatives continue to respond
tothe Group’s risks and in the year the Group has
seen positive engagement on People and Health
& Safety risks in particular and has responded to
the external threat of increasingly sophisticated
cyberattacks by investing in cyber strategy.
We continue to monitor and review emerging
risks, which are those risks that are hard to
determine the severity. Risks under review
include those in relation to geopolitical events,
technological, social, environmental, climate
andsustainability risks.
Credit management
The Group’s credit risk is primarily attributable
totrade receivables, with the risk spread over
alarge number of countries and customers,
andno significant concentration of risk.
Creditworthiness checks are undertaken before
entering into contracts or commencing trade
with new customers, and in companies where
insurance cover operates, the authorisation
process works in conjunction with the insurer,
taking advantage of their market intelligence.
We maintained coverage of the credit insurance
policy during the year and have cover in place
for virtually all of our companies at an aggregate
of 90% of receivables. Where appropriate, we
use trade finance instruments such as letters
ofcredit to mitigate any identified risk.
Rotork Annual Report 2023 rotork.com66
Financial review continued
Strategic report Corporate governance Financial statements
“ Net working capital reduced to
27.3% of revenue as inventory
levels reduced, resulting in 120%
cash conversion in the year.”
Jonathan Davis
Group Finance Director
Treasury
The Group operates a centralised treasury
function managed by a Treasury Committee,
chaired by me and also comprising the Group
Financial Controller and Group Treasurer.
TheCommittee meets regularly to consider
foreign currency exposure, control over deposits,
funding requirements and cash management.
The Group Treasurer monitors compliance
withthe treasury policies and is responsible for
overseeing all of the Group’s banking relationships.
A Subsidiary Treasury Policy restricts the actions
subsidiaries can take and the Group Treasury
Policy and Terms of Reference define the
responsibilities of the Group Treasurer and
Treasury Committee.
The Group uses financial instruments where
appropriate to hedge significant currency
transactions, principally forward exchange
contracts and swaps. These financial instruments
are used to reduce volatility which might affect
the Group’s cash or income statement. In assessing
the level of cash flows to hedge with forward
exchange contracts, the maximum cover taken
is75% of net forecast flows. The Board receives
treasury reports which summarise the Group’s
foreign currency hedging position, distribution
of cash balances and any significant changes
tobanking relationships.
Retirement benefits
The Group accounts for post-retirement benefits
in accordance with IAS 19, Employee Benefits.
The balance sheet reflects the net assets of these
schemes at 31 December 2023 based on the
market value of the assets at that date, and the
valuation of liabilities using year-end AA corporate
bond yields. We closed both the main defined
benefit pension schemes to new entrants; the
UK scheme in 2003 and the US scheme in 2009,
in order to reduce the risk of volatility of the
Group’s liabilities. In 2018 we further reduced
the risk of volatility when we completed the
closure to future accrual of both the UK and
USschemes. Members of the defined benefit
schemes were transferred onto the relevant
defined contribution plan operating in
theircountry.
During the year the Group made a special
contribution of £20m to the Rotork Pension
andLife Assurance Scheme. This contribution,
together with some of the existing assets, was
used to purchase a bulk annuity covering the UK
scheme’s existing pensioner liabilities. This has
been accounted for as a buy-in.
The most recent triennial valuation of the
UKscheme took place at 31 March 2022 and
showed an actuarial deficit of £35.1m and
afunding level of 84%. A recovery plan was
agreed with the Trustees as part of the 2022
valuation, which, following the special
contribution of £20m, resulted in required
monthly contributions from the Company of
£0.6m until September 2023 and £0.5m from
October 2023 to August 2024.
On an accounting basis the schemes moved
froma deficit of £8.0m in 2022 to a £9.1m
surplus in 2023 driven principally by the £20m
special contribution. The funding level increased
from 94% to 106%. The Company paid
totalcontributions of £26.6m over the year.
Theschemes’ assets increased in value by
£19.0m (2022: decrease of £89.1m) and
theschemes’ liabilities increased by £1.8m
(2022:decrease of £88.7m).
The accounting surplus / deficit is different to
theactuarial position as on an accounting basis
we are required to use AA-rated corporate bond
yields to value the liabilities. The UK scheme’s
actuarial valuation uses gilt yields since this
mostclosely matches the investment strategy
which is designed in part to hedge the
interestrate and inflation risks borne by the
scheme. Cash contributions are driven by the
actuarial valuation.
Dividends
The Board is proposing a final dividend of 4.65p
per share. When taken together with the 2.55p
interim dividend paid in September 2023, the
7.20p (2022: 6.70p per share) represents a
7.5%increase in dividends over the prior year.
This gives dividend cover of 2.0 times (2022:
1.9times) based on adjusted earnings per share.
Jonathan Davis
Group Finance Director
4 March 2024
rotork.com Rotork Annual Report 202367
Financial review continued
Strategic report Corporate governance Financial statements
How we manage risk
Managing the risks of our business is essential
toour purpose of ‘Keeping the world flowing for
future generations’. Our approach to risk is intended
toprotect the interests of all our stakeholders
Managing business risks
The Board is responsible for determining the
nature and extent of the risks it is willing to take
in achieving our strategic objectives. Our Group
risk appetite statement sets the tone from the
topand supports decision-making to mitigate,
control or accept risks. Rotork’s purpose,
‘Keepingthe world flowing for future generations’,
is embedded in the way we assess risks.
Our Group risk management process reviews
those risks that could have an immediate or
longer-term impact. The Board considers risk
throughout the year including quarterly key
riskindicator dashboards and a formal review
process conducted twice a year. The Board is
assisted in the oversight of risk management
bythe ESG Committee, the Audit Committee,
and the Rotork Management Board.
Principal risks are reviewed and managed using
the Group’s risk management framework which
incorporates both a ‘bottom-up’ and ‘top-down’
assessment. Risk owners are assigned to the
most material risks and appropriate control
measures are decided based on the perceived
materiality and agreed risk appetite. Where a
new response is required to manage a risk, an
action owner is assigned who is accountable for
the delivery of the action, with support from the
Risk & Compliance team. An appropriate action
could be to perform further analysis, to put in
place controls and mitigations, or to address
therisk by identifying other opportunities.
As with all businesses, there are certain risks and
uncertainties that may impact Rotork’s ability to
achieve its objectives. The Group risk management
process is an established way of identifying and
managing risk and is part of our governance
framework as set out in our Corporate Governance
report, see page 104. The continuous improvement
and execution of a comprehensive and robust
risk management system is of paramount
importance to Rotork.
The Group continues to build on the progress
made in recent years in relation to our risk
management framework, further integrating
itinto business practices and decision-making.
In2023, the Group continued to respond to our
principal and emerging risks to provide a clear
picture to our stakeholders on how we view
andmanage the key risks to our business.
An established functional risk review process
results in a ‘bottom-up’ assessment of risks.
The‘bottom-up’ assessment process includes
areview with all central functions, a focus on
risk identification, mitigation and reporting,
including emerging risks, risks associated with
ESG and development of further plans to
respond to risks in accordance with risk appetite.
The risks identified in the ‘bottom-up’ reviews
are consolidated before a ‘top-down’ evaluation
is performed by management and then reviewed
by the Board. The consolidation process looks at
all risks identified, the impact and likelihood of
each risk and where common risk themes have
been identified. The group level risks are then
evaluated against the existing set of principal
risks and uncertainties, and management review
if any updates are required to the principal risks
and uncertainties.
68Rotork Annual Report 2023 rotork.com
Risk management
Strategic report Corporate governance Financial statements
In this section
Risk management
Description of the Group’s risk
managementprocess
Read more on page 69
Risk appetite framework
Description of how risks are reviewed and
how the risk appetite framework is applied
to the management of our risks
Read more on page 70
Principal risks and uncertainties
Outline of the principal risks and uncertainties
for Rotork and the approach taken to manage
current and emerging risks
Read more on page 71
Principal risks – detail
Detailed description of the principal risks,
movements and mitigations
Read more on pages 73 to 79
Risk management process
Top-down
riskassessment
Ongoing risk
mitigationreviews
andcontrols testing
Rotork plc Board
• Oversight of risk management and internal controls
• Define risk appetite, statements and preferences
• Promote a risk-aware culture that emphasises integrity at all levels of business operations
• Determine our principal risks and consider emerging risks, ensuring that risk management is embedded
within the core processes of the Group
Audit Committee
• Review the
effectiveness of
internalcontrols
• Review the risk
management policy
• Approve the internal
audit assurance plans
ESG Committee
• Promote appropriate risk management
ofESG matters
• Review how we use the three pillars of
oursustainability framework (Operating
Responsibly, Enabling a Sustainable
Future, and Making a Positive Social
Impact) to guide our decision-making
anddrive our success in line with our
riskappetite
Rotork Management
Board (RMB)
• Identify, consolidate,
report and manage
principal and key risks
• Report to the plc Board
on the management of
our principal and key risks
Bottom-up
riskassessment
Divisions and functions
identify, manage and
monitor risks
Group internal audit
• Provide independent assurance over the risk management framework through audits and other assurance
work performed during the year, which is reported to the Audit Committee
Group risk & compliance
• Support the Group to identify risks and put in place appropriate mitigations
• Promote a risk-aware culture and adherence to risk appetite
• Report on the status of principal risks and emerging risks periodically, including key risk indicator dashboards
Functional management
• Identify current and emerging risks and opportunities specific to the relevant function/business unit
• Implement risk management within their designated area of accountability
rotork.com Rotork Annual Report 202369
Risk management continued
Strategic report Corporate governance Financial statements
Risk management process
The Board sets the Group’s risk appetite preference, stating whether
we are tolerant, neutral or averse to a particular risk. These preferences
guide our approach to managing risk. The risk appetite statements
provide guiding principles to support decision making atboth a Board
level and throughout the Group. During 2023, the Board reviewed and
updated the risk appetite framework to reflect changes tothe nature
of Rotork’s business and our operating environment, including
responses to the risks associated with supplychain disruption and
in-field product failure.
The Board have also reviewed the application ofrisk appetite
statements and preferences bymonitoring the key risk indicators
which are presented to the Board on a quarterly basis.
We use the three pillars of our sustainability
framework – Operating Responsibly, Enabling a
Sustainable Future, and Making a Positive Social
Impact to guide our decision making and drive
our success.
The Board is responsible for determining the
nature and extent of the risks it is willing to take
in achieving our strategic objectives. Our Group
risk appetite statement sets the tone from the
top and supports decision making. The risk
appetite framework provides qualitative and
quantitative insight on risks and supports
proactive mitigation planning.
1
Review and update the
risk appetite preferences
2
Identify key decisions
3
Evaluate decisions
against risk appetite
4
Review key
riskindicators
Risk appetite framework
Risk appetite statement: Rotork’s purpose, ‘Keeping the world flowing for future generations’,
is embedded in the way we assess risks. We are committed to generating stakeholder value
through innovation and sustainable growth and will only take considered risks that fulfil
ourstrategic objectives and do not risk our values, financial stability or our resilience
Rotork Annual Report 2023 rotork.com70
Risk management continued
Strategic report Corporate governance Financial statements
The principal risks identified are the result of
therobust ‘top-down’ and ‘bottom-up’ risk
assessment process previously described. Risks
include those that would threaten the Group’s
business model, future performance, solvency
orliquidity. Leaders within the business have
continued to develop Rotork’s risk aware culture
through training and workshops and an
increased focus on mitigating actions. Further
consistency in risk measurement and reporting
has been embedded across the organisation.
Emerging risks and opportunities
Our risk management process includes
consideration of risks and opportunities that may
impact Rotork across a range of time horizons.
Emerging risks and opportunities may be
developing or already known events which are
subject to uncertainty and ambiguity and are
therefore difficult to quantify using traditional
risk assessment techniques. Emerging risks and
opportunities are often complex, volatile, and
may be uncontrollable.
Emerging risks and opportunities are identified
throughout the year on a formal basis through
functional risk workshops and with the Rotork
Management Board and the Board twice a year.
The response to each emerging risk or opportunity
is tailored to the specific scenario and emerging
risks and opportunities are managed and
monitored based on the information available.
In 2023, the potential impact of a number of
new and emerging risks andopportunities were
reviewed and the defined responses to existing
emerging risks and opportunities assessed. The
ability to identify risksand opportunities that
may have a future impact on Rotork and
ourstakeholders is fundamental to our successful
risk management process and is closely linked
tothe delivery of our strategic objectives.
Work on emerging risks and opportunities will
continue in 2024 as we consider new external
developments and make internal assessments to
better understand new areas. Artificial intelligence
isagood example of this, where the speed of
developments is quicker than other risks.
Technology
A disruptive technological
advance in flow control
could pose a threat to
Rotork’s business model.
Rotork’s investment in
innovation seeks to stay
atthe forefront of flow
control technology.
Rotorkcontinues to review
the market for new or
disruptive technologies.
Rotork has led new
technological advances
over the last 65+ years
andintends to continue to
embrace new technologies
and innovate to remain
aleader in intelligence
flow control solutions
inthe future.
Artificial intelligence
Artificial intelligence could
be a risk or an opportunity
for Rotork. Developments
inhow AI is used in
manufacturing processes,
industry 4.0, and how the
insights from AI could
complement Rotork’s
iAMsolution may result in
opportunities being realised,
increasing the accuracy of
predictive maintenance.
Inthe future, AI could pose
a threat in relation to the
development of disruptive
technologies to control flow.
Advances in AI may also
cause information security
risks, if security controls and
prevention measures do not
advance at the same speed.
Changing stakeholder
expectations
Rotork’s traditional markets
may change over the longer
term as the world transitions
to new energy sources.
This transition is likely to
bea net opportunity for
Rotork. A rapid shift of
expectations by a wide
range of stakeholders for
Rotork to no longer serve
those traditional markets,
may lead to a range of risks
materialising due to the
speed of the transition.
Currently, Rotork is
wellpositioned to help
customers drive efficiency
improvements, reduce
emissions and to take
advantage of new and
growing markets such
ashydrogen.
Horizon scanning
Horizon scanning is a technique of viewing risks
and opportunities over the medium to longer-
term and allows the Group to look beyond
theshort-term and evaluate its strategy against
possible future realities which are then used to
inform future business planning. Our horizon
scanning exercises are performed in conjunction
with our analysis of emerging risks and
opportunities. In 2023, we focused on the risks
and opportunities associated with technology
and in relation to climate change across multiple
time horizons to further enhance our disclosures
in line with Task Force on Climate-related
Financial Disclosures (TCFD). For more
information see pages 82 to 92.
Principal risks and uncertainties
Our risk management processes are dynamic.
Wecontinue to assess and prioritise the risks
relatedto our strategic objectives and their
impactonthe principal risks
Examples of emerging risks reviewed during theperiod:
rotork.com Rotork Annual Report 202371
Risk management continued
Strategic report Corporate governance Financial statements
Update on 2023 principal risks
The risk landscape has continued to be complex,
with many risks interconnected. The Board
reviewed the links and connections between
risks to further understand how Rotork’s risks
may impact each other. For instance, if a
geopolitical risk were to materialise, it could
have a significant impact on our supply chain,
which could in turn impact our customers,
reputation and lead to a decline in revenue
andin margin. Tracing through these impacts
and understanding where the key mitigating
activities exist, allows Rotork to improve the
resilience of the business by focusing efforts
onthose key mitigating activities.
Risk categories
In 2023, a risk category called ‘Resilience’ was
introduced and replaced the risk category that
was called ‘IT security, continuity and system
implementation’. For more information see
page78.
2023 principal risk movements
The Board has continued to assess the principal
risks and uncertainties and has reviewed the
effectiveness of mitigations and responses to
risks. Rotork continued to see improvements in
the availability of key components and as a result
of this we reduced our supply chain disruption
risk, from the heightened level it was assessed
atlast year. Risks remain within the supply chain
but those risks are occurring in smaller pockets
rather than the widespread impacts noted in
previous years. See page 73 for more details.
The major in-field product failure risk was
reviewed by the Board and it was decided to
change the orientation of this risk to a low
likelihood and medium impact if the risk
materialised. This change represents a
re-evaluation of how this risk could impact
Rotork most.
Key risk indicators (KRIs) were kept under review
during 2023. A KRI dashboard is presented on a
quarterly basis to the Board. Our KRI dashboard
is an important tool to measure the effectiveness
of management actions. In 2023, KRI thresholds
for health & safety were reviewed to improve
thequality of analysis provided to the Board
inrelation to that risk.
Climate change
The Group has embedded the identification
ofclimate-related risks and opportunities
intothe Group’s risk management framework.
Climate-related risks and opportunities remained
as a specific agenda item in every functional risk
workshop held in the business. The output of
this work is described in more detail in the
TCFDsection of this report on pages 82 to 92.
Risks are also identified throughout the normal
course of business and captured in detailed risk
registers. This includes an assessment of the
physical risks of climate change and the risks
andopportunities related to the transition to
alow-carbon economy.
For many climate-related risks, either the severity
of the impact or the likelihood may be uncertain,
and typically these risks may materialise over
longer-term time horizons than more traditional
business risks. To account for this, we use a
‘horizon risk scanning methodology’ to assess
those risks that are more uncertain or intangible,
such as climate change. This uses a wider timeframe
than typically used, with short-term as 0-10 years,
medium-term as 10-25 years and long-term as
25years and beyond. Each transition and physical
climate risk or related opportunity has been
qualitatively assessed and scored based on the
potential financial impact. The level of potential
financial impact is a function of three criteria
including vulnerability (consisting of level of
exposure, sensitivity and adaptive capacity),
likelihood and magnitude. We also assessed
opportunities in terms of the size of opportunity
and ability to execute.
The risk and opportunity assessment results
(seepages 84 to 90) were used to inform the
next stage of the climate risk assessment – the
quantification of potential financial impact for
some of the most material risks. This will be used
to inform the continual development of risk
management responses for incorporation into
our climate transition plan.
In 2022 Rotork included a new principal risk
called ‘Climate commitments’. This demonstrates
that Rotork is committed to delivering our
sustainability strategy. In 2023, we monitored
this risk and further developed our understanding
of the drivers. The ESG Committee has monitored
the development of our ESG strategy, including
the risks associated with climate change.
Formore information see pages 118 to 120.
Focus for 2024
In 2024 we will continue to build on the work
performed in 2023, most notably in relation to
the work that has been conducted to understand
our emerging risks and opportunities in more
depth. Rotork has noted the changes in the
UKCorporate Governance Code, released in
January 2024 and are preparing to comply with
the announced changes by the deadline. In
relation to risk management, key activities that
will be performed in 2024 to allow the Audit
Committee to gain comfort that there is effective
assurance over risks and controls will include:
• Risk assurance mapping will be conducted
in2024 to confirm and document what
assurance activities are being undertaken
across the material risks of the business
• A review of risk appetite to confirm alignment
of the level of assurance planned for each
keyrisk
• Onboarding of a governance, risk & compliance
tool to improve the quality of risk and control
information collected and allow the collection
of risk information to be as smooth as possible
Principal risks and uncertainties continued
Rotork Annual Report 2023 rotork.com72
Risk management continued
Strategic report Corporate governance Financial statements
Principal risks
Economic and market conditions
1. Decline in market confidence
2. Increased competition
3. Geopolitical instability
Environment, Social and Governance
4. Health & safety
5. Compliance with laws and regulations
6. Climate commitments
7. People
Product quality and reliability
8. Major in-field product failure
Resilience
9. Supply chain disruption
10. Critical IT system failure and cybersecurity
Change management
11. Business change management
Low Medium High
Net impact
Net likelihood
Low Medium High
Change management
Economic and market conditions
Environment, Social and Governance
Product quality and reliability
Resilience
3
1
10
2
7
4
5
6
11
8
9
rotork.com Rotork Annual Report 202373
Principal risks and uncertainties
Strategic report Corporate governance Financial statements
Economic and market conditions
Trend key
Increasing Stable Decreasing
Strategy key
Target segments Customer value Innovative products & services
1. Decline in market confidence
Risk owner: Chief Executive Officer
Link to strategy Link to viability scenario Likelihood Impact Trend
1: Revenue decline
High High
Description
A decline in government and private sector confidence and spending will lead to cancellations of expected projects or
delays to existing expenditure commitments. This lower investment in Rotork’s traditional market sectors would result
in a smaller addressable market, which in turn could lead to a reduction in revenue from that sector.
Update
This risk remains unchanged from the prior year. We continue to identify opportunities in how we can support
ourcustomers to reduce emissions and increase efficiency.
Key mitigating actions
• Product development and innovation to address new markets and new applications in existing markets.
• Geographic and end market diversification provides resilience to a reduction in any one geographic area but
maynot fully mitigate a change in the larger end markets.
• Small to mid-sized orders are generally less likely to come under pressure during uncertain economic times.
Weestimate that 75% of Rotork orders by value are small to mid-sized, i.e. less than £100k.
• Increased focus on service offerings to capitalise on increased demand for product maintenance
Risk appetite statement
We will in the long term move to increase the addressable markets which we serve.
Focus for 2024
Alongside the continuation of our existing key mitigating actions we will:
• Continue our investment in innovation converting the pipeline into launches
• Identify opportunities to support our customers to increase efficiency, aligned to the ‘electrification
ofeverything’trend
2. Increased competition
Risk owners: End Market MDs
Link to strategy Link to viability scenario Likelihood Impact Trend
1: Revenue decline
2: One-off costs
Medium Low
Description
Increased competition on price or product offering leading to a loss of sales globally or market share.
Update
This risk remains unchanged since the prior year, the availability of components is recovering, demand remains strong
and our Growth+ strategy has identified key areas of focus for the Group.
Key mitigating actions
• R&D investment and organic product development, or acquisition of companies with new products, to maintain
differentiation from the competition both in terms of the features and quality of our products and the services
weprovide.
• Global procurement team securing lower prices and efficiencies despite difficult market.
• Rotork has production or sales and service operations in many low-cost countries
Risk appetite statement
We will invest in R&D, customer service and technology in order to retain a differentiated product portfolio.
Wewillsupport this by providing a leading service solution to our customers.
Focus for 2024
As outlined in our Growth+ strategy, we will:
• Continue our investment in innovative products and services
• Focus on global key account management
• Continue to deliver benefits from various key programmes such as lead time reduction, global transportation
andglobal shortages
• Work with our supply chain partners to build strategic partnerships
• Review how we deliver to customers including moving forward with our digital strategy
Rotork Annual Report 2023 rotork.com74
Principal risks and uncertainties continued
Strategic report Corporate governance Financial statements
Economic and market conditions continued Environmental, Social andGovernance
3. Geopolitical instability
Risk owner: Group Finance Director
Link to strategy Link to viability scenario Likelihood Impact Trend
1: Revenue decline
2: One-off costs
3: Loss of profitability
High High
Description
Increasing social and political instability results in disruption and increased protectionism in key geographic markets.
Business disruption could impact our sales and might ultimately lead to loss of assets located in the affected region.
Update
This risk is unchanged since the prior year. Last year, the risk was increased and so is already at an elevated level.
Theimpact of geopolitical instability can cause issues within our supply chain or customer base. Rotork continues
tomonitor geopolitical events closely and develop strategies to remain resilient.
Key mitigating actions
• Regular review of global markets considering social and political risks and contingency plans. Market exit strategies
developed and implemented as required.
• Key risk indicator monitoring the percentage of revenue from high risk markets reported quarterly to the Board.
• The geographic spread of Rotork’s operations and customers limits the impact of any one market on the results
ofthe Group as a whole.
• Group Treasury policy sets cash limits for overseas businesses, restricting our exposure to any one market.
TheTreasury Committee assesses compliance with these limits on a monthly basis
Risk appetite statement
We will continue to operate a geographically diverse business and actively pursue opportunities and efficiency
ofourglobal supply chain.
Focus for 2024
• Continuation of our existing key mitigating actions
• Review of plans to deal with the impact of geopolitical tensions in the territories we do business in
4. Health & safety
Risk owner: Operations Excellence Director
Link to strategy Link to viability scenario Likelihood Impact Trend
2: One-off costs
Medium
High
Description
The nature of Rotork’s core business and geographical locations involves potential risks to the health and safety
ofouremployees or other stakeholders.
Update
We are showing a decreasing trend for our H&S risk as a result of the mitigating actions taken by management and
allcolleagues at Rotork to build a more safety conscious culture. The embedding of the range of initiatives and safety
standards is ongoing. Rotork is not being complacent and is focused on achieving consistent H&S performance.
Thehealth, safety and wellbeing of our colleagues and customers remains of paramount importance.
Key mitigating actions
• Compliance with relevant legislation and codes of best practice.
• Robust health and safety policy and training included in all staff inductions, in addition to regular refresher training.
• Refresh of the global health and safety standards.
• Regular health and safety audits, site checks and reporting.
• Appropriate training is provided for known safety risks.
• Regular communications about accidents at work and visible key risk indicators.
• Engagement of a third-party to provide international support and travel advice in all markets and geographies.
• Proactive culture of ‘safety spots’ introduced to help reduce safety issues.
• Internal assurance reviews conducted during the year.
• Monitoring of our energy usage and emissions of our sites and implementation of more energy efficient solutions
Risk appetite statement
We are fully committed to ensuring the health and safety of all our employees and other stakeholders and we are
committed to reducing any negative impact of our environmental footprint.
Focus for 2024
Alongside the continuation of our existing key mitigating actions we will:
• Enhance our environment data collection processes to support the identification and targeting of high energy usage
and emissions across the Group
• As part of the global standards programme, Rotork will continue to provide additional specific training to colleagues
to enhance their competencies and safety awareness against our highest risks, building on the work performed
during 2023
rotork.com Rotork Annual Report 202375
Principal risks and uncertainties continued
Strategic report Corporate governance Financial statements
Environmental, Social andGovernance continued
Trend key
Increasing Stable Decreasing
Strategy key
Target segments Customer value Innovative products & services
5. Compliance with laws and regulations
Risk owners: Group General Counsel & Company Secretary
Link to strategy Link to viability scenario Likelihood Impact Trend
2: One-off costs
Low Medium
Description
Failure of our staff or third parties who we do business with to comply with laws or regulations or to uphold our high
ethical standards and Values.
Update
This risk has decreased since the prior year. Legal and compliance teams across the group have implemented a range
ofrisk mitigations that reduce the likelihood of the risk. For instance, sanctions procedures were updated during
theyear.
Key mitigating actions
• We are committed to reduce our environmental impact and to comply with all legal and regulatory requirements.
• A ‘no tolerance’ culture, supported by a tone from the top, reinforcing our high ethical standards and Values.
• A training programme providing appropriate learning and awareness on a range of compliance topics to
relevantstaff.
• Due diligence procedures in place for channel partners and acquisition targets before engaging in
businessrelationships.
• Availability and promotion of the ‘Speak Up’ policy and hotline; no retaliation policy with concerns raised
beinginvestigated.
• Monitoring of changes in legislation, including sanctions, with appropriate safeguards put in place.
• Ongoing assessment of the modern slavery risks arising in our business against specific KPIs.
• Template contract terms include requirements on third parties to comply with applicable laws
Risk appetite statement
We have zero tolerance for non-compliance with relevant laws and regulations in the markets in which we operate.
Focus for 2024
Alongside the continuation of our existing key mitigating actions we will:
• Continue with our ongoing training programme on key compliance topics
• Continue the enhancement of our controls relating to the appointment and monitoring of third party intermediaries
• Continue to enhance our people’s awareness and confidence in using our ‘Speak Up’ hotline
6. Climate commitments
Risk owner: Chief Executive Officer
Link to strategy Link to viability scenario Likelihood Impact Trend
1: Revenue decline
2: One-off costs
3: Loss of profitability
Low Low
Description
We do not deliver against our commitment to enable a sustainable future and Rotork is not recognised by our
stakeholders as being part of the solution, leading to reputational damage.
Update
Rotork is committed to enabling a sustainable future. On an ongoing basis, Rotork assesses new and upcoming
regulations, identifying those that are relevant for Rotork. The use of renewable energies has increased across
globaloperations, as has the work to assess our suppliers’ readiness to set science-based targets.
Key mitigating actions
• ESG Committee sets Rotork’s ESG strategy and provides oversight.
• Our annual report outlines and updates stakeholders on progress against delivering against stated targets.
• Net-zero commitment published.
• Compliance with TCFD guidelines and requirements.
• Science-based targets defined and monitored
Risk appetite statement
Rotork is committed to enabling a sustainable future. We are responsible for our own operations and supporting
oursuppliers and customers to operate responsibly and sustainably.
Focus for 2024
• Increase the proportion of renewable energies consumed in our operations globally, where available
• Develop our approach to providing assurance over emissions reporting
• Continue to develop climate transition plans required to further enhance resilience and alignment with a future
low-carbon economy
• Continue our assessment of supplier readiness to set science-based targets
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Principal risks and uncertainties continued
Strategic report Corporate governance Financial statements
Environmental, Social andGovernance continued Product quality and reliability
7. People
Risk owner: Group Human Resources Director
Link to strategy Link to viability scenario Likelihood Impact Trend
2: One-off costs
Medium Low
Description
Our people, epitomised through our Stronger Together value, are critical to delivering our culture and plans. An inability
to attract, retain and develop key and diverse talent could mean we fail to successfully deliver our strategic goals.
Update
Our people risk decreased from last year due to the advancements made internally to react to changes in the market
and improve retention and recruitment practices. These actions reduce the likelihood of people risks materialising.
Key mitigating actions
• An early careers talent pool through graduate, intern and apprenticeship programmes to support our future talent
needs and an increased recruitment team.
• Adjusted ways of working including hybrid working guidance.
• ‘One Rotork’ Values & Behaviours are embedded in how we do business.
• A global wellbeing and employee assistance programme is offered 24/7 in all local languages.
• We publish our ethnicity pay as well as our gender pay report. We have a fair pay framework covering all employees
globally and have been a real living wage employer since 2020.
• We perform pulse engagement surveys twice a year to hear from our employees and understand where we can
make improvements.
• We have a talent review process including succession planning to identify talent around the business with oversight
from the Nominations Committee twice a year.
• We adjusted our reward approaches to offer more support to those facing cost of living challenges the most
(ourlowest paid) and our Rotork Benevolent Support Charity offers support to employees and ex-employees
andtheir families facing hardship.
• A dedicated Head of Culture & Inclusion is in place to support on key initiatives
Risk appetite statement
We will invest in ensuring that we have the right people, with the right skills to deliver our strategy. This will include
ensuring that we maintain appropriate succession plans, develop and attract the right talent.
Focus for 2024
• Enhancement of our family friendly policies to support the retention and attraction of talent
• Increase of training availability through a Learning Management System which, alongside career paths for all
functions, continues investment in the development of employees
• Continuation of the leadership training programme linked to our new Growth+ strategy
8. Major in-field product failure
Risk owners: Operations Excellence Director & Chief Technology Officer
Link to strategy Link to viability scenario Likelihood Impact Trend
3: Loss of profitability
Low Medium
Description
Major in-field failure of a new or existing Rotork product potentially leading to a product recall, major on-site warranty
programme or the loss of an existing or potential customer.
Update
Following a review by the Board, it was decided to change the orientation ofthisrisk to a low likelihood and medium
impact. This change represents a re-evaluation of where this risk could impact Rotork most. The mitigating actions will
correspond to how this risk is viewed.
Key mitigating actions
• An established product design review process pre-launch, using Rotork’s extensive product launch experience.
• Fitting and commissioning products wherever possible by Rotork engineers to ensure correct operation when
firstused.
• Comprehensive set of quality control procedures over suppliers. These include supplier visits, audits and a
scorecardsystem to measure their performance.
• Global service coverage ensures that any product failure issues should be dealt with quickly and efficiently
tominimise any reputational impact
Risk appetite statement
We will maintain robust quality control procedures over components purchased and over our finished products
inallofour manufacturing locations.
Focus for 2024
Alongside the continuation of our existing key mitigating actions we will:
• Focus on quality throughout the innovation pipeline
• Leverage our unrivalled installed base through our digital offerings such as the intelligent asset manager, iAM
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Principal risks and uncertainties continued
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Resilience
Trend key
Increasing Stable Decreasing
Strategy key
Target segments Customer value Innovative products & services
9. Supply chain disruption
Risk owner: Operations Excellence Director
Link to strategy Link to viability scenario Likelihood Impact Trend
1: Revenue decline
2: One-off costs
High Medium
Description
Supply chain disruption which may arise such as a tooling failure at a key supplier, logistics issues, severe weather
events impacting key suppliers which would cause disruption to manufacturing at a Rotork factory.
Update
Rotork has started to see some improvements in the availability of key components and as a result of this we reduced
our supply chain disruption risk, from a heightened level last year. We continue to forecast our component
requirements and proactively work with our supply chain partners.
Key mitigating actions
• Dual sourcing for key components wherever possible provides mitigation for key suppliers or a tooling failure.
• A key risk indicator measures single sourced critical components and is reported quarterly to the Board.
• Maintaining safety stock levels sufficient to protect against short-term disruption.
• Regular monitoring and replacement of our tooling at all suppliers reduces the risk of a tooling failure.
• Identification of our critical suppliers and components, and improvements in supply.
• Supply chain due diligence and monitoring of supplier quality.
• Strengthening of our risk monitoring processes, including the ways we identify and respond to early warning signs
of potential supplier failure.
• Building tactical inventories and increasing direct purchasing of key components.
Risk appetite statement
We will manage any disruption to our supply chain utilising a range of strategies dependent on the component and
risk. We will focus our mitigations on critical components and will consider geopolitical factors in decision making.
Weexpect our suppliers to adhere to our supplier code of conduct.
Focus for 2024
Alongside the continuation of our existing key mitigating actions we will:
• Work with our suppliers and partners to source key components
• Re-engineer products and review the adaptability of alternative components, following robust quality testing processes
10. Critical IT system failure and cybersecurity
Risk owner: Chief Information Officer
Link to strategy Link to viability scenario Likelihood Impact Trend
1: Revenue decline
2: One-off costs
Medium High
Description
Failure to provide, maintain and update the systems and infrastructure required by the Rotork business. Failure to protect
Rotork operations, sensitive or commercial data, technical specifications and financial information from cybercrime.
Update
Accreditation for cybersecurity was achieved in 2022 which sets the benchmark for future improvements in our cyber
response. Cyber risk continues to increase globally and the Group continue to invest in risk mitigation and preventative
controls. Threat intelligence and patching has played a key role in the mitigation of this risk.
Key mitigating actions
• Established security controls, policies and procedures.
• Dedicated security team using monitoring and defence tools.
• Third party cyber maturity assessments performed regularly.
• Continuously raising cybersecurity awareness through regular training and simulated phishing attacks.
• All new IT services are designed with a ‘cloud first’ approach to improve security, resilience and availability.
• All IT services are patched in accordance with vendor support contracts and external advice.
• A disaster recovery solution (supported by third party service level agreements) is in place for all critical systems.
• Increased security and authentication controls implemented for all IT users.
• Key risk indicators and a cybersecurity report submitted on a quarterly basis to the Board
Risk appetite statement
We will continue to review current external and internal cyber threats and respond to them to ensure that we have
appropriate technology processes and controls in place.
Focus for 2024
Alongside the continuation of our existing key mitigating actions we will:
• Continue to deliver our cybersecurity strategy in line with internationally recognised standards against an evolving
threat landscape
• Deliver our obsolescence plan, focusing on confidentiality, integrity, and availability of our data and services
• Continue with our D365 ERP rollout, transitioning to a more modern, resilient and integrated architecture,
optimising business performance and improving the security and resilience of our systems
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Principal risks and uncertainties continued
Strategic report Corporate governance Financial statements
Change management
11. Business change management
Risk owner: Business Transformation Director
Link to strategy Link to viability scenario Likelihood Impact Trend
1: Revenue decline
2: One-off costs
3: Loss of profitability
Low Medium
Description
The delivery of our strategic initiatives relies upon our ability to deliver a series of key change programmes without
causing business disruption or having a negative impact to our day-to-day operations.
Update
Following the launch of our Growth+ programme, we have adjusted this risk to reflect the importance on delivery
ofthe key elements of our strategy and incorporated the risks associated with delivering value from an acquisition.
This risk tracks the key change programmes underway in Rotork, such as the global roll-out of an ERP system, as the
management team are aware of the importance of the delivery of the key aspects of our Growth+ strategy.
Key mitigating actions
• A new function has been set up to focus on delivery of our key change programmes spanning finance,
ITandcommercial.
• A dedicated project management office is in place to manage key deliverables with a mix of both operational
andspecific project management experience.
• Outcomes are monitored and tracked against the initial objectives of each initiative.
• Metrics are in place to indicate and manage any impact on day-to-day operations.
• Regular governance forums are in place to report on risks and deal with issues in a timely manner
Risk appetite statement
We will ensure that our change management capacity is sufficient to implement our strategy and that the business
decisions do not negatively influence our day-to-day business.
Focus for 2024
• Continue with the development of technologies to enable delivery of Growth+, including digitalisation
• Develop the key programme plans to deliver customer value and innovative products and services..
• Build the resources required to deliver Growth+
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Principal risks and uncertainties continued
Strategic report Corporate governance Financial statements
Assessment of Prospects
The Group’s Growth+ Strategy (see page 17)
and Principal Risks (see page 71) are well
documented. The Group works closely with
itscustomers on projects ranging from
severalweeks to several years, discussing
operational plans and longer-term capital
expenditure programmes.
Whilst the Board has no reason to believe the
Group will not be viable over a longer period,
the directors have assessed the viability of the
Group over a three-year period taking account
of the Group’s current position and the potential
impact of the principal risks.
Three years is considered an appropriate period
over which a reasonable expectation of the
Group’s longer-term viability can be evaluated
and is aligned with our planning horizon at both
Group and divisional level. The Board has
considered whether it is aware of any specific
relevant factors beyond the three-year horizon
and confirmed that there are none.
Assessment of Viability
A robust assessment of the principal risks facing
the business was conducted through the year
with the review of the risk appetite framework
and risk dashboards contributing to a fuller
consideration of those risks which might impact
the business model or future performance. The
directors have considered each of the remaining
principal risks, individually and some in combination,
and the potential impact they could have in severe
but plausible scenarios. The scenarios contained
significant one-off financial shocks and significant
profit erosion impacting the Group’s revenue. In
particular, the scenarios cover different potential
impacts associated with geopolitical instability,
disruption to supply chain or to logistics, whatever
the source of that disruption, increasing political
protectionism in respect of trade tariffs and
lower investment in the oil and gas markets.
These events occurring individually or at once
have been considered in the modelling of the
different scenarios.
Financial scenario modelling was carried out to
assess the impact of these risks on the Group’s
three-year plan, including a reverse stress test.
Assumptions were made concerning market
activity levels, the impact of the scenarios on
working capital cycles and the mitigating actions
that could be taken to reduce the cash and
financial impact of the stress-test scenarios.
Further mitigating actions not modelled that
could be taken if needed include curtailment
ofdividends or capital asset investment.
In coming to this view, the Board has considered
the current level of geopolitical instability,
inherent volatility in exchange rates and oil and
other commodity prices, the current inflationary
environment, the remaining challenges around
the supply chain, and the nature of the industry
and the business cycles involved.
Given the current position of the Group and the
likely effectiveness of any mitigating actions, the
Board has assessed the impact these would have on
the business model, future performance, solvency
and liquidity over the period and have a reasonable
expectation that the Company will be able to
continue in operation and meet its liabilities
asthey fall due over a three-yearperiod.
Viability statement
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Viability statement
Strategic report Corporate governance Financial statements
Scenario modelled Scenario modelled Link to Principal Risks
1: Revenue decline
• 4% decline in revenue from 2023 by year three
• The Board considered events that would result in a gradual
erosion of revenue and gross margin which would ultimately
reduce operating cash generation
• Decline in market confidence
• Geopolitical instability
• Increased competition
• Major in-field failure
• Climate commitments
• Critical IT-system failure and cybersecurity
• Business change management
• Supply chain disruption
2: One-off costs
• £50m one-off costs in year one and no growth in revenue
from current levels
• Impact of a one-off cost due to a specific issue, accompanied
by a reduction or downturn in forecast revenue due to an
interruption to production, supply chain disruption or
disruption to a specific end market
• Geopolitical instability
• Supply chain disruption
• Increased competition
• Health & Safety
• Compliance with laws and regulation
• Major in-field product failure
• Business change management
• Climate commitments
• People
• Critical IT system failure and cybersecurity
3: Loss of profitability
• £50m one-off costs in year one and a 12% decline in revenue
from 2023 by year three
• One-off cash costs as a result of a specific issue and
apermanent loss of subsequent profitability which affects
operating cash generation
• Geopolitical instability
• Major in-field product failure
• Business change management
• Climate commitments
4: Reverse Stress Test
• £120m one-off costs in year one and a 13% decline
inrevenue from 2023 by year three
• There is no reasonably possible scenario that would lead
tothe conditions modelled in the reverse stress test
• Multiple Concurrent Risks
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Viability statement continued
Strategic report Corporate governance Financial statements
2023 TCFD report
Introduction
The following sections report on our implementation of the recommendations of the Task Force on
Climate-related Financial Disclosures. We support the purpose of TCFD, to standardise climate-related
disclosures that will enable financial and other partners to gain a clear view of which companies will
endure or even flourish as the environment changes, regulations evolve, new technologies emerge
and customer behaviour shifts. Better information about climate risks and opportunities will then
also flow into companies’ risk management and strategic planning processes. As this occurs, companies’
and investors’ understanding of the financial implications associated with climate change will grow,
empowering the markets to channel investment to sustainable and resilient solutions, opportunities,
and business models.
TCFD and CFD Statement of Compliance
Rotork is disclosing in accordance with the Financial Conduct Authority (FCA) Listing Rule 9.8.6(R)(8)
and the Companies (Strategic Report)(Climate-related Financial Disclosure ) Regulations 2022. The
main disclosures are set out here, within the TCFD report, on pages 82 to 92. There are additional
disclosures on pages 41-47 and 51-55. The disclosures describe activity to date and future areas
offocus to further strengthen our strategic approach and communication of climate-related issues.
Ofthe TCFD’s 11 disclosure recommendations, we are compliant with nine, and we explain the
statusof the remaining two below.
TCFD recommendation Status
Strategy
(b) Describe the impact of climate-
related risks and opportunities on the
organisation’s businesses, strategy
andfinancial planning
This 2023 report includes further detail on how we integrate
climate related risk into financial planning. To fully align
withTCFD, in 2024 Rotork will draft its Transition Plan,
whichwill ‘describe our plans for transitioning to a
low-carbon economy’ in line with TCFD guidance.
Metrics and targets
(a) Disclose the metrics used by the
organisation to assess climate-related
risks and opportunities in line with its
strategy and risk management process
We currently provide a qualitative update on our physical
riskmetrics. As part of refreshing our scenarios and financial
impact analysis in 2024, we will review the climate-related
metrics of material risks and opportunities. Where relevant,
we will implement quantitative metrics that allow for historic
trend analysis in line with TCFD guidance.
Governance
Summary of disclosure
• The CEO has overall responsibility for the
delivery of the Environmental, Social and
Governance (ESG) agenda, which includes
addressing climate-related issues. The CEO
reports to the Board which has responsibility
for the oversight of the effective management
of opportunities and risks related to
climatechange.
• The Board is supported in monitoring the
management of climate-related risks and
opportunitiesby:
• (i) Its ESG, Remuneration and Audit
Committees, which each oversee specific
aspects of the Rotork’s climate
commitments and related reporting
• (ii) Its oversight of the Company’s strategy
and policy for risk management, which
incorporate climate related matters
• (iii) The Rotork Management Board,
whichhas management oversight
ofclimate-related issues
• Individual members of the Rotork
Management Board take responsibility for
specific deliverables of the climate strategy
within their areas of responsibility.
• In 2023, three ESG measures contributed
tothe bonus. One was ‘environmental
innovation’, as measured through evidence
ofthe positive environmental impact enabled
by our products, services and customer
engagement. ESG measures overall were
10% of the bonus opportunity and apply to
the entire senior leadership population of
around 100 people. In addition, 10% of the
executive LTIP award for 2023 – vesting in
2025 – is subject to achieving at least a
35%absolute reduction in scope 1 and 2
emissions versus 2020 levels, a level of
reductions in line with our formally validated,
science-based 2030 target. For the 2024 LTIP,
from base year 2020, maximum performance
represents a 46% reduction in 2027 and
threshold performance represents a 42%
reduction (see page 152).
Next steps (2024)
• Next chair of the Safety & Sustainability
(formerly ESG) Committee to be appointed.
Climate-related responsibilities
oftheBoard
Strategy
The Board supports the ongoing development of
Rotork’s business strategy. This year, the Board
has been particularly focused on the 2023 LTIP’s
emissions reduction target and our approach
toemissions measurement and assurance.
Performance
The Board monitors the Group’s performance
against five key financial and two non-financial
performance indicators: carbon emissions per
£1million revenue and lost time injury rates.
Performance against these measures is evaluated
by the Board and the ESG and Remuneration
Committees.
Updates: The Board meets regularly during the
year and receives updates from the ESG
Committee Chair following each ESG Committee
meeting. Each update will include coverage of
climate-related matters. The ESG Committee
meets three times each year and receives regular
reports from our CEO on the Group’s progress
towards science-based emissions reduction
targets, the related LTIP target and our net-zero
carbonroadmap. In 2023, each meeting
included climate-related matters (see page 118);
these updates are prepared by the ESG, HSE and
Group Sourcing teams.
Climate risk assessment: The Board reviews
andassesses current and emerging climate and
environment-related risks at Group Risk Review
meetings held twice a year. The plc Board
provides atop-down view of climate risks
andassesses how risks are being responded
tobymanagement.
Rotork Annual Report 2023 rotork.com82
Task Force on Climate-related Financial Disclosures
Strategic report Corporate governance Financial statements
Climate-related responsibilities
ofmanagement
Targets: Climate strategy and targets are set by
the Rotork Management Board, with support
from the ESG & Sustainability team, and are
approved by the ESG Committee and the Board.
Our science-based greenhouse gas (GHG)
emissions reduction targets cover scopes 1 & 2
and scope 3.
Remuneration: In 2023, remuneration from ESG
performance metrics was expanded to include
scope 1 and scope 2 emissions reduction into
the LTIP. For the 2024 LTIP, measured against
base year 2020, maximum performance
represents a 46% emissions reduction in 2027
and threshold performance represents a 42%
reduction
Management team responsibilities
during2023
Individuals
• Chief Executive Officer: Responsible for
overseeing integration of climate
considerations within the corporate strategy
and M&A-related activity and reports directly
to the Board. The CEO is a member of the
ESG Committee. Our CEO is also responsible
for our HSE and procurement teams, which
respectively i) oversee the implementation of
environmental and energy efficiency projects
at our manufacturing sites to deliver energy,
waste and water reduction targets, and ii)
oversee emissions reduction opportunities in
the upstream value chain, including engaging
with suppliers to set science-based targets.
• Group Finance Director: Responsible for
climate reporting and compliance with
disclosurerequirements.
• Chief Technical Officer: Responsible for
realising product efficiency opportunities
within new product development and
overseeing continuous improvement
andinnovation in product design to manage
our demand on resources and limit our
environmentalimpact.
• Other members of the management team:
Responsible for supporting the individuals
above andmeeting their own emissions
reduction mandates. For example, our
GroupHR Director is responsible for the
development and implementation of our
fleetstrategy to reduce associatedemissions.
The management team are led by our CEO.
Teams
• ESG team: Responsible for developing the
ESG and climate strategy and delivering
related communications and reports.
Reporting to the Group Finance Director,
theirresponsibilities also include (i) monitoring
andaddressing stakeholder expectations
inrelation to climate issues, (ii)monitoring
broader ESG and climate-related policy
developments, and (iii)monitoring our
exposure to climate related risks and
opportunities to ensure awareness of
themanagement team andtomeet
disclosurerequirements.
• Health, Safety and Environment team:
Responsible for setting and adhering to
environmental standards for our operations
and collating environmental performance
data. Reporting to the CEO, it is also responsible
for overseeing the implementation of the
operational components of the climate
strategy set by theBoard.
• Group Sourcing team: Responsible for
supplier engagement on climate issues and
engaging suppliers to set science-based
targets. Reporting to the CEO, the team is
additionally responsible for analysing and
responding to ESG risks and opportunities in
our supply base, including the development
of forecasts of climate-related supply chain
disruption issues and implementation
ofmitigation strategies where required.
Governance continued
83rotork.com Rotork Annual Report 2023
Task Force on Climate-related Financial Disclosures continued
Strategic report Corporate governance Financial statements
Our climate scenario analysis process
Identify climate risks
andopportunities
Assess climate risks
andopportunities Quantify financial impact
Integrate into Rotork
processes
Establish a long list of risks
and opportunities based
on internal interviews and
workshops, sector research
and climate scenarios
Score and prioritise risks
and opportunities across
climate scenarios and
time horizons
Quantify the potential
cash flow impacts to
identify material climate
risks and opportunities
Integrate the results
ofthe climate scenario
analysis into business
strategy, financial
planning and risk
management processes
Strategy
Qualitative climate scenario process
This non-financial assessment scored and
rankedthe identified climate-related risks and
opportunities. We follow a two-stage process
for our assessment:
1. Risk and opportunity identification:
Researchon sectoral and climate scenario
impacts is supplemented with extensive
internal engagement across numerous
business functions to identify risks and
opportunities and understand those that
arerelevant for different functions.
2. Qualitative risks and opportunities
assessment: Identified risks and
opportunities are scored and prioritised
using three assessment criteria: vulnerability,
magnitude and likelihood. Each physical and
transition risk or opportunity is considered
across time horizons and climate scenarios
using indicators from IPCC and NGFS
databases (specifically, IPCC WGI Interactive
Atlas, NGFS IIASA Scenario Explorer and
CAClimate Impact Explorer).
This process enables Rotork to understand
therange of possible climate-related risks
andopportunities and to prioritise those that
could have the most material financial impact.
The shortlisted risks and opportunities of our
qualitative assessment are set out in full on
page85 of this report.
Quantification of financial impact from
material risks and opportunities
For these potentially material climate-related
risks and opportunities, we then modelled the
potential financial impacts across forward-looking
business and climate scenarios.
As part of our assessment, we quantified the
incremental financial impact of climate-related
risks and opportunities across three time horizons:
short term (0–10 years), medium term (10–25
years) and long term (25+ years). For both
transition and physical risks, Rotork reports
thenet present value (NPV) for the period
2022–2050.
The potential financial impacts presented
provide a single snapshot of Rotork’s potential
positive and negative exposure to selected
climate risks and opportunities. This snapshot
isunderpinned by numerous assumptions
relatedto factors such as energy consumption,
fuel prices and others, which are all subject
tovariability. Our analysis of financial impacts
willtherefore be an ongoing process and any
changes, including to data and assumptions,
willbe continually updated in our calculations.
Summary of disclosure
• We undertake systemic scoring and ranking
of climate-related risks and opportunities
across different future climate-related
scenarios, including a lower than 2°C
scenario, and different timehorizons
• We also undertake extensive internal
stakeholder engagement to identify and
assess potential climate impacts across
Rotork’s business value chain
• We quantify the financial impact of potentially
material physical and transition risks and
opportunities across climate scenarios
Next steps (2024)
We will continue to:
• Develop our Climate Transition Plan to further
enhance resilience and to ensure alignment
with a future low-carbon economy
• Standardise climate scenario analysis to
enable regular assessment of risks and
opportunities to the business, with
assessments to be refreshed at least every
threeyears
Qualitative assessment of climate-related
risks and opportunities
Our qualitative climate scenario approach
Over 2021–22, we conducted a non-financial
(qualitative) assessment of the potential impact
of climate-related risks and opportunities over
future climate scenarios and time horizons. This
qualitative analysis was detailed on pages 64–68
of our 2021 Annual Report. With these results,
we assessed the potential (quantitative) financial
impacts from the risks and opportunities
considered most material to the business.
For these analyses, Rotork defines time horizons
as short term (0–10 years), medium term (10–25
years), and long term (25+ years), in line with our
Group Horizon risk and opportunity scanning
methodology. In relation to climate related
matters, short term aligns with strategic planning,
medium term aligns with our net-zero target
timeframes and long term aligns with the
timeframe we use to look at macro and megatrend
risk scenarios. Our analysis considers climate
impacts across these time horizons by referencing
climate scenarios that allow us to explore different
possible futures and assess potential risks
andopportunities.
The climate scenarios we selected for our initial
qualitative analysis are taken from the set of
hypothetical scenarios developed by the Network
for Greening the Financial System (NGFS),
specifically three transition categories with
sixpossible scenarios:
• Orderly transition: The net-zero 2050
scenario and Below 2°C scenario assume:
(i)early, ambitious action to support the
transition to a net-zero economy, (ii) a policy
ambition to limit temperature increase to
1.5°C and 1.7°C respectively.
• Disorderly transition: The divergent net-zero
2050 scenario and Delayed Transition scenario
assume: (i) late, disruptive, sudden and/or
unanticipated action no earlier than 2030, (ii)
a policy ambition to limit temperature increase
to between 1.5°C and 1.8°C respectively.
• Hot house world: The Nationally Determined
Contributions scenario and Current Policies
scenario assume: (i) limited action resulting
incontinued global warming and significant
increases in exposure to physical risks, (ii) a
policy ambition to limit temperature increase
to ~2.5°C and 3°C+ respectively.
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Summary of material climate-related risks and opportunities
Qualitative scenario analysis – risks and opportunities assessed
The table below sets out the climate related risks and opportunities that we qualitatively assessed. The issues identified as possibly material (in bold) were assessed in the quantitative stage that followed.
This quantification identified the risks and opportunities that are potentially material, detailed on pages 87 and 89. Where the risks are viewed as overlapping (carbon tax and stricter climate legislation,
extreme weather related risks), they are consolidated as one risk on pages 87 and 89.
Transition risks
Policy and legal
• Carbon tax
• Stricter climate legislation
• Green credentials for manufacturing
Market and
technology
• Change in energy costs
• Increased cost of raw materials
• End market demand changes
• Costs to transition to lower emissions technology
Reputation
• Increased stakeholder concern and expectations
• Inability to attract workforce
Climate-related opportunities
Energy source and
efficiency
• Implementation of energy efficiency measures
• Customer engagement to consider alternative products and switch
to renewable energy sources
• Development of new technologies to facilitate mitigation
• Reduced risk exposure, and lower operating costs from energy
savings and procurement of renewable electricity
Products and
markets
• Increasing demand as new and existing technologies emerge that
support a low-carbon world, including hydrogen, battery storage,
gasification, biofuels, etc.
• High-quality Rotork products are resilient under extreme
climateconditions
• Rotork products can respond to physical climate challenges,
e.g.water flow control in floods
Resilience
• Regionalise supply chain to avoid overspending in carbon tax, and
reduce distance between manufacturing plants and customers
• Build supply chain resilience by using environmental risk assessment
criteria and demanding ‘green’ credentials from suppliers
Physical risks
Chronic – longer-
term climatic shifts
• Changes in weather patterns
• Rainfall interannual variability
• Rising temperatures
Acute – extreme
temperatures
• Extreme cold and hot temperatures affect working conditions,
impacting employees and equipment
Acute – rainfall
andfloods
• Intense rainfall events and increase in frequency and/or severity
offloods results in damage to assets
Acute – extreme
weather events
• Frequency and intensity of hurricanes and snowstorms causing
disruption to assets
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Summary of material climate-related risks and opportunities continued
UNEP FI’s risk factor pathway framework
1. Incremental emissions costs
2. Incremental expenditure for low-carbon transition
and avoided risk from mitigation
3. Incremental revenue from new market
opportunities and increasing demand
Climate adjusted NPV
To understand the way
transition costs manifest and
the impact on cash flows
1a. Direct
(price on carbon)
1b. Indirect
(fossilfuelprice)
Transition scenarios and risk quantification
Our methodology for transition risks
andopportunities
Rotork referred to the UNEP FI risk factor pathway
framework to inform the initial selection of
transition risks and opportunities for financial
quantification. This framework identifies three
categories of cross-sector ‘risk factor pathways’
that represent financial pressures experienced by
firms from the transition to alow-carbon economy.
These include GHG emission costs, investment
inlow-carbon transition measures and revenue
from low-carbon market opportunities. For the
quantitative assessment of transition risk, impacts
on Rotork’s cash flow have been determined
based on projected changes to global operational
costs. Rotork used four scenarios modelled by
the World Energy Outlook (WEO) which examines
future energy trends based on the World Energy
Model (WEM). Through the use of these
scenarios – which vary by the level of climate
action achieved – we can assess whether the
impact values vary with the level of climate action:
• Stated Policies (STEPS): Reflection of current
and in-progress policies that exist for sectors
and countries. Does not assume governments
will achieve their goals and commitments.
• Announced Pledges (APS): Illustrates the
impact of governments meeting their
announced pledges. Assumes all countries
meet national targets up to 2050.
• Sustainability Development (SDS): Assumes a
surge in green energy policies and significant
investment in green markets. Also assumes
asubstantial reduction in air pollution and
universal energy access.
• Net-zero Emissions (NZE): A pathway for the
global energy sector to achieve net-zero by
2050. Does not rely on emissions reductions
from outside the energy sector.
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Transition risks and opportunities impact assessment
UNEP FI transition riskfactor
pathwaycategory Transition risks andopportunities
Incremental financial impact
(by scenario) Potential management responses
Direct GHG emissioncosts
Time horizon: mediumterm
Trend: financial impact rises in line
with projected carbon price
Carbon tax
• The costs of carbon taxes applied toscope
1 and 2 emissions from gas and electricity
use at our globalfacilities
• EU Carbon Border Adjustment Mechanism
(CBAM) applied to goods imported into
our EU operations. Sectors affected: iron,
steel and aluminium.
Stated Policies
Announced Pledges
Sustainable Development
Net-zero Emissions
• Identify and implement measures to reduce gross GHG emissions
• We are taking steps to ensure compliance with CBAM’s requirements
Metrics
• Scope 1 and 2 emissions
Targets
• In line with Rotork’s SBTs, reduce emissions from scope 1 and 2 sources
by42% by2030
Indirect GHG emissioncosts
Time horizon: longterm
Trend: if global demand for fossil
fuels declines, fuel prices and our
risk exposure reduce. In the net-zero
scenario, the forecast price is lower
than the base case.
Change in energy costs
• Prices of fossil fuels (gas and diesel) will
change in the energy transition as society
shifts to low-carbon alternatives. Three
scenarios indicate a net negative impact
resulting from higher energy prices.
Thenet-zero scenario, due to significant
reductions in energy prices, indicates a
netpositive impact.
Stated Policies
Announced Pledges
Sustainable Development
Net-zero Emissions
• Switch consumption from fossil fuels to low-carbon alternatives, e.g.
replacement ofgas boilers with electric, or electrification of fleet
• Procure renewable energy where possible. In2023 we sourced 44%
ofourelectricity from renewable sources (2022: 34%)
Metrics
• Gas and diesel consumption
Targets
• Reduce consumption of gas and diesel
Avoided risk frommitigation
Time horizon: shortterm
Reduced risk exposure, and lower operating
costs from energy savings and procurement
of renewable electricity
• Cost savings resulting from emissions
reductions initiatives at our facilities
• Avoided carbon tax from a reduction
ofgross emissions
Stated Policies
Announced Pledges
Sustainable Development
Net-zero Emissions
• Develop a long-term transition plan to align with the net-zero transition
• Consider developing a cost of carbon for the business to be used in business
cases for mitigation measures
Metrics
• Scope 1 and 2 emissions
Targets
• Reduce emissions from scope 1 and 2 sources by 42% by2030
Incremental revenue from new
market opportunities
Time horizon: shortterm
• Increasing demand from hydrogen-related
end markets
• Increasing demand for upstream
electrificationinoilandgas markets
All scenarios
All scenarios
• We are a supplier to upstream electrification and hydrogen projects which
willdeliver significant emissions reductions, see pages 52-54
• Our IQTF is established as the leading electric actuator for upstream oil
andgas choke valveapplications
Impact thresholds (key):
Negative exposure: <£3m £3–5m £5–10m £10–20m >£20m Positive exposure: <£3m >£20m
Summary of material climate-related risks and opportunities continued
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Summary of material climate-related risks and opportunities continued
Transition risks and opportunities impact
assessment continued
Practical limitations when quantifying future
transition risks
Please note that these quantifications are
forward-looking projections which can only
provide an indicative value at risk. These
valuesare based on place-based assumptions
concerning likelihood, magnitude and asset
vulnerability which vary between future
climatescenarios.
Climate-related opportunities
The role Rotork can play in a green economy
anda cleaner, more sustainable future featured
highly in our recent materiality assessments.
Ourproducts will enable the move to a low-carbon
world, with applications in transition fuels such
as LNG, natural gas and biofuel. In the medium
term there are also opportunities to participate
in fast developing new sectors such as hydrogen,
carbon capture, usage and storage, and
batterymaterials.
In addition, there are considerable opportunities
to assist our Oil & Gas customers in delivering
against their ambitious net-zero commitments,
including through providing products and
services that deliver reliable, energy efficient
solutions that minimise environmental impacts
(for example, through lower emissions, energy
consumption and water usage).
We assessed the value at risk due to climate
change compared to 1995 exposure to
determine incremental financial impacts.
Asmany climatic models are set up with a
1995–2005 baseline, the period is taken to
represent the current climatic ‘normal’ including
in the IPCC Sixth Assessment Report. ‘Shared
Socioeconomic Pathways’ (SSPs) – and their
associated projections to 2050 – were used
tomodel a low, middle and high warming
scenario (SSP1-2.6, SSP2-4.5 and SSP5-8.5
respectively). These SSPs are the same scenarios
input in the climate models used in the IPCC
Sixth Assessment Report, ensuring our analysis
uses latest climate science. The SSPs are
described asfollows:
• SSP1-2.6: ‘Sustainability’ scenario with low
challenges to mitigation and adaptation –
Ahigh-priority scenario which broadly aligns
to a 2°C increase in temperature by 2100.
• SSP2-4.5: ‘Middle of the Road’ scenario
withmedium challenges to mitigation and
adaptation – Ascenario which broadly aligns
to a 2.7°C increase in global warming by
2100 and assumes little shift in current trends
of social, economic and technological trends.
• SSP5-8.5: ‘Fossil-fueled Development’
scenario with high challenges to mitigation
and low challenges to adaptation – A low
energy transition scenario which aligns to a
4.7°C increase intemperature by 2100 and in
which there is strong fossil-fuel development
up to the end of thecentury.
Similar opportunities present themselves
inthepower, water and industrial markets.
Ourproducts have applications in the rollout
andmodernisation of critical infrastructure.
Water scarcity is resulting in a greater need for
recycling and desalination, and rising sea levels
are necessitating flood defence investment.
Wewill continue to evaluate these and
incorporate any newly material opportunities
into future TCFD reporting.
Case studies illustrating the role we can play are
set out on pages 40 to 55
Physical climate scenarios and
riskquantification
Our methodology for physical climate risks
The physical impacts of climate change are
expected to increase in the future through an
increase in frequency and severity of extreme
weather events as well as through long-term
shifts in climate patterns. Rotork identified four
of its most significant manufacturing locations
toanalyse the potential impacts of extreme
weather events such as heatwaves, hurricanes,
heavy precipitation and storms, increasing in
intensity and frequency.
We quantified two key drivers of financial costs–
1) damage to property value and 2) productivity
loss due to weather events – to analyse the
financial impacts of physical hazards at our
selected manufacturing locations.
Practical limitations when quantifying future
physical risks
It should be noted that these quantifications are
forward-looking projections which can only
provide an indicative value at risk. These values are
based on place-based assumptions concerning
likelihood, magnitude and asset vulnerability which
vary between future climate scenarios.
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Physical risk impact assessment
Value drivers assessed Description Incremental financial impact (by scenario) Potential management responses
Damage to property value
at our four most significant
manufacturingoperations
Physical risk: acute
Time horizon: medium term
Geographies:
United Kingdom, USA, Italy, China
The potential impact to property value from
physical damage pertaining to potential increases
in expenditure on maintenance, replacement
andrepair.
• Extreme weather events degrade building
materials requiring increased maintenance
andreplacement
• Asset failures where facilities are not
constructed fit for future climate risks
2°C increase (SSP1-2.6)
2.7°C increase (SSP2-4.5)
4.7°C increase (SSP5-8.5)
• Review disruption plans for sites to ensure they are tailored
to likely weather events and protect ourpeople and assets
• Consider climate risk factors as part of operational footprint
optimisation or site improvement decision-making processes
Metrics
• Number of sites with tailored severe weather event plans
Targets
• All sites to have tailored severe weather event plans in place,
see page 92 for an update on metrics
Productivity loss at our
four most significant
manufacturing operations
Physical risk: acute
Time horizon: medium term
Geographies:
United Kingdom, USA, Italy, China
The impact of climate-related events on sites’
productivity and continuity. The aggregated
percentage loss of productivity from all physical
hazards at each respective manufacturing sitehas
been applied to annual manufacturing revenues.
• Reduced efficiency due to extreme
weatherconditions
• Temporary shutdowns due to extreme
weatherevents
2°C increase (SSP1-2.6)
2.7°C increase (SSP2-4.5)
4.7°C increase (SSP5-8.5)
• Continually monitor weather patterns to ensure enough
time is given to implement adaptation plans
Metrics
• Number of days operations are disrupted due to extreme
weatherevents
Targets
• Reduction of expected disruption through investment
inadaptation, see page 92 for an update onmetrics
Impact thresholds (key): Negative exposure: <£3m £3–5m £5–10m £10–20m >£20m Positive exposure: <£3m >£20m
Climate resilience, financial and
transitionplanning
Integration into financial planning
The material opportunities and risks (net of any
insurance cover) of climate change are integrated
into our financial planning, to the extent that the
likelihood of occurrence is probable.
• The expected cost of taxes (including
environmental taxes), energy and capital
expenditure (including energy saving and
renewable energy projects) are incorporated
into our budgeting process.
• The revenue and anticipated revenue from
our eco-transition portfolio factors into our
financial forecasts, including climate related
opportunities like oil & gas customers
purchasing electric actuators as part
ofdecarbonising upstream operations.
• As part of our budgeting process, we
incorporate the cost of performing risk
assessments and undertake mitigations
toreduce the impact of physical risks.
Wepurchase insurance to further mitigate
the risk of property damage from extreme
weather events.
Where the likelihood of risk occurrence is
moreremote, consideration will be given to the
potential financial impact as part of the viability
assessment (pages 80–81). The likelihood of
risks occurring is monitored through our group
risk management process.
Climate resilience
The scenario analysis indicates that Rotork is
resilient to both the transition to a low-carbon
economy and to the more frequent, severe weather
events that would accompany climate scenarios
with greater levels of warming. The most material
risk identified was the potential costs of a high
carbon tax, and our continued progress against our
science-based Scope 1 and 2 target demonstrates
our ability to manage this risk. Likewise, the analysis
indicates that (i) the risk posed by changing fuel
prices diminishes in the Sustainable Development
and net-zero scenarios, and (ii) we stand to benefit
from proactively reducing emissions in all WEO
scenarios. The modelling of physical risk from
extreme weather indicated modest risk values,
andmajor incident plans are in place at all our sites.
Likewise, through our ability to supply
technologies that enable the transition –
including hydrogen production and electrification
of oil and gas operations – we are positioned
tobenefit from the transition to a 2°C scenario.
For further examples of our products’ use in
low-carbon technologies, see pages 52–55.
Next steps (2024)
• Develop a Climate Transition Plan which
incorporates our approach to resilience and
the transition to a low-carbon economy
• Standardise climate scenario analysis to enable
regular assessment of risks and opportunities
to the business, with assessments to be
refreshed at least every threeyears
Summary of material climate-related risks and opportunities continued
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Risk management
The Board is responsible for determining the
nature and extent of the risks it is willing to take
in achieving our strategic objectives. Our Group
risk appetite statement sets the tone from the
top and supports decision making to mitigate,
control or accept risks. Rotork’s purpose,
‘Keeping the world flowing for future generations’,
is embedded in the way we assess risks.
The Board considers climate issues in strategic
and financial planning throughout the year;
however, a formal review process is conducted
twice yearly. It is assisted in the assessment of
climate-related matters by the ESG Committee,
the Audit Committee, and the Rotork
Management Board.
Our Group risk management process reviews
those risks that could have an immediate or
longer-term impact. As part of this process in
2022, and following the detailed work
performed to evaluate climate-related risks as
part of TCFD, it was decided that a new risk be
included in our principal risks, titled ‘Climate
commitments’. Our Climate commitments risk
isdriven by the Group’s commitment to enable
asustainable future, and our understanding of
the challenges that are posed in delivering our
targets, both internally and externally to align
with the climate science. Sustainability is a key
pillar of our strategy, and we are well positioned
to support the transition to a low-carbon economy
and sustainable future. This is further outlined in
ourGrowth+ strategy on page 17. Werecognise
that as a company we must live upto our
promises and deliver on the targets wehave set.
This risk demonstrates that we understand that
operating responsibly is important for Rotork
and our stakeholders. Formore information
seepages 110 to 112.
Climate-related risks and response options are
managed using the Group’s Risk Management
Framework which incorporates both a bottom-up
and top-down assessment. Climate change is a
standing agenda item at risk workshops held at
least twice a year. Given the unique characteristics
ofclimate-related risks, we use our Horizon risk
methodology to assess risks against longer-term
time horizons relevant to climate change. Risk
owners are assigned to the most material risks
and appropriate control measures are decided
based on the perceived materiality and the
agreed riskappetite.
Risk control and management
When risks are identified, a risk owner is assigned
who is accountable for monitoring and managing
the risk. In some cases, climate-related risks
identified may already sit as risk drivers to an
existing risk. For example, within our Supply
Chain Disruption risk, there is an element that
isrelated to delays and unavailability of products
related to increased severity of the physical
effects of climate change.
Where a new response is required to manage
arisk, an action owner is assigned who is
accountable for the delivery of the action,
withsupport from the Risk & Compliance team.
An appropriate action could be to perform
further analysis, to put in place controls and
mitigations, or to address the risk by identifying
other opportunities.
Climate risk identification and assessment
Risk management framework: Climate-related
risks and opportunities are assessed and managed
using the Group’s overarching risk management
framework (see pages 68 to 72 for more
information). Our established risk management
framework incorporates both a ‘bottom-up’
anda ‘top-down’ risk identification and review
processes. The bottom-up process is carried out
at functional, divisional and regional levels and
the top-down process is performed at the
management and Board level.
Horizon risk methodology: For many climate-related
risks, either the severity of the impact or the
likelihood may be uncertain, and typically these
risks may materialise over longer-term time horizons
than more traditional business risks. To account for
this, we use a ‘Horizon risk methodology’ to assess
those risks that are more uncertain or intangible,
such as climate change. This uses a wider timeframe
than typically used, with short term as0–10 years,
medium term as 10–25 years and long term as
25years and beyond.
Climate risk identification: Climate-related risks
are identified, monitored and managed through
risk workshops held with all key functions at
least twice a year. During 2022, in addition
tothe established risk management process,
additional cross-function workshops were
convened to identify and contextualise
climate-related risks and opportunities that
affect different functions. The potential impacts
were discussed and ranked based on perceived
business importance.
Climate risk assessment: In accordance with
theTCFD recommendations, our assessment
primarily focused on understanding the potential
financial impact of these risks. To achieve this,
each transition and physical climate risk or
related opportunity has been qualitatively
assessed and scored based on the potential
financial impact. The level of potential financial
impact is a function of three criteria including
vulnerability (consisting of level of exposure,
sensitivity and adaptive capacity), likelihood
andmagnitude. We also assessed opportunities
in terms of the size of opportunity and ability
toexecute.
The risk and opportunity assessment results
(seepage 85) were used to inform the next
stage of the climate risk assessment – the
quantification of potential financial impact for
some of the most material risks. We currently
define financial materiality as effecting net profit
by over £6m and probability greater than 25%.
This will be used to inform the continued
development of risk management responses for
incorporation into our Climate Transition Plan.
Next steps (2024)
• Standardise climate scenario analysis to
enable regular assessment of risks and
opportunities to the business, with
assessments to be refreshed at least
everythreeyears
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Summary of disclosure
• Rotork has reported operational GHG emissions (scope 1 and 2), energy, waste and water data,
trends over time, and related reduction targets for many years. CO
2
e per £m revenue is a
long-standing non-financial key performance indicator
• Scope 3 emissions have also been reported for some categories for a number of years. In 2021,
Rotork calculated its full scope 3 inventory and have continued to track performance since 2022.
Emissions for all relevant categories are set out below and on pages 41 and 42
• We have developed and committed to science-based emissions reduction targets for scopes 1,
2and 3 and our near-term targets are validated by the SBTi
• Emissions are calculated according to the GHG Protocol. Scope 1 and 2 emissions are
independently assured by MakeUK. Scope 3 emissions have been calculated with support from
Corporate Citizenship
Next steps (2024)
• As part of developing the Climate Transition Plan, develop a strategy for achieving net-zero as
well asa strategy for GHG removals for residualemissions
GHG emissions and climate risks
Rotork has calculated and reported CO
2
e emissions relating to its own operations for many years,
inaccordance with the GHG Protocol Corporate Accounting and Reporting Standard. Our detailed
greenhouse gas footprint is available on pages 41 and 42.
381,365
Rotork’s 2023
GHGemissions
374,215
Breakdown
of scope3
emissions (2023)
GHG emissions Tonnes CO
2
e (2023) Associated risks
Scope 1 direct
3,197
Limited assurance
• Price volatility for fossil fuels
Scope 2 indirect
(location based)
3,953
Limited assurance
• Fluctuation in electricity costs
(renewable and non-renewable)
Scope 3 other indirect
85,386
Purchased goods
andservices
248,465
Products in use
40,364
Rest of scope 3 categories
• Insufficient decarbonisation action
from suppliers
• Complexity of evidencing avoided
emissions from use of products by
customers (which are not captured
intypical GHG emissions corporate
accounting methodology)
Total GHG emissions
381,365 • Increase cost of carbon both through
carbon tax and carbon price
• Faster than expected growth resulting
in an increase in GHG emissions
beyond planned mitigations
Metrics and targets
Scope 1
Scope 2
Scope 3
Purchased goods and services
Products in use
Rest of scope 3 categories
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Climate-related metrics
Rotork has reported operational GHG emissions (scope 1 and 2) per £1 million revenue as one of its
key non-financial performance indicators since 2013 and has a track record of improving its efficiency
year-on-year. In 2023, our total scope 1 and market-based scope 2 emissions decreased by 11%.
Emissions per £m revenue reduced by 12%, with 9.9 tonnes CO
2
e being produced per £m, compared
to 11.3 tonnes in 2022.
We use the following metrics to monitor performance, though these may change as our approach
toclimate risk evolves:
Transition risks
andopportunities Current metric 2023 2022 % change
Direct GHG
emissioncosts
Scope 1 and 2
emissions (tonnes,
market-based)
6,310 7,052 -11%
Avoided risk
frommitigation
Indirect GHG
emissioncosts
Gas, diesel and petrol
consumption (GJ)
49,377 nr* —
Incremental revenue
from new market
opportunities
% revenue from
eco-transition
portfolio
30% 28% 2%
Physical risks
andopportunities Current metric 2023 update
Damage to
propertyvalue
Sites with tailored
severe weather
eventplans
All sites have a major incident plan in place.
The four major manufacturing sites
assessed for TCFD have severe weather
management plans in place.
Productivity loss
Number of days
operations were
disrupted due
toextreme
weatherevents
We currently monitor disruption and
productivity loss through the Group risk
management function. These events are
very infrequent. During 2024, we will
review the extent to which acute
operational disruption affects overall
output, and may refine our metric accordingly.
* Diesel and petrol data not available and ‘not reported’ in prior years.
Energy, water, and waste data is reported on pages 41 to 45 of this report. Renewable and
non-renewable electricity consumption in 2023 is reported on page 63.
Rotork acknowledges the need to continue to expand its range of climate-related metrics to track
performance and control the exposure to risks as well as take advantage of opportunities. The list
below describes planned development of additional cross-industry, climate-related metrics in line
with the 2022 TCFD implementation guidance update:
• Capital deployment: Rotork is in the process of refining pathways to achieve our science-based
targets, including in R&D for product development to capitalise on opportunities in the transition
and in a low-carbon economy. In 2023, as part of assessing the investment required for our
transition to net-zero, we undertook energy audits at several of our global facilities.
• Cost of carbon: Rotork does not yet use an internal price of carbon. As part of drafting our
Transition Plan and refreshing our scenario analyses in 2024, we have the opportunity to review
whether specific aspects of our business would benefit from formalising the carbon cost of
itsactivities.
Climate-related targets
We are committed to net-zero for scope 1 and 2 by 2035 and for scope 3 by 2045. Our near-term
emissions reduction targets for scope 1 and 2 and scope 3 emissions have been validated by the
SBTi. The baseline year for all targets is 2020.
We have set a market-based target to reduce scope 1 and 2 emissions by 42% by 2030 compared
with 2020. This is an absolute reduction target, aligned to a 1.5ºC pathway. Our market-based
emissions are reported on page 41. We aim to achieve our target through renewable energy
procurement, use of on-site solar photovoltaic generation, energy efficiency projects across our
estate and our fleet emissions reduction strategy. We are currently on track to achieve this target,
with a 32% emissions reduction in 2023 versus our 2020 baseline.
For scope 3, we have also set an absolute reduction target for emissions associated with the
‘UseofSold Products’. Our target is to reduce emissions by 25% by 2030, in line with a well-below
2ºC pathway. We target energy efficiency improvements as part of the new product development
process. We aim to achieve our target by driving product developments and initiatives and partnering
more closely with customers to support their emissions reduction strategies. Our ambition will also
be supported by the progressive ‘greening of the grid’, asover time our products will be powered
byan increasing proportion of renewable energy during their use. We are on track with programme
delivery, see further details on page 46.
In addition, we have set a supplier engagement target for emissions associated with purchased
goods and services. We are engaging with suppliers to improve their environmental performance.
We are requesting that suppliers representing 25% of supply chain emissions set science-based
targets by 2027. We are on track with our supplier engagement activities, see further details on
page47.
In 2023 and 2024, the executive LTIP awards include a measure targeting reductions in
scope1and2emissions.
Metrics and targets continued
Rotork Annual Report 2023 rotork.com92
Task Force on Climate-related Financial Disclosures continued
Strategic report Corporate governance Financial statements
The Non-Financial Reporting Requirements in Sections 414A and 414CB of the Companies Act 2006 are
addressed in this statement using cross references to indicate pertinent sections within this report
This report refers to a range of policies that support our performance across Environment, Social and Governance topics.
The majority of the policies are available to read on our website: www.rotork.com/en/environmental-social-governance/esg-reports-and-policies.
Environmental information
Where material information can be found in the Strategic report
Material policies How we monitor the effectiveness of policies
Our approach to managing our environmental impacts is set out on
pages 30 to 63. Our TCFD report, incorporating disclosures which
meet the requirements of the UK Companies Act climate-related
financial disclosures (CFD), is set out on pages 82 to 92. We work to
measure and reduce our environmental impact and report progress
inour Annual Report, and in our separately published GRI table.
Environmental Policy
This sets out our commitment to protecting the environment,
ecosystems and biodiversity; continually improving our
environmental and energy performance; and complying with
all applicable environmental and energy regulations. It applies
to the whole Group,including subsidiaries.
We measure performance against key environmental
metrics and report this publicly. We also include
environmental obligations in our agreements withsuppliers
and monitor performance. See the non-financial performance
KPIs on page 11 for GHG emissions per £m revenue
performance in 2023 and trends over time.
The Company’s employees
Where material information is located
Material policies How we monitor the effectiveness of policies
Our approach to People and Culture is set out on pages 57 to 61.
Ouremployee engagement approach is also covered in our Section 172
statement on pages 110 to 112. Related principal risks, on pages 73 to
79, are Health, Safety and the Environment and Change Management.
Board Diversity & Inclusivity Policy
Sets out the Board’s approach to diversity and inclusion and
provides the framework for the Board’s approach to diversity
and inclusion in senior management roles.
Code of Conduct
Outlines our values – Stronger Together, Always Innovating
and Trusted Partner – and the standards of behaviour we
expect of ouremployees.
Health & Safety Policy
Sets out our commitment to the planning and management
ofhealth and safety for reducing accidents and cases of
work-related ill-health. It applies Group-wide, including
toallsubsidiary businesses and persons working for or
onbehalf of the Company.
Speak Up Policy
Outlines our commitment to conducting our business with
openness, integrity and fairness, and encouraging people to
report suspected wrongdoing as soon as possible and without
fear of detrimental treatment as a result of raising a concern.
It applies to all individuals working within, for, or with Rotork,
including suppliers.
Our regular ‘pulse’ surveys assess employees’ engagement
and their views of Rotork as a place towork. Surveys
include questions on diversity and inclusion and the pace
of change. We conduct regular audits of our health and
safety system. We track colleague diversity at different
levels within the organisation, reviewing gender, ethnic
and age diversity among others. We also monitor the
number of contacts made through our whistleblowing
linesand the outcomes of any investigations. The Lost
TimeInjury Rate (LTIR) is one of our two key non-financial
performance indicators. Performance in 2023 and trends
over time are set out on page 11.
rotork.com Rotork Annual Report 202393
Non-financial and sustainability information statement
Strategic report Corporate governance Financial statements
Social and community matters
Where material information is located
Material policies How we monitor the effectiveness of policies
Our contribution to the communities in which we operate,
including charitable giving, is covered on pages 56 to 62. Our
approach to supplier management is on pages 47 to 48 and 112.
Supplier Code of Conduct
Our Supplier Code of Conduct sets out our minimum
expectations regarding human and labour rights, among other
requirements. Weassess potential slavery and human trafficking
risks arising from supplier relationships using a number of different
methods. These include assessing new and existing suppliers
and conducting supplier site visits. In the event that an issue is
identified, we will undertake appropriate remedial action. This
might include placing appropriate contractual obligations on a
supplier; working together with a supplier on a corrective action
plan; or ceasing to work with a supplier altogether. In 2022, we
updated our Supplier Code of Conduct and took this opportunity
to provide more detailed information regarding our expectations
of suppliers in relation to human rights.
Worldwide Charity Support Policy
This policy sets out how we implement charitable giving, in line
with our corporate responsibility aims. Every location has authority
to spend 0.1% of its prior year’s profit before tax on charitable or
good cause activities chosen by the employees of that location.
Group Tax Strategy
Our overall tax strategy is for full disclosure and co-operation
with all tax authorities. We consider reputational, financial and
operational risks in our approach to tax planning. We are committed
to creating an open and transparent working relationship with
tax authorities in the jurisdictions in which we operate, and to
abiding by all applicable laws.
We capture and report data on our charitable giving and
assess the impact we have made. We audit high-risk
suppliers, as required, to ensure compliance with our
SupplierCode of Conduct.
Rotork Annual Report 2023 rotork.com94
Non-financial and sustainability information statement continued
Strategic report Corporate governance Financial statements
Respect for human rights
Where material information can be found in the Strategic report
Material policies How we monitor the effectiveness of policies
Our approach to diversity and inclusion and respect for
humanrights is covered on pages 48 to 50 and 57 to 61.
OurModern Slavery Statement is published on our Group
website at www.rotork.com
Modern Slavery Statement
This covers our policy on working to ensure that slavery and
human trafficking is not occurring in any part of our business
orsupply chain.
Modern Slavery Policy
Our Modern Slavery Policy was introduced in 2021. It is designed
to raise employee awareness of modern slavery and human
trafficking and includes key performance indicators to measure
the effectiveness of our control measures.
Code of Conduct
Outlines the values and standards of behaviour we expect from
employees, including our approach to protecting human rights
and empowering staff to ‘Speak Up’ if they have a concern.
Respect at Work and Equality of Opportunity
Sets out our commitment to the principle of equal opportunities
to ensure that no employee or job applicant receives less favourable
treatment based on their age, race, nationality, ethnic origin,
disability, sex, sexual orientation, religion or belief or marital status.
Conflict Minerals Policy
This policy sets out the Company’s commitment to not using
tantalum, tin, tungsten and gold that directly or indirectly
finances or benefits armed groups in the Democratic Republic
ofthe Congo or adjoiningcountries.
We deliver a range of mandatory training courses, including
Code of Conduct and Speak Up training. In2022, the programme
included training designed toraise employee awareness of
modern slavery and human trafficking risks in our business
and supply chain. Completion is tracked and a number of
thecourses include a knowledge check assessment.
We also introduce new joiners to our values during
theirinduction sessions.
In 2022, we introduced mandatory compliance certification,
requiring colleagues to confirm compliance with our Code
ofConduct and associated policies, the completion of all
mandatory training, and any actual or potential conflicts
ofinterests.
We review our suppliers for modern slavery risks. Weengage
an independent intelligence provider to helpanalyse our
supply base. We follow up with audits when necessary.
We monitor the number of reports of suspected wrongdoing
received. We investigate all concerns, and analyse the outcomes
for any trends or risk indicators.
We exercise due diligence based on the ‘Responsible Minerals
Initiative’ guidance, by mapping our supply chain using their
reporting templates for tantalum, tin, tungsten and gold,
andfollowing up any concerns raised via a corrective action
management process.
rotork.com Rotork Annual Report 202395
Non-financial and sustainability information statement continued
Strategic report Corporate governance Financial statements
Anti-bribery and corruption
Where material information is located
Material policies How we monitor the effectiveness of policies
Culture, ethics and governance section
(pages 49 and 50), ourpeople and culture
section (pages 57 to 61).
Code of Conduct
This sets out our zero-tolerance approach to bribery and corruption and the standards of
behaviour expected to minimise the risk of bribery, including in relation to gifts and hospitality.
Anti-bribery and Corruption Policy
We take a zero-tolerance approach to bribery and corruption. Ourpolicy and related guidance
helps employees understand howbribery can impact individuals and the Company and how
toreport a potential breach.
Gifts and Hospitality Policy
Provides guidance on the rules relating to the offering and acceptance of gifts and hospitality.
We updated the policy in2022.
Supplier Code of Conduct
Outlines our zero-tolerance policy to extortion, bribery and corruption and to offering, paying,
soliciting or accepting bribes in any form.
In addition to mandatory Code of Conduct and
Speak Up training, employees are required to
complete anti-bribery andcorruption courses on
aregular basis. We track training completion rates.
See page 49 for more information.
We investigate all concerns raised and remain alert
toriskindicators.
We also submit responses to the CDP Climate
and Water Security questionnaires annually.
Oursustainability reports and policies are
published at the following address: www.rotork.
com/en/careers/diversity-and-inclusion and
www.rotork.com/en/environmental-social-
governance/esg-reports-and-policies.
Non-financial information
Non-financial
information Section Pages
Business
model
• Business model 4–5
Key non-
financial
performance
indicators
• Key performance
indicators
• Sustainability Review
10 –11
30–63
Information for funds applying
the Sustainable Finance Disclosure
Regulation (SFDR)
Our end markets
In 2023, 46% of our sales were into Oil & Gas,
30% into Chemical, Process & Industrial and
24% into Water & Power. The most common
application of Rotork’s products and services
–across all end markets – is the control and
management of water, including for water
recovery, recycling and treatment processes.
Rotork’s products are an essential component
inprocesses for new energies and technologies
that enable climate change mitigation and
adaptation. They also contribute positively to
thesustainable use of water resources, as well
ashaving applications in flood protection.
Our ‘eco-transition portfolio’ includes three
portfolios: ‘Water & wastewater’, ‘Methane
emissions reduction’ and ‘New energies &
technologies portfolio’ as well as other
applications such as process water management
and gasification. We estimate that these three
portfolios represented around 30% of sales in
2023, with other applications also material but
difficult to estimate. Eco-transition portfolio
sales promote environmental or sustainability
characteristics, specifically methane emissions
elimination, water preservation, carbon capture
and new capacity renewable energy generation.
See pages 40 to 55 for case studies. For the
avoidance of doubt, Rotork does not produce
nuclear power, own fossil fuel reserves, produce
or sell tobacco or military or other weapons or
operate in the gambling sector.
Our business
• ESG ratings: Rotork is highly ranked by
numerous ESG ratings agencies, including
MSCI, Sustainalytics, S&P Global and CDP.
See page 30 for details.
• Alignment to the 2015 Paris Agreement:
Rotork has set science-based emissions
reduction targets across scopes 1 and 2 and
scope 3. We have also committed to target
net-zero by 2035 for scopes 1 and 2 and by
2045 for scope 3. See page 41 for details.
• UN 2030 Agenda for Sustainable Development:
As part of Rotork’s sustainability framework,
launched in 2021, we are targeting progress
for UN SDGs 5, 6, 7, 8, 9, 12 and 13. Rotork
was also an early signatory of the UN Global
Compact. See page 37 for details.
Further details of our ESG performance,
including on metrics such as accident frequency
rate, gender pay gap, human rights policy,
anti-corruption practices and whistleblowing are
set out in the Sustainability Review on pages 30
to 63.
Approval and signing of the Strategic Report
The Strategic Report was approved by the Board
on 4 March 2024 and signed on its behalf by:
Kiet Huynh
Chief Executive Officer
4 March 2024
Rotork Annual Report 2023 rotork.com96
Non-financial and sustainability information statement continued
Strategic report Corporate governance Financial statements
rotork.com Rotork Annual Report 202397
Contents
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
Corporate
governance
The Rotork Board continues to be committed
tothehighest standards of governance and
stakeholderengagement
Page title
Strategic report Corporate governance Financial statements
Corporate governance
Strategic report Corporate governance Financial statements
Rotork Annual Report 2023 rotork.com98
Board activities in the year
A key focus for the Board this year was
reviewing the strategic initiatives underway to
support the delivery of our Growth+ strategy,
launched in November 2022. To support this we
have reviewed, through deep dives, our Target
Segments and key markets as well as exploring
the opportunities and risks in depth.
In recognition that we have an important role to
play in new energies and technologies that will
support the transition to a low-carbon economy,
the Board also took time to review how we
might play our part through investment in new
product development in driving the transition
toa sustainable future where resources are
usedresponsibly. To ensure the appropriate
levelof governance in this key area, we took the
opportunity to refocus the aims and scope of the
Board Committee overseeing the implementation
of Rotork’s sustainability strategy to enable an
enhanced focus on our selected Sustainable
Development Goals. As a result, our ESG
Committee, which was established in October
2020, was reconstituted as the Safety and
Sustainability Committee, with effect from
1January 2024.
Another key focus of the Board this year has
been to oversee the acceleration of Rotork’s
business transformation through implementing
and integrating common systems and processes
across the Group supported by a new enterprise
resource planning (ERP) system. This will improve
lead times and enhance customer experience.
Animportant milestone was reached in the
firstquarter of 2023 with the successful first
deployment of our ERP system at our Bath
factory. The Board will monitor its deployment
across all sites over the next few years.
The Board regularly reviews its capital needs in
line with our capital allocation strategy. With our
strong balance sheet, healthy net cash position
and good cash generation, we recognise that we
have the financial flexibility to pursue our organic
investment plans, pay a progressive dividend and
execute our targeted M&A strategy.
Applying the principles
oftheUK Corporate
Governance Code 2018
On behalf of the Board, Iam
pleased to introduce Rotork’s
Corporate Governance Report
for2023
Dorothy Thompson, CBE
Chair
The aim of this report is to provide a clear
explanation of Rotork’s governance framework
and the practical application of the principles
ofgood corporate governance. As a Board,
weconsider that strong governance underpins
the successful management of the Group and
enables us to focus on the key strategic issues.
Introduction
I am pleased to introduce my first report to you
as Chair, which describes the key activities of the
Board during the year along with our governance
arrangements. I am excited to have joined Rotork
as it takes forward its vision to become a world
leader in intelligent flow control, pursues its
Growth+ strategy and plays its part in enabling
asustainable future. I look forward to working
with the Board, our colleagues and stakeholders
to help steward the Company through its
journey to successfully deliver on its strategy.
During my first few months as Chair Ihave
enjoyed spending time in getting to understand
the business and meeting key stakeholders,
including our employees and investors and
taking on board their views. I would like to
thank everyone for the warm reception and
support I have received.
Page title
Strategic report Corporate governance Financial statements
Chair’s governance overview
Strategic report Corporate governance Financial statements
rotork.com Rotork Annual Report 202399
Board activities in the year continued
To this latter end, we were pleased to announce
the acquisition, on 4 August 2023, of Hanbay
Inc, based in Montreal, Canada. This acquisition
expands Rotork’s electric actuator offering and
isconsistent with all three pillars of our
Growth+strategy.
The Board is always keen to understand and
respond to the views, concerns and challenges
of our people. In October, the Board took a
deepdive into the initiatives being taken by
management in the areas of leadership, talent
development, culture and engagement which
we consider critical to ensuring retention and
having motivated, well-led teams able to deliver
the Growth+ strategy. The Board also reviewed
the aims and outcomes of the employee
engagement process undertaken through the
pulse surveys. Key initiatives included a more
focused Leadership Programme and an enhanced
Learning Management System, linked to career
planning for all colleagues to access.
A fuller summary of the Board’s activities during
the year can be found on pages 106 to 109.
Board composition
The Nomination Committee keeps the balance
of skills, knowledge and experience on the
Board under regular review and is mindful of
thebest practice requirements under the UK
Corporate Governance Code 2018 and the
requirements in Listing Rule 9.8.6.
There have been a number of changes to the
Board since the last annual report. Jonathan
Davis, who has served as Group Finance Director
since 2010, advised the Board in September that
he would be retiring after 21 years, during which
he has made a significant contribution to the
Company. The Board has appointed Ben Peacock
as Chief Financial Officer to succeed Jonathan
who will continue in his current role until Ben
joins the Board on 11 March 2024. Jonathan will
step down from the Board on 30 April 2024 but
will remain with the Company to support the
transition for an interim period. Ben brings a
experience, race, age, gender, educational and
professional background, thinking and other
personal attributes is required. The importance
of this area forms the basis for succession
planning as we consider the best constitution of
the Board to successfully take Rotork forward.
You can read more about our overall approach
to diversity and inclusion across the Group on
page 59.
Stakeholders
The Board takes account of the impact of
itsdecisions on all our stakeholders, whether
they are our customers, employees, suppliers,
shareholders or the communities in which we
operate, while taking steps to secure the Group’s
longer-term success. As a trusted partner,
working together with all our stakeholders to
understand their different perspectives during
these continuing challenging times remains a
focus for the Board. There has been a regular
dialogue with our stakeholder groups and, on
behalf of the Board, I would like to thank them
for their partnership during the year.
Our people continue to be fundamental to
Rotork’s success. Tim Cobbold has held the
roleof designated Non-executive Director for
Workforce Engagement since 2019. The role
ensures employees’ views are represented and
their interests are considered at the strategic
level in the Board’s decision making. You
canread about Tim’s engagement with our
colleagues undertaken during the year on
pages113 and114.
Details of the ways we have engaged with
stakeholders to understand their views can be
found on pages 110 to 112. A statement on how
the directors have had regard to the matters set
out in Section 172 of the Companies Act 2006
can be found on page 9.
Board performance review
Under the Corporate Governance Code, there
isa requirement to undertake an externally
facilitated Board evaluation once every three
wealth of industry experience and highly relevant
skills to the role and we are delighted to welcome
him to Rotork. Peter Dilnot stepped down from
the Board on 31 December 2023, in light of his
appointment as CEO of Melrose Industries PLC.
The Board and our executive leadership have
benefitted greatly from his advice and his
expertise over the past six years. Tim Cobbold
succeeded Peter as Senior Independent Director
from 1 January 2024. Ann Christin Andersen has
decided not to seek re-election at the Company’s
AGM, in light of her appointment as CEO of
Norwegian Energy Partners. The Board is grateful
to Ann Christin for her valued contribution,
particularly with respect to environmental and
sustainability matters through her chairing the
ESG Committee (now the Safety and Sustainability
Committee). During the latter part of the year,
the Nomination Committee initiated a thorough
search for two non-executive directors, following
which Andrew Heath and Vanessa Simms
wereappointed to the Board with effect from
1April 2024 and 21 June 2024 respectively with
Andrew standing for election at our 2024 AGM.
Together, they bring extensive experience in
strategic leadership in the listed environment.
New appointments are subject to a formal,
rigorous and transparent process, led by the
Nomination Committee, and further details
onthe procedures taken for these recent
appointments can be found on page 127.
Allnew Board members participate in a
comprehensive induction programme, details
ofwhich can be found on page 108.
Diversity and inclusion
Diversity, both in the boardroom and throughout
the entire Group, is taken seriously by the Board
as part of our stated commitment to nurture
aninclusive and respectful culture. The Board
iscommitted to ensuring that its membership
reflects diversity in its broadest sense. We believe
that in order to provide a range of perspectives,
insights and challenge in support of good
decision making and to enable achievement
ofstrategic objectives, a combination of skills,
years, with our last external review having taken
place in 2019. Whilst we were due to conduct
anexternal process during 2022, the Board
decided to postpone the external Board evaluation
to 2023 following my appointment as Chair
toenable a more meaningful baseline against
which to assess Board effectiveness. A report on
the process and outcomes of the 2023 external
Board evaluation can be found on page 115.
Governance
Throughout the year, we have applied
theprinciples of the Code to our decision
making and have ensured that there is good
co-operation within the Group to enable us
todischarge our governance responsibilities
effectively. The application of the principles of
the Code are described throughout this report,
together with explanations and signposts
providing direction to the relevant page where
more detail can be found.
The Company’s corporate governance
compliance statement for 2023 is set out
onpage 100.
On a personal note, I would like to thank
shareholders, the Board and all our employees
for welcoming me to the Board as Chair and for
their support and hard work this year. Rotork
isaworld class business and I believe it is well
placed to build on this strength to deliver
sustainable growth over the coming years.
Dorothy Thompson, CBE
Chair
4 March 2024
Page title
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Chair’s governance overview continued
Strategic report Corporate governance Financial statements
Rotork Annual Report 2023 rotork.com100
UK Corporate Governance Code
Corporate governance compliance statement
It is the Board’s view that for the financial year ended
31December 2023, the Company complied with all of the
provisions and applied the principles of the UK Corporate
Governance Code 2018 (the ‘Code’).
The Company’s auditor, Deloitte LLP, is required to review
whether the above statement reflects the Company’s
compliance with the provisions of the Code specified for
itsreview by Listing Rule 9.8.10 and to report if it does not
reflect such compliance. No such report has been made.
The Code is publicly available on the website of the
FinancialReporting Council at www.frc.org.uk.
Task Force on Climate-related Financial Disclosures –
statement of compliance
Rotork’s statement of compliance in implementing the
recommendations of the Task Force on Climate-related
Financial Disclosures (‘TCFD’), required to be made
underListing Rule 9.8.6(8), is set out on page 82.
Acquisition of Hanbay, Inc.
Approved the acquisition
ofHanbay, Inc., adding a
compact high-torque electric
valve actuator to our product
offering. This acquisition
isfullyconsistent with the
Growth+ strategy.
See page 65
Hanbay sales post acquisition
in 2023:
£1.6m
with margins in line with the
Rotork Group average.
Promoting diversity
andinclusion
We remain committed to
maintaining a diverse and
inclusive culture on the Board
and working to achieve
adiverse executive and
leadership composition.
See pages 127 and 128
Board female representation
asat 31 December 2023:
50%
Board ethnicity as at
31December 2023:
25%
Progressing our
sustainability framework
Refocusing of the Board
Committee overseeing the
implementation of Rotork’s
sustainability strategy to
enablegreater focus on
ourselected Sustainable
DevelopmentGoals.
See pages 118 to 120
Commitment to net-zero by:
2045
2030 target to reduce scope
1and 2 emissions:
42%
Ensuring strong succession
Approved the appointment
ofTim Cobbold as Senior
Independent Director and
theGroup Finance Director
succession, whilst recognising
the advantages of having in
place a diversity of gender,
social and ethnic backgrounds
and cognitive and personal
strengths for the Board and
senior management.
See pages 126 to 128
Average non-executive
directortenure:
2.83 years
Key Board activities in 2023
Progressing our
Growth+strategy
Continued oversight
andmonitoring of the
implementation of Rotork’s
Growth+ strategy, which is
designed to drive growth
through a focus on Target
Segments, customer value
andinnovation.
See page 17
Revenue growth in 2023 (OCC):
+13.6%
Enhanced employee
engagement
Continued engagement with
our people to understand
theirviews through site visits,
webinars,direct two-way
communication and
all-employeesurveys.
See pages 113 to 114
Survey participation rate:
79%
Governance highlights
Strategic report Corporate governance Financial statements
rotork.com Rotork Annual Report 2023101
Independence/skills/experience
Kiet
Huynh
Jonathan
Davis
Dorothy
Thompson
1
Peter
Dilnot
Ann Christin
Andersen
Janice
Stipp
Tim
Cobbold
Karin
Meurk-Harvey
Independence
Listed CEO/CFO experience
Sector experience
2
Engineering and innovation
Operations
International
Health and safety
Finance and banking
Strategy and M&A
Sustainability
Digital, cyber and technology
1 Dorothy Thompson was considered independent upon appointment.
2 Sector experience means experience in the Flow Control sector together with the Oil & Gas; Chemical, Processing & Industrial;
and Water & Power sectors, being Rotork plc’s end markets.
Focus for 2024
Progression of Growth+ strategy
Continued Board oversight of the delivery of
mid to high-single-digit revenue growth and
mid-20s adjusted operating margins over time.
Embedding Board changes
Ensuring comprehensive induction and
handover programmes are in place to support
the new Chief Financial Officer and new
non-executive director appointments.
Business transformation and ERP rollout
Acceleration of our business transformation
through the implementation and integration
of common systems and processes throughout
the Group.
Investment in people
Continued investment in a focused Leadership
Programme and an enhanced Learning
Management System, linked to career
planning for all our colleagues.
Directors’ skills and experience matrix Board at a glance
Director changes
• Dorothy Thompson succeeded Martin Lamb as Chair on 28 April 2023
• Peter Dilnot stepped down from the Board and as Senior Independent Director on 31December 2023
• Tim Cobbold was appointed Senior Independent Director with effect from 1January 2024
• Ben Peacock joins the Board as executive director and Chief Financial Officer on 11March 2024
tosucceed Jonathan Davis who is retiring after 21 years with the Company at the 2024 AGM
• Ann Christin Andersen steps down from the Board on 30 April 2024
• Andrew Heath and Vanessa Simms were appointed non-executive directors with effect from
1April2024 and 21 June 2024 respectively
Non-executive director Board tenure
as at 31 December 2023
Board gender identity or sex
as at 31 December 2023
Board composition
0–3 years
4–6 years
7+ years
Female – 50%
Male – 50%
Female Board
representation is
50%and exceeds the
target set under the
Listing Rules and
DTRs of 40% female
representation on
boards by 2024.
Board ethnic background
as at 31 December 2023
Asian/Asian
British – 25%
White British
orother white
(including
minority-white
groups) – 75%
Rotork exceeds
theParker Review
recommendation for
FTSE 250 companies
for at least one
ethnically diverse
Board member
by2024.
The matrix below captures the skills and experience that the directors, who served during the year
under review and remained in office at 31 December 2023, brought to the boardroom table in
driving Rotork’s long-term success and supporting its purpose of keeping the world flowing for
future generations. An essential element in addition to skills is diversity in approach and thinking
styles which results from the varied backgrounds and experiences of the directors. This is covered
more fully in the individual biographies on pages 102 and 103.
Governance highlights continued
Strategic report Corporate governance Financial statements
Rotork Annual Report 2023 rotork.com102
Kiet Huynh (45)
Chief Executive Officer
Jonathan Davis (57)
Group Finance Director
Dorothy Thompson, CBE (63)
Chair
A Board with experience
Promoting the long-term sustainable
success of the Company and generating
value for stakeholders continues to
bethe focus of the Board
N
Nomination Committee
A
Audit Committee
R
Remuneration Committee
S
Safety and Sustainability Committee
(formerly, the ESG Committee)
–
None
Denotes Chair
N
Appointed to the Board
December 2022
Skills, competencies andexperience
Dorothy was previously Chief
Executive Officer of Drax Group plc,
the UK renewable power business,
from 2005 to 2017. She is currently
aNon-Executive Director of Eaton
Corporation plc, a leading global
power management company listed
on the New York Stock Exchange, and
of the InstaVolt group, a provider of
electric vehicle charging infrastructure.
Dorothy retired as Senior Independent
Director of the Bank of England in
July2022, where she had been on the
Court since 2014. From 2018 to 2021
she served as the non-executive Chair
of Tullow Oil plc and was a non-executive
director of Johnson Matthey plc from
2007 to 2016.
External appointments
Non-executive director of Eaton
Corporation plc
–
Appointed to the Board
January 2022
Skills, competencies andexperience
Kiet joined Rotork in 2018 as
Managing Director responsible for
theInstruments division. Following
the Group’s divisional realignment in
2019, he has led both the Chemical,
Process & Industrial and the Water &
Power divisions. Kiet has more than
15 years’ experience working as a
senior executive for world-leading
industrial companies, beginning his
career at IMI plc before moving on
toTrelleborg. Kiet was appointed
asCEO on 10 January 2022.
External appointments
None
–
Appointed to the Board
April 2010
Skills, competencies andexperience
Jonathan joined Rotork in 2002 after
holding finance positions in several
listed companies. He gained
experience of the Rotork business
initially as Group Financial Controller,
and then as Finance Director of the
Rotork Controls division. Jonathan
was appointed as Group Finance
Director in 2010 and will be retiring
from the Board at the conclusion of
the AGM to be held on 30 April 2024.
External appointments
Non-executive director and Audit
Committee Chair of Volution Group plc
Board of directors
Strategic report Corporate governance Financial statements
rotork.com Rotork Annual Report 2023103
Peter Dilnot (54)
Senior Independent
Non-executive Director
1
N A R
Board tenure
September 2017 – December 2023
Skills, competencies
andexperience
Peter was appointed CEO of
Melrose Industries PLC in October
2023. Peter spent seven years as
Chief Executive Officer of Renewi
plc (previously Shanks Group plc),
an international recycling
company. Peter has an
engineering background and
wasa senior executive at Danaher
Corporation, a leading global
industrial business listed on the
New York Stock Exchange. Peter
served as a director throughout
2023 and stepped down from
theBoard on 31 December 2023.
External appointments
CEO of MelroseIndustries PLC
Ann Christin Andersen (57)
Non-executive director
Tim Cobbold (61)
Non-executive Director for Workforce
Engagement
2
Karin Meurk-Harvey (58)
Non-executive director
Janice Stipp (64)
Non-executive director
N A R S
Appointed to the Board
December 2018
Skills, competencies andexperience
Ann Christin Andersen is a non-executive
director with more than 30years’
experience of the oil and gas industry.
An engineer by profession, she
hasbeen Chief Digital Officer for
TechnipFMC. She has served as
Chairand non-executive director of
anumber of companies over the past
several years. Ann Christin will be
stepping down from the Board at
theconclusion of the AGM to be
heldon 30 April 2024.
External appointments
Non-executive Deputy Chair
ofÅEnergi AS
CEO of Norwegian Energy Partners
N A R S
Appointed to the Board
December 2018
Skills, competencies andexperience
Tim has extensive experience in
leading large, complex international
listed businesses, having previously
served as the Chief Executive Officer
of Chloride Group plc, De La Rue plc
and, more recently, UBM plc. Prior to
this, Tim held senior management
positions at Smiths Group/TI Group
for 18 years. He was a non-executive
director at Drax Group plc until
September 2019.
External appointments
Non-executive Chair of TI Fluid
Systems plc
N R S
Appointed to the Board
September 2021
Skills, competencies andexperience
Karin has an international background
in engineering, technology and
telecoms spanning over 30 years,
adding commercial expertise to
Rotork’s Board, particularly in high-
growth technology/digital markets.
Between 1996 and 2013, Karin held
anumber of senior roles with Ericsson
and has also served as a non-executive
director of Korala Associates Ltd, a
privately owned ATM software business.
External appointments
Chief Commercial Officer
ofSmartDCCLtd
N A R
Appointed to the Board
December 2020
Skills, competencies andexperience
Janice brings relevant sectoral and
financial expertise to the Rotork
Board, together with a global
perspective, particularly Asia.
Janicewas formerly Senior Vice
President and Chief Financial Officer
of Rogers Corporation, a US speciality
engineered materials technology and
manufacturing company. Prior to this,
Janice held senior financial positions
invarious international manufacturing
and engineering companies.
External appointments
Non-executive director and
AuditChair of Diploma PLC
Non-executive director
ofArcBestCorporation
1 Until 31 December 2023.
2 Senior Independent Director (from 1 January 2024).
Board of directors continued
Strategic report Corporate governance Financial statements
Rotork Annual Report 2023 rotork.com104
Our governance framework
Chair
Responsible for the leadership of the Board and for
ensuring that it operates effectively through productive
debate and challenge.
Chief Executive Officer
Responsible for the day-to-day running of the Group’s
business and performance and the development and
implementation ofstrategy.
Board committees
Responsible for overseeing and making recommendations
to the Board on theirrespective specialist areas as set
outbelow.
The Board
Accountable to shareholders for the long-term sustainable success of the Group. This is achieved through setting the strategy and priorities and overseeing their delivery in a way that enables
sustainable long-term growth, whilst maintaining a balanced approach to risk within a framework of effective controls and taking into account the interests of a diverse range of stakeholders.
Audit Committee
Janice Stipp
Chair
To assist the Board with the discharge of
its responsibilities in relation to financial
reporting, including reviewing the Group’s
annual and half-year financial statements
and accounting policies, internal and
external audits and controls.
Read more P.121
Nomination Committee
Dorothy Thompson
Chair
To keep under review the composition,
structure and size of, and succession to,
the Board and its Committees. To oversee
succession planning for senior executives
and the Board, leading the process for
allBoard appointments. To evaluate the
balance of skills, knowledge, experience
and diversity on the Board.
Read more P.126
Remuneration Committee
Tim Cobbold
Chair
To recommend the Group’s policy on
executive remuneration, determining
thelevels of remuneration for executive
directors, the Chair and the Rotork
Management Board. To oversee
remuneration and workforce policies and
take these into account when setting the
policy for directors’ remuneration.
Read more P.129
Safety and Sustainability Committee
(formerly, the Environmental, Social
and Governance Committee)
Ann Christin Andersen
Chair
To oversee the implementation of Rotork’s
safety and sustainability strategies in line
with its purpose of keeping the world
flowing for future generations.
Read more P.118
* In addition, the Disclosure Committee of the Board oversees the disclosure of market sensitive information and other public announcements.
Rotork Management Board
Led by the Chief Executive Officer, the Rotork Management Board comprises the Company’s senior leadership team below Board
level and facilitates the execution of the strategy through running the day-to-day operational management of the business.
Corporate governance report
Strategic report Corporate governance Financial statements
rotork.com Rotork Annual Report 2023105
Focus on culture
The Board recognises the importance of a
healthy culture which guides responsible
decisions and actions. The Board is responsible
for defining and setting Rotork’s culture from
the top and leading by example. Our purpose,
values and behaviours are embedded across
thebusiness and underpin our business model.
They are fundamental to the way we work with
our employees, customers, suppliers and other
stakeholders and guide the way we engage with
the wider community and environment so as
toencourage employees to make a positive
difference for stakeholders.
Our purpose
Keeping the world flowing for future
generations, through providing innovative,
high-quality, engineered solutions and services
for our customers, helps guide our culture
alongside our three values.
How the Board monitors culture Cultural indicators
Health and safety: we have a zero-harm vision which
applies to our broader agenda of health and safety,
environment and product safety.
• 0.08 lost time injury rate for 2023
(2022: 0.13)
• 0.26 total recordable injury rate for 2023
(2022: 0.53)
Direct employee engagement: Tim Cobbold, as our
designated Non-executive Director for Workforce
Engagement, brings the employee voice into the
boardroom through sharing updates on his engagement
with employees. This is supplemented by Rotork site
visits conducted by other non-executive directors
during the year.
• 5 non-executive director in-person
sitevisits
Employee pulse surveys: these are conducted
anonymously during the year with results reviewed
bythe Board. Whilst some have a specific theme,
certain questions recur regularly to track progress.
These help identify the key areas where employees
feelthat enhancements can bemade.
• 79% employee survey participation rate
(2022: 75%)
The annual review of Rotork’s people, culture and
social strategies: covering such areas as progress on
diversity and inclusion, leadership and engagement,
employee mental health and wellbeing, community
engagement and support to external charities.
• 7.4 employee rating of Rotork as a
place to work in July 2023 (an increase
of 2.7% from December 2022)
Compliance with policies and procedures: with the
assistance of its Committees, the Board oversees
theeffectiveness of a number of its policies, e.g.
theCode of Conduct, Anti-Bribery and Corruption,
Modern Slavery and Supplier Code of Conduct.
• Employees must undertake mandatory
Code of Conduct and Speak Up training
with training completion rates tracked
and sign annual confirmations
ofcompliance
‘Speak Up’ whistleblowing helpline: enables
anonymous reporting of improper behaviour
tobeinvestigated and appropriate action taken
wherenecessary.
• The number of reports made through
the whistleblowing hotline and the
outcomes of investigations are
monitored and reported to the Board
Diversity and inclusion: the Nomination Committee
reviews annually the Company’s policy on diversity
andinclusion, its objectives and linkage to Company
strategy, how it has been implemented and the
progress on achieving the objectives.
• 50% Board gender diversity
• 25% Board ethnic diversity
• 64% Early careers diversity
• 3% mean gender pay gap in favour
offemales
We ensure our people, policies and systems are aligned to our values which were selected by our
people and are important in creating a culture that we can be proud of. These are aimed at engaging
and motivating colleagues and protecting their rights. We strive to provide fair and equitable
treatment, as well as opportunities to grow, learn and progress.
Our values
Stronger together
We put people first, we collaborate, inspire
and support each other to wintogether.
Always innovating
We’re committed to continuous
improvement, thinking differently
andimproving for the future.
Trusted partner
We’re a responsible business, proud ofour
customer focus.
We put quality and service at our heart.
Our Code of Conduct, which applies to all
permanent employees, temporary workers
andcontractors, sets out the principles that
underpin and guide the way we conduct
business. A high-level summary of our Code
isset out on pages49 and 50.
The Board aims to ensure that our values are
integrated into decision making and that policies
and procedures, such as the Code of Conduct
and our Anti-Bribery and Corruption Policy,
maintain these expected behaviours. Where
thisis not the case, the Board and management
team take appropriate action. This is achieved
through updates to the Board on, for example,
compliance matters and reports received through
our ‘Speak Up’ whistleblowing helpline. The
regular employee pulse surveys also help
evaluate the implementation of our values
andculture.
The Board is satisfied that the Company’s
purpose, values, strategy and culture are aligned
and promote the long-term success of the
Company, generating and protecting value
toshareholders and other stakeholders.
Corporate governance report continued
Strategic report Corporate governance Financial statements
Rotork Annual Report 2023 rotork.com106
Board leadership
The Board is responsible for determining the
Company’s strategy, purpose, culture and values,
reflecting in particular the generation of
long-term value for shareholders and Rotork’s
role in a sustainable future. It oversees the
execution of its strategy by management and the
governance and control framework underpinning
the Company. The Board is assisted by four
principal Committees (Audit, Nomination,
Remuneration, and Safety and Sustainability),
each of which is responsible for reviewing and
dealing with matters within its terms of reference.
The activities and decisions made at the
Committee meetings are reported to the
subsequent Board meeting.
This year’s strategy meeting held in June at
oursite in Leeds explored further the effective
implementation of Rotork’s Growth+ strategy
which was launched in November 2022. More
details on strategy and Rotork’s business model
are covered on pages 17 to 25 and pages 4 and
5 of the Strategic Report. The Board is confident
that the necessary resources are in place for the
business to meet its strategic objectives.
The Board is also responsible for the review and
oversight of the effective management of risk,
whilst delegating oversight of the controls
framework to the Audit Committee. The Board
rigorously challenges strategy, performance,
responsibility and accountability to ensure
thatdecisions are made effectively and in
thelong-term interests of the business.
In its duty to promote the long-term success of
Rotork, the Board recognises that its responsibilities
extend not only to the creation of value for its
shareholders but also to the Company’s wider
stakeholders, including employees, customers,
suppliers, the governments and communities
inwhich it operates and the environment. In so
doing, the Board has also sought to understand the
views of these other key stakeholders. Pages110
to 112 describe how their interests have been
considered at Board-level discussions.
Division of responsibilities
All the non-executive directors have the
appropriate skills, experience in their respective
disciplines and characteristics to bring
independence and objective judgement to
Boarddiscussions. As well as chairing the
Boardmeetings, Dorothy Thompson chairs
theNomination Committee. Asthe Senior
Independent Director throughout 2023, Peter
Dilnot provided a sounding board for the Chair
in addition to acting as an intermediary for other
directors and shareholders, a role now held
byTim Cobbold. In December 2023, the
non-executive directors met, without the Chair
present, to appraise the Chair’s performance.
Janice Stipp chairs the Audit Committee, which
meets three times a year. Ann Christin Andersen
chairs the Safety and Sustainability Committee
(formerly the Environmental, Social and Governance
Committee). Tim Cobbold chairs the Remuneration
Committee as well as being the designated
non-executive director responsible for supporting
increased engagement with the workforce and
for bringing the voice of the workforce into
theboardroom. Details of the work he has
undertaken in fulfilment of this role can be
found on pages 113 and 114. As mentioned
above, Tim Cobbold took over as SID on
1January 2024.
Private meetings of the non-executive directors
are held at each Board meeting and each year
the Chair, together with the non-executive
directors, meet outside of the formal meeting
structure, and without the executive directors
present, to scrutinise and hold to account the
performance of management and individual
executive directors.
The roles of the Chair, Chief Executive Officer,
Senior Independent Director, Group Finance
Director as well as the members of the Rotork
Management Board are set out in the table
onpage 104.
Responsibilities of the Board
Non-executive Chair
Dorothy Thompson
Leading the Board and setting its agenda; setting high standards of
integrity and ensuring effective governance is maintained; supporting
and guiding the CEO; overseeing Group performance; representing
theGroup and leading relations with shareholders to understand
theirperspectives.
Chief Executive Officer
Kiet Huynh
Overall management of the Group and leadership of the Rotork Management
Board; delivering the Group strategy; leading operational management,
business development and growth opportunities; influencing and
developing succession planning and managing investor relations.
Group Finance Director
Jonathan Davis
Reports to the Board on the Group financial performance; supports the
CEO in delivering the Group strategy and in managing investor relations;
implements Board decisions and responsible for compliance with financial
policy and controls.
Senior Independent
Director (SID)
Tim Cobbold
1
Provides a sounding board for the Chair and acts as an intermediary
forother directors and shareholders; leads the annual performance
evaluation of the Chair; and ensures the orderly succession of the
Chair’srole.
Non-executive directors
Provide independent oversight, judgement and challenge to the executive
directors on delivery of the Company strategy within the agreed control
framework and governance structure and ensure balance in the Board’s
decision-making process.
As the designated Non-executive Director for Workforce Engagement,
TimCobbold provides an effective engagement mechanism for the
Boardto understand the views of the workforce; brings the views and
experiences of the workforce into the boardroom and ensures that the
views of the workforce are considered in the Board’s decision making. This
role combines well with Tim’s responsibilities as Chair of the Remuneration
Committee, providing a valuable linkage and insight between the
workforce and remuneration matters at all levels across the business.
Group General Counsel
&Company Secretary
Stuart Pain
Advises the Board on legal and corporate governance matters and
supports the Board in applying the Code, complying with UK listing
obligations and other statutory and regulatory requirements; ensures
Board members have access to the information they need.
1 Until 31 December 2023, Peter Dilnot held this office. Tim Cobbold was appointed SID from 1 January 2024.
Page title
Strategic report Corporate governance Financial statements
Corporate governance report continued
Strategic report Corporate governance Financial statements
rotork.com Rotork Annual Report 2023107
Non-executive director independence
The Chair is committed to ensuring that the
Board comprises a majority of independent
non-executive directors who objectively challenge
management on the execution of its strategy.
The Company maintains clear records of the
terms of service of the Chair and non-executive
directors to ensure they meet the requirements
of the Code. Neither the Chair nor any non-
executive director has exceeded their nine-year
recommended term of service.
The Board considers all non-executive directors,
Tim Cobbold, Ann Christin Andersen, Karin
Meurk-Harvey, Janice Stipp and new appointees
Andrew Heath and Vanessa Simms to be
independent. Dorothy Thompson, Chair, was
considered to be independent on her appointment.
Peter Dilnot was considered to beindependent
throughout his tenure.
Board effectiveness
Board meetings
The Board meets regularly during the year as well
as on an ad hoc basis, as business needs dictate.
The Board met formally six times during the year,
with video calls held in other months for updates
on key matters relating to trading and financial
performance. Meeting attendance is shown
opposite. The Chair, Chief Executive Officer and
Division of responsibilities continued
Rotork Management Board Responsibility
Keith Barnard, Managing Director, Oil & Gas
Paul Burke Chief Information Officer
Kathy Callaghan Group HR Director
Jonathan Davis Group Finance Director
Metin Gerceker Managing Director, Water & Power
Kiet Huynh Chief Executive Officer
Xin Man Managing Director, Chemical, Process & Industrial
Lyndsey Norris Business Transformation Director
Stuart Pain, Group General Counsel & Company Secretary
Ross Pascoe Chief Technology Officer
Mike Pelezo Site Services Director
The Rotork Management
Board comprises the
Company’s senior leadership
team below Board level and
facilitates the execution
ofthe strategy through
running the day-to-day
operational management
ofthe business. Members
ofthe Rotork Management
Board attend Board
meetings by invitation
toupdate the Board on
operational matters.
Board meeting attendance in 2023
Member Member since
Eligible
meetings
(max. 6) Attendance
Martin Lamb, (former Chair)
(i)
June 2014 2 2
Dorothy Thompson, Chair
(ii)
December 2022 6 6
Peter Dilnot, Senior Independent Director
September 2017 6 6
Kiet Huynh, Chief Executive Officer
January 2022 6 6
Jonathan Davis, Group Finance Director
April 2010 6 6
Ann Christin Andersen, non-executive director
(iii)
December 2018 6 5
Tim Cobbold, non-executive director
December 2018 6 6
Karin Meurk-Harvey, non-executive director
September 2021 6 6
Janice Stipp, non-executive director
December 2020 6 6
(i) Martin Lamb retired from the Board on 30 April 2023.
(ii) Dorothy Thompson was appointed Chair from 30 April 2023.
(iii) Ann Christin Andersen was unable to attend the December Board meeting due to an exceptional and unexpected family
emergency. She received the papers in advance and provided feedback to the Board Chair which was shared at the meeting.
The Board Chair then briefed her on deliberations and outcomes following the meeting.
Group General Counsel & Company Secretary
agree a structured agenda ahead ofeach Board
meeting. Board activities are structured to help the
Board achieve its goals and to provide support and
advice to the executive management team on the
delivery of strategy within a robust governance
framework. Throughout the year, theBoard has
received regular in-depth progress reports and
presentations on current trading and financial
performance and presentations from the Chief
Executive Officer, Group Finance Director and
wider executive management team, particularly
regarding implementation updates on our
Growth+ strategy, issues relating to our supply
chain, and the development of our people. Other
regular reports have included health and safety,
legal, compliance and governance updates,
investor relations activities, environmental and
sustainability issues, risk management reviews and
cyber security updates. If a director is unable to
attend a meeting due to exceptional circumstances,
he/she still receives the papers in advance of the
meeting and has the opportunity to discuss with
the relevant Chair any matters onthe agenda they
wish to raise. Feedback is provided to the absent
director on the decisions taken at the meeting.
The Chair meets privately with the Senior
Independent Director and with the non-executive
directors on a regular basis.
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Rotork Annual Report 2023 rotork.com108
Composition
The Board currently consists of seven Board
members, five of whom are non-executive
directors. As at 4 March 2024, female
representation on our Board was 57% with
ethnic diversity representation being 28%.
Following the changes to the Board and
appointment of the two non-executive directors
as mentioned elsewhere in this annual report,
from 21 June 2024, the respective percentages
will be 50% and 25%.
The Board members come from a variety of
professional backgrounds including engineering,
manufacturing and finance, and collectively
possess significant managerial experience, as
well as experience of being executive directors of
other public limited companies. A more detailed
analysis of Board composition, skills and experience
can be found on pages 101 to 103. In line with
Provision 18 of the Code, each director who
iscontinuing in service is subject to annual
re-election at the AGM.
The Board delegates certain matters to specific
Committees for more in-depth consideration,
including to the Nomination, Remuneration,
Audit, and Safety and Sustainability (formerly the
Environmental, Social and Governance Committee)
Committees. Each Committee has formal, written
terms of reference which are available to download
from the Rotork website at www.rotork.com
and which are reviewed annually. All Committees
have at least three independent non-executive
directors within their composition. The Company
also has a Disclosure Committee. The Group
General Counsel & Company Secretary acts as
secretary to the Committees. The number of
Board meetings can be found on page 107.
Thenumber of meetings held during the year of
the Audit, ESG, Nomination and Remuneration
Committees can be found on pages 118, 121,
126 and 129.
Time commitment
All directors are expected to attend all meetings
of the Board and any Committees on which they
serve. They are also expected to attend the AGM
and Board away days. Directors are also expected
to devote sufficient time to prepare for each
Board and Committee meeting.
By accepting their appointment each non-executive
director has confirmed that they are able to allocate
sufficient time to the Company to discharge their
responsibilities effectively. Inaccordance with the
Code, directors are also required to seek prior
approval of the Board before accepting additional
external appointments.
The Chair, through the Nomination Committee
under its terms of reference, monitors the time
commitment of non-executive directors with
noissues having been identified during the year.
Information and support
All non-executive directors are entitled to
unfettered access to information and management
across the Group. Rotork’s executive directors
understand the distinction between their roles
as executive managers andas Board directors.
The Board has a procedure for directors, if deemed
necessary, to take independent professional advice
at the Company’s expense in the furtherance
oftheir duties. All directors have access to the
advice of the Group General Counsel & Company
Secretary who supports the Board on legal
andcorporate governance matters, including
compliance with the Company’s Listing Rules
obligations and other regulatory or statutory
requirements. Together with the CEO and the
Group General Counsel & Company Secretary,
the Chair ensures that the Board is kept properly
informed and is consulted on all issues reserved
for it. Board papers and other information are
distributed in a timely fashion to allow directors
to be properly briefed in advance of meetings.
In accordance with the Company’s Articles of
Association, directors, as well as the Group
General Counsel & Company Secretary, have
been granted an indemnity by the Company
tothe extent permitted by law in respect of
liabilities incurred as a result of their office.
Theindemnity would not provide any coverage
where they are proved to have acted fraudulently
or dishonestly. The Company has also arranged
appropriate insurance cover in respect of legal
action against its directors and officers.
Induction and ongoing
professionaldevelopment
Following appointment, each director receives a
comprehensive and formal induction to familiarise
them with their duties and Rotork’s business
operations and risk and governance arrangements.
As new directors they need to quickly absorb a
great deal about the business if they are to fulfil
their roles effectively from the start. Our tailored
inductions offer a swift and thorough way to
help them understand our business, markets,
culture and relationships and to establish a link
with our workforce. Through these interactions,
they are able to gain an insight into the Rotork
culture and values. In order to facilitate continued
awareness and understanding of Rotork’s business
and the environment in which it operates,
directors aregiven regular updates on changes
and developments in the business. Over the
course of the year, directors will continually
update and refresh their skills and knowledge
and seek independent professional advice
whenrequired.
Conflicts of interest
Procedures are in place to identify and manage
declared actual and potential conflicts of interest
which directors (or their connected persons)
mayhave and are obliged to avoid under their
statutory duties and the Company’s Articles of
Association. The Board considers each director’s
situation and decides whether to approve any
conflicts based on the overriding principle that
adirector must at all times be able to consider
and exercise independent judgement to promote
the success of the Company. This procedure
hasoperated effectively throughout the year.
Authorisations given by the Board are reviewed
on a regular basis. No director has declared any
material conflicts of interests.
Corporate governance report continued
Strategic report Corporate governance Financial statements
rotork.com Rotork Annual Report 2023109
Insight into the Boardroom
An insight into the breadth of matters discussed by the Board during the year, how we have considered stakeholders’ interests, and their outcomes, is set out below:
Key Board activity Stakeholder engagement and Section 172 considerations Outcomes
Strategy and
sustainability
• Regular deep dives into Growth+ strategic initiatives with
focus on target markets (e.g. LNG)
• M&A strategy
• Acquisition proposal
• Progression of sustainability strategy in line with Rotork’s
threepillars
• Opportunities to accelerate growth
• Reconstitution of the ESG Committee to the Safety and
Sustainability Committee
• Consideration of the balance of differing stakeholders’ needs and
expectations in delivering long-term sustainable value
• Review of governance and oversight of Rotork’s sustainability strategy
in the long-term interests of stakeholders, including the environment
• Reaffirmation of Growth+ strategy and effective monitoring and
oversight of its implementation
• Acquisition of Hanbay, Inc
• Continued monitoring of our science-based emissions reduction targets
according to current agreed methodology
• Approval of constitution and membership of Safety and Sustainability
Committee to replace ESG Committee
Financial
• Regular financial performance updates
• Full-year, half-year and trading updates
• 2024 budget
• Cash flow, liquidity, going concern and long-term viability
• External audit tender
• Use of cash/capital allocation
• Final salary pension scheme
• Investor engagement around full-year, half-year and trading
updates,given interest in good governance to protect the long-term
interests ofall stakeholders
• Consideration of employees’ interests
• Continued active dialogue and relationship building with investors
andinvestment community
• Publication of Annual Report and Accounts
• Progressive final and interim dividends
• Publication of tax strategy
• KPMG LLP appointed as new external auditor recommendation
for2024AGM
• Reaffirmation of capital allocation policy and funding position
• Approval of additional contributions to scheme over limited period
Operational
• Health and safety
• Divisional and functional reviews
• Supply chain and geopolitical risk assessment
• ERP platform rollout update
• Capital expenditure and investment
• New product development
• Consideration of stakeholders’ interests in the drive to improve
efficiency and ultimately deliver an enhanced customer experience
inasafety-conscious environment of ‘zero harm’
• Consideration of geopolitical risks that impact the supply chain
toprotect stakeholders’ long-term interests
• Effective Board oversight of operations and execution of Growth+
strategy with feedback to management
• Approval of the continued deployment of the ERP across the Group
onaphased basis
• Approval of action plan to de-risk geopolitical exposure to supply chain
People and
organisational
• People and culture update
• Employee pulse surveys
• Succession planning
• Board Diversity Policy update
• Gender pay gap
• Employee voice in the boardroom
• Renewal of Sharesave Scheme
• Employee engagement by management and taking account of
theconcerns and views expressed by our colleagues
• Engagement with employees by Tim Cobbold and other
non-executivedirectors
• In setting the tone from the top, the consideration of employees’
interests and understanding the value of having a diverse workforce
• Board endorsement of people strategy with continued investment
inlearning, career development, and leadership development
• Rollout of enhanced leadership development programme
• Gender and Ethnicity Pay review
• Continued support for employee share ownership
Risk, governance,
legal, compliance
and investor
relations
• Full and half-year risk reviews, including principal and
emerging risks and insurance renewal strategy
• AGM matters, including new Remuneration Policy and
director re-elections
• ‘Speak Up’ reports
• Legal, Ethics and Compliance functional review
• Modern Slavery Statement
• External Board evaluation
• Annual review of Committee’s terms of reference and
Matters Reserved for the Board
• Investor Relations updates and functional review
• Review of status of key risks to the business and mitigating actions
taken to protect stakeholders’ long-term interests
• Assessment of resolutions to be put to the AGM in the interests
oftheCompany and its shareholders; Remuneration Committee
Chairengagement with investors and voting bodies on
remunerationarrangements
• Consideration of stakeholders’ interests in objective to support
Growth+ strategy and mitigate contractual risk where possible
• Consideration of employees’ interests within the business and
withinthe supply chain relating to preventing modern slavery
• Consideration of best practice governance procedures to protect
long-term interests of all stakeholders
• Direct engagement with shareholders to consider their views
• Oversight of tolerance range for all risks,approval of the principal and
emerging risks and risk appetite for inclusion in the 2023 Annual Report
and approval of terms of Group insurance renewal for 2024/25
• All AGM resolutions approved in the range of 92.10% to 99.99%
• Board oversight of functional support to the business operations
• Approval of annual Modern Slavery Statement
• Approval of external Board evaluation process and provider for 2023
with findings presented to the Board
• Approval of updated Committee terms of reference for publication
onwebsite
• Continued active dialogue with our shareholders and
investmentcommunity
Corporate governance report continued
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Rotork Annual Report 2023 rotork.com110
Corporate governance report continued
Strategic report Corporate governance Financial statements
Section 172 statement
Engaging with our stakeholders
We engage proactively with all our key stakeholder groups in the
knowledge that our long-term success is dependent on how we
work with all our stakeholders. Our policy is to understand our
stakeholder views, and to deal with issues with integrity when
they arise. Like any business, we sometimes have to take decisions
that adversely affect one or more of these groups and, in such
cases, we always look to ensure that those impacted are
treatedfairly.
The following pages describe our engagement with stakeholders
and form part of our Section 172(1) Statement, set out on page 9
of the Strategic Report. Further details of how the Board considers
stakeholders’ interests when making its decisions are also given
on page 109.
We serve customers in the oil and gas, water and power,
andchemical, process and industrial sectors in more than
170countries around the world. Our customers rely on Rotork
for innovative, cutting-edge solutions and dedicated lifecycle
service and support. We invested £13.9m in research and
development in 2023.
How we engage
We aim to be a ‘Trusted Partner’ to our customers.
Rotork has a long-established tradition of innovation
and of tackling challenging engineering problems.
Ourglobal supply chain programme aims to improve
our delivery and leads 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.
As part of our Growth+ strategy, we have focused on
further aligning our business with our customers’ needs
and delivering value to them. Customer engagement,
satisfaction and projects to improve the customer
experience are key topics in Board discussions.
Outcomes
• We launched 4 new products in 2023, many of
which are helping customers meet their energy
andemissions reduction challenges and reduce
operating costs through leveraging the latest
controlsystems.
• Our CEO, Kiet Huynh, met with key customers on
avisit to the UAE and discussed how we are making
Rotork easier to do business with.
• Launched key business transformation projects
todeliver customer value through digitally driven
processes, systems and customer journeys.
• Made progress on reducing lead times across our
assembly sites and in some cases we have reduced
lead times from 18 weeks to two weeks.
• Trained and up-skilled over 460 of our customer
service specialists worldwide using our new learning
management system.
Priorities for 2024
We are focused on delivering our pipeline of innovative
new products, leading with those offering high efficiency
and which are aligned to the electrification trend.
Weare also working to apply greater focus to
customervalue.
Customers
• s.172(1)(c) The need to foster the Company’s business relationships with suppliers,
customersand others
rotork.com Rotork Annual Report 2023111
The Board takes into consideration the interests of the Company’s
employees when making decisions and understands the value
of having a diverse workforce. We have around 3,300 employees,
working in 66 offices and 17 manufacturing facilities across the
world. Our employees expect safe working conditions, fair pay
and terms and conditions, equality and fairness in the workplace
and engagement on important issues for the Company.
How we engage
We communicate with our employees using a variety
ofchannels that promote open discussion and feedback.
These include our ‘Pulse’ Surveys, employee forums,
town halls, team meetings, Konnect, our company
intranet, the use of online collaboration tools and our
working@rotork email channel. The Chief Executive
Officer’s regular Board reports include updates on
employee engagement and views of the wider
workforce. Our designated non-executive director
foremployee engagement, Tim Cobbold, alsobrings
the employee’s voice into the boardroom, including
through direct suggestions received via email.
TimCobbold’s report on employee engagement in
2023 is on pages 113 and 114. Both Tim Cobbold
andKiet Huynh participate in induction sessions
fornew starters.
Outcomes
• We increased our ‘Fair Pay’ commitment in 2021
such that we will now pay more than the living
wagepublished in a country. Rotork continues to
beaccredited as a Living Wage Employer by the
Living Wage Foundation.
• We published our third UK ethnicity pay review
inearly 2023, now providing three years’ data
forcomparison.
• We improved our employee engagement in 2023.
Ourengagement survey asks employees to rate Rotork
as a place to work between 1-10, where 10 is good.
The engagement score increased to 7.4 in 2023,
from7.2 in December 2022 and 6.7 in June 2022.
• We continued our support of World Mental Health
Day and signed the Global Mental Health pledge –
our commitment to taking positive action on workplace
mental health in every location across our company.
We also participate in International Wellbeing Week
and we have at least one trained Mental Health First
Aider per site. We currently have 98 Mental Health
First Aiders globally.
• Ann Christin Andersen, as Chair of the ESG
Committee, joined a group of Mental Health First
Aiders in a session to discuss mental health at Rotork.
• Non-executive directors engaged with employees
atvarious sites across the Group, including Leeds,
Lucca, Rochester and Montreal.
Priorities for 2024
We will continue to ensure that all our colleagues
arewell-informed of our Growth+ strategy, and their
role inhelping to deliver it, via regular communications
from the CEO and leadership team. Our pulse surveys
measure engagement and seek to understand any
issues, with robust action plans to follow-up where
necessary. Wecelebrate key events such as International
Women’s Day, World Wellbeing Week, and Women in
Engineering. We’ll also promote diversity and inclusion
and plan to introduce family-friendly policies on wellbeing
and mental health.
The Board understands that acting fairly in the interests
ofallshareholders ensures good governance and increases
investor confidence. Our shareholders expect us to deliver
sustainable value and we have a strong track record of
creatingshareholder value with our dividend payments.
Wepaid£58.8m in dividends in 2023.
How we engage
We actively engage with our shareholders, advisers
andthe investment community, as well as our employee
shareholders. All shareholders, whether theyare
individual or institutional, are treated fairly and have
equal access to information. Our Chair, Chief Executive
Officer, Group Finance Director and our Investor
Relations Director regularly communicate with existing
and potential shareholders. During the year, they
engaged with shareholders representing over half of
our issued share capital. In 2023, they attended over
100 meetings with over 150 separate institutions. The
views expressed by investors are shared with the Board
at Board meetings and with the relevant Committees,
enabling the Board to take these views into account
inits wider decision making. The Board understands
shareholders’ need for return on investment and
approved progressive interim and final dividends
basedon the Company’s profits.
As part of Dorothy Thompson’s induction as Chair,
shemet with some of our shareholders to understand
their views on Rotork and their key areas of importance.
Our2023 AGM was held In Bath, UK. The AGM provided
an opportunity for the Board to interact with shareholders
and to answer any questions they may have. All resolutions
were approved by the shareholders, with votes In favour
ranging from 92.10% to 99.99%.
Our corporate website contains a variety of resources
for investors including current webcasts, presentations,
and press releases, as well as annual and interim
reports. We also offer internal communication channels
for our employee shareholders. Our share register
Information can be found on page 206 of this report.
Outcomes
• In 2023, the Chief Executive Officer, Group Finance
Director and Investor Relations Director attended
(either in person or virtually) over 100 meetings
withover 150 separate institutions. The Growth+
strategy was a major discussion topic in meetings
during the year.
• The views expressed by shareholders are shared with
the full Board and with the relevant Committees,
enabling the Board to take these views into account
in its wider decision making.
• Dorothy Thompson engaged with shareholders
aspart of her Chair Induction programme.
• Our AGM gave our shareholders an opportunity
toengage with the Board.
Priorities for 2024
We will continue to offer an extensive investor
engagement programme, to include further information
on how we will achieve our net-zero commitment.
Wewill ensure that our new Chief Financial Officer’s
induction programme includes meetings with some
ofour shareholders to learn abouttheir views.
Employees
• s.172(1)(b) The interests of the Company’s employees
Shareholders
• s.172(1)(f) The need to act fairly between members of the Company
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Section 172 statement continued
Rotork Annual Report 2023 rotork.com112
Fostering the Company’s business relationships with customers
is a key consideration for the Board. Our suppliers expect fair
ordering and contracting, on-time payments and information
about our policies and procedures, including ESG standards.
How we engage
Interaction with our suppliers remains a key topic in
Board discussions especially in regions experiencing, or
at risk of, geopolitical disruption. Our global Procurement
function oversees engagement with suppliers and sets
requirements for suppliers. Rotork’s requirements cover
technical competency, performance, and commitment
to environmental, social, and governance (ESG) standards.
Key and high-risk suppliers to the Group are subject to
on-site audits, focusing on their social, environmental,
and ethical conduct and their technical and operational
capabilities. These audits form part of a broader risk
assessment, which utilises our updated Risk and
Resilience framework, revised in 2023 to include more
considerations. We remain vigilant about potential
risksrelated to modern slavery and human trafficking.
Outcomes
• We spent £364m with suppliers in 2023.
• We continued to undertake supplier audits against
the latest supplier Code of Conduct.
• We reviewed and updated our supplier risk and
resilience framework to cover a broader range of
topics and integrate with our supplier segmentation
criteria and other processes.
• We reviewed and updated our process for supply
chain compliance with sanctions legislation.
• We engaged one to one with some of our highest
carbon emitting suppliers and presented two global
supplier webinars to ensure commitments were
aligned to our science-based target GHG emissions
reduction commitments in support of Rotork’s 2045
net-zerotarget.
• We increased our engagement with suppliers likely
to have the highest ESG risk.
• Details on the progression of our modern slavery
activities areprovided in our modern slavery
statement: www.rotork.com/en/investors/modern-
slavery-statement.
Priorities for 2024
During 2024, we will continue to focus on evolving
ourglobal supply base to deliver greater resilience
andoperational efficiency. One way of achieving this
isby continuing to build data on our key suppliers and
critical sub-tier suppliers against new risks included in
our updated supplier Risk and Resilience Framework.
We will continue to increase coverage of the carbon
footprint generated from our purchased goods
andservices that are with suppliers which have
commitments to deliver their own science-based
targetsto reduce their greenhouse gas emissions.
Suppliers
• s.172(1)(c) The need to foster the Company’s business relationships with suppliers, customers
and others
• s.172(1)(e) The desirability of the Company maintaining a reputation for high standards
ofbusiness conduct
Board decisions are made with consideration of our operational
impact on the communities and environment in which we work.
We aim to make a positive contribution to communities through
the employment we provide, suppliers we work withand
contributions to charitable causes. The Board also understands
the importance of our environmental responsibility and how
wecan create a sustainable future.
How we engage
We engage positively with our local communities,
investing in job creation, using local talent and
supplychains, paying our taxes and helping to
supportand grow the communities in which we
operate. We consider social and environmental impacts
of our business decisions carefully, including potential
impacts on localcommunities. We also offer support
through charitable giving. Rotork currently has three
global charity partnerships, with Renewable World,
Pump Aidand WeForest. In addition, charity
committees atRotork sites support causes that are
important to employees locally through charitable
giving andvolunteering.
The ESG Committee (now reconstituted as the Safety
and Sustainability Committee) assists the Board in
overseeing the execution of the Company’s sustainability
strategy and monitoring its progress. The Committee
receives updates from our Head of Sustainability on
ourESG targets and programmes. We conduct periodic
materiality assessments to ensure our programmes
areaddressing the priority ESG issues (including
environmental issues). We maintain our ISO14001
environmental management system, monitor the
energy and carbon intensity of our operations and
aremaking steady progress toward our2030 scope
1and 2reduction target.
Outcomes
• We donated £147,000 in total to our three global
partner charities in 2023.
• Our CEO, Kiet Huynh, visited two projects in India
where we support a non-profit organisation serving
40,000 meals to underprivileged school children
aswell as a project where we sponsored five smart
classrooms promoting the education of 3,000
disadvantaged female students.
• In 2023, our scope 1 and 2 emissions reduced 32%
versus our 2020 baseline.
• We are incorporating sustainability requirements into
our product development process to reduce
theimpact of their use. Our products continue
tosupport the energy transition, from reducing
themethane emissions of existing infrastructure
toenabling hydrogen and lithium production.
• We paid £32.8m in taxes in 2023.
Priorities for 2024
We will continue to ensure our charitable partnerships
have a positive social impact, aligned to our purpose
and the UN Sustainable Development Goals we have
identified to support. We will also continue to support
our employees in contributing to local causes close to
their hearts. Our focus on the environment continues,
and we aim to conduct a ‘double materiality’ aligned
review of ESG priorities and deliver projects to improve
our environmental data systems.
Communities and the environment
• s.172(1)(d) The impact of the Company’s operations on the community and the environment
Section 172 statement continued
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rotork.com Rotork Annual Report 2023113
“ Hearing from employees including
their involvement, feedback and
commitment to the Growth+
strategy, and seeing the desire
from management to discuss and
improve, provides the Board with
great insights and contributions
to feed into our decision-making
processes and gives us confidence
in the future success of
thebusiness.”
Tim Cobbold
Non-executive Director for Workforce Engagement
I have been pleased to serve as the designated
Non-executive Director for Workforce Engagement
for the last five years since the role was created.
As a Board, we recognise that success as a
business relies on our culture, values and people.
The Board knows that long-term performance is
built by our teams worldwide and how we work
together to deliver value for all stakeholders.
In my role as the NED for Workforce Engagement,
I help ensure our employees’ perspectives are
represented in the Board’s decision-making
process by bringing their views and experiences
to the boardroom and ensuring that the
experiences and opinions of colleagues are
considered as Board discussions take place
andas decisions are made.
This role combines well with my responsibilities
as Chair of the Remuneration Committee.
Itprovides valuable linkage and context to
remuneration matters at all levels across the
business. It also helps the Remuneration
Committee fulfil its responsibility of oversight
ofpay and remuneration across Rotork’s
widerworkforce.
Each year we create a structured programme
ofactivities, involving as many Board members
as possible. The aim is to ensure sufficient direct
engagement between Board members, including
myself and colleagues, outside the line of
management, to create opportunities for
feedback and provide a voice for any concerns
tothe Board to deepen their understanding
ofthe employee perspective.
I am responsible for developing the programme
and reviewing progress during the year with the
Group HR Director, Head of Communications
and Chief Executive Officer. I also provide
updates to the Board.
In 2023, our approach was to increase engagement
between the Board and employeeson particular
topics relevant to the Company and employees
and direct face-to-face communication with
employees in their work environment. To take
into account the global nature of Rotork’s
workforce and the broad range of roles within
that, including shop-floor colleagues, the
framework for this year comprised three streams:
• topic-based structured meetings/engagement
with colleagues conducted online to enable
broad global participation;
• face-to-face meetings with staff in their
workenvironment to allow for more
personalinteractions; and
• a review of data including employee survey
outcomes and whistleblowing.
Topic-based workforce engagement
In May, I participated in a global workshop
todiscuss and understand employee thoughts
and perspectives on moving the diversity and
inclusion agenda forward. This was useful
insight,particularly into our Board thinking
onsuccession and talent topics.
In June, Ann Christin Andersen, Chair of
theEnvironmental, Social and Governance
Committee, supported World Environment Day,
which focused on plastics pollution, by sending
an email to all employees and providing an
update on our ESG activities, giving an example
of how our manufacturing plant in Lucca, Italy,
isreducing polystyrene usage in its packaging.
In October, Ann Christin also met with a group
of our global Mental Health First Aiders, aligning
with World Mental Health Day, to share personal
experiences and reflections and to discuss the
importance of their role and the support they
have received and require from the Company in
carrying out this role successfully. Ann Christin
was also able to announce that we had just
signed the Global Business Collaboration
forBetter Workforce Mental Health Pledge,
demonstrating our commitment to positively
impacting workplace mental health in every
location across our Company.
I continue to be available to all colleagues to
discuss a range of topics through our ‘Ask Tim’
approach, a channel established through our
Working@Rotork platform for any employees to
contact me directly with any concerns, questions
or issues.
Face-to-face employee engagement
Throughout 2023, our Board members valued
again being able to meet with employees face to
face. This year our non-executive Board members
visited five Rotork sites meeting with the local
teams, holding ‘skip-level’ meetings with
employees (without local management) and
touring facilities.
Each year the Board holds its annual strategy
session at an operational site and in 2023 this
was held at our manufacturing facility in Leeds,
UK, where Board members toured the facility
and engaged directly with employees.
In September, Dorothy Thompson and Kiet Huynh
visited Rotork Hanbay in Montreal, Canada, our
most recent acquisition, and met with the team
to learn more about its activities and contribution
to delivering Rotork’s strategy. Later that month,
Dorothy also visited our manufacturing facility in
Lucca, Italy.
Janice Stipp and Karin Meurk-Harvey visited our
Rochester facility in the USA. The visit included
leadership roundtables, a facility tour and
‘skip-level’ employee meetings.
Non-executive Director for
WorkforceEngagement
Tim Cobbold has held the role of designated
Non-executive Director for Workforce
Engagement since its inception in 2019.
Thisrole helps to ensure an effective
engagement mechanism between the
Board and employees operates so that
employees’ views are better represented,
and their interests more fully considered
atall levels of the Board’s decision making.
Workforce engagement in action
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114Rotork Annual Report 2023 rotork.com
Face-to-face employee engagement
continued
At the start of each meeting, we commit that
allcomments are completely confidential and
non-attributable and that we feedback only
themes to management and during Board
discussions. During all these visits, attention is
given to meeting colleagues from all levels and
areas, particularly those that may not always be
easily reached through other channels, such as
email, due to the nature of their work and role.
Following each meeting with employees, Board
members summarise the themes in a paper and
offer debriefs to local or senior management
toconsider insights and any resulting actions.
Overall, Board members who participated
inthese activities commented on the quality
andcommitment of our employees and the
visible improvements they are seeing across
theCompany.
Data including Employee Surveys
andWhistleblowing
Employee engagement is a crucial measure
forthe success of our organisation; receiving
direct feedback from employees is essential to
understand what is working well and where we
should focus on improving. Every year, we ask all
employees to anonymously provide their views
and measure engagement scores and feedback
across key areas.
I was pleased to see the participation rate for
thesurvey in 2023 was 79%, an increase of
4%versus the prior year. Scores also indicated
apositive trend in all areas. The rating of Rotork
asa place to work, which reflects our progress
on employee engagement and experience,
rosefrom 7.2/10 in 2022 to 7.4/10 in 2023.
While there is strong positivity about the
futuredirection of the business, some useful
feedback themes emerged. Employees want
more insight into the ongoing progress of our
Growth+ strategy. This builds on the successful
engagement we carried out in early 2023 to
introduce the strategy to our employees and
discuss what it means to them personally and
how their actions and behaviours contribute to
its delivery. We have introduced greater frequency
on demonstrating some of the tangible actions
we have taken, and the successes surrounding
those and added more communication channels
to enable this. In 2022 the cost of living was
akey topic and we supported colleagues by
bringing forward the 2023 annual salary review
for all but the most senior people, from April to
January and made additional funds available to
increase the pay of the lowest-paid colleagues
who are most affected by the cost-of-living
pressures. Feedback from this year’s survey
helped us to understand that, for many, the
cost-of-living crisis has continued to affect them,
and this feedback directly impacted our decision
to bring the 2024 annual pay review forward
from April to January also, for all but our most
senior people.
I also continue to review employee-related data
including Whistleblowing through our confidential
Speak Up line.
Looking ahead, I look forward to actively
promoting Rotork’s Board’s engagement
in2024and strengthening the meaningful
two-way communication between employees
and the Board.
Workforce engagement in action continued
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rotork.com Rotork Annual Report 2023115
Annual Board evaluation
In accordance with the Code, the Board
undertakes a formal and rigorous annual
evaluation of its own performance and that of
its Committees and Directors. The purpose of
the evaluation is to ensure key areas such as
theBoard’s composition, expertise, interaction,
management, key decision-making processes
and meeting focus and prioritisation continue
tobe assessed and developed.
2022 internal Board evaluation
The areas identified for development during the
previous year’s internal evaluation process and
the actions that we have taken during 2023
toaddress them are set out below.
Areas identified fordevelopment Actions taken in 2023
Embed the new Chair A comprehensive and tailored induction programme was
undertaken during 2023 to familiarise Dorothy Thompson with
Rotork’s business operations, people and risk and governance
arrangements, supplemented by regular meetings with members
of the Rotork Management Board during the year.
Board focus on delivery
ofstrategic initiatives under
the Growth+ strategy
The Board devoted focused time during the year in overseeing and
monitoring the execution of the Growth+ strategy through review
and discussion of the issues reported in the regular updates at
itsmeetings and through deep dives on key strategic initiatives.
Board papers Under the leadership of the Chair and with the support of the
management team, continued enhancements to the content,
presentation and delivery of Board and Committee papers were
undertaken to ensure they are concise, targeted and provide
appropriate insight to enable effective decision making.
Continued engagement with
the RMB
During the year, more opportunities and means of engagement
were created to enable the Board to engage, both formally and
informally, with the RMB.
2023 Board evaluation
As explained in last year’s annual report, in view
of the change in Chair, the decision was taken
topostpone the external Board evaluation which
was due to take place during 2022.
This year, following a tender process, the Board
engaged Better Boards Limited (‘Better Boards’)
to conduct an independent external evaluation
of the performance of the Board, its Committees
and the Chair, following the process and steps
outlined below and on the following page.
Better Boards has no other connection
withRotork.
The purpose of Better Boards’ approach was
togain insights into the hallmarks of effective
boards, together with how directors view
themselves compared to how they are perceived
by their fellow directors and other key stakeholders.
The overall outcome was an understanding of
the levers that directors can pull, individually
andcollectively, to increase their impact in the
boardroom to make the Board more effective.
The end result was an action plan that allows
the Board to focus on the most relevant and
strategic issues.
2023 Board and Committee External
Evaluation: the stages
Stage 1: Programme Design
• Meetings held between Better Boards,
the Board Chair and the Group General
Counsel & Company Secretary to discuss
and agree the programme’s objectives,
areas of particular focus, design
andapproach.
Stage 2: Individual face-to-face meetings
• Taking a forward-looking approach,
Better Boards held one-to-one meetings
with individual Board members and the
Group General Counsel & Company
Secretary to gain insights into the
Board’s effectiveness, including any
challenges and issues.
Stage 3: Online questionnaires
• Each Board member and the Group
General Counsel & Company Secretary
completed an online questionnaire.
Stage 4: Data analysis by Better Boards
• Data from the online questionnaire and
one-to-one meetings were combined to
generate an aggregated report for the
collective Board.
Stage 5: Feedback meeting
• Better Boards held meetings with the
Chair, CEO and the Group General
Counsel & Company Secretary to discuss
the aggregated Board results.
Stage 6: Board action plan
• Presentation to the Board, including a
Board strength matrix, key competencies,
priorities, culture and measures for
aligning Board vision.
Key insights
• A united Board, comprising highly accomplished
individuals representing a good mix of expertise
in valued key areas and breadth of experience,
with an open recognition of the need to
better understand how to leverage each
other’s distinctive strengths and skillsets to
become an even better performing Board.
• A Board that has successfully established a
joint vision through the launch of the Growth+
strategy programme which has been positively
received both internally and externally.
Aspart of the evolution of Growth+, the
nextstep is to focus on the continued
implementation of the strategy and to
identify further opportunities for growth.
Outcome and actions for 2024
The key areas identified by this year’s external
evaluation for increased focus and development
for the forthcoming year are set out below.
Progress against these areas will be reviewed
aspart of the 2024 internal evaluation and
reported on in next year’s annual report.
• Focus on further strengthening the quality
and value of the induction programme and
integration process for new Board members
so as to not only enable them to gain an
in-depth understanding of Rotork’s operations
and end markets, but how to get to know
each other better and leverage each other’s
strengths to shape the business for
thefuture.
• Focus on supporting the executives in
enhancing the performance culture whilst
maintaining the values and strengths which
underpin Rotork as a company.
• Continued focus on the implementation of
theGrowth+ strategy, including consideration
of additional opportunities to accelerate growth
and how to further understand the views of key
stakeholders such as customers and suppliers
within the boardroom.
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Chair’s performance evaluation
An externally facilitated review of the Chair’s
performance was undertaken by means of an
online questionnaire facilitated by Better Boards
and private meetings held between the Senior
Independent Director and both the non-
executive and executive directors. It was
concluded that Dorothy had made a strong and
impactful start in the role, with recognition
given to her having spent meaningful time in
getting to know Rotork’s operations and its
people. Feedback from the evaluation was
shared with Dorothy, which included the
priorities for 2024, with a particular focus on
ensuring the smooth transition of the Board in
the coming year. The 2024 Chair’s performance
review will be conducted internally.
Audit, risk and internal control
Whilst maintaining overall responsibility, the
Board delegates the establishment of formal and
transparent policies and procedures relating to
independence and effectiveness of internal and
external audit functions to the Audit Committee.
The Audit Committee scrutinises the integrity of
financial and narrative statements and considers
whether the assessment of Rotork’s position and
prospects are fair, balanced and understandable
and then recommends these statements to the
Board for approval.
The established risk review process produces a
‘bottom-up’ assessment of the risks facing the
Group, reflecting the views of the commercial
divisions and functional teams. These are
consolidated before a ‘top-down’ review is
performed by management and then by the
Board to ensure the corporate risks are complete
and adequately assessed.
A risk dashboard is presented to the Board on
aquarterly basis. This includes a set of key risk
indicators which provide a means of monitoring
the Group’s risk exposures, and highlights areas
where the Group exceeds, or will potentially
exceed, risk appetite. Quarterly reporting is
supplemented, as necessary, by more detailed
monthly reporting to the Board by the executive
management team on new or evolving risks, the
effectiveness of existing mitigations and plans to
further strengthen mitigations.
The Risk and Compliance team, led by the Head
of Risk and Compliance, monitors the effectiveness
of risk management across the Group. During
the year this team was bolstered with the
onboarding of a Risk and Compliance Manager
and promoting an internal candidate to Risk and
Compliance Analyst. The team is responsible for
supporting the Group to identify risks and put
inplace appropriate mitigations, promoting a
risk-aware culture, adherence to risk appetite
and reporting on the status of principal and
emerging risks periodically. The Risk and
Compliance team also operates a practice of
peer financial control reviews whereby experienced
finance professionals from across the business,
who have received training from the compliance
team, perform financial control reviews at different
entities within the Group, the results of which
are reported to the Audit Committee. PwC leads
the Group’s third line ofdefence through the
provision of an internal audit function.
The Board is satisfied that the main roles and
responsibilities of the Audit Committee, as set
out in Provisions 25 and 26 of the Code, are
included in its terms of reference. Further details
of how the roles and responsibilities of the
AuditCommittee have been discharged are
onpages121 to 125.
The Board is required to carry out a robust
assessment of the Company’s emerging and
principal risks. A summary of the assessment
undertaken by the Board and a description of
the principal risks and procedures in place to
identify and manage the emerging risks can
befound on pages 71 to 79.
How the Board operates effectively
Risk management and internal controls
The Board is responsible for Rotork’s system
ofrisk management and internal controls.
TheBoard’s annual review of the system’s
effectiveness is completed with the assistance
ofthe Audit Committee.
During 2023, the Board and Audit Committee
regularly considered matters relating to the
Group’s risk management and internal control
systems. This year areas which received
particular focus were:
• the effectiveness of internal controls;
• the finance transformation programme,
including resourcing levels across the
financefunction and the deployment
ofthenew ERP system; and
• UK Corporate Reform.
At each Audit Committee meeting during the
year, progress with various elements of the finance
transformation programme has been discussed.
The focus for each meeting has varied as needed.
The Audit Committee reviewed and agreed
management’s plan to proactively respond to
the proposed changes to UK Corporate Reform.
Throughout the year the Committee received
updates from management and the external
andinternal auditors on developments with
theGovernance Code.
Following the first ‘go-live’ of the new ERP
system at our Bath Factory in January 2023,
apost-implementation control effectiveness
review was performed by the Risk and Compliance
team supported by external specialists. The results
of the review, which were presented to the
Committee, identified several opportunities for
further enhancements to the control environment.
TheCommittee will monitor management’s
implementation of these enhancements
andtheirincorporation into the blueprint
forfuture implementations.
More broadly, the effectiveness of the risk
management and internal control systems is
regularly monitored and reviewed by the Audit
Committee. The Audit Committee has confirmed
to the Board that, notwithstanding the identified
enhancements to the new ERP control environment,
the key elements of the Group’s systems of risk
management and internal controls, which were
in place for the year under review, remained
effective and are in accordance with the Code
and the FRC Guidance on Risk Management,
Internal Control and Related Financial and
Business Reporting.
Main features of the Group’s risk
managementprocess
The Board is responsible for determining the
nature and extent of the risks it is willing to
takein achieving our strategic objectives.
The Risk Management Policy documents the
Group’s risk management processes and the
connections between those various processes
and the day-to-day operations of the Group.
Each member of the executive team who is
adesignated risk owner has responsibility
forproducing and updating detailed plans to
respond to risks in accordance with risk appetite.
Progress on response plans is reported to
theBoard as part of the risk review process.
Work on these plans will continue in 2024.
This is expressed through a number of risk
dimensions against which risk appetite is defined
and risks are monitored and reported. A risk
dashboard is presented to the Board on a
quarterly basis. It constitutes a set of key risk
indicators, which provide a means of monitoring
the Group’s risk exposures and focuses the
Board on risks where the Group exceeds, or will
potentially exceed, risk appetite. As part of the
monthly reporting process the Board receives
reports on any specific new or emerging risks
and any actions planned in mitigation.
An established divisional and functional risk review
process results in a ‘bottom-up’ assessment of
Group risks. These risks are consolidated before
the top-down evaluation is performed by
management and then reviewed by the Board.
The bottom-up assessment process includes
areview with all central functions, a focus on
risk mitigation reporting, and development
ofplans to respond to risks inaccordance
withrisk appetite.
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How the Board operates effectively
continued
Main features of the Group’s risk
managementprocess continued
Further details of the Group’s internal control
and risk management systems and the process
for identifying, evaluating and managing the
principal risks faced by the Group during 2023,
emerging risks, and the Board’s risk appetite,
arecovered on pages 68 to 79.
Main features of the Group’s internal
controlsystems
All Board members receive Audit Committee
papers and meeting minutes, which contain
theAudit Committee’s annual review of the
assessment of the effectiveness of the Group’s
risk management and internal control systems.
The Chair and executive directors attend Audit
Committee meetings with other members of the
senior leadership team presenting or attending
as necessary. In addition, a dedicated Board Risk
Review session is held each year.
Key elements of the control environment, which
form part of the review of the effectiveness of
risk management and internal control and which
enable Rotork to respond appropriately to all
types of business risks, include:
• the Rotork values and behaviours;
• the Code of Conduct supported by Group-
wide policies and procedures, including
authority levels and division of responsibilities;
• training of staff on policies and procedures
relevant to their roles;
• ongoing monitoring of business performance,
including key risk indicators;
• ongoing monitoring of internal audit and
financial control reviews;
• a formal schedule of reserved matters for the
Board, including responsibility for reviewing
Group strategy;
• a formal whistleblowing policy, with an
external whistleblowing hotline, the results
ofwhich are reported to the Board; and
• defined controls and assurance processes
over, for example, financial reporting and
health and safety procedures.
During the year, work on the finance transformation
programme continued with good progress on
the key areas being prioritised as follows:
• Development of the new ERP system
continued and ‘go-live’ at the Bath factory
was achieved in January 2023 and the
Group’s Head Office in August 2023.
Theimplementation process has also
commenced at a number of other sites.
• We embedded the new Group financial
reporting toolset which has been operational
since January 2023 reporting.
The two system changes detailed above form
the bedrock for most of the other finance
transformation changes and so have been the
key focus in 2023. Work on other aspects of
thefinance target operating model will continue
in 2024.
Remuneration
The responsibility for determining remuneration
arrangements for the Chair and executive directors,
as well as oversight over workforce remuneration,
has been delegated to the Remuneration
Committee, chaired by TimCobbold. Four
meetings of the Remuneration Committee
tookplace in 2023.
Rotork’s remuneration policies and practices are
designed to support its strategy and promote
the long-term sustainable success of the Company.
A description of the work undertaken by the
Remuneration Committee in 2023 can be found
on pages 129 to 134.
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Committee composition and meetings
During 2023, the ESG Committee comprised three
independent non-executive directors: myself as Chair,
TimCobbold and Karin Meurk-Harvey (both non-executive
directors), Kiet Huynh, CEO and Kathy Callaghan, Group HR
Director. Meetings were also attended by the Board Chair,
the Investor Relations Director and the Head of ESG &
Sustainability. The Group Finance Director also attended
byinvitation with other non-executive directors joining our
meetings when possible. The Group General Counsel &
Company Secretary acted as secretary to the Committee.
TheCommittee normally meets three times a year. Details of
the Committee members and their attendance at the meetings
held during the year are set out below. TheChair reports
tothe Board on the key issues covered ateach meeting.
Member
Member
since
Eligible
meetings
(max 3) Attendance
Ann Christin Andersen,
Committee Chair
October
2020
3 3
Tim Cobbold, October
2020
3 3
Kiet Huynh, January
2022
3 3
Kathy Callaghan October
2020
3 3
Karin Meurk-Harvey September
2021
3 3
From 1 January 2024, membership of the Safety and Sustainability comprises
three independent non-executive directors with myself as Chair, Tim Cobbold
and Karin Meurk-Harvey. The CEO, Kiet Huynh, has a standing invitation
tothe Committee with other Directors, executives and external advisors
attending the Committee as required. The Group General Counsel &Company
Secretary continues to act as secretary to the Committee. Thecurrent terms
ofreference are available on our website at https://www.rotork.com/en/
documents/publication/24904.
Environmental, Social and Governance (‘ESG’) Committee report
For the year under review, the ESG Committee
was responsible for:
• recommending the overarching ESG vision
tothe Board in order to ensure that ESG
priorities are embedded in the Group’s
strategy and, in so doing, agree the annual
plan and targets relating to ESG matters;
thisincludes agreeing appropriate ESG
performance targets as part of the executive
directors’ personal strategic objectives;
• reviewing the nature of the proposed
ESGmeasure for the 2023 LTIP from a
sustainability perspective;
• agreeing a process for determining which
ESG goals are material and significant for the
business, taking on board management’s
views on what are considered to be the most
meaningful areas of focus;
• acting as a focal point to gather and discuss
relevant insights from a variety of sources on
ESG matters before sharing with the Rotork
Management Board and the business;
• monitoring the implementation of the
sustainability strategy and measuring
progress on the annual targets (informed by,
and aligned to, the Remuneration Committee
targets and incentive arrangements);
• reviewing the Company’s performance
against its annual plan and ESG targets
including challenging performance against
the Company’s long-term ESG goals, targets
(including KPIs), initiatives and commitments;
• guiding the Company’s ESG communication
strategy and reviewing the detail of external
communications on ESG matters on behalf
ofthe Board; and
• ensuring that ESG priorities are reflected in
the Company’s culture through its Purpose,
vision, values and behaviours as well as its
Code of Conduct.
“ I am pleased to present the 2023 annual report of
Rotork’s Environmental, Social and Governance (‘ESG’)
Committee. During the year, the Committee focused on
the oversight of the operational progress towards
Rotork’s commitment to net-zero by 2045 and to reduce
scope 1 and 2 emissions by 42% by 2030. The Committee
also oversaw Rotork’s social strategy and initiatives. From
1 January 2024, the Committee has been reconstituted as
the Safety and Sustainability Committee with a refreshed
remit and membership and will have responsibility for
oversight of the implementation of Rotork’s sustainability
strategy in line with Rotork’s chosen UN Sustainability
Development Goals.”
Ann Christin Andersen
Chair of the Safety & Sustainability Committee (formerly, the ESG Committee)
Ann Christin Andersen
Chair of the Safety &
Sustainability Committee
(formerly, the ESG Committee)
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Rotork’s sustainability strategy is divided into three pillars which are each aligned with specific
UNSustainable Development Goals and specific targets. These are as follows:
Operating responsibly – our mission: to run safe, efficient and sustainable operations.
SDG Commitment
1. We will reduce our lost time injury rate each year and strive for
azero-harmworkplace
2. We will embed social, ethical and environmental considerations into our
GlobalSupplier Excellence programme
We will reduce our carbon emissions. We have intensity, interim and net-zero targets:
• Reduce emissions per £1m revenue year-on-year
• To reduce scope 1 and 2 by 42% and scope 3 by 25% by 2030
• Net-zero for scope 1 and 2 by 2035 and for scope 3 by 2045
Enabling a sustainable future – our mission: to help drive the transition to a cleaner future where
environmental resources are used responsibly.
SDG Commitment
We will enable sustainable management of water resources and greater water
efficiency for our customers
We will support customers’ energy and emissions reduction and enable them
toincorporate renewable energy into their operations
We will play our part to enable the global energy transition and support a cleaner,
more sustainable future
Making a positive social impact – our missions: to support thriving, fair and resilient communities
SDG Commitment
We will develop and deliver greater gender and ethnic diversity
We will contribute to a fairer society more broadly, including by ensuring that 100%
ofour employees are covered by the fair pay framework
Our sustainability framework
Activities of the Committee during the year
On behalf of the Board, the ESG Committee
oversaw the Company’s ESG plans, targets and
related initiatives. The Committee met three
times during the year, receiving updates from
the executive team on progress towards the
goals set for each of Rotork’s sustainability
pillars, together with the annual review of its
social strategy and initiatives across the Group.
The key areas of focus for the Committee during
the year are described below.
Net-zero roadmap
At each meeting held during the year, the
Committee reviewed progress on Rotork’s
net-zero roadmap and the operational
workstreams being undertaken across the
Group. The Committee is pleased to note that,
overall, good progress continues to be made via
the various pathways to achieve the goal, by
2030, of a 42% reduction in scope 1 and 2
emissions. During 2023, further emissions
reduction opportunities were identified by
management at specific operational locations.
As part of our wider programme of reduction
projects, these initiatives will contribute towards
the achievement of our science-based targets.
In terms of scope 3 emissions, and specifically
addressing the Purchased Goods and Services
category, the Committee reviewed and supported
the steps being taken by management to engage
with suppliers on emissions measurement.
Commenced this year and extending up to
2026,Rotork will engage with its supplier base
on emissions measurement and target setting
insupport of Rotork’s net-zero commitment.
Toaddress scope 3 emissions from the use of
sold products, a product sustainability programme
was implemented during the year whereby the
design of Rotork’s ‘Next Generation’ products
will seek to incorporate specific sustainability
requirements to reduce their operational impact.
In-flight and existing products within the
portfolio will also be reviewed against these
sustainability requirements.
In October, mindful of the need to ensure the
integrity of the climate-related disclosures, in
conjunction with the Audit Committee, the
Committee reviewed the process and methodology
for the measurement and assurance of scopes
1and 2 emissions and scope 3 emissions in
accordance with the recognised Greenhouse
GasProtocol. It was recognised that our approach
to measurement and assurance was currently
appropriate; however, over time the approach
will evolve as standards and reporting
requirements advance.
As a Committee, we endorsed the steps being
taken by the executive team, with its focus on
product development to deliver efficiency and
reduce emissions whilst recognising that our
path to net-zero is a long-term commitment.
Further details of progress achieved during the
year towards our net-zero emissions targets
canbe found within the Strategic Report on
pages30 to 63.
Linking the sustainability strategy
toremuneration
As reported last year, so as to align our
sustainability strategy with management
performance incentives, we added to the 2023
award under our Long Term Incentive Plan an
emissions reduction target as a fourth performance
condition. At its February meeting, the Committee
reviewed the proposed ESG measure for the
2023 LTIP award which aligns with Rotork’s SBTi
targets. Satisfied that the proposed measure
wasin alignment with Rotork’s sustainability
strategy, the Committee recommended it to the
Remuneration Committee for its determination
of the environmental performance condition
forthe 2023 LTIP awards.
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Rotork Annual Report 2023 rotork.com120
Activities of the Committee during
theyear continued
TCFD and CSRD Reporting
As a Committee, we are conscious of the
fast-moving developments in sustainability and
climate-related reporting. Ahead of the publication
of the 2022 Annual Report, we recognised the
good progress on TCFD reporting being made
with Rotork which, for 2022, was ahead of the
mandatory FCA reporting requirements.
With the EU’s Corporate Sustainability Reporting
Directive (CSRD) coming into effect in January
2023, replacing the Non-Financial Reporting
Directive, the Committee will explore, over
thecourse of the next year, the enhancements
required to produce Rotork’s first CSRD-aligned
report for financial year 2025. Whilst our current
environmental and social disclosures already
meet a number of CSRD requirements, alignment
with additional requirements will be needed
such as third-party assurance, an enhanced
sustainability assessment using the principle of
‘double materiality’ and additional supply chain
data disclosures. To ensure that the external
disclosure and assurance requirements of TCFD
and CSRD are being addressed by the appropriate
governing body within Rotork, the terms of
reference of the Audit Committee were updated
in 2022 in anticipation of this requirement.
2023 materiality assessment
At its April meeting, the Committee reviewed the
findings of the refreshed materiality assessment
of Rotork’s key sustainability issues and their
relative importance in terms of both risks and
opportunities. Following feedback from the
Committee, changes to the topics for 2023 were
noted and agreed. The outcome of the resulting
2023 review is set out on page 36.
Social
At the April and October meetings, the
Committee received updates on the various
social initiatives and actions across the Group.
These covered such areas as employee wellbeing
and mental health, social policies and contributions,
fair pay, fleet policy, charity support and diversity
and inclusion issues. The Committee was pleased
to note management’s commitment, through
observation of the Parker Review and membership
of the 30% Club, to a diverse andinclusive
culture and maintaining a diverse executive and
leadership composition which the executive
team will seek to improve year on year. Further
details on how Rotork drives the right culture
and behaviours are provided on pages 57 to
60.The Committee also reviewed the 2023
activities of the Rotork Benevolent Support Fund.
TheTrustees continued to help those in need,
particularly in light of the continued cost of
livingissues.
Reconstitution of the ESG Committee as the
Safety and Sustainability Committee
To enhance the Committee’s ability to focus
onthe key and evolving ESG matters, and in
recognition that the ESG Committee’s terms
ofreference covered a wide range of topics
resulting in some overlap with the Board and
certain other Committees, a review was
undertaken during the year of the Committee’s
scope and any overlaps with the Board and
otherCommittees. In October, the Board
approved, with effect from 1 January 2024,
thereconstitution of the ESG Committee into
aSafety and Sustainability Committee with
responsibility for oversight of the implementation
of Rotork’s sustainability strategy in all areas
except for workforce matters which will continue
to be the responsibility of the Board and
Nomination and Remuneration Committees.
TheSafety and Sustainability Committee now
comprises at least three members, all of whom
are required to be independent non-executive
directors. Current members are myself as Chair,
Tim Cobbold and Karin Meurk-Harvey. The CEO
has a standing invitation to the Committee with
other Rotork directors, executives and external
advisers being invited to attend the Committee
as required. The Group General Counsel &
Company Secretary continues to act as secretary
to the Committee. New terms of reference were
also approved and these are available on our
website (www.rotork.com/en/documents/
publication/2490).
Committee Performance
In accordance with good governance practice,
an external evaluation of the Committee’s
performance was undertaken by Better Boards
as part of the process outlined on page 115.
Asis usual, opportunities for greater focus
wereidentified: continuing the emphasis on the
efficiency with which Rotork meet its commitments,
targets and regulatory obligations, enhancing
oversight of ensuring the appropriate assurance
of metrics and focus on a greater level of detail
on issues relating to Safety.
Looking ahead
Since its inauguration in October 2020, the ESG
Committee has overseen the significant amount
of progress made by Rotork in driving change,
embedding its net-zero roadmap, identifying
opportunities for sustainable business growth
and implementing the external reporting
recommendations of the TCFD. I am very proud
to have played a part in this journey. I will be
stepping down from Rotork at the conclusion
ofthe 2024 AGM and therefore relinquishing
myrole as Chair. Under its new structure as
theSafety and Sustainability Committee and
under the leadership of Andrew Heath, I am
confident that Rotork will continue to build
onthe foundations set over the past few
yearsandcontinue to set the bar high in
addressing the sustainability challenges
andopportunities presented.
I would like to thank all our colleagues within
the business for their support in driving our
sustainability strategy and my fellow Board
members and Rotork management for their
contribution and commitment throughout
2023and beyond.
Ann Christin Andersen
Chair of the Safety and Sustainability Committee
(formerly, the ESG Committee)
4 March 2024
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Committee membership and meeting attendance
All Audit Committee members are independent non-executive
directors. There have been no changes to the membership
ofthe Committee during the year. Peter Dilnot stepped down
on 31 December 2023.
Member
Member
since
Eligible
meetings
(max 3) Attendance
Janice Stipp,
Committee Chair
December 2020 3 3
Peter Dilnot September 2017 3 3
Ann Christin
Andersen
1
December 2018 3 1
Tim Cobbold December 2018 3 3
1 Due to the unforeseen rescheduling of Ann Christin’s flight connections,
she was unable to attend or dial into the August Committee meeting.
Shereceived the papers in advance and provided feedback to the
Committee Chair which was shared at the meeting. The Committee
Chairthen briefed her on deliberations andoutcomes following
themeeting. AnnChristin was unable to attend the December
meetingdue to an unexpected family emergency.
Janice Stipp and Tim Cobbold hold professional accounting
qualifications and are deemed to have recent and relevant
financial experience. All Committee members have experience
of working in complex global industrial product businesses,
anumber of which share common end markets with Rotork.
The biographies and skillsets of each member of the Audit
Committee can be found on page 103.
The Audit Committee operates under formal terms of
reference which are reviewed annually and were last updated
in December 2023. A copy of the terms of reference is
available on the Rotork website at https://www.rotork.com/en/
documents/publication/4145.
Audit Committee report
Continued delivery of effective scrutiny and oversight of Rotork’s reporting processes,
risk management and internal controls in conjunction with our external auditor
Principal responsibilities
The principal responsibilities of the Audit
Committee are to review and report to the
Board on the:
• integrity of financial and
non-financialreporting;
• application of significant accounting
policiesand judgements;
• internal audit programme, its remit,
resourcing and effectiveness;
• adequacy and effectiveness of the
Group’sinternal controls and risk
management systems;
• appointment, independence and
remuneration of the external auditor; and
• effectiveness of the external audit process.
Janice Stipp
Chair of the Audit Committee
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Activities of the Committee during
theyear
Financial reporting
• Reviewed the Annual Report and Accounts
(including whether they are fair, balanced
andunderstandable and disclosures related
to TCFD), the Corporate Governance Report
and results announcements.
• Reviewed material judgements and estimates,
going concern assumptions and the viability
statement in the Annual Report and Accounts.
• Reviewed the half-year accounts including
material judgements, estimates and half-year
results announcement.
• Reviewed the external auditor’s report on the
year-end accounts and proposed full-year
external audit scope, key risks, materiality
andall matters associated with the financial
yearend.
Internal controls and risk management
• Reviewed processes and procedures for risk
management and the effectiveness of the
internal controls framework.
• Reviewed the development of the Business
Control Framework and integration of this
work with the design of the new ERP system.
• Reviewed the financial control review plan.
• Reviewed significant internal control reports,
findings and management responses.
• Discussed compliance with Group policies.
• Reviewed and approved the Group risk
management policy.
• Reviewed anti-bribery and corruption
procedures, compliance and whistleblowing
activity and the gifts and hospitality policy.
External audit
• Reviewed the external audit plan and scope
of the work and considered whether there
was any reason to provide further specific
direction to the external auditor; the Audit
Committee concluded that there was not
andaccordingly approved the plan.
• Considered and reported to the Board on the
external auditor’s independence, objectivity
and the effectiveness of the audit process.
• Reviewed the external auditor’s representation
letter and fraud risk management.
• Reviewed the external auditor’s views on the
control environment including their assessment
of the D365 general IT controls following the
go-live of the system during the year.
• Reviewed and approved non-audit services
undertaken by the external auditor and the
policy on non-audit work.
• Considered audit fees and engagement terms.
• Evaluated the effectiveness of the external
audit process.
• Led the tender process for the appointment of
the external auditor for the 2024 financial year,
resulting in a change in auditor.
Internal audit
• Reviewed and approved the internal
auditprogramme, including discussion of
reports throughout the year.
• Reviewed the maturity and effectiveness
ofinternal audit, its remit and resourcing.
• Reviewed the policy on the independence
ofthe internal auditor.
• Approved the internal audit charter.
• Discussed and monitored progress on
implementing recommended actions,
including overdue actions.
• Evaluated the effectiveness of the internal
audit process.
Other work
• Reviewed progress of the finance
transformation programme.
• Reviewed Audit Committee effectiveness
andterms of reference.
• Approved the Audit Committee’s schedule
ofwork for 2024.
I am pleased to present the report of the Audit
Committee for the year ended 31December2023.
This year the key areas of focus for the Audit
Committee, in addition to its usual schedule
ofwork, have been:
• Leading the tender of the external audit
service provider for the 2024 financial year.
• Reviewing progress of the finance
transformation programme including
theimplementation and roll-out of the new
ERPsystem and the impact of the integrated
controls to enhance the control environment
and consistency across the Group. Following
the first ‘go-live’ a post-implementation
control effectiveness review was performed
by the Risk and Compliance team supported
by external specialists. The results of the
review, as well as the results of the
assessment performed by external audit,
which were presented to the Committee,
identified several opportunities for further
enhancements to the control environment.
The Committee will monitor management’s
implementation of these enhancements and
their incorporation into the blueprint for
future implementations.
• Reviewing progress with the proposals for
UKCorporate Reform. The Audit Committee
reviewed and agreed management’s plan
toproactively respond to proposals relating
to UK Corporate Reform. Throughout the
year the Committee received updates from
management and the external and internal
auditors on the proposed developments
withthe Code.
• Reviewing and agreeing the roadmap for
assurance of ESG metrics.
Governance
The Audit Committee maintains an annual
schedule of work which is kept under review and
forms the basis of its principal meetings throughout
the year. The annual schedule is supplemented
by consideration of specific matters as and when
they arise.
The Audit Committee met three times during
theyear. Details of attendance are set out on
page 121. The Chair, Chief Executive Officer,
Group Finance Director, Group Financial Controller,
Assistant Group Financial Controller, Head of
Internal Audit, Head of Risk and Compliance and
representatives of the external auditor (including
the lead audit partner) also attend meetings
byinvitation. The Group General Counsel and
Company Secretary acts as secretary to the
Audit Committee.
As Chair of the Committee, I additionally hold
regular meetings with the Group Finance Director,
the external audit partner, the Head of Internal
Audit, Head of Risk and Compliance and other
members of the management team. These
meetings provide me with a better understanding
of key issues and identify those matters which
require meaningful discussion at Audit
Committee meetings.
During the year, the Audit Committee received
reports from management, the Risk and
Compliance team, the internal audit team and
the external auditor. Through face-to-face
discussions and detailed written reports the
Committee was ableto challenge, scrutinise and
ask questions where clarification or discussion
was required. Meetings were also held with the
external auditor and theHead of Internal Audit
withoutmanagementpresent.
Further details of the work undertaken by
theAudit Committee during 2023 is set out
onpages 123 to 125.
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rotork.com Rotork Annual Report 2023123
Financial reporting
A key role of the Audit Committee in relation to
financial reporting is to review the quality and
appropriateness of the half-year and year-end
financial statements with a particular focus on:
• accounting policies and practices;
• the clarity of disclosures and compliance with
International Financial Reporting Standards,
UK company law and the UK Corporate
Governance Code;
• material areas in which significant judgements
have been applied or where there has been
discussion with the external auditor;
• upon request of the Board, advising the
Board on whether the Annual Report
andAccounts are fair, balanced and
understandable and provide the information
necessary for shareholders to assess the
Company’s performance;
• review and challenge of the judgements
applied in the timing of revenue recognition
in line with the requirements of IFRS 15
Revenue from Contracts with Customers; and
• review of alternative performance measures
to ensure that they are not given undue
prominence, and challenging the nature
andvalue of significant adjusting items.
In order to assess the financial statements,
theCommittee receives reports from members
of the Group finance team who are invited to
attend meetings. Through face-to-face discussions
and detailed written reports the Committee
isable to understand and challenge the key
judgements and estimates and how they are
being recorded and disclosed in the
financialstatements.
The Committee also receives reports from, and
holds meetings with, the external auditor. It uses
these reports and meetings to help challenge
management’s judgement and understand
thequality and appropriateness of the
financialreporting.
The principal matters of judgement and
estimation considered by the Audit Committee
in relation to the 2023 accounts and how they
were addressed were:
Retirement benefit schemes. At 31 December 2023,
the Group operated two defined benefit
retirement plans, both of which are now closed
to future accrual. The valuations are prepared
byan independent qualified actuary. During
theyear the Group made a special contribution
to the UK scheme. This contribution, together
withsome of the existing assets, was used
topurchase a bulk annuity covering the UK
scheme’s existing pensioner liabilities which was
accounted for as a buy-in. The Audit Committee
considered the report from the Group Financial
Controller and was satisfied the assumptions
used for determining the defined benefit
obligation and the associated accounting
treatment of the buy-in were appropriate.
Thedetailed disclosures for these schemes
underIAS19 are shown in note 25 of the
financial statements and the Audit Committee
issatisfied they are complete and accurate.
Alternative performance measures. The Group
uses adjusted figures as key performance
measures in addition to those reported under
adopted IFRS, as management believes these
measures provide additional useful information
to assist in the comparison of the Group’s
underlying results with prior periods and
assessment of trends in financial performance.
The Audit Committee reviewed the presentation
of the alternative performance measures in the
financial statements and were satisfied that they
were not given undue prominence. The Audit
Committee reviewed and challenged the report
from the Group Financial Controller and was
satisfied that the nature and value of significant
adjusting items was appropriate.
Hanbay acquisition. The Group acquired, via its
holding companies 100% of the equity interest
in Hanbay Inc during the year. The Committee
reviewed and challenged the acquisition
accounting and associated disclosures and
wassatisfied that the assumptions used and
presentation wereappropriate.
External auditor
The year under review marks the tenth year
during which Deloitte LLP has been the Group’s
external auditor. The 2023 year-end audit was
the fifth year that David Griffin has acted as
Deloitte LLP’s lead audit partner for Rotork.
During the year David and the Deloitte senior
team visited some key Rotork locations and they
also continued to effectively communicate with
and supervise the broader team.
The Audit Committee assesses the effectiveness
of the external audit process, the scope of the
Group audit and the quality of the audit work
throughout the year, andthe independence
ofthe auditor. Theassessment considers:
• any issues encountered in conducting the
prior year external audit;
• the proposed external audit plan, including
identification of risks specific to Rotork;
• external audit scope and materiality thresholds;
• matters arising during the external audit
andthe communication of these to the
AuditCommittee;
• the independence and objectivity of the
external auditor including the level of
challenge provided to management; and
• the FRC audit quality review report on
selected audits undertaken by Deloitte.
Independence
• Deloitte confirmed to the Committee during
the year that:
— the audit engagement team, and others
in the firm as appropriate, Deloitte LLP,
and, where applicable, all Deloitte
network firms are independent of the
Group and their objectivity is
notcompromised.
— they have no relationships with Rotork
plc, its directors and senior management
and its affiliates, nor other services
provided to other known connected
parties, that they consider may reasonably
be thought to bear on their objectivity
and independence, together with the
related safeguards that are in place.
• The Committee ensures the policy on
non-audit services has been applied.
• The Group has not employed former
members of the audit team or Deloitte
Partners during the year.
• Following each Audit Committee meeting
theCommittee held private sessions with
theexternal auditor, thus facilitating the
ability of the external auditor to raise
anyissues of concern. The Chair of the
Committee also meets with the external
auditpartner and other senior members
ofthe audit team ahead of each Audit
Committee meeting.
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Effectiveness
• Reviewing the external audit plan, identified
risks and audit scope with Deloitte.
• Reviewing the experience and expertise
ofthe audit team.
• Reviewing written reports prepared by
Deloitte for the Committee on key audit
findings, financial reporting topics and the
control environment.
• Reviewing the nature and quality of the
external auditor’s report.
• Obtaining feedback from executive
management and the Group Finance team
onthe quality and effectiveness of the audit,
who in turn have canvassed the opinions of
various Group entities using a questionnaire
on audit quality.
• Discussing with executive management,
theGroup Finance team and Deloitte as
towhether the audit has been delivered
inline with the plan.
• Holding discussions throughout the year
directly with the Deloitte lead partner and
other senior members of the audit team to
understand the work they have performed,
their knowledge of the Group’s business and
industry, and how they have maintained
independence, demonstrated professional
scepticism and challenged management’s
assumptions. Notable examples of how the
external auditor challenged management and
demonstrated professional scepticism during
the year include the audit of adjusting items
and revenue recognition in respect of
bill-and-hold sales.
Having completed this review, the Audit
Committee agreed that the audit process,
independence and quality of the external
auditwere satisfactory.
Tender update
As reported in last year’s Annual Report, the
2023 financial year was the tenth year end since
Deloitte was appointed as external auditor, and
therefore an external audit tender process was
run during the year.
The tender process was conducted in line with
the FRC’s Audit Tenders: Notes on Best Practice
guidelines and was overseen by the
subcommittee comprising myself, Tim Cobbold
and Jonathan Davis, Group Finance Director.
The Big Four and two challenger firms were
approached to consider their participation in the
audit tender. Several firms declined to participate
due to a variety of reasons including existing
non-external audit commitments with the
Group, resource availability or expertise, and a
geographic presence which would not enable
them to deliver a global audit for the Group.
Asa result, two firms – KPMG and Deloitte –
participated in the tender.
The audit firms were assessed against the
following criteria:
• strength and experience of the lead audit
partner and supporting team;
• understanding of Rotork’s business and
Rotork’s industry;
• quality of audit approach;
• ability to build respected working
relationships;and
• value and insights.
Following the conclusion of the tender process
inApril 2023, the subcommittee decided
torecommend the appointment of KPMG.
Thesubcommittee was cognisant of its analysis
andunderstanding of the key risks faced by the
business, and its capabilities in respect of, and
understanding, of the new ERP system as well
asits use of technology to drive effectiveness
and insight.
KPMG confirmed its independence to
theCommittee from 1 July 2023 and will be
appointed as the external audit service provider
for the 2024 financial year subject to shareholder
approval at the 2024 AGM. Transition planning
isalready underway and, as is usual during
thetransition of auditors, KPMG attended key
meetings, as an observer, throughout the audit
of the 2023 results.
Statement of compliance
The Company confirms that it has complied with
terms of The Statutory Audit Services for Large
Companies Market Investigation (Mandatory
Useof Competitive Tender Processes and
AuditCommittee Responsibilities) Order 2014
(the‘Order’) throughout the year.
Non-audit services
In order to safeguard the independence and
objectivity of the external auditor, the Board
hasadopted a policy on non-audit services,
which restricts the work and fees available to
theexternal audit firm. The Audit Committee
reviews the policy annually to ensure it remains
appropriate. The policy reflects the FRC’s
RevisedEthical Standard 2019 on permitted
non-auditservices.
The policy permits the use of the external
auditor only for services identified on the list
contained in the Revised Ethical Standard. Prior
to commencing any activity the external auditor
will assess whether it meets the requirements
ofits independence checks. If those checks are
satisfied the Chair of the Audit Committee will
then have the delegated authority to approve or
reject each activity. Any work that is approved is
reported at the next Audit Committee meeting.
An analysis of fees paid to Deloitte, including
thesplit between audit and non-audit, is
included in note 9 of the financial statements.
The only non-audit services provided related to
the interim review performed on the half-year
resultsunder ISRE2410.
Internal controls, internal audit
andriskmanagement
The Audit Committee has responsibility for
reviewing and monitoring the effectiveness
ofthe Group’s control environment, risk
management and internal audit process.
As set out in the Strategic Report, the
continuous improvement and execution
ofacomprehensive and robust system of risk
management is a high priority for Rotork. During
the year internal control reviews were largely
performed in person. The methods of remote
working established during COVID-19 continued
to work effectively where in-person reviews
were either not permitted or were impractical.
The Audit Committee received reports at each
meeting on progress with the work. Plans for
2024 were reviewed by the Audit Committee in
December 2023 and progress will be monitored
in the coming year.
The Head of Risk and Compliance leads a team
that is responsible for risk management and
financial compliance reviews across the Group,
providing a distinct second line of defence. The
core team is supplemented by Rotork finance
staff from other parts of the business who have
been trained in the compliance review process.
This combined team has delivered financial
compliance reports for 24 of our global locations
during 2023 and additional review areas
including expenses and the new ERP system.
Guidance is provided by the Committee to the
Risk and Compliance team on the nature and
extent of testing to be undertaken.
In 2023, improvements were made to the
business control framework compliance
assurance process to make it a more rigorous
process that provides the Committee with
moregranular information in relation to the
performance of key controls. This change is
partof how Rotork is continually improving
itsmaturity in relation to risk management
andinternal controls.
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Internal controls, internal audit
andriskmanagement continued
The Audit Committee receives reports on
financial compliance review activity, any
significant matters arising and the management
responses. During the year, recommendations
were made for improvement to controls, which
management is charged with implementing,
none of which related to significant failings or
weaknesses. The status and effectiveness of
actions are monitored by the Head of Risk and
Compliance and regularly reported to the Audit
Committee. We are continuing to see improved
accountability in respect of improvement actions
arising from financial control reviews.
The Risk and Compliance team continues to
manage the process for sites to confirm the
operation of key financial controls. In the fourth
quarter a confirmation process was deployed to
confirm operation of key controls in advance of
the year end and to provide an update on the
earlier Business Control Framework activity.
Theresults of the assessment were shared
withmanagement and the Audit Committee.
Other means of assessing the internal control
systems include the risk assessment process, the
Audit Committee’s assessment of the effectiveness
of risk management and annual letters of assurance
from the divisional leadership team. These controls
sit alongside our system of governance, including
key Committees that monitor our processes and
controls, such as the Audit Committee and
ESGCommittee.
The Risk Management Policy documents the
Group’s risk management processes and the
connections between those various processes
and the day-to-day operations of the Group.
Each member of the executive team who is
adesignated risk owner has responsibility for
producing and updating detailed plans to respond
to risks in accordance with risk appetite. Progress
on response plans is reported to the Board as
part of the risk review process. Work on these
plans will continue in 2024.
PwC continued to provide internal audit services
throughout 2023. The function is led by an
experienced Head of Internal Audit from PwC.
Risk-based internal audit reviews have been
completed during 2023 covering the
followingareas:
• procurement and ongoing supplier monitoring;
• health and safety; and
• sanctions processes.
The Audit Committee receives updates on
internal audit activity, any significant matters
arising and the management response. The
status of actions is monitored by internal audit
and regularly reported to the Audit Committee.
In selecting risk-based internal audits for the
2024 plan, the team has focused on those risks
where reliance on mitigations is most significant
whilst ensuring a broad coverage of areas over
amulti-year cycle. The Risk and Compliance
team has determined the sites to be subject to
second-line review in 2024 based on a thorough
risk assessment using a number of criteria. The
Audit Committee reviewed and approved the
2024 programme for risk and compliance and
internal audit at its December 2023 meeting.
The Committee confirms it has carried out its
annual review of the effectiveness of the system
ofinternal control as operated throughout the
yearended 31 December 2023.
Other matters
In accordance with its terms of reference,
theAudit Committee carried out a review of
itseffectiveness including how it discharged its
responsibilities. An externally facilitated interview
process was used to reflect on progress in the
year from the previous work and the output
from this was discussed in the December 2023
meeting and recommendationsagreed.
The Audit Committee continued to monitor
progress to report in line with the recommendations
from the TCFD and received reports on the
recommendations and considered assurance
requirements over disclosures.
Throughout the year, the Audit Committee also
considered relevant accounting and corporate
governance developments, in addition to those
in relation to risk and internal controls
discussedabove.
Areas of focus for 2024
Key areas of focus for the coming year, in
addition to the usual schedule of work, are:
• to ensure an effective transition of the
external auditor;
• to review the ongoing implementation and
roll-out of the ERP system and the impact
ofthe integrated controls to enhance the
control environment and drive consistency
between locations; and
• to review the implications for Rotork of
developments in the external audit process
and regulation arising from the proposed
UKcorporate reform.
Janice Stipp
Chair of the Audit Committee
4 March 2024
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Committee composition and meetings
The Committee, under the chairship of Dorothy Thompson,
currently comprises all independent non-executive directors.
Together, they bring a diverse and complementary range of
backgrounds, personal attributes and experience to discharge
the Committee’s duties effectively. The skills and experience
of the Committee members are set out on pages 102 and 103.
The Committee met four times during the year and members’
attendance at the meetings is set out below. The Chief
Executive Officer, Group Finance Director and Group HR
Director also attend the meetings by invitation. The Group
General Counsel & Company Secretary acts as secretary to
the Committee.
Member
Member
since
Eligible
meetings
(max 4) Attendance
Dorothy Thompson
Committee Chair
December 2022 4 4
Martin Lamb (former
Committee Chairman)
June 2014 2 2
Peter Dilnot
(i)
September 2017 4 3
Ann Christin Andersen December 2018 4 4
Tim Cobbold December 2018 4 4
Karin Meurk-Harvey September 2021 4 4
Janice Stipp December 2020 4 4
(i) Peter Dilnot was unable to attend the December meeting due to the late
re-arrangement of the meeting. He received the papers in advance and
provided feedback to the Board Chair which was shared at the meeting.
The Board Chair subsequently briefed Peter on deliberations and
outcomes following the meeting with Peter attending the associated
Board meeting.
The terms of reference of the Nomination Committee
werereviewed in October 2023. A copy of the current
termsof reference are available on Rotork’s website at
https://www.rotork.com/en/documents/publication/5553.
Nomination Committee report
The Nomination Committee is responsible for:
• leading the process for Board appointments
and making recommendations for
appointments to the Board;
• ensuring plans are in place for orderly
succession to both the Board and senior
management positions and overseeing
thedevelopment of a strong and diverse
pipeline forsuccession;
• reviewing the structure, size and composition
and balance of the Board, including its
balance of skills, diversity, knowledge
andexperience;
• making recommendations to the Board on
the composition of the Board’s committees;
• assessing each year whether non-executive
directors continue to be independent; and
• reviewing the Company’s policy on diversity
and inclusion, its objectives and linkage to
strategy, how it has been implemented and
progress made on achieving the objectives.
“ The Committee facilitated effective succession planning
and the development of a diverse and effective Board
inthe year.
I am pleased to present an overview of the Nomination
Committee’s activities during the year. The principal
purpose of the Committee is to ensure that plans are
inplace for orderly succession of the Board and senior
management positions while maintaining an appropriate
balance of skills, experience, independence and diversity.
The Committee regularly reviews the structure, size and
composition of the Board and makes recommendations
tothe Board with regard to any changes.”
Dorothy Thompson, CBE
Chair of the Nomination Committee
Dorothy Thompson, CBE
Chair of the Nomination Committee
Nomination Committee report
Strategic report Corporate governance Financial statements
rotork.com Rotork Annual Report 2023127
The role of the Committee
The Committee evaluates and examines the skills
and characteristics needed to ensure the Board
and senior management have the right balance,
knowledge and attributes to operate effectively
in the execution of its business strategy and the
delivery of the long-term success of the Company
whilst ensuring that business is conducted with
the utmost integrity and in full alignment with
the Company’s culture, purpose and values. Board
and Committee composition isformulated to
ensure the appropriate range of diverse experience
and expertise. It also reviews the succession
needs of the Company and puts in place the
appropriate processes for nominating, training
and evaluating directors and senior management.
Activities of the Committee during
theyear
• Oversaw the selection process and appointment
of the incoming Chief Financial Officer.
• Led the process for the selection
andappointment of two new
non-executivedirectors.
• Reviewed the talent management process
and personal profiles development and
succession plans for Rotork’s senior leaders.
• Reviewed the latest developments in gender
and ethnicity reporting and approved Rotork’s
UK Gender and Ethnicity Pay Report 2023.
• Approved an updated Board Diversity &
Inclusion Policy and monitored performance
against targets set therein.
Succession planning
Succession planning for the Board and senior
management is continuous. During the year,
theCommittee considered the composition,
structure and size of the Board and the need to
maintain an appropriate range of skills, knowledge,
diversity, independence and experience to
ensure that, as it evolves, the Board and senior
management remain appropriately balanced and
complementary. The mix of skills and experience
of the current Board required to drive Rotork’s
long-term success is set out on page 101.
TheCommittee reviewed in the year the
succession plans and leadership development
programmes in place for RMB members and the
management tier below, including the initiatives
taken during the course of 2023 to further
enhance them. Further details on these activities
can be found on page 58.
Chief Financial Officer appointment
Jonathan Davis, who has served as Group
Finance Director since 2010, advised the Board
that he would be retiring and would step down
from the Board at the conclusion of the 2024
AGM. Overseen by the Committee, a search for
a new Chief Financial Officer was undertaken.
Having identified the desired skills and experience
sought from the new CFO, Lygon Group was
engaged to act as Rotork’s search consultants.
Lygon Group do not have any other connection
with the Company or the directors, except
where it has undertaken previous recruitment
processes for other Board positions (such as the
recent Chair appointment). They are a signatory
of the Voluntary Code of Conduct for Executive
Search firms which is a requirement of our
BoardDiversity and Inclusion Policy. Ashortlist
of candidates was compiled and, following a
comprehensive interview and referencing process,
Ben Peacock’s appointment was recommended
to the Board. The Board approved Ben’s
appointment as Chief Financial Officer to succeed
Jonathan who will continue in his current role
until Ben joins the Board as an executive director
and employee on 11 March 2024. Jonathan will
step down from the Board on 30 April 2024
butwill remain with the Company until
10September 2024 to support thetransition.
Non-executive director appointments
With both Peter Dilnot and Ann Christin
Andersen stepping down from the Board
on31December 2023 and 30 April 2024
respectively, the Committee oversaw the
selection process for two new non-executive
directors during the latter part of 2023 and
theearly part of 2024. In recognition of the
continuing need to maintain an appropriate mix
of the right skillsets and breadth of perspective
required to make balanced decisions and
maximise the opportunities for the Company’s
success, the desired skills and experience sought
in the new directors were identified and the
Committee again engaged Lygon Group to act
as Rotork’s search consultants. The Committee
considered a shortlist of potential candidates
provided by the search consultant and took
intoaccount the balance of skills, knowledge,
independence, diversity and experience,
together with an assessment of the time
commitment expected. Following the interview
process, the Committee recommended to the
Board the appointments of Andrew Heath and
Vanessa Simms asnon-executive directors to
take effect from 1April 2024 and 21 June 2024
respectively. Iam delighted to welcome them
toour Board. They both bring a wide range of
listed company expertise in leading change and
in delivering organic and non-organic growth.
Andrew’s experience of industrial businesses
throughout his career, and Vanessa’s expertise
infinance will further strengthen the diverse mix
of skills and experience on the Board. Andrew
will stand for election at the forthcoming
AGMand will become Chair of theSafety and
Sustainability Committee from 1May 2024.
Theirother public commitments were disclosed
and considered by the Committee prior to their
appointment and will be provided, following
appointment, on our website at www.rotork.com.
Global talent review
At the Committee’s December meeting, in
fulfilment of its role to oversee the Group’s global
talent review and executive succession process,
the Committee reviewed with management how
talent was identified, developed and managed
across the top leadership team and senior roles
in the organisation. Investment in leadership
training and systems continues to be made so
asto build the leadership pipeline and nurture
emerging talent, particularly in those key roles
required to take the business forward in line
with delivering Rotork’s Growth+ strategy.
Diversity and inclusion
The Board Diversity and Inclusion Policy provides
a high-level indication of the Board’s approach
to diversity and inclusion in senior management
roles which is governed in greater detail through
the Group’s policies. In April, the Committee
reviewed and approved an updated policy which
can be found at https://www.rotork.com/en/
careers/diversity-and-inclusion which sets out the
areas of activity and initiatives currently being
undertaken and practised by Rotork, including
the diversity- related Sustainable Development
Goals, reference to the FTSE Women Leaders
Review and theParker Review, alongside our
continued commitment to the aims of the 30%
Club. TheCommittee endorsed management’s
initiatives and actions for increased focus on
diversity and inclusion undertaken throughout
the business during the year noting that, as
partof the launch of the Early Years Careers
Programme, at least 50% ofparticipants are
diverse in terms of gender, ethnic and disability.
The Committee also reviewed and approved the
publication of the Gender Pay Report figures
for2023 which can be found on our website.
Rotork also publishes its ethnicity pay figures
within that document.
The Committee is aware of the new
requirementsunder the FCA’s Listing Rules
andDTRs covering new diversity and inclusion
reporting for UK listed Companies, in particular
the three specified targets: (i) at least 40% of
the Company’s board of directors be women;
(ii)at least one of the company’s senior board
positions (Chair, Chief Executive Officer, Senior
Independent Director or Chief Financial Officer)
be held by a woman; and (iii) at least one
member of the company’s board be from
aminority ethnic background. The Board is
pleased to report that Rotork met these targets
well ahead of their required effective date.
Nomination Committee report continued
Strategic report Corporate governance Financial statements
Rotork Annual Report 2023 rotork.com128
Diversity and inclusion continued
As at 31 December 2023, Dorothy Thompson
held office as Board Chair, female Board
representation was 50% and ethnic representation
on the Board was 25%. The numerical data on
the gender identity and ethnic diversity of the
Board and executive management is set out
opposite. The data has been collected through
avoluntary survey request mechanism.
As at 4 March 2024, female Board representation
was 57% with ethnicity being 28%. Following
the appointment of the two new non-executive
directors, from 21 June 2024, the respective
percentages will revert to being 50% and 25%.
External Board evaluation process
As explained in last year’s annual report, in view
of the change in Chair, the decision was taken
postpone to 2023 the external Board evaluation
which was due to take place during 2022. The
Board engaged Better Boards Limited (‘Better
Boards’) to conduct an independent external
evaluation of the performance of the Board, its
Committees and the Chair. Further details on the
full evaluation process, key insights, outcomes
and the action plan going forward can be found
on page 115.
Election and re-election of directors
Led by the Committee Chair it was concluded
that, based on an assessment of the individual
skills, relevant experience, contributions and
timecommitment of the non-executive directors
and taking into account their other offices and
interests held, all those non-executive directors
standing for election or re-election in 2024
remain independent, committed to their role
and continue to be highly effective members
ofthe Board. The Board continues to be mindful
of the number of external appointments held
bydirectors. In August 2023, the Board External
Appointments Policy was introduced. Set within
the context and expectations of the Code, it
details the Company’s approach to external
appointments for both Board and RMB members.
The emphasis is on ensuring directors have
sufficient time to meet their Rotork Board
responsibilities, including during any periods of
additional time requirements. All prospective
external appointments by non-executive or
executive directors require Board approval
following prior consultation with, and the support
of, the Chair or the Senior Independent Director.
The Board is recommending the election or
re-election to office of all continuing directors
atthe 2024 AGM. As explained elsewhere in the
Corporate Governance report, none of Peter Dilnot,
Ann Christin Andersen or Jonathan Davis will
bestanding for re-election. Ben Peacock and
Andrew Heath will be standing for election for
the first time. The biographical details of the
newly appointed directors are set out in the
AGM Notice. Details of the service agreements
for the executive directors and letters of
appointment for the non-executive directors
areset out in the Directors’ Remuneration
Report on page 140.
Nomination Committee evaluation
As part of the externally facilitated evaluation
process, the findings were discussed by the
Committee and the Board. It was concluded
thatthe Committee continued to fulfil its duties
effectively. The areas identified for further emphasis
and development by the Committee were focus
on further strengthening the quality and value
ofthe induction programme and integration
process for new Board members and greater
focus on succession planning at RMB level.
Dorothy Thompson, CBE
Chair of the Nomination Committee
4 March 2024
Board and executive management diversity as at 31 December 2023
Gender identity or sex
Number of
Board members
Percentage of
theBoard
Number of senior
positions on the
Board (CEO, CFO,
SID and Chair)
Number in
executive
management
Percentage of
executive
management
Men 4 50% 3 9 81.8%
Women 4 50% 1 2 18.2%
Ethnic background
Number of
Board members
Percentage of the
Board
Number of senior
positions on the
Board (CEO, CFO,
SID and Chair)
Number in
executive
management
Percentage of
executive
management
White British or
other White
(including minority-
white groups)
6 75% 3 9 81.8%
Asian/Asian British 2 25% 1 2 18.2%
Gender identity or sex
Gender identity or sex
Men: 50%
Women: 50%
Men: 81.8%
Women:18.2%
Ethnic background
Ethnic background
Asian/Asian
British: 25%
White British
orother White
(including
minority-white
groups): 75%
Asian/Asian
British: 18.2%
White British
orother White
(including
minority-white
groups): 81.8%
Board
Executive Committee (Rotork Management Board)
Nomination Committee report continued
Strategic report Corporate governance Financial statements
The Remuneration Committee is responsible for:
• determining individual remuneration packages for the
executive directors, the Chair and, on the advice of the
Chief Executive Officer, the Rotork Management Board
within the approved policy;
• selecting the measures and setting the performance
criteria for the annual bonus and LTIP and, at the end of
their performance periods, evaluating performance against
these criteria and considering whether any discretion
should be applied in determining the level of payment;
• agreeing the terms and conditions to be included in
service agreements for executive directors, including
termination payments;
• selecting, appointing and setting terms of engagement
with any remuneration consultants who may advise the
Remuneration Committee;
• monitoring the principles and structures of remuneration
across the Group and ensuring there is consistency and
there are procedures in place to monitor fairness of
application. In this regard, the Remuneration Committee
reviews internal relativities, pay ratios and gender and
ethnicity pay gaps, and invites the Group HR Director to
itsmeetings to provide a broader picture of workforce
remuneration across the Group;
• taking into account guidance issued by shareholders, their
representative bodies and proxy agencies (including the
Investment Association, Institutional Shareholder Services
and Glass Lewis); and
• taking into consideration any views expressed by
shareholders during the year (including at the AGM)
andencouraging an open dialogue with its largest
shareholders. Major shareholders are consulted in advance
about changes to the policy or any significant proposed
changes to the way in which it is implemented.
Directors’ Remuneration report
Rotork’s key remuneration principles
The Remuneration Committee is committed
towards remuneration being:
• performance driven, competitive and fair;
• motivating, affordable and proportionate;
• aligned to shareholders’ interests; and
• globally relevant and transparent.
Tim Cobbold
Chair of the Remuneration Committee
“ I am pleased to present the 2023 Directors Remuneration
report on the first year under our new approved policy
which received 98% support at the 2023 AGM. Our policy
continues to align the interests of Rotork, its shareholders
and our other stakeholders and focuses executive directors
on delivery of the Company’s strategic objectives.”
Tim Cobbold
Chair of the Remuneration Committee
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Directors’ Remuneration report
Strategic report Corporate governance Financial statements
Annual statement by the Chair of the Remuneration Committee
Dear Shareholder
I am pleased to present the Remuneration
Committee’s report for the financial year ended
31 December 2023. The business has continued
to build on the performance of recent years,
despite operating in challenging trading and
wider economic conditions. During the year,
decisions on directors’ and senior managers’
compensation were taken having regard to wider
workforce considerations, especially in light of
the continuing cost of living crisis. During 2023,
the business continued the implementation of
the Growth+ strategy launched by Kiet and his
team in November 2022 and which is already
delivering value for shareholders. At the AGM
held on 28 April 2023, following a period of
engagement with shareholders, we were pleased
to receive strong support for the new Remuneration
Policy which will remain in force until April 2026.
Both the Committee and I firmly believe in the
value of consulting with shareholders and I am
grateful to all those shareholders who participated
in the process, which resulted in a Remuneration
Policy which supports the strategic goals of the
business and aligns with market practice.
Other priorities and key activities for the
Committee in 2023 included:
• The Committee reviewed and approved both
the remuneration package of Ben Peacock,
the incoming Chief Financial Officer, and the
terms of Jonathan Davis’s retirement as the
outgoing Group Finance Director.
• In February, following extensive consultation
with shareholders and in order to strengthen
the alignment of long-term incentives to the
new Growth+ strategy with its focus on
sustainability, we agreed the introduction
ofan environmental measure within the
LTIP,accounting for 10% of the maximum
opportunity, with a corresponding reduction
in the proportion applied to the existing
measures, all three of which were retained
and remained equally weighted. The measure
is an absolute reduction in scope 1 and 2 CO
2
emissions (2020 base year) with targets aligned
to the accredited, published 2030 Science
Based Targets initiative (‘SBTi’) targets. The LTIP
targets, which are set out on page 147 are at
least as demanding as the path required to
meet the SBTi target in 2030. The performance
required at threshold, target and maximum
has been set and approved by both the ESG
and Remuneration Committees. Other than
the adjustment in weightings from 33% to
30% each to accommodate the addition of
theESG measure and the alignment of the
threshold payout level for the EPS measure
with that used for the other measures, there
were no changes to the operation of the
existing measures. These performance
conditions were included for the 2023 LTIP
award which was granted on 24 March 2023
and is due to vest in March 2026.
• The Committee, conscious that this was the
first time emissions data had been used for
an LTIP measure, was concerned to ensure
that there was consistency in the calculation
of emissions data and that an adequate
assurance process would be in place at the
time of evaluating vesting outcomes in 2026.
Therefore in conjunction with the ESG and
Audit Committees, a detailed review of the
measurement and assurance processes
adopted by management was undertaken.
The Committee was satisfied that the current
calculation methodology and level of assurance
was not inappropriate, but it recognised that
this is a developing area where established
protocols and standards are subject to
interpretation and change. TheCommittee
will, together with the other relevant
Committees, keep this under review but
issupportive of the intended approach.
• As part of its ongoing responsibility to make
decisions about the remuneration of senior
management, including executive directors in
the context of the pay and benefits available
to the wider workforce, the Committee received
an update from management on the findings
of the Global Benefits Review which had
been undertaken to clarify how people in
Rotork value the mix of benefits, pay and
bonus structures across the Group. The
Committee reviewed how Rotork balances
the need to attract and retain talent through
locally relevant pay and benefits offerings
whilst ensuring equity of benefits across
thebusiness.
The Committee’s approach to
remuneration in 2023
The Committee’s approach to remuneration in
2023 across Rotork in general and for the executive
directors and senior managers, for whom the
Committee is explicitly responsible in particular,
was guided by Rotork’s Key Remuneration
Principles. The approach was based on a sensitive
appreciation of the business’s performance and
the experience of shareholders and employees
during the year. The Committee’s specific
considerations are described below.
Business performance
In the Committee’s view, as is evident in the
Annual Report and Accounts, Rotork continued
to perform well despite the ongoing, but slowly
subsiding challenges in global supply chains.
Ona reported basis 2023 adjusted operating
profit was £164.5m, up 14.8% on 2022 with
revenues 12.0% higher. On a constant currency
basis, 2023 adjusted operating profit at £168.1m
was 17.3% higher. Adjusted operating margins
were 60bps higher. The Committee noted that
our order book at 31 December 2023 remained
high, ending at a similar level to that at the end
of 2022, demonstrating the underlying health of
the business and the good progress being made
by the Growth+ strategy.
Shareholder experience
For the majority of 2023, it has not been the
easiest year in stock markets generally, largely in
reaction to macro-economic factors, particularly
‘higher for longer’ interest rates. Rotork’s share
price proved resilient in the face of these
headwinds which were essentially out of
Rotork’s control. The share price was broadly
flatduring the year.
The Committee is aware that dividends are an
important part of the business case for many
shareholders. The full-year dividend for 2022
was paid following the 2023 AGM and an
interim dividend of 2.55p was declared and paid
in the second half of the year as usual. Looking
forward, the Board is recommending the payment
of a final dividend of 4.65p at the 2024 AGM,
such that the full dividend for 2023 of 7.2p, up
0.5p, is in line with the stated dividend policy
whilst also allowing for an improvement in
dividend cover.
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Directors’ Remuneration report continued
Strategic report Corporate governance Financial statements
Employee experience
Under the leadership of the Board and senior
management, Rotork’s approach continues
tobeto protect the health (including mental
health) and financial wellbeing of employees,
mindful ofobligations to other stakeholders.
In 2022 the Committee, aware of the elevated
cost inflation challenges in many countries and
the impact of this on the financial position of
employees, particularly for those at the lowest
paid levels, took a number of actions to respond
to this, including bringing forward the annual
pay review from 1 April 2023 to 1 January 2023
and making available an additional higher pay
review for our lowest-paid employees. Feedback
from employees this year confirmed that the
elevated cost inflation challenges in many
countries has remained and this context has
again been considered by the Committee within
its own decision making.
• The 2024 annual salary review, ordinarily
due1 April 2024, has been brought forward
to 1 January 2024 for all employees below
the directors and Rotork Management Board
for the second year running.
• The overall average pay increase for the
widerworkforce, excluding promotions,
was4.9% globally and 4.4% in the UK.
• Salary reviews for all directors and the Rotork
Management Board will be made in the usual
course, effective from 1 April 2024. As a
matter of policy, normally salary reviews for
executive directors will be no higher than the
average increase for the wider workforce
forthe country in which they work. However,
the Remuneration Committee retains the
discretion to award higher increases where
appropriate (for example, to reflect
progression in the role or increased
experience of the individual).
• All employees in Rotork continue to participate
in a bonus scheme with targets based on a
combination of the performance of their local
business and the performance of the Group.
Bonus awards in respect of 2023, paid in 2024,
at an average of 93.2% of maximum, are
higher than for 2022 as a result of our strong
performance in 2023.
• The business continued to support the
physical and mental health of employees
through the global Employee Assistance
Programme (EAP).
• Our charity, Rotork Benevolent Support,
maintained support for employees,
ex-employees and their families
sufferinghardship.
• Pulse engagement surveys of the workforce
continued to show growing engagement
levels at7.4/10 compared with 7.2/10 in
2022and 6.4/10 in 2021.
• In recognition of our responsibility to help
reduce inequality and to contribute to a fairer
society more broadly, Rotork committed to
aReal Living Wage Policy in 2020 and, since
then, has ensured any employee is paid above
this level where a published rate exists in a
country. Rotork is an accredited Real Living
Wage Employer.
Our Fair Pay Framework continues to guide
Rotork’s reward policies, procedures, systems
and decision making globally in support of the
commitment to deliver fair and competitive
remuneration in line with the remuneration
principles. This provides assurance that processes
are non-discriminatory and operate to help
reduce any gender or ethnicity pay gaps. All new
employees are made aware of the Framework in
their global induction and all managers globally
have attended a Performance and Reward
workshop to ensure they understand the
approach and how to implement this fairly.
Overall, the Committee’s assessment of the
employee experience is that Rotork has acted
responsibly towards all employees and has
proactively supported their health (including
mental health) and their financial wellbeing
during 2023, being mindful of the continued
impact of the cost of living crisis. The Committee
also believes that Rotork has maintained a pay
culture, pay policies and frameworks that support
wider societal views through 2023.
Remuneration outcomes for 2023
Salary review
Salaries are normally reviewed on (and any changes
take effect from) 1 April in each year. In line with
the arrangements made on his appointment
(and detailed in the 2021 and 2022 Remuneration
Reports), Kiet Huynh’s salary as CEO was increased
to £616,400, an increase of 50% of the difference
between his current salary and the former CEO’s
salary plus a 5% ‘inflationary’ increase which
was below the average increase for the UK
workforce (excluding promotions) of6.34%.
The Committee was aware that this resulted
inan increase ahead of that for the wider
workforce in the UK. But, as has been explained
in previous Remuneration Reports, the Committee’s
intention was that, after appointment and
subject to performance, Kiet’s salary would be
increased, over a period of approximately two
years, to the level of his predecessor’s salary in
2021, indexed in line with increases to the other
directors, such increases being no higher than
those awarded to the wider workforce.
Jonathan Davis’s salary as Group Finance
Director increased by 5% to £390,100.
TheChair’s fee was also increased by 5%
withthe Board also determining that the
non-executive director base fee should also
increase by 5%. There were no increases in
thesupplementary fees payable to those
directors with additional responsibilities.
Annual bonus
The annual bonus targets for 2023 were based
on: adjusted operating profit performance
(60%of opportunity); cash generation
(15%ofopportunity); ESG measures (10%
ofopportunity) including lost time injury rate,
together with a mix of quantitative targets
covering culture and engagement scores and
qualitative targets focused on environmental
innovation; and individual personal objectives
(15% of opportunity). For full details, see pages
144 to 145.
Having reviewed performance against these
targets, including the personal objectives set
atthe start of the year, the Committee decided
that the level of payout, expressed in percentage
of maximum opportunity, should be 97.5% for
Kiet Huynh and 97.0% for Jonathan Davis with
no need for discretion to be applied. In
approving this level of payout for the executive
directors, the Committee noted that at this level:
• the 2023 pay out results in an award, as
apercentage of maximum opportunity,
between 51 and 53 percentage points higher
than in 2022 on an adjusted operating profit
increase of 17.3% on a constant currency
basis; and
• the payout results in an award for the
CEOand GFD of 146.3% and 121.3%
ofsalary respectively compared to 70.2%
and55.4%respectively in 2022.
Annual statement by the Chair of the Remuneration Committee continued
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Directors’ Remuneration report continued
Strategic report Corporate governance Financial statements
Annual statement by the Chair of the Remuneration Committee continued
Remuneration outcomes for 2023 continued
Annual bonus continued
• The 2023 payout for employee groups in
thewider workforce averaged 93.2% of the
normal maximum opportunity. The normal
maximum opportunity was exceeded because
performance hit the stretch targets that are
anelement ofthe wider workforce bonus
scheme. Thisrepresents an increase of 43
percentage points on 2022 on an adjusted
operating profit increase of 17.3% at organic
constant currency.
The Committee was therefore satisfied that the
bonus award to the executive directors was
aligned with Rotork’s key remuneration principles
and to the performance of the business and was
appropriate and fair in comparison with the
wider workforce.
Under the Remuneration Policy, any bonus
awarded to executive directors greater than
60% of maximum opportunity is deferred
inshares for three years under the Deferred
Annual Bonus Plan. Accordingly, in respect
of2023, ofthe bonus award, 56% and 46% of
salary foreach of Kiet Huynh and Jonathan Davis
respectively will be deferred in shares for three
years under the Deferred Annual Bonus Plan.
LTIP – including consideration of windfall gains
The Committee determined there should be no
COVID-19 or other business-related adjustments
to LTIP targets for in-flight awards.
The outturn for the 2021 LTIP award, which
vests in March 2024, is based equally on growth
in adjusted earnings per share (‘EPS’), relative
total shareholder return (‘TSR’) over three years
and the rate of growth in economic profit
(areturn on invested capital measure) over
thethree years to December 2023.
The outcomes on each of the performance
measures over the three-year period were as
follows. Adjusted EPS grew by 17.1% over the
period, exceeding the requirement of 9% growth
for threshold vesting resulting in 41.4% vesting
for this part of the award. Rotork’s relative
TSRranking within its comparator group was
insufficient for vesting of the TSR tranche.
Economic profit declined over the measurement
period and so did not reach the threshold level
for payment. This tranche of the award lapses in
full. This resulted in an overall level of vesting of
13.8% for the 2021 LTIP award. Having reviewed
share price movements in the three-year period,
the Committee is satisfied that no windfall gains
were made in relation to the 2021 LTIP.
In March 2023, an annual LTIP award was
madeto the executive directors, a group of
senior managers and a number of less senior,
high-performing and talented employees.
Inaccordance with policy, the award levels
were200% of salary for the CEO and 175%
ofsalary for the GFD. The Committee will, at
vesting, as part ofits normal review of formulaic
remuneration outcomes, explicitly look at the
value of these awards relative to the shareholder
and employee experience over the same period.
All recipients accepted this in writing, as a
condition of receipt of the award.
Overall level of remuneration in 2023
The Committee carefully considered the extent
to which the overall remuneration outturn for
executive directors, taking the salary review,
annual bonus and 2021 LTIP outturns together,
reflected the substantive performance of the
business and both the shareholder and employee
experience in the year. The Committee was
satisfied that the overall outcome was fair,
appropriate and proportionate and in line with
the pay culture and approach within Rotork.
Full details of the targets and performance
against those targets for both the Annual Bonus
Plan and the 2021 LTIP are set out on page 135
and pages 144 to 146.
Remuneration in 2024
The structure of remuneration in 2024 will be
consistent with 2023 and in accordance with
thecurrent Remuneration Policy approved
byshareholders on 28 April 2023.
Salary review
In reviewing the salaries of the executive
directors, the Committee was conscious that
theincrease for the wider workforce in the
UKwas 4.4%.
Kiet Huynh, CEO
As explained above, the Committee’s intention
was that after appointment, Kiet’s salary would
be increased, over a period of approximately two
years, to the level of his predecessor’s salary in
2021 indexed in line with increases awarded to
directors but not to exceed the level of increases
awarded to the wider workforce. The Committee
approved an increase of an additional 50% of
the difference plus an annual increase of 4.2%
(average workforce increase in the UK of 4.4%),
taking his salary to £682,950 effective from
1April 2024.
Retirement of Jonathan Davis as executive
director and Group Finance Director
As announced on 12 September 2023,
JonathanDavis will be stepping down from
hisrole of Group Finance Director when Ben
Peacock joins the Board as Chief Financial Officer
(CFO) on 11March 2024. Jonathan will continue
as an executive director until the conclusion
oftheAGM to be held on 30 April 2024.
Jonathan willcontinue to provide support to
Benuntilhisemployment with Rotork ceases
on10September 2024, which will be his
retirement date.
Jonathan will receive a basic salary increase
of4.2% (average workforce increase in the UK
of4.4%), taking his salary to £406,480, effective
from 1 April 2024, and will continue to receive
this until he retires. Jonathan will be eligible
tobe considered for the 2024 annual bonus
award which will be pro-rated up to the date
ofretirement. Any amounts either awarded in
relation to 2023, or subject to deferral in shares
under the rules of the Deferred Annual Bonus
Plan will be disclosed in the 2024 Directors’
Remuneration Report.
Given the managed succession process,
Jonathan has been granted good leaver status
and so, in accordance with the respective share
plans, his DABP awards and the 2022 and 2023
LTIP awards are due to vest after his retirement.
Any vesting of Jonathan’s existing unvested LTIP
awards will be pro-rated for the period until his
retirement and will be subject to the achievement
of the required performance conditions and the
relevant rules. Jonathan’s 2021 LTIP award is due
to vest at 13.8% as described on page 146.
Jonathan will not be granted any LTIP awards in
2024. His outstanding awards under the DABP
and LTIP are shown on page 148. Any vesting
ofJonathan’s share awards, together with such
dividend entitlements to be settled in the form
of additional shares, will continue to be subject
to the post-departure shareholding requirements
for executive directors (up to 200% of salary for
two years).
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Directors’ Remuneration report continued
Strategic report Corporate governance Financial statements
Remuneration in 2024 continued
Appointment of Ben Peacock,
ChiefFinancialOfficer
As the incoming CFO, Ben Peacock will receive
an annual salary of £430,000 with effect from
his date of appointment of 11 March 2024
withthe first salary review not intended to
bebefore 1April 2025. Further details of his
remuneration arrangements, effective from
11March 2024, are set out on pages 142 and 143.
Chair and non-executive directors’ fees
The fee for the Chair will also increase by
4.2%,with the non-executive director base
feealso increasing by 4.2% from 1 April 2024
asapproved by the Board. There will be slight
increases to the supplementary fees payable to
those directors with additional responsibilities.
Chair and non-executive directors’ fees for 2024
are set out on page 155.
Pensions
In Rotork, the UK basic rate of pension is 9%
butas Rotork passes on savings in National
Insurance from the sacrificed salary to employees,
the majority pension contribution rate in the UK
is10.24% at current NI contribution levels. In
accordance with the current Remuneration Policy,
the pension allowance for the executive directors
is aligned to the contribution available for the
majority of the wider workforce. As at the date
ofthis report, this is 10.24%
Annual bonus
In line with the current Remuneration Policy
themaximum opportunity for Kiet Huynh will
be150% of salary. For Jonathan Davis and
BenPeacock, the maximum opportunity will
be125% of salary and, for each of them,
willbepro-rated for time served accordingly.
The performance metrics which are unchanged
from 2023 will be:
• Adjusted operating profit performance (60%
of opportunity) – the bonus plan is based on
the 2024 budget approved by the Board.
• Cash generation (15% opportunity) – the
target to achieve maximum outturn will
remain at 110%, reflecting the importance
ofthe sustained focus on cash generation.
• ESG (10% of opportunity) – measures will
bealigned to the three pillars of the ESG
strategy, as set by the ESG Committee but
exclude environmental emissions reductions
which will be part of the LTIP opportunity.
Half of the opportunity will continue to be
based on a health and safety measure with
athreshold set at 0.26 and a maximum at
0.23. The other half (5% of maximum
opportunity) will be split across quantitative
targets set tocover culture and engagement
scores; and qualitative targets focusing on
environmental innovation, particularly in
relation to products.
• Strategic personal objectives (15% of
opportunity) – these will be set for the
executive directors with a focus on the
strategic development of the business with
the focus on the implementation of the
Growth+ strategy.
In accordance with the Remuneration Policy,
anypayout in excess of 60% of the maximum
opportunity will be deferred in shares under
theDeferred Annual Bonus Plan.
As is usual, executive directors will be invited to
participate and must agree in writing to all the
conditions pertaining to the Annual Bonus Plan,
including those relating to the post-cessation
ofemployment shareholding arrangements
thatwill apply to any bonus deferred in shares.
LTIP
In line with the current Remuneration Policy, the
maximum opportunity for Kiet Huynh as CEO and
Ben Peacock as the incoming CFO will be 200%
and 175% of salary respectively. Jonathan Davis,
as the outgoing GFD and executive director,
willnot be granted an LTIP award in 2024.
The structure of the 2024 LTIP performance
conditions and metrics will be as set out below.
• Adjusted EPS (30% of opportunity) – the
threshold and maximum set at 9% and
35%growth over the 2023 adjusted EPS
by2026 respectively.
• TSR (30% of opportunity) – the maximum
outturn will be achieved if TSR is in the top
quartile relative to the constituents of the
FTSE 350 Industrial Goods and Services sector.
• Economic profit (30% of opportunity) –
performance will be measured against the
long-term plan for the business. Maximum
award will require a growth rate over the
period equivalent to more than 11.5% CAGR
in profit after tax.
• Absolute reduction in scope 1 and 2 CO
2
emissions from a 2020 base (10% of
opportunity) – maximum performance will
represent a reduction of 46% by the end
of2027 which is at least as demanding as the
path required to meet the published 2030 SBTi
target. Threshold performance will represent
areduction of 42%.
The proportion of maximum earned at
thresholdperformance is no more than 25%
forall four measures.
These awards will attract dividend equivalents
inthe form of additional shares and will be
subject to the same post-vesting holding period
requirements. The awards will be made in the
normal course following the publication of the
results and subject to the executive directors
agreeing in writing to all the conditions under
which awards are made including to the
post-cessation of employment shareholding
arrangements that will apply to these awards.
Wider workforce remuneration matters
Our key remuneration principles provide the
foundation for a fair pay agenda at Rotork and
this has been reflected in our approach to pay
and remuneration during 2023.
We look to apply the key remuneration
principles, along with our Fair Pay Framework,
consistently through the business and we seek
toensure there is consistency in how we
structure pay so that performance measures
andincentives reinforce the right behaviours in
the business. If specific actions are necessary to
satisfy governance expectations or are required
under the directors’ Remuneration Policy, these
are made once the right remuneration structure
for the business has been set.
Our Fair Pay Framework helps ensure standards
are met throughout our operations globally,
including ensuring our approaches and decisions
are non-discriminatory.
The Committee keeps the business’s
performance on any potentially discriminatory
factors under regular review. Gender pay gap
metrics are reviewed each year before they are
published, as is the gender-based distribution
ofpay increases, promotions and bonus awards.
We have also focused our attention on pay and
ethnicity and the Committee now reviews these
metrics in addition to gender-related metrics.
Wehave again published our ethnicity pay gap
alongside our Gender Pay Report.
Recruitment processes are reviewed to help
remove potential bias in order to help the
business have access to the whole talent pool
and to help ensure that there is no bias against
any potential employees.
Annual statement by the Chair of the Remuneration Committee continued
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Annual statement by the Chair of the Remuneration Committee continued
Wider workforce remuneration matters
continued
The Company considers employee participation
in the success of the business to be a key part
ofthe Company’s overall remuneration strategy
which aligns the interests of employees and
shareholders and helps to recruit, retain and
motivate employees at all levels within the
Group. The Company offers annual bonus
opportunities to all employees, regardless of
role, offers share ownership schemes where
practicable and delivers a profit-sharing
programme to the vast majority of employees.
The Committee believes that this approach
provides a meaningful and important incentive
to employees in promoting share ownership at
all levels in the Group with over half of our
employees being employee shareholders.
Notwithstanding the considerable progress that
has been made, we set ourselves high standards
and will continue to review and update our
approaches and continue to commit to doing
the right thing. More details are provided in
the‘Making a positive social impact’ section
onpages 56 to 62.
Bringing the employee voice into
theboardroom
In addition to my role as Chair of the Remuneration
Committee, I am the designated Non-executive
Director for Workforce Engagement which
provides a useful linkage to the wider remit of
the Remuneration Committee itself. Details on
how my fellow Board members and I have engaged
with Rotork’s employees during the course of
the year are set out on pages 113 to 114. There
is no doubt that this process of engagement has
fed through into the Committee’s discussions on
the approach to remuneration across the business.
While there is a strong sense of positivity about
the future direction of the business, we’ve heard
from colleagues that some challenges, such as
the rise in cost of living, continue to influence
them. To support colleagues around the world
through this, we have again brought forward
the annual remuneration review and salary
increases for all but our most senior people
from1 April 2024 to 1 January 2024.
Composition of the Committee
All members of the Committee are independent
non-executive directors with their respective
views, backgrounds and experience being
reflective of the demographic diversity of our
global business. We were sorry to lose Peter
Dilnot as a Committee member when he
stepped down from the Board on 31 December
2023. He brought his knowledge of the UK
remuneration environment to our discussions
which complemented Ann Christin’s and Karin’s
European perspective and Janice’s US outlook.
Similarly, we shall miss Ann Christin’s insights
when she steps down as a non-executive
director at the conclusion of the April 2024
AGM. I would like to note my thanks
toCommittee members for their important
contribution to the operation of the Committee
throughout 2023 and to all our colleagues across
the business for their hard work and support
during the past year.
Committee performance
In accordance with good governance practice,
an external evaluation of the Committees’
performance was undertaken during 2023
byBetter Boards as part of the process outlined
on page 115. As is usual, opportunities for
greater focus and improvement were identified.
The key areas of focus for 2024 will be to
carefully consider how we ensure that good
performance is rewarded when deserved and
how we send clear signals of motivation to the
high performers and the level of reward they
could achieve. However, noting the continuing
challenging nature of remuneration, it is very
pleasing to report that the Committee is
regarded as operating effectively and working
through contentious issues in a focused way.
Tim Cobbold
Chair of the Remuneration Committee
4 March 2024
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Implementation of our Remuneration Policy in 2023
Purpose Element Kiet Huynh (Chief Executive Officer) Jonathan Davis (Group Finance Director)
Attract and retain high-calibre
executive directors
Salary £600k £385k
Benefits Benefits comprise a car allowance, personal accident and private medical insurance and life assurance.
Pension Fixed at rate available to the majority of the workforce in the country in which the director operates (currently in the UK this is 10.24% of salary).
Drive and reward short-term performance Annual bonus 150% of salary maximum (90% salary on-target) 125% of salary maximum (75% salary on-target)
Based on profit, cash generation, ESG and personal targets.
Incentivise long-term value creation and
providealignment with shareholders
Long Term
incentive Plan
(LTIP)
200% of salary performance share award 175% of salary performance share award
Based on adjusted earnings per share (‘EPS’), relative total shareholder return (‘TSR’), growth in economic profit assessed over a three-year
performance period (‘ROIC’) and absolute reduction in scope 1 and 2 CO
2
emissions with targets aligned to the accredited, published 2030 SBTi
targets. A two-year post-vesting holding period also applies, together with malus and clawback provisions.
Provide alignment with shareholders Shareholding
requirements
350% of salary 300% of salary
Executive directors are required to build a shareholding equal to their variable pay opportunity within five years of appointment. A requirement to
hold 200% of salary in shares will apply for two years after cessation of employment (but does not apply to shares held which were purchased with
the executive’s own funds) subject to the shares having been acquired from share awards made after the approval of the 2020 Remuneration Policy.
Total remuneration opportunity at on-target performance £1,416k £843k
Actual total remuneration for 2023 £1,583k £986k
Remuneration at a glance
Performance outcomes for the 2023 financial year
The table below sets out how the annual bonus and LTIP awards have vested for the financial year
ended 31 December 2023 based on performance against target.
Award Measure Performance Kiet Huynh Jonathan Davis
2023
annual
bonus
• Profit (60%)
• Cash generation (15%)
• ESG (10%)
• Personal and
strategic(15%)
• 60% achieved
• 15% achieved
• 10% achieved
• K Huynh:
12.5%achieved
• J Davis: 12.0% achieved
• 97.5% of
maximumawarded
• 97.0% of
maximum awarded
2021 LTIP
award
• EPS growth (33%)
• TSR (33%)
• Economic profit(33%)
• 41.4% of maximum
• 0.0% of maximum
• 0.0% of maximum
• 13.8% of
maximum vesting
• 13.8% of
maximum vesting
How our Remuneration Policy supports Rotork’s strategy
Our directors’ Remuneration Policy has been developed to enable Rotork to recruit and reward
appropriately an executive team of the calibre required to lead our global business to deliver the
superior outcomes for all our stakeholders. We aim to pay competitively against the talent pools
from which we recruit with a significant proportion of pay linked directly to the performance of the
business and delivered in Rotork’s shares to ensure strong long-term alignment with shareholders.
Our aim is to deliver strong and sustainable margins, consistent year-on-year growth in revenues and profit
and a high return on capital which, combined with our asset-light model, delivers strong cash generation.
The financial measures in our incentive plans reflect these priorities and our long-term financial objectives.
The introduction of explicit ESG measures reflects the strategic importance of ESG in Rotork.
Strategic
priorities Bonus LTIP
Innovation • Strategic targets • Economic profit (ROIC) measure
Operational
excellence
• Cash generation measure and
personal performance targets
• Not applicable
Growth • Profit measure • Total shareholder return measure
• Earningspershare measure
Sustainability • ESG (including
safety)measures
• Deferral into shares
• Malus and
clawbackprovisions
• Five-year time horizon (three-year performance period
and two-year holding period)
• Malus and clawback provision
• Absolute reduction in scope 1 and 2 CO
2
emissions with
targets aligned to the accredited, published 2030 SBTi targets
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Performance measures
Performance measures are used to determine the extent of any awards made under the variable
elements of the executive directors’ remuneration, both annual bonus and LTIP. The performance
measures are selected because of their use as key performance indicators (‘KPIs’) to assess Company
performance and to align the interests of the directors to those of the shareholders. Non-financial
KPIs constitute partof the annual bonus award and these are selected to ensure that performance
measured by financial KPIs is not delivered at the expense of important non-financial considerations,
specifically safety and sustainability.
The measures currently used each fulfil a distinct purpose as set out below:
Measure Used in Purpose
Adjusted operating profit Annual bonus Maintain focus on annual profits.
Cash generation Annual bonus Maintain discipline on managing inventory and receivables.
ESG measures Annual bonus Focus on health and safety, employee engagement,
diversity and product environmental impact.
LTIP Absolute reduction in scope 1 and 2 CO
2
emissions (2020
base year) with targets at least as demanding as the
path required to meet the published 2030 SBTi target.
Strategic objectives Annual bonus Provide a balance to financial delivery which reflects
activities that contribute to the longer-term success
oftheGroup. These include environmental targets.
Adjusted earnings per share LTIP Adjusted EPS is a key measure for analysts who cover
Rotork and reflects long-term growth in profits.
Relative TSR LTIP Reflects the long-term growth in the value
ofshareholders’ investment in Rotork.
Economic profit LTIP Captures the cost of the capital required to operate
thebusiness and instils discipline around capital usage
into financial decision making.
Remuneration at a glance continued
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Overview of the Remuneration Policyreport
This section sets out a summary of Rotork’s
directors’ Remuneration Policy (the ‘Policy’)
which was approved by shareholders in a binding
vote at the AGM held on 28 April 2023 and
became effective on that date. The Committee’s
intention is that the current Policy will operate
for the three-year period up to the AGM in
2026, unless approval for a new policy issought
sooner. The full Policy can be found inthe 2022
Annual Reports and Accounts.
Remuneration Policy report
Directors’ Remuneration Policy
Element of
remuneration
Purpose and how it supports
thestrategy How the element operates Maximum amounts payable Framework used to assess performance
Base salary
To attract and retain
executive directors of the
right calibre and provide
acore level of reward for
therole.
Salary levels (and subsequent salary increases) are set after taking into account
the responsibilities of the role, the value of the individual in terms of skills,
experience and personal contribution, Company performance, internal relativities
and pay conditions, and external market data (benchmarked against companies
of a similar size and complexity and other companies in the same industry sector).
The Remuneration Committee also considers the impact of any increase to
salaries on the total remuneration package.
Salaries are paid monthly and normally reviewed annually (salaries are normally
reviewed in February, with any changes effective from 1 April).
Details of the current salaries of the executive
directors are set out in the Annual Report
onRemuneration.
Normally, future salary increases will be no higher
than the average increase (as a percentage of
salary) applied to the UK workforce. However, the
Remuneration Committee retains the discretion to
award higher increases if appropriate (for example,
to reflect progression in the role or increased
experience of the individual).
N/A
Benefits
To attract and retain
executive directors of the
right calibre by providing
amarket competitive level
ofbenefit provision.
The range of benefits that may be provided is set by the Remuneration
Committee after taking into account local market practice in the country where
the executive director is based or has relocated from and suitable benefits,
including compensation for increased taxation where an individual is relocating
from one country to another.
Standard benefits for executive directors’ benefits comprise a car allowance,
personal accident insurance, private medical insurance and life assurance.
Additional benefits may be provided, as appropriate, including travel benefits
forexecutives working away from their home country.
Executive directors are also entitled to participate in all-employee share plans
onthe same basis as other employees based in the same country.
Any reasonable business related expenses may be reimbursed (including any
taxifdetermined to be a taxable benefit).
There is no prescribed maximum level, but the
Remuneration Committee monitors the overall
costof the benefit provision to ensure that it
remainsappropriately proportionate.
N/A
Pension
To provide a market
competitive remuneration
package to enable the
recruitment and retention
ofexecutive directors.
The Company may fund contributions to a director’s pension as appropriate.
Thismay include contributions to a money purchase scheme and/or payment
ofacash allowance where appropriate.
No higher than the percentage of salary available
to the majority of the workforce for the country
inwhich the executive director operates.
N/A
Principles
The Remuneration Committee remains
committed towards remuneration being:
• performance driven, competitive and fair;
• motivating, affordable and proportionate;
• aligned to shareholders’ interests; and
• globally relevant and transparent.
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Element of
remuneration
Purpose and how it supports
thestrategy How the element operates Maximum amounts payable Framework used to assess performance
Annual bonus
Drives and rewards
performance against annual
financial and operational
goals which are consistent
with the medium to
long-term strategic
needsofthe business.
Bonus up to 60% of the maximum opportunity is paid in cash. Any bonus
awarded in excess of 60% of the maximum is deferred into shares for threeyears.
Dividend equivalents may be paid on the deferred shares on vesting.
TheRemuneration Committee retains discretion to adjust the number
ofdeferredshares in the event of a variation in the capital of the Company
and/orto settle the award in cash.
The maximum annual bonus opportunity is 150%
of salary.
Details of the current annual opportunity are set
out in the Annual Report on Remuneration.
For each measure, normally a sliding scale of
stretching targets is set by the Remuneration
Committee. The threshold level of bonus under
each financial measure varies but accounts for
nomore than one third of the maximum bonus
opportunity under any single measure.
The annual bonus is focused on the delivery of
strategically important performance measures.
These include demanding financial and non-financial
measures. Financial measures will account for
themajority.
Under the terms of the bonus plan, the Remuneration
Committee has the discretion, in exceptional
circumstances, to amend previously set targets
orto adjust the proposed pay-out to ensure a fair
and appropriate outcome.
LTIP
To incentivise long-term value
creation and alignment with
shareholder interests.
The LTIP permits an award of shares to be granted which vests subject to
performance and continued employment. The LTIP awards will be granted
inaccordance with the rules of the plan, (which includes the ability to award
dividend equivalents on shares that vest) which were approved by shareholders
in2019, and the discretions contained therein.
Awards under the LTIP may be granted in the form of conditional shares,
forfeitable shares, nil-cost options or cash (where the award cannot be settled
inshares).
Directors must retain any shares vesting (net of tax) until the fifth anniversary
ofgrant.
The maximum LTIP opportunity is 200% of salary.
Details of the current award levels are set out
inthe Annual Report on Remuneration.
Awards under the LTIP are subject to performance
conditions, measured over three financial years,
currently being adjusted EPS, economic profit and
TSR. Different measures may be used for future
award cycles.
A sliding scale of targets is set for eachmeasure
with no more than 25% ofthe award (under each
measure) vesting for achieving the threshold
performance hurdle.
The performance targets are set prior tothe grant
of each award. Different measures, targets and/or
weightings between measures may be set for
future award cycles.
Under the LTIP rules approved by shareholders,
theRemuneration Committee has the discretion
toamend the targets applying to existing awards
inexceptional circumstances providing the new
targets are no less challenging than originally
envisaged. The Remuneration Committee also has
the power to adjust the number of shares subject
to an award in the event of a variation in the capital
of the Company.
Shareholding
guideline
To provide alignment with
shareholders by requiring
executives to build and
maintain a meaningful
shareholding in Rotork.
The executive directors are also subject to a requirement during their period of
employment to build and maintain a shareholding in Rotork equivalent to the
combined annual award opportunity under their bonus and LTIP. It is expected
that this requirement will be achieved within five years of appointment.
Following the cessation of their employment, executive directors are required
toretain for a further two years any shares held that have vested to them under
the Group’s share plans after 24 April 2020 (subject to a maximum holding
requirement of 200% of final salary).
N/A N/A
Directors’ Remuneration Policy continued
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Element of
remuneration
Purpose and how it supports
thestrategy How the element operates Maximum amounts payable Framework used to assess performance
Chair and
non-executive
directors’ fees
To attract and retain
non-executive directors
ofthe right calibre.
Fees for the Chair and non-executive directors are normally reviewedannually.
Non-executive director fees are determined by the Chair and the executive
directors. The fees for the Chair are determined by the Remuneration Committee.
The fees for the non-executive directors comprise a basic Board fee, with
additional fees paid to the Senior Independent Director, Committee Chairs,
theNon-executive Director for Workforce Engagement, and other similar
Boardresponsibilities. Additional fees may be paid for additional
temporaryresponsibilities.
Any reasonable business-related expenses may be reimbursed (including
taxthereon if determined to be a taxable benefit).
The maximum aggregate fee level is as specified
inthe Group’s Articles of Association
(currently£1,000,000).
The fee levels are set by reference to rates in
companies of comparable size and complexity.
Thefee levels are reviewed periodically taking
intoaccount the responsibilities of the role and
thetime commitment of the individual.
N/A
Malus and clawback
The payment of any bonus is at the ultimate
discretion of the Remuneration Committee
which also retains an absolute discretion to
reclaim or withhold some, or all, of any annual
bonus paid in exceptional circumstances, such as
misstatement of results, an error in the calculation
of the performance targets and/or award size,
gross misconduct, reputational damage and
unreasonable failure to protect the interests
ofemployees and customers.
The Remuneration Committee has similar power
in respect of the LTIP and may exercise discretion
to reclaim or withhold some, or all, of a vested
LTIP award in exceptional circumstances
(thespecified situations being the same
asforthe Annual Bonus Plan).
Discretion
The Remuneration Committee retains discretion
under the Policy to operate the incentive plans
inaccordance with their detailed rules, to amend
performance conditions of in-flight incentives
and yet to be granted LTIP awards and future
bonus awards. Annually, the Remuneration
Committee will assess whether it feels the
formulaic outcomes from the incentive plans
reflect the Company’s underlying performance
and retains the ability to alter those outcomes.
Differences between the Policy Report and
the policy on employee remuneration
We use the same principles (as set out at the
start of this report) to determine pay for our
executives and everyone else who works at
Rotork. We recognise that it is appropriate for
asignificant proportion of executive directors’
remuneration to be contingent on the performance
of the Group, and that such remuneration is
atrisk subject to the satisfaction of stretching
performance conditions. Executive directors and
other senior managers are invited to participate
in the LTIP under which shares are awarded
subject to performance conditions over a
three-year period. We are also widening
participation in our share-based long-term
incentive schemes within the organisation.
Executive directors and other senior managers
are also invited to participate in the annual
bonus scheme which will result in a bonus
payment being made if targets are achieved,
part of which for executive directors may be
deferred in shares. Alternative or additional
incentive plans may operate from time to time
for senior managers and/or other employees.
Employees share in the success of the Group
through a profit-based bonus plan which is
linked to the performance of their business unit,
Group performance and their own individual
performance. This is coupled with the opportunity,
for eligible employees, to receive free shares from
the Company, paid from the Company’s profits.
Approach to recruitment remuneration
We recruit our most senior leaders from a global
talent pool and our Policy provides the flexibility
for such recruitment. Base salary levels for new
executives are set after taking into account the
experience and calibre of the individual and
theirexisting remuneration package. It may be
appropriate in certain circumstances to offer a
salary which is initially lower than the market
level but having a planned series of increases
tosuch salary over subsequent years subject to
individual performance. We will be clear as to
our intentions with a candidate if we intend to
adopt such an approach for a particular reward
package. Benefits will generally be provided in
accordance with the Policy. Where an executive
is required to relocate in order to take up his/her
role, we may offer relocation expenses and
assistance and/or ongoing expatriate benefits
(including tax equalisation), the nature of
whichwould be determined by the
individualcircumstances.
The structure and level of the ongoing variable
pay element will be in accordance with the Policy.
Different performance measures may be set
initially for the annual bonus, taking into account
the responsibilities of the individual, and the point
in the financial year that the executive joined.
In the case of an external hire, it may be
necessary to buy out certain elements of
remuneration from an executive’s previous
employer which would be forfeited on leaving
that employer. Where we do this, it will always
be subject to the principal consideration that
making such a buy-out is in the best interests of
the Group. Any such payment would be structured
to take into account the form (cash or shares),
timing and expected value (i.e. likelihood of
meeting any existing performance criteria) of
theremuneration being forfeited. Replacement
share awards, if used, may be granted using
Rotork’s existing share plans to the extent
possible, although awards may also be granted
outside of these schemes if necessary and as
permitted under the Listing Rules.
In the case of an internal hire, or the appointment
of an individual who is not an executive director
but who still falls within this Policy, any outstanding
variable pay awarded in relation to the previous
role will be allowed to pay out according to its
terms of grant.
Directors’ Remuneration Policy continued
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Approach to recruitment remuneration
continued
Details of the remuneration package for Ben
Peacock as the incoming, externally appointed,
Chief Financial Officer are given on page 142.
Fees for a new Chair or non-executive director
will be set in line with the Policy.
Service contracts and policy on payments
for loss of office
Under the executive directors’ service contracts,
up to 12 months’ notice of termination of
employment is required by either party. Should
notice be served, the executive directors can
continue to receive salary, benefits and pension
for the duration of their notice period during
which time the Company may require the individual
to continue to fulfil their current duties or may
assign a period of garden leave. The Company
applies a general principle of mitigation in relation
to termination payments and the service contracts
expressly include the use of monthly phased
payments following termination in lieu of
noticewhich can be reduced to the extent that
alternative remunerated employment isfound.
The service contracts also enable the Company
to elect to make a payment in lieu of notice
equivalent in value to 12 months’ base
salaryonly.
In the event of cessation of employment, the
executive directors may still be eligible for a
bonus at the discretion of the Remuneration
Committee, on a pro-rata basis for the period
oftime served from the start of the financial
year to the date of termination and not for any
period in lieu of notice. Different performance
measures (to the other executive directors) may
be set for the bonus for the period up until
departure, as appropriate, to reflect changes
in`responsibility.
Any unvested shares held under the deferred
Annual Bonus Plan will ordinarily vest on the
normal vesting date, save where the departure
isas a result of summary dismissal, in which case
the awards will lapse on cessation of employment.
The Remuneration Committee may also determine
that the shares shall vest on an earlier date
(including the date of cessation) if the Remuneration
Committee, in its discretion, considers that the
circumstances of the cessation merit early
vesting of the awards.
The rules of the LTIP set out what happens to
awards if a participant leaves employment before
the end of the vesting period. Generally, any
unvested LTIP awards will lapse when an executive
director leaves employment except in certain
circumstances. If the executive director ceases to
be employed as a result of death, injury, retirement,
transfer of employment or any other analogous
reason, they may be treated as a ‘good leaver’
under the plan rules. The shares for a good leaver
will vest subject to an assessment of performance,
with a pro-rata reduction to reflect the proportion
of the vesting period served. Awards for a good
leaver may then vest on the normal vesting date,
unless the Remuneration Committee determines
that they should vest early (for example, following
the death of the participant). In determining
whether an executive director should be treated
as a good leaver and the extent to which their
award may vest (up to the pro-rated amount),
the Remuneration Committee will take
intoaccount the circumstances of an
individual’sdeparture.
Outplacement services and reimbursement of
legal costs may be provided where appropriate.
Any statutory entitlements or sums to settle
orcompromise claims in connection with
atermination would be paid as necessary.
Any legacy benefits under the Company’s
defined benefit pension schemes will be allowed
to be paid under the terms of those schemes
and as set out in the Policy Report.
Outstanding share awards would ordinarily
vestearly on a change of control of the Company.
In the case of unvested awards under the LTIP,
performance would be measured to the date
ofcontrol normally with a pro-rata reduction
toreflect the proportion of the vesting or
performance period served.
The Chair and non-executive directors do not
have service contracts; they serve under letters
of appointment and are subject to annual
re-election by shareholders at the AGM. The
term of appointment for non-executive directors
and the Chair is three years and their appointments
are subject to termination on three months’ notice
(up to 12 months for the Chair). In the event of
the termination of their position, they are entitled
to reimbursement of any outstanding fees and
expenses due.
Executive directors’ service contracts
Name Date of appointment to Board Date of service contract Notice period (rolling)
Kiet Huynh 10 January 2022 8 January 2022 12 months by
either party
Jonathan Davis 1 April 2010 19 November 2009 as amended by a
Deed of Variation dated 4 March 2020
and a Letter of Variation dated
11September 2023
12 months by
either party
Ben Peacock 11 March 2024 11 September 2023 12 months by
either party
Non-executive directors’ terms of engagement
Name Date of appointment to the Board Date of most recent letter of appointment
Dorothy Thompson (Chair) 1 December 2022 30 November 2022
Ann Christin Andersen 1 December 2018 16 November 2018
Tim Cobbold 1 December 2018 9 November 2018
Peter Dilnot 1 September 2017 28 April 2021
Karin Meurk-Harvey 13 September 2021 10 September 2021
Janice Stipp 1 December 2020 24 November 2020
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Rotork Annual Report 2023 rotork.com140
Directors’ Remuneration report continued
Strategic report Corporate governance Financial statements
Annual Report on Remuneration
This part of the report has been prepared in accordance with Part 3 of The Large and Medium-sized
Companies and Groups (Accounts and Reports) Regulations (as amended) and Rule 9.8.6 of the
Listing Rules. The Annual Statement and Annual Report on Remuneration will be putto a single
advisory vote at the AGM on 30April 2024.
Committee membership and governance
The Committee currently comprises four independent non-executive directors, namely, Tim Cobbold
(Chair), Ann Christin Andersen, Janice Stipp and Karin Meurk-Harvey. Throughout 2023, Peter Dilnot
also served on the Committee. The Group General Counsel & Company Secretary acts as secretary
tothe Remuneration Committee. The Remuneration Committee met four times during 2023 with
attendance set out as follows.
Member Member since
Eligible meetings
(max 4) Attendance
Tim Cobbold, Chair December 2018 4 4
Peter Dilnot
(i)
May 2021 4 3
Ann Christin Andersen December 2018 4 4
Karin Meurk-Harvey September 2021 4 4
Janice Stipp December 2020 4 4
(i) Peter Dilnot was unable to attend the December meeting due to unforeseen events. He received the papers in advance and
provided feedback to the Committee Chair which was shared at the meeting. The Committee Chair subsequently briefed
Peter on deliberations and outcomes following the meeting.
The Remuneration Committee is keen to ensure that its deliberations and decisions are undertaken
inthe fullest context of the business and taking into account how employees across the Group are
rewarded, as well as ensuring that its decisions are made in the most transparent manner possible.
Tothat end, the Committee invites the Group HR Director to its meetings to provide this wider
context and to ensure that all its decisions remain aligned with Rotork’s values and culture, which
weseek to nurture within thebusiness.
The Board Chair is also invited to attend meetings and provides input relating to the performance
and remuneration of the Chief Executive Officer and Group Finance Director. The Chief Executive
Officer and Group Finance Director are invited to attend parts of certain meetings but are not
present when their own remuneration is considered. Arepresentative from Korn Ferry, the
Committee’s remuneration advisers, also attends to provide independent remuneration and
ancillarygovernance advice.
Role of the Remuneration Committee
The principal role of the Remuneration
Committee is to set the framework and policy
for remuneration of the executive directors,
theRotork Management Board (‘RMB’) and the
Board Chair. It also oversees the principles and
structure of remuneration arrangements for
allemployees across the Group, and seeks
toensure there is consistency across regions,
business lines and organisational levels. In so
faras possible, similar structures are used across
the Group, since this is the most reliable way of
ensuring transparency. At all levels, in line with
our remuneration principles, we ensure that
remuneration is competitive and fair; at the
executive level, this means offering remuneration
that is sufficiently attractive and appropriately
rewards the leadership team required to
successfully run a complex global business.
The terms of reference of the Remuneration
Committee can be found on the Company’s
website at https://www.rotork.com/en/
documents/publication/5923.
UK Corporate Governance Code –
Provision 40 disclosures
When developing the proposed Remuneration
Policy and considering its implementation, the
Committee was mindful of the UK Corporate
Governance Code and considers that the
executive remuneration framework appropriately
addresses the following factors:
• Clarity – the Committee is committed
toproviding open and transparent
disclosuresregarding our executive
remuneration arrangements.
• Simplicity – remuneration arrangements for
our executives and our wider workforce are
simple in nature and well understood by both
participants and shareholders.
• Risk – the Committee considers that the
incentive arrangements do not encourage
inappropriate risk taking. Malus and clawback
provisions apply to annual bonus, LTIP and
DABP awards, and the Committee has
overarching discretion to adjust formulaic
outcomes to ensure that they are appropriate.
• Predictability and proportionality – our policy
illustrates opportunity levels for executive
directors under various scenarios for each
component of pay.
• Alignment to culture – any financial and
strategic targets set by the Committee
aredesigned to drive the right behaviours
across the business. The LTIP encourages
ourexecutives to focus on making the
rightdecisions for the execution of our
strategy and the creation of long-term
shareholder value.
rotork.com Rotork Annual Report 2023141
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Annual Report on Remuneration continued
Priorities and activities of the
Remuneration Committee during 2023
Reviewed the application of our Remuneration
Policy to ensure it delivers a package that
is proportionate to the opportunity for
shareholders and aligned with their interests
• Set pay principles.
• Reviewed all elements of the directors’
Remuneration Policy in advance of
recommendation to shareholders at the 2023
AGM to ensure that it is globally relevant,
remains fit for purpose and aligns with, and
supports, Rotork’s culture and values, and fits
with our pay principles.
• Considered corporate governance
developments, guidance from institutional
investors and external remuneration trends
toensure our remuneration structures reflect
evolving good practice.
• Developed the approach to the remuneration
structure for 2024.
• Reviewed the approach to the measurement
and assurance process for the environmental
measure for the 2023 LTIP awards.
• Reviewed and agreed the performance
conditions and measures for the 2024
LTIPawards.
Set pay at a competitive level against the
external market and ensured it is affordable
and fair in the context of pay for all
Rotorkemployees
• Reviewed the pay arrangements for employees
across the Group and considered how these
related to those for our senior leaders.
• Ensured that decisions on pay were in line
with the Fair Pay Framework which guides
Rotork’s reward policies, procedures, systems
and decision making globally in support
ofthe commitment to deliver fair and
competitive remuneration in line with the
remuneration principles.
• Set basic salary for executive directors and
members of the RMB for 2023.
• Reviewed the fee payable to the Chair.
Determined pay outcomes that are
performance driven
• Determined bonus performance outcome
against 2022 targets and approved
bonuspayments.
• Determined LTIP vesting outcome against 2020
performance targets and approvedvesting.
• Reviewed incentive plan outcomes and
evaluated whether discretion should
beapplied.
Ensured future pay is motivating, transparent
and aligned to shareholders’ interests
• Reviewed the terms of both bonus and LTIP
plans to ensure they remain fit for purpose
and in line with developing best practice.
• Selected the measures and set the
performance ranges for executive directors
and other members of senior management’s
bonus scheme for 2023.
• Approved executive directors’ personal
objectives for 2023.
• Set LTIP performance targets and award levels
for executive directors and other members
ofsenior management for the 2023LTIP.
Maintained transparency and clarity in
everything we do
• Approved the Directors’ Remuneration
Report 2022.
Retirement of Jonathan Davis and the
appointment of Ben Peacock as executive
director and Chief Financial Officer
• The Committee reviewed and determined
theremuneration arrangements relating to
theretirement of Jonathan Davis as Group
Finance Director and executive director and
the appointment of Ben Peacock as executive
director and Chief Financial Officer. Details of
their respective remuneration arrangements
are set out below.
Retirement of Jonathan Davis as executive
director and Group Finance Director
As announced on 12 September 2023, Jonathan
Davis will relinquish his role as Group Finance
Director when Ben Peacock joins the Board as
Chief Financial Officer (CFO) on 11 March 2024.
Jonathan will continue as an executive director
until the conclusion of the AGM to be held on
30 April 2024. Jonathan will continue to provide
support to Ben until his employment with Rotork
ceases on 10 September 2024 (‘Retirement Date’).
Jonathan will continue to receive his current
salary of £390,100 per annum (subject to annual
review effective from 1 April 2024) and benefits
monthly up until the Retirement Date. Jonathan
will be eligible to be considered for the 2024
annual bonus award which will be pro-rated
upto the Retirement Date. Any amount either
awarded in relation to 2023, or subject to
deferral in shares under the rules of the Deferred
Annual Bonus Plan will be disclosed in the 2024
Directors’ Remuneration Report.
In accordance with the respective share plans,
Jonathan has been granted good leaver status
with respect to his existing DABP awards and
the2022 and 2023 LTIP awards that are due to
vest after his Retirement Date. Any vesting of
Jonathan’s existing LTIP awards will be pro-rated
for the period until his Retirement Date and will
be subject to the achievement of the required
performance conditions and the relevant rules.
Jonathan’s 2021 LTIP award is due to vest at
13.8% as described on page 146. Jonathan will
not be granted any LTIP awards in2024. His
outstanding awards under the DABP and LTIP
are shown on page 148. Any vesting of
Jonathan’s share awards, together with such
dividend entitlements to be settled in the form
of additional shares, will continue to be subject
to the post-departure shareholding requirements
for executive directors (up to 200% of salary for
two years).
As an employee leaving Rotork, with effect from
the Retirement Date, Jonathan will no longer
participate in the Company’s Share Incentive
Plan (SIP) and shares held in the SIP trust (‘Trust’)
on his behalf will be removed from the Trust.
Full details of Jonathan Davis’s remuneration
arrangements, once confirmed, will be provided
in the statement required under Section 430(2B)
of the Companies Act 2006 which will be
released when he retires from the Board on
30April 2024 and will be included in Rotork’s
Directors’ Remuneration Report in subsequent
years as appropriate. There are no payments
forloss of office relating to Jonathan Davis.
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Appointment of Ben Peacock as executive
director and Chief Financial Officer
Ben Peacock was appointed as an executive
director and Chief Financial Officer to take effect
from 11 March 2024 (‘Commencement Date’)
tosucceed Jonathan Davis. Effective from his
Commencement Date, Ben will receive an annual
salary of £430,000 with the first salary review not
intended to be undertaken before 1 April 2025.
His benefits, which are all in line with the current
Remuneration Policy, will comprise a car
allowance of £13,584 (which can only be used
towards acquiring an electric, hybrid or low
emission vehicle), personal accident and private
medical insurance and life assurance. His pension
allowance will be fixed at the rate available
tothe majority of the workforce in the UK,
which isthe country in which Ben will operate
(currently in the UK this is 10.24% of salary).
Ben will be eligible to participate in the
discretionary annual bonus scheme with his
maximum opportunity being 125% of basic
salary which, for 2024, will be pro-rated for
timeserved from his Commencement Date.
Thepayment of any bonus will be determined by
the Committee at its absolute discretion as they
may determine from time to time. Any bonus up
to 60% of the maximum opportunity is paid in
cash with any bonus awarded in excess of 60%
of the maximum to be deferred into shares for
three years under the rules of the Deferred
Annual Bonus Plan. At the Company’s discretion,
Ben may participate in the LTIP with his level of
participation being up to 175% of basic salary.
He is also entitled to participate in the all-employee
share plans operated by the Company which
currently include the SIP (Partnership and
FreeShares) and the UK Sharesave schemes.
Residual payments in 2023 relating to Kevin
Hostetler as former executive director and CEO
As reported in last year’s Remuneration Report,
Kevin Hostetler stepped down from the Board
and as CEO with effect from 10 January 2022
and continued to provide support to Kiet Huynh,
until Kevin’s employment with Rotork ceased
on17 April 2022 (‘Departure Date’). The vesting
of Kevin’s LTIP awards were pro-rated for the
period until the Departure Date and were
subject to the achievement of the required
performance conditions and the relevant rules.
The 2020 LTIP did not vest during 2023 as
performance conditions were not met and
hisaward lapsed on 7 April 2023. The 2021
and2022 LTIP awards are due to vest on
24March 2024 and 24 March 2025 respectively.
Other than as set out above, no other
remuneration payment or any payment for loss
of office of the type specified in Section 430(2B)
of the Companies Act 2006 have been made
toKevin Hostetler. The relevant remuneration
information will continue to be included in
Rotork’s Directors’ Remuneration Report in
subsequent years, as appropriate.
Annual Report on Remuneration continued
In line with the Remuneration Policy, certain
elements of Ben’s remuneration from his
previous employer will be bought out.
Theseinclude the payment of a bonus buyout
equivalent to the amount he is forecasted to lose
(£140,568), to be paid in cash in March 2024
post his Commencement Date. The Company
willalso make an award of Rotork ordinary
shares to the value of £230,000 in compensation
for unvested Restricted Stock Units to which he
is entitled under his previous employment. The
grant of these awards is anticipated to be made
shortly after the later of his joining the Company
and the announcement of the preliminary results
for the 2023 financial year and will be subject
toterms and conditions similar to the Rotork LTIP
(other than performance conditions and timing).
The vesting date for the awards will match those
being forfeited. Full disclosure will take place
innext year’s Directors Remuneration Report.
Tax support will be offered for up to three tax
years for advice and support in completing tax
returns in the UK and US subject to an annual
cap of £10,000 to be paid directly to the
provider. Contributions towards relocation costs
(subject to caps) from the US to a location within
25 miles of Bath will also be provided. Such
relocation costs will include flights, temporary
accommodation, use of relocation company,
shipping costs, contribution to house purchase
costs and payment of incidentals against
receipts. Disclosure will take place in next
year’sDirectors’ Remuneration Report.
rotork.com Rotork Annual Report 2023143
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Strategic report Corporate governance Financial statements
Annual Report on Remuneration continued
Total pension entitlements (audited)
No director participates in, or has a deferred benefit under, a defined benefit pension scheme.
Inaccordance with the current Remuneration Policy, the executive directors receive a cash allowance
in lieu of pension at the level of the majority of the workforce, being 10.24% from 1 January 2023.
Payments to former directors and for loss of office
No payments were made to former directors or for loss of office during the year, other than in relation
to Kevin Hostetler whose remuneration following cessation of office can be found on page 143.
Other directors (£000s)
Base fees
Additional fees/
remuneration
Total remuneration
Name 2023 2022 2023 2022 2023 2022
Ann Christin Andersen 61 59 7 7 68 66
Tim Cobbold 61 59 18 18 79 77
Peter Dilnot 61 59 11 11 72 70
Karin Meurk-Harvey 61 59 — — 61 59
Janice Stipp 61 59 11 11 72 70
Martin Lamb
(i)
84 246 — — 84 246
Dorothy Thompson
(i)
194 5 — — 194 5
(i) Martin Lamb stepped down from the Board on 30 April 2023 with Dorothy Thompson succeeding him as Chair. The fees
shown are pro-rated for time served as Chair with Dorothy Thompson’s fee also including her pro-rated non-executive base
fee from 1 January 2023 to 30 April 2023.
The additional fees referred to above are the supplementary fees paid in cash to the Chairs of
theAudit, Remuneration and Safety and Sustainability (formerly ESG) Committees, the Senior
Independent Director and the non-executive director responsible for workforce engagement.
Alldirectors have confirmed that, save as disclosed in the single figures of remuneration table
above,they have not received any other items in the nature of remuneration.
Annual bonus for 2023
Bonuses in 2023 were based 60% on annual profit, 15% on cash generation, 10% ESG measures
(including lost time injury rate), and 15% on personal strategic objectives. Details of performance
achieved against the targets set are shown below.
Performance
required to trigger
bonus payment
Performance
required at
maximum
% payable
at maximum
performance
Performance
outcome
% bonus
awarded
Annual profit target £131m £162m 60% £164m 60%
Cash generation 85% 110% 15% 120.3% 15%
ESG measures:
Environmental innovation,
engagement and culture
See below See below 5% See below 5%
Lost time injury rate 0.19 0.12 5% 0.08 5%
Total 85% 85%
ESG measures comprise: environmental innovation in product and customer focus to reduce
environmental impact (2%), employee engagement (2%) and culture (1%). The product and
customer innovation performance was sufficient to deliver the full 2%. The employee engagement
score of 7.4 outperformed the target range of 6.8 to 7.3 delivering 2% of bonus. The culture score
of 61% diversity in candidates filling available roles at RMB level and the tier below exceeded the
target range of 40% to 50%, delivering 1% of bonus.
Single figure of remuneration (£000s) (audited)
The tables below set out the single figure remuneration for the directors of Rotork for the year ended 31 December 2023.
Executive directors
Salary Benefits
(i)
Annual bonus
(ii)
LTIP
(iii)
RSU
(iv)
SIP
(v)
Pension and
related benefits Total remuneration Total fixed pay Total variable pay
Name 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022
Kiet Huynh 600 538 22 22 877 378 19 — — 95 4 3 61 56 1,583 1,092 683 616 900 476
Jonathan Davis 385 369 15 15 467 204 73 — — — 4 4 42 53 986 645 442 437 544 208
(i) The benefit value consists of a car allowance and private medical insurance.
(ii) Of the maximum bonus opportunity, the following applied: for Kiet Huynh, £540k was paid in cash with £337k deferred
into shares for three years; for Jonathan Davis, £289k was paid in cash with £178k deferred into shares for three years.
(iii) The 2023 figure relates to the vesting of the 2021 LTIP award based on performance to 31 December 2023. These awards are not
eligible to vest until 24 March 2024 and, as such, an indicative share price of 309.5p (being the average closing share price over the
three-month period to 31 December 2023) has been used for the purposes of valuing these awards. This value will be restated in
next year’s report. The 2022 figure relates to the nil vesting of the 2020 LTIP award based on performance to 31 December 2022.
(iv) Restricted Stock Unit Awards (‘RSU Awards’) were granted on 21 September 2021 to Kiet Huynh prior to his appointment
asan executive director. In accordance with the previous Remuneration Policy, as Kiet was an internal appointment, any
outstanding variable pay awarded to him in his previous role was allowed to pay out according to its terms of grant. No RSU
Awards have been granted to executive directors. The 2022 figure relates to the vesting of the RSU Award (including accrued
dividend equivalents) on 7 April 2023. This value has been restated from last year’s report to reflect the value of the award
on the date of vesting, based on the closing share price of 307.6p. Of the £95k, 14.7% relates to a decrease in the value
ofthe underlying shares from date of grant to vesting.
(v) Face value of SIP free share awards made during the year.
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Rotork Annual Report 2023 rotork.com144
Directors’ Remuneration report continued
Strategic report Corporate governance Financial statements
Annual bonus for 2023 continued
Personal strategic objectives, which accounted for 15% of the bonus opportunity, were set at the start of the year. The Remuneration Committee set specific and measurable targets covering a range of
theCompany’s strategic priorities and assigned each an individual weighting. Performance against each of the defined targets was assessed by the Remuneration Committee with input from the Chair and
other non-executive directors. The objectives for both executive directors and the performance against them are summarised in the table below.
Annual Report on Remuneration continued
Kiet Huynh Performance summary
% payable
at maximum
% bonus
awarded
Business strategy and vision To complement Rotork’s Growth+ strategy, a full product portfolio analysis was conducted with the outcomes, conclusions and next steps
presented to the Board. Inorganic growth plans were also formulated for review and further investigation.
2.0% 2.0%
Growth+ strategy implementation, including: 13.0% 10.5%
Target Segments Commenced the implementation of the necessary critical success factors to enable the revenue growth within the target segments
ofmethane, LNG and decarbonisation.
Customer value Delivered improved customer satisfaction through commercial and operational improvements which addressed the management of global
projects and key accounts and the development of an enhanced global supply chain strategy.
Innovative products and services Accelerated the development of key products and launched engineering KPIs.
Enabling a sustainable future and investing
inpeople and culture
Defined and launched KPIs and plans to deliver net-zero milestones for scope 1, 2 and 3 which were approved by the ESG Committee.
Delivered the remaining six modules of the Rotork Life Saving Rules within all plants and subsidiaries.
Embracing digital technology Defined in further detail Rotork’s digital and data strategy with initiatives aimed to drive increased efficiency and decision making to aid
Growth+. Launched the new ERP in Bath and progressed the subsidiary build blueprint in line with implementation plan.
Total 15.0% 12.5%
Jonathan Davis Performance summary
% payable
at maximum
% bonus
awarded
Business strategy and vision To complement Rotork’s Growth+ strategy, a full product portfolio analysis was conducted on certain product lines to assess their suitability
to deliver Growth+ and shape their ranges for the future. An acquisition pipeline was developed to align with strategy.
2.0% 2.0%
Development and implementation of financial systems, including: 7.0% 5.0%
Forecasting/budgeting Launched an improved budgeting and forecasting process designed to improve the process efficiency through integration as other systems permit.
Reporting A new format and methodology was cascaded through the financial performance reporting lines and aligned with quarterly divisional
performance reviews.
Control environment In preparation for the anticipated regulatory changes, work continued to enhance the control environment. This included implementation
ofanew business control review methodology aligned to the business control framework. The external audit tender process was completed
inthe year culminating with the appointment of a new external auditor for the 2024 financial year.
Growth+ strategy implementation, including: 6.0% 5.0%
Investing in people and culture Stabilisation of finance teams through retention and faster recruitment. Expansion of training programmes for team members carrying out
business control reviews; global finance conference held with further regional finance meetings held to reinforce the subject matter and
continue training the teams.
Enabling a sustainable future Defined and launched KPIs and plans to deliver net-zero milestones for scopes 1, 2 and 3 with ESG Committee approval given.
Embracing digital technology Launched the new ERP in Bath and progressed the subsidiary build blueprint. Designed and completed the plan to modify sales channels
where required to facilitate the ERP rollout plan.
Total 15.0% 12.0%
rotork.com Rotork Annual Report 2023145
Directors’ Remuneration report continued
Strategic report Corporate governance Financial statements
Annual Report on Remuneration continued
Annual bonus for 2023 continued
Having reviewed the performance of the
business against these targets, including the
personal objectives, set at the start of the
yearthe Committee decided that the level of
pay-out, expressed in percentage of maximum
opportunity, should be 150% and 125% for
KietHuynh and Jonathan Davis respectively with
no need for discretion to be applied. As a result,
the bonus for Kiet Huynh and Jonathan Davis for
2023 paid out at 90% and 75% of salary in cash
and 56% and 46% of salary in deferred shares
under the Deferred Annual Bonus Plan
respectively with the details shown below.
Deferred Annual Bonus Plan ‘DABP’
awards (audited)
Any bonus earned above a threshold of 60%
ofthe maximum is deferred into share awards
under the Deferred Annual Bonus Plan, vesting
on the third anniversary of grant. No further
performance conditions apply; DABP awards
aresubject to continued employment only and
dividend equivalents may be paid on the deferred
shares on vesting. Of the 2023 bonus award,
56% and 46% of salary for each of Kiet Huynh
and Jonathan Davis will be deferred in shares for
three years under the Deferred Annual Bonus
Plan and are not subject to any additional
performance conditions. Of the above amounts,
Kiet Huynh will defer £337k and Jonathan Davis
will defer £178k. There were no DABP awards
made in 2023 with respect to the 2022
annualbonus.
LTIP awards vesting based on performance to 31 December 2023 (audited)
The LTIP rewards performance against the principal measures of Rotork’s long-term financial success. Performance is measured over a three-year period
using a combination of adjusted EPS, relative TSR compared to a peer group and economic profit growth. The economic profit metric measures the
post-tax profitability of the Group after a charge has been taken for the combined capital used (both debt and equity) within the business. The charge
iscalculated using the weighted average cost of capital basedon average capital employed in the period. In determining capital employed, cumulative
amortised goodwill and long-term pensions liabilities are adjusted for. Indetermining the economic profit, adjustments are made for restructuring costs
and benefits and also, when material, for M&A activity and exchange. Thetarget is set by using the latest long-term financial plan approved by the
Board. It targets arate of growth of the average economic profit over the three years of the plan over the three years preceding the plan period.
The measure captures the extent to which the business has earned a return above the cost of capital. It has been shown in many other capital-intense
businesses to drive improved decision making, particularly when evaluating large-scale investment decisions, and was introduced at Rotork in 2017.
The LTIP awards granted on 24 March 2021 had a performance period from 1 January 2021 to 31 December 2023 and were subject to the following
performance targets:
Measure Weighting Performance period Threshold target Stretch target (100% vesting) Performance outcome
Earnings per share
(i)
33% 01/01/21 – 31/12/23 9% (15% vesting) 35% EPS growth of 17.1% exceeded the
requirement of 9% growth for
threshold vesting but was insufficient
to meet the stretch target for maximum
payout. This resulted in 41.4% vesting
for this part of the award.
TSR relative to the
constituents of the FTSE
350 Industrial Goods
and Services Sector
33% 01/01/21 – 31/12/23 Median ranking
(25%vesting)
Upper quartile ranking
orabove
Rotork’s relative TSR ranking within
itscomparator group was insufficient
for this tranche to vest.
Economic profit growth 33% 01/01/21 – 31/12/23 Growth on three times
the2020 economic profit
(0% vesting)
26% growth on
threetimes the 2020
economicprofit
Economic profit declined over the
measurement period and did not
reachthe threshold level for payment.
(i) For performance between threshold and stretch, awards vest on a pro-rata basis.
During the three-year performance period, adjusted EPS grew by 17.1%. Relative TSR performance in the period was insufficient for vesting. Economic
profit growth (growth in profit ahead of the return demanded by the weighted average cost of capital) declined over the measurement period and did
not reach the threshold level for payment. The Remuneration Committee, therefore, approved the vesting of 13.8% of the shares awarded under the
2021 cycle as set out below. With respect to Kevin Hostetler, former CEO, under the terms of his agreement upon leaving Rotork, he was given good
leaver status for both his outstanding DABP awards and his remaining 2021 and 2022 LTIP awards. Upon the vesting of his 2021 LTIP award, he
willreceive the number of shares shown below which have been pro-rated up to his date of leaving Rotork, being 17 April 2022. Additional shares,
representing accrued dividends in the period, will be added upon vesting. Under the shareholding guidelines as set out under the Policy, Kevin will
berequired to retain the vested number of shares (net of tax and social security) for a further period of two years.
2021 LTIP Award
Grant date
Number of shares
under award
Number of
shares vesting
(i)
Number of
shares lapsing
Vesting/
lapse date
Kevin Hostetler
(i)
24 March 2021 119,593 16,504 103,089 24 March 2024
Kiet Huynh 24 March 2021 43,681 6,028 37,653 24 March 2024
Jonathan Davis 24 March 2021 169,899 23,446 146,453 24 March 2024
(i) The award to Kevin Hostetler was made as a conditional share award and was pro-rated to his Departure Date.
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Share awards granted in 2023 (audited)
LTIP awards (audited)
The following LTIP awards were made to the executive directors on 24 March 2023. These grants
were made at the levels permitted under the current Remuneration Policy.
Share
awards made
during 2023
(i)
Basis on which
awards made
Face value of
award (£)
(ii)
Percentage
vesting
for minimum
performance
(iii)
End of
performance
period Vesting date
Kiet Huynh 358,586 200%
ofsalary
1,099,998 13.3% 31 December
2025
24 March
2026
Jonathan Davis 211,978 175%
ofsalary
650,263 13.3% 31 December
2025
24 March
2026
(i) Awards to both Kiet Huynh and Jonathan Davis were made as nil-cost options.
(ii) The share price used to determine the number of shares under the awards was 307p, being the average share price
overthefive dealing days immediately prior to the date of the award.
(iii) Vesting if the minimum performance EPS, TSR, capital return (economic profit) and ESG conditions are achieved.
Theperformance measures are:
a 30% based on adjusted earnings per share – EPS growth must be at least 9% for 25% vesting, increasing on
astraight-line basis to full vesting for EPS growth of 35% and above;
b 30% based on total shareholder return – measured relative to the constituents of the FTSE 350 Industrial Goods and
Services Sector, 25% vesting for median performance, increasing on a straight-line basis to full vesting for upper quartile
performance and above;
c 30% based on economic profit – measures the profitability of the Group after a charge for the overall level of capital
(based on the total capital used and calculated using the weighted average cost of capital) is subtracted. It is measured
on a cumulative basis, over the three-year performance period. No pay-out will be received for a negative economic
profit. The threshold target (at which 0% vests) requires average economic profit over the three-year period to exceed
that generated in 2022 and the maximum target has been set such that it will require double digit growth in post-tax
profits alongside improved balance sheet efficiencies. Details of the exact targets are considered by the Remuneration
Committee to be commercially sensitive. However, full details of the targets and how economic profit has been
calculated will be disclosed on vesting; and
d 10% based on an absolute reduction in scope 1 and 2 CO
2
emissions with targets at least as demanding as the path
required to meet the published 2030 SBTi targets.
SIP share awards (audited)
In common with all eligible employees, UK-based executive directors receive an entitlement to
ordinary shares under the SIP. Under the SIP, an aggregate total of up to 4% of profits are distributed
to employees each year in the form of ordinary shares. The distribution is calculated by reference to
years of service and basic salary, capped at £3,600. Details of free share awards under the SIP made
to executive directors in 2023 are set out below.
Free share awards made during the year
Face value
of award
Date of grant Number Basis on which award made
Kiet Huynh 6 April 2023 1,151 Non-performance based £3,600
Jonathan Davis 6 April 2023 1,151 Non-performance based £3,600
The executive directors are also eligible to purchase monthly partnership shares under the SIP to
amaximum of £150 per month.
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Annual Report on Remuneration continued
Summary of outstanding share awards held by executive directors (audited)
Awards held at
31 December 2022
Granted
in the year
Lapsed in
the year
Awards exercised
in the year
Awards held at
31 December 2023 Performance period
Exercise
price Date of grant Vesting date End of holding period
Kiet Huynh
LTIP
(i)
60,713 — 60,713
(ii)
— — 1 Jan 2020–31 Dec 2022 — 7 April 2020 7 April 2023 7 April 2025
RSU
(iii)
30,356 — — 30,356 — 1 Jan 2020–31 Dec 2022 — 20 September 2021 7 April 2023 7 April 2025
LTIP
(i)
43,681 — — — 43,681 1 Jan 2021–31 Dec 2023 — 24 March 2021 24 March 2024 24 March 2026
LTIP
(i)
335,939 — — — 335,939 1 Jan 2022–31 Dec 2024 — 24 March 2022 24 March 2025 24 March 2027
LTIP — 358,586 — — 358,586 1 Jan 2023–31 Dec 2025 — 24 March 2023 24 March 2026 24 March 2028
SIP 1,232 — — 1,232 — N/A — 29 May 2020 29 May 2023 n/a
SIP 991 — — 991 N/A — 9 April 2021 9 April 2024 n/a
SIP 889 — — — 889 N/A — 6 April 2022 6 April 2025 n/a
SIP — 1,151 — — 1,151 N/A — 6 April 2023 6 April 2026 n/a
SAYE 1,411 — — — 1,411 N/A 255p 10 October 2019 1 June 2023 n/a
SAYE 9,201 — — — 9,201 N/A 195p 7 October 2022 1 June 2026 n/a
Total 484,413 359,737 60,713 31,588 751,849
Jonathan Davis
LTIP
(i)
14,219 — — — 14,219 1 Jan 2019–31 Dec 2021 — 16 May 2019 16 May 2022 16 May 2024
LTIP
(i)
198,300 — 198,300
(ii)
— — 1 Jan 2020–31 Dec 2022 — 7 April 2020 7 April 2023 7 April 2025
LTIP
(i)
169,899
(iv)
— — — 169,899 1 Jan 2021–31 Dec 2023 — 24 March 2021 24 March 2024 24 March 2026
LTIP
(i)
192,246
(iv)
— — — 192,246 1 Jan 2022–31 Dec 2024 — 24 March 2022 24 March 2025 24 March 2027
LTIP
(i)
— 211,978 — — 211,978 1 Jan 2023–31 Dec 2025 — 24 March 2023 24 March 2026 24 March 2028
DABP
(v)
26,744 — — 26,744 — N/A — 3 March 2020 3 March 2023 n/a
DABP
(v)
8,544 — — — 8,544 N/A — 8 March 2021 8 March 2024 n/a
SIP 1,367 — — 1,367 — N/A — 29 May 2020 29 May 2023 n/a
SIP 991 — — — 991 N/A — 9 April 2021 9 April 2024 n/a
SIP 1,091 — — — 1,091 N/A — 6 April 2022 6 April 2025 n/a
SIP — 1,151 — — 1,151 N/A — 6 April 2023 6 April 2026 n/a
Total 613,401 213,129 198,300 28,111 600,119
(i) Nil cost options.
(ii) Subject equally to EPS performance (9% to 35% growth), TSR performance relative to the FTSE 350 Industrial Goods and Services Sector (median to upper quartile) and capital return (economic profit) performance over the three-year performance period.
As none of the performance conditions were met, the 2020 LTIP award did not vest and all shares lapsed on 7 April 2023.
(iii) Restricted Stock Unit Awards (‘RSU Awards’) were granted on 21 September 2021 to Kiet Huynh prior to his appointment asan executive director. In accordance with the Remuneration Policy, as Kiet was an internal hire, any outstanding variable pay
awarded to him in his previous role was allowed to pay out according to its terms of grant. On 7 April 2023, the RSU award over 30,356 shares vested with an additional 778 shares representing dividend equivalents applied.
(iv) Subject equally to EPS performance (9% to 35% growth), TSR performance relative to the FTSE 350 Industrial Goods and Services Sector (median to upper quartile), capital return (economic profit) and, in the case of the 2023 LTIP award, ESG performance over the
three-year performance period. Anyvesting awards will also be subject to a two-year post-vesting holding period during which time they may not be sold.
(v) Conditional share awards.
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Strategic report Corporate governance Financial statements
Statement of directors’ shareholding and share interests (audited)
The table below shows total shareholdings of the current directors as at 31December 2023.
Beneficially
owned shares
(i)
Unvested
DABP Awards
(ii)
SIP
(iii)
% of salary
shareholding
achieved
(iv)
Unexercised/
Unvested
LTIP Awards
subject to
performance
targets
Executive directors
Kiet Huynh 31,731 — 3,031 18% 738,206
Jonathan Davis 471,847 8,544 3,233 388% 588,342
Non-executive directors
Ann Christin Andersen 2,000 — — n/a —
Tim Cobbold — — — n/a —
Peter Dilnot 10,000 — — n/a —
Karin Meurk-Harvey 2,000 — — n/a —
Janice Stipp — — — n/a —
Dorothy Thompson 20,000 — — n/a —
(i) Includes shares held by connected persons, SIP partnership shares, SIP free shares released from the three-year trust period
and vested LTIP awards which are subject to the two-year holding period.
(ii) DAPB awards attract an entitlement to accrued dividends during the holding period but are only available upon release.
The satisfaction of the entitlement can be in shares or cash as determined by the Remuneration Committee at the time
ofthe release confirmation.
(iii) SIP free awards held in trust.
(iv) The share price used to determine the percentage of the shareholding of salary achieved is 313.7p, being the 12 month
average share price as at 31 December 2023. The shareholding guideline for the executive directors is 350% of salary for the
Chief Executive and 300% of salary for the Group Finance Director to be achieved within five years. A post-cessation holding
requirement of 200% of salary was introduced under the Policy and is applicable only to share-based awards granted after
theapproval of the Policy on 24 April 2020. In order to ensure adherence to the post-cessation holding requirements,
executive directors will, as a condition of receiving any and each share-based award, formally accept the post-cessation
requirements inwriting.
There has been no change in the directors’ interests in the ordinary share capital of the Company
between 31 December 2023 and 4 March 2024, except in the case of Jonathan Davis’s monthly
purchases of partnership shares under the SIP.
TSR performance graph
This graph shows the value, by 31 December 2023, of £100 invested in Rotork plc on 31 December 2013,
compared with the value of £100 invested in the FTSE 350 Industrial Goods & Services Index on the
same date. This index has been chosen as a comparator as it represents companies with similar
business operations to the Company, and is an index of which Rotork is a constituent.
£50
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
£100
£150
£200
£250
Rotork Plc
FTSE 350 Industrial Goods & Services Index
Historic Chief Executive remuneration table
Year Chief Executive
Chief Executive
single figure
remuneration
(£000s)
Annual cash bonus
as a percentage
of maximum
opportunity
LTIP vesting rate
as a percentage
of maximum
opportunity
2023 Kiet Huynh 1,583 97.5% n/a
2022 Kevin Hostetler/Kiet Huynh
(i)
1,114 46.2% 0%
2021 Kevin Hostetler 1,380 48.7% 9.4%
2020 Kevin Hostetler 2,203 69.7% 84.4%
2019 Kevin Hostetler 1,422 82.0% n/a
2018 Kevin Hostetler
(ii)
1,193 90.9% n/a
2018 Martin Lamb
(iii)
353 n/a n/a
2017 Martin Lamb
(iii)
282 n/a n/a
2017 Peter France
(iv)
681 72.0% 0%
2016 Peter France 835 45.5% 0%
2015 Peter France 696 23.4% 0%
2014 Peter France 1,092 66.0% 37.0%
2013 Peter France 1,452 94.4% 67.0%
(i) Kiet Huynh was appointed to the role of Chief Executive Officer on 10 January 2022. The CEO single figure remuneration
for 2022 includes both the remuneration for Kevin Hostetler from 1 to 10 January 2022 of £27,000 and for Kiet Huynh from
10 January to 31 December 2022 of £1,087,000. The annual cash bonus figure is an average of the bonus for Kiet Huynh
of46.8% and for Kevin Hostetler of 45.6%.
(ii) Kevin Hostetler was appointed to the role of Chief Executive Officer on 12 March 2018 and stood down from the Board
on10 January 2022.
(iii) Martin Lamb held the role of Executive Chairman from 28 July 2017 to 12 March 2018 and received an additional fixed
remuneration of £55,000 per month on top of his annual Chairman’s fee during this period.
(iv) Peter France resigned as Chief Executive Officer and stood down from the Board on 27 July 2017.
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Annual Report on Remuneration continued
Percentage change in remuneration of directors
The table below shows the percentage change in remuneration (based on salary/fee, benefits and bonus) between 2023 and 2019 of the directors in the Group compared to the percentage change for the
average UK employee. Dorothy Thompson, Karin Meurk-Harvey and Janice Stipp were appointed to the Board in December 2022, September 2021 and December 2020, respectively. Martin Lamb stepped
down from the Board on 28 April 2023.
Percentage change FY23 to FY22 Percentage change FY22 to FY21 Percentage change FY21 to FY20 Percentage change FY20 to FY19
Role Salary/Fee Benefits Bonus Salary/Fee Benefits Bonus Salary/Fee Benefits Bonus Salary/Fee Benefits Bonus
Executive directors
Kiet Huynh Chief Executive Officer 11.5 1.5 132.0 N/A N/A N/A N/A N/A N/A N/A N/A N/A
Jonathan Davis Group Finance Director 4.6 -4.9 128.9 3.1 1.8 -6.2 1.9 0 -10.1 0.7 0 -14.8
Non-executive directors
Martin Lamb
(i)
Chairman -66.0 N/A N/A 3.1 N/A N/A 1.9 N/A N/A 0.0
Dorothy Thompson
(ii)
Chair 3817 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Ann Christin Andersen Non-executive Director 4.5 N/A N/A 3.1 N/A N/A 1.9 N/A N/A 0.0
Tim Cobbold Non-executive Director 4.5 N/A N/A 3.1 N/A N/A 1.9 N/A N/A 0.0 N/A N/A
Peter Dilnot Non-executive Director 4.5 N/A N/A 3.1 N/A N/A 1.9 N/A N/A 0.0 N/A N/A
Karin Meurk-Harvey Non-executive Director 4.5 N/A N/A 260 N/A N/A N/A N/A N/A N/A N/A N/A
Janice Stipp Non-executive Director 4.5 N/A N/A 1.9 N/A N/A 1.9 N/A N/A N/A N/A N/A
All permanent employees 8.3 14.1 116.4 5.7 13.6 49.9 4 2.6 -16.6 0.3 3.7 1.0
(i) Martin Lamb stepped down from the Board on 28 April 2023; the pro rata fee increase is 4.5%.
(ii) Dorothy Thompson joined the Board as Non-executive Director and Chair Designate in December 2022; the pro rata fee increase is 229%. The increase in the Chair fee applied on 1 April 2023 was 5%.
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Percentage change in remuneration of directors continued
Relative importance of spend on pay
The following table shows actual expenditure of the Group and change in spend between current and
prior financial periods on remuneration paid to all employees against distributions to shareholders.
2023 2022
Percentage
change
Employee remuneration (£000s) 152,679 127,311 19.9%
Dividends (£000s)
(i)
61,940 57,610 7.5%
(i) Dividends paid were the only distributions to shareholders during the year.
CEO pay ratio disclosure
The table below sets out Rotork’s CEO pay ratio for the 2018 – 2023 financial years.
Year Method
25th percentile
pay ratio
Median
pay ratio
75th percentile
pay ratio
2023 Option B 43:1 34:1 25:1
2022 Option B 36:1 33:1 20:1
2021 Option B 43:1 38:1 28:1
2020 Option B 45:1 37:1 28:1
2019 Option B 48:1 43:1 27:1
2018 Option B 49:1 45:1 33:1
Option B has been used for the calculation of the pay ratio. Under this method, the latest gender pay
gap data has been used to identify on an indicative basis three UK employees at 25th, median and
75th percentile. This methodology has been chosen as the data is readily available and avoids the
challenge in collecting and verifying accurately the variable pay elements for all UK employees across
many subsidiaries. The figure for 2022 is lower than previous periods due to the starting salary of
theincumbent CEO who was appointed in January 2022. This is expected to rise to the level of his
immediate predecessor’s 2021 salary, plus the average increase for the UK workforce over this period.
To provide further context, the table below shows the CEO and the employee percentile pay used
todetermine the 2023 pay ratios. The main changes are due to the variable pay outturns in the last
few years.
Year
CEO
£000
25th percentile
£000
Median
£000
75th percentile
£000
Total salary
(i)
600 25 36 49
Total remuneration (single figure)
(i)
1,583 37 46 64
(i) Full time equivalent.
Statement of voting at general meeting
The Remuneration Committee is committed to ongoing shareholder dialogue and takes an active
interest in votingoutcomes. Where there are substantial votes against resolutions in relation to
Directors’ remuneration, the Company seeks to understand the reasons for any such vote and
willreport any actions in response to it. The following table sets out actual voting at the AGM held
on30April 2023 in respect of both the current Remuneration Policy and the Annual Report on
Remuneration for the year ended 31 December 2022.
Resolution Votes cast ‘for’ %
Votes cast
‘against’ %
Votes
‘withheld’ %
To approve the
RemunerationPolicy 683,772,096 98.04 13,640,012 1.96 410,841 0
To approve the Annual Report
on Remuneration 2022 679,150,943 97.82 15,105,911 2.18 3,566,095 0
Advisers to the Remuneration Committee
Korn Ferry has acted as adviser to the Committee since July 2020. Korn Ferry is a member of the
Remuneration Consultants’ Group and a signatory to its Code of Conduct. The Committee keeps the
independence of the advice provided under review and remains satisfied that Korn Ferry is sufficiently
independent to act as remuneration adviser to the Remuneration Committee. Korn Ferry provides
additional advice to the Company.
In 2023, the Company paid £122,400 (2022: £177,230) to Korn Ferry for services to the Remuneration
Committee. Figures exclude VAT and disbursements.
Annual Report on Remuneration continued
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Annual Report on Remuneration continued
How we will operate the Policy in 2024
Salary
Kiet Huynh’s salary will increase to £682,950, effective from 1 April 2024, an increase of 50% of the difference between his current salary and the outgoing CEO’s 2021 salary plus
4.2% (average workforce increase in the UK of 4.4%, excluding promotions). The Committee is aware that this total results in an increase ahead of that for the wider workforce in the
UK but it sees it as fulfilling its commitment made to the CEO on appointment and believes that the increase is fully merited.
Jonathan Davis will receive a basic salary increase of 4.2% (average workforce increase in the UK of 4.4%, excluding promotions), taking his annual salary to £406,480, effective from
1April 2024. He will continue to receive this monthly up until his Retirement Date of 10 September 2024.
As the incoming CFO, Ben Peacock will receive an annual salary of £430,000 with effect from his Commencement Date of 11 March 2024.
Benefits
Benefits comprise a car allowance, personal accident and private medical insurance and life assurance.
Pension
The pension allowance for the executive directors is aligned to the contribution available to the majority of the UK workforce. As at the date of this report, this is 10.24%.
Annual bonus
In line with the current Remuneration Policy, the maximum opportunity for Kiet Huynh will be 150% of salary. For Jonathan Davis and Ben Peacock, the maximum opportunity will each
be 125% of salary and will be pro-rated for time served accordingly. Any bonus earned above 60% of the maximum opportunity will be deferred in shares for three years. Bonuses will
be based on:
• Adjusted operating profit Performance (60% of opportunity); the plan is based on the 2024 Budget approved by the Board and the challenging nature of the targets and stretch
elements will be maintained.
• Cash Generation (15% opportunity); the target to achieve maximum outturn will remain at 110%, reflecting the value of a sustained focus on cash generation. The Growth
Acceleration Programme is funded from Rotork’s own cash resources.
• ESG (10% of opportunity) – measures will be aligned to the three pillars of the ESG strategy. Half of the opportunity will be based on a TRIR health and safety measure with
athreshold set at 0.26 and a maximum at 0.23. The remaining 5% will be split across quantitative targets set to cover culture and engagement scores and qualitative targets focusing
on environmental innovation, particularly in relation to products and on customer engagement on sustainability issues.
• Strategic Personal Objectives (15% of opportunity) – these will be set with a focus on the continued strategic development of the business with a focus on continuing delivery of the
Growth+ Programme and new IT systems.
The specific targets relating to the bonus have not been disclosed as they are considered by the Remuneration Committee to be commercially sensitive but full details will be given on a
retrospective basis in next year’s report. The executive directors will be invited to participate and must agree in writing to the conditions pertaining to the Annual Bonus Plan, including
those relating to the post-cessation of employment shareholding arrangements that will apply to any bonus deferred in shares.
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Strategic report Corporate governance Financial statements
LTIP
The LTIP maximum award levels for 2024 will be 200% of salary for Kiet Huynh and 175% of salary for Ben Peacock. Jonathan Davis will not be granted any LTIP awards in 2024.
Theawards will be subject to the following performance conditions:
• 30% will be based on adjusted EPS. Adjusted EPS growth must be at least 9% for 25% vesting, increasing on a straight-line basis to full vesting for adjusted EPS growth of 35% and
above. The targets will be based on adjusted EPS (i.e. excluding the impact of any material restructuring costs). However, the Committee will use its discretion to increase the targets
as appropriate, to take into account the Board’s expected return on any restructuring investment during the period.
• 30% will be based on relative TSR performance with 25% vesting at median increasing to full vesting for upper quartile performance or above.
• 30% will be based on economic profit. No payout will be received for a negative economic profit. The threshold target (0% vesting) will require the cumulative economic profit over
the three-year period to exceed that generated in the three year period to 2023 and the maximum target has been set such that it will require double-digit growth in post-tax profits
alongside improved balance sheet efficiencies. Similar to EPS targets, these targets may be adjusted upwards to take into account the Board’s expected return on any restructuring
investment during the period. Details of the exact targets are considered by the Remuneration Committee to be commercially sensitive at the current time. However, full details of
thetargets and how economic profit has been calculated will be disclosed on vesting.
• 10% will be based on an absolute reduction in scope 1 and 2 CO
2
emissions with targets at least as demanding as the path required to meet the published 2030 SBTi target.
The awards will be granted following the publication of the 2023 results and will be made subject to executive directors agreeing in writing to all the conditions under which the awards
are made, including the post-cessation of employment shareholding arrangements that will apply to these awards. The executive directors will be required to retain any shares vesting
under the awards (net of tax) until the fifth anniversary of grant.
Shareholding
guidelines
The executive directors are required to build and maintain a shareholding equivalent to their total variable pay opportunity (being 350% and 300% for the Chief Executive Officer and
Chief Financial Officer respectively) to be achieved within five years.
A requirement to hold shares for a period of two years post-cessation will apply, as described in the Policy, and is applicable only to share based awards made after the Policy was
approved on 24 April 2020. In order to ensure adherence to the post-cessation holding requirements, executive directors will, as a condition of receiving any and each share-based
award, formally accept the post-cessation requirements in writing going forwards.
Non-executive
director fees
An increase of 4.2% to both the Chair’s fee and the base Board fee has been approved (average increase for the UK workforce of 4.4%, excluding promotions).
Chair: £271,230, effective 1 April 2024;
Base Board fee: £64,800, effective 1 April 2024.
Increases have been approved to the supplementary fees payable to those directors with additional responsibilities:
Additional fee for chairing the Audit Committee: £14,000;
Additional fee for chairing the Remuneration Committee: £14,000;
Additional fee for the role of Senior Independent Director: £10,590;
Additional fee for chairing the Safety and Sustainability Committee: £10,000; and
Additional fee for undertaking the role of Non-executive director for Workforce Engagement: £10,000.
On behalf of the Board
Tim Cobbold
Chair of the Remuneration Committee
4 March 2024
Annual Report on Remuneration continued
How we will operate the Policy in 2024 continued
rotork.com Rotork Annual Report 2023153
Directors’ Remuneration report continued
Strategic report Corporate governance Financial statements
Directors’ report
The directors present their report which
incorporates the management report required
under the Disclosure Guidance and Transparency
Rules (‘DTRs’) for listed companies and the audited
accounts for the year ended 31December 2023
as set out on pages 167 to 204. In compiling
thisreport, the directors have consulted with
themanagement of the Group.
Information required in the report of the
directors set out in the Strategic Report
Information relating to the likely future
developments of the Company and its
subsidiaries and information relating to the
research and development activities of the
Company and its subsidiaries, together with a
description of the principal risks and uncertainties
that they face, is set out in the Strategic Report
on pages 1 to 96 and is incorporated into this
Directors’ Report by reference.
Corporate governance statement and
TCFDdisclosures
The corporate governance statement, required
under Rule 7 of the DTRs, explaining how Rotork
complies with the Code is set out on page 100
and is incorporated into this Directors’ Report by
reference. A description of the composition and
operation of the Board and its Committees is set
out on pages 102 to 134 and is incorporated
into this Directors’ Report by reference.
Rotork’s statement of compliance in implementing
the recommendations of the Task Force on
Climate-related Financial Disclosures (TCFD),
required to be made under Listing Rule 9.8.6(8),
is set out on page 100.
Additional disclosures
The Strategic Report can be found on pages 1 to
96, and encompasses our corporate responsibility
report. A complete list of the Group’s subsidiaries
has been included on pages 202 to 204 to
comply with Section 409 of the Companies
Act2006 (the ‘Act’). Other information that is
relevant tothis report, and is incorporated by
reference, including information required in
accordance with the Act and Listing Rule 9.8.4R,
can be located as follows:
Listing Rule
Statement Detail Page reference
9.8.4R(4) Details of
long-term
incentive schemes
Note 26 to
thefinancial
statements and
the Directors’
Remuneration
Report on pages
129 to 153.
9.8.4R(12) Shareholder
waivers of
dividends
Note 18 to
thefinancial
statements
9.8.4R(13) Shareholder
waivers of
futuredividends
Note 18 to
thefinancial
statements
9.8.4R(1-2),
(5-11) and (14)
Not applicable N/A
Principal activity
The Company manufactures industrial flow
control equipment and instrumentation for oil
and gas, water and wastewater, power, chemical,
process and industrial applications. It operates
globally serving customers in 170 countries
through a network of offices and manufacturing
facilities. The Company employs circa 3,300
employees worldwide and is headquartered
in Bath, UK.
Company status
Rotork plc is incorporated as a public limited
company and is registered in England and Wales
with the registered number 00578327. Its registered
office is Rotork House, Brassmill Lane, Bath, BA1
3JQ. It has a premium listing on the London
Stock Exchange Main Market for listed securities
(LON:ROR) and is a constituent member of
theFTSE 250 Index. Our registrars are Equiniti
Limited, located at Aspect House, Spencer Road,
Lancing, West Sussex, BN99 6DA.
Results and dividends
The results for the year ended 31 December 2023
are set out in the financial statements on pages
167 to 204. The Board has recommended a final
dividend for the year of 4.65p per ordinary share
(2022: 4.30p) which, together with the interim
dividend of 2.55p per ordinary share paid on
22September 2023, gives a total dividend forthe
year of 7.20p per ordinary share (2022: 6.70p per
ordinary share). Subject to shareholder approval,
the final dividend will be paid on 24May 2024 to
ordinary shareholders on the register at the close
of business on 19April 2024.
Directors
The directors who served during the year and
their biographies and other details, are set out
on pages 102 and 103. Dorothy Thompson, who
was appointed as non-executive director on1
December 2022, succeeded Martin Lamb as
Chair following his stepping down from the
Board at the conclusion of the 2023 Annual
General Meeting after nine years of service.
Peter Dilnot stepped down from the Board
andas Senior Independent Director on
31December 2023 after six years with
TimCobbold taking over as Senior Independent
Director from 1January 2024. After over five
years, Ann Christin Andersen will retire from
theBoard on 30 April 2024 upon the conclusion
of the AGM. Andrew Heath and Vanessa Simms
were appointed non-executive directors with
effect from 1 April 2024 and 21 June 2024
respectively. Ben Peacock is joining the Board as
executive director and Chief Financial Officer on
11 March 2024 to succeed Jonathan Davis who
steps down from the Board on 30April 2024
after 21 years withthe Company and 14 years
asan executivedirector.
Directors’ indemnification and insurance
The Company’s Articles of Association provide
for the directors and officers of the Company
tobe appropriately indemnified, subject to the
provisions of the Act. The Company has granted
indemnities to each director in respect of any
liabilities incurred in relation to acts or omissions
arising in the ordinary course of their duties, but
only to the extent permitted by law. The Company
also purchases and maintains insurance for the
directors and officers of the Company in respect
of potential legal action instigated against its
directors, as permitted by Section 233 of the Act.
Powers of the directors
As set out in the Company’s Articles of
Association, the business of the Company is
managed by the Board which may exercise
allthe powers of the Company.
Appointment and removal of directors
The Board may appoint a director, either to fill a
vacancy or as an additional director. Any director
appointed by the Board must retire at the next
AGM of the Company and put themselves
forward for re-appointment by the shareholders.
In accordance with the recommendations of
theCode, each member of the Board submits
themself for re-election on an annual basis.
In addition to any power of removal conferred
by the Companies Act 2006, the Company
mayby ordinary resolution remove any director
before the expiration of their period of office
and may, subject to the Articles of Association,
by ordinary resolution appoint another person
who is willing to act as a director in their place.
Page title
Strategic report Corporate governance Financial statements
Rotork Annual Report 2023 rotork.com154
Directors’ report
Strategic report Corporate governance Financial statements
Committed to the highest standards
ofethical behaviour
High ethical standards are fundamental to
theway in which we do business. Respecting
internationally proclaimed human rights,
promoting an open and honest culture, having
azero-tolerance approach to bribery and
corruption worldwide, and selecting suppliers
with sound reputations in the marketplace are
important principles that the Group adheres to.
Code of Conduct
The latest version of our Code of Conduct was
introduced in 2019 and sets out the standards
ofbehaviour that Rotork expects from anyone
acting on Rotork’s behalf. This is supplemented
by a range of additional policies that sit beneath
the Code of Conduct, covering Confidentiality,
Conflicts of Interest, Speak-Up, Fair Competition,
Gifts and Hospitality, Anti-Bribery and Corruption,
Data Protection, Modern Slavery and Trade
Sanctions. A high level summary of the main
policy is set out on pages 49 and 50.
Our Suppliers’ Code of Conduct can be viewed
on our website at www.rotork.com/en/about-us/
terms-and-conditions/suppliers/code-of-conduct
and is available in six languages.
Whistleblowing
Rotork encourages the reporting of any
suspected wrongdoing through its Speak-Up
line, details of which can be found on the
Rotorkwebsite at www.rotork.com/en/
documents/publication/6675. The Speak-Up
policy gives the workforce and third parties, e.g
suppliers, various ways to alert management and
directors to any concerns, including suspected
wrongdoing. An independent anonymous
Speak-Up line is provided to assist infacilitating
the reporting of any concerns confidentially.
TheCompany has a strict no-retaliation policy
inplace to protect thoseraising concerns.
All Speak-Ups are investigated thoroughly,
however communicated. The Board of directors
receive updates on the nature and number of
Speak-Up concerns the Company has received.
Anti-Bribery and Corruption
Rotork has a zero-tolerance policy to bribery and
corruption worldwide, irrespective of country or
business culture. Both our Code of Conduct and
Anti-Bribery and Corruption Policy make it
clearthat our employees will never offer, pay
orsolicit bribes in any form. Our Group Gifts
andHospitality Policy clarifies where gifts and
hospitality are acceptable and the actions that
our staff are required to take when they intend
to offer or accept them.
As part of our process for the appointment
ofour agents, controls are in place to monitor
how they operate in accordance with our Code
of Conduct.
Modern Slavery Act
In February 2024, the Board approved an
updated Modern Slavery Act Statement
whichcan be found on the Rotork website
atwww.rotork.com/en/investors/modern-
slavery-statement. The updated statement
wasconsidered to reflect Rotork’s approach to
identifying, monitoring and eradicating human
slavery and trafficking in its business and supply
chain, together with the improvements made
during the year.
FTSE4Good
Rotork plc is a constituent of the FTSE4Good
equity index series which is designed to facilitate
investment in companies that meet globally
recognised corporate social responsibility
standards. We continue to meet the standards
set by FTSE4Good. More detail regarding our
corporate responsibility is given on pages 32
to62 of the Strategic Report.
Charitable donations
Rotork supports its chosen charities, Pump Aid,
Renewable World and WeForest. In addition, a
variety of local donations are made to charitable
causes relevant to communities around Rotork’s
operating sites. Donations are also made to the
Rotork Benevolent Support fund, a charity that
was established to provide short-term financial
support to employees, and ex-employees, and
their families facing financial hardship with the
charity’s priorities having been expanded to
include hardship being faced as a result of the
cost of living crisis. Further details are given on
page 62.
Political donations or political
expenditureincurred
No political donations were made, or political
expenditure incurred, during the year. The Group
has a policy of not making political donations
inany part of the world and this will continue.
However, it is possible that certain routine
activities undertaken by the Company and its
subsidiaries might unintentionally fall within the
wide definition of matters constituting political
donations and expenditure in the Act. Accordingly,
the Company is seeking a renewal of authority
at the 2024 AGM to ensure that it does not
inadvertently commit any breaches of the Act
through the undertaking of routine activities
which would not normally be considered to
comprise political donations or expenditure.
Further details of the proposed ordinary
resolution are provided within the AGM Notice.
Use of financial instruments
An explanation of the Group policies on the
useof financial instruments and financial risk
management objectives are contained in
note27to the financial statements.
Existence of branches outside the UK
The Company has no branches outside of
theUK.
Share capital
Details of the Company’s share capital including
the rights and obligations attached to each class
of shares and the ordinary shares issued during
2023 are summarised in note 18 of the financial
statements. Ordinary shares of 0.5p each represent
over 99.9% of the Company’s total share capital
and £1 non-redeemable preference shares
represent less than 0.1% of the Company’s
totalshare capital.
There are no securities of the Company carrying
special rights with regard to the control of
theCompany.
At the Company’s last AGM held on 28 April 2023,
the shareholders authorised the Company to
make market purchases of ordinary shares
limited to just under approximately 10% of its
issued ordinary share capital at that time and
ofcertain issued preference shares, and to
allotshares within certain limits approved by
shareholders. These authorities expire at the
2024 AGM and appropriate renewals will
besought.
JTC Employer Solutions Limited is a shareholder
which acts as the trustee of Rotork’s Employee
Benefit Trust (‘EBT’). It is used to purchase
Company shares in the market from time to
timeand hold them for the benefit of employees,
including satisfying outstanding awards under
the Company’s various employee share plans.
The EBT purchased a total of 773,000 shares
during the year for an aggregate consideration
of £2,444,000 (including dealing costs) and
released 1,038,000 shares to satisfy share plan
awards. As at 31 December 2023, the EBT held
1,566,000 Rotork plc ordinary shares (0.18%)
ofthe issued share capital) in trust. Adividend
waiver is in place from the trustee inrespect of
the dividends payable by the Company on the
shares held in the EBT. Furtherdetails can be
found in note 18 to thefinancial statements.
rotork.com Rotork Annual Report 2023155
Directors’ report continued
Strategic report Corporate governance Financial statements
Share capital continued
The Company’s Articles of Association contain
customary restrictions on the transfer of shares
as applicable only in certain limited circumstances
(e.g. in relation to transfers to a minor). Save for
those provisions, there are no restrictions on the
transfer of ordinary shares in the capital of the
Company other than certain restrictions which
may be required from time to time by law, for
example, insider trading law. In accordance with
the Company’s share dealing code, directors and
certain employees are required to seek the prior
approval of the Company to deal in its shares.
The Company is not aware of any agreements
between shareholders that may result in restrictions
on the transfer of securities and/or voting rights.
The Company’s Articles of Association contain
limited restrictions on the exercise of voting
rights (e.g. in relation to disenfranchised shares
following the issue of a notice to shareholders
under Section 793 of the Companies Act 2006).
The Company’s share schemes each contain
provisions providing voting rights to the
schemetrustee.
Amendments to the Company’s Articles
ofAssociation
The Company’s Articles of Association may only
be amended by special resolution at a general
meeting of the shareholders and were last
updated and approved by shareholders at the
AGM held on 30 April 2021.
Significant agreements – change ofcontrol
The Company is not aware of any significant
agreements to which it is party, that take effect,
alter or terminate upon a change of control of
the Company following a takeover. There are
noagreements between the Company and
itsdirectors or employees that provide for
compensation for loss of office or employment
that occurs because of a takeover bid, except
that provisions of the Company’s share schemes
and plans may cause options and awards
granted to employees under such schemes
andplans to vest on a takeover.
Greenhouse gas emissions
The disclosures concerning greenhouse gas
emissions required by law are set out in the
keyperformance indicators on page 11.
Disabled persons and employee engagement
The disclosures concerning the Group’s policies
on the employment of disabled persons and
how we engage with our employees are set
outon pages 58 to 59.
Engagement with suppliers and customers
For details on how we have engaged with our
suppliers and customers, see pages 110 and 112.
Relations with shareholders
The Board supports the aims of the Code
andthe UK Stewardship Code to promote
engagement and interaction between listed
companies and their major shareholders.
The Board welcomes the opportunity for
investors and shareholders to engage directly
with the Chair and Senior Independent Director
and also with the Chief Executive Officer and
Group Finance Director. Information on how the
Board has engaged with its shareholders is set
out on page 111. A range of online and face-to-face
investor relations events following the publication
of the full-year and half-year results have been
scheduled for 2024.
Substantial shareholders
As at 31 December 2023, the Company had
been notified under DTR5 of the following
interests in its shares representing 3% or more
of the voting rights in its issued share capital.
There were no changes in interests in
sharesnotified to the Company between
31December 2023 and 4March 2024.
Identity
Number of voting
rights (direct
and indirect)
% of
voting rights
Liontrust
Investment
Partners, LLP
51,653,156 6.00
Blackrock, Inc 48,858,420 5.68
Disclosure of information to the auditor
The directors who held office at the date of
approval of this Directors’ Report confirm that,
so far as they are each aware, there is no relevant
audit information of which the Company’s
auditor is unaware, and each director has taken
all the steps that they ought to have taken as
adirector to make themselves aware of any
relevant audit information and to establish that
the Company’s auditor is aware of that information.
‘Going concern’ basis of preparation
After making enquiries, the directors have
areasonable expectation that the Group has
adequate resources to continue in operational
existence for the foreseeable future. For this
reason, they continue to adopt the going
concern basis in preparing the financial
statements. In forming this view, the directors
have considered trading and cash flow forecasts,
financial commitments, the significant order
book with customers spread across different
geographic areas and industries and the
significant net cash position. For further
information see pages 64 to 80.
Viability statement
In line with the Code, the directors have
carriedout a rigorous review of the prospects
ofthe current business, and its ability to meet
itsliabilities through to at least the end of
December 2026. For further information,
seepage 80 which is incorporated into
thisDirectors’ Report by reference.
Post-balance sheet events
There have been no material post-balance sheet
events for the year ended 31 December 2023.
Annual General Meeting
The AGM will be held on 30 April 2024.
Fulldetails of the resolutions to be proposed
atthe AGM, as well as shareholders’ rights
withrespect to attendance, participation in the
meeting and the process for submission of proxy
votes in advance of the meeting, are set out in
the Notice of AGM.
Additional information for shareholders can be
found on the Rotork website at www.rotork.com.
External auditor
Following the conclusion of an external audit
tender process (described in detail on page 124)
and upon the recommendation of the Audit
Committee and approval of the Board, a
resolution to appoint KPMG LLP as auditor
toreplace Deloitte LLP will be proposed at the
forthcoming AGM, together with a resolution
toauthorise the Audit Committee to determine
its remuneration.
The Directors’ Report was approved by the
Board on 4 March 2024.
By order of the Board
Stuart Pain
Group General Counsel & Company Secretary
4 March 2024
Page title
Strategic report Corporate governance Financial statements
Rotork Annual Report 2023 rotork.com156
Directors’ report continued
Strategic report Corporate governance Financial statements
Statement of directors’ responsibilities for preparing
the Annual Report andfinancial statements
Directors’ responsibilities
The directors are responsible for preparing the
Annual Report and the financial statements in
accordance with applicable law and regulations.
Company law requires the directors to prepare
financial statements for each financial year.
Under that law, the directors are required to
prepare the Group financial statements in
accordance with UK-adopted International
Accounting Standards. The directors have also
chosen to prepare the parent company financial
statements in accordance with Financial Reporting
Standard 101 Reduced Disclosure Framework.
Under company law, the directors must not
approve the financial statements unless they are
satisfied that they give a true and fair view of
the state of affairs of the Company and of the
profit or loss of the Company for that period.
Inpreparing these financial statements,
International Accounting Standard 1 requires
that directors:
• properly select and apply accounting policies;
• present information, including accounting
policies, in a manner that provides
relevant,reliable, comparable and
understandable information;
• provide additional disclosures when
compliance with the specific requirements
inIFRSs are insufficient to enable users
tounderstand the impact of particular
transactions, other events and conditions
onthe entity’s financial position and financial
performance; and
• make an assessment of the Company’s ability
to continue as a going concern.
The directors are responsible for keeping
adequate accounting records that are sufficient
to show and explain the Company’s transactions
and disclose with reasonable accuracy at any
time the financial position of the Company and
enable them to ensure that the financial statements
comply with the Companies Act 2006. They are
also responsible for safeguarding the assets of
the Company and hence for taking reasonable
steps for the prevention and detection of fraud
and other irregularities.
The directors are responsible for the maintenance
and integrity of the corporate and financial
information included on the Company’s website.
Legislation in the United Kingdom governing
thepreparation and dissemination of financial
statements may differ from legislation in
otherjurisdictions.
Directors’ responsibility statement
pursuant to the Disclosure Guidance
andTransparency Rules
Each of the currently serving directors, whose
names and functions are listed on pages 102
and 103 confirm that, to the best of each
person’s knowledge and belief:
• the financial statements, prepared in
accordance with the applicable set of
accounting standards, give a true and fair
view of the assets, liabilities, financial position
and profit of the Group and Company;
• the Report of the Directors includes a fair
review of the development and performance
of the business and the position of the Group
and Company, together with a description of
the principal risks and uncertainties that they
face; and
• having taken advice from the Audit Committee,
the Annual Report and financial statements,
taken as a whole, is fair, balanced and
understandable and provides the information
necessary for shareholders to assess the
Company’s performance, business model
andstrategies.
Kiet Huynh
Chief Executive Officer
4 March 2024
rotork.com Rotork Annual Report 2023157
Statement of directors’ responsibilities
Strategic report Corporate governance Financial statements
Contents
159 Independent auditor’s report to
themembers of Rotork plc
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 and
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
Rotork Annual Report 2023 rotork.com158
Strategic report Corporate governance Financial statements
Financial
statements
Report on the audit of the financial statements
1. Opinion
In our opinion
• the financial statements of Rotork plc (the ‘parent company’) and its subsidiaries (the
‘group’) give a true and fair view of the state of the group’s and of the parent company’s
affairs as at 31 December 2023 and of the group’s profit for the year then ended;
• the group financial statements have been properly prepared in accordance with United
Kingdom adopted international accounting standards;
• the parent company financial statements have been properly prepared in accordance with
United Kingdom Generally Accepted Accounting Practice, including Financial Reporting
Standard 101 “Reduced Disclosure Framework”; and
• the financial statements have been prepared in accordance with the requirements of the
Companies Act 2006.
We have audited the financial statements which comprise:
• the consolidated income statement;
• the consolidated statement of comprehensive income;
• the consolidated and parent company balance sheets;
• the consolidated and parent company statements of changes in equity;
• the consolidated statement of cash flows; and
• the related notes 1 to 31, and (a) to (i).
The financial reporting framework that has been applied in the preparation of the group financial
statements is applicable law and United Kingdom adopted international accounting standards.
Thefinancial reporting framework that has been applied in the preparation of the parent company
financial statements is applicable law and United Kingdom Accounting Standards, including FRS 101
“Reduced Disclosure Framework” (United Kingdom Generally Accepted Accounting Practice).
2. Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK))
andapplicable law. Our responsibilities under those standards are further described in the auditor’s
responsibilities for the audit of the financial statements section of our report.
We are independent of the group and the parent company in accordance with the ethical requirements
that are relevant to our audit of the financial statements in the UK, including the Financial Reporting
Council’s (the ‘FRC’s’) Ethical Standard as applied to listed public interest entities, and we have fulfilled
our other ethical responsibilities in accordance with these requirements. The non-audit services provided
to the group and parent company for the year are disclosed in note 9 to the financial statements. We
confirm that we have not provided any non-audit services prohibited by the FRC’s Ethical Standard to
the group or the parent company.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
3. Summary of our audit approach
Key audit matters
The key audit matter that we identified in the current year was the
timing of revenue recognition, which had a similar level of risk to the
prior year.
Materiality
The materiality that we used for the group financial statements was
£8.0m which was determined on the basis of profit before tax
adjusted for ‘Other adjustments’, defined in note 5 to the financial
statements.
Scoping
Our audit scope covered 78% of group revenue, 81% of group
profit before tax and 86% of group net assets.
Our approach to component scoping is consistent with prior year,
with audit work once again being performed by a combination of
group audit team and component audit teams.
Significant changes
in our approach
There have been no significant changes in our approach.
4. Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern
basis of accounting in the preparation of the financial statements is appropriate.
Our evaluation of the directors’ assessment of the group’s and parent company’s ability to continue
to adopt the going concern basis of accounting included:
• Evaluation of the available financing facilities including the nature of facilities and repayment
terms set out in note 27 to the financial statements;
• Assessment of whether the cash flow forecasts over the outlook period are reasonable including
the consideration of the principal risks as disclosed on pages 73 of the Corporate Governance
section, and particularly in light of the current economic environment;
• Evaluation of the headroom forecast by management over liquidity positions;
• Assessment of the sufficiency of the sensitivity analysis performed by management;
• Testing of the clerical accuracy of those forecasts and our assessment of the historical accuracy
offorecasts prepared by management; and
• Assessment of the appropriateness of the disclosure provided in note 1 to the financial statements.
rotork.com Rotork Annual Report 2023159
Independent auditor’s report to the members of Rotork plc
Strategic report Corporate governance Financial statements
Report on the audit of the financial statements continued
4. Conclusions relating to going concern continued
Based on the work we have performed, we have not identified any material uncertainties relating to
events or conditions that, individually or collectively, may cast significant doubt on the group’s and
parent company’s ability to continue as a going concern for a period of at least twelve months from
when the financial statements are authorised for issue.
In relation to the reporting on how the group has applied the UK Corporate Governance Code,
wehave nothing material to add or draw attention to in relation to the directors’ statement in the
financial statements about whether the directors considered it appropriate to adopt the going
concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are
described in the relevant sections of this report.
5. Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial statements of the current period and include the most significant assessed
risks of material misstatement (whether or not due to fraud) that we identified. These matters
included those which had the greatest effect on: the overall audit strategy, the allocation of
resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole,
andin forming our opinion thereon, and we do not provide a separate opinion on these matters.
5.1 Timing of revenue recognition
Key audit matter
description
The group generated revenue of £719 million during the year (2022: £642
million) relating to the manufacture and delivery of products. Revenue growth
is a key performance indicator for the business. In applying IFRS 15 Revenue
from Contracts with Customers there is judgement required in determining
the timing of the transfer of control of products and services to customers,
which impacts the amount of revenue recognised in the group’s financial
statements. This judgement could be the subject of management bias or error
and so we considered that the timing of the cut-off of revenue recognition
represents a key audit matter, and a risk of potential fraud in respect of
revenue recognition.
The determination of whether control of products has passed to a customer
requires the consideration of a number of factors, which include consideration
of the specific delivery terms of the arrangement and whether certain criteria
have been met to evidence the passing of control. The circumstances where
most judgement is required are when the products are yet to be despatched
to the customer (known as bill-and-hold sales).
Further details are included within note 1 to the financial statements.
How the scope
ofour audit
responded to the
key audit matter
In response to the identified key audit matter we have performed the
following procedures:
• Obtained an understanding of the relevant controls in place to address the
risk that revenue is recorded in an inappropriate period;
• Obtained an understanding of the relevant shipping terms used by
thegroup for the delivery of goods as well as assessed the likely length
oftime required to ship tocustomer locations, and how this impacts the
timing of revenue recognition; and
• Assessed the processes that management follow in recording salesfrom
manufacturing facilities to sales offices, and eventually tothird parties.
For selected samples of transactions, we have performed the following:
• Inspected a combination of purchase orders, invoices, despatch notes,
shipping terms and delivery notes to assess whether the timing of
revenue recognition is appropriate based on the status of products and
services at year-end; and
• Specifically in the case of bill-and-hold sales assessed the extent to which
there is evidence the customer controlled the product before year-end
including whether there was a substantive reason for the customer
requesting the arrangement.
Key observations
We are satisfied that the timing of revenue recognition is appropriate.
Rotork Annual Report 2023 rotork.com160
Independent auditor’s report to the members of Rotork plc continued
Strategic report Corporate governance Financial statements
Report on the audit of the financial statements continued
6. Our application of materiality
6.1. Materiality
We define materiality as the magnitude of misstatement in the financial statements that makes
itprobable that the economic decisions of a reasonably knowledgeable person would be changed
orinfluenced. We use materiality both in planning the scope of our audit work and in evaluating
theresults of our work.
Based on our professional judgement, we determined materiality for the financial statements as
awhole as follows:
Group financial statements Parent company financial statements
Materiality
£8.0 million (2022: £6.7 million) £7.2 million (2022: £6.0 million)
Basis for
determining
materiality
5% of profit before tax adjusted
for‘Other adjustments’ (2022: 5%
ofprofit before tax adjusted for
‘Otheradjustments’).
In the year ended 31 December 2023
the adjustments to statutory pre-tax
profit are consistent with those
presented in note 2 to the financial
statements, except for amortisation
which is added back. This basis is
consistent with the year ended
31December 2022.
Parent company materiality equates
to2% of parent company net assets
(2022: 2% of net assets), which is
capped at 90% of group materiality
(2022: capped at 90%). From a
company stand-alone perspective
weconsider that 2% of net assets is
anappropriate benchmark and as part
of the group audit we have used our
professional judgement to cap this
at90% of group materiality.
Rationale
for the
benchmark
applied
Adjusted profit before tax reflects the
manner in which business performance
is reported and assessed by external
users of the financial statements.
Consistent with last year we have
adopted this measure, as defined above,
as it provides a consistent year-on-year
basis for determining materiality.
Net assets are considered to be
anappropriate benchmark for the
parent company given that it is mainly
aholding company.
6.2. Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that,
inaggregate, uncorrected and undetected misstatements exceed the materiality for the financial
statements as a whole.
Group financial statements Parent company financial statements
Performance
materiality
70% (2022: 70%) of group materiality 70% (2022: 70%) of parent
companymateriality
Basis and
rationale for
determining
performance
materiality
In determining performance materiality, we considered the following factors:
• The quality of the control environment in the group and in the component
finance teams;
• The level of corrected and uncorrected misstatements identified inprevious
audits; and
• The level of consistency in key management personnel.
Compared to the prior period we have not identified any significant changes
inthe above assessment, which resulted in a consistent performance materiality
determination in 2023.
£8.0m
Group materiality
£2.8m to £7.2m
Component materiality range
£0.4m
Audit Committee reporting threshold
£164.2m
PBT adjusted for “Other adjustments”
Group materiality
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Report on the audit of the financial statements continued
6. Our application of materiality continued
6.3. Error reporting threshold
We agreed with the Audit Committee that we would report to the Committee all audit differences
inexcess of £0.4m (2022: £0.3m), as well as differences below that threshold that, in our view,
warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure
matters that we identified when assessing the overall presentation of the financial statements.
7. An overview of the scope of our audit
7.1. Identification and scoping of components
Our group audit was scoped by obtaining an understanding of the group and its environment,
including group-wide controls and assessing the risks of material misstatement at a group level.
Based on that assessment, we focused our group audit scope primarily on the audit work at 15
components (2022: 15), which were subject to a full scope audit and on a further 9 components
(2022: 7) subject to specified audit procedures.
The 24 components (2022: 22) include the principal business units within the group’s three
reportable segments across 14 countries and account for 78% of the group’s revenues (2022: 79%),
81% of the group’s profit before tax (2022: 81%) and 86% of the group’s net assets (2022: 89%).
They were also selected to provide an appropriate basis for undertaking audit work to address the
risks of material misstatement identified above. In selecting which business units to include within the
scope of our audit we considered both quantitative and qualitative factors and a change in selected
units from the prior year to introduce an element of unpredictability in scoping. Our audit work at
these components was executed at levels of materiality applicable to each individual entity, which
were lower than group materiality ranging from £3.8 million to £4.2 million (2022: £2.1 million to
£2.8 million) as well as the parent company materiality at £7.2 million (2022: £6.0 million).
At the group level we also tested the consolidation process and carried out analytical procedures to
re-confirm our conclusion that there were no significant risks of material misstatement of the aggregated
financial information of the remaining components not subject to full scope audit. None of these
components represented more than 3% of revenue or profit before taxation individually.
7.2. Our consideration of the control environment
The group operates a diverse IT infrastructure globally. With the involvement of IT audit specialists we
obtained an understanding of the relevant IT environment including general IT controls in place on key
IT systems; this year that included the new global ERP system. As summarised on page 125 in the
Audit Committee Chair’s report, development of the new ERP system continued and ‘go-live’ at the
Bath factory was achieved in January 2023 and Head office in August 2023.
In updating our understanding of the control environment at Bath factory we assessed controls
associated with the data migration and key post-implementation controls over the IT environment.
Wenoted that some of the post-implementation controls were developed over the course of the year,
with enhancements identified and deployed.
We did not place reliance on those controls for the purposes of our substantive audit testing
procedures. The changing IT environment, and the comparative diverse infrastructure that currently
operates around the group, led us to our audit strategy of performing a fully substantive audit. For
all components we obtained an understanding of the relevant controls associated with the financial
reporting process, key audit matters, and in relation to significant accounting estimates.
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Strategic report Corporate governance Financial statements
Revenue Profit before tax Net assets
64%
74%
72%
14%
22%
9%
19%
12%
14%
Full audit scope
Specified audit procedures
Review at group level
7. An overview of the scope of our audit continued
7.3. Our consideration of climate-related risks
As described on page 85, the group has assessed the risks and opportunities associated with various
future climate-related scenarios and its own commitment to transition to an operating model that
has a reduced level of GHG emissions. We have considered the group’s assessment of the impact
ofthese risks and opportunities on the financial statements and its conclusion disclosed in the
accounting policies on page 177.
We have also considered the impact of climate-related risks on our risk assessment and audit approach.
We read the climate-related narrative in the Sustainability review to consider whether it is materially
consistent with the financial statements and our knowledge obtained in the audit. Engaging with
ourclimate specialists, we have reviewed the TCFD disclosure and considered whether the disclosure
is consistent with our understanding of the entity and its business operations.
7.4. Working with other auditors
We engaged component auditors from Deloitte member firms to perform procedures at the
components under our direction and supervision.
Due to the significance to the group audit of the components’ operations subject to full scope
audits, we exercised oversight over our component audit teams. We issued detailed instructions to
the component auditors and held planning meetings, interim update meetings and year end close
meetings with each component team. As group auditors we were involved throughout the audit
process of our component teams including involvement in the risk assessment process and audit
procedure design.
We enhanced our oversight procedures over financially significant components (in the US, China,
andthe UK) through on-site visits by senior members of group audit team. As part of our rotational
component visit plan, we also performed an on-site visit in Germany. During our visits we attended
key meetings with component management and auditors, reviewed our component auditor working
papers in the underlying audit files.
Oversight over the remaining components remained remote with our approach ensuring there was
increased dialogue and use of video conferencing. Where appropriate we haveensured that we have
utilised local language expertise within the group audit team.
8. Other information
The other information comprises the information included in the annual report, other than the
financial statements and our auditor’s report thereon. The directors are responsible for the other
information contained within the annual report.
Our opinion on the financial statements does not cover the other information and, except to the extent
otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our knowledge obtained
inthecourse of the audit, or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to
determine whether this gives rise to a material misstatement in the financial statements themselves.
If, based on the work we have performed, we conclude that there is a material misstatement of
thisother information, we are required to report that fact.
We have nothing to report in this regard.
9. Responsibilities of directors
As explained more fully in the directors’ responsibilities statement, the directors are responsible
forthe preparation of the financial statements and for being satisfied that they give a true and fair
view, and for such internal control as the directors determine is necessary to enable the preparation
of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the
parent company’s ability to continue as a going concern, disclosing as applicable, matters related to
going concern and using the going concern basis of accounting unless the directors either intend to
liquidate the group or the parent company or to cease operations, or have no realistic alternative but
to do so.
10. Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered material if, individually
or in the aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on
theFRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our
auditor’s report.
Report on the audit of the financial statements continued
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11. Extent to which the audit was considered capable of detecting irregularities,
including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined above, to detect material misstatements in respect
of irregularities, including fraud. The extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below.
11.1. Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud
and non-compliance with laws and regulations, we considered the following:
• the nature of the industry and sector, control environment and business performance including
the design of the group’s remuneration policies, key drivers for directors’ remuneration, bonus
levels and performance targets;
• the group’s own assessment of the risks that irregularities may occur either as a result of fraud
orerror as approved by the board;
• results of our enquiries of management, internal audit, the directors and the Audit Committee
about their own identification and assessment of the risks of irregularities, including those that
are specific to the group’s sector;
• any matters we identified having obtained and reviewed the group’s documentation of their
policies and procedures relating to:
— identifying, evaluating and complying with laws and regulations and whether they were
aware of any instances of non-compliance;
— detecting and responding to the risks of fraud and whether they have knowledge of any
actual, suspected or alleged fraud;
— the internal controls established to mitigate risks of fraud or non-compliance with laws
andregulations; and
• the matters discussed among the audit engagement team including significant component
auditteams and relevant internal specialists, including tax, valuations, pensions, IT, climate and
industry specialists regarding how and where fraud might occur in the financial statements and
any potential indicators of fraud.
As a result of these procedures, we considered the opportunities and incentives that may exist within
the organisation for fraud and identified the greatest potential for fraud in the key audit matter
associated with the timing of revenue recognition, consistent with the previous period. In common
with all audits under ISAs (UK), we are also required to perform specific procedures to respond to
therisk of management override.
We also obtained an understanding of the legal and regulatory frameworks that the group operates
in, focusing on provisions of those laws and regulations that had a direct effect on the determination
of material amounts and disclosures in the financial statements. The key laws and regulations we
considered in this context included the UK Companies Act, Listing Rules, UK Corporate Governance
code, pensions legislation and tax legislation in relevant jurisdictions.
In addition, we considered provisions of other laws and regulations that do not have a direct effect
on the financial statements but compliance with which may be fundamental to the group’s ability
tooperate or to avoid a material penalty. These included the group’s compliance with environmental,
health and safety, and anti-bribery and corruption legislation; as well as considering the group’s
monitoring of changes in legislation including sanctions.
11.2. Audit response to risks identified
As a result of performing the above, we identified the timing of revenue recognition as a key audit
matter related to the potential risk of fraud. The key audit matters section of our report explains the
matter in more detail and also describes the specific procedures we performed in response to that
key audit matter.
In addition to the above, our procedures to respond to risks identified included the following:
• reviewing the financial statement disclosures and testing to supporting documentation to assess
compliance with provisions of relevant laws and regulations described as having a direct effect
onthe financial statements;
• enquiring of management, the Audit Committee and in-house legal counsel concerning actual
and potential litigation and claims;
• performing analytical procedures to identify any unusual or unexpected relationships that may
indicate risks of material misstatement due to fraud;
• reading minutes of meetings of those charged with governance, reviewing internal audit reports
and reviewing correspondence with HMRC; and
• in addressing the risk of fraud through management override of controls, testing the
appropriateness of journal entries and other adjustments; assessing whether the judgements
madein making accounting estimates are indicative of a potential bias; and evaluating the business
rationale of any significant transactions that are unusual or outside the normal course of business.
We also communicated relevant identified laws and regulations and potential fraud risks to all
engagement team members including internal specialists and significant component audit teams,
and remained alert to any indications of fraud or non-compliance with laws and regulations
throughout the audit.
Report on the audit of the financial statements continued
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Strategic report Corporate governance Financial statements
Report on other legal and regulatoryrequirements
12. Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the directors’ remuneration report to be audited has been properly
prepared in accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the strategic report and the directors’ report for the financial year for
which the financial statements are prepared is consistent with the financial statements; and
• the strategic report and the directors’ report have been prepared in accordance with applicable
legal requirements.
In the light of the knowledge and understanding of the group and the parent company and their
environment obtained in the course of the audit, we have not identified any material misstatements
in the strategic report or the directors’ report.
13. Corporate Governance Statement
The Listing Rules require us to review the directors’ statement in relation to going concern,
longer-term viability and that part of the Corporate Governance Statement relating to the company’s
compliance with the provisions of the UK Corporate Governance Code specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following
elements of the Corporate Governance Statement is materially consistent with the financial
statements and our knowledge obtained during the audit:
• the directors’ statement with regards to the appropriateness of adopting the going concern basis
of accounting and any material uncertainties identified set out on page 156;
• the directors’ explanation as to its assessment of the company’s prospects, the period this
assessment covers and why the period is appropriate set out on page 80;
• the directors’ statement on fair, balanced and understandable set out on page 116;
• the board’s confirmation that it has carried out a robust assessment of the emerging and principal
risks set out on page 80;
• the section of the annual report that describes the review of effectiveness of risk management
and internal control systems set out on page 116; and
• the section describing the work of the Audit Committee set out on page 121.
14. Matters on which we are required to report by exception
14.1. Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the parent company, or returns adequate
forour audit have not been received from branches not visited by us; or
• the parent company financial statements are not in agreement with the accounting records
andreturns.
We have nothing to report in respect of these matters.
14.2. Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures
ofdirectors’ remuneration have not been made or the part of the directors’ remuneration report
tobe audited is not in agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
15. Other matters which we are required to address
15.1. Auditor tenure
Following the recommendation of the Audit Committee, we were appointed by the Board
on2June2014 to audit the financial statements for the year ending 31 December 2014 and
subsequent financial periods. The period of total uninterrupted engagement including previous
renewals andreappointments of the firm is 10 years, covering the years ending 31 December 2014
to 31December 2023. As set out in the Audit Committee Chair’s report on page 124, 2023 financial
yearis the final year of our audit tenure.
15.2. Consistency of the audit report with the additional report to the Audit Committee
Our audit opinion is consistent with the additional report to the Audit Committee we are required
toprovide in accordance with ISAs (UK).
Report on the audit of the financial statements continued
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Strategic report Corporate governance Financial statements
16. Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of
Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state
tothe company’s members those matters we are required to state to them in an auditor’s report
andfor no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company’s members as a body, for our
audit work, for this report, or for the opinions we have formed.
As required by the Financial Conduct Authority (FCA) Disclosure Guidance and Transparency Rule
(DTR) 4.1.15R – DTR 4.1.18R, these financial statements will form part of the Electronic Format
Annual Financial Report filed on the National Storage Mechanism of the FCA in accordance with
DTR4.1.15R – DTR 4.1.18R. This auditor’s report provides no assurance over whether the Electronic
Format Annual Financial Report has been prepared in compliance with DTR 4.1.15R – DTR 4.1.18R.
David Griffin FCA (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
04 March 2024
Report on the audit of the financial statements continued
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Strategic report Corporate governance Financial statements
Consolidated income statement
For the year ended 31 December 2023
2023
2022
Note
£000
£000
Revenue
3
7 1 9 ,1 5 0
6 41, 8 12
Cost of sales
(38 0,0 54)
(350, 079)
Gross profit
339,09 6
2 91, 7 3 3
Other income
6
1,4 0 5
1, 6 2 0
Distribution costs
(6, 314)
(6 ,1 9 7)
Administrative expenses
(184,630)
(16 3,17 7)
Other expenses
6
(79 0)
(37 2)
Operating profit
3
148,767
12 3 , 6 0 7
Finance income
8
5,3 01
3, 0 49
Finance expense
8
(3, 43 0)
(2,55 4)
Profit before tax
9
150 , 63 8
12 4 ,1 0 2
Income tax expense
10
(37, 150)
(3 0 , 9 0 1)
Profit for the year
11 3 , 4 8 8
93 ,2 01
Attributable to:
Owners of the parent
113,13 5
93,24 3
Non-controlling interests
353
(42)
113 , 4 8 8
9 3, 201
Basic earnings per share
19
1 3.2p
10. 9p
Diluted earnings per share
19
1 3.2p
10. 8p
Operating profit
3
148 ,767
12 3 , 6 0 7
Adjustments:
Amortisation of acquired intangible assets
3
2 ,11 0
7, 0 5 1
Other adjustments
5
13 , 5 9 8
12 , 5 8 7
Adjusted operating profit
2,3
16 4 , 475
14 3 , 24 5
Adjusted basic earnings per share
2,19
14 . 6p
12. 7p
Adjusted diluted earnings per share
2,19
14 . 6p
12. 7p
Consolidated statement of comprehensive income
For the year ended 31 December 2023
2023
2022
£000
£000
Profit for the year
113 , 4 8 8
9 3, 201
Other comprehensive income
Items that may be subsequently reclassified to be income statement:
Foreign exchange translation differences
(20, 271)
21 ,928
Effective portion of changes in fair value of cash flow hedges net of tax
1,3 97
(1, 6 2 7)
(18 , 8 74)
20 , 301
Items that may be subsequently reclassified to be income statement:
Remeasurement (loss) in pension scheme net of tax
(7, 72 2)
(4 ,932)
Expenses and income recognised in other comprehensive income
(26 ,59 6)
15 , 3 6 9
Total comprehensive income for the year
86 ,892
10 8 , 57 0
Attributable to:
Owners of the parent
86,609
10 8 , 5 61
Non-controlling interest
283
9
86 ,892
10 8 , 57 0
rotork.com Rotork Annual Report 2023167
Consolidated income statement
Strategic report Corporate governance Financial statements
Consolidated balance sheet
At 31 December 2023
2023 2022
Note£000£000
Non-current assets
Goodwill
11
2 31,70 3
228 ,0 05
Intangible assets
12
3 1 ,12 6
20,579
Property, plant and equipment
13
7 4 , 411
7 8 ,726
Derivative financial instruments
24
206
74
Defined benefit scheme surplus
25
9 ,1 4 4
—
Deferred tax assets
14
15, 4 5 4
1 5,965
Total non-current assets
362 ,04 4
343, 34 9
Current assets
Inventories
15
8 3,963
92,3 0 6
Trade receivables
16
15 2 , 8 42
13 4 , 2 7 9
Current tax
16
4 ,1 8 7
7, 87 7
Derivative financial instruments
24
673
62
Other receivables
16
2 3,70 1
3 9 ,11 2
Assets classified as held for sale
16
—
2 11
Cash and cash equivalents
17
1 46,37 2
11 4 , 7 7 0
Total current assets
411 ,7 3 8
3 8 8 , 617
Total assets
773 ,78 2
7 3 1, 9 6 6
Equity
Issued equity capital
18
4,306
4,30 4
Share premium
21,0 0 4
19 , 9 5 9
Other reserves
13 , 4 6 5
32,269
Retained earnings
581,813
5 3 1, 9 51
Equity attributable to the parent
620,5 88
588,4 83
Non-controlling interests
1,707
1, 4 2 4
Total equity
622, 295
5 8 9,9 07
Non-current liabilities
Interest bearing loans and borrowings
20
8,826
5,4 05
Employee benefits
21
4 ,1 9 7
11 , 9 5 5
Deferred tax liabilities
14
3,872
4,028
Derivative financial instruments
24
15
215
Provisions
22
1, 37 1
1, 4 3 9
Total Non-current liabilities
18 , 2 81
2 3,0 42
Note
2023 2022
£000£000
Current liabilities
Interest bearing loans and borrowings
20
3 ,1 3 1
3, 4 31
Trade payables
23
40,585
42 , 314
Employee benefits
21
2 9,75 4
15 , 2 0 0
Current tax
23
12 , 3 8 7
11 , 8 9 3
Derivative financial instruments
24
538
2,7 29
Other payables
23
42 ,536
3 9,0 8 4
Provisions
22
4, 275
4,366
Total current liabilities
13 3 , 2 0 6
11 9 , 0 1 7
Total liabilities
151, 4 8 7
14 2 , 0 59
Total equity and liabilities
773,7 82
73 1, 9 6 6
These financial statements were approved by the Board of Directors and authorised for issue on
4 March 2024 and were signed on its behalf by:
K Huynh and JM Davis
Directors
Rotork Annual Report 2023 rotork.com168
Consolidated balance sheet
Strategic report Corporate governance Financial statements
Total
IssuedCapitalattributable Non-
equityShareTranslationredemptionHedgingRetainedto owners of controlling
capitalpremiumreservereservereserveearningsthe parent
interest
Total
£000
£000
£000
£000
£000
£000
£000
£000
£000
Balance at 31 December 2021
4,302
18 , 8 2 8
9,47 5
1,71 6
8 28
4 9 8 ,9 31
534, 080
—
534, 080
Profit/(loss) for the year
—
—
—
—
—
93, 243
93, 24 3
(42)
9 3, 201
Other comprehensive income
Foreign exchange translation differences
—
—
2 1, 8 7 7
—
—
—
21, 8 7 7
51
21 ,928
Effective portion of changes in fair value of cash flow hedges
—
—
—
—
(2,0 67)
—
(2, 06 7)
—
(2,0 67)
Actuarial loss on defined benefit pension plans
—
—
—
—
—
(6,7 27)
(6 ,7 27)
—
(6,7 27)
Tax on other comprehensive income
—
—
—
—
4 40
1, 7 9 5
2,2 35
—
2, 235
Total other comprehensive income
—
—
2 1, 8 7 7
—
(1, 6 2 7)
(4 ,932)
15 , 3 18
51
15 , 3 6 9
Total comprehensive income/(loss)
—
—
2 1, 8 7 7
—
(1, 6 2 7)
8 8, 311
10 8 , 5 61
9
10 8 , 5 70
Non-controlling interest in newly-established subsidiary
—
—
—
—
—
—
—
1, 415
1, 415
Transactions with owners, recorded directly in equity
Equity settled share-based payment transactions
—
—
—
—
—
1,7 9 0
1,7 9 0
—
1, 7 9 0
Tax on equity settled share-based payment transactions
—
—
—
—
—
(9 87)
(98 7)
—
(9 87)
Share options exercised by employees
2
1 ,13 1
—
—
—
—
1 ,13 3
—
1 ,13 3
Own ordinary shares acquired
—
—
—
—
—
(3, 475)
(3 ,475)
—
(3, 475)
Own ordinary shares awarded under share schemes
—
—
—
—
—
2,765
2,76 5
—
2,765
Dividends
—
—
—
—
—
(55, 38 4)
(55, 38 4)
—
(55,3 8 4)
Balance at 31 December 2022
4,30 4
19, 9 5 9
31, 3 5 2
1, 716
(799)
5 3 1, 9 51
588,4 83
1, 4 24
58 9,9 07
Consolidated statement of changes in equity
For the year ended 31 December 2023
rotork.com Rotork Annual Report 2023169
Consolidated statement of changes in equity
Strategic report Corporate governance Financial statements
Total
IssuedCapitalattributable Non-
equityShareTranslationredemptionHedgingRetainedto owners of controlling
capitalpremiumreservereservereserveearningsthe parent
interest
Total
£000
£000
£000
£000
£000
£000
£000
£000
£000
Balance at 31 December 2022
4,30 4
19, 9 5 9
31, 3 5 2
1, 716
(799)
5 3 1, 9 51
588,4 83
1, 4 24
58 9,9 07
Profit for the year
—
—
—
—
—
113 ,135
113,135
353
113 , 4 8 8
Other comprehensive income
Foreign exchange translation differences
—
—
(20,201)
—
—
—
(20,201)
(70)
(20 ,271)
Effective portion of changes in fair value of cash flow hedges
—
—
—
—
1 ,8 41
—
1, 8 41
—
1, 8 41
Actuarial loss on defined benefit pension plans
—
—
—
—
—
(9,8 75)
(9, 875)
—
(9,8 75)
Tax on other comprehensive (loss)/income
—
—
—
—
(444)
2 ,1 5 3
1,70 9
—
1,70 9
Total other comprehensive (loss)/income
—
—
(20,201)
—
1,3 97
(7, 7 2 2)
(26 , 526)
(70)
(26 , 596)
Total comprehensive (loss)/income
—
—
(20,201)
—
1,3 97
10 5 , 413
86,609
283
86 ,892
Transactions with owners, recorded directly in equity
Equity settled share-based payment transactions
—
—
—
—
—
2,282
2, 282
—
2,282
Tax on equity settled share-based payment transactions
—
—
—
—
—
43
43
—
43
Share options exercised by employees
2
1,0 4 5
—
—
—
—
1,0 47
—
1, 0 47
Own ordinary shares acquired
—
—
—
—
—
(2 , 44 4)
(2, 4 4 4)
—
(2 ,4 4 4)
Own ordinary shares awarded under share schemes
—
—
—
—
—
3,38 8
3,388
—
3,38 8
Dividends
—
—
—
—
—
(58 ,82 0)
(58 ,8 20)
—
(58 ,820)
Balance at 31 December 2023
4,306
2 1,0 0 4
11 ,1 5 1
1, 716
59 8
581,813
620, 588
1,70 7
622,29 5
Detailed explanations for equity capital, the translation reserve, capital redemption reserve and hedging reserve can be seen in note 18.
Consolidated statement of changes in equity continued
For the year ended 31 December 2023
Rotork Annual Report 2023 rotork.com170
Consolidated statement of changes in equity continued
Strategic report Corporate governance Financial statements
Consolidated statement of cash flows
At 31 December 2023
2023 2023 2022 2022
Note£000£000£000£000
Cash flows from operating activities
Profit for the year
113 , 4 8 8
93 , 201
Adjustments for:
Amortisation of acquired intangibles
2 ,11 0
7, 0 51
Other adjustments
5
13 , 5 9 8
12 , 5 8 7
Amortisation and impairment of development costs
2 ,352
1, 4 3 6
Depreciation
13,533
1 4,933
Equity settled share-based payment expense
5,670
4 ,6 01
(Profit) on sale of property, plant and equipment
(3 42)
(15 9)
Finance income
(5 , 3 0 1)
(3,0 49)
Finance expense
3,430
2,55 4
Income tax expense
3 7,1 5 0
3 0,9 01
18 5, 68 8
1 64,056
Decrease/(increase) in inventories
5,49 0
(19, 47 9)
Increase in trade and other receivables
(10 , 4 8 8)
(32,591)
Increase/(decrease) in trade and other payables
1, 39 9
(2,9 02)
Operating cash flow impacts of other adjustments
5
(13 , 4 9 6)
(12 , 0 5 6)
Difference between pension charge and cash contribution
(26 ,628)
(6 ,979)
Increase/(decrease) in provisions
216
(38 3)
Increase in employee benefits
15 ,5 3 8
67
15 7, 7 19
8 9,7 33
Income taxes paid
(32 ,8 25)
(3 0 , 2 2 1)
Net cash flows from operating activities
12 4 , 8 9 4
5 9 , 512
Investing activities
Purchase of property, plant and equipment
(7, 3 0 6)
(8 , 2 9 1)
Purchase of intangible assets
(2 ,08 9)
(2, 0 66)
Development costs capitalised
(2 , 411)
(2 , 5 41)
Sale of property, plant and equipment
1,8 8 3
4,629
Acquisition of business (net of cash acquired)
4
(18 , 39 9)
—
Settlement of hedging derivatives
937
9
Interest received
3,927
751
Net cash flows from investing activities
(23 ,45 8)
(7,509)
rotork.com Rotork Annual Report 2023171
Consolidated statement of cash flows
Strategic report Corporate governance Financial statements
Consolidated statement of cash flows continued
At 31 December 2023
2023 2023 2022 2022
Note£000£000£000£000
Financing activities
Issue of ordinary share capital
1, 047
1,13 3
Own ordinary shares acquired
(2 ,4 4 4)
(3, 475)
Interest paid
(93 6)
(8 17)
Repayment of bank loans
—
(69 4)
Repayment of lease liabilities
(3,69 9)
(3, 96 6)
Dividends paid on ordinary shares
(58 ,82 0)
(55 ,3 8 4)
Receipt from non-controlling interest in newly-established subsidiary
—
1, 415
Net cash flows from financing activities
(6 4, 8 52)
(61, 7 8 8)
Net increase/(decrease) in cash and cash equivalents
36,58 4
(9,785)
Cash and cash equivalents at 1 January
114 , 7 7 0
12 3 , 4 74
Effect of exchange rate fluctuations on cash held
(4 ,9 8 2)
1, 0 8 1
Cash and cash equivalents at 31 December
17
1 46,37 2
114 , 7 7 0
Rotork Annual Report 2023 rotork.com172
Consolidated statement of cash flows continued
Strategic report Corporate governance Financial statements
For the year ended 31 December 2023
Except where indicated, values in these notes are in £000.
Rotork plc is a public company limited by shares, registered and domiciled in England. The consolidated
financial statements of the Company for the year ended 31 December 2023 comprise the Company
and its subsidiaries (together referred to as the Group). The accounting policies contained below in
note 1 and the disclosures in notes 2 to 31 all relate to the Group financial statements. The Company
balance sheet, accounting policies and applicable notes can be found following note 31.
1. Accounting policies
The accounting policies applied in the preparation of these consolidated financial statements
are set out below. These policies have been consistently applied to the years presented, unless
otherwise stated.
Basis of preparation
The consolidated financial statements of Rotork plc have been prepared in accordance with
UK-adopted international accounting standards and in conformity with the requirements of the
Companies Act 2006.
The consolidated financial statements have been prepared under the historical cost convention
except for defined benefit pension schemes, share based payments and derivative financial
instruments as referred to in the respective accounting policies below.
New accounting standards and interpretations
A number of amended standards became applicable for the current reporting period. The application
of these amendments has not had any material impact on the disclosures, net assets or results of
the Group.
New standards and interpretations not yet adopted
Further narrow scope amendments have been issued which are mandatory for periods commencing
on or after 1 January 2024. The application of these amendments will not have any material impact
on the disclosures, net assets or results of the Group.
Adjustments to profit
Adjustments to profit are items of income and expense which, because of the nature, size and/or
infrequency of the events giving rise to them, merit separate presentation. These specific items
are presented as a foot note to the income statement to provide greater clarity and an enhanced
understanding of the impact of these items on the Group’s financial performance. In doing so, it also
facilitates greater comparison of the Group’s results with prior periods and assessment of trends in
financial performance. This split is consistent with how business performance is measured internally.
Adjustments to profit items may include but are not restricted to: costs of significant business
restructuring and any associated impairments of intangible or tangible assets, adjustments to the
fair value of acquisition related items such as contingent consideration, acquired intangible asset
amortisation and other items considered to be significant due to their nature or the expected
infrequency of the events giving rise to them.
Going concern
The directors are satisfied that the Group has sufficient resources to continue in operation for the
foreseeable future, a period of not less than 12 months from the date of this report. Accordingly,
the Group continue to adopt the going concern basis in preparing the financial statements.
In forming this view, the macroeconomic conditions and the impact of geopolitical instability on
the Group, as discussed in the Principal risks on pages 71 to 79, have been considered. The directors
have reviewed: the current financial position of the Group, which has net cash of £134m and unused
uncommitted overdraft facilities of £24m as at the year end; the significant order book, which
contains customers spread across different geographic areas and industries; and the trading and cash
flow forecasts for the Group. A reverse stress test, where the Group’s business model would become
unviable, has been performed and the directors believe there is no reasonably possible scenario that
would lead to the conditions modelled in the reverse stress test.
The directors are satisfied that the Group has adequate resources to continue operating as a going
concern for the foreseeable future, and that no material uncertainties exist with respect to this
assessment. The Group also has a number of mitigating actions that it can take at short notice to
preserve cash, for example reduction in capital programmes, dividend deferral and other reductions
in discretionary spend.
Consolidation
The consolidated financial statements incorporate the financial statements of the Company and its
subsidiaries for the year to 31 December 2023. The financial statements of subsidiaries are included
in the consolidated financial statements from the date that control commences until the date control
ceases. Intra-Group balances and any unrealised gains or losses or income and expenses arising from
intra-Group transactions are eliminated in preparing the consolidated financial statements.
Foreign currencies
The individual financial statements of each Group company are presented in the currency of the
primary economic environment in which it operates (its functional currency). For the purposes of
the consolidated financial statements, the results and financial position of each Group company
is expressed in sterling, which is the functional currency of the Company, and the presentational
currency for the consolidated financial statements.
Transactions in foreign currencies are translated at the average foreign exchange rates for the year,
this is deemed to be a reasonable approximation of the actual rate ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are
translated to sterling at the foreign exchange rate ruling at that date. Foreign exchange differences
arising on translation are recognised in the income statement. Non-monetary assets and liabilities
that are measured in terms of historical cost in a foreign currency are translated using the exchange
rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign
currencies that are stated at fair value are translated to sterling at foreign exchange rates at the
dates the values were determined.
rotork.com Rotork Annual Report 2023173
Notes to the Group financial statements
Strategic report Corporate governance Financial statements
1. Accounting policies continued
Foreign currencies continued
Assets and liabilities of foreign subsidiaries, including goodwill and fair value adjustments arising
on consolidation, are translated into sterling at rates of exchange ruling at the balance sheet date.
The revenues and expenses of foreign subsidiaries are translated to sterling at rates approximating
those ruling at the date of the transactions. Differences on exchange arising from the retranslation
of the opening net investment in subsidiaries, and from the translation of the results of those
subsidiaries at average rate, are reported as an item of other comprehensive income and
accumulated in the translation reserve.
Any differences that have arisen since 1 January 2004, the date of transition to IFRS, are presented
as a separate component of equity. Translation differences that arose before the date of transition
to IFRS in respect of all foreign entities are not presented as a separate component.
Revenue
Revenue is measured based on the consideration specified in a contract with a customer. The Group
recognises revenue when it transfers control of a product or service to a customer and is shown net
of value-added tax, returns, rebates and discounts and after eliminating sales within the Group.
The transaction price is determined and known at the point of initial sale.
Revenue from the sale of actuators, gearboxes and flow control products is recognised in the income
statement when control of the goods has transferred. The timing of the transfer of control to the
customer varies depending on the nature of the products sold and the individual terms of the contract
of sale. Sales made under internationally accepted trade terms, Incoterms 2020, are recognised as
revenue when the Group has completed the primary duties required to transfer control as defined
by the International Chamber of Commerce Official Rules for the Interpretation of Trade Terms.
This is the agreed point in time when the customer has accepted and has legal title to the goods,
there is a present right to payment for the goods, and they can determine its future use and location.
In limited instances, a customer may request that the Group retains physical possession of an asset
for a period after control has been transferred to the customer. In these circumstances, the revenue
is recognised prior to delivery of the asset on a ‘bill-and-hold’ basis in line with IFRS 15.B81.
The Group provides service and support through preventative maintenance contracts, on-site and
workshop service, retrofit solutions and the client support programme. Revenue in respect of on-site
and workshop service and retrofit solutions is recognised on completion of the work and after all
performance obligations have been completed. Revenue in respect of preventative maintenance
contracts and the client support programme is recognised as the services are performed in line with
the contractual terms. The stage of completion is assessed by reference to the transfer of control
over time, which usually corresponds to the contractual agreement with each separate customer and
the costs incurred on the contract to date in comparison with the total forecast costs of the contract.
The directors have assessed that these contracts are satisfied over time given that the customer
simultaneously receives and consumes the benefits provided by the Group. The element of revenue
recognised on an over-time basis is insignificant and is therefore not disaggregated in note 3.
No revenue is recognised if there are significant uncertainties regarding recovery of the consideration
due, associated completion costs, the possible return of goods or continuing management
involvement with the goods.
The Group has applied the practical expedient in IFRS 15.121 and therefore not disclosed the
information in IFRS 15.120 regarding unsatisfied (or partially unsatisfied) performance obligations
on contracts with a duration of one year or less.
Business combinations
Business combinations are accounted for using the acquisition method as at the acquisition date,
which is the date on which control is transferred to the Group
For acquisitions on or after 1 January 2010, the Group measures goodwill at the acquisition date as:
• the fair value of the consideration transferred; plus
• the recognised amount of any non-controlling interests in the acquiree; plus
• the fair value of the existing equity interest in the acquiree; less
• the net recognised amount (generally fair value) of the identifiable assets acquired and
liabilities assumed.
When the excess is negative, a bargain purchase gain is recognised immediately in the income
statement. The fair value of the assets and liabilities assumed are provisional for a 12 month period.
Costs related to the acquisition, other than those associated with the issue of debt or equity
securities, are expensed as incurred.
Any contingent consideration payable is recognised at fair value at the acquisition date. If the
contingent consideration is classified as equity, it is not remeasured and settlement is accounted for
within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are
recognised in profit or loss.
Goodwill is stated at cost or deemed cost less any impairment losses. Goodwill is not amortised but
is reviewed for impairment annually. For the purposes of impairment testing, goodwill is allocated to
each of the Group’s cash generating units (CGUs) expected to benefit from the synergies of the
combination. An impairment loss is recognised whenever the carrying value of an asset or its CGU
exceeds its recoverable amount. Impairment losses are recognised in the income statement.
Non-controlling interests
Non-controlling interests in subsidiaries are identified separately from the Group’s equity therein.
The interest of non-controlling shareholders is initially measured at the non-controlling interests’
proportion of the share of the fair value of the acquiree’s identifiable net assets. Subsequent to
acquisition, the carrying amount of non-controlling interests is the amount of those interests
at initial recognition plus the non-controlling interests’ share of subsequent changes in equity.
Total comprehensive income is attributed to non-controlling interests even if this results in the
non-controlling interests having a deficit balance.
For the year ended 31 December 2023
Notes to the Group financial statements continued
Strategic report Corporate governance Financial statements
Rotork Annual Report 2023 rotork.com174
1. Accounting policies continued
Intangible assets
i) Research and development
Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical
knowledge and understanding, is recognised in the income statement in the period in which it is
incurred. Development costs incurred after the point at which the commercial and technical feasibility
of the product have been proven, and the decision to complete the development has been taken and
resources made available, are capitalised. The expenditure capitalised includes the cost of materials,
direct labour and an appropriate proportion of overheads. Capitalised development expenditure is
stated at cost less accumulated amortisation and impairment losses. Development expenditure has
an estimated useful life of up to five years and is written off on a straight-line basis.
ii) Software as a Service
For ‘Software as a Service‘ (‘SaaS‘) arrangements, the Group capitalises costs only relating to the
configuration and customisation of SaaS arrangements as intangible assets where control of the
software and associated configured and customised elements exists. An element of judgement is
involved with identifying specific elements of programme costs, however, these judgements do not have
a significant impact on the costs to be capitalised. SaaS assets are assessed to have useful lives of 10
to 15 years from the point in time they are available for use and are amortised on a straight-line basis.
iii) Other intangible assets
Other intangible assets that are acquired by the Group as part of a business combination are stated
at cost less accumulated amortisation and impairment losses. The useful life of each of these assets
is assessed based on discussions with the management of the acquired business and takes account
of the differing nature of each of the intangible assets acquired. The assessed useful lives of
intangibles acquired are as follows:
Brands 4 to 10 years
Customer relationships 2 to 8 years
Other 3 to 8 years
Amortisation is charged on a straight-line basis over the estimated useful life of the assets.
Property, plant and equipment
Freehold land is not depreciated. Long leasehold buildings are amortised over 50 years or the expected
useful life of the building where less than 50 years. Other assets are depreciated in equal annual
instalments by reference to their estimated useful lives and residual values at the following annual rates:
Freehold buildings 2% to 4%
Short leasehold buildings period of lease
Plant and equipment 10% to 33%
Items of property, plant and equipment are stated at cost or deemed cost less accumulated
depreciation and impairment losses.
Leases
i) The Group as a lessee
For any new contracts entered into, the Group considers whether a contract is, or contains a lease.
A lease is defined as ‘a contract, or part of a contract, that conveys the right to use an asset
(the underlying asset) for a period of time in exchange for consideration’. To apply this definition
the Group assesses whether the contract meets three key evaluations which are whether:
• the contract contains an identified asset, which is either explicitly identified in the contract
or implicitly specified by being identified at the time the asset is made available to the Group;
• the Group has the right to obtain substantially all of the economic benefits from use of the
identified asset throughout the period of use, considering its rights within the defined scope
of the contract; and
• the Group has the right to direct the use of the identified asset throughout the period of use.
The Group assesses whether it has the right to direct ‘how and for what purpose’ the asset
is used throughout the period of use.
ii) Measurement and recognition of leases as a lessee
At the lease commencement date, the Group recognises a right-of-use asset and a lease liability
on the balance sheet. The right-of-use asset is measured at cost, which is made up of the initial
measurement of the lease liability, any initial direct costs incurred by the Group, an estimate of
any costs to dismantle and remove the asset at the end of the lease, and any lease payments made
in advance of the lease commencement date (net of any incentives received).
The Group depreciates the right-of-use assets on a straight-line basis from the lease commencement
date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term.
The Group also assesses the right-of-use asset for impairment when such indicators exist.
At the commencement date, the Group measures the lease liability at the present value of the lease
payments unpaid at that date, discounted using the interest rate implicit in the lease if that rate is
readily available or the Group’s incremental borrowing rate.
Lease payments included in the measurement of the lease liability are made up of fixed payments,
variable payments based on an index or rate, amounts expected to be payable under a residual value
guarantee and payments arising from options reasonably certain to be exercised.
Subsequent to initial measurement, the liability will be reduced for payments made and increased
for interest. It is remeasured to reflect any reassessment or modification, or if there are changes in
in-substance fixed payments.
When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use
asset, or income statement if the right-of-use asset is already reduced to zero.
The Group has elected to account for short-term leases and leases of low-value assets using the
practical expedients. Instead of recognising a right-of-use asset and lease liability, the payments in
relation to these are recognised as an expense in the income statement on a straight-line basis over
the lease term.
On the balance sheet, right-of-use assets have been included in property, plant and equipment and
lease liabilities have been included in loans and borrowings.
For the year ended 31 December 2023
Notes to the Group financial statements continued
Strategic report Corporate governance Financial statements
rotork.com Rotork Annual Report 2023175
1. Accounting policies continued
Interest-bearing loans and borrowings
Obligations for loans and borrowings are recognised when the Group becomes party to the related
contracts and are measured initially at fair value less directly attributable transaction costs. After
initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised
cost. Amortised cost is calculated by taking into account any issue costs and any discount or premium
on settlement. Borrowings are classified as current liabilities unless the Group has an unconditional
right to defer settlement of the liability for at least 12 months after the balance sheet date.
Taxation
Income tax on the profit for the year comprises current and deferred tax. Income tax is recognised
in the income statement except to the extent that it relates to items recognised directly in equity or
in other comprehensive income, in which case it is recognised in equity or in other comprehensive
income respectively. Current tax is the expected tax payable on the taxable income for the year,
using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment
to tax payable in respect of previous years.
Deferred tax is provided using the balance sheet liability method, providing for temporary differences
between the carrying amounts of assets and liabilities for financial reporting purposes and the
amounts used for taxation purposes. The following temporary differences are not provided for: the
effect of taxable temporary differences for goodwill not deductible for tax purposes and the initial
recognition of assets or liabilities in a transaction which is not a business combination that affect
neither accounting nor taxable profits. The amount of deferred tax provided is based on the expected
manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates
enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits
will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent
that it is no longer probable that the related tax benefit will be realised. Both deferred and current
tax assets and liabilities are offset when criteria set out in IAS 12.71 and IAS 12.74 are met.
Inventory and work in progress
Inventory and work in progress is valued at the lower of cost and net realisable value. Cost is calculated
either on a ‘first in, first out’ or an average cost basis depending upon its nature and use. In respect
of work in progress and finished goods, cost includes all production overheads and the attributable
proportion of indirect overhead expenses which are required to bring inventories to their present
location and condition. The net realisable value in respect of old and slow moving inventory is
assessed by reference to historic usage patterns and forecast future usage.
Trade and other receivables
Trade and other receivables are initially recognised at fair value and are subsequently held at
amortised cost less any expected credit losses according to IFRS 9.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and short term (with an original maturity less than
three months) deposits. Bank overdrafts that are repayable on demand form part of cash and cash
equivalents for the purpose of the consolidated statement of cash flows.
Equity
Equity comprises issued equity capital, share premium, reserves and retained earnings.
When issued equity capital is repurchased, the amount paid, including directly attributable costs,
is recognised as a change in equity. Repurchased shares are debited directly to equity and shown
as a deduction from retained earnings.
Provisions
i) Warranties
A provision for warranties is recognised when the underlying products or services are sold.
The provision is based on historical warranty cost data, known issues and management expectations
of future costs.
ii) Contingent consideration
The terms of an acquisition may provide that the value of the purchase consideration, which may
be payable in cash at a future date, depends on uncertain future events. The amounts recognised
in the financial statements represent a fair value estimate at the balance sheet date of the amounts
expected to be paid.
Employee benefits
i) Pension plans
Where the Group operates a defined benefit pension scheme, contributions are made in accordance
with the schedule of contributions agreed with the Trustees. In respect of all remeasurements that
arise in calculating the Group’s obligation in respect of the plans, these are recognised in other
comprehensive income. The retirement benefit obligation recognised in the consolidated balance
sheet represents the deficit in the Group’s defined benefit pension schemes. Interest on pension
scheme surplus is recognised within finance income and interest on pension scheme liabilities is
recognised within finance expenses.
The Group also operates defined contribution pension schemes. The costs for these schemes are
recognised in the income statement as incurred.
ii) Share-based payment transactions
The Rotork Sharesave Plan offers certain employees the opportunity to purchase shares in Rotork plc
at a discounted price compared with the market price at the time of grant. Details of the scheme
are given in note 26. The fair value of the right/option is recognised as an employee expense with
a corresponding increase in equity. The fair value is measured at grant date and spread over the
period between grant and maturity. The right/option reaches maturity when the employee becomes
unconditionally entitled. The fair value of the grant is measured using a Black-Scholes model, taking
into account the terms and conditions upon which the rights were granted. The amount recognised
as an expense is adjusted to reflect the actual number of share options that vest except where
forfeiture is due only to share prices not achieving the threshold for vesting.
For the year ended 31 December 2023
Notes to the Group financial statements continued
Strategic report Corporate governance Financial statements
Rotork Annual Report 2023 rotork.com176
1. Accounting policies continued
Employee benefits continued
ii) Share-based payment transactions continued
The Rotork Long Term Incentive Plan grants shares to executive directors and senior managers.
These awards may vest after a period of three years dependent upon both market and non-market
performance conditions being met. Details of the grants are given in note 26. The fair value of the
award is measured at grant date, using a Monte Carlo simulation model which takes into account the
market based performance criteria, and spread over the vesting period. The fair value of the award
is recognised as an employee expense with a corresponding increase in equity for the share settled
award. The amount recognised as an expense is adjusted to exclude options that do not vest as a
result of non-market performance conditions not being met.
The Global Employee Share Plan (GESP) and the share incentive plan (SIP) are discretionary profit
linked share schemes based on the prior year profit of the participating Rotork companies. The value
of the award to each employee is based on salary and the length of service. The value of the awards
can be up to £3,600. Shares awarded under these schemes are issued by the trustee at the cost of
purchase. The costs of providing these plans are recognised in the income statement over the period
in which the employee has earned the award.
iii) Long term service leave
The Group’s net obligation in respect of long term service leave is the amount of future benefit
that employees have earned in return for their service in the current and prior periods.
iv) Other employee benefits
The Group offers a number of discretionary bonus schemes to employees around the world.
The costs of these schemes are recognised in the income statement as the criteria are met and
service is undertaken.
Derivative financial instruments
The Group uses forward exchange contracts and swaps to hedge its exposure to foreign exchange
risk arising from operational and financing activities. These are the only derivative financial instruments
used by the Group. In accordance with its Treasury Policy, the Group does not hold or issue contracts
for trading purposes. Forward exchange contracts that do not qualify for hedge accounting are
accounted for as trading instruments.
At inception of designated hedging relationships, the Group documents the risk management
objective and strategy for undertaking the hedge. The Group also documents the economic
relationship between the hedged item and the hedging instrument, including whether the changes
in cash flows of the hedged item and hedging instrument are expected to offset each other.
Forward exchange contracts are recognised initially at fair value. Where a forward exchange contract
is designated as a hedge of the variability in cash flows of a recognised liability or a highly probable
forecasted transaction, the effective part of any gain or loss on the forward contract is recognised
directly in other comprehensive income. Any effective cumulative gain or loss is removed from equity
and recognised in the income statement at the same time as the hedged transaction. The ineffective
part of any gain or loss is recognised in the income statement immediately.
When a hedging instrument or hedge relationship is terminated but the hedged transaction is still
expected to occur, the cumulative gain or loss at that point remains in equity and is recognised in
accordance with the above policy when the transaction occurs. If the hedged transaction is no
longer expected to take place, the cumulative unrealised gain or loss held in equity is recognised
in the income statement immediately.
Dividends
Interim dividends are recorded in the financial statements when they are paid. Final dividends are
recorded in the financial statements in the period in which they are approved by the
Company’s shareholders.
Critical judgements and key estimation uncertainties
Estimates and judgements are regularly evaluated and are based on historical experience and
other factors, including expectations of future events that are believed to be reasonable under
the circumstances.
As described on page 84, we have considered the impact of climate change and climate-related risks
and concluded that there is no material impact on the key accounting policies, estimates and
judgements that form the basis of these financial statements.
The Group makes estimates and assumptions concerning the future. The resulting estimates will, by
definition, seldom equal the actual results. The estimates and assumptions that have a risk of causing
a material adjustment to the carrying amount of assets and liabilities in the next financial year are
listed below.
i) Critical accounting judgements
There are no critical accounting judgements requiring evaluation.
ii) Key sources of estimation uncertainty
Retirement benefits
The Group’s financial statements include costs in relation to, and liabilities for, retirement benefit
obligations. Management is required to estimate the future rates of inflation, discount rates and
longevity of members, each of which may have a material impact on the defined benefit obligations
that are recorded. Sensitivities to changes in key estimates affecting the pension schemes’ liabilities
are shown in note 25.
For the year ended 31 December 2023
Notes to the Group financial statements continued
Strategic report Corporate governance Financial statements
rotork.com Rotork Annual Report 2023177
2. Alternative performance measures
The Group uses adjusted figures as key performance measures in addition to those reported under
adopted IFRS, as management believe these measures provides stakeholders with additional useful
information to facilitate greater comparison of the Group’s underlying results with prior periods and
assessment of trends in financial performance.
The Group believes alternative performance measures, which are not considered to be a substitute
for, or superior to, IFRS measures, provide stakeholders with additional helpful information on the
performance of the business. These alternative performance measures are consistent with how the
business performance is planned and reported within the internal management reporting to the
Board. Some of these measures are also used for the purpose of setting remuneration targets.
The key alternative performance measures that the Group use include adjusted profit measures
and organic constant currency (OCC). Explanations of how they are calculated and how they are
reconciled to IFRS statutory results are set out below.
a. Adjusted operating profit
Adjusted operating profit is the Group’s operating profit excluding the amortisation of acquired
intangible assets and other adjustments as defined in note 1. Further details on these adjustments
are given in note 5.
b. Adjusted profit before tax
The adjustments in calculating adjusted profit before tax are consistent with those in calculating
adjusted operating profit above.
2023
2022
Profit before tax
150,638
124,102
Adjustments:
Amortisation of acquired intangible assets
2,110
7,051
Gain on disposal of property
(723)
(1,208)
Business Transformation costs
13,097
8,868
Other costs
1,224
1,372
Russia market exit
—
3,555
Adjusted profit before tax
166,346
143,740
c. Adjusted basic and diluted earnings per share
Adjusted basic earnings per share is calculated using the adjusted net profit attributable to the
ordinary shareholders and dividing it by the weighted average ordinary shares in issue (see note 19).
Adjusted net profit attributable to ordinary shareholders is calculated as follows:
2023
2022
Net profit attributable to ordinary shareholders
113,488
93,201
Adjustments:
Amortisation of acquired intangible assets
2,110
7,051
Gain on disposal of property
(723)
(1,208)
Business Transformation costs
13,097
8,868
Other costs
1,224
1,372
Russia market exit
—
3,555
Tax effect on adjusted items
(3,567)
(3,440)
Adjusted net profit attributable to ordinary shareholders
125,629
109,399
Adjusted diluted earnings per share is calculated by using the adjusted net profit attributable to
ordinary shareholders and dividing it by the weighted average ordinary shares in issue adjusted
to assume conversion of all potentially dilutive ordinary shares (see note 19).
d. Adjusted dividend cover
Dividend cover is calculated as earnings per share divided by dividends per share. Adjusted dividend
cover is calculated as adjusted earnings per share as defined in note 2c above divided by dividends
per share.
e. Total shareholder return
Total shareholder return is the movement in the price of an ordinary share plus dividends during
the year, divided by the opening share price.
For the year ended 31 December 2023
Notes to the Group financial statements continued
Strategic report Corporate governance Financial statements
Rotork Annual Report 2023 rotork.com178
2. Alternative performance measures continued
f. Return on capital employed
The return on capital employed ratio is used by management to help ensure that capital is used efficiently.
2023
2022
Adjusted operating profit
164,475
143,245
Capital employed
Shareholders’ funds
622,295
589,907
Cash and cash equivalents
(146,372)
(114,770)
Interest bearing loans and borrowings
11,957
8,836
Pension (surplus)/deficit net of deferred tax
(6,904)
6,065
Capital employed
480,976
490,038
Average capital employed
485,507
458,002
Return on capital employed
33.9%
31.3%
Average capital employed is defined as the average of the capital employed at the start and end
of the relevant year.
g. Working capital as a percentage of revenue
Working capital as a percentage of revenue is monitored as control of working capital is key to
achieving our cash generation targets. It is calculated as inventory plus trade receivables, less trade
payables, divided by revenue.
h. Organic constant currency (OCC)
OCC results remove the results of businesses acquired or disposed of during the period that are not
consistently presented in both periods’ results. The 2023 results are restated at 2022 exchange rates.
Key headings in the income statement are reconciled to OCC as follows:
OCC
31 December Currency Acquisition 31 December
2023 adjustment adjustment 2023
Revenue
719,150
11,857
(1,599)
729,408
Cost of sales
(380,054)
(6,233)
714
(385,573)
Gross margin
339,096
5,624
(885)
343,835
Overheads
(174,621)
(1,454)
324
(175,751)
Adjusted operating profit
164,475
4,170
(561)
168,084
Interest
1,871
(268)
54
1,657
Adjusted profit before tax
166,346
3,902
(507)
169,741
Adjusted taxation
(40,717)
(956)
137
(41,536)
Adjusted profit after tax
125,629
2,946
(370)
128,205
i. Cash conversion
Cash conversion is calculated as adjusted operating cash flow as a percentage of adjusted operating
profit. It is monitored to illustrate how efficiently adjusted operating profits are converted into cash.
Adjusted operating cash flow is calculated as follows:
2023
2022
Adjusted operating cash flow
Operating cash flow
157,719
89,733
Operating cash flow impact of other adjustments
13,496
12,056
Difference between pension charge and cash contribution
26,628
6,979
Adjusted operating cash flow
197,843
108,768
Adjusted operating profit
164,475
143,245
Cash conversion
120%
76%
3. Operating segments
The three identifiable operating segments where the financial and operating performance is reviewed
monthly by the chief operating decision maker are as follows:
• Oil & Gas
• Chemical, Process & Industrial
• Water & Power
Each of our customers is allocated to a division. Sales to that customer, along with all directly
associated costs of that sale, are reported under the division to which that customer is allocated.
Where some of our customers sell into multiple end markets, a lead end market is identified. Sales
to these customers will generally be allocated to the lead end market unless the sale is of significance
and an alternative end market has been identified, in which case it will be reported under the
alternative end market.
For all costs not directly attributed to a sale, these are allocated across the three divisions within
each of our businesses. There are some costs which are directly attributable to a division, but most
support costs and facility costs are not directly attributable to a division and are generally allocated
based on split of revenue. Amortisation of acquired intangible assets is allocated based on the split
of revenue of the entity to which the asset relates.
Unallocated expenses comprise corporate expenses.
For the year ended 31 December 2023
Notes to the Group financial statements continued
Strategic report Corporate governance Financial statements
rotork.com Rotork Annual Report 2023179
3. Operating segments continued
Geographic analysis
Rotork has a worldwide presence in all three operating segments through its subsidiary selling offices
and through an agency network. A full list of locations can be found at www.rotork.com.
Analysis by operating segment
Chemical,
Process &
Oil & Gas Industrial Water & Power Unallocated Group
2023 2023 2023 2023 2023
Revenue from external
customers
328,391
213,712
177,047
—
719,150
Adjusted operating profit*
83,627
51,253
46,445
(16,850)
164,475
Amortisation of acquired
intangible assets
(1,100)
(848)
(162)
—
(2,110)
Segment result
82,527
50,405
46,283
(16,850)
162,365
Other adjustments
(13,598)
Operating profit
148,767
Net finance income
1,871
Income tax expense
(37,150)
Profit for the year
113,488
Chemical,
Process &
Oil & Gas Industrial Water & Power Unallocated Group
2022 2022 2022 2022 2022
Revenue from external
customers
283,266
198,355
160,191
—
641,812
Adjusted operating profit*
63,960
51,206
40,293
(12,214)
143,245
Amortisation of acquired
intangible assets
(5,063)
(1,410)
(578)
—
(7,051)
Segment result
58,897
49,796
39,715
(12,214)
136,194
Other adjustments
(12,587)
Operating profit
123,607
Net finance expense
495
Income tax expense
(30,901)
Profit for the year
93,201
* Adjusted operating profit is operating profit before the amortisation of acquired intangible assets and other adjustments
(see note 5).
Chemical,
Process &
Oil & Gas Industrial Water & Power Unallocated Group
2023 2023 2023 2023 2023
Depreciation
6,180
4,022
3,331
—
13,533
Amortisation:
– Acquired intangible assets
1,100
848
162
—
2,110
– Development costs
774
504
417
—
1,695
Chemical,
Process &
Oil & Gas Industrial Water & Power Unallocated Group
2022 2022 2022 2022 2022
Depreciation
6,591
4,615
3,727
—
14,933
Amortisation:
– Acquired intangible assets
5,063
1,410
578
—
7,051
– Development costs
1,239
701
868
—
2,808
Balance sheets are reviewed by subsidiary and operating segment balance sheets are not prepared.
Therefore no further analysis of operating segments assets and liabilities is presented.
Revenue by location of subsidiary
2023
2022
UK
75,568
55,146
Italy
65,553
52,997
Rest of Europe
105,293
96,627
USA
141,046
129,499
Other Americas
59,419
44,161
China
102,133
120,188
Rest of World
170,138
143,194
719,150
641,812
For the year ended 31 December 2023
Notes to the Group financial statements continued
Strategic report Corporate governance Financial statements
Rotork Annual Report 2023 rotork.com180
4. Acquisitions
i) Hanbay
On 4 August 2023, the Group acquired 100% of the share capital of Hanbay Inc. (‘Hanbay’)
for £21,107,000. Hanbay designs and manufactures precise, miniature electric actuators which
offer a compact profile and high torque design for use with small valves and instrument valves
for use in hazardous and non-hazardous applications, headquartered in Montreal, Canada.
The acquisition expands the Group’s electric actuator offering and is fully consistent with all three
pillars of the Growth+ strategy and increases the percentage sales contribution of the Group’s
Eco-transition portfolio.
In the five months to 31 December 2023 Hanbay contributed £1,599,000 to Group revenue and
£561,000 to consolidated operating profit before amortisation, this performance is in line with
management’s expectations. The amortisation charge in the five-month period from the acquired
intangible assets was £649,000.
If the acquisition had occurred on 1 January 2023 the business would have contributed £3,945,000
to Group revenue and £1,643,000 to Group operating profit.
ii) Acquisitions fair value table
The acquisition had the following effect on the Group’s assets and liabilities.
£’000
Fair value
Non-current assets
Property, plant and equipment
13
Intangible assets
9,379
Current assets
Inventory
695
Trade and other receivables
45
Cash
2,708
Current liabilities
Trade and other payables
(96)
Non-current liabilities
Deferred tax liability
(2,485)
Total net identifiable assets
10,259
Goodwill
10,848
Cash movements in respect of acquisitions
Purchase consideration – paid in cash
21,107
Cash held in acquired subsidiary
(2,708)
18,399
The adjustments shown in the table represent the alignment of accounting policies of the acquired
businesses to Rotork Group policies and the fair value adjustments of the assets and liabilities at the
acquisition date of each of the business. The amounts stated above are not provisional.
The goodwill arising from this acquisition represents the opportunity to grow through expanding
the Group’s electric actuator offering and employee know-how. The value of goodwill expected
to be deductible for tax purposes is £10,848,000.
The intangible assets identified comprise customer relationships, product design and non-compete
agreements. The intangible assets have been valued by modelling the discounted cashflows attributable
to the respective asset. A discount rate of 18.0% was used. Assumptions regarding future cashflows
are based on a combination of historic performance data and management’s forecasts.
iii) Acquisition costs
Acquisition costs of £384,000 have been expensed in administration expenses in the income statement
and presented as other adjustments to profit.
For the year ended 31 December 2023
Notes to the Group financial statements continued
Strategic report Corporate governance Financial statements
rotork.com Rotork Annual Report 2023181
5. Other adjustments
Refer to note 1 for details on the adjustments to profit, including an explanation of ‘other adjustments’.
The other adjustments to profit included in statutory profit are as follows:
2023
2022
Gain on disposal of property
723
1,208
Other costs
(1,224)
(1,372)
Business Transformation costs
(13,097)
(8,868)
Russia market exit
—
(3,555)
Other adjustments
(13,598)
(12,587)
Gain on disposal of property
The £723,000 (2022: £1,208,000) gain on disposal of property relates to the sales of property
in Ballarat, Australia and Radstock, UK. These disposals are the last of the Growth Acceleration
Programme operational footprint actions.
Other costs
£1,224,000 (2022: £1,372,000) of other costs have been incurred, largely in relation to acquisition
and pension buy-in advisory costs.
Business Transformation costs
During the year £13,097,000 (2022: £8,868,000) of costs were incurred on Business Transformation.
The multi-year transformation includes the implementing and integrating of common systems and
processes throughout the Group, including a new cloud-based ERP system. This brings the total
expensed under the programme to £44,920,000. These costs were expensed as they do not meet
the capitalisation criteria under IAS 38. Costs include an allocation of personnel expenses in respect
of employees directly involved in the programme.
The new ERP system launched at the Bath, UK factory in Q1 2023 and also went live at the Head
Office site in Q3 2023. These costs will continue to be reported in adjusted items. Over the next 3
– 3.5 years we will deploy the Business Transformation programme, including the new ERP system,
across all other Group entities at an estimated further cost of £45m to £50m.
Russia market exit
The Russia market exit costs are in relation to the ceasing of operations in Russia and the impairment
of the gross assets of the Russian entity.
Income statement disclosure
All adjustments are included in administrative expenses. The adjustments are taxable or tax
deductible in the country in which the expense is incurred.
Cash flow statement disclosure
Other adjustments have a net operating cash outflow of £13,496,000 (2022: £12,056,000) and
a net investing cash inflow of £955,000 (2022: £4,049,000).
6. Other income and expenses
2023
2022
Gain on disposal of property, plant and equipment
684
214
Other
721
1,406
Other income
1,405
1,620
2023
2022
Loss on disposal of property, plant and equipment
(342)
(55)
Other
(448)
(317)
Other expenses
(790)
(372)
7. Personnel expenses
2023
2022
Wages and salaries (including bonus and incentive plans)
152,679
127,311
Social security costs
21,514
18,531
Pension costs (note 25)
7,392
6,142
Share-based payments (note 26)
5,670
4,601
(Decrease)/increase in liability for long term service leave
(352)
135
186,903
156,720
2023
2022
Average monthly number of employees during the year:
UK
901
852
Overseas
2,390
2,371
3,291
3,223
Personnel expenses and the average monthly number of employees during the year includes expenses
and employees that are included in Business Transformation costs within Other adjustments (note 5).
For the year ended 31 December 2023
Notes to the Group financial statements continued
Strategic report Corporate governance Financial statements
Rotork Annual Report 2023 rotork.com182
8. Finance income and expense
Recognised in the income statement
2023
2022
Interest income
4,203
1,235
Net interest income on pension scheme liabilities (note 25)
352
—
Foreign exchange gains
746
1,814
Finance income
5,301
3,049
2023
2022
Interest expense
(807)
(744)
Interest expense on lease liabilities (note 28)
(495)
(406)
Net interest charge on pension scheme liabilities (note 25)
—
(110)
Foreign exchange losses
(2,128)
(1,294)
Finance expense
(3,430)
(2,554)
Recognised in other comprehensive income
2023
2022
Effective portion of changes in fair value of cash flow hedges
797
(1,044)
Fair value of cash flow hedges transferred to income statement
1,044
(1,023)
Foreign currency translation differences for foreign operations
(20,271)
21,928
(18,430)
19,861
Recognised in:
Hedging reserve
1,841
(2,067)
Translation reserve
(20,271)
21,928
(18,430)
19,861
9. Profit before tax
Profit before tax is stated after charging/(crediting) the following:
Notes
2023
2022
Depreciation of property, plant and equipment:
– Owned assets
i
9,385
10,458
– Assets held under lease contracts
i
4,148
4,475
Amortisation:
– Other intangibles
iii
2,110
7,051
– Development costs
iii
1,409
1,436
– Software
iii
657
—
Impairment of development cost assets
iii
286
1,372
Impairment of property, plant and equipment
iii
—
140
Inventory write downs recognised in the year
ii
2,310
1,100
Product research and development expenditure
iii
10,468
10,891
Exchange differences realised
iv
1,382
(520 )
Fees payable to the Group’s auditor and their associates for:
– For the audit of the Group’s annual accounts
1,338
1,136
– For the audit of the Group’s subsidiaries
106
254
Total audit fees
1,444
1,390
– Audit related assurance services
70
65
Total non-audit fees
70
65
Total fees
1,514
1,455
These costs can be found under the following headings in the income statement:
i) Both within cost of sales and administrative expenses
ii) Within cost of sales
iii) Within administrative expenses
iv) Within finance income and expenses
For the year ended 31 December 2023
Notes to the Group financial statements continued
Strategic report Corporate governance Financial statements
rotork.com Rotork Annual Report 2023183
10. Income tax expense
2023
2023
2022
2022
Current tax:
UK corporation tax on profits for the year
4,865
3,173
Adjustment in respect of prior years
435
(942)
5,300
2,231
Overseas tax on profits for the year
32,091
30,242
Adjustment in respect of prior years
146
(287)
32,237
29,955
Total current tax
37,537
32,186
Deferred tax:
Origination and reversal of other temporary
differences
1,187
(1,935)
Impact of rate change
(591)
252
Adjustment in respect of prior years
(983)
398
Total deferred tax
(387)
(1,285)
Total tax charge for year
37,150
30,901
Profit before tax
150,638
124,102
Profit before tax multiplied by the blended standard rate
of corporation tax in the UK of 23.5% (2022: 19.0%)
35,400
23,579
Effects of:
Different tax rates on overseas earnings
4,552
9,339
Permanent differences
(118)
404
Losses not recognised
166
93
Tax incentives
(1,587)
(1,935)
Impact of rate change
(861)
252
Adjustments to tax charge in respect of prior years
(402)
(831)
Total tax charge for year
37,150
30,901
Effective tax rate
24.7%
24.9%
Adjusted profit before tax (note 2b)
166,346
143,740
Total tax charge for the year
37,150
30,901
Amortisation of acquired intangible assets
286
1,109
Business Transformation costs
3,220
2,217
Other adjustments (note 5)
61
114
Adjusted total tax charge for the year
40,717
34,341
Adjusted effective tax rate
24.5%
23.9%
A tax credit of £43,000 (2022: charge of £987,000) in respect of share-based payments has been
recognised directly in equity in the year.
The effective tax rate for the year is 24.7% (2022: 24.9%). The adjusted effective tax rate is 24.5%
(2022: 23.9%) and is lower than the effective tax rate for the year principally because of the tax
treatment of expenses included in other adjustments.
The adjusted effective tax rate has increased from 23.9% in 2022 to 24.5% in 2023, principally
because of an increase in the UK corporation tax rate. The UK corporation tax rate increased from
19% to 25% on 1 April 2023 leading to a blended rate of 23.5% in the Accounting Period. The Group
expects its adjusted effective tax rate to continue to move in line with the trends in corporate tax rates
in the jurisdictions where Rotork operates. The adjusted effective tax rate will continue to be higher
than the standard UK rate principally due to higher rates of tax in China, the US, Germany and India.
On 20 June 2023 legislation was substantively enacted in the UK to introduce the OECD’s Pillar Two
global minimum tax rules together with a UK qualified domestic minimum top-up tax, with effect
from 1 January 2024. Under the legislation Rotork plc will be required to pay to the UK tax authorities
top-up tax on profits of its subsidiaries that are taxed at an effective tax rate of less than 15 per cent.
Based on Pillar Two impact assessments carried out on prior years’ data, Rotork plc considers that
Pillar Two will not have a material impact on its current tax expense in future years.
The Group has applied the mandatory temporary IAS 12 exception from the accounting requirements
for deferred taxes in IAS 12, such that the group will not recognise or disclose information on
deferred tax assets and liabilities related to Pillar Two income taxes.
The Group is continuing to assess the impact of the Pillar Two income taxes legislation on its future
financial performance.
There is an unrecognised deferred tax liability for temporary differences associated with investments
in subsidiaries. Rotork plc controls the dividend policies of its subsidiaries and the timing of the reversal
of the temporary differences. The value of temporary differences associated with unremitted earnings
of subsidiaries for which deferred tax has not been recognised is £320,839,000 (2022: £272,249,000).
11. Goodwill
2023
2022
Cost
At 1 January
249,791
238,370
Acquisition through business combinations (note 4)
10,848
—
Exchange adjustments
(7,242)
11,421
At 31 December
253,397
249,791
Provision for impairment
At 1 January
21,786
21,592
Exchange adjustments
(92)
194
At 31 December
21,694
21,786
Net book value
231,703
228,005
For the year ended 31 December 2023
Notes to the Group financial statements continued
Strategic report Corporate governance Financial statements
Rotork Annual Report 2023 rotork.com184
11. Goodwill continued
Cash generating units
Goodwill acquired through business combinations has been allocated to groups of cash-generating
units (CGUs) that are expected to benefit from that business combination. For the Group, these are
considered to be the Oil & Gas, Chemical, Process & Industrial and Water & Power divisions. On this
basis, the value in use calculations exceeded the CGU carrying values after applying sensitivity analysis.
Discount rate
Discount rate
Cash generating unit
2023
2022
2023
2022
Oil & Gas
13.5%
12.6%
92,326
93,154
Chemical, Process & Industrial
13.7%
12.8%
120,799
116,224
Water & Power
13.7%
12.8%
18,578
18,627
Total Group
231,703
228,005
Impairment testing
The Group is required to test, on an annual basis, whether goodwill has suffered any impairment.
The annual impairment test was performed at 31 October 2023. The annual impairment testing
considers a range of scenarios which includes costs and risks associated with sustainability.
The key assumptions used in the annual impairment review which are common to all CGUs are set
out below:
i) Discount rates
The discount rates for the significant CGUs presented above are pre-tax rates that reflect current market
assessments of the time value of money and the risks specific to the CGU for which the future cash flows
have not been adjusted. Discount rates are based on estimations that market participants operating in
similar sectors to Rotork would make, using the Group’s economic profile as a starting point. For each
CGU, the risk premium was adjusted on a weighted average basis to reflect the region in which the CGU
carries out the majority of its business, applied a premium based on the size of the CGU and applied a
market participant tax rate in the region the CGU operates. In calculating the discount rates, consideration
was given to exclude risks that were not relevant or which had already been reflected in the cash flows.
ii) Growth rates
Value in use calculations are used to determine the recoverable amount of goodwill allocated to each of
the CGUs. These calculations use cash flow projections from management forecasts which are based on
the budget and the Group’s three year strategic plan. The three year plan is a bottom up process which
takes place as part of the annual budget process. Once the budget for the next financial year is finalised,
years two and three of the three year plan are prepared by each reporting entity’s management reflecting
their view of the local market, known projects and experience of past performance and expectations
of future changes in the market. The Group annual budget and the three year plan are reviewed and
approved by the Board each year. The compound annual revenue growth forecast for the Group during
years one to three, used within the impairment models, reflects the growth rates within the budget and
three-year plans. Years four and five of the forecast used within the impairment model are based on
Group management judgement and forecasts taking account for future expected changes in the market.
From year six onwards, a growth rate of 2% (2022: 2%) is used to drive a terminal value.
Sensitivity analysis
The Group has conducted an analysis of the sensitivity of the impairment test to changes in the key
assumptions used to determine the recoverable amount for each of the CGUs to which goodwill is allocated.
There are no reasonably possible changes in assumptions that would lead to an impairment.
12. Intangible assets
Product Acquired intangible assets
development Customer
Software costs Brands
relationships
Other
Total
Cost
31 December 2021
9,624
23,390
49,844
113,771
21,421
218,050
Additions
2,066
2,541
—
—
—
4,607
Exchange adjustments
—
307
3,048
5,624
822
9,801
31 December 2022
11,690
26,238
52,892
119,395
22,243
232,458
Additions
2,089
3,394
—
—
—
5,483
Acquisition through business
combinations (note 4)
—
—
—
1,938
7,441
9,379
Exchange adjustments
—
(106)
(1,703)
(3,484)
(454)
(5,747)
31 December 2023
13,779
29,526
51,189
117,849
29,230
241,573
Amortisation
31 December 2021
—
16,867
45,934
108,106
21,421
192,328
Charge for the year
—
1,436
1,569
5,482
—
8,487
Impairment
—
1,372
—
—
—
1,372
Exchange adjustments
—
255
3,061
5,554
822
9,692
31 December 2022
—
19,930
50,564
119,142
22,243
211,879
Charge for the year
657
1,409
1,186
378
546
4,176
Impairment
—
286
—
—
—
286
Exchange adjustments
—
(105)
(1,672)
(3,537)
(580)
(5,894)
31 December 2023
657
21,520
50,078
115,983
22,209
210,447
Net book value
31 December 2022
11,690
6,308
2,328
253
—
20,579
31 December 2023
13,122
8,006
1,111
1,866
7,021
31,126
Other acquired intangible assets represent order books, intellectual property, non-compete
agreements and unpatented technology.
The amortisation charge and impairment are recognised within administrative expenses in the
income statement. Included within software additions in the year is £983,000 relating to assets
under construction previously included within plant and equipment.
Included in the net book value of software are assets in the course of development, which are not
amortised, with a cost of £917,000 (2022: £11,690,000).
For the year ended 31 December 2023
Notes to the Group financial statements continued
Strategic report Corporate governance Financial statements
rotork.com Rotork Annual Report 2023185
13. Property, plant and equipment
Land and Plant and
buildings
equipment
Total
Cost
31 December 2021
78,728
119,686
198,414
Additions
5,020
8,075
13,095
Disposals
(1,459)
(3,722)
(5,181)
Assets classified as held for sale
(1,046)
—
(1,046)
Exchange adjustments
4,208
6,139
10,347
31 December 2022
85,451
130,178
215,629
Additions
5,715
8,735
14,450
Disposals
(1,704)
(9,525)
(11,229)
Acquisition through business combinations
—
13
13
Exchange adjustments
(5,992)
(5,850)
(11,842)
31 December 2023
83,470
123,551
207,021
Depreciation
31 December 2021
28,788
91,828
120,616
Charge for the year
5,299
9,634
14,933
Disposals
(798)
(3,395)
(4,193)
Impairment
—
140
140
Assets classified as held for sale
(835)
—
(835)
Exchange adjustments
1,612
4,630
6,242
31 December 2022
34,066
102,837
136,903
Charge for the year
4,508
9,025
13,533
Disposals
(1,243)
(9,116)
(10,359)
Exchange adjustments
(4,228)
(3,239)
(7,467)
31 December 2023
33,103
99,507
132,610
Net book value
31 December 2022
51,385
27,341
78,726
31 December 2023
50,367
24,044
74,411
Net book value of land and buildings can be analysed between:
2023
2022
Land
5,820
5,904
Buildings
44,547
45,481
Net book value at 31 December
50,367
51,385
It is the Group’s policy to test assets for impairment whenever events or changes in circumstances
indicate that their carrying amounts may not be recoverable.
Included in the net book value of plant and equipment are assets in the course of construction,
which are not depreciated, with a cost of £1,996,000 (2022: £1,706,000). Depreciation of these
assets will commence when the assets are ready for their intended use.
Included in the net book value of land and buildings and plant and equipment are leased assets
(see note 28).
14. Deferred tax assets and liabilities
Assets
Liabilities
Net
Assets
Liabilities
Net
2023
2023
2023
2022
2022
2022
Property, plant and equipment
1,942
(1,530)
412
1,238
(1,216)
22
Intangible assets
3,111
(4,187)
(1,076)
3,546
(3,327)
219
Employee benefits
3,170
—
3,170
3,412
—
3,412
Inventory
5,709
—
5,709
5,980
—
5,980
Other items
5,223
(1,856)
3,367
5,556
(3,252)
2,304
Net tax assets/(liabilities)
19,155
(7,573)
11,582
19,732
(7,795)
11,937
Set off of tax
(3,701)
3,701
—
(3,767)
3,767
—
15,454
(3,872)
11,582
15,965
(4,028)
11,937
Movements in the net deferred tax balance during the year are as follows:
2023
2022
Balance at 1 January
11,937
8,603
Credited to the income statement
(204)
1,537
(Charged)/credited directly to equity in respect of share-based payments
43
(987)
Impact of rate change
591
(252)
Credited directly to equity in respect of pension schemes
2,153
1,795
(Charged)/credited directly to hedging reserves in respect of cash flow hedges
(445)
440
Acquired as part of business combinations
(2,527)
—
Exchange differences
34
801
Balance at 31 December
11,582
11,937
A deferred tax asset of £15,454,000 (2022: £15,965,000) has been recognised at 31 December 2023.
The directors are of the opinion, based on recent and forecast trading, that the level of profits in the
current and future years make it more likely than not that these assets will be recovered.
A deferred tax asset has not been recognised in relation to capital losses of £7,559,000 (2022: £7,632,000),
due to uncertainty over the offset against future capital profits in the companies concerned. There is
no expiry date in relation to this asset.
For the year ended 31 December 2023
Notes to the Group financial statements continued
Strategic report Corporate governance Financial statements
Rotork Annual Report 2023 rotork.com186
15. Inventories
2023
2022
Raw materials and consumables
67,381
72,182
Work in progress
5,687
5,091
Finished goods
10,895
15,033
83,963
92,306
Included in cost of sales was £262,201,000 (2022: £205,136,000) in respect of inventories consumed
in the year.
16. Trade and other receivables and assets held for sale
2023
2022
Current assets:
Trade receivables
154,870
139,507
Allowance for expected credit loss
(2,028)
(5,228)
Trade receivables – net
152,842
134,279
Corporation tax
4,187
7,877
Current tax
4,187
7,877
Other non-trade receivables
6,683
5,536
Other taxes and social security
10,323
14,998
Prepayments
6,695
18,578
Other receivables
23,701
39,112
Land and buildings
—
211
Assets held for sale
—
211
As at 31 December 2022, non-current assets relating to a property in Melle, Germany were classified
as held for sale.
17. Cash and cash equivalents
2023
2022
Bank balances
78,617
69,008
Cash in hand
12
36
Short term deposits
67,743
45,726
Cash and cash equivalents in the consolidated statement of cash flows
146,372
114,770
18. Capital and reserves
0.5p Ordinary £1 Non- 0.5p Ordinary £1 Non-
shares issued redeemable shares issued redeemable
and fully preference and fully preference
paid up shares paid up shares
2023 2023 2022 2022
At 1 January
4,304
40
4,302
40
Issued under employee share schemes
2
—
2
—
Cancelled following share buyback programme
—
—
—
—
At 31 December
4,306
40
4,304
40
Number of shares (000)
861,201
860,771
The ordinary shareholders are entitled to receive dividends as declared and are entitled to vote at
meetings of the Company.
Share issue
The Group received proceeds of £1,047,000 (2022: £1,133,000) in respect of the 429,946 (2022: 494,972)
ordinary shares issued during the year: £2,000 (2022: £2,000) was credited to share capital and
£1,045,000 (2022: £1,131,000) to share premium. Further details of the share awards are shown in note 26.
Own shares held
Within the retained earnings reserve are own shares held in Rotork’s Employee Benefit Trust.
The Group acquired 773,000 of its own shares during the year (2022: 1,124,000). The total amount
paid to acquire the shares was £2,444,000 (2022: £3,475,000), and this has been deducted from
shareholders’ equity. During the year, 1,038,000 (2022: 793,000) ordinary shares were released to
satisfy share plan awards. The investment in own shares held is £5,056,000 (2022: £6,000,000) and
represents 1,566,000 (2022: 1,831,000) ordinary shares of the Company held in trust for the benefit
of directors and employees for future payments under the Share Incentive Plan and Long Term
Incentive Plan. The dividends on these shares have been waived.
Preference shares
The preference shareholders (see note 20) take priority over the ordinary shareholders when there is
a distribution upon winding up the Company or on a reduction of equity involving a return of capital.
The holders of preference shares are entitled to vote at a general meeting of the Company if a preference
dividend is in arrears for six months or the business of the meeting includes the consideration of
a resolution for winding up the Company or the alteration of the preference shareholders’ rights.
For the year ended 31 December 2023
Notes to the Group financial statements continued
Strategic report Corporate governance Financial statements
rotork.com Rotork Annual Report 2023187
18. Capital and reserves continued
Translation reserve
The translation reserve comprises all foreign exchange differences arising from the translation
of the financial statements of foreign operations.
Capital redemption reserve
The capital redemption reserve arises when the Company redeems shares wholly out of
distributable profits.
Hedging reserve
The hedging reserve comprises the effective portion of the cumulative net change in the fair value
of cash flow hedging instruments that are determined to be an effective hedge.
Dividends
The following dividends were paid in the year per qualifying ordinary share:
Payment date
2023
2023
2022
4.30p final dividend for 2022
(final dividend for 2021: 4.05p)
24 May
36,926
34,787
2.55p interim dividend for 2023
(interim dividend for 2022: 2.40p)
22 September
21,894
20,597
58,820
55,384
After the balance sheet date the following dividends per qualifying ordinary share were proposed by
the directors. The dividends have not been provided for.
2023
2022
Final proposed dividend per qualifying ordinary share
4.65p
40,046
—
4.30p
—
37,013
19. Earnings per share
Basic earnings per share
Earnings per share is calculated for both the current and previous years using the profit attributable
to the ordinary shareholders for the year. The earnings per share calculation is based on 859.3m
shares (2022: 858.9m shares) being the weighted average number of ordinary shares in issue
(net of own ordinary shares held) for the year.
2023
2022
Net profit attributable to ordinary shareholders
113,488
93,201
Weighted average number of ordinary shares
Issued ordinary shares at 1 January
858,940
858,776
Effect of own shares held
198
6
Effect of shares issued under Sharesave plans
122
167
Weighted average number of ordinary shares during the year
859,260
858,949
Basic earnings per share
13.2p
10.9p
Adjusted basic earnings per share
Adjusted basic earnings per share is calculated for both the current and previous years using the
profit attributable to the ordinary shareholders for the year after adding back the after-tax impact
of the adjustments. The reconciliation showing how adjusted net profit attributable to ordinary
shareholders is derived is shown in note 2.
2023
2022
Adjusted net profit attributable to ordinary shareholders
125,629
109,399
Weighted average number of ordinary shares during the year
859,260
858,949
Adjusted basic earnings per share
14.6p
12.7p
Diluted earnings per share
Diluted earnings per share is based on the profit for the year attributable to the ordinary shareholders
and 862.4m shares (2022: 860.6m shares). The number of shares is equal to the weighted average
number of ordinary shares in issue (net of own ordinary shares held) adjusted to assume conversion
of all potentially dilutive ordinary shares. The Company has two categories of potentially dilutive
ordinary shares: those share options granted to employees under the Sharesave plan where the exercise
price is less than the average market price of the Company’s ordinary shares during the year and
contingently issuable shares awarded under the Long Term Incentive Plan (LTIP).
2023
2022
Net profit attributable to ordinary shareholders
113,488
93,201
Weighted average number of ordinary shares (diluted)
Weighted average number of ordinary shares for the year
859,260
858,949
Effect of Sharesave options
730
562
Effect of LTIP share awards
2,398
1,119
Weighted average number of ordinary shares (diluted) during the year
862,388
860,630
Diluted earnings per share
13.2p
10.8p
For the year ended 31 December 2023
Notes to the Group financial statements continued
Strategic report Corporate governance Financial statements
Rotork Annual Report 2023 rotork.com188
19. Earnings per share continued
Adjusted diluted earnings per share
2023
2022
Adjusted net profit attributable to ordinary shareholders
125,629
109,399
Weighted average number of ordinary shares (diluted) during the year
862,388
860,630
Adjusted diluted earnings per share
14.6p
12.7p
20. Interest bearing loans and borrowings
This note provides information about the contractual terms of the Group’s interest bearing loans and
borrowings. For more information about the Group’s exposure to interest rate, liquidity and currency
risks, see note 27.
Notes
2023
2022
Non-current liabilities
Preference shares classified as debt
40
40
Lease liabilities
28
8,786
5,365
8,826
5,405
Current liabilities
Lease liabilities
28
3,131
3,431
3,131
3,431
Total interest bearing loans and borrowings
11,957
8,836
Terms and debt repayment schedule
The terms and conditions of outstanding bank loans and preference shares were as follows:
Interest Year of
Currency rates
maturity
2023
2022
Non-redeemable preference shares
Sterling
9.5%
—
40
40
40
40
Information on leases and the lease repayment profile are shown in note 28.
21. Employee benefits
2023
2022
Recognised liability for defined benefit obligations
—
8,006
Other pension scheme liabilities
673
158
Employee bonuses
25,497
11,524
Employee indemnity provision
2,016
1,925
Other employee benefits
5,765
5,542
33,951
27,155
Non-current
4,197
11,955
Current
29,754
15,200
33,951
27,155
Defined benefit pension scheme disclosures are detailed in note 25.
22. Provisions
Warranty Restructuring
provision
provision
Total
Balance at 1 January 2023
4,318
1,487
5,805
Exchange differences
(165)
—
(165)
Charge to the income statement
981
32
1,013
Provisions utilised during the year
(669)
(338)
(1,007)
Balance at 31 December 2023
4,465
1,181
5,646
Maturity at 31 December 2023
Non-current
1,371
—
1,371
Current
3,094
1,181
4,275
4,465
1,181
5,646
Maturity at 31 December 2022
Non-current
1,439
—
1,439
Current
2,879
1,487
4,366
4,318
1,487
5,805
For the year ended 31 December 2023
Notes to the Group financial statements continued
Strategic report Corporate governance Financial statements
rotork.com Rotork Annual Report 2023189
22. Provisions continued
The warranty provision is based on estimates made from historical warranty data associated with
similar products and services. The provision relates mainly to products sold during the last 12 months
and the typical warranty period is 18 months.
The restructuring provision is expected to be utilised within the next 12 months.
23. Trade and other payables
2023
2022
Trade payables
40,585
42,314
Corporation tax
12,387
11,893
Current tax
12,387
11,893
Other taxes and social security
8,906
10,230
Contract liabilities
9,142
8,244
Other non-trade payables and accrued expenses
24,488
20,610
Other payables
42,536
39,084
Contract liabilities are recognised as amounts are received from customers in advance of performance
under contract, these amounts are then recognised as revenue as and when the Group performs
under the contract. Generally there is no significant time delay between receipt from customers and
performance under contract and so these liabilities remain current.
24. Derivative financial instruments
Assets Liabilities Assets Liabilities
2023 2023 2022 2022
Forward foreign exchange contracts – cash flow hedges
879
81
136
1,239
Foreign exchange swaps – cash flow hedges
—
472
—
1,705
Total
879
553
136
2,944
Less non-current portion:
Forward foreign exchange contracts – cash flow hedges
206
15
74
215
Current portion
673
538
62
2,729
The full fair value of a hedging derivative is classified as a non-current asset or liability if the
remaining maturity of the hedged item is more than 12 months, and as a current asset or liability,
if the maturity of the hedged item is less than 12 months.
There was no ineffectiveness to be recorded from the use of foreign exchange contracts.
The hedged forecast transactions denominated in foreign currency are expected to occur at various
dates. Gains and losses in respect of these derivatives recognised in the hedging reserve in equity
at 31 December 2023 are recognised in the income statement in the period or periods during which
the hedged forecast transaction affects the income statement.
25. Pension schemes
i) Defined benefit pension schemes
The Group operates two defined benefit pension arrangements – the Rotork Pension and Life
Assurance Scheme (UK Scheme) and the Rotork Controls Inc. Pension Plan (US Pension Plan).
On retirement, leaving service or death, the Schemes provide benefits based on final salary and
length of service. Whether measured by assets or liabilities, the UK Scheme is more than 85%
of the overall value of the two defined benefit Schemes.
The UK Scheme is subject to the Statutory Funding Objective under the Pensions Act 2004.
A valuation of the Scheme is carried out at least once every three years to determine whether
the Statutory Funding Objective is met. As part of the process the Company must agree with the
trustees of the Scheme the contributions to be paid to address any shortfall against the Statutory
Funding Objective.
The UK Scheme is managed by a Trustee, with directors appointed in part by the Group and part
from elections by members of the Scheme. The Trustee has responsibility for obtaining valuations
of the fund, administering benefit payments and investing the Scheme’s assets. The Trustee
delegates some of these functions to its professional advisers where appropriate. The UK Scheme
which was closed to new entrants in 2003 was closed to future accrual from 1 April 2018.
A key development over 2023 was that the Group paid a one-off contribution to the UK Scheme
in May 2023 of £20 million. This was to help facilitate the purchase of a bulk annuity with Aviva
covering the UK Scheme’s current pensioner liabilities. This transaction happened in the second
half of June 2023 and we refer to this as the pensioner buy-in.
The US Pension Plan is subject to the ERISA funding requirements. A valuation of the Plan is carried
out annually to ensure the Funding Objective is met under ERISA by contributing at least the
Minimum Required Contribution. As part of this process the Company must contribute to the Plan
enough contributions to ensure at least the Minimum Contribution is deposited in the Trust to pay
for the accrual of benefits. The US Pension plan which was closed to new entrants in 2009 was
closed to future accrual on 31 December 2018.
The two defined benefit pension arrangements expose the Group to a number of risks:
• Investment risk – the Schemes hold investments in asset classes, such as equities, which
have volatile market values and while these assets are expected to provide real returns over
the long-term the short-term volatility can cause additional funding to be required if a deficit
emerges. However, following the pensioner buy-in, more than 90% of the value of the UK
Scheme’s assets is invested in the pensioner buy-in and LDI/bonds.
• Interest rate risk – the Schemes’ liabilities are assessed using market yields on high quality
corporate bonds to discount the liabilities. A decrease in the bond interest rate will increase
the Schemes’ liabilities but this will be largely offset by an increase in the value of the Schemes’
pensioner buy-in and LDI/bond investments.
• Inflation risk – a significant proportion of the benefits under the UK Scheme is linked to
inflation. Although the UK Scheme’s assets are expected to provide a good hedge against
inflation over the long term, movements over the short-term could lead to deficits emerging.
• Mortality risk – in the event that members live longer than assumed a deficit will emerge
in the Schemes.
For the year ended 31 December 2023
Notes to the Group financial statements continued
Strategic report Corporate governance Financial statements
Rotork Annual Report 2023 rotork.com190
25. Pension schemes continued
i) Defined benefit pension schemes continued
The impact of the requirement to equalise benefits of men and women for unequal GMPs was
estimated to be a 0.3% addition to the liabilities of the UK Scheme, the same allowance that was
made at the previous year-end.
Movements in the present value of defined benefit obligations
2023
2022
Liabilities at 1 January
144,381
233,135
Administration costs
—
23
Interest cost
6,704
4,576
Benefits paid
(7,414)
(10,946)
Actuarial loss/(gain)
3,558
(84,893)
Currency loss/(gain)
(1,007)
2,486
Liabilities at 31 December
146,222
144,381
Movements in fair value of plan assets
2023
2022
Assets at 1 January
136,375
225,510
Interest income on plan assets
7,056
4,466
Employer contributions
26,475
6,826
Benefits paid
(7,414)
(10,946)
Return on plan assets, excluding interest income on plan assets
(6,317)
(91,620)
Currency gain/(loss)
(809)
2,139
Assets at 31 December
155,366
136,375
Expense recognised in the income statement
2023
2022
Administration costs
—
23
Net interest (income)/ cost
(352)
110
(352)
133
The expense is recognised in the following line items in the income statement
2023
2022
Cost of sales
—
9
Administrative expenses
—
14
Net finance expense
(352)
110
(352)
133
Remeasurements over the year
2023
2022
Experience adjustments on plan assets
(6,317)
(91,620)
Experience adjustments on plan liabilities
(2,681)
(3,565)
Actuarial (loss)/gain from changes to financial assumptions
(3,180)
88,334
Actuarial gain from changes to demographic assumptions
2,303
124
Experience adjustments on currency
198
(347)
(9,677)
(7,074)
Reconciliation of net defined benefit obligation
2023
2022
Net defined benefit obligation at the beginning of the year
8,006
7,625
Current service costs
—
—
Administration costs
—
23
Net financing expense
(352)
110
Remeasurements over the year
9,677
7,074
Employer contributions
(26,475)
(6,826)
(9,144)
8,006
For the year ended 31 December 2023
Notes to the Group financial statements continued
Strategic report Corporate governance Financial statements
rotork.com Rotork Annual Report 2023191
25. Pension schemes continued
i) Defined benefit pension schemes continued
Liability for defined benefit obligations
The principal actuarial assumptions at 31 December 2023 (expressed as weighted averages):
UK scheme US scheme Weighted average
(% per annum) (% per annum) (% per annum)
2023
2022
2023
2022
2023
2022
Discount rate
4.55
4.75
4.77
4.98
4.58
4.78
Rate of increase in salaries
n/a
n/a
n/a
n/a
n/a
n/a
Rate of increase in pensions (post
May 2000)
2.90
3.00
0.00
0.00
2.50
2.60
Rate of increase in pensions (pre
May 2000)
4.60
4.60
0.00
0.00
4.00
4.00
UK rate of inflation
3.00
3.10
n/a
n/a
3.00
3.10
In the UK the Retail Price Index is used as the rate of inflation as it is a requirement of the UK Scheme’s rules.
The split of the Schemes’ assets were as follows:
Fair value Fair value
2023 2022
Equities
7,825
17,
24 4
Targeted return
—
12,966
Property
839
1,134
Multi-asset credit (quoted)
3,770
21,152
LDI/absolute return bonds
53,690
68,761
Value of pensioner buy-in bulk annuity
74,049
—
US deposit administration contract
15,193
15,118
Total
155,366
136,375
Actual return on the Schemes’ assets
739
(87,154)
The UK Scheme has a strategic asset allocation, which was most recently reviewed at the time of
the pensioner buy-in in June 2023 and after considering the UK Scheme’s liability profile, funding
position, expected return of the various asset classes and the need for diversification. The level of
interest rate and inflation hedging has been increased by the pensioner buy-in and the use of liability
driven investment (LDI) funds. Currently the Scheme has hedged around 90% of both the interest
rate risk and the inflation risk of its liabilities, as measured on a low risk gilts basis. The pensioner
buy-in also hedges the longevity risk of current pensioners, whose liabilities account for just over
50% of the UK Scheme’s defined benefit obligation.
The only change made to the demographic assumptions at the 2023 year-end is that future
improvements in mortality are now based on the CMI_2022 core projection model, which places
a 25% weighting on 2022’s mortality experience (2022: CMI_2021).
By way of example the respective mortality tables indicate the following life expectancy:
2023
Life expectancy at age 65
2022
Life expectancy at age 65
Current age
Male
Female
Male
Female
65
22.7
23.4
23.2
23.8
45
24.0
24.8
24.6
25.2
Sensitivity analysis on the Schemes’ liabilities
Approximate effect on liabilities
Adjustments to assumptions
2023
2022
Discount rate
Plus 1.0% p.a.
(20,700)
(20,600)
Minus 1.0% p.a.
24,500
24,400
Inflation
Plus 0.5% p.a.
6,700
6,600
Minus 0.5% p.a.
(6,400)
(6,300)
Life expectancy
Increase of one year in assumed life expectancy
5,100
4,600
The sensitivities disclosed are indicative of how reasonably possible changes would impact the
liabilities recognised. Further movements in assumptions would result in higher variances accordingly.
They are approximate and only show the likely effect of an assumption being adjusted whilst all
other assumptions remain the same. They focus solely on the liability impact and do not reflect
possible matching movements in the assets, as a result of the UK Scheme’s pensioner buy-in and
LDI/bond holdings.
The sensitivity analysis was determined using the same method as per the calculation of liabilities
for the balance sheet disclosures, but using assumptions adjusted as detailed above.
Effect of the Schemes on the Group’s future cash flows
The Group is required to agree a Schedule of Contributions with the Trustee of the UK Scheme
following a valuation which must be carried out at least once every three years. Following the
valuation of the UK Scheme as at 31 March 2022, the Group estimates that cash contributions to the
Group’s defined benefit pension schemes during 2024 will be £3,667,000 (2023: £26,475,000, which
included the one-off contribution of £20 million paid by the Group to facilitate the pensioner buy-in).
The weighted average duration of the defined benefit obligation for the UK Scheme is approximately
17 years.
For the year ended 31 December 2023
Notes to the Group financial statements continued
Strategic report Corporate governance Financial statements
Rotork Annual Report 2023 rotork.com192
25. Pension schemes continued
ii) Other pension plans
The Group makes a contribution to a number of defined contribution plans around the world to
provide benefits for employees upon retirement. Total expense relating to these plans in the year
was £7,392,000 (2022: £6,142,000).
26. Share-based payments
The Group awards shares under the Long Term Incentive Plan (LTIP), the Save As You Earn scheme
(Sharesave plan), the Global Employee Share Plan (GESP) and the Share Incentive Plan (SIP).
The equity settled share-based payment expense included in the income statement for each
of the plans can be analysed as follows:
2023
2022
Sharesave plan (a)
539
746
Long Term Incentive Plan (b)
2,533
2,189
GESP/SIP profit-linked share scheme
2,598
1,666
Total expense recognised as employee costs (note 7)
5,670
4,601
Volatility assumptions for equity-based payments
The expected volatility of all equity compensation benefits is based on the historic volatility
(calculated based on the weighted average remaining life of each benefit), adjusted for any expected
changes to future volatility due to publicly available information.
a) Sharesave plan
UK employees are invited to join the Sharesave plan when an offer is made each year. All the offers to
date were made at a 20% discount to market price at the time. There are no performance criteria for
the Sharesave plan. Employees are given the option of joining either the 3 year or the 5 year scheme.
3 year scheme
5 year scheme
2023
2022
2023
2022
Grant date
6 October
7 October
6 October
7 October
Share price at grant date
304p
244p
304p
244p
Exercise price
243p
196p
243p
196p
Shares granted under scheme
407,482
1,024,131
115,093
468,529
Vesting period
3 years
3 years
5 years
5 years
Expected volatility
31.1%
31.1%
31.1%
31.1%
Risk free rate
4.48%
4.31%
4.40%
4.30%
Expected dividends expressed as a dividend yield
2.26%
2.64%
2.26%
2.64%
Probability of ceasing employment before vesting
2%
2%
2%
2%
Fair value
97p
75p
109p
84p
Movements in the number of share options outstanding and their weighted average prices are as follows:
2023
2022
Average option Average option
price per share
Options
price per share
Options
At 1 January
220p
2,538,426
252p
2,342,007
Granted
243p
522,575
196p
1,492,660
Exercised
243p
(429,946)
230p
(494,972)
Forfeited
229p
(170,466)
261p
(801,269)
At 31 December
221p
2,460,589
220p
2,538,426
Of the 2,460,589 outstanding options (2022: 2,538,426), 120,220 are exercisable (2022: 130,749).
The Group received proceeds of £1,047,000 in respect of the 429,946 options exercised during the
year: £2,000 was credited to share capital and £1,045,000 to share premium. The weighted average
share price at date of exercise was 310p (2022: 310p).
The weighted average remaining life of 1,640,383 (2022: 1,763,976) awards outstanding under the
3 year plan is 2.0 years. The weighted average remaining life of 820,206 (2022: 774,450) awards
outstanding under the 5 year plan is 3.4 years.
b) Long Term Incentive Plan
The Long Term Incentive Plan (LTIP) is a performance share plan under which shares are conditionally
allocated to selected members of senior management at the discretion of the Remuneration Committee
on an annual basis. Following shareholder approval of the LTIP at the Company’s AGM on 18 May 2000,
awards of shares are made to executive directors and senior managers each year.
2019 LTIP plan
Following shareholder approval of the 2019 LTIP plan at the Company’s AGM on 26 April 2019,
awards of shares have been made annually to executive and senior managers. Previously, a third of
these awards vested under a TSR performance condition, a third under an EPS performance condition
and a third under a Return on Invested Capital (ROIC) performance condition. For the 2023 awards
onwards, 30% of these awards vest under a TSR performance condition, 30% under an EPS performance
condition, 30% under a Return on Invested Capital (ROIC) performance condition and 10% under
an ESG performance condition.
TSR measures the change in value of a share and reinvested dividends over the period of measurement.
The actual number of shares transferred will be determined by the number of shares initially allocated
multiplied by a vesting percentage. The actual number of shares transferred will be 25% at the 50th
percentile rising to 100% at the 75th percentile.
The EPS performance condition is satisfied with 25% (15% for pre 2023 awards) of the awards
vesting if the EPS growth is 9% over the vesting period up to a maximum of 100% vesting if EPS
growth exceeds 35%.
Vesting of awards under the ROIC condition is determined by calculating the growth in ROIC, on a
cumulative basis, over the performance period. For the 2021, 2022 and 2023 awards, the awards will
vest by comparing the average ROIC over the performance period against a set of pre-defined targets.
For the year ended 31 December 2023
Notes to the Group financial statements continued
Strategic report Corporate governance Financial statements
rotork.com Rotork Annual Report 2023193
26. Share-based payments continued
2019 LTIP plan continued
The ESG performance condition is satisfied with an absolute reduction in scope 1 and 2 CO
2
emissions
with targets aligned to the accredited, published 2030 SBTI targets.
The performance period for the 2020 awards ended on 31 December 2022. Messrs.
PricewaterhouseCoopers LLP as independent actuaries certified to the Remuneration Committee
that there was a 0% vesting of this award. The TSR, EPS and ROIC elements of the scheme did not
vest as the performance criteria were not met.
The performance period for the 2021 awards ended on 31 December 2023. Messrs.
PricewaterhouseCoopers LLP as independent actuaries certified to the Remuneration Committee that
there was a 13.8% vesting of this award as the Group’s EPS growth was 17.1% over the performance
period. The TSR and ROIC elements of the scheme did not vest as the performance criteria were not met.
2023
2022
Grant date
24 March
24 March
Share price at grant date
307p
333p
Shares granted under scheme
1,543,337
1,298,366
Vesting period
3 years
3 years
Expected volatility
28.4%
33.5%
Risk free rate
3.3%
3.6%
Expected dividends expressed as a dividend yield
0.0%
0.0%
Probability of ceasing employment before vesting
5% p.a.
5% p.a.
Fair value of awards under TSR performance conditions
190p
206p
Fair value of awards under EPS and ROIC performance conditions
307p
333p
Outstanding Granted Vested Outstanding
at start of year during year
during year
Lapsed
at end of year
2020
Award
1,421,496
—
—
(1,421,496)
—
2021
Award
921,438
—
—
(110,566)
810,872
2022
Award
1,298,366
—
—
(86,690)
1,211,676
2023
Award
—
1,543,337
—
—
1,543,337
3,641,300
1,543,337
—
(1,618,752)
3,565,885
The weighted average remaining life of awards outstanding is one year.
c) Global Employee Share plan (GESP) and the Share Incentive Plan (SIP)
These discretionary profit linked shares schemes are annual schemes based on the prior year profit
of participating Rotork companies. The value of the award to each employee is based on salary and
length of service and can be up to £3,600.
27. Financial instruments
Financial risk and treasury policies
The Group Treasury department maintains liquidity, identifies and manages foreign exchange risk,
manages relations with the Group’s bankers and provides a treasury service to the Group’s businesses.
Treasury dealings such as investments, borrowings and foreign exchange are conducted only to support
underlying business transactions.
The Group has clearly defined policies for the management of credit, foreign exchange and interest
rate risk. The Group Treasury department is not a profit centre and, therefore, does not undertake
speculative foreign exchange dealings for which there is no underlying exposure. Exposures resulting
from sales and purchases in foreign currency are matched where possible and the net exposure may
be hedged.
a) Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial
instrument fails to meet its contractual obligations, and arises principally from the Group’s
receivables from customers and cash on deposit with financial institutions.
Management has a credit policy in place and exposure to credit risk is both monitored on an ongoing
basis and reduced through the use of credit insurance covering over 80% of trade receivables at any
time. Credit evaluations are carried out on all customers requiring credit above a certain threshold,
with varying approval levels set around this depending on the value of the sale. At the balance sheet
date there were no significant concentrations of credit risk.
Goods are sold subject to retention of title clauses, so that in the event of non–payment the Group
may have a secured claim.
The Group maintains an allowance for impairment in respect of non–insured receivables where
recoverability is considered doubtful.
The Group Treasury Committee meets regularly and reviews the credit risk associated with
institutions that hold a material cash balance. As well as credit ratings, counterparties and
instruments are assessed for credit default swap pricing and liquidity of funds.
For the year ended 31 December 2023
Notes to the Group financial statements continued
Strategic report Corporate governance Financial statements
Rotork Annual Report 2023 rotork.com194
27. Financial instruments continued
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum
exposure to credit risk at the reporting date was:
Carrying amount
2023
2022
Trade receivables
152,842
134,279
Cash and cash equivalents
146,372
114,770
299,214
249,049
The maximum exposure to credit risk for trade receivables at the reporting date by currency was:
Carrying amount
2023
2022
Sterling
23,613
17,9 49
US dollar
30,291
33,648
Euro
46,378
38,511
Other
52,560
4 4,171
152,842
134,279
Allowance for expected credit loss against trade receivables
The following table shows the expected credit loss (ECL) that has been recognised for trade receivables:
Gross Provision Gross Provision
2023 2023 2022 2022
Not past due
118,229
—
97,291
—
Past due 0–30 days
23,077
(32)
23,141
—
Past due 31–60 days
6,684
(96)
8,168
(65)
Past due 61–90 days
2,084
(106)
3,525
(46)
Past due more than 91 days
4,796
(1,794)
7,381
(5,116)
154,870
(2,028)
139,506
(5,227)
The reduction in provision from 2022 to 2023 primarily relates to the write off of trade receivables
provided for in prior years.
b) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall
due. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always
have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions,
without incurring unacceptable losses or risking damage to the Group’s reputation.
The Group is highly cash generative and uses monthly cash flow forecasts to monitor cash requirements
and to optimise its return on investments. Typically the Group ensures that it has sufficient cash
on hand to meet foreseeable operational expenses; it also maintains a £5,000,000 uncommitted
overdraft facility (2022: £5,000,000) on which interest would be payable at base rate plus 2.0%
(2022: 2.0%) and a €5,000,000 uncommitted overdraft facility (2022: €5,000,000) on which interest
would be payable at base rate plus 1.1% (2022: 1.1%).
The following are the contractual maturities of financial liabilities, including interest payments and
excluding the impact of netting agreements:
Analysis of contractual cash flow maturities
Carrying Contractual Less than More than
31 December 2023 amount cash flows
12 months
1–2 years
2–5 years
5 years
Lease liabilities
11,917
13,220
3,604
3,134
5,367
1,115
Trade and other payables
and accrued expenses
65,073
65,073
65,073
—
—
—
Foreign exchange contracts
553
553
538
15
—
—
Non-redeemable preference shares
40
40
—
—
—
40
77,583
78,886
69,215
3,149
5,367
1,155
Analysis of contractual cash flow maturities
Carrying Contractual Less than More than
31 December 2022 amount cash flows
12 months
1–2 years
2–5 years
5 years
Lease liabilities
8,796
9,678
3,735
1,991
3,281
671
Trade and other payables and accrued
expenses
62,924
62,924
62,924
—
—
—
Foreign exchange contracts
2,944
2,944
2,729
215
—
—
Non-redeemable preference shares
40
40
—
—
—
40
74,704
75,586
69,388
2,206
3,281
711
Where a counterparty experiences credit stress the foreign exchange contracts may be settled on
a net basis but standard practice is to settle on a gross basis and the undiscounted gross outflow
in respect of these contracts is £102,500,000 (2022: £97,700,000) and the gross inflow is
£102,800,000 (2022: £94,900,000).
For the year ended 31 December 2023
Notes to the Group financial statements continued
Strategic report Corporate governance Financial statements
rotork.com Rotork Annual Report 2023195
27. Financial instruments continued
Allowance for expected credit loss against trade receivables continued
c) Market risk
Market risk arises from changes in market prices, such as currency rates and interest rates, and
may affect the Group’s results. The objective of market risk management is to manage and control
market risk within suitable parameters.
i) Currency risk
The Group is exposed to foreign currency risk on sales and purchases that are denominated in a
currency other than the business unit’s functional currency. The currencies primarily giving rise to
this risk are the US dollar and related currencies and the euro. The Group hedges up to 75% of
forecast US dollar or euro foreign currency exposures using forward exchange contracts. In respect
of other non-sterling monetary assets and liabilities the exposures may also be hedged up to 75%
where this is deemed appropriate.
As part of the Group’s cash management some of the overseas subsidiaries have loan and deposit
balances where their intra-group counterparty is in the UK. The balances are typically in local
currency for the subsidiary so the UK holds a foreign currency current asset or liability which is
usually hedged through the use of foreign exchange swaps. At the balance sheet date only the
‘forward’ part of the swap remains and this is designated as a cash flow hedge to match the
currency exposure of the intercompany loan asset.
The Group classifies its forward exchange contracts (that hedge both the forecast sale and purchase
transactions and the intercompany loan and deposit balances) as cash flow hedges and states them
at fair value. The net fair value of foreign exchange contracts used as hedges at 31 December 2023
was a £326,000 asset (2022: £2,808,000 liability) comprising an asset of £879,000 (2022: £136,000)
and a liability of £553,000 (2022: £2,944,000). Forward exchange contracts in place at
31 December 2023 mature in 2024 and 2025.
Changes in the fair value of foreign exchange contracts that economically hedge monetary assets
and liabilities in foreign currencies, and for which no hedge accounting is applied, are recognised
in the income statement.
Sensitivity analysis
It is estimated that, with all other variables held equal (in particular other exchange rates), a general
change of one cent in the value of euro against sterling would have had an impact on the Group’s
operating profit for the year ended 31 December 2023 of £150,000 (2022: £150,000) and a change
of one cent in the value of US dollar against sterling would have had an impact on the Group’s
operating profit for the year ended 31 December 2023 of £500,000 (2022: £550,000). Larger
changes would have a linear impact on operating profit. The method of estimation, which has been
applied consistently, involves assessing the transaction impact of US dollar and euro cash flows and
the translation impact of US dollar and euro profits.
The following significant exchange rates applied during the year:
Average rate
Closing rate
2023
2022
2023
2022
US dollar
1.24
1.24
1.27
1.21
Euro
1.15
1.17
1.15
1.13
ii) Interest rate risk
The Group does not undertake any hedging activity in this area.
All cash deposits are made at prevailing interest rates and the majority is available with same
day notice, though deposits are sometimes made with a maturity of no more than three months.
The main element of interest rate risk concerns sterling, US dollar, Euro and Renminbi deposits,
all of which are on a floating rate basis.
The interest rate profile of the Group’s financial liabilities (excluding leases) at 31 December was as follows:
2023
2022
Fixed rate financial liabilities
40
40
Floating rate financial liabilities
—
—
40
40
The fixed rate financial liabilities comprise preference shares.
The weighted average interest rate of the fixed and floating rate financial liabilities are 9.5%
(2022: 9.5%) and nil (2022: nil respectively.
The maturity profile of the Group’s fixed rate financial liabilities (excluding leases) at 31 December was
as follows:
2023
2022
In one year or less
—
—
In more than one year but not more than two years
—
—
In more than two years but not more than five years
—
—
In more than five years
40
40
Total
40
40
For the year ended 31 December 2023
Notes to the Group financial statements continued
Strategic report Corporate governance Financial statements
Rotork Annual Report 2023 rotork.com196
27. Financial instruments continued
Allowance for expected credit loss against trade receivables continued
d) Capital risk management
The primary objective of the Group’s capital management is to ensure it maintains sufficient capital
in order to support its business and maximise shareholder value. The Group has an asset-light
business model and uses cash generated from operations to either invest organically or by acquisition.
The Group manages its capital structure and makes adjustments to it in light of changes in economic
and market conditions. To maintain or adjust the capital structure, the Group may adjust the dividend
payment to shareholders or issue new shares.
The Group defines capital as net cash/(debt) plus equity attributable to shareholders. There are no
externally imposed restrictions on the Group’s capital structure. The reconciliation of the Group’s
definition of capital employed is shown in note 2. The Group’s reconciliation of net debt to net cash
is shown below.
Notes
2023
2022
Total borrowings including lease liabilities
20
(11,957)
(8,836)
Total cash and cash equivalents
17
146,372
114,770
Group net cash
134,415
105,934
Reconciliation of changes in assets and liabilities arising
from financing activities
Repayment of bank loans
—
694
Repayment of lease liabilities
3,699
3,966
Increase in lease liabilities
(7,069)
(4,151)
Effect of exchange rate fluctuations
249
(9)
Changes in financial liabilities arising from
financing activities
(3,121)
500
Net increase/(decrease) in cash and cash equivalents
31,602
(8,703)
Net increase/(decrease) in net cash
28,481
(8,203)
Net cash at start of year
105,934
114,137
Net cash at end of year
134,415
105,934
e) Fair values
The fair values of financial assets and liabilities, together with the carrying amounts shown in the
balance sheet, were as follows:
Carrying Carrying
amount Fair value amount Fair value
2023 2023 2022 2022
Loans and receivables
Trade receivables
152,842
152,842
134,279
134,279
Financial assets
Cash and cash equivalents
146,372
146,372
114,770
114,770
Designated cash flow hedges
Foreign exchange contracts:
– Financial assets
879
879
136
136
– Financial liabilities
(553)
(553)
(2,944)
(2,944)
Financial liabilities at amortised cost
Bank loans
—
—
—
—
Trade and other payables and
accrued expenses
(65,073)
(65,073)
(62,924)
(62,924)
Contingent consideration
—
—
—
—
Preference shares
(40)
(40)
(40)
(40)
Lease liabilities
(11,917)
(11,917)
(8,796)
(8,796)
222,510
222,510
174,481
174,481
Fair value hierarchy
The fair value of the Group’s outstanding derivative financial assets and liabilities consisted of foreign
exchange contracts and swaps and were estimated using year end spot rates adjusted for the forward
points to the appropriate value dates, and gains and losses are taken to other comprehensive income,
and estimated using market foreign exchange rates at the balance sheet date. All derivative financial
instruments are categorised as Level 2 of the fair value hierarchy.
The other financial instruments are classified as Level 3 in the fair value hierarchy and are valued as follows.
Cash and cash equivalents, trade and other payables, and trade receivables are carried at their book
values as this approximates to their fair value due to the short-term nature of the instruments.
Bank loans and lease liabilities are carried at amortised cost as it is the intention that they will not be
repaid prior to maturity, where this option exists. The fair values are evaluated by the Group based
on parameters such as interest rates and relevant credit spreads.
For the year ended 31 December 2023
Notes to the Group financial statements continued
Strategic report Corporate governance Financial statements
rotork.com Rotork Annual Report 2023197
28. Leases
The Group leases many assets including land and buildings, vehicles, machinery and IT equipment.
Information about leases for which the Group is a lessee is presented below.
Right-of-use assets
The right-of-use assets are disclosed as a non-current asset and are part of the property, plant and
equipment balance of £74,411,000 at 31 December 2023.
Land and Plant and
2023 buildings
equipment
Total
Balance at 1 January
7,293
1,072
8,365
Depreciation charge for the year
(3,288)
(860)
(4,148)
Additions to right-of-use assets
5,157
1,912
7,069
Right-of-use assets disposed of
(150)
(1)
(151)
Foreign exchange differences
218
93
311
Balance at 31 December
9,230
2,216
11,446
Lease liabilities
2023
2022
Maturity analysis – contractual undiscounted cash flows
Less than one year
3,604
3,735
One to five years
8,501
5,272
More than 5 years
1,115
671
Total undiscounted lease liability at 31 December
13,220
9,678
Interest cost associated with future periods
(1,303)
(882)
Lease liabilities included in Consolidated balance sheet at 31 December
11,917
8,796
Current
3,131
3,431
Non-current
8,786
5,365
Amounts recognised in the income statement
The Group has elected not to recognise a lease liability for short term leases (leases with an expected
term of 12 months or less) or for leases of low value assets. Payments made under such leases are
expensed on a straight-line basis. In addition, certain variable lease payments are not permitted to
be recognised as lease liabilities and are expensed as incurred.
2023
2022
Leases under IFRS 16
Interest on lease liabilities
495
406
Expenses relating to short-term leases and leases of low-value assets
2,485
2,202
Depreciation of right-of-use assets
4,148
4,475
Amounts recognised in statement of cash flows
2023
2022
Total cash outflow for leases
6,184
6,168
29. Capital commitments
Capital commitments at 31 December for which no provision has been made in these accounts were:
2023
2022
Contracted
933
1,238
30. Contingencies
2023
2022
Performance guarantees and indemnities
8,194
3,444
The performance guarantees and indemnities have been entered into in the normal course of business.
A liability would only arise in the event of the Group failing to fulfil its contractual obligations.
Rotork Annual Report 2023 rotork.com198
For the year ended 31 December 2023
Notes to the Group financial statements continued
Strategic report Corporate governance Financial statements
30. Contingencies continued
Subsidiary audit exemptions
Rotork plc has issued guarantees over the liabilities of the following companies at 31 December 2023
under Section 479C of Companies Act 2006 and these entities are exempt from the requirements
of the Act relating to the audit of individual accounts by virtue of Section 479A of the Act.
• Bifold Fluidpower Limited (01787729)
• Bifold Group Limited (06186844)
• Flowco Limited (02891839)
• Rotork Midland Limited (02819224)
• Rotork Americas Holdings Limited (12320359)
• Rotork Controls Limited (00608345)
• Rotork Overseas Limited (01010160)
• Rotork UK Limited (01090344)
31. Related parties
The Group has a related party relationship with its subsidiaries and with its directors and key
management. A list of subsidiaries is shown on pages 203 to 205 of these financial statements.
Transactions between two subsidiaries for the sale and purchase of products or the subsidiary
and parent Company for management charges are priced on an arm’s length basis.
Key management emoluments
The emoluments of those members of the Rotork Management Board, including directors, who are
responsible for planning, directing and controlling the activities of the Group were:
2023
2022
Emoluments including social security costs
6,713
4,381
Pension contributions
261
261
Share-based payments
1,628
524
8,602
5,166
Page title
Strategic report Corporate governance Financial statements
rotork.com Rotork Annual Report 2023199
For the year ended 31 December 2023
Notes to the Group financial statements continued
Strategic report Corporate governance Financial statements
2023 2022
Notes £000 £000
Non-current assets
Property, plant and equipment c 10 14
Investments d 43,205 43,205
Amounts owed by Group undertakings 322,995 326,687
Deferred tax assets e 284 51
366,494 369,957
Current assets
Amounts owed by Group undertakings 44,161 9,156
Other receivables f 447 693
Cash and cash equivalents — —
44,608 9,849
Total assets 411,102 379,806
Equity
Share capital i 4,306 4,304
Share premium 21,004 19,959
Capital redemption reserve 1,716 1,716
Retained earnings 341,034 319,139
368,060 345,118
Non-current liabilities
Preference share capital 40 40
40 40
Current liabilities
Trade payables 288 438
Current tax 7,888 4,919
Amounts owed to Group undertakings 29,950 25,842
Other payables g 4,876 3,449
43,002 34,648
Total equity and liabilities 411,102 379,806
The Company reported a total comprehensive income for the financial year of £77,489,000
(2022:£62,689,000).
These Company financial statements, company number 00578327, were approved by the Board
ofDirectors on 4 March 2024 and were signed on its behalf by:
K Huynh and JM Davis
Directors
Share
Capital
£000
Share
premium
£000
Capital
redemption
reserve
£000
Retained
earnings
£000
Total
equity
£000
Balance at 31 December 2021 4,302 18,828 1,716 310,753 335,599
Total comprehensive income for the year — — — 62,689 62,689
Equity settled share-based payment
transactions — — — 1,791 1,791
Share options exercised by employees 2 1,131 — — 1,133
Own ordinary shares acquired — — — (3,475) (3,475)
Own ordinary shares awarded under
share schemes — — — 2,765 2,765
Dividends — — — (55,384) (55,384)
Balance at 31 December 2022 4,304 19,959 1,716 319,139 345,118
Total comprehensive income for the year — — — 77,489 77,489
Equity settled share-based payment
transactions — — — 2,282 2,282
Share options exercised by employees 2 1,045 — — 1,047
Own ordinary shares acquired — — — (2,444) (2,444)
Own ordinary shares awarded under
share schemes — — — 3,388 3,388
Dividends — — — (58,820) (58,820)
Balance at 31 December 2023 4,306 21,004 1,716 341,034 368,060
Rotork plc Company balance sheet
At 31 December 2023
Rotork plc Company statement of changes in equity
At 31 December 2023
[Page title]
Strategic report Corporate governance Financial statements
Rotork Annual Report 2023 rotork.com200
Rotork plc Company balance sheet and statement of changes in equity
Strategic report Corporate governance Financial statements
a) Accounting policies
The following accounting policies have been applied consistently in dealing with items which are
considered material in relation to the financial statements. Notes a to i relate to the Company rather
than the Group. Except where indicated, values in these notes are in £000.
Basis of preparation
The financial statements have been prepared under the historical cost convention.
The Company has applied Financial Reporting Standard 101 ‘Reduced Disclosure Framework’
(FRS101) issued by the Financial Reporting Council (FRC) incorporating the Amendments to FRS 101
issued by the FRC in July 2015, and the amendments to Company law made by The Companies,
Partnerships and Groups (Accounts and Reports) Regulations 2015. In these financial statements, the
Company has applied the exemptions available under FRS 101 in respect of the following disclosures:
• a Cash Flow Statement and related notes;
• comparative period reconciliations for share capital and tangible fixed assets;
• disclosures in respect of transactions with wholly-owned subsidiaries;
• disclosures in respect of capital management;
• the effects of new but not yet effective IFRSs; and
• disclosures in respect of the compensation of Key Management Personnel.
The Company produces consolidated financial statements which have been prepared in accordance
with UK-adopted international accounting standards and in conformity with the requirements of the
Companies Act 2006. As the consolidated financial statements of the Company include the equivalent
disclosures, the Company has also taken the exemptions under FRS 101 available in respect of the
following disclosures:
• IFRS 2 Share Based Payments in respect of Group settled share based payments; and
• the disclosures required by IFRS 7 and IFRS 13 regarding financial instrument disclosures have not
been provided.
Where the Company enters into financial guarantee contracts to guarantee the indebtedness of
othercompanies within the Group, the Company considers these to be insurance arrangements, and
accounts for them as such. In this respect, the Company treats the guarantee contract as a contingent
liability until such time as it becomes probable that the Company will be required to make a payment
under the guarantee. The Company accounts for intra-Group cross guarantees under IAS 37.
As permitted by s408 of the Companies Act 2006 the Company has elected not to present its own
profit and loss account or statement of comprehensive income for the year. The profit attributable
tothe Company is disclosed in the footnote to the Company’s balance sheet.
Foreign currencies
Transactions in foreign currencies are recorded using the rate of exchange ruling at the date of the
transaction. Monetary assets and liabilities denominated in foreign currencies are translated using
the rate of exchange at the balance sheet date and the gains or losses on translation are included
inthe profit and loss account.
Investments in subsidiaries
Investments are measured at cost less any provision for impairment and comprise investments in
subsidiary companies.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated
impairment losses.
Plant and machinery are depreciated by equal annual instalments by reference to their estimated
useful lives and residual values at annual rates of between 10% and 33%. Depreciation methods,
useful lives and residual values are reviewed at each balance sheet date.
Post-retirement benefits
The Company participates in a UK Group pension scheme providing benefits based on final pensionable
salary. The assets of the scheme are held separately from those of the Company. The sponsoring
employer for the Group pension scheme is Rotork Controls Ltd. No contractual agreement or policy
isin place for charging to individual Group entities the net defined benefit cost for the plan as a
whole. As a result, in accordance with IAS 19, the amount charged to the profit and loss account
represents the contributions payable to the scheme in respect of the accounting period.
Classification of preference shares
In line with the requirements of IFRS 9, Financial Instruments, the cumulative redeemable preference
shares issued by the Company are classified as long-term debt. The preference dividends are charged
within interest payable.
Share-based payments
The Company has adopted IFRS 2 and its policy in respect of share-based payment transactions is
consistent with the Group policy shown in note 1 to the Group financial statements. Costs in relation to
share-based awards made to other Group company employees are recharged to each subsidiary company.
Deferred taxation
Deferred tax is provided on temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for taxation purposes. The following
temporary differences are not provided for: the initial recognition of goodwill, the initial recognition
of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination,
and differences relating to investments in subsidiaries to the extent that they will probably not reverse
in the foreseeable future. The amount of deferred tax provided is based on the expected manner of
realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or
substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will
be available against which the temporary difference can be utilised.
rotork.com Rotork Annual Report 2023201
Notes to the Company financial statements
Strategic report Corporate governance Financial statements
a) Accounting policies continued
Dividends
Interim dividends are recorded in the financial statements when they are paid. Final dividends are recorded
in the financial statements in the period in which they are approved by the Company’s shareholders.
Critical judgements and key estimation uncertainties
Estimates and judgements are regularly evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances.
The Company makes estimates and assumptions concerning the future. The resulting estimates will,
by definition, seldom equal the actual results. The estimates and assumptions that have a risk of
causing a material adjustment to the carrying amount of assets and liabilities in the next financial
year are listed below.
There are no critical accounting estimates or judgements requiring evaluation.
b) Personnel expenses in the Company profit and loss account
2023 2022
Wages and salaries (including bonus and incentive plans) 6,799 5,191
Social security costs 1,109 661
Pension costs 209 211
Share-based payment charge 1,799 832
9,916 6,895
During the year there were 34 (2022: 35) employees of Rotork plc including the two (2022: two)
executive directors.
Disclosures required by paragraph 1 of schedule 5 of SI2008/410 are set out in the directors’
remuneration report on pages 129 to 153.
Share-based payments
The share-based payment charge relates to employees of the Company participating in the
LongTerm Incentive Plan (LTIP). The disclosures required under IFRS 2 can be found in note 26
totheGroup Financial Statements. The table below sets out the movement of share options under
the LTIP for employees of the Company.
Outstanding
at start of year
Granted
during year
Vested
during year Lapsed
Outstanding
at end of year
2020 Award 533,473 — — (533,473) —
2021 Award 377,220 — — — 377,220
2022 Award 642,899 — — (3,206) 639,693
2023 Award — 691,961 — — 691,961
1,553,592 691,961 — (536,679) 1,708,874
The weighted average remaining life of awards outstanding at the year end is one year.
c) Property, plant and equipment in the Company balance sheet
Plant and
equipment
Cost
At 1 January 2023 239
Disposals (220)
At 31 December 2023 19
Depreciation
At 1 January 2023 225
Disposals (220)
Charge for the year 4
At 31 December 2023 9
Net book value
At 31 December 2023 10
At 31 December 2022 14
d) Investments in the Company balance sheet
Shares in Group companies
2023 2022
At 1 January and 31 December 43,205 43,205
Notes to the Company financial statements continued
Strategic report Corporate governance Financial statements
Rotork Annual Report 2023 rotork.com202
d) Investments in the Company balance sheet continued
The Company has the following investments in wholly-owned subsidiaries. The principal activities
ofall the subsidiary undertakings are those of the Group, except as indicated below:
D Dormant company H Holding company N Active non-trading company
Subsidiary Incorporated in Registered address
100% owned by Rotork plc
G.H. Chaplain & Co
(Engineers)Limited
D
England and Wales Rotork House, Brassmill Lane, Bath, BA1 3JQ
Rotork Analysis Limited
N
England and Wales Rotork House, Brassmill Lane, Bath, BA1 3JQ
Rotork Cleaners Limited
N
England and Wales Rotork House, Brassmill Lane, Bath, BA1 3JQ
Rotork Control and Safety Limited
D
England and Wales Rotork House, Brassmill Lane, Bath, BA1 3JQ
Rotork Instruments Limited
D
England and Wales Rotork House, Brassmill Lane, Bath, BA1 3JQ
Rotork Nominees Limited
N
England and Wales Rotork House, Brassmill Lane, Bath, BA1 3JQ
Widcombe (Developments) Limited
D
England and Wales Rotork House, Brassmill Lane, Bath, BA1 3JQ
Rotork Controls Limited England and Wales Rotork House, Brassmill Lane, Bath, BA1 3JQ
Rotork Overseas Limited
H
England and Wales Rotork House, Brassmill Lane, Bath, BA1 3JQ
100% owned by Rotork
ControlsLimited
Rotork Actuation (Shanghai)
CoLimited
China Building G, No.260 Liancao Road, Minhang
District, Shanghai, PRC 201108
Rotork Trading (Shanghai)
CoLimited
China Room E, 3/f Tower D, Westlink, No. 2337 Gudai
Road, Minhang District Shanghai, 201199, China
Rotork Flow Technology
(Suzhou) Co Ltd
China No 2, Yunshen Road, Eastsouth Street,
Changshu, Jiangsu Providence
Rotork Controls (India)
PrivateLimited
India 28B, Ambattur Industrial Estate (North Phase),
Ambattur, Chennai 600 098, India
Rotork UK Limited England and Wales Rotork House, Brassmill Lane, Bath, BA1 3JQ
Valvekits Limited
H
England and Wales Rotork House, Brassmill Lane, Bath, BA1 3JQ
Rotork Americas Holdings Limited
N
England and Wales Rotork House, Brassmill Lane, Bath, BA1 3JQ
75% owned by Rotork
ControlsLimited
Rotork Saudi Arabia LLC Saudi Arabia LC07, Al-Khobar, 31671 Dammam, Kingdom
ofSaudi Arabia
100% owned by Rotork
OverseasLimited
Rotork Australia Pty Limited Australia 21-23 Décor Drive, Hallam, VIC, 3803, Australia
Rotork Controls Comercio
DeAtuadores LTDA
Brazil Condomínio Industrial Veccon Zeta Estrada
Mineko Ito n˚ 4.30, Sumaré, São Paulo,
13178-542, Brazil
Subsidiary Incorporated in Registered address
15175445 Canada Inc. Canada 2-6725 Millcreek Drive, Mississauga, Ontario
Canada L5N 5V, Canada
Rotork Controls (Canada) Limited Canada 2-6725 Milcreek Drive, Mississauga, Ontario,
L5N-5V3, Canada
Rotork Andina SpA Chile Canal La Punta 8770, Bodega 32, Renca, Santiago
Bifold Group Limited
H
England and Wales Rotork House, Brassmill Lane, Bath, BA1 3JQ
Rotork Midland Limited England and Wales Rotork House, Brassmill Lane, Bath, BA1 3JQ
Rotork Motorisation SAS France 75, rue Rateau 93126 La Courneuve Cedex, France
Rotork Controls
(Deutschland)GmbH
N
Germany Siemensstr. 33, 40721 Hilden, Germany
Rotork Germany Holdings GmbH
H
Germany Mühlsteig 45, 90579 Langenzenn, Germany
Rotork Limited Hong Kong 5/F, Manulife Place, 348 Kwun Tong Road,
Kowloon, HongKong
Rotork Controls Italia Srl Italy Via Portico 17, 24050, Orio al Serio,
Bergamo,Italy
Rotork Japan Co Limited Japan 2-2-24 Sengoku, Koto-ku, Tokyo,
135-0015Japan
Rotork Middle East FZE Jebel Ali Free Zone PUB-LC 07, near R/A 08, PO Box 262903, Jebel
Ali Free Zone, Dubai, United Arab Emirates
Rotork (Malaysia) Sdn Bhd Malaysia 1-17-1, Menara Bangkok Bank, Berjaya Central
Park, No 105, 50450 Jalan Ampang, Kuala
Lumpur, Malaysia
Rotork Actuation Sdn Bhd Malaysia 1-17-1, Menara Bangkok Bank, Berjaya Central
Park, No 105, 50450 Jalan Ampang, Kuala
Lumpur, Malaysia
Rotork Gears Holding BV
H
Netherlands Nijverheidstraat 25, 7581 PV Losser, Netherlands
Robusta Miry Brook BV
H
Netherlands Herikerbergweg 88, 1101CM,
Amsterdam,Netherlands
Rotork Norge AS Norway Ormahaugvegen 3, 5347 Ågotnes, Norway
Rotork Polska Zoo Poland Zabrze, Plutonowego Ryszarda Szkubacza 8,
41-800 Zabrze, Poland
Rotork Rus Limited Russia 127254 Moscow, Rustaveli street, 14,
bld.6,space 1/4.
Rotork Controls (Singapore)
PteLimited
Singapore 426 Tagore Industrial Avenue, Sindo Industrial
Estate, Singapore 787808
Rotork Africa (Pty) Limited South Africa 136 Kuschke Street, Meadowdale, Germiston,
Gauteng 1601 South Africa
Rotork Controls (Korea) Co Limited South Korea Room 515, 42 Jangmi-ro, Bundang-gu,
Seongnam-si, Gyeonggi-do, 13496, Korea,
Republic of
Notes to the Company financial statements continued
Strategic report Corporate governance Financial statements
rotork.com Rotork Annual Report 2023203
Subsidiary Incorporated in Registered address
100% owned by Rotork Overseas
Limited continued
Rotork YTC Limited South Korea 81 Hwanggeum-ro, 89 Beon-gil, Yangchon-
eup, Gimpo-si, Gyeonggi-do, 1048, Korea,
Republic of
Rotork Controls (Iberia) SL Spain Larrondo Beheko Etorbidea, Edificio 2, 48180
Loiu Bizkaia, Spain
Rotork Sweden AB Sweden Box 80, 791 22 Falun, Sweden
Rotork AG
H
Switzerland Fuchsacker 678, 9426 Lutzenberg, Switzerland
Rotork Inc
H
USA 675 Mile Crossing Blvd., Rochester NY 14624,
United States
Rotork Controls de Venezuela SA Venezuela Av. San Felipe Edif, La Castellana Caracas
(Chacao) Miranda Zona Postal 1060, Venezuela
Rotork Turkey Akıs¸ Kontrol
Sistemleri Ticaret LimitedSirketi
Turkey Aydınli Mh. Melodi Sk., Bilmo Küçük Sanayi
Sitesi, No:35/1-2, Tuzla, Istanbul, 34953, Turkey
100% owned by 15175445 Canada Inc
13688682 Canada Inc
13887987 Canada Inc
13887928 Canada Inc
Canada
Canada
Canada
2-6725 Millcreek Drive, Mississauga, Ontario
Canada L5N 5V, Canada
2-6725 Millcreek Drive, Mississauga, Ontario
Canada L5N 5V, Canada
2-6725 Millcreek Drive, Mississauga, Ontario
Canada L5N 5V, Canada
33.33% owned by each of
13688682 Canada Inc,
13887987Canada Inc and 13887928
CanadaInc
Hanbay Inc Canada 2-6725 Millcreek Drive, Mississauga, Ontario
Canada L5N 5V, Canada
100% owned by Valvekits Limited
Circa Engineering Limited
D
England and Wales Rotork House, Brassmill Lane, Bath, BA1 3JQ
100% owned by Rotork Trading
(Shanghai) CoLimited
Centork Trading (Shanghai) Co. Ltd China Room C-02, 1/F, West Area No. 2 Building, No.
29 Jiatai Road, Free Trade Zone, Shanghai, China
100% owned by Rotork UK Limited
Prokits Limited
D
England and Wales Rotork House, Brassmill Lane, Bath, BA1 3JQ
Flowco Limited England and Wales Rotork House, Brassmill Lane, Bath, BA1 3JQ
100% owned by Rotork Controls
Italia Srl
Subsidiary Incorporated in Registered address
Rotork Instruments Italy Srl Italy Via Portico 17, 24050, Orio al Serio,
Bergamo,Italy
Rotork Fluid Systems Srl Italy Via Padre Jacques Hamel, 55016 Porcari,
Lucca,Italy
100% owned by Rotork Gears
Holding BV
Rotork Gears BV Netherlands Nijverheidstraat 25, 7581,
PV Overijssel, Netherlands
Rotork BV Netherlands Mandenmakerstraat 45, 3194,
DA Hoogvliet, Netherlands
100% owned by Rotork Inc
Rotork (Thailand) Limited Thailand 35/8 Soi Ladprao 124 (Sawasdikarn),
Ladprao Road, Plubpla Sub-district, Bangkok
Metropolis, Wangtonglang District, Thailand
Rotork Controls Inc USA 675 Mile Crossing Blvd., Rochester,
NY14624,USA
Remote Control Inc USA 77 Circuit Drive. North Kingstown,
RI 02852, USA
Ranger Acquisition Corporation
H
USA The Corporation Trust Company, Corporation
Trust Center, 1209 Orange St., Wilmington,
DE19801 USA
100% owned by Ranger
Acquisition Corp
Fairchild Industrial
Products Company
USA 3920 West Point Blvd, Winston-Salem,
NC27103,USA
100% owned by Fairchild
Industrial ProductsCompany
Fairchild Industrial Products
(Sichuan)Company Limited
D
China Room 1201, Complex Square, No.88 West
Shenghe No.1 Road, High Tech Zone, Chengdu,
Sichuan, China. 610041
Fairchild India Private Limited
D
India 56-C/BB, Janakpuri, New Delhi-110058 IN, India
100% owned by Bifold
GroupLimited
Bifold Fluidpower
(Holdings) Limited
H
England and Wales Rotork House, Brassmill Lane, Bath, BA1 3JQ
100% owned by Bifold Fluidpower
(Holdings) Limited
Bifold Fluidpower Limited England and Wales Rotork House, Brassmill Lane, Bath, BA1 3JQ
MTS Precision Limited
D
England and Wales Rotork House, Brassmill Lane, Bath, BA1 3JQ
Marshalsea Hydraulics Limited
D
England and Wales Rotork House, Brassmill Lane, Bath, BA1 3JQ
d) Investments in the Company balance sheet continued
Rotork Annual Report 2023 rotork.com204
Notes to the Company financial statements continued
Strategic report Corporate governance Financial statements
Subsidiary Incorporated in Registered address
Bifold Company
(Manufacturing)Limited
D
England and Wales Rotork House, Brassmill Lane, Bath, BA1 3JQ
100% owned by
Bifold Fluidpower Limited
Fluidpower (Stainless Steel) Limited
D
England and Wales Rotork House, Brassmill Lane, Bath, BA1 3JQ
100% owned by
Rotork Germany Holdings GmbH
Max Process GmbH Germany Rastenweg 10, 53489 Sinzig, Germany
Schischek GmbH Germany Mühlsteig 45, 90579 Langenzenn, Germany
Rotork GmbH Germany Mühlsteig 45, 90579 Langenzenn, Germany
100% owned by Rotork AG
Schischek Limited
D
England and Wales Rotork House, Brassmill Lane, Bath, BA1 3JQ
100% owned by
Robusta Miry Brook BV
Rotork Servo Controles
deMexicoS.A. de C.V
Mexico Centeotl 223, Colonia Industrial San Antonio,
Delegación Azcapotzalco, Federal District,
02760, Mexico
e) Deferred tax assets and liabilities in the Company balance sheet
Deferred tax assets and liabilities are attributable to the following:
Assets
2023
Liabilities
2023
Net
2023
Assets
2022
Liabilities
2022
Net
2022
Tangible fixed assets 6 — 6 7 — 7
Provisions 278 — 278 44 — 44
284 — 284 51 — 51
Movements in the net deferred tax balance during the year are as follows:
2023 2022
Balance at 1 January 51 502
Credited to the income statement 233 (417)
Impact of rate change — (34)
284 51
d) Investments in the Company balance sheet continued
There is an unrecognised deferred tax liability for temporary differences associated with investments
in subsidiaries. Rotork plc controls the dividend policies of its subsidiaries and consequently the
timing of the reversal of the temporary differences. The value of temporary differences associated
with unremitted earnings of subsidiaries for which deferred tax has not been recognised is
£320,839,000 (2022: £272,249,000).
f) Other receivables in the Company balance sheet
2023 2022
Prepayments 423 689
Other receivables 24 4
447 693
g) Other payables in the Company balance sheet
2023 2022
Other taxes and social security 518 507
Other payables 3,054 1,713
Accruals 1,304 1,229
4,876 3,449
The Company has a £17,000,000 unused uncommitted gross overdraft facility (2022: £17,000,000)
and is part of a UK banking arrangement, see note h.
h) Contingencies in the Company
The UK banking arrangements are subject to cross-guarantees between the Company and its UK
subsidiaries. These accounts are subject to a right of set-off. The performance guarantees and
indemnities have been entered into in the normal course of business. A liability would only arise
inthe event of the Group failing to fulfil its contractual obligations.
i) Capital and reserves in the Company balance sheet
Details of the number of ordinary shares in issue and dividends paid in the year are given in note 18
to the Group financial statements.
rotork.com Rotork Annual Report 2023205
Notes to the Company financial statements continued
Strategic report Corporate governance Financial statements
2023 2022 2021 2020 2019 2018 2017 2016 2015 2014
£000 £000 £000 £000 £000 £000 £000 £000 £000 £000
Revenue 719,150 641,812 569,160 604,544 669,344 695,713 642,229 590,078 546,459 594,739
Cost of sales (380,054) (350,079) (306,394) (320,234) (357,718) (384,253) (358,090) (328,410) (296,944) (309,280)
Gross profit 339,096 291,733 262,766 284,310 311,626 311,460 284,139 261,668 249,515 285,459
Overheads (190,329) (168,126) (157,056) (171,207) (189,683) (188,542) (198,167) (167,891) (145,129) (143,232)
Operating profit 148,767 123,607 105,710 113,103 121,943 122,918 85,972 93,777 104,386 142,227
Adjusted
1
operating profit 164,475 143,245 128,080 142,543 151,005 146,015 130,162 120,588 125,272 157,167
Amortisation of acquired intangible assets (2,110) (7,051) (9,001) (14,110) (18,841) (20,284) (27,183) (26,811) (20,886) (14,940)
Other adjustments (13,598) (12,587) (13,369) (15,330) (10,221) (2,813) (17,007) — — —
Operating profit 148,767 123,607 105,710 113,103 121,943 122,918 85,972 93,777 104,386 142,227
Net interest 1,871 495 221 (537) (2,953) (2,170) (5,386) (2,707) (2,517) (1,062)
Profit before taxation 150,638 124,102 105,931 112,566 118,990 120,748 80,586 91,070 101,869 141,165
Tax expense (37,150) (30,901) (25,686) (26,808) (29,096) (29,004) (24,973) (23,897) (27,012) (37,963)
Profit for the year 113,488 93,201 80,245 85,758 89,894 91,744 55,613 67,173 74,857 103,202
Dividends 58,820 55,384 75,515 33,926 52,287 48,288 45,218 43,876 43,765 42,702
Basic EPS 13.2p 10.9p 9.2p 9.8p 10.3p 10.5p 6.4p 7.7p 8.6p 11.9p
Adjusted
1
EPS 14.6p 12.7p 11.3p 12.5p 13.0p 12.6p 10.6p 10.0p 10.4p 13.2p
Diluted EPS 13.2p 10.8p 9.2p 9.8p 10.3p 10.5p 6.4p 7.7p 8.6p 11.9p
1 Adjusted is before the amortisation of acquired intangible assets, the disposal of property and other adjustments.
Rotork Annual Report 2023 rotork.com206
Ten year trading history
Strategic report Corporate governance Financial statements
The tables below show the split of shareholder and size of shareholding in Rotork plc.
Ordinary shareholder by type
Number of
holdings %
Number of
shares %
Individuals 2,847 82.98 19,493,038 2.26
Bank or nominees 544 15.85 836,417,990 97.12
Other company 17 0.50 3,468,258 0.41
Other corporate body 23 0.67 1,822,013 0.21
3,431 100.00 861,201,299 100.00
Range
Number of
holdings %
Number of
shares %
1-1,000 1,166 33.98 488,233 0.06
1,001-2,000 451 13.15 659,472 0.08
2,001-5,000 558 16.26 1,831,055 0.21
5,001-10,000 354 10.33 2,558,031 0.30
10,001-50,000 490 14.28 10,601,578 1.22
50,001-100,000 78 2.27 5,385,528 0.63
100,001 + 334 9.73 839,677,402 97.50
3,431 100.00 861,201,299 100.00
Source: Equiniti.
Dividend information
In respect of each of the last five years, the table below details the amounts of interim and final
dividends declared or, in the case of the 2023 final dividend, proposed and subject to shareholder
approval at the 2024 AGM.
Interim dividend
(p)
Final dividend
(p)
Total dividends
(p)
2023 2.55 4.65 7.20
2022 2.40 4.30 6.70
2021 2.35 4.05 6.40
2020
2
— 6.30 6.30
2019
2
2.30 3.90 6.20
Financial calendar
5 March 2024 Preliminary announcement of annual results for 2023
18 April 2024 Ex-dividend date for proposed final 2023 dividend
19 April 2024 Record date for proposed final 2023 dividend
24 May 2024 Payment date for proposed final 2023 dividend
30 April 2024 Announcement of trading update
30 April 2024 Annual General Meeting to be held at Bailbrook House Hotel,
EveleighAvenue, London Road West, Bath, Somerset, BA1 7JD
6 August 2024 Announcement of interim financial results for 2024
20 November 2024 Announcement of trading update
1 Subject to shareholder approval at the 2024 AGM.
2 On 31 March 2020, the Board decided to withdraw the recommendation to pay the 2019 final dividend of 3.90p per share.
This was to reflect the exceptional set of circumstances imposed by COVID-19 at the time. The Board subsequently decided
to pay the 3.90p per share in full in September 2020 as an interim dividend. To aid year-on-year comparisons the table
above presents this dividend as the 2019 Final dividend reflecting the year to which it related.
Page title
Strategic report Corporate governance Financial statements
rotork.com Rotork Annual Report 2023207
Share register information
Strategic report Corporate governance Financial statements
Group General Counsel & Company
Secretary
Stuart Pain
Registered Office
Rotork plc
Rotork House
Brassmill Lane
Bath BA1 3JQ
Company Number
00578327
Registrars
Equiniti
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
Stockbrokers
J.P. Morgan Cazenove
25 Bank Street
Canary Wharf
London E14 5JP
Morgan Stanley
20 Bank Street
Canary Wharf
London E14 4AD
Financial Advisers
Rothchild & Co
New Court
St Swithin’s Lane
London EC4N 8AL
J.P. Morgan Cazenove
25 Bank Street
Canary Wharf
London E14 5JP
Morgan Stanley
20 Bank Street
Canary Wharf
London E14 4AD
Auditor (until 30 April 2024)
Deloitte LLP
2 New Street Square
London EC4A 3BZ
Auditor (from 30 April 2024)
KPMG LLP
66 Queen Square
Bristol
BS1 4BE
Financial Public Relations
FTI Consulting
200 Aldersgate
Aldersgate Street
London EC1A 4HD
[Page title]
Strategic report Corporate governance Financial statements
Rotork Annual Report 2023 rotork.com208
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Strategic report Corporate governance Financial statements
Rotork plc’s commitment to environmental issues is reflected in
this Annual Report, which has been printed on Symbol Freelife
Satin and Arena Smooth Extra White, FSC
®
certified materials.
This document was printed by Park Communications using its
environmental print technology, which minimises the impact
ofprinting on the environment.
Vegetable-based inks have been used and 99% of dry waste
isdiverted from landfill. The printer is a CarbonNeutral
®
company. Both the printer and the paper mill are registered
toISO 14001.
www.rotork.com