Rotork plc Annual Report 2020

FY2020 Annual Report · Rotork plc

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Keeping the world flowing
for future generations

Delivering resilience,
investing for growth

Annual Report 2020

Delivering resilience,
investing for growth

In challenging
times like these,
our Purpose, ‘keeping
the world flowing
for future generations’,
has never felt
more relevant.

Our Purpose is a powerful motivator, encouraging us
to make a positive difference to people’s lives not just
today, but also into the future. The products and
services we offer help provide vital resources to those
who need them whilst ensuring safety and helping
reduce emissions and environmental risks.

Read more on pages 43 to 45

RotorkAnnual Report 2020Annual Report 2020

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www.rotork.com

Risk management

Managing business risks
As with all businesses, there are certain risks and
uncertainties that may impact Rotork’s ability to
achieve our objectives. The 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 90. The continuous
improvement and execution of a comprehensive
and robust risk management system is of
paramount importance.

We have made a number of enhancements
during 2020: supporting the business in
responding to the risks associated with
COVID-19, aligning our risk management
reviews to changes in our structure, continuing
the focus on risk mitigations and development
of risk responses in line with our risk appetite.

In 2020, the Board received regular updates on a
range of key areas including cybersecurity,
supply chain and Health and Safety.

The Board reviewed Health and Safety risks and
mitigating actions in detail and the output of
assurance work carried out in this area.

Key risk indicators (KRIs) have also been kept
under review during 2020. KRIs are presented
on a quarterly basis to the Board and in 2020,
formed an important tool to measure the
effectiveness of management actions in light of
the global pandemic.

Risk management process

Top down
risk assessment

Ongoing risk
mitigation reviews and
controls testing

Bottom up
risk assessment

Divisions and functions
identify, manage and
monitor risks

Rotork PLC Board
The Rotork Plc Board is responsible for:
− Risk management and internal controls
− Defining risk appetite, statements and preferences
− Promoting a risk-aware culture that emphasises integrity at all levels of business operations
− Determining our Principal Risks and considering emerging risks, ensuring that risk management
is embedded within the core processes of the Group

Audit Committee
The Audit Committee is
responsible for:
− Reviewing the risk
management policy
− Reviewing the effectiveness
of internal controls
− Approving the internal
audit assurance plans

Rotork Management
Board (RMB)
The RMB is responsible for:
− The identification,
consolidation, reporting
and management of
Principal and Key Risks
− Reporting to the Board on
the management of our
Principal and Key Risks

Functional
Management
Functional Management
are responsible for:
− Identifying current and
emerging risks specific to the
relevant function/business unit
− Implementing risk
management within their
designated area of
accountability

Group Risk & Internal Audit
Group Risk & Internal Audit are responsible for:
− Supporting the delivery of effective risk management across the Group
− Monitoring risks and providing reporting to management
− Providing independent assurance to the Audit Committee over internal control effectiveness

RotorkAnnual Report 2020Risk appetite framework

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.

Risk appetite
Rotork’s Purpose, ‘keeping the world flowing for
future generations’, is reflected in how we
review 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 or financial stability.
Upholding Rotork’s core Values and maintaining
the resilience shown during 2020 will be key
drivers of our future success.

Risk appetite framework

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 2020, the Board reviewed and
updated the risk appetite framework to
reflect changes to the nature of Rotork’s
business and our operating environment,
including during the response to the risks
associated with COVID-19.

The Board have also reviewed the application
of risk appetite statements and preferences
through the monitoring of Key Risk Indicators
throughout the year.

Review and update the risk
appetite preferences

Identify key decisions

Evaluate decisions
against risk appetite

Review key risk indicators

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www.rotork.comAnnual Report 2020

Principal risks and uncertainties

Our risk management processes are dynamic.
We continue to assess and prioritise the risks
related to the Growth Acceleration Programme
and their impact on the Principal Risks detailed
below. These risks are the result of the robust
top down and bottom up risk assessment
process previously described. These risks include
those that would threaten the Group’s business
model, future performance, solvency or liquidity.
We have also provided some additional
information on how COVID-19 has impacted our
risk management activities and described some
of the key areas where COVID-19 has affected
our people and operations most.

Emerging risks and opportunities:
Our risk management process includes
consideration of risks and opportunities that may
impact Rotork in the future. Emerging risks are
risks that are unlikely to materialise in the short
term, risks that cannot be fully assessed yet, or
risks that we are not aware of but that could have
a significant impact on our ability to achieve our
strategy. We identify, manage and monitor
emerging risks dependent on the information
available and put in place plans to monitor or
manage the risk. In 2020, we reviewed the
potential impact of a number of new and
emerging risks and developed a framework to
support our analysis of those risks. Emerging risks
are identified throughout the year, investigated in
detail at our divisional and functional risk

workshops, and with the Rotork Management
Board and Plc Board twice a year. We believe our
ability to identify those risks and opportunities
that may pose a future impact to Rotork and our
stakeholders as being fundamental to our
successful risk management process.

Brexit
Throughout 2020, the risks associated with
Brexit were monitored and mitigating actions
put in place to minimise any potential impact.
Following the UK departure, the impact has
been well within our expectations and the
actions taken by management are currently
mitigating the risk. Going forward, we will
continue to monitor potential risks in relation
to trade, logistics and supply chain in particular.

Climate change

Climate-related risks, alongside other types of ESG risks and opportunities,
are assessed and managed throughout our business and across our
Principal Risks where they arise.

has also identified the opportunities that arise to help our customers
reduce emissions and increase efficiencies.

We recognise the complex global challenges in relation to climate
change, whilst also understanding that there are various opportunities
for Rotork to support our customers to reduce emissions, waste and
increase efficiencies. The identification of climate related risks is
embedded in the Group’s risk management framework. Risks are
identified throughout the normal course of business and captured in
detailed risk registers. This includes assessment of the physical risks of
climate change and the risks related to the transition to a low carbon
economy. The assessment of the risks associated with climate change

The energy transition is the global energy sector’s move from fossil-fuel
based systems such as oil and coal through to the use of biofuels and
hydrogen and then to renewable sources like wind and solar energy. In
order to understand the impact that an acceleration in energy transition
may have on our business, including the identification of risks and
opportunities, a study was commissioned to review how the energy
transition may impact the markets which we serve, looking at a range of
energy transition scenarios. The risks and opportunities identified will
support the development of our strategy.

Physical risk
Extreme weather events

Transition risk
Energy transition

Risks

Mitigating factors

Risks

Mitigating factors

Rotork operates in a
diverse number of
geographies which may be
impacted by different
forms of extreme weather
events

Our supply chain is
geographically diverse and
may be exposed to
extreme weather events in
the future

— Major incident plans are in

place with specific provisions
for areas most exposed to
potential risks (Flood, fires,
hurricanes etc).

— Geographic spread of the

business limits the impact to
our customers

— Our sourcing strategy takes into
account risks associated with
our key critical suppliers

The traditional markets
which we serve may be
exposed to an accelerated
change in energy
transition.

Our business may face
increased scrutiny arising
from the business we
conduct and markets in
which we operate

— Supporting our customers
to reduce emissions and
increase efficiency

— Rotork is well placed to take

advantage of opportunities in
new and alternative markets

— Demonstrating that our
products support our
customers to reduce emissions
and increase efficiency

— Clear articulation of Rotork’s
Purpose supported by the
actions that we take

An ESG Committee was established during the year. As part of its remit, the Committee will help define and support Rotork’s approach to
managing climate and environment related risks and opportunities. See page 102 for more information about the Committee and its mandate.

RotorkAnnual Report 2020Response to COVID-19

In early 2020 our sites in China reported that due to COVID-19, they would remain closed following Chinese New Year holidays. As events
unfolded globally, Rotork management set up a daily call to review the situation, take action and plan as required. We assessed and managed
COVID-19 risks within our existing risk profiles to capture how the pandemic impacted those business risks to varying degrees. This has allowed us
to monitor the effectiveness of controls and management actions. The three key areas which required most attention were:

Health and Safety
The Health and Safety of our people
is of paramount importance and risk
assessments on a site by site basis
were carried out to make sure that
appropriate procedures were put in
place to safeguard our colleagues.

Supply chain distribution
Our supply chain partners were impacted
by availability of materials and local
intervention from governments. Our
supply chain teams worked with suppliers
to reduce any delays, which included early
and frequent communication.

IT systems and cyber
Cyber risk has increased globally with
all companies facing an increase in
cyberattacks. Threat intelligence has
played a key role in the mitigation of this
risk. Systems resilience is continuously
monitored especially during the transition
from office work to home working.

Control effectiveness
The effectiveness of controls were monitored through the period and
where relevant, independent assurance was provided through our
internal audit function.

Board
The Plc Board and Rotork Management Board reviewed the specific
risks associated with COVID-19 and the impact that COVID-19 was
having on our Principal Risks throughout the year.

Risk appetite was reviewed in light of the impact of COVID-19 and the
key risk indicators were kept under review.

Scenario planning
Towards the end of March 2020, as the UK entered lockdown, we
carried out a scenario-planning exercise to examine the potential impact
of a range of outcomes from COVID-19. These scenarios modelled
impacts to our people and facilities, our supply chain and logistics
channels and the knock-on impact to the end markets we serve.
We also considered a range of possible working capital and funding
assumptions. We continue to monitor these scenarios as circumstances
change, see the Viability section on page 49 for more information. The
Group will continue to monitor the impact of the pandemic on our risk
profile. See Principal Risks on pages 40 to 45.

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www.rotork.comAnnual Report 2020

Principal risks

Focus for 2021:
In 2021 we will continue to monitor the risks
associated with COVID-19 and how they may
impact our business. We intend to build on
the framework to analyse emerging risks that
was introduced in 2020. Following the
formation of the ESG Committee, see page
102, we will analyse the management for the
most relevant ESG risks for the Group.

Update on 2020 Principal Risks:
A number of the Principal Risks show an
increase from 2019 due to COVID-19, see
pages 41 to 45 for more details. The short
term uncertainty in the market increases risk
and we expect that as certainty returns to the
market and business normalises, we will see a
reduction in our risks. The longer term legacy
of the pandemic on our customers, our
suppliers and the economies of the countries
we operate in is largely unknown.

The risks that have been most impacted
by COVID-19 are risks relating to Health
and Safety, Supply Chain disruption and
Cybersecurity. Whilst risk increased at a gross
level due to global uncertainty the effect on
our net risk has been managed successfully
demonstrating the resilience of our business
and our people.

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Product quality & reliability

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Likelihood

Impact

Low

Medium

High

Low

Medium

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Principal risks

1. Decline in market sector confidence
2. Increased competition
3. Geopolitical instability
4. Failure of an acquisition to deliver value
5. Health, Safety & Environment
6. Compliance with laws and regulations
7. Major in-field product failure
8. Supply chain disruption
9. Critical IT system failure and cybersecurity
10. Growth Acceleration Programme

RotorkAnnual Report 2020

Economic and market conditions

Principal risk

Description

Update

Key mitigating actions

1. Decline in
market
confidence

Link to strategy

Trend

2. Increased
competition

Link to strategy

Trend

3. Geopolitical
instability

Link to strategy

Trend

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.

Increased competition on
price or product offering
leading to a loss of sales
globally or market share.

This risk has increased
due to uncertainty in
the markets in which
we operate largely
driven by COVID-19,
however the majority
of Rotork’s activity is
driven by customers’
operational rather than
capital expenditure and
customers continue to
spend on automation,
environmental projects
as well as maintenance
and refurbishment.

This risk remains
unchanged from the
prior year. Whilst it is an
undoubtedly challenging
market at the moment,
Rotork has continued
to remain competitive
from a price and
product perspective.
Investment in R&D and
innovation continued
throughout the year to
manage future risk.

Increasing social and
political instability,
including Brexit, results
in disruption and
increased protectionism
in key geographic
markets. Business
disruption would impact
our sales and might
ultimately lead to loss
of assets located in
the affected region.

This risk has increased
as a result of the
uncertainty, driven by
COVID-19, in the key
geographic markets in
which Rotork operates.
The impact of Brexit
has been within
expectations. The
actions put in place
by management to
deal with Brexit have
mitigated the risk.

This risk is unchanged.
Rotork continues to
monitor markets for
suitable partners.

4. Failure of an
acquisition to
deliver value

Link to strategy

Trend

Failure of an acquisition
to deliver the growth or
synergies anticipated,
either due to unforeseen
changes in market
conditions or failure to
integrate an acquisition
effectively. Significant
financial under
performance could lead
to an impairment write
down of the associated
intangible assets.

Link to strategy

1 Accelerated growth

Increased margins

3 Sustainability

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Risk appetite statement

We will in the long term
move to increase the
addressable markets
which we serve.

− 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.

− 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 Strategic Sourcing team secure lower prices and

efficiencies despite difficult market.

− Rotork has production or sales and service operations in

many low cost countries.

− 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.

− A Brexit Committee was set up and external support

was sought to consider and put in place the necessary
response to the risks associated with Brexit.

− Forecast market conditions are considered during the

due diligence process.

− Due diligence processes provide information to assist
management and minimise likelihood of any surprises.

− During the due diligence process a 100 day plan is
prepared to manage the important initial stages of
integration.

− Careful consideration and negotiation of acquisitions by

senior management to ensure the purchase price
represents value for money.

− Effective integration and communication of Rotork’s

policies and procedures.

We will invest in R&D
in order to retain a
differentiated product
portfolio and will support
this by providing a
leading service element
to our offering. We will
invest in new products
and technologies where
there is evidence of
market opportunity.

We will continue to operate
a geographically diverse
business and actively pursue
opportunities and efficiency
of our global supply chain.

We will pursue acquisition
opportunities that are
in line with our growth
agenda and review each
on its individual merits
and expected benefits.

www.rotork.comAnnual Report 2020

Principal risks continued

Corporate social responsibility

Principal risk

Description

Update

Key mitigating actions

Risk appetite statement

5. Health,
Safety and the
Environment

Link to strategy

Trend

The nature of Rotork’s
core business and
geographical locations
involves potential risks
to the Health and Safety
of our employees or
other stakeholders. A
failure of our products
or internal processes
could have an impact
on the environment.

This risk has increased
due to COVID-19,
specifically the risks
associated with our
people becoming ill, the
wellbeing of our people
and compliance with
H&S regulations. A wide
range of controls and
measures have been put
in place to respond to
the increased COVID-19
risks as well as variety
of improvements in
our day to day Health
and Safety processes
and procedures.

6. Compliance
with laws and
regulations

Link to strategy

Trend

Failure of our staff
or third parties who
we do business with
to comply with law
or regulation or to
uphold our high ethical
standards and Values.

This risk has increased
due to the increased
compliance risks
associated with
COVID-19.

Product quality and reliability

7. Major
in-field
product failure

Link to strategy

Trend

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.

This risk of a failure
of a new or existing
Rotork product has not
increased. The ability of
our service engineers
to access customer
sites continued for any
priority service actions.

8. Supply chain
disruption

Link to strategy

Trend

Supply chain disruption
which may arise such
as a tooling failure at
a key supplier, logistics
issue, severe weather
events impacting key
suppliers which would
cause disruption to
manufacturing at a
Rotork factory.

The availability of key
components and the
logistical challenges to
source key components
has increased this
risk. During the year,
a number of our key
suppliers located globally
were impacted by
COVID-19, specifically
the temporary closures
of factories in our tier
1 and tier 2 suppliers.
The measures and
mitigations taken by the
business have managed
the risks over the period.

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.

We have zero tolerance
for non-compliance
with relevant laws and
regulations in the markets
in which we operate.

− 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 audit assurance reviews conducted during the

year.

− Monitoring of our energy usage and emissions of our
sites and implementation of more energy efficient
solutions.

− A ‘no tolerance’ culture, supported by a tone from the
top, reinforcing our high ethical standards and Values.
− Anti-bribery and corruption training is provided to all

relevant staff.

− Due diligence procedures in place for agents and
acquisition targets before engaging in business
relationships.

− Availability and promotion of the ‘Speak Up’ policy and

hotline.

− We are committed to reduce our environmental impact
and comply with all legal and regulatory requirements.

− Monitoring of changes in legislation, including

sanctions, with appropriate safeguards put in place.
− We continue to specifically assess the modern slavery
risks arising in our business and identify appropriate
steps to address any risks identified.

− 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.

We will maintain robust
quality control procedures
over components purchased
and over our finished
products in all of our
manufacturing locations.

− 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.

We will use our purchasing
power to optimise our
vendor base, ensure
value for money and
reduce lead times whilst
maintaining quality.

We will maintain robust
quality control procedures
over components
purchased and over our
finished products in all our
manufacturing locations.

RotorkAnnual Report 2020IT security, continuity and system implementation

Principal risk

Description

Update

Key mitigating actions

Risk appetite statement

9. Critical IT
system failure
and
cybersecurity

Link to strategy

Trend

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.

Cyber risk has increased
globally with all
companies facing a huge
increase in ever more
convincing spam. Threat
intelligence has played a
key role in the mitigation
of this risk. Additional
bandwidth for our
network was brought in
so that the increase in
proportion of our people
working from home
could be supported.

− 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 GAP 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.

We will continue to review
current external and internal
cyber threats and respond
to them to ensure that we
have appropriate processes
and controls in place.

Change management

10. Growth
Acceleration
Programme

Link to strategy

The Growth Acceleration
Programme and other
change projects lead to
business disruption or
have a negative effect on
day-to-day operations.

Trend

Despite the underlying
macro environment,
and challenges posed
by COVID-19, the
Growth Acceleration
Programme continued to
deliver throughout the
year demonstrating the
resilience of our business.

− Growth Acceleration Programme workstreams are

managed by a dedicated project management office,
with a mix of Rotork operational and specific project
management experience.

− There is a defined benefits tracking process to monitor
outcomes against the initial objectives of projects,
including monitoring any impact on day-to-day
operations.

− Metrics are in place to predict and monitor capacity

concerns across all workstreams.

− Regular governance forums are in place to deal with

risks and issues in a timely manner.

We will ensure that
management capacity is
sufficient to implement
our strategy and that
business decisions do not
negatively influence our
day-to-day business.

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Link to strategy

1 Accelerated growth

Increased margins

3 Sustainability

www.rotork.comAnnual Report 2020

Key performance indicators

Performance

Revenue growth
%

-9.7%

Adjusted operating margin
%

23.6%

2020

2019

2018

2017

-9.7%

2020

-3.8%

2019

8.3%

2018

8.8%

2017

23.6%

22.6%

21.0%

20.3%

Reasons
for choice

Revenue is a key driver for the
business and is reported in detail
for each division, end market and
geography. The measure enables
us to track our overall success and
our progress in increasing our
market share by product 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.

How
we calculate

Increase in revenue year-on-year
divided by prior year sales
revenue.

Adjusted operating profit shown
as a percentage of revenue. We
use adjusted operating profit as
this aids comparison year to year.

Comments
on results

Group revenue was 9.7% lower.
Water & Power sales grew
year-on-year, with both end
markets ahead. The division
reported an encouraging
performance, with sales driven
by water sector infrastructure
investment as well as power
sector refurbishment activity.

Margins increased by 100bps,
despite revenues being down
year-on-year, benefiting from
the ongoing GAP initiatives to
improve Rotork’s cyclical resilience
and temporary cost savings (such
as travel and entertainment).

Link
to strategy

Financial KPIs
Growth of the business, quality
of earnings and efficient use of
resources are crucial target areas
for Rotork and we employ a
number of performance
measures to monitor them.

Link to strategy

Accelerated growth

Increased margins

Sustainability

RotorkAnnual Report 2020
Performance

Cash conversion
%

Return on capital employed
%

Adjusted EPS growth
%

129.5%

31.9%

-3.8%

2020

2019

2018

2017

129.5%

2020

131.4%

2019

110.7%

2018

109.1%

2017

31.9%

2020

31.8%

2019

29.2%

2018

24.9%

2017

-3.8%

3.2%

18.9%

6.0%

Reasons
for choice

How
we calculate

Our cash conversion
demonstrates our operational
efficiency and enables us to fund
future growth. We consider 85%
conversion as a base level of
achievement. This measure is one
of the constituent parts of the
senior management reward
system.

Cash flow from operating
activities before tax outflows,
restructuring payments and the
pension charge to cash
adjustment, as a percentage of
adjusted operating profit.

Comments
on results

The drive to reduce inventory
generated £12.6m whilst a
reduction in trade receivables
generated a further £13.1m. Trade
receivables measured as days’
sales outstanding reduced from
57 to 56 days.

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.

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.

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 deficit net of related
deferred tax asset added back.
See calculation on page 162.

Increase in adjusted basic EPS
(based on adjusted profit after
tax) year-on-year divided by the
prior year adjusted basic EPS.

Return on capital employed
increased by 10 basis points. The
increase reflects a 6% reduction
in average capital employed.

Adjusted earnings per share was
3.8% lower year-on-year, slightly
less than the 5.6% decline in
adjusted operating profits.

Link
to strategy

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Key performance indicators continued

Performance

Lost times injury rates
LTIR

Carbon emissions
TnCO2e

0.24

14.1

2020

2019

2018

2017

0.24

2020

0.25

2019

0.32

2018

0.24

2017

14.1

15.5

17.0

19.2

Reasons
for choice

LTIR is used as one measure of the
effectiveness of our Health and
Safety procedures.

Scope 1 & 2 carbon emissions
(CO2e) per £1m reported revenue.
This KPI is a broad measure of our
environmental efficiency.

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 (Scopes 1 & 2)
is converted to equivalent tonnes
of CO2e and reported as a
function of revenue. 2019 data
has been restated; we emitted
15.5 tonnes per £1m revenue in
2019. See page 71 for more
detail.

Comments
on results

Our proactive approach is aimed
at continuously identifying
weaknesses in our safety
processes and removing or
mitigating risks when they are
identified.

Further consolidation of sites and
upgrades in some of our facilities,
alongside COVID-19 related office
closures, resulted in an 18%
reduction in our Scope 1 and
Scope 2 emissions last year.
Emissions per £1m reduced 9.5%.

Link
to strategy

Non-financial KPIs
We monitor non-financial areas
in our businesses, particularly in
the environmental, health &
safety and quality control areas,
and we place strong emphasis
within our organisation on
improving our performance here.

Link to strategy

Accelerated growth

Increased margins

Sustainability

RotorkAnnual Report 2020

Viability statement

Assessment of Prospects
The Group Strategy (see pages 24 to 35) and Principal Risks (see pages 40
to 45) 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. The Growth
Acceleration Programme, which has progressed well during the year,
is expected to reduce the Group’s cost base and improve the Group’s
longer-term operational and financial performance and financial position.

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
assessment has been completed on a same state basis, and therefore
principal risk 4, Failure of an acquisition to deliver value has been excluded.
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 the COVID-19 virus, Brexit, the increasing political
protectionism in respect of trade tariffs, failure of the Growth Acceleration
Programme and lower investment in the oil and gas markets. The potential
impact to Rotork from a Brexit could be a loss of revenue due to logistics
issues or permanent cost increase, supply chain disruption or permanent
cost increases as a result of increased tariffs. 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 inherent volatility in
exchange rates and oil prices, 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.

Scenario modelled

Link to Principal Risks

Scenario 1:
Revenue
decline

Scenario 2:
One off
costs

Scenario 3:
Loss of
profitability

Scenario 4:
Reverse
stress test

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
Increased competition
Critical IT system failure and cybersecurity

Impact of a one off cost due to a specific issue, followed by
a reduction or downturn in a specific end market.

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
Health, Safety and the Environment
Compliance with laws and regulations
Supply chain disruption
Growth Acceleration Programme

Major in-field product failure
Growth Acceleration Programme

Multiple concurrent risks

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Divisional review

Our new
market-aligned
structure

One of the most important Growth Acceleration Programme
initiatives was our move from a product-focused to an end
market segment focused structure that more closely meets
customer needs.

Group revenue
%

48%

26%

Oil & Gas

The Oil & Gas division supplies Rotork’s actuation and
instrumentation products and services to upstream,
midstream (including LNG and pipelines) and downstream
oil and gas customers across the world.

Water & Power

The Water & Power division supplies Rotork’s actuation and
instrumentation products and services to water and
waste-water, conventional power and renewables end
markets globally.

Chemical, Process
& Industrial (CPI)

The CPI division supplies Rotork’s actuation and
instrumentation products and services to a broad spread of
industries including chemicals, mining, basic materials, marine,
transport, HVAC, food and beverage, and pharmaceuticals.

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Divisional highlights
− EMEA sales were modestly

lower year-on-year
− Asia Pacific returned to

growth in the second half
− Americas revenues saw the

greatest decline

− Adjusted operating profit

margins increased to 23.3%

Strategy

We are the market leading actuator
supplier to the oil & gas sector, with
the broadest product offering in
the industry and the largest site
services team.

We aim to outgrow our market
through leveraging our installed
base, focusing on higher growth
geographies and targeted new
product development.

We believe we are well placed to
help our customers to deliver on
their ESG targets.

Strong returns
Adjusted operating margin

23.3%

Oil & Gas

The Oil & Gas division experienced
volatile trading conditions in 2020.
COVID-19 disruption impacted
Asia Pacific activity early in the year
before subsequently spreading to
other regions of the world.

The break-up of the OPEC+ consortium in
March resulted in volatility in hydrocarbon
prices and in response many customers
announced they would revisit their capital
investment plans. This was felt most acutely
in the Americas, the division’s smallest
geographic region, and in the upstream
sector. The downstream sector, which
represents over half of divisional sales,
was less effected.

Divisional revenues fell 11.5% year-on-year
(10.1% OCC) with the greatest decline seen
in the Americas. EMEA sales were modestly
lower with upstream, midstream and
downstream declining. Asia Pacific sales
were similarly down, but grew in the
second half, benefiting from increased
downstream activity. Americas revenues fell
despite progress in Latin America. Adjusted
operating profits were £67.9m, 10.1% lower
year-on-year. Adjusted margins rose 40

basis points to 23.3%, benefiting from
mix, lower headcount and reduced
discretionary expenses.

Oil & Gas aims to outperform its markets
through a number of strategic initiatives,
including leveraging the installed base
(through Rotork Site Services), helping our
customers improve their operational and
environmental performance, and increased
onboard sensing and computational
capabilities.

We consider the energy transition to be an
opportunity for us. The substantial majority
of our revenues are linked to brownfield
spend which Wood Mackenzie forecast to
remain stable for many years to come. We
expect that new segments, such as biofuel
and carbon capture and storage, will be
actuator intensive and hence exciting
opportunities for us.

Our customers have set themselves
challenging environmental targets which
they will strive to achieve regardless of
economic circumstances. Rotork believes
that electrification has an important role
to play in the reduction of our customers’
emissions across their upstream, midstream
and downstream processes, and that we are
well placed to assist them on this journey.

www.rotork.comAnnual Report 2020

Divisional review continued

Water
& Power

Water & Power made encouraging
progress during the year. Whilst the
division is not totally immune from
COVID-19 related disruption, its
products and services and those
of its customers are generally
considered essential, meaning
activity largely continued without
any significant delays.

The outlook for the division is positive.
We are now seeing the benefits of our
transition to an end-market alignment and
of our re-focused new product development.
Additionally, the world’s governments have
identified water infrastructure investment
as a priority, not only for population health
and safety reasons but also for economic
development. The division is well placed to
support these efforts.

Revenues increased 1.9% year-on-year
(4.0% OCC) with higher sales in all
geographic regions on an OCC basis.
In Asia Pacific the water segment saw strong
growth, particularly in China. Activity
in India, including that related to the
National Rural Drinking Water Programme
(“NRDWP”), was impacted by COVID-19 and
sales were lower. In the Americas, power

sales were higher due to refurbishment
work, which was won in 2019, whilst water
sales were largely unchanged. The growth
in EMEA sales was driven by desalination
projects in Iberia and a recovery in business
with UK water utilities. For the division,
both water and power sales were ahead
year-on-year.

The division’s adjusted operating profits
were £47.0m, 4.3% higher year-on-year.
Adjusted margins were 29.8%, up 70bps
reflecting Growth Acceleration Programme
initiatives and reduced discretionary spend
which more than compensated for a slightly
negative price/mix impact.

Water & Power aims to outperform its
markets through an optimised go-to-market
strategy and focus on high growth regions
and digital solutions (including network
management opportunities). The division is
focused on solving its customers’ challenges.
For example, water customers rely on
Rotork’s technologies to achieve higher
water quality standards, lower operational
costs, reduce water leakage and increase the
lifecycle of assets above- and under- ground.
In the traditional power generation
segment, Rotork teams are targeting
emission reduction projects whilst seeking
refurbishment opportunities within the
installed base.

Divisional highlights
− In APAC, revenue grew
in both sectors with
China water strong

− Americas higher

benefiting from power
refurbishment work

− EMEA sales were higher on

desalination market demand

− Margins up 70bps to 29.8%
benefiting from cost control

Growth strategy

The water market is forecast to
grow 4-5% a year long-term. There
are good upgrade and service
opportunities in power.

We are increasingly focused on
specific areas we have identified
as offering the greatest growth
opportunity, such as digital.

We are working to further optimise
our go-to-market, including
through benchmarking and
developing the indirect channel.

Sales growth
OCC revenue growth in 2020

4.0%

RotorkAnnual Report 2020Annual Report 2020

Divisional highlights
− EMEA revenues down but

less than the division overall
− APAC similarly lower due to
COVID-19 logistics challenges
− Americas sales double-digits
down, in part due to the
disposal of a distribution
business at the end of 2019
− Margins rose 170bps (OCC)

despite lower revenue

Chemical, Process
& Industrial (CPI)

CPI experienced challenging trading
conditions in 2020, particularly in the
first half, resulting in lower revenues.
However, our Growth Acceleration
Programme initiatives delivered
significantly higher adjusted margins
year-on-year and early successes in
promising new markets.

Revenues fell 12.4% year-on-year on an
OCC basis, with the greatest decline seen
in the Americas. Asia Pacific sales returned
to growth in the second half, driven by
the process sector. EMEA sales were lower
year-on-year, with COVID-19 impacting
customer activity. The fall in Americas
revenues reflects significantly lower project
business, including the non-repeat of
mining projects in South America, and a
decline in book and ship activity, notably to
the tyre and auto plastics industries.

The process segment represents a
substantial proportion of CPI overall.
Process revenues in EMEA were lower,
largely the result of COVID-19 disruption.
In Asia Pacific we saw increased demand
from control valve OEMs in China.
Continuing Americas process sales were
down double-digits. Amongst the division’s

other focus segments, chemical revenues
grew, whilst industrial sales were lower.

Strategy

The division’s adjusted operating profit was
£38.6m, 8.2% down year-on-year. Adjusted
margins increased 210bps to 24.9% despite
the lower revenues, benefiting from
positive price/mix, procurement savings and
lower headcount.

CPI is already seeing the early benefits of
salesforce re-alignment. Examples include
increased customer wallet share (e.g. in
mining) and early success in new energy
applications (e.g. in hydrogen electrolysers).

CPI aims to outgrow its markets through
focusing on high growth regions and
sectors, optimising its channel coverage and
developing the aftermarket. The division
is targeting key sectors including HVAC,
chemicals, and basic materials. Across all of
these, the drive to lower CO2 emissions is
gaining momentum. The decarbonisation
trend presents a key opportunity for CPI –
through the electrification of actuation and
the substitution of high maintenance and
inefficient compressed air valve systems.
New energy technologies such as hydrogen
are exciting medium-term opportunities,
and our project pipelines are building.

We target niche applications where
intelligent flow control and process
automation are critical to maximising
operational reliability, efficiency and
growth for our customers.

Growth drivers include technology
(electrification, automation and
digitalisation) and geography (Asia
Pacific economic growth, clean air
legislation in EMEA and Americas).

Our focus markets include
petrochemical, HVAC, new energy
technologies and decarbonisation.

Margin improvement
Change in 2020 adjusted margin

210bps

53
53

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Operating responsibly

We are focused
on delivering
sustainable
stakeholder
value

Sustainability is embedded in our
Purpose: ‘keeping the world flowing
for future generations’. Our Purpose is
underpinned by our strategy, Values
and culture. We recognise that effective
management of environmental, social
and governance (ESG) issues can result
in significant benefits and competitive
advantage and create value for all of
our stakeholders.

RotorkAnnual Report 2020About this
section

This section includes updates on
information reported in previous Annual
Reports. We report under the main
areas of People and Culture, Health &
Safety, and Environment. Performance
narrative and data sets in these sections
cover the period 1 January to
31 December 2020.

We also include details of work
completed in early 2021 (outside of
the reporting period). In January 2021,
we sought stakeholders’ views on our
selected UN Sustainable Development
Goals (SDGs), and priority sustainability
issues across our value chain.
Stakeholders’ views informed the
development of the framework for our
new sustainability strategy, which has
been built around our chosen SDGs
and material sustainability risks and
opportunities. The strategic framework,
our chosen SDGs and our materiality
matrix are therefore also presented
here. Future reporting will be aligned to
this new framework.

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Operating responsibly continued

We completed our materiality assessment in
January 2021. We conducted one-to-one
interviews with Rotork’s management board
members, and other senior leaders with
responsibility for key elements of our
sustainability agenda. We discussed i) the
key current and future sustainability trends
that are impacting, or are likely to impact,
our business and sector; ii) the risks and
opportunities these trends might present for
Rotork; and iii) how Rotork could play a role in
driving transformational change towards a more
sustainable future for all, including any business
opportunities that could exist in doing so. We
also undertook desk-based research and horizon
scanning of sustainability issues, supported
by the specialist sustainability consultancy,
Corporate Citizenship. Following this, we
engaged with customers, suppliers, employees,
charities, shareholders and analysts, and
government and other partners. We asked them
to complete a sustainability survey and provide
feedback on the SDGs we had identified as
having highest relevance to Rotork. We also
asked them to rank identified sustainability
issues in terms of their relative importance. We
received 100 responses, from representatives
covering each of our main stakeholder groups
across the world.

Our materiality matrix
Our materiality matrix, shown on page 57,
maps stakeholders’ priorities against those of
the business. Those issues which have been
identified as most important to both groups –
and where we have greatest potential to create
shared value – will be given higher priority in our
sustainability strategy and reporting. Over time,
the specific prioritisation of issues can change,
due to their potential impact on the business,
our success in managing them, or growing
public awareness of their importance.

We regard all of the issues set out in the matrix as
being important for us to address. We will cover
each of them in our Sustainability Report later this
year. The materiality process and its outcomes
have been checked by Corporate Citizenship.

Our strategic framework
The materiality process, its outcomes, and final
selection of the SDGs was discussed and ratified
by the ESG Committee in February 2021. The
ESG Committee endorsed targeting five main
SDGs, aligned to topics where the Company has
greatest potential to support the transition to a
better and more sustainable future for all. These
are Goals 6, 7, 9, 12 and 13. The Committee
also endorsed targeting two additional SDGs,
committing to progress under Goals 5 & 8. A
new strategic framework, based on three pillars,
has been developed around our chosen SDGs
and priority sustainability topics.

Our strategic framework aligns to our
chosen SDGs as follows:

Operating Responsibly:
12. Responsible consumption and production
13. Climate action

Enabling a Sustainable Future:
6. Clean water and sanitation
7. Affordable and clean energy
9. Industry, innovation and infrastructure

Making a Positive Social Impact:
5. Gender equality
8. Decent work and economic growth

We already make a significant contribution
towards advancing these Goals. The actions we
have taken and our performance across these
topics are covered throughout this report, and
in particular over the following pages. Our
new strategic framework will help guide our
future activity to ensure we continue to create
sustainable, shared value for all of our stakeholders.

Priorities for 2021

— We will publish a standalone Sustainability Report in summer 2021, aligned to the

Global Reporting Initiative (GRI) Standards and SASB reporting frameworks.

— We will develop a series of goals and targets under each of the three pillars of our

new sustainability strategy (Operating Responsibly, Enabling a Sustainable Future and
Making a Positive Social Impact).

— We will align our climate reporting to the Task Force for Climate-Related Financial

Disclosures (TCFD) framework and undertake a scenario analysis to help inform our
future policy.

— We will develop a net-zero carbon emissions reduction target.

Governance and management
The Board receives regular updates on our
sustainability performance, on topics such as
Health and Safety and stakeholder engagement.
In 2020, we further strengthened our
governance with the introduction of a Board
Committee for Environmental, Social and
Governance (ESG) matters. The Committee will
oversee the Company’s sustainability strategy,
performance and disclosures. ESG Committee
members include non-executive directors Ann
Christin Andersen (Chair) and Tim Cobbold, as
well as executive directors Kevin Hostetler (CEO),
Kathy Callaghan (Group HR Director) and Vijay
Rao (Strategy and M&A Director). It is also
attended by the Investor Relations team, which
is responsible for managing the implementation
of the sustainability strategy and reporting on
performance, both internally and externally.
The Committee met once during the year. Its
first report can be found on pages 102 to 103.

Reporting on progress
We currently report progress against our
objectives under the main areas of People and
Culture, Health & Safety, and Environment.
In 2020, we published our first ‘People and
Environment’ report. It provides more granular
data and greater transparency about our safety,
health and environment performance. It also
includes case studies illustrating how our
products and services support our customers’
safety, efficiency and environmental objectives.
This is a key area of focus for us. We recognise
we have huge potential to support the transition
to a more sustainable future through the
products and services that we provide.

We will build on this progress by publishing our
first Sustainability Report in summer 2021. The
report will be aligned to the Global Reporting
Initiative (GRI) Standards and the SASB reporting
framework, to ensure it meets all of our
stakeholders’ requirements.

We are committed to being open and transparent
about our business. We have a comprehensive
suite of sustainability policies. These are published
at the following address: www.rotork.com/ESG

Our reporting meets the requirements of the
EU’s Non-Financial Reporting Directive. It also
meets our reporting obligations as a signatory
to the United Nations Global Compact.

Priority sustainability issues
The ESG Committee endorsed Rotork’s adoption
of the Sustainable Development Goals (UN SDGs)
in 2020 to help guide us on sustainability matters.
We subsequently undertook an in-depth
analysis of the UN SDGs, using an established
methodology as a guide, to identify opportunities
for creating value for both the business and society
(“shared value”). We then undertook a materiality
assessment, involving both internal and external
stakeholders, to test our assessment of relevant
SDGs and gather their views on material
sustainability issues across Rotork’s value chain.

RotorkAnnual Report 2020Our sustainability strategy
Our new sustainability strategy is based on three strategic pillars:
Operating Responsibly; Enabling a Sustainable Future; and, Making a
Positive Social Impact. It covers the way we run our business, the impact
we can have through our products and services, and the way we engage
with our people and communities. Our strategic framework has been

developed around our chosen SDGs and our priority sustainability topics.
The main SDGs we target will guide where we focus our efforts to
continue to create sustainable, shared value for all of our stakeholders.
We have also committed to progress under two additional Goals. We will
publish details of ambitions and targets under each pillar in our
Sustainability Report in summer 2021.

Operating responsibly

Enabling a
sustainable future

Making a positive
social impact

We aim to run safe, efficient
and sustainable operations.

We want to help drive the
transition to a cleaner future
where environmental
resources are used sustainably.

We will seek out opportunities in energy,
water, power and industrial markets, and
innovate to provide new products and
services, to support a green economy and a
cleaner more sustainable future.

We aim to support fair,
resilient and thriving societies.

Topic areas:
— Climate change
— Safety, health and wellbeing
— Supply chain management
— Culture, ethics & governance

Topic areas:
— Innovation (products and applications)
— Global energy transition
— Environmental benefits of products
— Infrastructure (e.g. for water and energy)

Topic areas:
— Talent and diversity
— Safety benefits of products
— Stakeholder engagement
— Social contribution

The full set of topics included in this pillar
are coloured blue in the matrix below.

The full set of topics included in this pillar
are coloured green in the matrix below.

The full set of topics included in this pillar
are coloured orange in the matrix below.

Aligned management incentives and decision-making processes. Enhanced measurement reporting and disclosure.

Materiality matrix

Added by
ESG Committee

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Moderate

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www.rotork.comAnnual Report 2020SocialcontributionIndustrial technologyTalent & diversityInfrastructureEnvironmental benefits of productsCustomer & third-party relationshipsNew end markets & applicationsApplication & service performanceSafety, health & wellbeingSafety benefits of productsBrand equity InnovationClimate changeEnergy transitionStakeholder engagementSupply chainCircular economyTraining & developmentCulture ethics & governance

Operating responsibly continued
Operating responsibly continued

Our people
and culture

Rotork strives to be a great place to
work. Engaged, committed people are
key to the successful delivery of our
Growth Acceleration Programme and
sustainable business growth. We are
committed to nurturing an inclusive and
respectful culture. We want our people
to be themselves at work, to feel they
belong and can deliver at their best.

One Rotork
We work to a common Purpose, ‘keeping the
world flowing for future generations’. Our
Purpose and Values – Stronger Together, Always
Innovating and Trusted Partner – define the way
we work. Our Values were chosen by our people
and apply to everyone across our global
operations. We seek to safeguard and promote
these attributes, which are deeply rooted in our
culture. They help us make Rotork a great place
to work and give us our competitive edge.

Our people are key to our sustained growth
and success. We focus on ensuring our people
approaches, systems and policies are linked to
our Values. They are aimed at engaging and
motivating our people and protecting their
rights. We strive to provide fair and equitable
treatment, as well as opportunities to grow,
learn and progress. As a global Company, we
embrace the importance of connecting with the
communities in which we operate, to help make
a difference.

We came 32nd (out of 250) in Britain’s Most
Admired Companies and ranked 4th for product
quality. We were ranked 4th in our sector
(Engineering and Machinery).

Our Culture
Our Values are embedded in our Code of
Conduct. We expect everyone working for us,
and with us, to follow the Code and act with
integrity at all times.

Our Values are also embedded in our Respect at
Work and Equal Opportunities policies. These
aim to ensure that fair and objective treatment is
promoted across recruitment and employment
regardless of age, race, nationality, ethnic origin,
disability, gender, sexual orientation, religious
belief or marital status or any other protected
characteristic. All employees have a responsibility
to ensure the policy is successfully implemented.
We work with occupational health experts to
overcome any obstacles for employees, including
those with disabilities, by making appropriate
adjustments, wherever possible.

Our Code of Conduct also includes guidance on
the identification of potential modern slavery
risks. The Code aims to raise awareness among
employees and empowers them to ‘Speak Up’
if they identify any area of concern. We work
with the external company SafeCall, to allow
concerns to be raised confidently and
confidentially via its whistleblowing helpline.

In 2020, we launched our Recognition Scheme,
linked to our Values. We continue to align our
culture with our approach to performance and
reward mechanisms so they contribute towards
delivering our strategy.

Our Values

STRONGER TOGETHER

TRUSTED PARTNER

ALWAYS INNOVATING

RotorkAnnual Report 2020Supporting a fairer society
We are committed to apprenticeships and early
careers programmes. We believe apprenticeships
in particular provide an excellent career foundation.
This year, as we have not been able to fully utilise
our UK apprenticeship levy, we donated unused
funds to small and medium-sized enterprises
working in childcare and education. This will enable
young people to develop new skills and capabilities,
and in turn, to support the communities where
they live and work. We are also a member of the
Manufacturers Standardization Society (MSS), which
offers undergraduate and graduate scholarships in
relevant disciplines.

In 2020, we established Rotork Benevolent Support,
a charity to provide short-term financial support to
employees, and ex-employees, and their families
facing financial hardship, especially as a result of the
COVID-19 crisis.

Fair Pay Framework and a Real Living Wage

We believe that all colleagues should be
appropriately and fairly rewarded for their
contribution. In 2020, we launched a Fair
Pay Framework. This reflects our wider
vision to reduce inequality and contribute
to a fairer society more broadly. It includes
five areas of focus to guide our reward
policies, procedures, systems and

decision-making to support fair and
competitive remuneration. Our
Framework includes a commitment to pay
a living wage (rather than the minimum
wage) where this exists in a country.
We were accredited as a Living Wage
Employer in 2020 by the Living Wage
Foundation.

We have defined five Framework
areas to meet our Fair Pay goals.

Market-based,
competitive and fair

Non-discriminatory

Performance driven
and motivating

Provide progression

Simple, globally relevant
and consistent

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www.rotork.comAnnual Report 2020

Our people and culture continued

Employee engagement

2020

2019

7.1/10

7.3/10

Global Service Years as at
31 December 2020

Service (years)

0-4

5-9

10-14

15-19

20-24

25+

We seek employee feedback on a regular
basis. This enables us to consider their views in
decisions made at Board and management level.
It also means we can respond to any concerns in
a timely manner. Each employee ‘pulse’ survey
has a specific theme, but some questions do not
change: rating Rotork as a place to work, rating
the pace of change, and rating our leaders as
role models.

We believe the mix of Rotork experience and
new external experience is integral for the
success of our Growth Acceleration Programme.

During 2020, one of our ‘pulse’ surveys focused
on environment and sustainability. As a result of
the survey, we have allocated renewed focus on
environmental issues on our sites, such as saving
energy, reducing plastics and increasing recycling.

Our new HR system launched fully in 2020,
allowing ‘self-service’ for all managers and
employees globally, including on mobiles.
It provides greater insight relating to our
employees to support better decision-making.

We are proud to have so many long serving
employees. 37% of our people have worked at
Rotork for more than 10 years. We consider this
a good indicator of our culture and colleagues’
engagement in the Company. Similarly, 37% of
colleagues have been with Rotork for less than
five years.

Engagement ‘pulse’ surveys in 2020

Q2 Wellbeing and COVID-19 survey – 700+ responses

8.8/10 (score) ‘How well has Rotork responded to the current crisis’

97% Awareness among respondents of wellbeing activities put in place

3% Employees globally who were working from home had experienced IT issues

93% Said they received sufficient communication on key issues

Q3 Environment and Sustainability Survey – 1,500+ responses

7.4/10 (score) ‘Rotork cares about the environment’

7.1/10 ‘How likely would you recommend Rotork as a place to work?’

7.4/10 ‘Rotork offers an inclusive culture’

Employee feedback from this survey helped inform our ESG plans

Q4 Survey to inform 2021 plans – 1,700+ responses

8.2/10 (score) ‘How would you rate Rotork’s response to the COVID-19 pandemic’

7.1/10 ‘How do you rate Rotork as a place to work’

7.0/10 ‘To what extent do senior leaders role model our Values’
Q4 Ethnicity and Disability survey – 1,000+ responses

This information helped Rotork to complete an Ethnicity Pay Gap report

We have delivered team briefings online this
year, as it has not been possible to have
face-to-face town hall events as in previous
years. We have also made use of webinars
to engage and inform our people. Our
working@rotork email address enables any
colleague globally to raise questions regarding
HR topics, to comment on our internal
communications or to contact our non-executive
director for Workforce Engagement, Tim
Cobbold. We also have an “AskKevin” email so
that colleagues can contact the CEO directly.

We introduced virtual induction sessions for all
new joiners this year. These were attended by
CEO Kevin Hostetler, members of the Rotork
Management Board and Tim Cobbold, NED for
Workforce Engagement. We held eight sessions
for new joiners to introduce themselves,
network with other new people, find out more
about the Company and ask questions.

We are proud that a majority of our employees
hold shares in the Company. Colleagues in many
of our locations receive a gift of Rotork shares
each year, wherever is it practicable to do so,
and have the opportunity to purchase additional
Rotork shares through our schemes. This gives
our people an additional personal and financial
stake in our success.

All employees also participate in the Rotork
bonus scheme. We link performance to reward,
ensuring we recognise those who make the
greatest contribution, whilst living our Values.
We benchmark our rewards and benefits
arrangements externally in every country we
operate, taking into account cost considerations.
We also provide pension arrangements, based
on local laws and practices.

RotorkAnnual Report 2020
Collective bargaining
We are a signatory to the UN Global Compact
and are working to meet its Principles. As part
of this, we uphold colleagues’ freedom of
association and recognise their right to collective
bargaining. There are collective bargaining
arrangements in place in several sites and
countries in which we operate. We are
committed to open and constructive
engagement with our unions and employees.

Protecting our people during
COVID-19
The safety of our people during the COVID-19
pandemic has been our utmost priority. Our
COVID-19 Steering Committee, attended by our
CEO and key members of our management
team, met almost 100 times in 2020, to ensure
the ongoing safety of our colleagues, customers
and their friends and families. At all times,
we have followed the latest advice from
governments and health authorities.

We have employed a range of new measures for
colleagues working onsite and at home. Ways of
working in our production facilities have been
revised. Colleagues have been grouped into
small ‘bubbles’, with separate facilities for each
bubble. We check employees’ temperatures
upon arrival and encourage regular hand
washing. We have also revised the layout and
walkways inside our sites, introduced screens
and partitions, and provided personal protective
equipment, such as face coverings.

We have deployed similar changes and measures
in our office sites, where these are open around
the world, to protect employees and visitors. For
those working from home, managers ensure
that colleagues are supported with the
equipment they need in order to do their jobs
safely and effectively.

We are extremely proud of the resilience and
compassion our people have shown during the
pandemic. Rotork engineers have used their
technical expertise to produce face shields and
reusable visors to help protect people from the
virus. Many thousands of items of protective
equipment have been delivered to places such as
hospitals, air ambulances and care homes
around the world.

Employee wellbeing

We have also introduced a new suite of wellbeing tools to support
colleagues’ mental, physical and financial health during these difficult
times. Our new wellbeing portal on our colleague intranet site includes
messages from our CEO Kevin Hostetler, as well as activities and tips on a
range of topics such as managing stress, sleep, nutrition and mindfulness.
We also introduced opportunities for colleagues round the world to get
together virtually and join wellbeing activities such as desk yoga, Zumba,
guided meditation, Pilates and collective singing. Around a third of all
employees participated in at least one of these activities.

We continued to recognise World Wellbeing Week this year, albeit in a
more virtual capacity. We also launched two Rotork Global Challenges:
one to climb the world’s eight biggest peaks by ascending stairs; and
another to ‘visit’ every Rotork site globally, walking the distance in steps.
Our aim was to promote our value of ‘Stronger Together’ through team
activity and encouraging fitness and wellbeing.

We also launched a wellbeing@rotork email address so that colleagues
around the world could get in touch about wellbeing issues, enabling us
to provide any further support.

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www.rotork.comAnnual Report 2020

Our people and culture continued

Talent and Learning
We recognise the importance of attracting,
recruiting and developing talented people.
As part of our approach to performance
management, employees have regular,
structured performance and development
conversations with their line managers. We look
to fill all roles internally where possible. Around
half of our senior leaders have been promoted
into their current roles from within Rotork.

Our talent review process is completed twice a
year, with outputs reviewed by both the Rotork
Management Board and the plc Board. We
review the top three management levels, in
addition to identifying future talent from across
the whole organisation, for succession planning.
Linked to this, each of our top 100 leaders has
a specific personal and development profile that
is also reviewed by our Management and plc
Board. This process allows us to understand our
talent pipeline for senior roles and ensure the
right development is in place for key individuals.

This year we have continued to close skills gaps
in our commercial, sales, product management
and IT teams.

— We adapted a number of our courses
to a virtual environment in 2020 and
introduced new courses such as remote
working, change and project
management. A fifth of our global
colleagues attended one of our new
workshops in 2020.

— 480 managers have completed our

Performance and Reward workshops which
discuss the link to both results and Values in
how we make decisions, along with how a
performance culture operates and links with
reward.

— Alongside our restructure to end market

segments, our sales teams have
completed sales development training
based on value selling techniques. To
date, two thirds have completed the
programme.

Diversity and inclusion
We recognise the importance of fostering an
inclusive and diverse workforce, and valuing
different perspectives and contributions. This is
embedded in one of our behaviours within our
Stronger Together Value: we’re open and
honest, welcoming diversity and difference.

We continue to drive our commitment to
diversity and inclusion and build this into the way
we work. We actively review decisions around
performance, talent and remuneration to ensure
fairness. Our Board considers diversity as part of
talent and succession reviews. In one of our
pulse surveys this year, employees scored Rotork
as 7.4/10 in believing we offer an inclusive culture.

We review our age profile to assist workforce
and succession planning. We intend to refocus
efforts on a revised young talent and apprentices
programme post COVID-19.

We are committed to increasing the number of
women in our organisation at all levels. Globally
across our workforce, females make up 21.8%
of our people.

Our 2019/20 Gender Pay Report showed
continued progress towards our goals. The
mean gender pay gap for women versus men
across Rotork in the UK changed from 8.8% to
-4.9% whilst median average pay for our female
employees in the UK is 8.7% lower than for our
men, compared to the UK’s national gender pay
gap of 17.3%. Our full Gender Pay Report is
published at the following address: www.rotork.
com/en/careers/diversity-and-inclusion

We are a member of the 30% Club, which aims
to achieve at least 30% representation of all
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.

Age Profile
(Group, as of 31st December 2020)

Age Bracket

Under 30
30 to 49
50 and over

Employees

11%

65%

24%

Gender Profile
(Group, as of 31st December 2020)

Female
Male

21.8%

78.2%

We are also a partner of the Women in
Engineering Society (WES) charity, which aims to
inspire women to achieve as engineers, scientists
and as leaders. In 2020, Ann Christin Andersen,
one of Rotork’s non-executive directors and
Chair of our ESG Committee, helped judge the
annual Top 50 Women in Engineering awards.

We are proud to have achieved the target set
out in the Hampton-Alexander review of 33%
female representation on our Board. In the
Industrial Engineering sector of the Review,
Rotork was placed 2nd out of 7 in 2020.

RotorkAnnual Report 2020
During 2020, we undertook our first global
survey of ethnicity and disability, to better
understand our workforce. We achieved a 32%
response rate. We used this to calculate an
ethnicity pay analysis for the year 2020/21,
using the same approach as for gender pay
reporting. We have also retrospectively
calculated ethnicity pay figures for the year
2019/20, generating two years of data for us to
refer to. Our gender and ethnicity pay reports
are published at www.rotork.com. We will
use the outcomes of our survey and pay
analysis to design a programme of work
around supporting our BAME employees.

We welcome the Parker Review target for all
FTSE 250 boards to have at least one member
from an ethnic minority background by 2024.
Our Board diversity policy is available at: www.
rotork.com/en/careers/diversity-and-inclusion

Gender pay reporting:
All Rotork employees in the UK

At 5 April 2020

2020

2019

2018

Mean Gender Pay
Gap actions all Rotork
employees in the UK -12.9% -4.9% -8.8%

Median Gender Pay
Gap across all Rotork
employees in the UK

2.8% 8.7% 6.3%

Ethnicity pay reporting:
All UK survey respondents

Mean Ethnicity Gap
across all UK survey
respondents

Median Ethnicity Gap
across all UK survey
respondents

2020

2019

11.2%

-0.5%

-3.4%

-12.3%

Gender diversity at senior levels:

2018

2019

2020

Women on Boards

28.6% 37.5% 37.5%

Executive Committee
and Direct Reports

17.4% 23.1% 23.1%

Our % of women to men at Board and
Executive Committee and Direct Reports levels
were unchanged in 2020.

Supporting change
Our Growth Acceleration Programme continues
to drive change both culturally and structurally
in pursuit of higher growth and margins. Our
people are key to the successful delivery of the
Growth Acceleration Programme.

We believe in engaging all colleagues in our
change programmes and ensuring their views
are heard. We provide change workshops
locally before embarking on each programme.
We use two cycles of a change diagnostic tool
to understand how change is embedding
and how our colleagues feel about it.

Around a third of all global colleagues were
invited to respond to a change diagnostic survey
in 2020. The results enable us to put action
plans in place around key areas of focus. We also
assess colleagues’ comfort with the pace of
change through our quarterly pulse surveys. This
has remained steady throughout the Growth
Acceleration programme at between 6.1/10 and
6.5/10 points.

Senior Leaders Ethnicity Split
(includes RMB and their direct reports levels)
Ethnicity %

11.6%

1.7%

80%

29.3%

1.6%

5.9%

3.6%

2.7%

56.9%

Asian
Black
Hispanic
Mixed
White

Ethnic origin
(Responders, representing 32%
of the Group) Ethnicity %

Asian
Black
Hispanic or Latino
Mixed
Other
White

Registered disability
(Responders, representing 32% of the
Group) Recognised disability %

Yes
No

4.4%

95.6%

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Our approach
to cybersecurity

Our cybersecurity strategy is
directed by our Chief Executive
Officer and managed by our Chief
Information Officer. The strategy
is aligned to best-practice
cybersecurity frameworks and
built on four major pillars and
our core Values:

Visibility
— Our core cybersecurity team, alongside

our ‘Trusted Partners’, provide a
comprehensive view of the threat
landscape. This is monitored 24/7 by
our Security Operations Centre and
Managed Threat Detection and
Response teams.

Protection
— We implement proactive measures to

ensure the confidentiality, integrity and
availability of our information, including
the delivery of regular user awareness
training for all our people, to help them
recognise and avoid cyberattacks on our
business, making us ‘Stronger Together’.

Resilience
— We are ‘Always Innovating’ to develop
our Cyber Incident Response Plan and
Disaster Recovery capabilities, meaning
that we are able to respond and recover
quickly from any cyber incident,
minimising any impact to the business.

Governance
— We align our strategy and security

posture with internationally-recognised
cybersecurity frameworks, including
the National Institute of Standards and
Technology (NIST) and the Information
Assurance for Small and Medium
Enterprises (IASME). This continual
alignment ensures our standards,
processes and practices secure the
organisation against cyberthreats and
remain aligned to our business goals.
We also work closely with internal and
external audit partners to ensure that
cybersecurity risks are regularly
reviewed, managed and reported to
the board on a regular basis.

www.rotork.comAnnual Report 2020

Operating responsibly continued

Health
& safety

First aid injuries
(number)

147

2020

2019

2018

2017

2016

147

190

202

290

207

The health, safety and wellbeing of our
people, visitors and contractors is our
number one priority. We want our
colleagues to go home every day in the
same or better condition than when
they arrived at work. Safety involves
everyone and everything we do.

There are many challenges when
maintaining Health and Safety in
workplaces globally. It requires vigilant
awareness of many shifting factors.
In 2020 the COVID-19 pandemic set
us the toughest safety and health
challenge that we have ever
experienced.

Our global COVID
secure response

We set out two main objectives for our
defence against the virus. The first was
to ensure that our employees were safe
and protected against the threat of
virus spread at our facilities and at our
customers’ facilities. The second, to
protect the business by successfully
managing the threat and delivering on
commitments made to our customers.

To meet our objectives we established
the COVID-19 Steering Committee to
ensure the ongoing safety of colleagues,
customers and their families. The global
HSE team produced a standardised
approach to COVID-19 Risk Assessment
and control. Our seventy-seven point
control plan has helped us protect our
employees when at work and protect our
customers, maintaining excellent business
performance. We have kept continual
improvement in mind, by frequently
auditing the control plan at a facility level.
This has helped us react to the changing
virus developments when required.

Health, Safety and Environment
Management System
Improving our H&S data analysis
Creating an effective workplace safety strategy
begins with accountability, root cause analysis
and constant review against performance. At
Rotork we recognize the role that data collection
and analysis can play in helping us continually
improve our health & safety performance.

In 2020 we started the development of our new
HSE Management System (HSE MS) software
package using Microsoft Dynamics 365 (D365).
The system will capture all required HSE data,
including lagging and leading indicators.
The system will use Power BI to develop EHS
Performance dashboards and reports. This will
give our business leaders and HSE teams a
powerful new way to look at trends and to
examine the main causes of injuries, illnesses
and other EHS incidents at our facilities. The
system was implemented in February 2021.

Refreshing our Global Standards
We continue to perform well against our main
lagging indicator KPI. Our LTIR rate has reduced
for the last three years. That doesn’t stop
identifying improvement opportunity so we can
maintain that year on year LTIR reduction trend.

We are currently refreshing our Global Standards
and developing an updated set of Rotork Life
Saving Rules (RLSR). As part of this program
we completed a Gap Analysis of our current
systems, using other internationally recognized
best practice systems as a guide and benchmark.
Training against the new RLSR’s will be
completed by June 2021.

RotorkAnnual Report 2020Delivering safety solutions to our customers

Rotork products have an important role to play in helping our customers with their Health &
Safety performance. There are many great examples of Rotork products that have been
developed with safety in mind, including:

Remote Hand Station (‘RHS’)
The RHS enables the safe monitoring
and control of Rotork IQ3 actuators
installed in inaccessible and/or
hazardous locations (for example in
traditional power stations). The RHS
can be installed up to 100 metres from
the actuator using standard data cable.

Emergency Shutdown (ESD)
Intelligent actuators such as the IQ3
range offer Emergency Shutdown (ESD)
functionality, to prevent or minimise
consequences of failure and to stop the
flow of a product through the valve. ESD
within IQ actuators can be configured to
open, close or stay put depending on
process requirements. This is a key safety
related duty. IQ actuators are certified for
safety applications (SIL2/3).

LTIR
(lost time injury rate)

0.24

2020

2019

2018

2017

2016

0.24

0.25

0.32

0.27

0.39

Hazard identification, risk
assessment & incident reporting
H&S hazards are identified and risk assessments
are performed in a collaborative manner. The
assessment process identifies prevention and
mitigation strategies to reduce risks within our
operational environments.

We encourage employee engagement and
empowerment to hazard identification through
our Safety Spot system. The system proactively
drives awareness and continual improvement by
capturing hazards, minor near miss events and
behavioural requirements before they result in
an incident. We measure our performance
against the system and the system is one of our
three main leading indicators.

Our HSE Investigation procedure is our global
standard for all our businesses to follow. It
directs our businesses to have trained personnel
to report, classify, and investigate EHS Events
(i.e. near misses and incidents). It also requires all
employees to report all EHS Events promptly to
their line management, so that an appropriate
and timely response can be made.

As part of the Microsoft D365 HSE MS, we built
a new incident investigation process using the
eight disciplines problem solving format (8D).
The new process was rolled out as part of the
release in February 2021.

Wellbeing (Worker Health)
Employee wellbeing is a particular area of focus
for Rotork, particularly in these difficult times.
We support employees’ wellbeing by driving
awareness, providing support options and tools,
and promoting healthy choices, with the aim of
supporting employees to have a successful and
balanced workplace wellbeing lifestyle.

Our wellbeing platform provides access to
wellbeing communications from Kevin Hostetler
– our CEO who champions workplace wellbeing
– along with a dedicated area for Mental
Wellbeing, Activities and Challenges and a “Hints
and Tips” section where employees can discover
a number of useful pieces of information
including areas such as working from home and
how to maintain wellbeing whilst in isolation.

Performance
Tragically, we suffered our first ever workplace
fatality in July 2020. One of our Rotork Site
Services employees was fatally injured when
completing a maintenance task at a customer’s
facility. We thoroughly investigated the accident
to determine the root cause and identify any
lessons to be learned. Our investigation was
discussed by the Board. We are deeply saddened
by the loss and we continue to work towards
eliminating injuries at work.

We continue to use a mixture of leading
(proactive) and lagging (reactive) indicators to
assess the Health and Safety performance of our
organisation. We monitor and record Health and
Safety leading indicators at a site level and hold
our businesses accountable for improving their
leading indicator performance. Currently we
have three such KPIs. Our focus on these helped
to improve our accident performance in 2020.

Our main lagging indicator is our Lost Time
Injury Rate (‘LTIR’) and we delivered an
improvement from 0.25 in 2019 to 0.24 in 2020.
The number of first aid injuries also fell
significantly. In 2019 we had 198 first aid injuries
and in 2020 there were 147 first aid injuries.

Moving forward, we will work to continuously
improve our safety performance and further
develop our leading indicator philosophy.

Leading indicators:

Safety Gemba Walks:
Gemba is a lean term for the place where
the value is created. From a safety
perspective it means that we go to where
the work takes place and test how our
safety requirements are followed. In 2020
we completed 1,557 Safety Gemba Walks
across all Rotork facilities (2019: 902).

Safety Spots:
The Safety Spot system is part of our drive
towards safety awareness, participation,
hazard identification and engagement
with our employees.

We actively encourage our co-workers to
identify potential safety issues as part of
their day-to-day role. In 2020 we raised
6,646 Safety Spots across all Rotork
facilities, which is a percentage increase
from the 2019 performance of 52%.

Global annual audit
programme:
This programme provides an analysis
of how each of our facilities perform
against our standard Health, Safety
and Environmental requirements. The
programme is used as a key driver to
continually improve our HSE performance.
By the close of December 2020, 56 Rotork
sites completed internal audits which
resulted in 436 completed audit actions
throughout 2020.

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Operating responsibly continued

Engaging
with our
communities

Rotork considers it important to
contribute to and engage with the
communities in which we operate
around the world. We regard this as
part of our ongoing responsibilities as
a good corporate citizen. This directly
links to our Values and underlying
behaviours and enables us to make a
beneficial impact on our communities.

Our target is to contribute 0.1% of
profits to nominated international
charities, and a similar percentage to
local charitable causes around the
world. Local charity committees in each
site support charitable causes that are
important to their local communities,
such as volunteering, fundraising and
donations. In keeping with our Values,
local teams are empowered and
encouraged to decide how to
distribute funds and support their
local communities.

Local community highlights

In Germany, Rotork donated €7,500 to the
Children’s Hospital in Fürth. With this donation,
we provided start-up assistance for the financing
of a video laryngoscope that will be used in the
paediatric intensive care unit.

@RUH – Image is for illustration purposes only

In Malaysia our staff raised money towards a
local orphanage.

Rotork donated £5,000 to The Forever
Friends Appeal towards a Surgical Robot
for the Royal United Hospital in Bath, UK.
Over the years, huge advances in surgical
techniques has led to a shift from open
surgery to more minimally invasive
methods, which have fewer complications
and a shorter recovery time.

At Christmas our UK colleagues donated to the
KidsOut Giving Tree, raising money for children
who have escaped domestic abuse and are living
in refuges. We supported this in Bath in 2019,
and our Employee Forum were keen to extend
support nationally.

In India, our colleagues assisted with various
local community projects. We donated to several
schools, provided clean water drinking facilities
in Mattiyur, planted trees on world environment
day, helped with environmental efforts in Porur
lake, and donated to flood relief in Gujurat.

In Rochester, US, we donated $1,500 to
Foodbank a non-profit organisation who provide
emergency food to communities in need.

Our Winston-Salem, US, office donated $3000
to a local Food Bank and another $3000 to The
Salvation Army.

In Canada, colleagues raised over $2,000
towards the awareness of men’s health during
Movember, which Rotork match-funded.

RotorkAnnual Report 2020This year some of our community
support was channelled away from
our traditional focus on the Arts,
museums and education towards
the fight against COVID-19.
Colleagues around the world played
their part in supporting hospitals
and their local communities.

Colleagues in India donated £10,700
to the Prime Minster Relief Fund to fight
COVID-19. Half of this was raised by
employees agreeing to donate one day’s
pay, while the other half was donated from
the Rotork India CSR fund. With help from
local vendors, the team produced 5,000
face shields for health workers, which were
delivered to the office of the Chief of
State’s Medical Centre. Our colleagues
also took part in food collections to poor
communities and donations to food banks.

Our UK Engineering team designed and 3D
printed face shield frames to provide as vital
equipment for the National Health Service,
distributing frames and shields to the Royal
United Hospital in Bath. Face shields were also
delivered to hospitals in Chippenham and Leeds.

Employees at Rotork Midland, UK,
recognised how difficult the Christmas
period was going to be for many families
facing additional hardship as a result of the
COVID-19 situation and organised a
collection of food and toiletries to be
donated to the local foodbank.

Colleagues in Langenzenn, Germany supported
FabLab, a volunteer organisation, and used a 3D
printing techniques to produce a holding bracket
for face shields to assist medical personnel.

The team in Lucca, Italy, donated protective
equipment used by our paint staff to the local
hospital to assist front-line medical staff in the
fight against COVID-19.

In the US, our design engineers partnered
with local manufacturers to deliver over
5,000 assembled frames for face shields
with contributors from all over the US. Both
transparencies and elastic material holding the
frames in place were provided by Rotork and this
helped local hospitals in the fight against
COVID-19.

For over 50 years Fairchild in the US has
designed and manufactured precision pressure
control devices, used in a wide variety of
applications. Fairchild worked with six
manufacturers to fill the need for precision
pressure control regulators. They supplied
regulators to assist in the dual-use of ventilators
which allows for one ventilator to serve two
patients simultaneously.

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Engaging with our communities continued

International charity partners

International charities must align closely
with Rotork’s Purpose and Values.
Charities are identified and reviewed
using four parameters:

Accountability requirements. How will
donations be used, how readily are
accounts available, what proportion
reaches recipients?

Fit. Do key causes align and what’s the
global reach. How can we engage
effectively with the charity, what value
does our funding bring?

Demonstrating & learning from
achievements. Have there been
concerns with how the charity is run,
has the charity faced notable issues
and how were they dealt with?

Learning about funding practice. How
will the funding help us meet our own
strategic aims?

@Cara Treasure, Pump Aid

Pump Aid and Rotork
have worked together to
transform the lives of
children and community
members in rural Malawi.

At two pre-schools, Pump Aid has provided
water points, child-friendly toilets, handwashing
stations, and hygiene behaviour education, as
well as nutritious meals using crops grown in
kitchen gardens. As a result, 260 children and
1,600 community members now have access
to clean water and improved sanitation. Rather
than suffering ill health, children are able to
attend school and thrive, with higher cognitive
performance and dramatically improved life
chances. Community members are seeing
improved health and reduced distances walked
in order to draw water. In addition, Pump Aid’s
self-supply programme develops the skills of
local pump mechanics in order to restore water
functionality for communities and households,
and to provide irrigation to small-scale farmers.
In 2020, this brought clean, safe water to over
200,000 people in rural Malawi.

Contribution
Pump Aid

£40,000

RotorkAnnual Report 2020benevolent
support

In addition, Rotork match
funded £22,000 to the
Rotork Benevolent fund.

This is a charity Rotork has set up to
provide short-term financial support to
employees, and ex-employees, and their
families facing financial hardship, especially
as a result of the COVID-19 crisis.

@Renewable World

@WeForest

Funds donated by Rotork
to Renewable World
have contributed to the
development and delivery
of a solar water pumping
programme in Nepal.

In our 3Q environment and
sustainability survey (see
page 60), Rotork colleagues
told us they wanted us to
focus on planting trees to
help the environment.

Three solar water pumping projects in Nepal will
benefit a total of 26,500 people. Through the
SolarMUS III project, Renewable World were
able to install ten solar water pumps, benefitting
those in Nepal’s remote hills where communities
face increasing pressure generating an income
from agriculture due to unreliable water access.
Thanks to this programme, 5,000 people gained
access to a household tap for the first time.

Through a new partnership with WeForest,
Rotork is supporting the construction of natural
infrastructure solutions to halt desertification
in Ethiopia and to secure water resources for
18,000 families. This involves the planting
and conservation of 49 million trees, digging
water-harvesting infrastructures and the
deployment of ambitious schemes in 14 rural
villages, transforming the lives of these
communities. As the seedlings grow, the roots
bind the soil to reduce erosion, improving soil
health. WeForest works with farmers to build
dams, micro-basins and water harvesting ponds
to retain rainwater, improve infiltration and
increase water access.

Contribution
Renewable World

Contribution
WeForest

£40,000

£24,000

Match funded
Rotork Benevolent Support fund

£22,000

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Operating responsibly continued

Environment

Despite a challenging year, when the
Health and Safety of our colleagues,
contractors and visitors has been our
number one priority, we have been able
to make significant progress in reducing
our environmental impact.

Climate change is an increasing risk for
the world. As part of Rotork’s journey
to achieve our environmental goals, in
2020 we built a new environmental
data collection process using Power
App. The system develops data for
Power BI to produce reports and
analysis, to help us identify strategic
reduction opportunities at site and
corporate levels.

The system will be tested and rolled out
in early 2021.

Our approach to environment

We are working on
developing a new set of
aspirations and targets
to further reduce our
environmental impact.
As part of our approach, we
are committed to reducing
our emissions, energy,
water usage and waste.

GHG Emissions & Energy
— We will develop a net-zero carbon target. We will
implement energy reduction projects at our
manufacturing facilities, improve data collection,
and review additional ways to reduce our
carbon emissions.

Waste
— We will review our approach to waste management,
recycling and waste supplier selection, and work to
develop a new target for waste reduction.

Water
— We will conduct regular analysis to identify our
locations in water-stressed areas. We will also
develop our measurement analysis, leak detection
and water recycling and water saving approaches.

We will develop a net-zero carbon target.

RotorkAnnual Report 2020Emissions

Reduction in scope 1 & 2 GHG
emissions vs 2019
%

18%

Reduction in electricity usage
vs 2019
%

Targeted annual electricity and
gas reduction
%

7.5%

Intensity: emissions (scopes 1 and
2) per £1m of revenue for 2020
tCO2e

14.1tonnes CO2e/£1m

Reduction in electricity usage
since 2017 baseline
%

18.4%

Reduction in gas usage vs 2019
%

16.3%

Performance
Energy & emissions
Our total CO2e emissions (scopes 1, 2 and 3)
reduced by 8.4% last year. Scope 1 and 2
emissions reduced by 18% in 2020, or 9.5% per
£1 million of revenue. We emitted 14.1 tonnes
of CO2e per £1 million of revenue in 2020,
compared with 15.5 tonnes in 2019.

We achieved an 7.5% reduction in electricity
usage (kWh) compared with 2019 and a 18.4%
reduction from the 2017 baseline.

We were also able to demonstrate a gas usage
performance reduction of 16.3% (m3) from
2019, a decrease against the 2017 baseline
of 15.2%.

In 2020, we completed a number of footprint
rationalisations which contributed to the
reduction in our annual energy consumption.
We transferred assembly operations from Dallas
(USA) to Rochester. Operations at Petaluma
(USA) have been moved to both Rochester and
Houston. We also closed three sales offices
in Lutterworth (UK), Chelmsford (UK) and
Lutzenberg (Switzerland). In addition, we
completed several energy reduction projects
during the year as part of the Rotork
Management Operating System (RMOS),
including delivering LED lighting improvements,
better data collection processes and systematic
analysis of energy usage. The closure of our
offices due to COVID-19 also made a modest
contribution. To note, our office network
typically constitutes around 11% of our
electricity usage.

Total GHG Emissions
Our total Greenhouse Gas emissions were 8.4% lower year-on-year and 22.2% lower than
the 2017 baseline year. The Group has no other GHG emissions (such as methane, N2O,
Sulphur hexafluoride, HFCs or PFCs) to report.

Energy

Unit of Measure

2020

2019

2018

2017

Electricity used

KwH 13,409,310

14,501,917

16,194,145 16,438,473

Gas used

Cubic Metres

961,545

1,149,779

1,165,313

1,134,506

Emissions

Scope 1

Scope 2

Scope 3*

GHG Total
(Scope 1+2+3)

Unit of Measure

2020

2019

2018

2017

Metric tonnes
CO2e

3,217

4,575

5,597

5,644

5,286

5,833

6,286

6,682

40,630

43,234

49,739

50,792

49,133

53,642

61,623

63,120

Scope 3 emissions include those associated with water usage and waste water treatment, as well as well-to-tank
emissions for our energy sources.

We report our carbon emissions in line with the DEFRA Environmental Reporting Guidelines. These include guidance on
compliance with the Streamlined Energy and Carbon Reporting (SECR) regulations. Rotork Plc classifies GHG emissions into
three ‘scopes’. Scope 1 emissions are direct emissions from sources that are owned or controlled by Rotork, including
combustion of fuel and operation of facilities. Scope 2 emissions are indirect emissions from the purchase of electricity,
heat, steam and cooling purchased for own use. Scope 3 emissions are all indirect emissions (not included in scope 2) that
occur in the value chain. For Rotork, Scope 3 emissions include those associated with water usage and waste water
treatment, as well as well-to-tank emissions for our energy sources. Annual energy consumption (kWh) is obtained from
both actual (invoices and meter readings) and estimated (some office energy rates included in monthly charge) sources.
Where conversion of units to kWh is required, the latest conversion factors from the UK Government are used; source
www.gov.uk/government/collections/government-conversion-factors-for-company-reporting In line with the SECR
requirement to disclose the proportion of carbon emissions and energy associated with the United Kingdom, we estimate
that 17.6 per cent of emissions and 25.2 per cent of energy usage relates to our UK operations.

INDEPENDENT VERIFICATION: Electricity, gas and GHG emissions data for 2020 presented here has been independently
verified by Make UK. Some data for 2019 has also been restated following this independent verification.

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Environment continued

Water
Whilst our own operations are not large users
of water, Rotork plays a major part in managing
this scarce resource. In fact, the most common
application of Rotork’s products and services
across all our end markets is the control and
management of water.

Our customers are, with our help, making
significant efforts to manage their environmental
impact, including the recovery, recycling and
treating of water.

We complete a water stress risk assessment
for our operations on an annual basis. The
assessment identifies our locations that fall in
high water stress areas. We use information
from the assessment to identify if there is
opportunity to implement practical water use
reduction projects in those areas and ease the
burden on already stressed water basins.

Water consumption across the majority of our
sites is relatively small and limited to domestic
supply used for drinking and sanitary facilities.
A few of our sites use water for production
purposes though this is limited to oil/water
mixes, water for cleaning products prior to
painting and pressure testing of units. Where
water discharges occur into drainage systems,
this is from toilets and sinks and goes into
sewerage for treatment at a local facility.
Where contamination could occur from cleaning
processes, this water is removed by licensed
and authorised contractors for pre-treatment
prior to disposal. Oil/water mixes are treated as
hazardous waste and are disposed of in line with
local regulations.

Our water withdrawal fell by 4.8% year-on-year
in 2020, equivalent to a 18.6% reduction
against the 2017 baseline. The biggest driver
of the reductions was the completion of
environmental projects identified by the Rotork
Management Operating System (‘RMOS’). Water
is usually sourced from domestic suppliers. In
Chennai (India) we harvest rainwater.

Total water withdrawal

Cubic metres

Unit of Measure

2020

36,876

2019

38,738

2018

44,463

Waste
We encourage all of our locations to minimise or eliminate the amount of waste that they produce,
and we use the RMOS system to identify projects that drive performance improvement.

Total waste
Waste recycled
Sent to landfill
Of which hazardous
Sent to energy recovery

Unit of Measure

Metric tonnes
Metric tonnes
Metric tonnes
Metric tonnes
Metric tonnes

2020

2,205
1,654
295
67
255

2019

2,273
1,579
592
264
102

2018

3,592
2,471
820
360
301

In 2020, we achieved a reduction in total waste of 68 metric tonnes year-on-year, a 26% reduction
versus the 2017 baseline year. Our factory footprint optimisation initiatives contributed to the
improved performance.

We recycled 75% of our waste in 2020, up from 69.5% the prior year. Wood and steel represented
just over two-thirds of our recycled waste in 2020 (by weight). We achieved a significant reduction in
the amount of waste we sent to landfill in 2020; 50% less than in 2019.

Case study

Rochester (US)

Rotork held a groundbreaking celebration on
October 30, 2019 for new manufacturing and
office space as well as a state of the art
customer experience centre. The expansion
project was successfully completed and
turned over on October 28, 2020, less than
12 months after breaking ground. The
manufacturing and office expansion will
create an additional 55 jobs locally over the
next 5 years, while retaining a workforce of
one hundred and twenty employees.

We completed the project with a “Build
Green” philosophy. We took into
consideration the impact on the environment
by employing a fleet of energy efficient
electric forklifts; supplementing their existing

and projected electric energy source with a
renewable energy supply by incorporating
50% hydropower from Niagara Falls;
implementing a storm water management
system; implementing high efficient lighting,
HVAC and equipment, and adding
greenspace landscaping features.

RotorkAnnual Report 2020Task Force for Climate-related
Financial Disclosures aligned summary

Managing climate-related risks
and opportunities
We are working to implement the
recommendations of the Task Force on
Climate-related Financial Disclosures (TCFD).
TCFD aims to standardise companies’ reporting
of climate-related risks and opportunities,
in line with the four thematic areas, strategy,
risk management and targets and metrics.
We provide a summary of Rotork’s management
of climate-related risks and opportunities below.
We anticipate augmenting our TCFD-aligned
disclosure in our Sustainability Report, which
will be published later this year. We will also
undertake a TCFD-aligned scenario analysis this
year, to better understand the potential financial
impacts of risks and opportunities facing our
business. The scenario analysis will be published
in our 2021 Annual Report & Accounts.

Governance
The Rotork plc Board has overall accountability
for oversight of effective risk management.
As part of this, the Board oversees the
Company’s management of climate and
environment-related risks and opportunities. It is
included as an agenda item at Board meetings.
Our Board members bring deep sectoral and
engineering expertise, including climate and
environment-related competency. Given the
significance of climate change risks and
opportunities, the Board, and the newly-formed
ESG Committee, will participate in deep dive
sessions on the topic, as well as other pertinent
ESG issues, as part of a rolling programme going
forward. The Board is supported by the ESG
Committee, the Audit Committee and the Rotork
Management Board. Our Group Risk & Internal
Audit function is responsible for the day-to-day
delivery of effective risk management across the
group, including maintaining our risk register.
ESG performance – including management of
climate change issues – is linked to senior leaders’
remuneration. For 2021, it will become 10% of
the bonus opportunity.

Strategy
Sustainable use of natural resources is a
commercial imperative, as well as an
environmental one. We recognise that there are
significant operational, financial and competitive
benefits in addressing environmental issues.
Environmental considerations are therefore a key
part of our Growth Acceleration Programme.
This programme focuses on simplifying our core
business, delivering manufacturing improvements
and developing our global supply chain. It also
targets sustainable growth through innovation,
by broadening the application of existing
products and accelerating new product
development, with a particular focus supporting

our customers’ sustainability and net zero
objectives. Our capital management processes
include climate-related considerations. For
example, we consider energy and resource
efficiency, and emissions reduction, as part of
investments in our property estate. See the
case study on page 72 about our new facility
in Rochester, US, as an example of this.

We identify material risks and opportunities
through our Group risk management
framework. We also input views and
contributions from our key external stakeholders,
including customers, suppliers and investors.
We augmented our stakeholder engagement
in January 2021 with the introduction of a
materiality process. In this year’s process,
environmental matters, including climate
change, ranked among the most material topics
identified. Stakeholders’ inputs were discussed
by the ESG Committee in February 2021.
See pages 54 to 55 for more detail about our
materiality assessment and its outcomes.

We set out our approach to managing the
environmental impacts of our operations on
pages 68 to 70. We have committed to
developing a net-zero carbon target.
As mentioned above, we will also undertake a
detailed analysis during 2021, in line with TCFD
recommendations, to better understand the
potential financial impact and our resilience to
different climate change scenarios.

Risk management
Climate-related risks and opportunities are
assessed and managed using the Company’s
overarching risk management framework.
The Group’s established risk management
framework incorporates both a ‘top down’ and
‘bottom up’ risk identification process. ‘Top
down’ risk identification is performed at the
Board and management level. ‘Bottom up’
risk identification process is carried out at
departmental, regional and divisional levels.
Risks are identified continually during the year,
with formal reviews at mid-year and full year to
assess current and emerging risks. We also hold
dedicated risk sessions on specific topics, such as
the potential impact of the energy transition,
climate change or other environmental changes
that may impact Rotork in the future. We also
incorporate stakeholder feedback into our
assessment. For example, our Sales teams are in
regular dialogue with customers, and, through
this, gain insights into customers’ environmental
targets and issues beyond our own operations.
The most significant risks are consolidated
and reported at Group level onto our Principal
Risk register.

We monitor climate risk closely given its
significance internally and externally. In line with
the TCFD’s recommendations, we consider both
physical risks, such as extreme weather events,
and transitional risks, such as the global energy
sector’s shift from fossil-fuel based systems
to renewable sources. We also consider
opportunities that may arise. This could include,
for example, new opportunities for growth in
supporting our customers’ transition to a low
carbon economy. See page 40 for details of our
risk management approach and identified
physical and transitional climate change risks.

Metrics and targets
As detailed on page 70, we are working on
developing a new set of aspirations and targets
to further reduce our environmental impact.
As part of our approach, we are committed to
reducing our emissions, our energy and water
usage, and waste. We have committed to
developing a net-zero carbon target. Our scopes
1, 2 and 3 emissions for 2020 are reported on
page 71. Overall, we achieved a reduction of
8.4% in our total greenhouse gas emissions
compared to the prior year (scopes 1, 2 and 3).
Scope 1 and 2 emissions reduced by 18%
in 2020, or 9.5% per £1million of revenue.
We report emissions in line with the Greenhouse
Gas Protocol Corporate Standard. Going
forward, we will report progress against our
environment targets, and details of the
environmental initiatives we are undertaking,
in a dedicated Sustainability Report, as well as
in our Annual Report.

Water withdrawal
reduction year-on-year
in 2019
%

4.8%

Waste recycled in 2020
%

75%

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Financial review

Jonathan Davis
Group Finance Director

Order intake for the year was £590.2m (2019:
£691.8m), down 14.7% from the prior year or 12.4%
on an Organic Constant Currency (OCC) basis. Order
intake in the second half was 3.6% lower than the
first half of the year and 8.9% lower than the second
half of 2019 on an OCC basis. Group revenue was
9.7% lower (7.4% OCC). Water & Power sales grew
year-on-year, with both end markets ahead. The
division reported an encouraging performance with
sales driven by water sector infrastructure investment
as well as power sector refurbishment activity. We
currently expect the latter to continue through 2021.
Oil & Gas and CPI sales declined, reflecting
challenging trading conditions and, particularly in the
first half, COVID-19 disruption. Both divisions saw a
reduced revenue decline in the second half.

By geography, Europe, Middle East & Africa (“EMEA”)
revenues by destination were down slightly less
year-on-year than for the Group. In Asia Pacific, sales
growth in the second half was not quite sufficient to
offset the decline in the first half and full year
revenues were slightly down. Sales fell double-digits in
the Americas reflecting the disposal of a distribution
business at the end of 2019 and a significant
reduction in activity at Oil & Gas. The rate of decline in
Americas revenues was lower in the second half
however still double-digits.

RotorkAnnual Report 2020Gross margin increased 40 basis points to 47.0% driven by the 2019
disposal, productivity improvements, a positive divisional mix and lower
travel costs and other temporary savings. The 2019 disposal was a
dilutive business so on an OCC basis the increase in the year was 10
basis points. Adjusted operating profit was £142.5m, a decrease of
5.6% over the prior year, with the adjusted operating margin increasing
100 basis points to 23.6% (2019: 22.6%). Operating profit was
£122.6m, 3.5% lower year-on-year. On an OCC basis, adjusted
operating profit increased 90 basis points from 22.7% to 23.6%, the
difference to the reported numbers reflecting the disposal of the lower
margin business at the end of 2019. In addition to the improvements in
gross margin, overheads were tightly controlled and reduced by £16.5m
on an OCC basis. Personnel costs and travel were the two largest
reductions. When combined with the £7.8m cost savings above gross
profit, c.33% of the total £24.4m reduction might be considered
temporary and likely to reverse once travel and other COVID-19 related
restrictions reduce.

Net finance costs decreased by £2.5m to £0.5m as a result of a
lower interest payable and a more favourable impact of exchange
gains/losses.

The effect of lower corporate tax rates in regions we operate resulted
in the adjusted effective tax rate reducing to 23.4% resulting in
adjusted earnings per share of 12.5p, a decrease of 3.8%. Statutory
earnings per share were 10.7p, a decrease of 0.9%.

Growth Acceleration Programme
We entered 2020 with a number of the workstreams under the
Growth Acceleration Programme (GAP) already underway and with
considerable momentum. Within the Commercial Excellence pillar,
during 2019 the customer-facing sales organisation was reorientated
to be end-market facing in two regions of the world and work in the
Americas was completed in the first quarter of 2020. Later in the year,
and as a result of COVID-19 disrupting some of the GAP initiatives
scheduled for 2020, we accelerated the work to restructure the sales
back office functions starting in EMEA. These reorganisation activities
account for the vast majority of the £5.9 m restructuring costs in
the year but there is a £3.0m in-year benefit from the actions taken.
The profit contribution of new products launched in the last three years
was £2.1m, a 40% increase on 2019’s £1.5m.

to ensure we maintained the supply of components required to meet
customer deliveries. The challenges were both the situations at our
suppliers’ facilities and the logistics of getting the components to our
factories. In spite of this the GSS team delivered incremental net savings
of £2.3m in the year. Similarly the continuous improvement and lean
initiatives continued throughout the year with ~300 lean events
completed. Nearly half of these delivered financial benefits which
delivered £1.5m of savings in the year. Lastly the footprint optimisation
programme continued with a further two factories closed during the
year. The benefits of these closures and the carry forward from 2019
closures delivered £2.3m of incremental benefits.

In total the Growth Acceleration Programme generated £11.2m
compared with exceptional costs of £6.0m. This, together with the
savings achieved in 2018 and 2019, mean the cumulative impact on the
income statement of the Growth Acceleration Programme to date has
been £23.4m, which exceeds the cumulative £17.1m restructuring
costs. The cumulative cash benefits are now £19.7m, with an additional
£47.8m generated from reduced working capital. Investment to date in
IT and facilities was £23.6m. 2020 saw a significant increase in spend to
£18.2m on the new ERP development as well as the investment to
expand the Rochester (NY) factory which completed in the year.

Adjusted items
Adjusted profit measures are presented alongside statutory results as
the Directors believe they provide a useful comparison of business
trends and performance from one period to the next.

The statutory profit measures are adjusted to exclude amortisation of
acquired intangibles and other items, comprising the net restructuring
costs resulting from the Growth Acceleration Programme.

Adjusted earnings reconciliation

£m

Operating profit
Profit before tax
Tax

Profit after tax

Statutory

results Amortisation

Restructuring
costs

Adjusted
results

122.6
122.0
(28.7)

93.3

14.1
14.1
(3.0)

11.1

5.9
5.9
(1.5)

4.4

142.5
142.0
(33.2)

108.8

Within the Operational Excellence pillar the focus on managing our
factories through COVID-19 redirected efforts that might otherwise
have been spent on driving GAP initiatives. The global strategic
sourcing (GSS) team had to focus on managing our supply base, as
COVID-19 affected suppliers to varying degrees throughout the year,

The table above adjusts the statutory results for the significant
non-cash and other adjustments to give 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
restructuring costs are provided in note 4.

Organic constant currency results
We also present Organic Constant Currency (OCC) figures to exclude the impacts of currency, acquisitions, business closures and disposals.

£m

Revenue
Cost of sales

Gross profit
Overheads

Adjusted operating profit1

2020 as
reported

604.5
(320.2)

284.3
(141.8)

142.5

Constant
currency
adjustment

7.5
(4.8)

2.7
(0.8)

1.9

2020 at 2019
exchange
rates

612.0
(325.0)

287.0
(142.6)

144.4

49.9%
23.3%

23.6%

46.9%
23.3%

23.6%

47.0%
23.5%

23.6%

Organic
business at
2019
exchange
rates

612.0
(325.0)

287.0
(142.6)

144.4

46.8%
24.1%

22.7%

1 Adjusted is before the amortisation of acquired intangible assets and other items (see note 4).
2 As a result of business disposals and closures the 2019 comparatives have been restated to enable the OCC business growth to be calculated. This reconciliation is shown in note 2.

20192

661.2
(351.7)

309.5
(159.4)

147.1

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Financial review continued

Currency
In 2020 we experienced an overall currency headwind. The major
currencies impacting the income statement are the US$ and the euro.
The US$/£ average rate of $1.28 (2019: $1.28) was unchanged whilst
the euro/£ average rate was €1.12 (2019: €1.14), a 2 cent tailwind. With
the average sterling rate across the basket of currencies, particularly
India, Russia and Mexico, being stronger than 2020 this has resulted in
a £7.5m or 1.2% headwind reported in revenue.

Control of working capital as defined in the cash flow statement,
using average exchange rates and excluding disposals, is key to
achieving our cash generation KPI. The drive to reduce inventory
generated £12.6m whilst a reduction in trade receivables generated a
further £13.1m. Trade receivables measured as days’ sales outstanding
reduced from 57 to 56 days. Net working capital in the balance sheet
decreased to 21.0% of revenue compared with 24.2% in December
2019 and generated an £18.7m inflow in the cash flow statement.

The impact of currency on the Group is both translational and
transactional. Given the locations in which we have operations and the
international nature of our supply base and sales currencies, the impact
of transaction 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 still 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.

In order to estimate the impact of currency, at the current exchange
rates we consider the effect of a 1 cent movement versus sterling.
A 1 euro cent movement now results in approximately a £250,000
(2019: £300,000) adjustment to profit and for US dollar, and dollar
related currencies, a 1 cent movement equates to approximately a
£700,000 (2019: £700,000) 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 liability, net of the related
deferred tax. The average capital employed decreased 6.0% over the
year to £446.4m as there were no acquisitions during 2020 and we
increased our net cash position. This resulted in an increase in ROCE
despite the reduction in adjusted operating profit to 31.9% (2019:
31.8%).

Taxation
The Group’s headline effective tax rate decreased from 24.1% to
23.5%. Removing the impact of the non-recurring adjustments
provides a more reliable measure and on this basis, the adjusted
effective tax rate is 23.4% (2019: 23.5%), principally because of a
reduction in the deferred tax liability relating to unremitted earnings
from India as a result of a decrease in Indian withholding tax rates
from 1 April 2020. The Group expects its adjusted effective tax rate
to remain higher than the standard UK rate due to higher rates of tax
in China, the US, South Korea, Germany, India, and Australia.

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.

Cash generation
Our strong cash generation resulted in a net cash position of £178.1m
at the end of the year (2019: £106.1m). Our cash conversion KPI shows
a conversion of 129.5% of adjusted operating profit into cash which is
slightly lower than the 131.4% reported in 2019. The Group invested
£25.3m in capital expenditure in 2020, an increase of £8.0m, as we
continue to invest in our IT infrastructure and operating footprint as
part of the Growth Acceleration Programme. Our Research and
Development (R&D) cash spend has decreased 2% to £12.9m which
represents 2.1% of revenue (2019: £13.2m and 2.0%). The most
significant spend was associated with the development of Pakscan 4
but the focus in 2019 was largely on reorganising the R&D team before
accelerating spend on new developments. Dividends of £33.9m, which
was only one payment in the year, and tax payments of £30.8m were
the two other major outflows.

COVID-19, Brexit and geopolitical risk
In this report last year we highlighted three areas of risk that we
were monitoring and which could impact Rotork. It became apparent
shortly afterwards that one of these, COVID-19, was going to have a
significant impact globally. We established a COVID-19 Committee in
March 2020 which met daily to monitor the impact of and determine
our response to the pandemic as it spread across the world, affecting
the teams in our own facilities, our suppliers and our customers.

In the second quarter, when uncertainty regarding the pandemic was
at its height, we carried out a series of risk assessments in order to
plan for a range of scenarios. These mirrored some of the scenarios
we include in our annual viability statement which can be found on
page 49. Due to the level of uncertainty, and out of an abundance of
caution, we took the decision in March to withdraw the recommendation
to pay a 2019 final dividend which had been declared in the 2019
preliminary results announcement. We also applied to the UK
Government’s Covid Corporate Funding Facility, although we decided
not to completed the process so didn’t utilise the facility, and replaced
our committed revolving credit facility which was due to expire mid-2020.
At the same time we took advantage of a number of government
backed schemes, such as furlough in the UK, to temporarily reduce
the cost to the business of non-productive employees. Over the next
few months, as the situation stabilised, we repaid all UK government
support and were left with an immaterial benefit from other similar
schemes globally. The benefit of these is included in the assessment
of temporary saving shown above. At the mid-year we also decided
to pay a 3.9p per share interim dividend, equivalent to the 2019 final
dividend that had been proposed and then withdrawn. At the same
time we undertook to pay a dividend in respect of the whole of 2020
in May 2021.

Whilst monitoring the external influences of COVID-19 on the business,
the COVID Committee also coordinated the internal response. This
included initially planning for a sudden increase in numbers working
from home for those employees who could, introducing social
distancing measures within our factories and carrying out risk
assessments so that they could continue to work safely. Externally it
meant coordinating with our suppliers and logistics companies to
ensure a consistent supply of components and working with our
customers to understand the changes to their priorities. At the same
time actions were taken to mitigate the reduction in revenue and the
impact this would have on the results of the Group. A reduction in
recruitment, postponing the majority of salary increases at all levels and
restricting discretionary spend, plus the temporary savings, such as
lower travel costs, which were a direct consequence of the pandemic,
all helped contain costs.

The more severe scenarios we considered in our exercise in the second
quarter did not transpire for 2020. The dedication of all our employees,
whether working from home or continuing to go to work, has meant
we have been able to deliver a resilient set of results. The early actions
to mitigate costs, combined with the momentum in our Growth
Acceleration Programme, has driven an increase in adjusted operating
margins once again despite a reduction in revenue.

We entered 2020 expecting to see the final stages of the Brexit
negotiations and the terms on which the UK would trade with other
countries from 1 January 2021. The UK’s decision to leave the EU led to

RotorkAnnual Report 2020a higher level of uncertainty surrounding trading conditions, particularly
between the UK and the EU. Rotork established a Brexit steering
group following the referendum which assessed and monitored the
potential impact on the Group and it still continues to manage the
implementation of mitigation plans and assess ongoing risks.

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.

The following Brexit risks were identified as having a potential impact
on our business:
— Economic conditions: Increased uncertainty including the specific

The Group has one committed £60m revolving credit facility expiring
in June 2022. At year end this was undrawn, resulting in £60m
being available.

impacts on growth, inflation, interest and currency rates.

— Laws and regulations: Potential changes to UK and EU-based law and
regulation including product approvals, patents, duties and import/
export tariffs.

— Short term supply chain disruption: Potential changes in customer

buying patterns, delays in Customs for products shipped to and from
the EU and the rest of the world and border clearances and uncertainty
over UK and EU product approvals.

With the completion of the transition period of the EU:UK Withdrawal
Agreement on 31 December 2020 most of the risks around tariffs and
barriers to trade have diminished and should not be material to our
business. Whilst there has been some disruption to, and increased cost
of, entry and exit from the UK ports, logistics issues and cost escalation
relating to COVID-19 have been greater than the impact of Brexit to
date. The mitigating actions are the same whatever the cause of the
disruption, and increased inventory levels and extending lead-times,
have been effective ways to manage this risk so far.

As a global business we continue to monitor the trade position
between China and the US, and between all locations where we are
based or have customers or have 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 49.

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. This level of coverage
was retained despite the challenges faced in the credit market as a result
of COVID-19. Where appropriate, we use trade finance instruments such
as letters of credit to mitigate any identified risk.

Treasury
The Group operates a centralised treasury function managed by
a Treasury Committee chaired by the Finance Director 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 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.

Retirement benefits
The Group accounts for post-retirement benefits in accordance with
IAS 19, Employee Benefits. The balance sheet reflects the net deficit
of these schemes at 31 December 2020 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.

The most recent triennial valuation of the UK scheme took place at
31 March 2019 and showed an actuarial deficit of £28.7m and a
funding level of 86%. A recovery plan was agreed with the Trustees as
part of the 2019 valuation, resulting in required annual contributions
from the Company of £6.8m with effect from 1 April 2020. The annual
update to the actuarial valuation at 31 March 2020 showed the deficit
had grown to £45.9m and funding level decreased to 78%. This was
due to the continued reduction in gilt yields and the reduced value of
assets at what was the start of the first COVID-19 lockdown (asset
values have since recovered strongly).

On an accounting basis the deficit in the schemes increased from
£29.6m to £38.5m during 2020 and the funding level decreased from
87% to 85%. The Company paid total contributions of £10.3m over the
year and the schemes’ assets increased in value by £20.8m. However,
this was more than offset by the £29.7m increase in the value of the
schemes’ liabilities due to the much lower discount rate at the year-end,
which reflected the fall in yields on AA corporate bonds over 2020.

The accounting deficit is different to the actuarial deficit 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 6.3p per share. The 3.9p per
share dividend paid in September 2020 was the same as the 2019
proposed final dividend which was withdrawn in March 2020 as a
result of the uncertainty arising from COVID-19. Had that dividend
been paid as originally proposed, the full year dividend in respect of
2019 would have been 6.2p per share and would have been 2.1 times
covered based on adjusted earnings per share. Compared with that,
the 6.3p proposed final dividend represents a 1.6% increase and is 2.0
times covered based on adjusted earnings per share.

Jonathan Davis
Group Finance Director
1 March 2021

1 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.

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Non-financial information statement

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 at www.rotork.com

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
70 to 73. We target reductions for carbon,
energy, waste and water. We report progress
against them in our Annual Report and
Accounts, and other publications such
as our People & Environment Report.

Environment & Energy 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.

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 58 to 65. Our employee
engagement approach is also covered
in our Section 172 Statement on pages
80 to 81. Related principal risks, on
page 44, are Health, Safety and the
Environment and Change Management.

Our quarterly ‘Pulse’ employee surveys
assess engagement levels and employees’
views of Rotork as a place to work. They
include questions on diversity and inclusion
and the pace of change. We conduct
audits of our health & 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.

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 & safety for reducing accidents and cases of work-related
ill-health. It applies groupwide, including to all subsidiary businesses
and persons working for or on behalf of the Company.

Whistleblowing 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.

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 66 to 69. Our
approach to supplier management is covered
in our People & Environment Report.

Supplier Code of Conduct
This code covers our expectations on ethical behaviours and compliance
with applicable laws; including promoting equal opportunities, human
rights, freedom of association, labour rights, good environmental
practices, and our zero-tolerance approach to bribery and corruption. It
applies to suppliers globally and is published in seven different languages.

We audit high risk suppliers, as required,
to ensure compliance with our Supplier
Code of Conduct. We capture and
report data on our charitable giving and
assess the impact we have made.

Worldwide Charity Support Policy
This policy sets out how we implement charitable giving, in line
with our corporate responsibility aims. Our target is to contribute
0.1% of profits to nominated international charities, and a similar
percentage to local charitable causes around the world.

Group Tax Strategy
Our overall tax strategy is for full disclosure and cooperation 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.

RotorkAnnual Report 2020S
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Respect for human rights

Where material information is located

Material policies

How we monitor the effectiveness of policies

Our approach to diversity and inclusion is
covered on page 62. Our Modern Slavery
Statement is published on our group
website. As set out on page 61, we are
a member of the UN Global Compact.
We commit to meeting its Principles,
including supporting and respecting
the protection of internationally
proclaimed human rights.

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.

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 provide awareness training to
employees about conflict minerals
via an e-learning module.
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.

We also review our suppliers for modern
slavery risks. Our initial focus has been
on suppliers with enhanced risk profiles.
We engage an independent intelligence
provider to help analyse our supply base.
We follow up with audits when necessary.

We monitor the number of calls
made to the Speak Up line and the
outcomes of any investigations.

Anti-bribery and corruption

Where material information is located

Material policies

How we monitor the effectiveness of policies

Principal Risks, page 44, Corporate
Governance, page 90 & 104, and our
People & Environment Report.

Code of Conduct
This sets out our zero-tolerance approach, setting the
standards of behaviour expected to minimise the risk of
bribery, including gifts and hospitality. This is supported by
a more detailed, dedicated gifts and hospitality policy.

Employees are required to complete
anti-bribery and corruption courses
on a regular basis. We track training
completion rates. We regularly screen
suppliers for instances of corruption.

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.

Supplier Code of Conduct
Outlines our zero-tolerance policy to extortion, bribery and corruption
and never offering, paying, soliciting or accepting bribes in any form.

Further information can be found in our People & Environment Report 2019/20, published at the following address:
https://www.rotork.com/uploads/documents-versions/45536/1/pub000-241-00-1120.pdf.

We also participate in the Climate Change and CDP Water disclosure platforms; see
https://www.cdp.net/en/responses?utf8=%E2%9C%93&queries%5Bname%5D=Rotork
https://www.cdp.net/en/responses?utf8=%E2%9C%93&queries%5Bname%5D=Rotork

A standalone Sustainability Report will also be published later in 2021, additional information about our approach and performance in relation to our
customers, our people and our environment.

Non-financial information

Section

Business model

Key non-financial performance indicators

Key performance indicators
Operating responsibly

Pages

16 to 17

46 to 48
54 to 73

www.rotork.comAnnual Report 2020

Our stakeholders

Engaging
with our
stakeholders
& section 172

Our Section 172 Approach

The interests of our stakeholders have
informed the Board’s decision making
throughout 2020. It is recognised that it is
not always possible to provide positive
outcomes for all stakeholders and the
Board sometimes has to make decisions
which balance the competing priorities of
stakeholders. Key decisions relating to our
strategy and its implementation in relation
to all Group companies are taken by the
Board under its Matters Reserved schedule.
Those decisions delegated to the CEO and
his senior leadership team are taken by
the Rotork Management Board which
meets monthly and is responsible for
implementing the strategy. Decisions made
by our subsidiaries are aligned with the
strategy set by the Board and the
operational decisions made by the Rotork
Management Board.

Our approach to making Board decisions
under Section 172 is set out below:

Rotork’s Purpose and underlying
culture and Values help ensure
that there is proper consideration
of the potential impacts of Board
decisions on our stakeholders.

The Board performs due diligence
through challenge and probing in
relation to the quality of the information
presented and receives assurance and
further information where appropriate.

Board decision is taken.

Outcomes of decisions assessed and
further engagement and dialogue
with stakeholders with updates on
decisions taken and stakeholder
impact are brought back to the Board,
as relevant.

During the year, revised Board
paper templates have been
introduced to clearly set out how
those key matters which should be
brought to the attention of the
Board to inform their decision
making. These include:
− information and advice from
external professional advisers
on commercial, financial, legal,
compliance and social and
environmental issues.

− identification of those groups

whose interests will be materially
impacted by the Board’s decision
which have already been
considered at local level and
which now need to be
considered by the Board as the
potential impact is of a
Group-wide or plc nature.

RotorkAnnual Report 2020Section 172 Statement
As a Board, we have a duty to promote the success of Rotork for the
benefit of our members. In doing so, we must have 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.

These stakeholder relationships are fundamental to our business and
strategic direction. We have in excess of 3,700 shareholders and nearly
3,400 employees. We serve customers in more than 173 countries and
enjoy a global supply base. All these stakeholders are material to the long
term success of the business and strategic direction. Relationships with our
stakeholders support the generation and preservation of value in the
Group, as well as our culture and Values of ‘Stronger Together; Always
Innovating and Trusted Partner’.

Stakeholder considerations are woven throughout all Board discussions
and decisions. The table on pages 94 to 95 in the Corporate Governance
Report sets out our key stakeholder groups and how they were engaged
with, both directly and indirectly, by the Board throughout the year on
those matters which the directors understand are important to each
group. Examples of decisions taken by the Board and how stakeholder
views and inputs, as well as other Section 172 considerations have been
taken into account in its decision making, are set out on pages 93 to 94 of
the Corporate Governance Report. These are incorporated by reference
into this Section 172(1) Statement.

Further information on how these duties have been applied can be found
throughout the Annual Report:

Section 172 duties

Consequences
of decisions in
the long term

Key Examples

Our strategy
Our business model
Board activities
Strong balance sheet
Going concern and viability statement
Principal risks

Interests of employees

Fostering business relationships with
suppliers, customers and others

Our people
Our culture and Values

Our customers
Our supply chain
Divisional review

Impact of operations
on the community
and the environment

Maintaining high
standards of business
conduct

Acting fairly
between members

Engineering, technology and innovation
Production
Environment
Engaging with our communities

Our culture and Values
Our Code of Conduct
Health & Safety policy
Anti-Bribery and Corruption policy
Modern Slavery statement

Shareholder engagement

The Strategic Report was approved by the Board on 1 March 2021 and signed on its behalf by:

Kevin Hostetler
Chief Executive
1 March 2021

Page

30
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Corporate
Governance

The Rotork Board continues to
be committed to the highest
standards of governance and
stakeholder engagement and
remains at the forefront of
decision making.

Corporate Governance
84 Chairman’s governance overview
86 Corporate governance report
88 Board of directors
102 Environmental, Social and Governance

(‘ESG’) Committee report
104 Audit Committee report
108 Nomination Committee report
110 Directors’ Remuneration Report
138 Directors’ Report

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Chairman’s
governance
overview

In this section

Audit Committee report
The Committee provides oversight of the
financial reporting process, the audit
process, the Company’s system of internal
controls and compliance with laws and
regulations.

Read more on page 102

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Board of directors

Chairman

Executives

Non-executives

Martin Lamb (61)
Chairman

Kevin Hostetler (52)
Chief Executive

Jonathan Davis (54)
Group Finance Director

—

Appointed to the Board
June 2014

Appointed to the Board
February 2018

Appointed to the Board
April 2010

Skills, competencies
and experience
Jonathan joined Rotork in 2002
after holding several finance
positions in 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.

External appointments
− None

Skills, competencies
and experience
Martin has extensive experience
in the global engineering sector
having served as Chief Executive
of IMI plc for 13 years and has held
many senior management roles
over 34 years. He was a non-
executive director of Severn Trent
plc and Spectris plc and served
on the boards of a variety of
engineering businesses in a
non-executive capacity, both in
the public and private equity arena.

External appointments
− Chairman of Evoqua Water
Technologies Corporation

Skills, competencies
and experience
Kevin served as the Chief Executive
Officer of FDH Velocitel, an
engineering and construction
business serving the
telecommunications and
infrastructure industries in North
America. Prior to this, Kevin was an
executive advisor to several private
equity firms. His roles included
Chief Executive Officer of a
speciality valve manufacturer
and executive chairman of an
engineered high-pressure vessel
company serving the cryogenics
and LNG industries. From 2005 to
2012, Kevin held various senior
executive roles at the publicly
traded IDEX Corporation, where
he led the fluid and metering
technologies segment and their
Asia and emerging markets
businesses. Before that, Kevin
held several business leadership
positions and senior strategic and
business development roles at
Ingersoll Rand.

External appointments
− None

Sally James (72)
Senior Independent
Non-executive director

Appointed to the Board
May 2012 (appointed as
Senior Independent Director in
February 2017)

Skills, competencies
and experience
Sally has substantial experience in
the financial services sector having
served as a non-executive director
of UBS Limited, and has held a
number of senior legal roles in
investments banks in London and
Chicago including Managing
Director and EMEA General
Counsel at UBS Investment Bank.
She is a non-executive director
of Moneysupermarket, Hermes
Fund Managers and Bank of
America Europe.

External appointments
− Non-executive director

of Moneysupermarket.com
Group plc

− Non-executive director of

Bank of America Europe DAC

− Non-executive director of

Hermes Fund Managers Limited

RotorkAnnual Report 2020

Directors’ ages as
at 1 March 2021

Composition as at
31 December 2020
At the end of the year
the Board of Directors
comprised the Chairman,
two executive directors and
five non-executive directors.

Nomination Committee

Audit Committee

Remuneration Committee

ESG Committee

—

None

Denotes Chair

Peter Dilnot (51)
Non-executive director

Ann Christin Andersen (54)
Non-executive director

Tim Cobbold (58)
Non-executive director

Janice Stipp (61)
Non-executive director

Appointed to the Board
September 2017

Appointed to the Board
December 2018

Appointed to the Board
December 2020

Skills, competencies
and experience
Peter joined Melrose Industries Plc
as Chief Operating Officer in 2018
and became Interim Chief Executive
Officer of GKN Aerospace, which
is part of the Melrose Group, in
October 2020. He was appointed
to the Board of Melrose Industries
plc as an Executive Director on
1 January 2021. Prior to this, 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 NYSE. His earlier
career included six years at the
Boston Consulting Group (BCG)
based in both London and Chicago.

External appointments
− Executive director of Melrose

Industries plc

− Interim Chief Executive Officer of
GKN Aerospace Services Limited

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,
Managing Director and held SVP/
Vice President roles for Projects and
Products. She has served as chair
and non-executive director on a
number of companies over the past
several years. She currently serves
on the boards of Maersk Drilling
and Ferrexpo plc and chairs the
board of municipality-owned
Glitre Energi.

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 most 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 director of TI Fluid

Systems plc

External appointments
− Non-executive director of

The Drilling Company of 1972
AS (‘Maersk Drilling’)

− Non-executive director of

Ferrexpo PLC

− Non-executive Chair of Glitre

Energi AS

Skills, competencies
and experience
Janice brings highly relevant
sectoral and financial expertise to
the Rotork Board, together with a
global perspective, particularly in
Asia. Janice was formerly Senior
Vice President and Chief Financial
Officer of Rogers Corporation,
a US specialty 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 of

Sappi Ltd

− Non-executive director of

Commercial Vehicle Group Inc

− Non-executive director pf

ArcBest Corporation

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Corporate governance report

The role of the Board
The Board is responsible for determining the Company’s strategy,
Purpose, culture and Values, reflecting in particular on the role
Rotork plays in ensuring that the earth’s resources keep flowing
for future generations. It oversees the execution of its strategy by
management whilst having oversight of the governance and
control framework underpinning the Company.

This year’s strategy meeting held in July examined Rotork’s strategy
through to 2025. Our strategy and business model is covered on
pages 16 to 17 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 every decision we make is of the highest quality.

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, as well as the
planet. In so doing, the Board has also sought to understand the
views of these other key stakeholders. Pages 93 to 95 describe how
their interests have been considered at Board level discussions.
Tim Cobbold is the designated non-executive director dedicated to
improving employee engagement and details of the work he has
undertaken in fulfilment of this role can be found on page 96.

Our Purpose
The Board believes Rotork’s Purpose is to keep the world flowing
for future generations through providing innovative, high quality
engineered solutions and services for our customers. Our Purpose
helps guide our culture and our three Values as described below.
The way that Rotork uses its resources to fulfil its Purpose is set out
in our business model on pages 16-17.

Our culture, Values and behaviours
The Board has responsibility for reviewing, monitoring and
developing Rotork’s culture and ensures that this aligns with the
strategy. Rotork promotes an open culture in the workplace, where
we all act with trust and respect for our colleagues.

Our three Values

Stronger Together

Always Innovating

Trusted Partner

We put people first, we
collaborate, inspire and
support each other to
win as One Rotork.

We’re committed
to continuous
improvement, thinking
differently and
improving for the future.

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 78-79.

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 regular updates to the Board on, for example, compliance
investigations and reports received through our ‘Speak Up Helpline’
on suspected wrongdoing with actions agreed to be taken to
prevent a reoccurrence. The regular employee surveys also help
identify areas where employees feel that there is a divergence
between stated culture and expected behaviours and reality.

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 value to shareholders and other stakeholders.

RotorkAnnual Report 2020Board activities
The Chairman, Chief Executive and Company Secretary agree a structured agenda ahead of each Board meeting. 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 from the wider executive management team, particularly relating to progress
on the Growth Acceleration Programme and the development of our people. Other regular reports have included health and safety, legal,
compliance and governance updates, investor relations activities and risk management reviews. The Board meets six times a year, with calls
held in other months for updates on key matters relating to trading and financial performance.

An insight into the breadth of matters discussed by the Board during the year and key stakeholder groups that were central to those
discussions is set out below:

Strategy and
Company
performance

Trading and
business

Strategy

Considered trading performance, business updates and discussed operational
issues arising from across the Group’s businesses.

Set the Group’s strategy and vision of ‘keeping the world flowing for future
generations’ and monitored the progress in achieving this.

Culture and Values

As part of our continued monitoring of our culture, the Board reviewed the
results of the pulse employee feedback surveys and considered suggested
improvements and set out an implementation plan.

Financial

Growth
Acceleration
Programme (GAP)

Financial
performance

Budget

Trading
updates

Cash flow
and dividend

Risk

Regularly monitored progress made against set targets in the Growth
Acceleration Programme.

Received regular financial performance updates across the Group and
discussed any issues.

Reviewed and considered actual and forecast trading performance against the
agreed budget and implications on long-term performance. Considered and
approved the budget for 2021.

Considered year-end results, half-year and trading updates and, upon the
recommendation of the Audit Committee, approved such reports and
updates.

In the light of the impact of COVID-19 on the business, reviewed and
considered finance performance, cash flow, liquidity and other factors and,
given the economic uncertainty, agreed to defer the final dividend for FY19
until September 2020.

Conducted a full year risk review and, in the light of the Group’s risk appetite,
discussed the principal and emerging risks, including the impact of COVID-19
and climate-related risks.

Shareholders

Employees

Suppliers

Customers

Community

The Planet/Environment

Cybersecurity

Received regular updates on the implementation of the Group’s cybersecurity
strategy which is directed by the Chief Executive. The strategy is aligned to
best practice relating to cybersecurity frameworks and governance.

Insurance Review

Reviewed the Group’s 2021/22 insurance renewal strategy, taking into
account the current state of the insurance market, principal uninsured risks,
premiums paid at renewal in March 2020 and notable claims activity.

Brexit

Considered the potential impact on our international operations and
discussed impact assessments, scenario planning and preparations.

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Corporate governance report continued

Governance
and legal

Health and Safety

Received regular updates and agreed initiatives to enhance health and safety
systems and increase awareness. Commissioned an in depth internal and
external review into the circumstances surrounding the tragic fatality of one of
our service engineers in India, and reviewed and agreed a comprehensive set
of actions to mitigate future risk.

Whistleblowing
and compliance
investigations

Board action
planning

Board evaluation

Received regular updates on reports received through the ‘Speak Up’ hotline
and follow-up investigations and actions. In addition to Whistleblowing, the
Board also receives reports on compliance investigations.

Monitored progress of Board action against the Board rolling agenda which
details Board actions and set the action plan for 2021.

Carried out an internal evaluation of the Board’s effectiveness, composition
and methods of acting on feedback to ensure suggested improvements were
implemented. Further details are set out on page 99.

Board succession
and diversity

Reviewed the Board’s composition and diversity and considered the
succession plan.

Annual General
Meeting

Reviewed feedback and issues raised by private and institutional shareholders
throughout the year to be addressed in the meeting.

ESG Committee

Established a Board-level Environmental, Social and Governance Committee
to provide strategic direction on ESG matters.

To ensure continued best practice, each Committee reviewed its own terms of
reference which were approved by the Board. The schedule of matters
reserved for decision by the Board was also reviewed by the Board in
December.

In December 2020, in line with the directors’ interest provision in the
Companies Act 2006 and the Company’s Articles of Association, the Board
followed its procedure for the consideration and authorisation of directors’
conflicts or possible conflicts with the Company’s interests. It was concluded
that these were managed effectively in the year.

Shareholders

Employees

Suppliers

Customers

Community

The Planet/Environment

Board
Committees’ terms
of reference and
Matters Reserved
schedule

Dealing with
directors’ conflicts
of interest

RotorkAnnual Report 2020

Section 172 – how we listen and respond to our stakeholders at Board level
Our section 172 Statement and an explanation of our approach is given on pages 80-81.

To add more colour to our section 172 Statement, the following pages provide an insight into how we interact with our stakeholders and how we
consider their interests when making key decisions. Stakeholder considerations are woven throughout all Board discussions and decisions. Like any
business, sometimes we 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.

Examples of how the Board has considered the various factors set out in Section 172
In relation to decisions taken during the year, we set out below three examples of how the Board has considered the various factors set out in section
172(1) (a) to (f) and the impact on our stakeholders.

Board Decision

Section 172 Factor

Impact on Stakeholders

New Debt Facility

Consequences of
decisions in the long
term

The financing, being a £60m committed revolving credit facility with HSBC (with
£30m uncommitted accordion option), secured the liquidity required both to provide
additional headroom, given the short term uncertainties arising from COVID-19, and
for the Company to execute its long-term strategic plans.

COVID-19:
commitment to
mitigating actions
to protect the
business in the face
of the COVID-19
pandemic.

Fostering Business
Relationships

The refinancing enabled the Company to develop a lending relationship with a new
lender to the Group.

Acting Fairly between
Shareholders

The decision to secure a debt facility meant that there was no impact on the fairness
between the shareholders of the Company.

Consequences of
decisions in the long term

The conservation of balance sheet strength and the liquidity of the Group together
with the retention of substantial and increased financial headroom, ensured the
ability to absorb a downturn in trading as a consequence of COVID-19.

Acting Fairly between
Shareholders

Interests of Employees

The decision to suspend the final dividend was taken with a balance in mind between
the dividend income interests of our investors and the longer-term need to preserve
cash and liquidity in the face of the uncertain trading environment during the
COVID-19 pandemic. Once the position became clearer at the half year, the deferred
final dividend was subsequently paid in September as an interim dividend.

Our key priority throughout the pandemic has been the continued safety and wellbeing
of our people. A series of comprehensive COVID-19 risk assessments was undertaken in
the early days of the crisis with a COVID-19 Steering Committee being formed which
worked with local operational management, monitored day-to-day developments and
ensured that best practice was shared across the Group.

Rotork’s wellbeing website was launched offering support and a number of useful resources
to our employees during the COVID-19 crisis to aid their physical and mental wellbeing.

In 2020, Rotork established Rotork Benevolent Support, a charity to provide short-term
financial support to employees, ex-employees, and their families facing financial
hardship, especially as a result of the COVID-19 crisis.

Protection and support for colleagues through enhanced health and safety safeguards
in our production facilities and adaption of processes and ways of working to manage
the situation over a sustained period.

Provision of support for office-based employees to work from home wherever possible.

Fostering Business
Relationships

Pro-actively engaged with customers to understand their priorities as they were
impacted by COVID-19, and flexed our deliveries to meet their expectations.

Community

Reputation

Undertook proactive engagement with suppliers in understanding the short to
medium term effect on our suppliers imposed by the pandemic to ensure we could
have in place continuous production in our facilities.

Our people from across the world have taken pro-active steps to help their local
communities. Examples include production of personal protective equipment for
hospitals, as well as for use in care homes and the provision of food collections for
the less fortunate, in many of the countries in which we operate.

In line with our Purpose, current events have reinforced the recognition of the vital
role our people play in partnering with stakeholders to keep the world flowing in this
challenging time.

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Corporate governance report continued

Board Decision

Section 172 Factor

Impact on Stakeholders

Establishment of
Environmental,
Social and
Governance
Committee

Consequences of
decisions in the long
term

Investors are looking for companies that prioritise the environment, are committed to
diversity and inclusion and have robust ESG commitment and compliance policies. A
key objective of the ESG Committee is to ensure that ESG is an integral part of the
Company’s strategy and culture from the top down.

ESG performance is also an important part of the executive directors’ personal
strategic objectives and features in the annual bonus scheme for senior leaders.

Fostering Business
Relationships

We continue to work with our customers to reduce their carbon footprint. Our
comprehensive product and services portfolio and industry knowledge mean that
customers rely on us to help them deliver reliable, energy efficient solutions that
minimise their environmental impact.

Acting Fairly between
shareholders

Ensuring a balance between running responsible and profitable operations, improving
health and safety for our employees, and safeguarding the environment.

Community

Investing in job creation, utilising local talent and supply chains. Helping to support
and grow the communities in which we operate at the grassroots-level and
establishing Rotork as a global company with local roots.

Environmental Impact

Promoting energy efficiency – both in our own and our customers’ operations.
Reducing emissions through defining and implementing our decarbonisation strategy.

Reputation

Demonstrating ethical behaviour and high levels of integrity.

How we listen and respond to our key stakeholders when taking Board decisions

Shareholders

All Board decisions are made with the long-term success of Rotork in focus, which ultimately benefits our shareholders.
We have focused in particular on the Growth Acceleration Programme, ensuring that Rotork is well placed for the
future.

All shareholders, whether they are individual or institutional, are treated fairly. They have equal access to information.
We endeavour to provide a complete view of our business in the Annual Report and Accounts which is available in
electronic form to shareholders on our corporate website and also in hardcopy form. In October 2020, we published our
first ‘People and Environment Report’ which outlines the steps we are taking to reduce our impact on the environment
as well as highlighting how Rotork’s products and services are used to benefit the environmental performance and
safety of our customers. Our corporate website also contains a variety of resources for investors including current
webcasts, presentations and press releases, as well as annual and interim reports.

At our 2020 AGM all proposed resolutions were passed. Votes in favour ranged from 87.37% to 100%, including
overwhelming support for our new Remuneration Policy at 95.97%. Due to the impact of COVID-19 and the
Company’s need to comply with the Government’s ‘Stay at Home Measures’ in place at the time to safeguard
shareholders’ and employees’ health, our 2020 AGM was held with the minimum attendance necessary to form a
quorum. However, the Board put in place a dial-in facility for shareholders to listen to the AGM proceedings and
provided a link for shareholder questions to be submitted in advance.

We enjoy an active dialogue with our investors, advisers and the investment community. Our Chief Executive, Group
Finance Director and our Investor Relations Director regularly communicate with our major shareholders, and over the
course of the year have engaged with investors representing over half of our issued share capital. In 2020, despite the
restrictions imposed by COVID-19, they attended over 90 meetings (over video from mid-March) with over 40 separate
institutions and have also participated in analyst hosted webcasts and attended virtual shareholder events. In October
the Board engaged an external consultant to conduct research with Rotork top shareholders to better understand
perceptions of the Group and any potential room for improvement. The results of this review were presented to the
Board in December and key recommendations will be followed up throughout 2021.

The views expressed by investors are shared with the full Board at each Board meeting, via an investor relations update
and the Board takes these views into account in its wider decision making.

In addition, at the beginning of 2021, Tim Cobbold as Remuneration Committee Chair, wrote to our top 20 institutional
shareholders holding 56% of our issued share capital, to update them on executive remuneration ahead of our 2021
AGM. Further details on this shareholder engagement programme can be found on page 117.

RotorkAnnual Report 2020
Employees

Customers

Both the Chief Executive’s report provided for each Board meeting and the People updates presented by the HR Director
at certain times during the year, touch on the views of our employees and wider workforce. These views are expressed
not only via our employee forums, pulse surveys, town halls and ‘Ask Kevin’ direct communications and management
line but also through our designated non-executive director for employee engagement, Tim Cobbold who also brings
the employee’s voice into the Boardroom. Tim has continued to engage in employee matters during the year, despite
the practical challenges due to COVID-19. This included participating in new starter inductions, reviewing our staff
engagement surveys, responding to emails and attending employee forums, albeit remotely by video conference.
Further details on Tim’s engagement with employees during 2020 are set out below.

The way in which we interact with our customers, and customer satisfaction, remains a key topic in Board discussions.
As part of our Growth Acceleration Programme we have focused on further aligning our business with our customers’
needs. A significant change we have made is the realignment of our sales structure to focus on our key end markets
allowing our sales teams to deliver valued solutions to our customers. We have also invested in our value selling
programme and continue to roll this out throughout our organisation to ensure our teams maximise the benefits that
our products and solutions bring to our customers’ applications. Additionally, we have ongoing programmes to optimise
our order fulfilment process that will allow us to improve on our quote accuracy and response times as well as being
more responsive to customer enquiries which, in turn, will help improve the experience our customer will feel when
dealing with Rotork.

Community

Board decisions are made with consideration of our operational impact on the communities in which we work. There is
a continued focus on environmental issues including energy management, measures to reduce our water usage and
understanding as well as managing our waste. These were particularly considered by the Board as part of its
deliberations relating to its operational footprint and factory expansion projects.

Rotork supports charitable giving at both local and global level. The local charity committees at each of the Rotork sites
support charitable causes that are important to the employees locally. In addition to local sponsorship programmes,
Rotork partners with three global charities: Renewable World, Pump Aid and WeForest. Between them, these charities
serve to emphasise Rotork’s commitment to the environment and assist communities. Further details can be found on
pages 66 to 69.

Our newly established charity, Rotork Benevolent Support, provides short-term financial support to employees,
ex-employees, and their families facing financial hardship, especially as a result of the COVID-19 crisis.

Suppliers

We continue to invest in our supplier relationships as these relationships are vital to our success.

During the year we completed the tiering and categorisation of our supply base to identify those suppliers who are the
most critical to the performance of Rotork and enabling us to exceed the expectations of our customers. During 2021,
we will continue with the programme of work to continue to secure long term agreements with these suppliers

We continually review our global supply chain and operations to ensure that we are working to prevent modern slavery
in these areas. Details of the efforts we have made to combat modern slavery are detailed in our 2020 Modern Slavery
Statement which can be found on the Rotork corporate website at https://www.rotork.com/en/investors/modern-
slavery-statement.

We have a Supplier Code of Conduct which sets out our core Values and we require that all of our suppliers of goods
and services comply with it. This can be found at www.rotork.com/en/about-us/terms-and-conditions/suppliers/
supplier-code-of-conduct

In recognition of the increasing importance of ESG and sustainability matters, both within the business and across our
key stakeholder groups, a Board level ESG Committee was established during the year. The Committee assists the Board
in defining and executing the Company’s sustainability strategy which includes soliciting and understanding the views of
stakeholder groups (including customers, employees, suppliers, investors and local communities) on ESG matters and
ensuring that ESG priorities are an integral part of the Company’s corporate strategy. It will also oversee and challenge
management’s performance against the Company’s long-term ESG goals, targets, initiatives and commitments. Further
details on how the Committee will provide leadership and direction on these key issues can be found on page 102.

The Planet and
Environment

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A message from Tim Cobbold, designated non-executive director for workforce engagement
The Board recognises that it has a key role to ensure that a healthy culture, embodied by our Values, is in place to underpin the Group’s strategy and drive
long-term sustainable value for our shareholders, whilst contributing appropriately to the needs of the business’s other stakeholders.

In particular, the Board works with the Group’s senior management to create and maintain an inclusive, innovative, dynamic workplace in which colleagues
can develop with the business. The impact on and views of our employees are taken into account in our decision-making processes.

I was delighted to have been appointed as Rotork’s designated non-executive director (NED) for workforce engagement and to be able to work with Kevin
Hostetler, the Rotork Management Board and many others in improving the ways in which the views and opinions of our people are built into Board and
management processes and decision making. This role combines well with my 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 and also helping the Remuneration Committee fulfil its
responsibilities of oversight of pay and remuneration across Rotork’s wider workforce.

Purpose of the role
I see the purpose of my role to strengthen the links between the Board and our people throughout the business, with the key aims being:
− to enable the Board to better take into account our employees’ views as it considers proposals, discusses issues and makes decisions
− to develop and improve the two-way communication between employees and the Board so there is a reliable mechanism for the workforce to

share their views directly with the Board and for the Board to confirm how we have considered their feedback

Framework
During late 2019 and early 2020, in agreement with Kevin Hostetler, and conscious of the risk of blurring existing management lines of responsibility and
communication, we designed a framework to complement established channels whilst not restricting the scope of the role. Rotork has a significant number
of operational sites/offices in 40 countries, speaking numerous languages and on different timezones, so a conventional approach built around a Group-level
Employee Forum with elected employee representation was, in our view, unlikely to be highly effective and likely to be difficult to operate in practice –
in short it wouldn’t have fulfilled the purpose of the role. We would not have been able to cover the whole range of global employees in a meaningful way.

The framework we designed takes account of the dispersed nature of Rotork’s workforce and comprises three streams of activities:
− Direct Line of Communications – between employees and myself as the designated NED to allow direct communication outside existing lines of

communication

− Face to face meetings – with employees and members of the Board, including the designated NED, to allow for more personal interactions and to help

create a level of intimacy between Board members and the individual employees

− Group Employee Surveys – to inform, in a data driven way, the view of the workforce on specific topics in a repeatable manner, with response rates

indicating the degree of engagement

Of course, the impact of COVID-19 from March 2020 meant that employee engagement has never been more important, but it also necessitated that we
adapt the framework to take into account remote working and social distancing, particularly around face-to-face meetings. Once restrictions are eased
post-COVID, I and the rest of the Board are keen to re-address this to include again face-to-face meetings with Rotork colleagues.

− Direct Lines of Communications. On several occasions during the year, I contacted all employees (with access to email) inviting them to contact me
whenever they had views they wished to express. A particular email address is also in place to enable this. In March 2020, in the light of COVID-19,
I contacted all employees assuring them of the Board’s commitment to the health and safety of everyone who works in, and with, Rotork. I also highlighted
the role of the COVID-19 Steering Committee in making appropriate business decisions and in following the guidelines of the relevant governments and
putting preventative measures in place to keep everyone safe. During the year, I received many emails from employees on topics ranging from our ESG
performance, to the business’ approach to diversity, to the holiday arrangements during lockdowns, through to the constructive views of one individual
who was leaving the business. I replied personally and on an individual basis to every email received and followed up on requisite action as appropriate.
Where appropriate, I took up issues raised by employees in their direct communications with me, with senior management and/or the Board.

− Face to Face Meetings. As part of developing the framework for this role, in September 2019, I attended, in Bath, a local Employee Forum and the launch
event for the new company Values. This reinforced my view that building a level of intimacy between members of the Board and the workforce was a vital
and key element of engaging with and understanding what was important, to people in Rotork. Prior to COVID-19, our plan was to have a ‘grid’ of Board
visits right across the business during 2020. Commensurate with this plan, in January 2020, I visited the Rotork facility in Manchester and, in early March
2020, I visited the Rochester, New York facility. Both visits included factory tours, one on one sessions with key personnel and round table discussions with
a cross section of employees from that facility (without members of local senior management). In both cases, there were many questions covering the
Board, how the Board makes decisions as well as on remuneration processes and investment opportunities for their site. I found these two-way discussions
both interesting and revealing and they helped me to develop a sense of the issues that were important to our people. After each visit, I debriefed the
Group’s senior management and the Board as appropriate. Of course, COVID-19 meant that these types of interactions had to be suspended but they will
continue once it is safe to do so. In their place, during the rest of the year, I attended and presented at a number of virtual induction sessions aimed at new
joiners to Rotork, many of whom had not visited a Rotork facility since they joined because of COVID-19. These sessions were led by Kevin Hostetler to
welcome new starters, explain the Group’s strategy, explain the role of the Board and the role of the designated NED for workforce engagement and to
allow new employees to ask questions. They were well received.

− Employee Surveys. During 2020 we conducted three surveys to all employees globally gathering their views on a range of topics including Rotork’s

response to COVID-19, Environment and Sustainability, and Planning for 2021. Response rates on surveys were good, averaging 40-50% of employees.
This indicates a high level of engagement and desire to engage and give feedback. Before the launch of each survey, I had the opportunity to review
independently the survey questions so as to contribute directly to this aspect of engaging with our employees. Similarly, I review independently the results
of the survey ahead of them being shared with the Board by Kevin Hostetler. There is no doubt in my mind that these surveys provide the Board with
valuable insight into the views of employees and so inform decision making. Greater detail on the findings of the surveys can be found on page 60.

I feel we have made good progress in strengthening the engagement between the Board and the workforce. This progress reflects the professionalism and
commitment of the Rotork Management Board towards workforce engagement and the support and collaboration of the HR and Communications teams,
led by Kathy Callaghan, Group HR Director. By working together, we have started to introduce new and effective ways of engaging with our employees and
bringing a clearer employee voice to the Boardroom in Rotork. As we emerge from the restrictions imposed by COVID-19, I expect to deepen further the
engagement between the Board and the workforce.

RotorkAnnual Report 2020Division of Responsibilities
Roles and 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, Martin Lamb chairs the Nomination Committee. Sally James is the
Senior Independent Director and provides a sounding board for the Chairman in addition to acting as an intermediary for other directors and
shareholders. In December 2020, she met with other non-executive directors, without the Chairman present, to appraise the Chairman’s performance.

Until her retirement from the Board on 30 September 2020, Lucinda Bell chaired the Audit Committee with Sally James taking over as Audit Committee
Chair from 1 October 2020. Janice Stipp, who was appointed to the Board as an independent non-executive director in December 2020, will become
Audit Committee Chair upon the conclusion of the 2021 AGM. Ann Christin Andersen chairs the Environmental, Social and Governance Committee,
which was established during the year. Tim Cobbold chairs the Remuneration Committee as well as being the designated non-executive director
responsible for supporting increased engagement with employees and for bringing the voice of the workforce into the boardroom.

All non-executive directors constructively challenge executive management at Board meetings and 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.

To provide constructive challenge, strategic guidance and oversight, Board members engage directly with management. As well as regularly receiving
presentations from the Rotork Management Board in formal meetings, the Board typically meets with them at least twice a year for dinner, although
due to the restrictions imposed by COVID-19, only one such engagement was held in June 2020 and only limited other informal opportunities have been
possible during 2020. Once restrictions are eased post-COVID, opportunities will be sought for the Board and management to engage on a more
informal basis outside the Boardroom setting.

Each year the Chairman 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 Chairman, 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 below.

All directors have access to the advice of the Company Secretary and to third party legal advice if required.

Meeting attendance in 2020
The Board held six scheduled meetings and five calls during the year. Individual attendance is set out below.

The Chairman meets privately with the Senior Independent Director and with the non-executive directors on a regular basis.

In response to the findings of last year’s external Board evaluation, members of the Rotork Management Board have been invited to attend at least one
Board meeting, by videoconference, either in part or in its entirety during the year. Further opportunities for the Rotork Management Board to present at
Board meetings are planned for 2021.

Board meeting attendance and director responsibilities in 2020

Member

Number of meetings/
calls attended

Independent

Responsibility

Martin Lamb
Non-Executive Chairman

11/11

Kevin Hostetler
Chief Executive Officer

Jonathan Davis
Group Finance Director

11/11

Leading the Board and setting its agenda; setting high standards
of integrity and ensuring effective governance is maintained;
supporting and guiding the CEO; overseeing Company
performance; representing the Group and liaising with
shareholders when required.

Managing the Group and providing leadership; developing and
proposing the Group strategy, leading the Group structure and
operations, business development, growth opportunities;
influencing and developing succession planning; managing
Investor Relations.

Reports to the Board on the Group financial performance;
supports the CEO in developing the Group strategy and in
managing investor relations; implements Board decisions;
responsible for compliance with financial policy and controls.

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Member

Non-executive directors

Number of meetings/
calls attended

Independent

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Sally James
Senior Independent Director

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Lucinda Bell(i)

Tim Cobbold

Peter Dilnot

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Ann Christin Andersen

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Janice Stipp(ii)

1/1

Attended by invitation

Kathy Callaghan

Kiet Huynh

Vijay Rao

Neil Manning

Mark Nevin

Andrew Carter

Assisting the Chairman with shareholder communications; being
available to other non-executive directors if necessary and
leading the annual performance evaluation of the Chairman
alongside other non-executive directors.

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.

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 operations and
functional support. Members of the Rotork Management Board
attend Board meetings by invitation to update the Board on
operational matters of importance.

Risk and internal audit manager.

Investor relations director.

(i) Lucinda Bell retired from the Board in September 2020 having attended all meetings up until that date
(ii) Janice Stipp joined the Board in December 2020

Non-executive director independence
The Chairman 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 Chairman and non-executive directors to ensure they meet the requirements of the
Code. Neither the Chairman nor any non-executive director have exceeded their nine-year recommended term of service set out in the Code. Sally James
is now in her ninth full year of service and will not be seeking re-election at the Company’s AGM on 30 April 2021.

The Board considers all non-executive directors, Tim Cobbold, Peter Dilnot, Ann Christin Andersen, Sally James and Janice Stipp to be independent in
character and judgement. Martin Lamb, Chairman, was considered to be independent on appointment.

Composition, succession and evaluation
The Board consists of eight Board members, six of whom are non-executive directors. Female representation on our Board is currently 37.5%.

The Board members come from a variety of professional backgrounds including engineering, manufacturing, management, legal 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 88 to 89.

The Board has Nomination, Audit and Remuneration Committees as well as an Environmental, Social and Governance Committee which was established
during 2020. Each Committee has formal, written terms of reference which are available to download from the Rotork website at www.rotork.com.
All Committees have at least three independent non-executive directors within their composition, with the exception of the ESG Committee which has
at least three Board directors (two being independent non-executive and one being the Chief Executive) and two members of the Rotork Management
Board (being the Strategy and M&A Director and the Group HR Director). The Company Secretary acts as secretary to the Committees. The number of
Board meetings can be found on page 97. The number of meetings of the Audit, ESG, Nomination and Remuneration Committees can be found on
pages 104, 102, 108 and 110 respectively.

In line with Provision 18 of the Code, each director is subject to annual re-election at the AGM.

RotorkAnnual Report 2020
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.

2020 Internal Board Evaluation
This year the process was conducted internally to assess progress against
the actions recommended by the 2019 external evaluation.

During 2020, led by the Chairman and with guidance and support
provided by the Company Secretary, an internal evaluation of the
performance and effectiveness of the Board and its Committees was
conducted. The process was undertaken in November 2020 by way of
questionnaires targeted at the agreed key action areas and requiring all
Board members to provide input.

The Chairman, 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.

The Company Secretary collated and analysed the results, discussing them
with the Chairman prior to feedback being provided to the December
2020 Board meeting. Subsequently, the Board agreed an action plan for
implementation in the year ahead as set out below.

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, The induction
programme, which is co-ordinated by the Company Secretary, includes
briefings on industry and regulatory matters relating to Rotork, site visits
and meetings with senior management and different teams within the
business.

Areas identified for
development

Increased focus on succession
planning for Board, RMB and senior
management level (including talent
management, diversity)

In order to facilitate greater 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.

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.

2019 External Board Evaluation (conducted by
Independent Audit Limited)

Facilitate more effective debate on
strategy/M&A

Bring more external views into Board
meetings

Continue the work to increase the
access of Rotork’s management to the
Board and further develop employee
engagement with non-executive
directors

What we will do in 2021

Prioritise and allocate specific time
on the agendas of both the Board
and Nomination Committee to
facilitate the regular review
(comprising at least an annual deep
dive) of succession plans for each of
the identified categories.

Continue to focus the Board’s
attention on agreeing the strategic
plan, its implementation and longer
term sustainability issues.

Allocate agenda time for external
presentations, liaising with relevant
parties on matters to be covered and
material to be presented meetings to
ensure the Board’s expectations are
met.

Post-COVID, events to be arranged to
facilitate opportunities for RMB,
RMB-1 members and High Potentials
to meet with the Board.

Areas identified for
development

What we have done in 2020

Greater focus on longer-term strategy
and emerging risks, ensuring that
acquisition opportunities, the ‘digital’
future and the energy transition are
given sufficient time within the
boardroom.

The Board has implemented an
action plan to increase the Board’s
long-term strategic focus whilst
continuing to drive the
transformation forward and focusing
on its Purpose, culture and Values.

Chairman’s performance evaluation
Led by Sally James as the Senior Independent Director, a review of the
Chairman’s performance was undertaken separately, by means of a
questionnaire and private meetings held between Sally and the non-
executive and executive directors. The outcome was then shared with
the Chairman. The Chairman continues to be highly regarded and is
considered to exhibit a leadership style which promotes effective decision
making and constructive debate to ensure the Board works as a team.

Increasing the access of Rotork’s
management to the Board and
increased employee engagement with
non-executive directors

Audit Committee to focus on
enhancing the internal control
framework

Several members of the Rotork
Management Board have attended
Board meetings (either in part or in
their entirety) during the year. Such
attendance and access allows the
non-executive directors to get a feel
for the culture and is also a valuable
opportunity for senior management
to understand the perspective of
the Board.

This area has been a regular item for
review and discussion at the Audit
Committee meetings during the year.

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.
It then makes a recommendation to the Board.

The established risk review process was updated this year to reflect the
new divisional structure with functional areas now separately considered to
create a ‘bottom up’ assessment of the risks facing the Group. These are
consolidated before a ‘top down’ review is performed by management
and then by the Board to ensure the risk population is complete and
adequately assessed.

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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.

Further details of reports undertaken and reviewed are set out in the Audit
Committee report on pages 104-107.

The systems which were in place for the year under review, and up to the
date of approval of the report, are in accordance with the Code and the
FRC Guidance on Risk Management, Internal Control and Related Financial
and Business Reporting.

Throughout 2020, the co-source arrangement with PwC to provide risk
and internal audit services supported by an in-house team has continued,
with the function being led by an experienced Head of Risk and Internal
Audit from PwC.

Main features of the Group’s risk management process
The Board is responsible for determining the nature and extent of risks the
Group is willing to take in achieving its strategic objectives.

The Audit Committee was chaired by Lucinda Bell, who has recent and
relevant financial experience, until 30 September 2020. From
30 September onwards Sally James has taken the role of Audit Committee
Chair. Tim Cobbold has been on the Committee throughout the year and
was joined by Janice Stipp in December; both have recent and relevant
financial experience. 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, following relevant
updates in December 2020. Further details of how the roles and
responsibilities of the Audit Committee have been discharged are on
pages 104-107.

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 40-45.

How the Board operates effectively
Risk management and internal controls
The Board is responsible for Rotork’s system of risk management and
internal control. The Board’s annual review of the system’s effectiveness is
completed with the assistance of the Audit Committee.

During 2020 the Board and Audit Committee regularly considered matters
relating to the Group’s risk management and internal control systems. This
year three areas which received particular focus were energy transition,
COVID-19 and health and safety which were each discussed at several
meetings during the year.

Energy transition, and the risks and opportunities to Rotork from the
increased focus on ESG matters by all our stakeholders, has been on the
Board agenda for some time. Early in 2020, we commissioned a study to
focus on the impact the move away from fossil fuels might have on our
end markets. This has been used subsequently to inform our strategy in a
number of areas.

Throughout the year the Board received reports on the impact of
COVID-19 and the management response to the pandemic as it affected
our own people, our customers and our suppliers. With the establishment
of a COVID-19 Steering Committee in March, the level of reporting to the
Board increased as the committee managed the risk assessments and
social distancing measures introduced within our facilities, the impact on
our supply chain and logistics partners and the changing requirements of
our customers. Factory operating levels and employee sickness varied
across the countries in which we operate as the impact of the pandemic
rose and fell within those countries. The COVID-19 Steering Committee
continues to meet and report to the Board.

Health and Safety is always high on the agenda but following the fatality
of one of our service engineers on a customer site which unfortunately
occurred mid-year, a review was instigated of the process and procedures
in this area. As work has progressed, this has been discussed at each Board
and Audit Committee meeting.

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 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.

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 2020, emerging risks, and the
Board’s risk appetite, are covered on pages 40-45.

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. All non-executive directors are members of the Audit Committee
and the Chairman and executive directors attend Audit Committee
meetings.

Key elements of the control environment, which enable Rotork to respond
appropriately to all types of business risks, include:
— The Rotork Values and behaviours as part of defining One Rotork.
— A 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.

— 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 each Board meeting.
— Defined controls and assurance processes over financial reporting and

health and safety procedures.

During 2019 a programme of work was initiated to enhance controls and
create a more formal three lines of defence model. This also incorporated
the creation of a vision for the broader development of finance. A number
of the longer term improvements are aligned to the investment in a new
Enterprise Resource Planning (ERP) system. The workstreams underway at
the start of the year have progressed through 2020 and in the second half
of the year been consolidated into a broader finance transformation
programme. The second phase of the financial business control framework
project was due to start in March 2020 but was delayed due to travel
restrictions caused by the onset of COVID-19.

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RotorkAnnual Report 2020However, the programme was restarted mid-year using a variety of remote
working practices and is now on track to complete in 2021. This programme
will improve the quality and consistency of controls across all locations. The
development of the new ERP system has continued in 2020 despite a brief
pause due to COVID-19. The ERP will automate and enforce processes and
controls, strengthening the overall control environment.

The finance transformation programme will shape the way finance
operates in Rotork to deliver against the finance vision which was defined
in 2019. The focus was initially on three key development areas:
governance and controls (incorporating the business control framework),
business partnering and finance talent. In 2020 the finance target
operating model has been developed to provide a framework for all
finance developments in the coming years relating to people, process and
technology. Progress on these improvements, the ERP development and
creation of the three lines of defence model have been regularly reported
to the Audit Committee and Board.

Remuneration
The responsibility for determining remuneration arrangements for the
Chairman and executive directors as well as oversight over all aspects of
workforce remuneration has been delegated to the Remuneration
Committee, chaired by Tim Cobbold. Six meetings of the Remuneration
Committee took place in 2020.

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
2020 can be found at pages 110-137.

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www.rotork.comAnnual Report 2020

Environmental, Social
and Governance (‘ESG’)
Committee report

Ann Christin Andersen
Chair of the ESG Committee

I am pleased to present the first of our Environmental,
Social and Governance (‘ESG’) Committee Reports.
The Committee was established during the year,
recognising the increasing importance of ESG and
sustainability matters, both within the business and
across our key stakeholder groups. The Committee
will assist the Board in defining and executing the
Company’s ESG and sustainability strategy. This
includes soliciting and understanding the views of
stakeholder groups (including customers, employees,
suppliers, investors and local communities) on
sustainability matters and ensuring that ESG priorities
are an integral part of the Company’s corporate
strategy. It will also oversee and challenge
management’s performance against the Company’s
ESG goals, targets, initiatives and commitments.
I welcome the creation of this Committee to allow
us to accelerate our ESG journey ahead.

Committee composition and meetings
The Committee currently comprises two independent non-
executive directors (including myself as Chair), the Chief Executive,
the Strategy and Mergers & Acquisitions Director and the Group
HR Director. The Investor Relations Director and Head of ESG &
Sustainability also attend by invitation. The Deputy Company
Secretary acts as secretary to the Committee. The first meeting of
the Committee took place in October 2020. The Committee will
normally meet three times a year. Details of the Committee
members and their attendance at the meetings held during the
year are set out below. The Head of ESG & Sustainability, having
joined Rotork on 4 January 2021, attended her first meeting in
February 2021. The Chair reported to the Board on the key issues
covered at its first meeting.

Member

Eligible Meetings (max: 1)

Attendance

Ann Christin Andersen, Chair

Tim Cobbold, Non-executive Director

Kevin Hostetler, Chief Executive

Vijay Rao, Strategy and Mergers

& Acquisitions Director

Kathy Callaghan, Group HR Director

Andrew Carter1

(Investor Relations Director)

1 By invitation

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The ESG Committee is responsible for:

– recommending the overarching ESG vision to the Board
in order to ensure that ESG priorities are anchored at
the top of the Company and, in so doing, agree the
annual plan and targets relating to ESG matters; this
includes setting ESG performance targets as part of the
executive directors’ personal strategic objectives;

– agreeing a process for determining which goals are

material and significant for the business and take on
board management’s views on what is considered to
be the key, meaningful areas to progress across the
business;

– acting as a focal point to gather and discuss relevant
insights from a variety of sources on ESG matters for
onward sharing with the Rotork Management Board
and the business;

– ensuring development of, and regular updates to,
a suitable transformation map and dashboard that
measures 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
management’s 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.

RotorkAnnual Report 2020Our ESG Strategy

Our sustainability framework is founded on the three pillars

Operating
Responsibly

Enabling a
Sustainable
Future

Making
a Positive
Social
Impact

Further details about management’s SDG mapping exercise and
stakeholder engagement can be found on pages 56-57. The new strategic
framework is laid out in more detail on page 34. As part of its remit to
review external communications on ESG matters on behalf of the Board,
the Committee approved the key ESG themes and messages for the 2020
Annual Report.

In order to increase the alignment of incentives with the business strategy,
the Committee reviewed the element of the annual bonus structure
for executive directors relating to ESG targets and measures. For 2021,
the annual bonus has been adjusted to include 10% of the maximum
opportunity based on ESG performance, with measures aligned to the
strategic pillars and SDGs as set out above. More details can be found
within the Directors’ Remuneration Report on page 136.

Looking Ahead
I am delighted that Rotork has committed to set the bar high and deliver
on our ESG promises to customers, employees and society at large.
The SDGs will help Rotork play its role in driving transformational change
over the next decade. I look forward to overseeing the development of
Rotork’s strategy to address these urgent sustainability challenges and,
at the same time, identify opportunities for sustainable business growth.

I would like to thank members of the ESG Committee and Rotork
management for their constructive inputs and personal commitment to
this crucial agenda.

Ann Christin Andersen
Chair of the ESG Committee
1 March 2021

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Activities of the Committee during the year
Following its establishment, the Committee met once during the
year. During this formative meeting, the Committee agreed its terms
of reference which were subsequently approved by the Board in
October 2020 and are available on Rotork’s website at www.rotork.com.

During the meeting, Committee members shared their views on how the
Committee should be best positioned to influence Rotork’s ESG agenda.
The Committee remains mindful of providing direction to management on
ESG matters, whilst always keeping in mind our Purpose and Values.

The Committee also reviewed and approved for publication Rotork’s
first People and Environment Report. This provides disclosures on GHG
emissions as well as detailed coverage on people and health and safety
issues. It also explains how Rotork’s products can improve customers’
environmental performance (available at: https://www.rotork.com/en/
environmental-social-governance/environment).

The Committee also approved the adoption of the United Nations’
Sustainable Development Goals (SDGs) framework to guide Rotork’s
sustainability agenda. It subsequently oversaw a mapping exercise to
identify the SDGs that are most relevant for Rotork to support and a formal
materiality assessment, involving internal and external stakeholders, to
gather their views on priority sustainability issues. A materiality matrix, set
out on page 57, plots stakeholders’ priorities against those of the business.
Those topics identified as most material to all parties, and where the
Company has the greatest potential to create shared value, will be the
focus of our sustainability agenda.

At its meeting in February 2021, outside the reporting period, the ESG
Committee endorsed adopting five main SDGs, aligned to topics where
the Company has the greatest potential to support the transition to a
better and more sustainable future for all. These are as follows: (6) Clean
water and sanitation; (7) Affordable and clean energy; (9) Industry,
innovation and infrastructure; (12) Responsible consumption and
production and (13) Climate action. The Committee also endorsed
targeting two additional SDGs, committing to progress under Goals (5)
Gender equality and (8) Decent work and economic growth.

A new sustainability framework has been developed around our chosen
SDGs and priority sustainability topics. The framework is based on three
pillars: Operating Responsibly; Enabling a Sustainable Future; and Making
a Positive Social Impact. It covers the way we run our business, the impact
we can have through our products and services, and the way we engage
with our people and communities. It aligns to our chosen SDGs as follows:

Operating Responsibly
12. Responsible consumption and production
13. Climate action

Enabling a Sustainable Future
6. Clean water and sanitation
7. Affordable and clean energy
9. Industry, innovation and infrastructure

Making a Positive Social Impact
5. Gender equality
8. Decent work and economic growth

The Company’s main adopted SDGs will guide where we focus our efforts
to continue to create superior, shared value for all of our stakeholders.
A roadmap of ESG ambitions and targets, in alignment with our strategic
framework, is now under development. A standalone Sustainability
Report, to be published in summer 2021, will provide further detail and an
update on progress.

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www.rotork.comAnnual Report 2020

Audit Committee
report

Sally James
Chair of the Audit Committee

Committee membership & meeting attendance
All Audit Committee members are independent non-executive
directors. On 30 September 2020 Lucinda Bell, who had served
as a member of the Committee since her appointment to the
Board in 2014 and as Chair of the Audit Committee since 2017,
resigned from the Board. Sally James was appointed Chair of the
Audit Committee from 30 September 2020. Janice Stipp joined
the Audit Committee on 1 December 2020 and it is intended
that she take over the role of Chair of Audit Committee following
the conclusion of the 2021 AGM. There have been no other
changes to the membership of the Committee during the year.

Member

Lucinda Bell(i)

Sally James, Chair

Peter Dilnot

Ann Christin Andersen

Tim Cobbold

Janice Stipp(ii)

Eligible Meetings (max:4)

Attendance

(i) Lucinda Bell resigned on 30 September 2020 and accordingly only attended in

February and July 2020.

(ii) Janice Stipp joined on 1 December 2020 and accordingly only attended in

December 2020.

Lucinda Bell, Tim Cobbold and Janice Stipp hold a professional
accounting qualification and are deemed to have recent and
relevant financial experience. Tim Cobbold, Peter Dilnot, Ann
Christin Andersen and Janice Stipp have experience of working in
complex global industrial products businesses, a number of which
share common end-markets with Rotork. Biographies of each
member of the Audit Committee can be found on pages 88-89.

The Audit Committee operates under formal terms of reference which
are reviewed annually and were last updated in December 2020. A
copy of the terms of reference is available on the Rotork website at
www.rotork.com/en/investors/corporate-governance.committees.

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The Audit Committee is responsible for:

Financial reporting
– Reviewed the Annual Report & Accounts

(including whether they are fair, balanced and
understandable), the Corporate Governance
Report and draft results announcement.

– Reviewed the material judgements and estimates,
going concern assumption and viability statement
in the Annual Report & Accounts.

– Reviewed the half year accounts including

material judgements, estimates and draft half year
results announcement.

– Reviewed the external auditor’s report on the year
end accounts and the proposed full year external
audit scope, key risks, materiality and year
end issues.

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 significant internal control reports,

findings and management responses.

– Discussed compliance with Group policies.

– Reviewed anti-bribery and corruption procedures.

RotorkAnnual Report 2020External audit
– Reviewed and approved the external audit plan

and scope of the external auditors’ work

– Considered and reported to the Board on the

external auditor’s independence, objectivity and
effectiveness.

– Reviewed the external auditor’s representation

letter, views on the control environment and fraud
risk management.

– Meetings with the external auditor without

management present.

– Reviewed and approved non-audit services

undertaken by the external auditor and the policy
on non-audit work.

– Considered audit fees and engagement terms.

– Considered re-appointment of the external auditor.

Internal audit
– Reviewed and approved the internal audit

programme.

– Reviewed the maturity and effectiveness of

internal audit, its remit and resourcing.

– Reviewed the policy on independence of the

internal auditor

– Approved the Internal Audit Charter

– Discussed and monitored progress on implementing
recommended actions, including overdue actions.

– Meetings with the Head of Risk and Internal Audit

without management present.

Other work
– Reviewed the work to define a finance target

operating model and the development of a finance
transformation programme.

– Reviewed Audit Committee effectiveness and terms

of reference.

– Reviewed the whistleblowing, gifts and hospitality

and risk management policies.

– Approved the Audit Committee’s schedule of work

for 2021.

– Reviewed reports on legal compliance and on

compliance investigations.

I am pleased to present the report of the Audit Committee for the year
ended 31 December 2020. This year the key areas of focus for the Audit
Committee, in addition to its usual schedule of work, have been:
− Reviewing progress with the business control framework project and
plans to develop a stronger second line of defence. Activities in 2020
comprised a combination of immediate actions to mitigate risks and
planning for longer term improvements aligned with implementation
of the new ERP system.

− Reviewing the impact of COVID-19 on the control environment and

assessing the effectiveness of controls whilst large numbers of people
have moved to working from home at various times. In addition to
the regular financial compliance audits, a compliance questionnaire,
tailored to focus on the risks which are heightened when remote
working, was used to assess the impact on the control environment. The
findings from this were reviewed by the Committee.

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− Reviewing the ongoing progress to strengthen the finance function and

develop a new target operating model for finance. This project is a
multi-year programme which will leverage the benefits of the new ERP
system, together with a new reporting toolset, to enhance the quality
and consistency of financial analysis provided to the business whilst
at the same time improving the efficiency of the finance function.
The Audit Committee has actively engaged during the year in the
formulation of this programme and supported the finance
transformation plans.

Principal responsibilities and governance
The principal responsibilities of the Audit Committee are to review and
report to the Board on the:
− Integrity of financial reporting.
− Application of significant accounting policies and judgements.
− Internal audit programme, its remit, resourcing and effectiveness.
− Adequacy and effectiveness of the Company’s internal controls and risk

management systems.

− Appointment, independence and remuneration of the external auditor.
− Effectiveness of the external audit process.

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
issues as and when they arise.

The Audit Committee met four times during the year. Details of attendance
are set out on page 104. The Chairman, Chief Executive, Finance Director,
Group Financial Controller, Head of Risk and Internal Audit, Risk and
Internal Audit Manager and representatives of the external auditor
(including the lead audit partner) also attend meetings by invitation.

As Chair of the Committee, I additionally hold regular meetings with the
Finance Director, the external audit partner, the Head of Risk and Internal
Audit and other members of the management team, as Lucinda did during
her tenure. These meetings provide us 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 internal audit team and the external auditors. Through face to face
discussions and detailed written reports the Committee is able to
challenge, scrutinise and ask questions where clarification or discussion is
required. Further details of the work undertaken by the Audit Committee
during 2020 is set out on pages 104-105.

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 & Accounts are fair, balanced and understandable and provide
the information necessary for shareholders to assess the Company’s
performance.

In order to assess the financial statements, the Committee receives
reports from members of the finance team and external auditors, who are
invited to attend meetings. Through face to face discussions and detailed
written reports the Committee is able to understand the key judgements
and estimates and how they are being recorded and disclosed in the
financial statements.

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www.rotork.comAnnual Report 2020

Audit Committee report continued

The principal matters of judgement and estimation considered by the Audit
Committee in relation to the 2020 accounts and how they were addressed
were:
— Goodwill impairment testing. The year end balance sheet includes

goodwill of £224m (29% of the Group’s assets). The Audit Committee
discussed the appropriateness of the assumptions used in assessing the
value in use of each cash generating unit and were satisfied with the
approach taken by management which resulted in no impairment
being made in 2020. The Audit Committee also considered whether
any reasonable change would result in an impairment in any cash
generating unit. The Audit Committee reviewed the sensitivities and
impairment disclosures in note 10 and were satisfied these are balanced
and fair.

— Retirement benefit schemes. At 31 December 2020, 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. The Audit Committee considered the report from the
Group Financial Controller and were satisfied the assumptions used
were appropriate. The detailed disclosure for these schemes under
IAS19 is shown in note 24 and the Audit Committee is satisfied they are
complete and accurate.

External auditor
The year under review marks the seventh year during which Deloitte LLP
has been the Group’s external auditor following a formal tender process in
2014. The 2020 year end audit will be the second year that David Griffin
has acted as Deloitte LLP’s lead audit partner for Rotork. Whilst the
opportunities for David and the Deloitte senior team to visit Rotork
locations this year to familiarise themselves with Rotork has been limited,
they have been able to do this in the past having been part of the audit
team for a number of years and have also utilised technology to
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. The assessment considers:
— Any issues arising from 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.

— Private meetings with the external auditor without management being

present.

— The independence, objectivity and scepticism of the external auditor

including the level of challenge provided to management.

— The FRC audit quality review report on selected audits undertaken by

Deloitte.

Having completed this review, the Audit Committee agreed that the audit
process, independence and quality of the external audit were satisfactory.

Consideration was given to the possibility of re-tendering the external
audit during the year but as the Committee is satisfied with the work of
Deloitte, the decision was made not to re-tender. The Audit Committee
has recommended that Deloitte LLP be re-appointed auditors for the 2021
financial year and Deloitte’s continuing appointment will be subject to
shareholder approval at the 2021 AGM. This is the seventh year end since
Deloitte took over as external auditors and we will re-tender our external
audit service provider after 10 years have been completed at the latest.

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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 has been revised this year to reflect 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 their 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.

An analysis of fees paid to Deloitte, including the split between audit and
non-audit is included in note 8 of the Report & Accounts.

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. Many of the principal risks are aligned with areas
of accelerated growth and in a number of areas the risks increased as a
result of the impact of COVID-19. The work started in prior years to
improve accountability, consistency and the development of a stronger
second line of defence has progressed through the year. Aspects of the
work which required physical access to sites were delayed until methods
of remote working were established but it is now progressing once again.
Towards the end of the year a Head of Finance Transformation was
appointed to lead activities to deliver the finance vision including the
transition to a new finance target operating model.

The Audit committee received reports at each meeting on progress with
the work, including reports from the external auditor. Plans were approved
by the Audit Committee in December 2020 and progress will be monitored
in the coming year.

Strengthening the Finance, risk and compliance functions is central to
improving the control environment. Revised finance reporting lines, so that
finance reports through the finance team throughout the world, were
implemented early in the year and are now fully operational. The finance
leadership team meets regularly and is responsible for designing and
implementing all aspects of the finance transformation programme
supported by the newly-appointed Head of Finance Transformation.

RotorkAnnual Report 2020PwC continued to provide internal audit services throughout 2020. The
function is led by an experienced Head of Risk and Internal Audit from
PwC supported by an in-house Risk and Internal Audit Manager. The
Group continues to use Rotork staff supported by the dedicated in-house
team and staff from PwC to undertake internal audits. Quality assurance
procedures ensure consistency both in terms of audit approach and
proposed recommendations. Staffing of the central risk and internal audit
team will be kept under review during 2021. In the coming year we expect
to restructure the risk and internal audit functions to create a more distinct
second line of defence and these plans were approved by the Audit
Committee in December 2020.

Internal audit has delivered financial audit reports for 27 of our global
locations during 2020. The majority of these were undertaken remotely
because COVID-19 prevented international travel. Guidance is provided
to auditors about the nature and extent of testing to be undertaken,
including this year how to manage the process remotely, and to ensure
auditors focus their efforts in key areas of risk, tailored by site. Investment
has also been made to improve the quality and consistency of reporting
of issues.

A further nine risk-based internal audit reviews have been completed
during 2020, covering the following areas:
— Design of overall Health and Safety arrangements
— Health and Safety – site engineer documentation and travel risk
— IT (patch management, change and release management and the

response to COVID-19)

— Service bulletins (measures related to product quality)
— Travel and expenses systems
— Senior accounting officer processes
— Modern Slavery arrangements

The Audit Committee continues to receive reports at the main meetings on
internal audit activity, any significant matters arising and the management
response. During the year, the internal audit team made recommendations
for improvement to controls, which management is charged with
implementing. The status and effectiveness of actions are monitored by
internal audit and regularly reported to the Audit Committee. During 2020,
rigorous processes for internal audit ‘follow up’ of agreed management
actions have been followed and more actions have been completed within
the agreed timeframes. Overdue internal audit action points were reported
to the Board monthly and have reduced compared with prior years. This
will remain a focus area for the Audit Committee in 2021.

The internal audit team continue to administer the process for sites to
confirm the operation of key financial controls. This process provides
insight into key areas of risk and is verified during the internal audit visits.
A separate confirmation process was developed in early 2020 to assess
the impact on the control environment of new practices, such as the move
to working from home. A controls self-assessment was performed in
November 2020 in advance of year end. This process will now be paused
as the business controls framework is rolled out and once that has been
completed we anticipate a new confirmation process will be introduced.

Other means of assessing the internal control systems include the risk
assessment process 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 CSR Committee.

During the year, the Audit Committee also considered reports on
anti-bribery and corruption procedures as well as other compliance
processes and procedures.

The Risk Management Policy was updated extensively in 2019 and has
been refreshed in 2020. It documents the Group’s risk management
processes and the connections between those various processes and the
day-to-day operations of the Group. In 2020, those members of the
executive team who are designated risk owners have produced detailed
‘get to green’ plans to respond to risks in accordance with risk appetite.
Work on these plans will continue in 2021.

The 2021 internal audit programme has been scoped to include a number
of risk-based audits as well as financial audits across a wide range of
locations. Sites to be audited are selected based on a thorough assessment
using a number of relevant risk factors. The Audit Committee reviewed
and approved the 2021 programme at its December 2020 meeting.

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.
In 2019, Independent Audit, as the appointed external board evaluator,
interviewed the Committee members, Board members, members of
Rotork’s management team, the co-sourced internal auditors and external
advisors as part of this process. In 2020 an internally-facilitated
questionnaire was used to reflect on progress in the year from the previous
work and the output from this was presented with further
recommendations in December.

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 2021
Key areas of focus for the coming year are:
— To manage an effective transition to a new Audit Committee Chair.
— To review ongoing progress with the finance transformation

programme and creation of a separate second line of defence.

— To review development and implementation of the ERP system and the

integration of controls within its design to enhance the control
environment and drive consistency between locations.

— To review the implications for Rotork of developments in the external

audit process and regulation.

— To review the implications for Rotork of the Taskforce on Climate-

related Financial Disclosure reporting requirements that commence
in 2021.

Finally I would like to thank Lucinda for her excellent leadership of this
Committee over the last three years. It has been a time of much change at
Rotork and progress has been made in many of the areas of responsibility
of the Audit Committee.

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Sally James
Chair of the Audit Committee
1 March 2021

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Nomination
Committee report

Martin Lamb
Chair of the Nomination Committee

Committee membership & meeting attendance
The Committee, under the chairmanship of Martin Lamb,
currently comprises a majority of 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
88-89. Details of the Committee members and their attendance
at the meetings held during the year are set out below. In
December 2020, Janice Stipp joined the Committee following her
appointment to the Board. She will attend her first meeting in
2021. The Chief Executive, Group Finance Director and Group
Human Resources Director also attend the meetings by invitation.

Member

Eligible Meetings (max:4)

Attendance

Martin Lamb, Chair

Lucinda Bell(i)

Sally James

Peter Dilnot

Ann Christin Andersen

Tim Cobbold

Janice Stipp(ii)

N/A

(i) Lucinda Bell stepped down from the Board with effect from 30 September 2020

and accordingly only attended in April and June 2020.

(ii) Janice Stipp was appointed to the Board with effect from 1 December 2020 and

will attend her first meeting in February 2021.

The terms of reference of the Nomination Committee
were reviewed in October 2020. A copy of the revised
terms of reference are available on Rotork’s website at
www.rotork.com/en/investors/corporate-governance.

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The Nomination Committee is responsible
for:
– Leading the process for Board appointments and
making recommendations for appointments to
the Board.

– Ensuring succession planning is in place for

appointments to the Board and senior
management.

– Reviewing the structure, size and composition and

balance of the Board, including its balance of
skills, diversity, knowledge and experience, and
making recommendations as appropriate.

– Making recommendations to the Board on the

composition of the Board’s Committees.

– Making recommendations to the Board concerning
the annual reappointment by shareholders of any
directors and separately assessing each year
whether non-executive directors continue to be
independent.

RotorkAnnual Report 2020The role of the Committee
The Committee evaluates and examines the skills and characteristics
needed to ensure the Board has the right balance, knowledge and
attributes to operate effectively in the execution of its business strategy
and in the delivery of the long-term success of the Company. Board and
Committee composition is formulated to ensure that business is conducted
with the utmost integrity and in full alignment with the Company’s culture,
Purpose and Values. It also reviews the succession needs of the Company
and puts in place the appropriate processes for nominating, training and
evaluating directors, taking into account the need for diversity.

Activities of the Nomination Committee during
the year
During the year, the Committee undertook the following main activities:

Non-executive appointment
On 30 September 2020 Lucinda Bell stepped down from the Board
following six years’ service. Lucinda made a significant contribution to the
Rotork Board, especially in her role of Audit Committee Chair and we have
benefited greatly from her knowledge, experience and wise counsel.

On the Committee’s recommendation, the Board appointed Sally James,
the Company’s Senior Independent Director and a current member of
the Audit Committee, to the role of Audit Committee Chair with effect
from 1 October 2020, pending the appointment of Janice Stipp as
described below.

With the need for an additional non-executive director with strong
international financial experience having been identified for recruitment
during the year, Lygon Group were engaged to act as Rotork’s search
consultants for this role. Lygon has no other connection with the
Company. The Committee considered a list of potential candidates
provided by Lygon and took into account the balance of skills, knowledge,
independence, diversity and experience of the Board, together with an
assessment of the time commitment expected. The preferred candidate
was interviewed individually by all members of the Committee. Following
this process the Committee recommended to the Board that Janice Stipp
be appointed as a non-executive director with effect from 1 December
2020 and that she become a member of the Audit, Remuneration and
Nomination Committees from the same date. Janice will take over from
Sally James as Chair of the Audit Committee at the conclusion of the
Company’s 2021 AGM. Janice’s other public commitments were disclosed
to the Board before her appointment and are provided on page 89.
Janice brings a highly relevant sectoral background and international
financial expertise to the Board together with a global perspective,
particularly in Asia.

Sally James is in her ninth full year of service and will not be seeking
re-election at the AGM on 30 April 2021. The search for an additional
non-executive director will commence during 2021. I am pleased to report
that Peter Dilnot will take over the role of Senior Independent Director
from Sally effective from 30 April 2021.

Succession planning
Succession planning for the Board and senior management is continuous.
During the year, the Nomination Committee considered the need to
maintain an appropriate balance of skills and experience within the
Company to ensure progressive refreshing of the Board and senior
management. For example, at its October meeting, in fulfilment of its
role to oversee the talent review and executive succession process, the
Committee considered the personal profiles for those high potential
successor candidates identified for key future roles within Rotork, focusing
on the key leadership roles required to take the business forward, such
as those of the Managing Director of the Oil & Gas division and the
Group Engineering Director.

Diversity and Inclusion
The Board Diversity and Inclusion Policy (www.rotork.com/en/documents/
publication/24261) 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.

The Committee is committed to succession planning for the Board and
senior management team to ensure the right diverse mix of skills,
experience, knowledge and background is achieved. There has been
progressive discussion about talent management, succession planning and
diversity of the Board and at senior management level during the year. In
considering diversity, gender plays an important role but the Board also
takes into account social and ethnic background, and other cognitive and
personal strengths. The Committee is conscious of the recommendations
of the McGregor-Smith and the Parker Reviews concerning ethnic diversity
on the Board.

New appointments are made on merit, and take into account what is
required from a diversity and inclusion perspective to ensure a rounded
Board and considering the diversity benefit each candidate can bring.
Recruitment and selection for Board members ensures equality of
opportunity for all applicants and an unbiased approach will be taken
when interviewing. Objectives on diversity are set by the Board on a
regular basis and the policy is reviewed annually.

The Board is committed to the terms of the 30% Club, of which it is a
member, and to the aspirations of the Hampton-Alexander objective of
33% female representation by, or as soon as possible after, the target date
of 2020. The Group also notes the objectives of the Parker review for at
least one BAME Board member by, or as soon as possible after, the target
date of 2021.

As at 31 December 2020, there were three female directors at Board level,
equating to 37.5% female Board representation, which exceeds the
measure recommended by the Hampton-Alexander Review. Details of the
percentage of women in senior leadership positions and within the Group
can be found on page 62.

Internal Board Evaluation Process
During the year an evaluation of the Board, its Committees and the
Chairman was undertaken in line with the Committee’s terms of reference.
The evaluation process was internally facilitated by the Company Secretary
and details can be found on page 99.

Re-election of Directors
The Committee has satisfied itself as to the individual skills, relevant
experience, contributions and time commitment of the non-executive
directors, taking into account their other offices and interests held.

The Board is recommending the election or re-election to office of all
continuing directors at the 2021 AGM. Details of the service agreements for
the executive directors and letters of appointment for the non-executive
directors are set out in the Director’s Remuneration Report on page 124.

Nomination Committee Evaluation
The Committee carried out an internally facilitated review of its
performance as part of the overall Board evaluation in 2020 and its
outcomes were discussed by the Board. It concluded that the Committee
continued to fulfil its duties effectively with its key strengths being effective
chairmanship, a clear focus on priorities and strong support from
management. It was also recognised that the Committee was now serving
a broader remit, with a clearer window on talent and succession below
Board level.

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Martin Lamb
Chair of the Nomination Committee
1 March 2021

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Directors’
Remuneration report

Tim Cobbold
Chair of the Remuneration Committee

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

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The Remuneration Committee
is responsible for:
– Within the approved policy, determining individual
remuneration packages for the executive directors,
Chairman and, on the advice of the Chief Executive,
the RMB.

– 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 reference

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
procedures to monitor fairness of application. In this
regard, the Remuneration Committee reviews internal
relativities, pay ratios and gender pay gaps, and invites
the Group HR Director to its meetings to provide a full
picture of pay 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).

– 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 Report or any
significant proposed changes to the way in which it is
implemented.

RotorkAnnual Report 2020Statement from the Chair of
the Remuneration Committee

Dear Shareholder

There can be no doubt that 2020 was an exceptional year and the impact
of the COVID-19 pandemic affected nearly every aspect of all our lives,
both personally and professionally. It therefore comes as no surprise that it
also had a significant impact on the work of the Remuneration Committee
throughout 2020.

The Committee recognises that the pandemic has led to changes in the
definition, nature and characteristics of strong performance in 2020 (and
possibly into 2021) and that this will likely lead to a more challenging external
environment for the justification of remuneration outcomes. However, it also
appreciated that it is at difficult times that the value and impact of strong
leadership and high performing management teams is greatest and that
this benefits all stakeholders. The Committee also recognises that COVID-19
has accelerated many pre-existing trends in the way the appropriateness
of remuneration, especially for executive directors and senior managers,
is judged. The Committee expects the remuneration arrangements for
executive directors and senior managers to be viewed more through the
lens of equity with the wider workforce and in the light of the shareholder
experience than previously. The Committee understands that equity and
fairness matter in the same way that business performance matters.

Therefore, throughout the year my colleagues and I on the Remuneration
Committee have sought to find the right, equitable approach to
remuneration in which employees’ contributions are recognised fairly
whilst also recognising the critical role of the senior management team,
including the executive directors, in delivering performance from which
shareholders demonstrably benefit. I am pleased and grateful that the
Committee was actively supported by both Kevin Hostetler and Jonathan
Davis in the development of this approach and their leadership reflects the
equitable culture within Rotork. The detail of, and rationale for, our
approach and the specific decisions we have taken are laid out in this letter.

In addition to dealing with the consequences of COVID-19, the Committee
was active in many other areas through the year. The priorities and
activities of the Remuneration Committee in 2020 included:
− During the first half of 2020, the Committee completed the consultation
with shareholders regarding the new Remuneration Policy in a process
that was extended by COVID-19. Further details are provided later in this
statement.

− In the July 2020 meeting, the Committee appointed Korn Ferry as its

remuneration adviser.

− The Committee continued to develop its work on its broader remit
to consider more holistically the pay and remuneration culture in the
business with particular attention to the use of ESG metrics (aligned
to the strategy), fair pay, the gender pay gap, the ethnicity pay gap,
pensions and other benefits. Further details are provided below.

The Committee’s approach to Remuneration in 2020
The Committee’s approach to remuneration in 2020 across Rotork in
general and for the executive directors and senior managers, for whom
the Committee is explicitly responsible, was guided by Rotork’s Key
Remuneration Principles which are restated above. In particular, the
approach was based on a sensitive appreciation of the business’s
performance (in all the circumstances), the experience of shareholders
during the period, the employee experience during the year and the level
of Government support for the business. The Committee’s specific
considerations are described below.

Business Performance
In the Committee’s view, Rotork has navigated the COVID-19 storm well.
The Growth Acceleration Programme continued to deliver in line with plan
and, in particular, demonstrated the resilience that is now a feature of the
business model.
− On a reported basis, 2020 EBITA was £142.5m only 5.6% down on
2019 with revenues 9.7% lower. On a constant currency basis,
2020 EBITA was only 3.8% below 2019. The operating margin rose
by 1.0 percentage point to 23.6% despite the lower revenues as a result
of the exceptionally low flowthrough of sales shortfalls at 12%.

− The book to bill ratio was highly creditable at 0.98 which positions the
business well, in the circumstances, for 2021 and confirms that 2020
performance was not achieved at the expense of 2021.

− Operating cashflow was strong with operating cash conversion at

129.5%

− Working capital efficiency (capital/revenue) improved from 24.2%

to 21.0%.

− The balance sheet, which is run prudently, strengthened further during
the year and the net cash position increased to £178m up £71m on the
start of the year.

− A new bank facility was negotiated to replace one which was due to

expire in mid-2020.

On nearly all measures the operating performance has been good during
a year of unprecedented challenge and has contributed positively to the
experience of shareholders during the year.

The Committee noted that the strong operating performance was not
delivered at the expense of further strategic progress. The Growth
Acceleration Programme continued to be implemented with the
reorganisation from product to market facing divisions implemented as
planned and investment in the new IT system is on track, albeit to a slightly
revised timetable. Footprint optimisation and pre-COVID-19 planned
headcount reductions were implemented in accordance with the roadmap.

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Directors’ Remuneration report continued

Shareholder Experience
Initially, COVID-19 impacted the stock market valuation of Rotork. However,
this impact was relatively short-lived with the reductions of March and
April largely recovered by the end of the year. The average share price
in December 2020 was 309.8p, compared with the average December
2019 price of 332.9p and, at the time of writing, has recovered further.

The Committee regarded the resilience demonstrated by the business
during the year as a vindication of the strategy and of the Growth
Acceleration Programme. Both were introduced following the arrival of
Kevin Hostetler and their ongoing successful implementation reflects well
on the actions of everyone in Rotork. Consultations with shareholders have
confirmed that this increased resilience is recognised and valued. The
Committee believes that it is important to continue to support the ongoing
success of the strategy and Growth Acceleration Programme in its
approach to remuneration.

The Committee knows that dividends are an important part of the
investment case for many shareholders and that, although the Board
suspended the payment of the 2019 final dividend in March as part of cash
conservation measures (which was supported by shareholders at the time),
since then the business performance has allowed the 2019 dividend to be
reinstated and it was paid in September 2020. Looking forward, the
Committee noted that the Board has reconfirmed the dividend policy and is
recommending the payment of a dividend of 6.3p in respect of the whole
of 2020 at the AGM in line with that policy. Assuming this dividend is
approved, shareholders will not have suffered any loss of dividend value as
a result of COVID-19, albeit that payments were delayed by six months or so.

In the Committee’s view, in relative terms the shareholder experience has
been positive and, in absolute terms, it certainly hasn’t been negative.
In many ways the response to the COVID-19 pandemic has provided the
opportunity for the business to demonstrate its resilience which
shareholders have recognised.

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Employee Experience
The Committee recognises that, for all employees, 2020 has been a
difficult year that has required them to adapt whilst still delivering for
customers and, at the same time, accommodating material changes to
their lives and the lives of their families and friends. Across Rotork, the
response of all employees has been excellent and had a material impact
on the performance of the business, particularly its resilience.

Led by the Board and senior management, Rotork’s approach has been
to protect the health (including mental health) and financial well-being
of employees through this period, mindful of obligations to other
stakeholders. Specifically, the Committee agreed, with the support of the
Board including the executive directors, that the wider workforce would
receive a more favourable remuneration treatment than the executive
directors.
− Whilst the 2020 salary review due in April 2020 was cancelled, where
possible, for all Rotork personnel, including all directors, following the
good business performance in 2020, the 2021 annual salary review,
which would have been due ordinarily in April 2021, was brought
forward to 1 January 2021 for all employees other than directors.

− The income of furloughed employees was topped up by the business to
100% of normal pay so that employees did not suffer a loss of pay
during the pandemic. All furlough support received from the UK
Government has been repaid.

− All employees in Rotork continued to participate in a bonus scheme with

targets based on combinations of the performance of their local
business and the performance of the Group. For reasons explained in
the section on ‘Remuneration in 2020' below, the implementation of
the Annual Bonus Plan for all employees (including executive directors)
was delayed to June 2020 with targets for all employees set in the light
of COVID-19 to make them meaningful and credible.

− The business took a range of steps to support the physical and mental

health of employees through the pandemic. Stringent, clearly
communicated COVID-19 safe polices were implemented very early
on including the provision of PPE, working from home and site by site
safety at work procedures where necessary. Mental health has been
similarly supported with online activities including desk yoga and walk
the world initiatives.

− Rotork Benevolent Support, to which Rotork contributes, was

established to support employees, ex-employees and their families
through hardship, particularly those impacted by COVID-19.
− Internal pulse surveys of the workforce were consistently highly

favourable of the business’ response to COVID-19.

In addition, 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, ensuring that no employee is paid below
this level where it exists in a country. Rotork is now accredited as a Living
Wage Employer.

A Fair Pay Framework has also been introduced and communicated to
all employees globally. The Framework 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. This provides assurance that processes are
non-discriminatory and operate to help reduce any gender or ethnicity pay
gaps we are aware of.

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 financial wellbeing
during 2020 as well as introducing frameworks and approaches that
support wider societal expectations.

RotorkAnnual Report 2020Impact of COVID-19 on 2020 Remuneration
Arrangements – 2020 Annual Bonus Plan
The implementation of the 2020 Annual Bonus Plan for all employees
was delayed when COVID-19 ‘struck’ in March 2020, though the targets
for the Plan for executive directors and senior management had been
approved by the Committee in late February. These targets also form the
basis of the profit incentives for all other employees. As the impact of the
pandemic became clearer, the focus for the business during the rest of
March, April and May was rightly on addressing the immediate challenges
of COVID-19, particularly the health and safety of employees.

However, this delay in implementing the Annual Bonus Plan meant that
employees (including executive directors and senior managers) were not
participating in a bonus plan at a time when, in the view of the
Committee, the interests of all stakeholders were best served by a highly
motivated workforce. The Group is in a period of transformation with each
business unit able and required to take decisions that impact the Group’s
performance. Ensuring that the business units’ profit based bonuses (which
all employees participate in) were achievable was, in the Committee’s view,
critical to ensuring that momentum in the transformation was maintained.
So, by June, once the Group’s COVID-19 Plan had been approved by
the Board, the Committee decided to implement the delayed Annual
Bonus Plan for all employees (including executive directors and senior
management) to support delivery of the COVID-19 Plan. However, it was
clear that the profit element of the incentives for all employees (including
executive directors and senior management) could not be based credibly
on the targets approved, but not implemented, by the Committee in late
February. The Committee decided that targets for the profit element of
bonus schemes for all employees (including executive directors and senior
management) should based on the COVID-19 Plan. For the executive
directors and senior management, the profit element represents 60% of
the maximum annual bonus opportunity and targets were set for the
‘threshold’ and ‘on-target’ targets but with the ‘stretch’ target being kept
at the level approved in February.

The Committee was satisfied that these targets would be more challenging
than those previously approved but not implemented, given the
circumstances at the time. For executive directors and senior management,
other than small revisions to refocus personal objectives in the light of
COVID-19, the targets approved in February for the non-profit related
elements of the annual Bonus Plan (Cash Generation, Health and Safety,
Personal Objectives), which cover 40% of their maximum opportunity,
were retained.

The Committee decided that it was not appropriate to scale back the
opportunity for any employees (including executive directors and senior
management) given the challenging nature of the targets and the
extraordinary circumstances that were prevailing. However, the Committee
expressly noted, for executive directors, that to the extent that the targets
resulted in a higher bonus than would have been due under those
approved in February, the Committee would consider, depending on the
outcome, scaling the ‘additional’ bonus back and/or awarding some or all
of the excess as deferred shares.

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Government Support
Conscious of concerns that Government support should not enable
inappropriate or unfair remuneration outcomes, the Committee noted
that Rotork has not been a material net beneficiary of support from
Governments around the world and has not benefitted from any support
from the UK Government. For the avoidance of doubt, Rotork made no
use of any government backed loans or facilities, all furlough support
received from the UK Government has been repaid and Rotork received no
UK Government business rates relief for any of its UK facilities.

Remuneration in 2020
Rotork entered 2020 with a clear strategy and good momentum in the
business. The focus for remuneration was the development of a new
Remuneration Policy bringing practices and levels in line with the prevailing
market, standards and expectations. The consultations with shareholders,
which began in July 2019, continued into January 2020 and resulted in
amendments to the original proposals and a new policy proposal was
published in the 2019 Annual Report.

In early 2020 the process for setting the Annual Bonus targets followed the
usual course, with targets for the executive directors, the senior
management and the wider workforce, approved by the Remuneration
Committee at the late February 2020 meeting. These were detailed in the
Remuneration Report in the 2019 Annual Report.

The arrival of COVID-19 in early March 2020 caused these ‘normal’
Remuneration arrangements to be revisited.

Impact of COVID-19 on 2020 Remuneration
Arrangements – New Remuneration Policy
The arrival of COVID-19 shortly after the publication of the Annual Report
focused sensitivities around remuneration in the UK and consequently
further consultation on the proposed new Remuneration Policy with
shareholders and proxy advisers took place in the time between the
publication of the Annual Report and the AGM. As a result of these
consultations, further amendments were made to the immediate
implementation of the proposed policy and I was pleased that
shareholders approved the new policy, with 96% voting in favour.

As a reminder, the key elements of the new policy are outlined below,
together with any implementation decisions that affected 2020.
− Pension Allowances – Pension contributions (or cash in lieu) for new
executive directors was capped at the level for the majority of the
workforce which is equivalent to 9% of salary. Pension contributions for
the incumbent executive directors will be frozen at the values paid in
2019 for two years and then reduced to 20% for the CEO and 15% for
the GFD and then, for both, to the level of the workforce by
31 December 2022.

− Variable Opportunity – the maximum opportunity for Annual Bonus

and LTIP was increased by 25% and 50% (of salary) respectively,
effective 2021. The increase in variable opportunity was accompanied by
more demanding targets which were implemented in 2020 despite the
delay in the increase in opportunity until 2021. The Committee believes
that the targets regime, established at the time the new policy was
approved, remains appropriate for Rotork in 2021.

− Shareholding Guidelines and Post Cessation Requirements – the
shareholding guideline was increased to the maximum annual variable
pay opportunity, currently 350% and 300% of salary for the CEO and
GFD respectively, to be built up within five years and a post cessation
holding requirement of 200% of salary, applicable only to share based
awards made after the approval of the policy, was introduced. 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 and
reconfirm the same each year, also in writing.

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The Committee therefore decided:
− To exercise downward discretion to reduce the ‘additional’ bonus

by 33%;

− To require that 33% of the ‘additional’ bonus should be paid in shares
deferred for three years under the Deferred Share Bonus Plan to the
extent not required by the Remuneration Policy; and

− That 33% of the ‘additional’ bonus should be paid in cash.

As a result of these decisions, the level of payout for the executive directors
was reduced to 68.9% of maximum opportunity. In approving this level of
payout, the Committee noted that at this level:
− The 2020 payout results in a bonus award 15% lower than in 2019 on

profits (EBITA) down 3.8% on a constant currency basis but with
operating margin up 1% point.

− The 2020 payout for employee groups in the wider workforce, for

whom no discretion (other than for Health and Safety) has been applied,
is an average of 80% of maximum opportunity, higher
than for the executive directors. The Committee viewed this disparity
in treatment as appropriate, conscious that income levels vary in
the business.

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 Share Bonus Plan. In the light of the overall
performance of the business notwithstanding the delayed Annual Bonus
Plan and after careful consideration, the Committee decided not to require
any further deferrals of the bonus beyond that required by the policy on
the basis that the combination of strong performance and downward
discretion had resulted in an appropriate, fair and proportionate outcome.

The Committee’s view is that the incentivisation created throughout the
whole business by having a relevant and meaningful, albeit delayed, bonus
plan materially influenced the profit performance in the year, especially
given that the salary review had been cancelled. Without this delayed plan,
the Committee’s view was that the results achieved would not have
been as strong as they were. This is one of the strengths of Rotork’s ‘all
employee’ bonus arrangements; everyone is incentivised to make a positive
difference and this is reflected in the levels of award, as a percentage of
maximum opportunity, made to all employees.

As a result, the bonus for Kevin Hostetler and Jonathan Davis for 2020 paid
out at 86.1% and 68.9% of salary respectively. In 2019 the corresponding
payments were 102.5% and 81.5% of salary respectively. Of the bonus
award, 11.13% and 8.9% of salary for each of Kevin Hostetler and
Jonathan Davis respectively will be deferred in shares for three years under
the Deferred Share Bonus Plan.

Directors’ Remuneration report continued

Remuneration Outcomes for 2020
Salary Review
In light of COVID-19, the 2020 planned salary review for all Rotork
employees and directors, including the executive directors, was initially
suspended and subsequently cancelled where this was possible. Other
than those that were contractually committed, legally required or reflected
promotions, there were no salary reviews for any employees in 2020.
However, in December 2020 it was decided to bring forward the 2021
salary review which was planned to be effective from 1 April 2021 to
1 January 2021 for all employees, except directors.

Annual Bonus
The Annual Bonus targets for 2020 were based on annual profit (EBITA),
cash generation, lost time injury rate (LTIR) and individual personal
objectives. Although the profit targets were set in the light of COVID-19,
other than small changes to specific personal objectives to reflect
COVID-19, no changes were made to the LTIR and Cash targets approved
in February. The Committee was conscious that both these targets had
been made more challenging in the light of the increase in Annual Bonus
opportunity (the implementation of which was subsequently deferred into
2021) in the new Remuneration Policy approved by shareholders.

As reported elsewhere, very sadly one of Rotork’s employees died whilst
undertaking his duties during 2020. This happened despite several years of
improving health and safety metrics in the business, a trend that continued
into 2020. This good progress resulted in the targets within the health and
safety element of the Annual Bonus Scheme, which accounts for 5% of
maximum opportunity, being met in full.

In the Committee’s view, it would not be appropriate to pay a maximum
health and safety based bonus in a year in which a Rotork employee had
died at work and therefore the Committee decided to reduce all Health
and Safety bonus related payments, for all employees, by 50%. The
Committee felt that it was important to continue to recognise the
significant progress that has been made across the business in improving
the Health and Safety record in recent years by retaining an element of the
bonus. More information on the Health and Safety activities and
performance in the business is provided on pages 64-65.

After adjusting for the reduction in Health and Safety bonus, on a formulaic
basis the 2020 Annual Bonus Plan would have resulted in a payout of 77.4%
of maximum opportunity for the executive directors and senior management.
After careful consideration, the Committee felt that the performance of the
business (in all the circumstances) had been good and warranted this level of
bonus outturn for the senior management and the wider workforce.

114

RotorkAnnual Report 2020Remuneration in 2021
The structure of remuneration in 2021 will be consistent with 2020 but
with an adjustment for the greater strategic focus on ESG in the business
following the establishment of the Board’s ESG Committee of which I am a
member. In order to increase the alignment of incentives with the business
strategy, the weighting on ESG measures for 2021 will increase by 5%
points of maximum opportunity to 10% (including the Health and Safety
performance measure (LTIR) of 5%), with a corresponding decrease in the
weighting of personal objectives to 15%. ESG performance measures and
targets will be agreed by both the ESG Committee and the Remuneration
Committee. The weighting for profit (60% of opportunity) and cash
generation (15% of opportunity) will be unchanged. The ESG weighting
may increase in future years to reinforce further alignment of incentives
with the business’s strategy.

In addition, the Committee has, after careful consideration, decided to
implement the increase in variable opportunity (Annual Bonus and LTIP)
that was approved in the 2020 Remuneration policy. The Committee
considered that it was appropriate to do so having regard to the
corresponding tougher targets that were implemented in 2020 (and which
will be carried forward into 2021), that there will be no COVID-19 related
adjustments to the process of setting targets and that it completes the
process of bringing the executive directors much closer to market normal
levels of reward.

Salary Review
Executive directors will receive a basic salary increase of 2.6%, in line with
the level awarded to the wider workforce, but effective from 1 April 2021,
three months later than the wider workforce. This is in line with the
Remuneration Policy commitment that salaries will normally only increase
in line with the wider workforce. The fee for the Chairman will also
increase by 2.6%, with the Board base fee and supplementary fees for the
Committee Chairs and workforce engagement director increasing by
2.5%, all effective from 1 April 2021.

LTIP
The Committee decided that for all inflight LTIP awards (2018, 2019 and
2020) there would be no COVID-19 related adjustments to targets.

The outturn for the 2018 LTIP award, which vests in 2021 is based equally
on growth in basic earnings per share (EPS) in 2020 compared with 2017,
total relative shareholder return (TSR) over three years and the rate of
growth in economic profit (a capital returns measure) over the three years
to December 2020.

The 2017 basic EPS was depressed by an impairment charge related to a
then recent acquisition which had the effect of making the target growth
rates easier to achieve. In October 2020, the Committee decided that
this was not appropriate and exercised its discretion to add back the
impairment charge thereby making the target harder to achieve. Despite
this adjustment, basic EPS grew by 39%. Economic profit growth (growth
in profit ahead of the return demanded by the weighted average cost of
capital) was good at 4.4% CAGR. Relative TSR performance in the period
was in the second quartile reflecting the strong recovery in performance
following the change in leadership and the implementation of the new
business strategy and the Growth Acceleration Programme. As a result,
84.4% of the award to the executive directors and other members of the
senior management team vested.

In April 2020, an LTIP award was made to the executive directors, a group
of senior managers and a number of more junior, high performing and
talented employees. The structure of the performance conditions was
consistent with the 2019 award with no COVID-19 related adjustment to
targets. The targets were made more challenging in the light of the
increase in the LTIP opportunity for executive directors (the implementation
of which was subsequently deferred into 2021) in the new Remuneration
Policy approved by shareholders.

At the time, the Committee satisfied itself that although the award was
made at a share price reduced by COVID-19, having regard to both the
good share performance in the previous 12 months and a decline in the
share price of less than 25%, that it was not appropriate to scale back
the award and that explicit windfall provisions would not be necessary.
However, 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.

The Committee carefully considered the extent to which the overall
remuneration outturn for executive directors, taking the salary review,
Annual Bonus Plan and 2018 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 2018 LTIP are set out on pages 127-130.
Steps have been taken to expand this section further to improve
transparency in response to the feedback from shareholders.

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Directors’ Remuneration report continued

Annual Bonus
The maximum opportunity available to executive directors will increase
by 25% of salary. The maximum opportunity for Kevin Hostetler and
Jonathan Davis will therefore be 150% and 125% respectively.
− EBITA Performance (60% of opportunity) – the bonus plan is based on
the 2021 Budget approved by the Board and takes into account the
continuing COVID-19 related uncertainty around the world by adopting
a broader range between threshold and maximum targets. The
challenging nature of the targets will be maintained by ensuring that the
growth rate required to achieve the stretch target remains the same as
was applied before COVID-19.

− Cash Generation (15% opportunity) – the target to achieve maximum
outturn will remain at 110% (it was increased to this level in 2020)
reflecting the importance of the 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 continue to be based on
Health and Safety (LTIR) with a target set on the basis of 2020
performance and a maximum that requires maintaining the historical
improvement in LTIR. In this first year, an additional 5% will be split
across quantitative targets set to cover normalised carbon emissions
(scopes 1 and 2); culture and engagement scores (including inclusivity);
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
for both executive directors with a focus on the continued strategic
development of the business with a continued focus on the Growth
Acceleration Programme, including leveraging the new sector-based
organisation, and on the new IT System and control environment
development and implementation.

In accordance with the Remuneration Policy, any pay out in excess of 60%
of the maximum opportunity will be deferred in shares under the Deferred
Share 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
The maximum opportunity available to Executive Directors will increase by
50% of salary. The maximum opportunity for Kevin Hostetler and
Jonathan Davis will therefore be 200% and 175% of salary respectively.

The structure of the 2021 LTIP performance conditions will be the same as
in 2020 and targets will be unchanged as follows:
− TSR (33% of opportunity) – in line with market standards for this

measure the maximum outturn will be achieved if TSR is in the upper
quartile relative to the constituents of the FTSE 350 Industrial Goods and
Services Sector.

− Adjusted EPS (33% of opportunity) – the threshold and maximum set at
9% and 35% growth over the 2020 adjusted EPS by 2023 respectively.
− Economic profit (33% of opportunity) – performance will be measured
against the latest long-term plan for the business. Maximum award will
require a growth in the economic profit over the period of 7.9% CAGR,
equivalent to growth of more than 11% CAGR in profit after tax.

These awards will be made in the normal course following the publication
of the results and will be made 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.

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Wider Workforce Remuneration Matters
In my view there is a good pay culture at Rotork. Our Key Remuneration
Principles provide the foundation and this has self-evidently been reflected
in our approach to pay and remuneration during the COVID-19 pandemic.
It is, for example, unusual in my experience, for all employees to participate
in and benefit from a bonus scheme, as is the case in Rotork.

We look to apply the Key Remuneration Principles along with our new Fair
Pay Framework, introduced in 2020, 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 in 2020 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. Whilst there has been no
evidence of deliberate or wilful discrimination, the Committee will continue
to monitor the potential consequences of bias in remuneration decision
making. In Rotork this process is most advanced relating to gender
although work has now progressed in the ethnicity arena. The Gender Pay
Gap metrics are reviewed each year before they are published as is the
gender-based distribution of pay rises, promotions and bonus awards. We
are for the first time also publishing our Ethnicity Pay Gap following an
ethnicity and disability capture survey of all our employees globally.
Recruitment processes are being reviewed to remove any bias in order to
give the business access to all talent and to ensure no bias to all potential
employees.

Notwithstanding the considerable progress that has been made, we set
ourselves high standards and so some of this remains work in progress.
There should however be no doubt about Rotork’s commitment to doing
the right thing. More details are provided in the People and Culture section
on pages 58-63.

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 now wider remit of the Remuneration
Committee itself. Details on how I have engaged with Rotork’s employees
during the course of the year are set out on page 96.

Remuneration Adviser
Following AON’s withdrawal from the market and in line with the
Committee’s wish to receive a fresh perspective on Remuneration,
the Committee conducted an extensive process to select a new adviser.
From a shortlist of three, and after a process involving written submissions,
multiple interviews and reference taking, Korn Ferry were appointed as the
Group’s remuneration adviser in July.

RotorkAnnual Report 2020Ongoing engagement with shareholders
Since assuming the role of Chair of the Remuneration Committee, I have
been keen to maintain a high level of engagement with shareholders. We
consulted extensively with our major shareholders and the proxy agencies
in the development of the new Remuneration Policy between July 2019
and the AGM in 2020.

In early January 2021 we contacted our 20 largest shareholders
representing over 56% of our issued share capital, as well as the
Investment Association, ISS and Glass Lewis, to share with them the key
decisions the Committee took in 2020 and the principles of the approach
for determining 2020 outturns and setting 2021 targets. A small number
of shareholders responded and all were supportive of the approach we
have taken except one who preferred to wait for the publication of this
report. The proxy agencies largely reiterated their guidance, reserving
judgement until they had reviewed the Remuneration Report.

It is my intention to continue this higher level of engagement to maintain
an ongoing and transparent dialogue with our major shareholders. The
inherent challenge with such consultations is that shareholders have
differing opinions on specific aspects of remuneration, especially at a
time that executive remuneration has never been under greater scrutiny.
Nevertheless, all these opinions are valuable and, combined with the
feedback from the proxy agencies if available, do inform the Committee’s
decision making. Together with the Committee, I seek to navigate a path
that delivers Remuneration approaches that we are sure are right for the
business in the long-term and are recognised and supported as such by a
significant majority of our shareholders. So, I am grateful to shareholders
for contributing to these consultations and trust they recognise our
willingness to both listen to, and act on, the views they expressed.

Composition of the Committee
Lucinda Bell retired as a member of both the Board and Committee in
September 2020 and I would like to record here my thanks to Lucinda
for her valuable work and counsel on the Committee. Janice Stipp joined
the Committee in December 2020. She brings, in addition to her
manufacturing, engineering and financial experience, a US perspective to
remuneration which will complement Ann Christin Andersen’s European
perspective, both of which are important given the international nature of
Rotork’s business. Sally James, who will have served nine years on the
Board and the Committee during 2021, will be retiring from the Board at
the conclusion of the 2021 AGM. I am pleased that Peter Dilnot will be
joining the Committee effective from 30 April 2021. In addition, with Peter
also becoming Senior Independent Director, it is appropriate for him to
become a Committee member; he will bring a strengthened knowledge of
the UK remuneration environment to our discussions.

Committee performance
In accordance with the good governance, the Committee evaluated its
performance during 2020. As is usual, opportunities for improvement were
identified, particularly following the appointment of a new remuneration
adviser and the dynamic nature of remuneration practices. However,
noting the extremely challenging nature and extent of the Committee’s
work this year, it is very pleasing to report that the Committee is regarded
as operating effectively and to a high level.

Tim Cobbold
Chair of the Remuneration Committee
1 March 2021

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Remuneration at a glance

Our Remuneration Policy in 2020

Purpose

Attract and retain
high-calibre
executive directors

Element

Salary(i)

Benefits

Pension

Kevin Hostetler (Chief Executive)

Jonathan Davis (Group Finance Director)

£608,000

Standard benefits plus relocation
arrangements agreed in connection with
his appointment

£351,000

Standard benefits

Pension allowances fixed from 1 January 2020 at their 2019 absolute values, i.e. £152,100 and
£70,119 for the Chief Executive and Group Finance Director respectively. These allowances will
fall to 20% and 15% of salary respectively in 2022 and, by the end of 2022, will align with the 9%
contribution available to the majority of the workforce.

Drive and reward
short-term
performance

Annual bonus(i)

150% of salary maximum
(90% salary on-target)

125% of salary
maximum
(75% salary on-
target)

Incentivise long-
term value
creation and
provide alignment
with shareholders

Long term
incentive plan
(LTIP)(i)

Provide alignment
with shareholders

Shareholding
requirements

Based on profit, cash generation, safety and personal targets (including strategic and
environmental). Any bonus above 60% of maximum is deferred in shares for three years.

200% salary performance share award

175% of salary
performance share
award

Based on adjusted earnings per share (EPS), relative total shareholder return (TSR) and growth in economic
profit assessed over a three-year performance period. A two-year post-vesting
holding period also applies.

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 (£’000)

Actual total remuneration for
2020 (£’000)

£1,517,000

£2,203,000

£780,000

£1,095,000

(i)

In response to the COVID-19 crisis, the executive directors agreed to the delayed introduction of the 25% and 50% of salary increases in bonus and LTIP opportunity and the cancellation of the
2.5% salary rise that were set out in last year’s report. The more demanding targets that had been set for these plans and the increased shareholding requirement remained, however.

Performance outcomes for the 2020 financial year
The table below sets out how the annual bonus and LTIP awards have vested in the year based on performance against target.

2020 annual bonus

2018 LTIP award

Profit (60%)
Cash generation (15%)
LTIR (5%)
Personal and strategic (20%)

EPS growth (33%)
TSR (33%)
Economic profit (33%)

32.9% achieved
15.0% achieved
2.5% achieved
KH:18.5% achieved
JD:18.5% achieved

100.0% of maximum
94.2% of maximum
59.0% of maximum

Kevin Hostetler

Jonathan Davis

68.9% of
maximum awarded

84.4% of
maximum vesting

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RotorkAnnual Report 2020How 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

Innovation

Strategic targets

Operational excellence

Cash generation measure
Personal performance targets

Growth

Profit measure

Sustainability

ESG (including Safety) measures
Deferral into shares
Clawback and malus provisions

LTIP

Economic profit measure

Total Shareholder Return measure
Earnings per share measure

Five-year time horizon (three-year performance
period and two-year holding period)
Clawback and malus provisions

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 ESG.

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

ESG Measures

Annual bonus

Maintain discipline on managing inventory and receivables.

Annual bonus

Focus on safety, emissions, employee engagement, diversity and product environmental impact

Strategic objectives

Annual bonus

Provide a balance to financial delivery which reflect activities which contribute to
the longer term success of the Group. These include environmental targets.

Adjusted earnings per share

Economic profit

Relative TSR

LTIP

Adjusted EPS is a key measure for analysts who cover Rotork and reflects long-term
growth in profits.

Captures the cost of the capital required to operate the business and instils discipline
around capital usage into financial decision-making.

Reflects the long-term growth in the value of shareholders’ investment in Rotork.

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Overview of the Policy report

This section sets out an overview of Rotork’s directors’ Remuneration Policy which was approved by shareholders in a binding vote at the AGM held on
24 April 2020 and became effective on that date. The Committee’s intention is that the current policy will operate for the three-year period to the AGM
in 2023, unless approval for a new policy is sought sooner.

A copy of the directors’ Remuneration Policy is set out in full within the 2019 Annual Report and can be found online at www.rotork.com/en/documents/
publication/24348

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.

Details of the current salaries of the
executive directors are set out in the
Annual Report on Remuneration.

N/A

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).

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
reviewed annually (salaries are
normally reviewed in February, with
any changes effective from 1 April).

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.

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

Standard benefits for executive
directors’ benefits comprise a car and
fuel (or car and fuel 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 membership of the all-employee
Rotork Share Incentive Plan (SIP), or
Overseas Profit Linked Share Scheme
(OPLSS), within the maximum limits as
set by HMRC.

Any reasonable business related
expenses may be reimbursed
(including any tax if determined to be
a taxable benefit).

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RotorkAnnual Report 2020Element of
remuneration

Purpose and how it
supports the strategy

How the element operates

Maximum amounts payable

Framework used to
assess performance

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.

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.

LTIP

To incentivise long term
value creation and
alignment with
shareholder interests.

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 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 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).

For awards granted from 2017
onwards, the directors must retain any
shares vesting (net of tax) until the
fifth anniversary of grant.

For executive directors appointed after
the 2020 AGM: no higher than the
percentage of salary available to the
majority of the workforce.

N/A

For directors appointed prior to the
2020 AGM an amendment to service
contracts will provide that: in 2020
and 2021, contribution capped at the
level paid to them in 2019; in 2022,
no higher than 20% of salary for the
Chief Executive and 15% of salary for
the Group Finance Director; and by
the end of 2022, pension contributions
will be aligned with that available to
the majority of the workforce in which
the executive is located.

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 maximum LTIP opportunity is
200% of salary.

Details of the current award levels are
set out in the Annual Report on
Remuneration.

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.

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.

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Overview of the Policy report continued

Framework used to
assess performance

N/A

Element of
remuneration

Purpose and how it
supports the strategy

How the element operates

Maximum amounts payable

Shareholding
guideline

To provide alignment
with shareholders by
requiring executives to
build and maintain a
meaningful
shareholding in Rotork.

N/A

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 the adoption of this Policy
(subject to a maximum holding
requirement of 200% of final salary).

Chairman
and non-
executive
directors’
fees

To attract and retain
non-executive directors
of the right calibre.

Fees for the Chairman and non-
executive directors are reviewed
periodically.

The maximum aggregate fee level is
as specified in the Group’s Articles
of Association (currently £700,000).

N/A

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.

Non-executive director fees are
determined by the Chairman and
Chief Executive. The fees for the
Chairman are determined by the
Remuneration Committee taking into
account views of the Chief Executive.

The fees for the non-executive
directors comprise a basic Board fee,
with additional fees paid to the Senior
Independent Director Committee
chairs 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).

Clawback and malus
The payment of any bonus is at the ultimate discretion of the Remuneration Committee and the Remuneration Committee 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 and gross misconduct.

The Remuneration Committee has similar power in respect of the LTIP and may exercise discretion to reclaim some, or all, of a vested LTIP award in
exceptional circumstances (the specified situations being the same as for the annual bonus plan). The Remuneration Committee may also lapse or reduce
an award prior to vesting where the participant is found to be guilty of serious misconduct.

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.

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.

122

RotorkAnnual Report 2020Approach 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 may be given over subsequent years subject to individual
performance. We will be clear as to our intentions with a candidate if we
intend to adopt such approach for a particular rewards 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, any outstanding variable pay awarded in
relation to the previous role will be allowed to pay out according to its
terms of grant.

Fees for a new Chairman 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 basic 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 with a pro-rata
reduction to reflect the proportion of the vesting period served.

The Chairman 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 Chairman is three years and their
appointments are subject to termination on three months’ notice (up to
12 months for the Chairman). In the event of the termination of their
position, they are entitled to reimbursement of any outstanding fees and
expenses due.

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www.rotork.comAnnual Report 2020

Overview of the Policy report continued

Executive directors’ service contracts

Name

Date of appointment to Board

Date of service contract

Notice period

Kevin Hostetler

12 February 2018

Jonathan Davis

1 April 2010

1 January 2018 as amended by a Deed of
Variation dated 4 March 2020

19 November 2009 as amended by a Deed of
Variation dated 4 March 2020

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

Martin Lamb (Chairman)

2 June 2014

Ann Christin Andersen

1 December 2018

Tim Cobbold

Peter Dilnot

Sally James

Janice Stipp

1 December 2018

1 September 2017

11 May 2012

1 December 2020

3 April 2019

16 November 2018

9 November 2018

1 September 2017

3 April 2019

24 November 2020

Illustration of the application of the Policy
The charts below illustrate how the Remuneration Policy would function for minimum, on-target and maximum performance for 2021 for each executive
director. In addition, the fourth bar illustrates the value of total remuneration in the event both the annual bonus and LTIP pay out in full with the shares
also being subject to 50% share price appreciation over the relevant period.

£4,000k

£3,500k

£3,000k

£2,500k

£2,000k

£1,500k

£1,000k

£824k

£3,632k

52%

£3,008k

41%

£1,552k

11%

36%

31%

26%

100%

53%

27%

23%

£500k

£1,834k

51%

24%

£1,520k

41%

30%

29%

£796k
11%
34%

56%

£443k

100%

Below target

Target

Maximum

Maximum (with 50%
share price
appreciation)

Below target

Target

Maximum

Maximum (with 50%
share price
appreciation)

Chief Executive Officer

Group Finance Director

Fixed Pay

Annual Bonus

Performance Shares

Salary levels (and consequently the other elements of the remuneration package which are calculated as a percentage of salary) are based on those
intended to apply in 2021. Taxable benefits are shown as the cost to the Company of supplying the benefits for the year ending 31 December 2020.

On-target performance, for illustrative purposes, assumes achievement of 60% of the maximum available bonus and threshold LTIP vesting (13.3% of the
maximum).

Maximum performance assumes achievement of the maximum bonus and full vesting of the LTIP shares.

The LTIP grant level is shown as 200% for Kevin Hostetler and 175% for Jonathan Davis. No share price growth has been assumed (other than for the
fourth scenario, as described above), and for simplicity the benefit derived from participating in the Company’s SIP has been excluded.

124

RotorkAnnual Report 2020

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 2021.

Committee Membership and Governance
The Committee currently comprises four independent non-
executive directors, namely, Tim Cobbold (Chair) Ann Christin
Andersen, Sally James and Janice Stipp who joined the Board on
1 December 2020. Lucinda Bell was also a Committee member
until her retirement from the Board on 30 September 2020.
The Company Secretary acts as secretary to the Remuneration
Committee. The Remuneration Committee met six times during
2020 with attendance set out as follows.

Member

Eligible Meetings (max:6)

Attendance

Tim Cobbold, Chair

Lucinda Bell(i)

Sally James

Ann Christin Andersen

Janice Stipp(ii)

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 Chairman. 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. Insofar 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 to attract and appropriately reward the leadership
team required to successfully run a complex global business.

The full terms of reference of the Remuneration Committee can be
found on the Company’s website at www.rotork.com/en/investors/
corporate-governance

Priorities and activities of the Remuneration
Committee during 2020
Considering the impact of COVID-19 on the
remuneration arrangements in 2020 and 2021
− Developed the approach to remuneration outcomes in 2020 and the

(i) Lucinda Bell stepped down from the Board with effect from 30 September 2020.
(ii) Janice Stipp was appointed to the Board with effect from 1 December 2020.

structure for 2021

− Consulting with shareholders on the above

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 Chairman is also invited to
attend meetings. The Chief Executive and Group Finance Director
are invited to attend parts of certain meetings but are not
present when their own remuneration is considered. The
Committee also considers it valuable to listen to the views of a
serving UK executive director during its deliberations and for that
reason Peter Dilnot, is invited to attend Committee meetings,
subject to his availability.

Reviewing our remuneration 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 to

ensure that it is globally relevant, remains fit for purpose and aligns
with, and supports, Rotork’s Values and culture, and fits with our
pay principles.

− Oversaw the implementation of the revised 2020 Remuneration

Policy following shareholder approval on 24 April 2020.

− Considered corporate governance developments, guidance from

institutional investors and external remuneration trends to ensure our
remuneration structures reflect evolving good practice.

− Conducted a thorough process to select a new remuneration adviser,

leading to the appointment of Korn Ferry.

Setting pay at a competitive level against the
external market and ensuring 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.

− Reviewed the implementation of a 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 2021.

− Reviewed the fee payable to the Chairman.

125

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www.rotork.comAnnual Report 2020

Annual Report on Remuneration continued

Priorities and activities of the Remuneration
Committee during 2020 continued

Determining pay outcomes that are
performance-driven…
− Determined bonus performance against targets and approved

2019 bonus payments.

− Determined LTIP performance against targets and approved

2017 vesting.

− Reviewed incentive plan outcomes and evaluated whether

discretion should be applied.

…and ensuring 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 2020.

− Approved executive directors’ personal objectives for 2020.
− Set LTIP performance targets and award levels for executive directors

and other members of senior management for the 2019 LTIP.

Maintaining transparency and clarity in
everything we do
− Consulted with shareholders on the changes to our Directors’

Remuneration Policy.

− Approved the Directors’ Remuneration Report 2020.

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 2020.

Executive directors

Name

Kevin
Hostetler

Jonathan
Davis

Salary(i)

Benefits(ii)

Annual
bonus(iii)

LTIP(iv)

Pension and related
benefits(v)

Total
remuneration

Total
fixed pay

Total
variable pay

2020

2019

2020

2019

2020

2019

2020

2019

2020

2019

2020

2019

2020

2019

2020

2019

608

604

351

348

524

619

871

–

152

151 2,203

1,422

656

652 1,547

770

242

284

418

377

70 1,095 1,191

365

362

730

829

(i) The slight rise in salary is due to the 2019 increase in salary being applied in July 2019.
(ii) The benefit value consists of a car and fuel (or a car and fuel allowance), private medical insurance and the cash value on allocation of SIP free share awards as appropriate.
(iii) Of the maximum bonus opportunity, the following applied: for Kevin Hostetler, £456,300 was paid in cash with £67,685 deferred into shares for three years; for Jonathan Davis, £210,357 was paid

in cash with £31,203 deferred into shares for three years.

(iv) The 2020 figure relates to the vesting of the 2018 LTIP award based on performance to 31 December 2020. These awards are not eligible to vest until 7 March 2021 and, as such, an indicative share
price of 303.2p (being the average closing share price over the three-month period to 31 December 2020) has been used for the purpose of valuing these awards. This value will be restated in next
year’s report. Of the £871,000 and £418,000, 13% relates to an increase in the value of the underlying shares over the period. The 2019 figure relates to the vesting of the 2017 LTIP award based on
performance to 31 December 2019. 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 254.8p. Of the
£377,075, 6% relates to an increase in the value of the underlying shares over the period.

(v) See below for further details.

Total pension entitlements (audited)

Director

Kevin Hostetler

Jonathan Davis

Normal
retirement
age

Total accrued
pension in the
defined benefit
scheme as at
31 December
2020 (£ per
annum)

–

Value of pension related benefits (£) during Company financial year to:

31 December 2019

31 December 2020

Defined benefit
scheme

Cash in lieu of
pension

–

151,000

69,600

Total

151,000

69,600

Defined benefit
scheme

Cash in lieu of
pension

–

152,100

70,119

Total

152,100

70,119

Notes:
1

The amounts above have been calculated in accordance with Statutory Instrument 2013 No 1981 – The Large and Medium-sized Companies and Groups (Account and Reports) (Amendment)
Regulations 2013.
The total accrued pension in the defined benefit scheme as at 31 December 2020 is that which would be paid annually on retirement from normal pension age. Jonathan Davis was a member of the
defined benefit scheme until he opted out with effect from 30 April 2017. During 2019, Mr Davis elected to remove his accrued benefits from the defined benefit scheme and place them in a private
pension scheme. This transaction, which is an option open to any scheme member in a similar situation, was conducted based on independent actuarial advice and overseen by the Chair of the
Trustees of the pension scheme. The amount of the transfer was an accrued pension of £37,717 per annum and as a result Mr Davis has no remaining financial interest in the defined benefit scheme.
Kevin Hostetler is not a member of the defined benefit scheme.

3 Kevin Hostetler receives an annual cash allowance in lieu of pension contributions which has been capped at a maximum annual value of £152,100.
4

Jonathan Davis receives an annual cash allowance in lieu of pension contributions which has been capped at a maximum annual value of £72,169.

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RotorkAnnual Report 2020Payments to former directors and for loss of office
No payments were made to former directors or for loss of office during the year.

Other directors (£000s)

Name

Lucinda Bell(i)

Ann Christin Andersen

Tim Cobbold

Peter Dilnot

Janice Stipp(ii)

Sally James

Martin Lamb

(i) Retired from the Board on 30 September 2020.
(ii) Joined the Board on 1 December 2020

Base fees

Additional fees/remuneration

Total remuneration

2020

2019

2020

–

234

–

2019

–

234

2020

2019

–

234

The additional fees referred to above are the supplementary fees paid in cash to the Chairs of the Audit, Remuneration and 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 2020
Bonuses in 2020 were based 60% on annual profit, 15% on cash generation, 5% on lost time injury rate and 20% on personal strategic objectives.
Details of performance achieved against the targets set are shown below. These targets were set in anticipation of the 25% of salary increase in
opportunity that was described in last year’s annual report.

Annual profit target
Cash generation
Lost time injury rate

Total

Performance
required to
trigger bonus
payment

£114m
85%
<0.30

Performance
required at
maximum

% payable* at
maximum
performance

£171m
110%
<0.25

60%
15%
5%

80%

Performance
outcome

£143m
130%
0.24

% bonus
awarded*

32.9%
15.0%
2.5%

50.4%

* % of maximum bonus. The score for the lost time injury rate was reduced from the maximum of 5% in consideration of the fatality.

Personal strategic objectives, which accounted for 20% 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.

Due to the onset of COVID-19 and the need for leadership’s focus on a coordinated global response, it was agreed to realign specific personal objectives
of the executive directors’ objectives for the full year which was done in conjunction with the preparation of Rotork’s COVID-19 Response Plan. Small
changes were made to the objectives mid-year in response to the level of leadership required to steer the Group through the COVID-19 crisis.
Performance against each of the defined targets was assessed by the Remuneration Committee with input from the Chairman and other non-executive
directors.

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www.rotork.comAnnual Report 2020

Annual Report on Remuneration continued

The objectives for both executive directors and the performance against them are summarised in the table below. Small changes were made to the
objectives mid-year with the original weightings shown in brackets.

Kevin Hostetler

Performance summary

Business strategy & vision
− Continue to drive execution on previously identified
strategic initiatives, including opportunities arising
from decarbonisation and the digital future.

− Develop roadmap for M&A.
− Develop horizon scanning.

Implementation of strategic initiatives, including
decarbonisation and digital strategies.

The M&A roadmap developed and maintained.

ESG Strategy development commenced.

% payable* at
maximum

% bonus
awarded*

3.0% (4.0%)

3.0%

Growth Acceleration Programme:
− IT Systems Deployment.

Horizon scanning paused for 2020 due to COVID-19.

Achieved alignment of IT, operations, commercial and
functional support teams in preparation to deploy next
generation IT solution set, to schedule and budget.

12.0% (16.0%) 10.5%

− Talent Management, Culture and Diversity.

Embedded Culture and Values.

− Innovation, R&D and Sustaining Engineering.

− Operational Improvement Plan

(including driving the ESG agenda).

Further progress on gender and ethnic diversity programmes.

Strong rhythm of communications leading to high levels of
engagement through COVID-19.

Maintained Innovation Funnel, NPD Initiatives & Core NPD
Process and KPIs development.

Net NPD incremental revenues were only partially achieved due
to lower market volumes.

Operational improvement plan continued successfully.

Achieved targeted reductions in energy and water usage.

− Route to market – switch from product to sector

facing businesses.

Switch to end market sectors completed on-time with positive
interim survey results.

Mid-year adjustments
− COVID-19 response plan – focus on H&S and

business disruption.
− COVID-19 Financial Plan.
− O&G Plan to address rapid sector decline in 2020.

COVID-19 Response plan presented to Board in March 2020
and successfully implemented.

5.0% (0%)

5.0%

COVID-19 Financial Plan approved in June 2020. Plan exceeded.

Communications plan prepared and executed throughout 2020.

O&G Plan developed and successfully implemented.

Total

20.0%

18.5%

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RotorkAnnual Report 2020Jonathan Davis

Performance summary

Development and implementation of financial systems,
including:
− Realignment of financial reporting to match end market

The new reporting framework was completed on schedule
to support the switch to an end market facing business.

% payable* at
maximum

% bonus
awarded*

17.0% (20.0%)

15.5%

structure.

− Finance transformation.

Related investor communications well received.

New target operating model concept developed and
corresponding financial control environment defined.

New ERP finance structure designed in line with the broader
ERP programme.

COVID-19 impacted schedule.

− Business Control Framework enhancement.

New control framework developed and documented.

− Internal Audit Process Improvement.

− Finance function development.

Gap analysis performed across all regions.

Implementation of first phase interim solutions on track to a
post COVID-19 plan.

COVID-19 impacted schedule.

Clear progress delivered in responsiveness to
recommendations.

“Lines of Defence” structure and approach defined and
agreed.

A new finance team structure was implemented and regional
teams strengthened.

Finance talent and succession planning review completed –
implementation underway.

− Development of Management/Board reporting in line with

Board expectations/requirement.

Marked improvement to insight in and analysis of business
trends with enhancements to key management reporting.

− Driving the ESG agenda.

Achieved targeted reductions in energy and water usage.

Mid-year adjustments
Replace existing committed facilities and enhance
liquidity forecasting.

New credit facilities in place by June 2020 with tenor
extended.

3.0% (0%)

3.0%

Forecasting significantly more granular.

Total

* % of maximum bonus.

20.0%

18.5%

Following the publication of the 2019 annual report and, as the business was starting to be impacted by the effects of COVID-19, both of the executive
directors agreed to postpone the increase in bonus opportunity of 25% of salary that shareholders then approved at the 2020 AGM.

After adjusting for the reduction in Health and Safety bonus, on a formulaic basis the 2020 Annual Bonus Plan, would have resulted in a payout of 77.4%
of maximum opportunity for the executive directors and senior management. After careful consideration, the Committee felt that the performance of the
business (in all the circumstances) had been good and warranted this level of bonus outturn for the senior management and the wider workforce.

However, in considering the executive directors, the Committee, conscious that targets had been set in June in the light of COVID-19, noted that the level
of payout (also on a formulaic basis) had the targets approved in February been applied, would have been 51.7%. Therefore, absent any action by the
Committee, the delayed Annual Bonus Plan would have led to a payout higher by 25.7% of maximum opportunity, equivalent to 32.1% and 25.7%
of salary for Kevin Hostetler and Jonathan Davis respectively. The Committee’s view was that this degree of ‘additional’ bonus, whilst reflective of
performance, should be moderated. The Committee therefore decided to exercise downward discretion to reduce the ‘additional’ bonus by 33%; to
require that 33% of the ‘additional’ bonus should be paid in shares deferred for three years under the Deferred Share Bonus Plan to the extent not
required by the Remuneration Policy; and that 33% of the ‘additional’ bonus should be paid in cash.

As a result of these decisions, the level of payout for the executive directors was reduced to 68.9% of maximum opportunity. In approving this level of
payout the Committee noted that at this level the 2020 payout results in a bonus award 15% lower than in 2019 on profits (EBITA) down 3.8% on a
constant currency basis but with operating margin up 1% point. The 2020 payout for employee groups in the wider workforce, for whom no discretion
(other than for Health and Safety) has been applied, is an average of 80% of maximum opportunity, higher than for the executive directors. The
Committee viewed this disparity in treatment as appropriate, conscious that income levels vary in the business.

As a result, the bonus for Kevin Hostetler and Jonathan Davis for 2020 paid out at 86.1% and 68.9.% of salary respectively. Of the bonus award,
11.1% and 8.9% of salary for each of Kevin Hostetler and Jonathan Davis will be deferred in shares for three years under the Deferred Bonus Share Plan
and subject to no further performance conditions. Of the above amounts, Kevin Hostetler will defer £67,685 and Jonathan Davis will defer £31,203;
the balance is paid in cash.

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Annual Report on Remuneration continued

Deferred Share Bonus Plan (DSBP) awards (audited)
Any bonus earned above a threshold of 60% of the maximum is deferred into share awards under the Deferred Share Bonus Plan, vesting on the third
anniversary of grant. No further performance conditions apply; DSBP awards are subject to continued employment only and dividend equivalents may be
paid on the deferred shares on vesting.

The following DSBP awards were made on 3 March 2020 (based on performance in relation to the 2019 financial year):

Kevin Hostetler

Jonathan Davis

Share awards granted

Basis on which
awards made

Face value
of awards (£)(i)

Vesting date

59,362

26,744

27.5% of salary

21.5% of salary

166,000

3 March 2023

75,000

3 March 2023

(i) The share price used to determine the number of shares under the award was 279.9p being the share price immediately prior to the date of the award.

LTIP awards vesting based on performance to 31 December 2020 (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 basic EPS, TSR compared to a comparator group and economic profit growth. The economic profit 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 7 March 2018 were based on performance to 31 December 2020 and were subject to the following performance targets:

Measure

Weighting

Performance period

Threshold target

Stretch target

Performance outcome

Earnings per share1

33%

01/01/2018 – 31/12/20

9% (15% vesting)

35% (100% vesting)

TSR relative to the
constituents of the FTSE
350 Industrial Goods and
Services Sector1

33%

01/01/2018 – 31/12/20 Median ranking

Upper quartile ranking
or above

Economic profit growth

33%

01/01/2018 – 31/12/20

0% growth on three
times the 2017
economic profit

32.6% growth on three
times the 2017
economic profit

EPS performance of 39.0% was
above the stretch target resulting
in 100% vesting for this part of
the award.

TSR growth of 73.0% was above
the threshold target resulting in
94.2% vesting for this part of the
award.

Economic profit performance of
13.7% growth was above the
threshold target resulting in 59.0%
vesting for this part of the award.

For performance between threshold and stretch, awards vest on a pro-rata basis.

The 2017 basic EPS was depressed by an impairment charge relating to the Bifold acquisition which had the effect of making the target growth rates
easier to achieve. In October 2020, the Committee decided that this was not appropriate and exercised their discretion to add back the impairment
charge thereby making the target harder to achieve. Despite this adjustment, basic EPS grew by 39%. Economic profit growth (growth in profit ahead of
the return demanded by the weighted average cost of capital) was good at 4.4%. Relative TSR performance in the period was top quartile reflecting the
strong recovery in performance following the change in leadership and the implementation of the new business strategy and the Growth Acceleration
Plan. The Remuneration Committee, therefore, approved the vesting of 84.4% of the shares awarded under the 2018 LTIP cycle as follows:

Kevin Hostetler

Jonathan Davis

Grant date

March 2018

Number of
Shares(i)
under award

340,393

163,461

Number of
shares vesting

Number of
shares lapsing

Vesting date

287,291

137,961

53,102

7 March 2021

25,500

7 March 2021

(i) Awarded as nil-cost options. For Kevin Hostetler only, the nil-cost options were re-designated as conditional share awards effective from 18 December 2019 as permitted under the 2010 LTIP Rules.

130

RotorkAnnual Report 2020Share awards granted in 2020 (audited)
LTIP awards (audited)
The following LTIP awards were made to the executive directors on 7 April 2020. These grants are at lower levels than were anticipated in last year’s
Directors’ Remuneration Report, reflecting the decision to postpone the 50% of salary increase in award level that shareholders then approved at the
2020 AGM.

Kevin Hostetler

Jonathan Davis

Share awards
made
during 2020(i)

Basis on which
awards made

Face value
of award (£)(ii)

412,941 150% of salary

198,300 125% of salary

912,600

438,244

Percentage
vesting for
minimum
performance(iii)

13.3%

End of
performance period

Vesting date

31 December 2022

7 April 2023

31 December 2022

7 April 2023

(i) Awards to Kevin Hostetler were made as conditional share awards; awards to Jonathan Davis were made as nil-cost options.
(ii) The share price used to determine the number of shares under the awards was 221p, 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 and capital return (economic profit) conditions are achieved. The three equally-weighted performance measures are:

a
b

Earnings per share – EPS growth must be at least 9% for 15% vesting, increasing on a straight-line basis to full vesting for EPS growth of 35% and above;
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; and
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 payout will be received for a negative economic profit. The threshold target requires average
economic profit over the three-year period to exceed that generated in 2019 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.

The structure of the performance conditions was consistent with the 2019 award with no COVID-19 related adjustment to targets. The Committee
believes the targets were made more challenging in light of the increase in the LTIP opportunity (the implementation of which was subsequently deferred
into 2021) in the new Remuneration Policy approved by shareholders.

At the time the Committee satisfied itself that although the award was made at a share price reduced by COVID-19, having regard to both the good
share performance in the previous 12 months and a decline in the share price of less than 25% (which was widely regarded at the time as the threshold
for considering scaling back of awards or other similar measures), that it was not appropriate to scale back the award and that explicit windfall provisions
would not be necessary. However, the Committee will, in 2023, 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.

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 5% 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. Details of free share awards under the SIP made to executive directors in 2020 are set out below.

Kevin Hostetler

Jonathan Davis

Free share awards made during the year

Date of grant

Number

Basis on which award made

29 May 2020

1,367

Non-performance based

Face value of
award

£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
2019

Granted in
the year

Lapsed
in the
year

Option
awards
exercised in
the year

Awards
held at
31 December
2020

Performance
period

Exercise
price

Date of grant

Vesting date/end
of holding period

Kevin Hostetler

LTIP

DSBP

SIP

SAYE

Total

Jonathan Davis

LTIP

DSBP

SIP

Total

340,393

315,015

–

412,941

71,783

–

7,058

–

59,362

1,367

–

734,249

473,670

175,135

163,461

151,274

–

198,300

14,697

36,790

–

26,744

1,440

1,274

1,204

–

1,367

–

1 Jan 2018-
31 Dec 2020(ii)

1 Jan 2019-
31 Dec 2021(iii)

1 Jan 2020-
31 Dec 2022(iii)

N/A

340,393

315,015

412,941

71,783

59,362

1,367

7,058

1,207,919

–

7 March 2018 7 March 2021

16 May 2019

16 May 2022

7 April 2020

7 April 2023

5 March 2019 5 March 2022

3 March 2020 3 March 2023

6 April 2020

6 April 2023

255p 1 October 2019

1 June 2023

27,146

147,989

1 Jan 2017-
31 Dec 2019(i)

–

1,440

–

163,461

151,274

198,300

14,697

36,790

26,744

–

1,274

1,204

1,367

1 Jan 2018-
31 Dec 2020(ii)

1 Jan 2019-
31 Dec 2021(iii)

1 Jan 2020-
31 Dec 2022(iii)

N/A

–

6 March 2017

6 March 2020

7 March 2018

7 March 2021

16 May 2019

16 May 2022

7 April 2020

7 April 2023

7 March 2018

7 March 2021

5 March 2019

5 March 2022

3 March 2020

3 March 2023

6 April 2017

6 April 2020

6 April 2018

6 April 2021

8 April 2019

8 April 2022

6 April 2020

6 April 2023

545,275

226,411

27,146

149,429

595,111

(i) 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 described in last year’s report, the TSR target was achieved, while the EPS and capital return (economic profit) were partially met.
Accordingly, 147,989 shares vested in March 2020. These vested awards are subject to a two-year post-vesting holding period during which time they may not be sold.

(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. Any vesting awards will also be subject to a two-year post-vesting holding period during which time they may not be sold. As described
above, the EPS target was met in full with the TSR and capital return (economic profit) targets achieved at above threshold. Accordingly, for Kevin Hostetler, 287,291 shares will become eligible to
vest and, for Jonathan Davis,137,961 shares will become eligible to vest in March 2021.

(iii) 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. Any vesting awards will also be subject to a two-year post-vesting holding period during which time they may not be sold

132

RotorkAnnual Report 2020Statement of directors’ shareholding and share interests (audited)
The table below shows total shareholdings of the current directors and former directors as at 31 December 2020.

Executive directors
Kevin Hostetler
Jonathan Davis

Non-executive directors
Ann Christin Andersen
Tim Cobbold
Peter Dilnot
Janice Stipp
Sally James
Martin Lamb

Unconditionally
owned shares(i)

Unvested DSBP
Awards(ii)

71,230
42,711

131,388
367,283

–
–
–
–
13,031
152,414

% of salary
shareholding
achieved(iv)

Unvested LTIP
awards

96%
337%

1,068,349(v)
513,035(vi)

SIP(iii)

1,367
3,845

SAYE

7,058
–

N/A
N/A
N/A
N/A
N/A
N/A

–
–
–
–
–
–

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.

(i)
(ii) DSPB awards (shown net of estimated tax and national insurance) 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 the three-year trust period.
(iv) The share price used to determine the percentage of the shareholding of salary achieved is 286.2p, being the 12 month average share price as at 31 December 2020. 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.

(v) An LTIP award over 412,941 shares was granted to Kevin Hostetler on 7 April 2020.
(vi) An LTIP award over 198,300 shares was granted to Jonathan Davis on 7 April 2020.

There has been no change in the directors’ interests in the ordinary share capital of the Company between 31 December 2020 and 1 March 2021, except
in the case of Jonathan Davis’s and Kevin Hostetler’s monthly purchases of partnership shares under the SIP.

TSR performance graph
This graph shows the value, by 31 December 2020, of £100 invested in Rotork plc on 31 December 2010, 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.

£250

£200

£150

£100

Dec 10

Dec 11

Dec 12

Dec 13

Dec 14

Dec 15

Dec 16

Dec 17

Dec 18

Dec 19

Dec 20

Rotork plc

FTSE 350 Industrial
Goods & Services Index

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Annual Report on Remuneration continued

Historic Chief Executive remuneration table

Year

2020
2019
2018
2018
2017
2017
2016
2015
2014
2013
2012
2011
2010

Chief Executive

Kevin Hostetler
Kevin Hostetler
Kevin Hostetler(i)
Martin Lamb(ii)
Martin Lamb(ii)
Peter France(iii)
Peter France
Peter France
Peter France
Peter France
Peter France
Peter France
Peter France

Chief Executive
single figure
remuneration
(£000s)

Annual cash
bonus as a
percentage of
maximum
opportunity

LTIP vesting
rate as a
percentage of
maximum
opportunity

2,203
1,422
1,193
353
282
681
835
696
1,092
1,452
1,539
1,182
1,288

69.7%
82.0%
90.9%
N/A
N/A
72.0%
45.5%
23.4%
66.0%
94.4%
91.3%
88.9%
91.9%

84.4%
N/A
N/A
N/A
N/A
0%
0%
0%
37.0%
67.0%
75.5%
30.0%
94.4%

(i) Kevin Hostetler was appointed to the role of Chief Executive on 12 March 2018.
(i) 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.

(iii) Peter France resigned as Chief Executive and stood down from the Board on 27 July 2017.

Percentage change in remuneration of directors
The table below shows the percentage change in remuneration (based on salary, benefits and bonus) between 2019 and 2020 of the directors in the
Group compared to the percentage change for the average UK employee. As the salary increase for 2019 was given to both Kevin Hostetler and Jonathan
Davis in July 2019, their change in base salary shows an increase of 0.7%. Kevin Hostetler’s benefit increase was due to his eligibility to participate in the
SIP for the first time. Janice Stipp was appointed to the Board in December 2020.

All permanent employees

Kevin Hostetler

Jonathan Davis

Ann Christin Andersen

Tim Cobbold

Peter Dilnot

Sally James

Martin Lamb

Janice Stipp

Change in
base salary
%

Change in
benefits
%

Change in
annual bonus
%

0.3

0.7

0.0

N/A

3.7

7.5

0.0

N/A

1.0

-15.3

-14.8

N/A

Relative importance of spend on pay
The following table shows actual expenditure of the Company and change in spend between current and prior financial periods on remuneration paid to
all employees against distributions to shareholders.

Employee remuneration (£000s)

Dividends (£000s)(i)

(i) Dividends paid were the only distributions to shareholders during the year.

2020

134,747

33,926

2019

Percentage change

153,879

52,287

-12.4%

-35.1%

134

RotorkAnnual Report 2020CEO pay ratio disclosure
The table below sets out Rotork’s CEO pay ratio for the 2018, 2019 and 2020 financial years.

Year

2020

2019

2018

Method

Option B

25th percentile
pay ratio

Median
pay ratio

75th percentile
pay ratio

45:1

48:1

49:1

37:1

43:1

45:1

28:1

27:1

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.

To provide further context, the table below shows the CEO and the employee percentile pay used to determine the 2020 pay ratios.

Year

Total salary1

Total remuneration (single figure)1

Full time equivalent.

CEO
£000

608

2,203

25th percentile
£000

Median
£000

75th percentile
£000

Statement of voting at general meeting
The 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 24 April 2020 in respect of the Remuneration Policy and Annual Report on
Remuneration for the year ended 31 December 2019.

Resolution

To approve the Remuneration Policy

To approve the Annual Report on
Remuneration

Votes cast ‘for’

682,875,938

Votes cast
‘against’

% Votes ‘withheld’

95.97

28,701,772

4.03

8,566,067

693,950,567

96.83

22,686,190

3.17

3,506,020

Advisers to the Remuneration Committee
Korn Ferry currently acts as advisor to the Committee, having been appointed by the Remuneration Committee in July 2020 following a competitive
tender process. Korn Ferry is a member of the Remuneration Consultants’ Group and a signatory to its Code of Conduct. Prior to this, the Committee was
advised by the executive remuneration practice of Aon plc. Another subsidiary of Aon plc remains the scheme actuary for the Group’s USA pension plan
and, up to and including their ceasing to be an adviser, Aon had procedures in place to ensure that no conflict of interest would arise. The Committee
keeps the independence of the advice provided under review and remains satisfied that Korn Ferry is sufficiently independent to act as remuneration
advisor to the Remuneration Committee. Korn Ferry provides additional advice to the Company.

In 2020, the Company paid £102,948 (2019: £189,730) to Aon for services to the Remuneration Committee and £40,887 to Korn Ferry (2019: nil). Figures
exclude VAT and disbursements.

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Annual Report on Remuneration continued

How we will operate the Policy in 2021

Salary

Benefits

Pension

Executive directors’ salaries will increase effective from 1 April 2021 by 2.6% as follows:
− Kevin Hostetler – £624,000
− Jonathan Davis – £360,000

The average increase for the UK workforce in 2021 is 2.63%.

Benefits comprise car and fuel (or car and fuel allowance), personal accident and private medical insurance and life assurance. In addition, Kevin
Hostetler receives travel benefits to his home country of the United States.

A commitment has been made to align existing executive directors’ pensions to the level of the majority of the workforce, 9%, by the end of
2022. Until then, executive directors receive a cash allowance in lieu of pension contributions, the value of which, for 2021, will remain fixed at
the level paid in 2019, as follows:
− Kevin Hostetler – £152,100
− Jonathan Davis – £70,119

LTIP

The LTIP award levels for 2021 will be 200% of salary for Kevin Hostetler and 175% of salary for Jonathan Davis. This implements the postponed
increases envisaged and described in last year’s report. The awards will be subject to the following performance conditions:

− 33% will be based on relative TSR performance with 25% vesting at median increasing to full vesting for upper quartile performance

or above.

− 33% will be based on adjusted EPS. Adjusted EPS growth must be at least 9% for 15% 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.

− 33% will be based on economic profit. No payout will be received for a negative economic profit. The threshold target will require the

cumulative economic profit over the three-year period to exceed that generated in the three year period to 2020 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.

The awards will be granted following the publication of the 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.

Annual
bonus

The maximum opportunity available to executive directors will increase by the postponed 25% of salary envisaged and described in last year’s
remuneration report. Therefore, the maximum opportunity for Kevin Hostetler and Jonathan Davis will be 150% and 125% respectively. Any
bonus earned above 60% of the maximum opportunity will be deferred in shares for three years. Bonuses will be based on:

− EBITA Performance (60% of opportunity) – the plan is based on the 2021 Budget approved by the Board and the challenging nature of the
target will be maintained by ensuring that the growth rate required to achieve both the on target and stretch elements remains the same as
was approved in the original 2020 plan, prior to COVID-19.

− Cash Conservation (15% opportunity) – the target to achieve maximum outturn will remain at 110%, having been increased to this level in
2020, 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 continue to be based

on Health and Safety (LTIR) with a target set on the basis of 2020 performance and a maximum that requires maintaining the historical
improvement in LTIR. In this first year, an additional 5% will be split across quantitative targets set to cover normalised carbon emissions
(scopes 1 and 2); culture and engagement scores (including inclusivity); 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 the Growth Acceleration Plan including leveraging the new sector-based organisation and on the new IT System and control
environment development and implementation.

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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RotorkAnnual Report 2020Shareholding
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 and Group Finance Director respectively) to be achieved within five years.

From 2020, 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 Policy which 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

In line with the salary increase for the wider workforce, an increase of 2.6% to the Chairman’s fee and an increase of 2.5% to the base Board fee
have been approved as follows:
− Chairman: £240,000, effective 1 April 2021;
− Base Board fee: £57,400, effective 1 April 2021.

Similarly, an increase of 2.5%has been approved to the supplementary fees payable to those directors with additional responsibilities, effective
from 1 April 2021:
− Additional fee for chairing the Audit Committee £10,250;
− Additional fee for chairing the Remuneration Committee £10,250;
− Additional fee for the role of Senior Independent Director £10,250;
− Additional fee for chairing the ESG Committee £7,175; and
− Additional fee for undertaking the role of workforce engagement director £7,175.

On behalf of the Board

Tim Cobbold
Chair, Remuneration Committee
1 March 2021

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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 2020 as set out on pages 152-196. 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, is set out in the Strategic
Report on pages 10-81.

Corporate Governance Statement
Under Rule 7 of the DTRs, a requirement exists for a corporate governance
statement to be included in this Directors’ Report. The corporate
governance statement explaining how Rotork complies with the
Governance Code is set out on page 86. A description of the composition
and operation of the Board and its Committees is set out on pages 86-89.

Disclosures
The Strategic Report can be found on pages 10-80, and encompasses our
corporate responsibility report. A complete list of the Group’s subsidiaries
has been included on pages 193 to 195 to comply with section 409 of the
Companies Act 2006.

Listing Rule 9.8.4R Disclosures

Listing Rule Statement Detail

Page reference

9.8.4R(4)

Details of long-term
incentive schemes

Note 25 to the financial
statements and the
Directors’ Remuneration
Report on pages 130-131

9.8.4R(12)

9.8.4R(13)

9.8.4R(1-2),
(5-11) and (14)

Shareholder waivers
of dividends

Note 17 to the financial
statements

Shareholder waivers
of future dividends

Note 17 to the financial
statements

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 173 countries through a network of offices and manufacturing facilities.
The Company employs 3,400 employees worldwide and is headquartered
in Bath, UK.

Registered Office
Rotork plc is incorporated as a public limited company and is registered in
England with the registered number 00578327. Its registered office is
Rotork House, Brassmill Lane, Bath, BA1 3JQ. Our registrars are Equiniti
Limited, located at Aspect House, Spencer Road, Lancing, West Sussex,
BN99 6DA.

138

Results
The results for the year ended 31 December 2020 are set out in the
financial statements on pages 152-155.

Dividend
The directors recommend a final dividend of 6.3p per ordinary share
(2019: nil) for the year, payable on 21 May 2021 to shareholders on the
register on 9 April 2021. The recommendation to pay a final dividend in
respect of 2019 was withdrawn on 31 March 2020 in response to the
uncertainty arising from the COVID-19 pandemic. The Board subsequently
decided to pay this dividend and declared an interim dividend for the year
ended 31 December 2020 of 3.90p per ordinary share (2019: 2.30p) which
was payable to shareholders on the register on 21 August 2020 and paid
on 25 September 2020.

Directors
The directors in office at the date of this report (all of who served during
the year) and their biographies and other details, are set out on pages
88-89.

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 Companies Act 2006. The Company purchases and maintains
insurance for the directors and officers of the Company in performing their
duties, as permitted by section 233 Companies Act 2006.

Powers of the directors
As set out in the Company’s articles of association, the business of the
Company is managed by the Board who 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.

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. The 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 and
Trade Sanctions were last updated in 2019. A high level summary of the
main policy is set out on pages 78-79.

Our Suppliers’ Code of Conduct can be viewed on our website at
https://www.rotork.com/en/about-us/terms-and-conditions/suppliers/
code-of-conduct and is available in our six core languages.

RotorkAnnual Report 2020Whistleblowing
Rotork encourages the reporting of any suspected wrongdoing through
its Speak-Up line which can be found on the Rotork website
https://www.rotork.com/en/documents/publication/6675. The Speak-Up
policy gives the workforce various ways to alert management and directors
to any concerns including suspected wrong doing, including an
independent external Speak-Up line to assist in facilitating the reporting of
any concerns confidentially.

All Speak-Ups are investigated thoroughly, however communicated. At
each meeting of the Board, directors review any 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 give or
receive them.

In 2020, we continued to implement our plan to reduce the number
of agents that we engage. We have a thorough process for their
appointment, the terms under which they operate and stringent ongoing
monitoring requirements.

Modern Slavery Act
The current Modern Slavery Act Statement, can be found on the Rotork
website at https://www.rotork.com/en/investors/modern-slavery-statement.

Benchmarking
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 54-73 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, a charity that was
established to provide short-term financial support to employees, and
ex-employees, and their families facing financial hardship, especially as a
result of the COVID-19 crisis. Further details are given on pages 66-69.

Political donations
No political donations were made during the year. The Group has a policy
of not making political donations in any part of the world.

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 26 to the
accounts.

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
2020 are summarised in note 17 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 24 April 2020, 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 2021 AGM and appropriate renewals will be sought. The Company did
not acquire any of its own shares under this authority in 2020.

During the year, ordinary shares were acquired and held in trust for the
benefit of directors and employees for future payments under the
Company’s share schemes. Further details can be found in note 25.

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 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.

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.

Greenhouse gas emissions
The disclosures concerning greenhouse gas emissions required by law are
set out in the key performance indicators on page 71.

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 58-63.

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Directors’ report continued

Engagement with Suppliers and Customers
For details on how we have engaged with our suppliers and customers,
see page 95.

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 Chairman and Senior Independent Director and
also with the Chief Executive and Group Finance Director. A range of
online and virtual investor relations events following the publication of the
full-year and half-year results has been scheduled for 2021.

Substantial shareholders
As at 31 December 2020, the following notifiable interest in issued share
capital had been received by the Company under the Disclosure Guidance
and Transparency Rules (DTR 5) of the FCA. Since 31 December 2020, Fiera
Capital has made two further notifications to the Company, one being a
disclosure of a decrease in its holding to below the 5% threshold followed
by a notification of an increase in holding to 5.03%. There were no other
interests in shares notified between 31 December 2020 and 1 March 2021.

Identity

Fiera Capital Corporation

Number of voting
rights (direct and
indirect)

44,073,449

% of
voting
rights

5.05

Disclosure of information to auditors
The directors who held office at the date of approval of this Report of the
Directors confirm that, so far as they are each aware, there is no relevant
audit information of which the Company’s auditors are 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.

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 2023. For further information,
see page 49.

Post-balance sheet events
There have been no important post-balance sheet events.

Annual General Meeting
The AGM will be held on 30 April 2021.

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
Upon the recommendation of the Audit Committee and approval of the
Board, a resolution to appoint Deloitte LLP as auditor, and to authorise the
Audit Committee to determine their remuneration, are to be proposed at
the forthcoming AGM.

The Directors’ Report was approved by the Board on 1 March 2021.

By order of the Board

Sandra Forbes
Group General Counsel and Company Secretary (Interim)
1 March 2021

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RotorkAnnual Report 2020Statement of directors’ responsibility 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 international accounting standards in conformity with the requirements of the Companies Act 2006
and International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. 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 directors, whose names and functions are listed on pages 88-89 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, are fair, balanced and understandable

and provide the information necessary for shareholders to assess the Company’s performance, business model and strategies.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website.
Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Kevin Hostetler
Chief Executive
1 March 2021

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Financial
Statements

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Independent auditor’s report to the members
of Rotork Plc

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 2020 and of the group’s profit for the year then ended;

− the group financial statements have been properly prepared in accordance with international accounting standards in conformity with the

requirements of the Companies Act 2006, and International Financial Reporting Standards (IFRSs) as adopted by the European Union;

− 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 30, and (a) to (i).

The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law, international
accounting standards in conformity with the requirements of the Companies Act 2006, and IFRSs as adopted by the European Union. 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 8 to the financial statements. We confirm that the non-audit services prohibited by the FRC’s
Ethical Standard were not provided 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

Materiality

The key audit matter that we identified in the current year was:
− The timing of revenue recognition.

The materiality that we used for the group financial statements was £6.0 million which was determined on the basis of
profit before tax adjusted for ‘Other adjustments’, defined in note 4.

Scoping

Our audit scope covered 79% of group revenue, 86% of group profit before tax, and 87% of net assets.

Significant
changes in
our approach

Our component scoping has been revised and now includes a number of additional components on which we have
performed specified audit procedures, with work being performed by the Group audit team. This change was made in
order to retain appropriate coverage of revenue. There have been no other significant changes to our approach in the
year.

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RotorkAnnual Report 20204. 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 as well as relevant covenants, set out in note 26;
− Assessment of whether the cash flow forecasts over the outlook period are reasonable including consideration of the potential impact of COVID-19;
− Evaluation of the headroom forecast by management over both liquidity positions and covenant compliance;
− Assessment of the sufficiency of the sensitivity analysis performed by management;
− Evaluation of the forecast impacts of COVID-19 on the group and the extent to which these are considered in the prepared sensitivity analyses;
− Testing of the clerical accuracy of those forecasts and assessment of the historical accuracy of forecasts prepared by management; and;
− Assessment of the adequacy of the disclosure provided in note 1.

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 earned revenues of £605 million during the year (2019: £669 million) relating to the manufacture and delivery
of products and services. 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 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 the delivery terms of the arrangement and whether specific 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 the Audit Committee report on page 104, and 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 at each component to address the risk of inappropriate revenue

cut off;

− determined an appropriate sample of third party transactions exhibiting particular risk characteristics around the year end

identified from populations relevant to the terms and shipping destinations of each business; and

− determined an appropriate sample of intercompany transactions shipped direct to customers from manufacturing locations,

to evaluate whether the accounting for the third party transaction is appropriate.

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For those samples of transactions we have performed the following:
− inspected purchase orders, invoices, despatch notes, shipping terms and delivery notes as required to assess whether the
timing of revenue recognition is appropriate based on the status of products at year end. This included a challenge of
whether control has passed in line with the requirements of IFRS 15; and

− specifically in the case of bill-and-hold sales, amongst other things, assessed the extent to which there is evidence the

customer has accepted ownership before year-end and if there is a substantive reason for continuing to hold the products.

Key
observations

We are satisfied that the timing of revenue recognition is appropriate.

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Independent auditor’s report to the members of Rotork Plc 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

£6.0 million (2019: £6.4 million)

£2.1 million (2019: £2.2 million)

5% of profit before tax adjusted for ‘Other adjustments’.

In the year ended 31 December 2020 the adjustments we
make to statutory pre-tax profit are consistent with those
presented in Note 4. This basis is consistent with the year
ended 31 December 2019.

Parent company materiality equates to less than 1% of net
assets, which is capped at 50% of group performance
materiality. This basis is consistent with that applied at the
year ended 31 December 2019.

Adjusted profit before tax reflects the manner in which
business performance is reported and assessed by external
users of the financial statements.

Net assets are considered to be an appropriate
benchmark for the parent company given that
it is mainly a holding company.

Consistent with last year we have adopted this measure, as
defined above, as it provides a consistent year on year basis
for determining materiality.

Group materiality £6m

Component materiality range £1.9m to £2.5m

Audit Committee reporting threshold £0.3m

Basis for
determining
materiality

Rationale
for the
benchmark
applied

PBT adjusted for
‘Other adjustments’
£127.9m

PBT adjusted for
‘Other adjustments’

Group materiality

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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.

Performance
materiality

Basis and
rationale for
determining
performance
materiality

Group financial statements

Parent company financial statements

70% (2019: 70%) of group materiality

70% (2019: 70%) of parent company materiality

In setting performance materiality we considered:
− The quality of the control environment in the Group and in the component finance teams and the extent to which

this has been impacted by COVID-19;

− The low number of corrected and uncorrected misstatements identified in previous audits; and
− The level of consistency in key management personnel.

We have not identified any significant changes in the above assessment which results in a consistent performance
materiality determination in 2020 and 2019.

Error reporting threshold
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £0.3 million (2019: £0.3 million),
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 16 components (2019: 16) which were subject to a full scope audit and on a further five components (2019: 2) which were subject to
specified audit procedures.

The 21 components (2019: 18 components) represent the principal business units within the Group’s three reportable segments across
14 countries and account for 79% of the Group’s revenues (2019: 81%) and 86% of profit before tax (2019: 87%) and 87% of net assets
(2019: 87%). They were also selected to provide an appropriate basis for undertaking audit work to address the risks of material misstatement
identified above. 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 £1.9 million to £2.5 million (2019: £2.0 million to £2.7 million). The increased number of components included
within our audit scope reflects the inclusion of three additional components on which the group audit team performed specified audit procedures.
This change was made in order to retain appropriate coverage of revenue.

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.

Revenue

21%

12%

Profit before tax

Net assets

14%

11%

13%

67%

75%

87%

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Full audit scope
Speciﬁed audit procedures
Specified audit procedures
Review at group level
Review at group level

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Independent auditor’s report to the members of Rotork Plc continued

7.2. Our consideration of the control environment
The group operates a diverse IT infrastructure globally. With the involvement of our IT specialists we obtained an understanding of the relevant IT
environment including in some instances performance of general IT control (“GITC”) testing. We did not place reliance on those controls for the
purposes of our substantive audit procedures.

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. In some locations we were able to take a controls reliance approach over the revenue and
trade receivables, inventory, cost of sales and payables, and payroll account balances.

7.3. Working with other auditors
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. In light of the travel restrictions and widespread lockdowns resulting from the COVID-19 pandemic we were not able to complete our
normal programme of planned visits in the year. In response to the restrictions we have transitioned to a remote oversight approach through a
number of measures, as appropriate to each component, including more frequent dialogue and increased usage of video conferencing and screen
sharing facilities. Where necessary we have ensured that we have local language expertise within the group audit team. In December 2019 and
January 2020, senior members of the group engagement team visited component audit teams in the USA, China, and Italy, as well as across
the UK.

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.

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RotorkAnnual Report 202011. 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;
− results of our enquiries of management, internal audit, and the Audit Committee about their own identification and assessment of the risks of

irregularities;

− 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, and impairment 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. 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, and employment law,
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.

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Independent auditor’s report to the members of Rotork Plc continued

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 group’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 140;

− the directors’ explanation as to its assessment of the group’s prospects, the period this assessment covers and why the period is appropriate set

out on page 49;

− the directors’ statement on fair, balanced and understandable set out on page 105;
− the board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 100;
− the section of the annual report that describes the review of effectiveness of risk management and internal control systems

set out on page 106; and

− the section describing the work of the Audit Committee set out on page 104.

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.

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RotorkAnnual Report 202015. 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 7 years, covering the years ending 31 December 2014 to 31 December 2020.

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).

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.

David Griffin FCA (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
1 March 2021

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Consolidated income statement
For the year ended 31 December 2020

Revenue
Cost of sales

Gross profit
Other income
Distribution costs
Administrative expenses
Other expenses

Adjusted operating profit
Adjustments
– Amortisation of acquired intangible assets
– Other adjustments

Operating profit

Finance income
Finance expense

Profit before tax
Income tax expense

Profit for the year

Basic earnings per share
Adjusted basic earnings per share
Diluted earnings per share
Adjusted diluted earnings per share

Notes

2,3

3
4

2,3

7
7

8
9

18
18
18
18

2020
£000

604,544
(320,234)

284,310
1,581
(5,271)
(157,336)
(710)

142,543

(14,110)
(5,859)

122,574

2,394
(2,931)

122,037
(28,709)

93,328

10.7p
12.5p
10.7p
12.5p

2019
£000

669,344
(357,718)

311,626
2,875
(6,408)
(180,434)
(649)

151,005

(18,841)
(5,154)

127,010

2,087
(5,040)

124,057
(29,957)

94,100

10.8p
13.0p
10.8p
13.0p

Consolidated statement of comprehensive income
For the year ended 31 December 2020

Profit for the year
Other comprehensive income
Items that may be subsequently reclassified to the income statement:
Foreign exchange translation differences
Effective portion of changes in fair value of cash flow hedges net of tax

Items that are not subsequently reclassified to the income statement:
Actuarial loss in pension scheme net of tax

Income and expenses recognised in other comprehensive income

Total comprehensive income for the year

2020
£000

2019
£000

93,328

94,100

(3,913)
(12)

(3,925)

(14,836)

(18,761)

74,567

(12,643)
2,081

(10,562)

(6,705)

(17,267)

76,833

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RotorkAnnual Report 2020Consolidated balance sheet
At 31 December 2020

Non-current assets
Goodwill
Intangible assets
Property, plant and equipment
Deferred tax assets

Total non-current assets
Current assets
Inventories
Trade receivables
Current tax
Derivative financial instruments
Other receivables
Assets classified as held for sale
Cash and cash equivalents

Total current assets

Total assets

Equity
Issued equity capital
Share premium
Other reserves
Retained earnings

Total equity

Non-current liabilities
Interest bearing loans and borrowings
Employee benefits
Deferred tax liabilities
Derivative financial instruments
Provisions

Total non-current liabilities
Current liabilities
Interest bearing loans and borrowings
Trade payables
Employee benefits
Current tax
Derivative financial instruments
Other payables
Provisions

Total current liabilities

Total liabilities

Total equity and liabilities

Notes

2020
£000

2019
£000

10
11
12
13

14
15
15
23
15
15
16

19
20
13
23
21

19
22
20
22
23
22
21

223,537
25,145
100,620
16,624

365,926

61,467
112,565
7,180
1,582
25,868
1,119
187,204

396,985

762,911

4,370
16,826
20,934
540,400

582,530

5,396
42,846
8,705
–
1,720

58,667

3,754
33,560
23,645
14,765
168
41,334
4,488

121,714

180,381

762,911

222,052
40,848
89,062
14,582

366,544

73,905
129,390
4,830
2,196
27,558
–
117,612

355,491

722,035

4,363
14,521
24,859
495,657

539,400

6,791
33,576
10,745
124
1,964

53,200

4,752
41,195
24,734
13,270
52
40,581
4,851

129,435

182,635

722,035

These financial statements were approved by the Board of Directors and authorised for issue on 1 March 2021 and were signed on its behalf by:

KG Hostetler and JM Davis
Directors

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Consolidated statement of changes in equity

Balance at 31 December 2018
Profit for the year
Other comprehensive income

Foreign exchange translation differences
Effective portion of changes in fair value of cash

flow hedges

Actuarial loss on defined benefit pension plans
Tax on other comprehensive income

Total other comprehensive income

Total comprehensive income
Transactions with owners, recorded directly in equity
Equity settled share-based payment transactions
Tax on equity settled share-based payment transactions
Share options exercised by employees
Own ordinary shares acquired
Own ordinary shares awarded under share schemes
Dividends

Balance at 31 December 2019
Profit for the year
Other comprehensive income

Foreign exchange translation differences
Effective portion of changes in fair value of cash

flow hedges

Actuarial gain on defined benefit pension plans
Tax on other comprehensive income

Total other comprehensive income

Issued
equity
capital
£000

4,358
–

Share
Premium
£000

13,024
–

–

–
–
–

–

–
–
5
–
–
–

–

–
–
–

–

–
–
1,497
–
–
–

Translation
Reserve
£000

34,930
–

(12,643)

–
–
–

(12,643)

–
–
–
–
–
–

Capital
redemption
reserve
£000

1,644
–

–

–
–
–

–

–
–
–
–
–
–

Hedging
Reserve
£000

Retained
Earnings
£000

Total
£000

(1,153)
–

460,825
94,100

513,628
94,100

–

(12,643)

2,548
–
(467)

2,081

–
(8,058)
1,353

2,548
(8,058)
886

(6,705)

(17,267)

87,395

76,833

–
–
–
–
–
–

(1,011)
(8)
–
(5,287)
6,030
(52,287)

(1,011)
(8)
1,502
(5,287)
6,030
(52,287)

4,363
–

14,521
–

22,287
–

1,644
–

928
–

495,657
93,328

539,400
93,328

–

–
–
–

–

–
–
7
–
–
–

–

–
–
–

–

–
–
2,305
–
–
–

(3,913)

–
–
–

(3,913)

–
–
–
–
–
–

–

–
–
–

–

–
–
–
–
–
–

–

6
–
(18)

(12)

–
–
–
–
–
–

–

(3,913)

–
(18,570)
3,734

6
(18,570)
3,716

(14,836)

(18,761)

78,492

74,567

(306)
(65)
–
(3,645)
4,193
(33,926)

(306)
(65)
2,312
(3,645)
4,193
(33,926)

Balance at 31 December 2020

4,370

16,826

18,374

1,644

916

540,400

582,530

Detailed explanations for equity capital, the translation reserve, capital redemption reserve and hedging reserve can be seen in note 17.

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RotorkAnnual Report 2020Consolidated statement of cash flows
For the year ended 31 December 2020

Notes

2020
£000

2019
£000

Cash flows from operating activities
Profit for the year
Adjustments for:
Amortisation of acquired intangibles
Other adjustments
Amortisation and impairment of development costs
Depreciation
Equity settled share-based payment expense
Loss on sale of property, plant and equipment
Finance income
Finance expense
Income tax expense

Decrease in inventories
Decrease in trade and other receivables
Decrease in trade and other payables
Restructuring costs paid
Difference between pension charge and cash contribution
Decrease in provisions
Decrease in employee benefits

Income taxes paid

Net cash flows from operating activities
Investing activities
Purchase of property, plant and equipment
Development costs capitalised
Sale of property, plant and equipment
Disposal of businesses
Settlement of hedging derivatives
Interest received

Net cash flows from investing activities
Financing activities
Issue of ordinary share capital
Own ordinary shares acquired
Interest paid
Decrease in bank loans
Repayment of lease liabilities
Dividends paid on ordinary shares

Net cash flows from financing activities

Net increase in cash and cash equivalents
Cash and cash equivalents at 1 January
Effect of exchange rate fluctuations on cash held

93,328

14,110
5,859
2,967
16,313
3,685
146
(2,394)
2,931
28,709

165,654
12,561
14,672
(7,195)
(6,437)
(10,109)
(483)
(622)

168,041
(30,781)

(25,279)
(1,298)
272
3,807
(3,157)
1,389

2,312
(3,645)
(954)
(69)
(5,168)
(33,926)

Cash and cash equivalents at 31 December

94,100

18,841
5,154
2,874
16,359
4,702
5
(2,087)
5,040
29,957

174,945
18,176
7,198
(391)
(5,151)
(6,070)
(347)
(1,160)

187,200
(32,769)

137,260

154,431

(17,306)
(1,937)
663
–
(3,070)
1,628

(24,266)

(20,022)

1,501
(5,287)
(2,828)
(59,967)
(4,717)
(52,287)

(41,450)

71,544
117,612
(1,952)

187,204

(123,585)

10,824
104,489
2,299

117,612

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Notes to the Group financial statements
For the year ended 31 December 2020

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 2020 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 30 all relate to the Group financial statements. The Company balance sheet,
accounting policies and applicable notes can be found following note 30.

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 international accounting standards in conformity with
the requirements of the Companies Act 2006 and International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002
as it applies in the European Union.

The consolidated financial statements have been prepared under the historical cost convention subject to the items referred to in the derivative
financial instruments accounting policy below.

New accounting standards and interpretations
i. Amendments
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
i. Amendments
Further narrow scope amendments have been issued which are mandatory for periods commencing on or after 1 January 2021. 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 on the face of the income statement to provide greater clarity and a better
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
underlying results with prior periods and assessment of trends in financial performance. This split is consistent with how underlying business
performance is measured internally.

Adjustments to profit items may include but are not restricted to: costs of significant business restructuring, significant 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 due to their significance, size or nature, and the related taxation.

Going concern
After carrying out a detailed review of the viability of the business, 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 on-going impact of COVID-19 on the Group has been considered. The directors have
reviewed: the current financial position of the Group, which has net cash of £178m and unused committed debt facilities of £60m as at the period
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. The directors have reverse stress tested the forecasts and are satisfied that the downside scenarios are considered remote
and that the Group would continue to have headroom on existing facilities. 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 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 2020.
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 foreign exchange 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.

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RotorkAnnual Report 2020
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, generally at a point of time on despatch of goods, in line with the International Chamber of Commerce International Commercial
terms (incoterms). 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.

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.

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.

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.

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Notes to the Group financial statements continued
For the year ended 31 December 2020

1. Accounting policies continued
Intangible assets continued
ii) 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 natures of each of the intangibles acquired. The assessed useful lives of intangibles acquired are as follows:

Brands
Customer relationships
Other – product design patents
Other – order backlog

4 to 10 years
2 to 8 years
4 to 8 years
3 months to 1 year

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
Short leasehold buildings
Plant and equipment

2% to 4%
period of lease
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 on or after 1 January 2019, 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 profit and loss 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 profit or loss 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.

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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 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.

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. 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.

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.

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Notes to the Group financial statements continued
For the year ended 31 December 2020

1. Accounting policies continued
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 actuarial gains and losses 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 liabilities has been recognised within financing 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 25. 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.

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 25. 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 Overseas profit linked share plan (OPLSS) 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 to 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 incurred.

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.

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RotorkAnnual Report 2020Dividends
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 accounting estimates and judgements
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 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 provisions for, retirement benefit obligations. Management is required to
estimate the future rates of inflation, salary increases, 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 24.

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 facilitate greater comparison of the Group’s underlying results with prior periods and assessment of trends in financial performance.

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 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 on these adjustments are given in note 4.

b. Adjusted profit before tax
The adjustments in calculating adjusted profit before tax are consistent with those in calculating adjusted operating profit above.

Profit before tax
Adjustments:
Amortisation of acquired intangible assets
Gain on disposal of businesses
Redundancy and executive change costs
Other restructuring costs

Adjusted profit before tax

2020

2019

122,037

124,057

14,110
–
5,744
115

18,841
(2,539)
2,791
4,902

142,006

148,052

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Notes to the Group financial statements continued
For the year ended 31 December 2020

2. Alternative performance measures continued
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 18). Adjusted net profit attributable to ordinary shareholders is calculated as follows:

Net profit attributable to ordinary shareholders
Adjustments:
Amortisation of acquired intangible assets
Gain on disposal of businesses
Redundancy and executive change costs
Other restructuring costs
Tax effect on adjusted items

2020

93,328

14,110
–
5,744
115
(4,484)

2019

94,100

18,841
(2,539)
2,791
4,902
(4,908)

Adjusted net profit attributable to ordinary shareholders

108,813

113,187

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 18).

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.

f. Return on capital employed
The return on capital employed ratio is used by management to help ensure that capital is used efficiently.

Adjusted operating profit
Capital employed
Shareholders’ funds
Cash and cash equivalents
Interest bearing loans and borrowings
Pension deficit net of deferred tax

Capital employed

Average capital employed

Return on capital employed

2020

2019

142,543

151,005

582,530
(187,204)
9,150
30,965

435,441

446,357

31.9%

539,400
(117,612)
11,543
23,942

457,273

474,647

31.8%

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. Flowthrough
Flowthrough is calculated as the change in OCC adjusted operating profit as reported, divided into the change in OCC revenue.

OCC
31 December
2020

612,035
144,419

OCC
31 December
2019

661,173
150,090

Change

(49,138)
(5,671)

11.5%

Revenue
Adjusted operating profit

Flowthrough

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RotorkAnnual Report 2020i. 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 2020 results are restated at 2019 exchange rates. There are no disposals or acquisitions in 2020 that are not consistently presented in both
periods.

Key headings in the income statement are reconciled to OCC as follows:

Revenue
Cost of sales

Gross margin
Overheads

Adjusted operating profit
Interest

Adjusted profit before tax
Adjusted taxation

Adjusted profit after tax

Revenue
Cost of sales

Gross margin
Overheads

Adjusted operating profit
Interest

Adjusted profit before tax
Taxation

Adjusted profit after tax

31 December

2020 Currency adjustment

604,544
(320,234)

284,310
(141,767)

142,543
(537)

142,006
(33,193)

108,813

7,491
(4,750)

2,741
(865)

1,876
(4)

1,872
(438)

1,434

OCC
31 December
2020

612,035
(324,984)

287,051
(142,632)

144,419
(541)

143,878
(33,631)

110,247

31 December
2019

Impact of 2019
disposals

31 December
2019

669,344
(357,718)

311,626
(160,621)

151,005
(2,953)

148,052
(34,865)

113,187

(8,171)
6,044

(2,127)
1,212

(915)
−

(915)
320

(595)

661,173
(351,674)

309,499
(159,409)

150,090
(2,953)

147,137
(34,545)

112,592

3. Operating segments
As described on page 50, the Group has chosen to move from a product focused structure to an end market segment focused structure that more
closely meets customer needs. 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
− Water & Power
− Chemical, Process & Industrial

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 and remain the same as they were under the previous product division structure.

Segmental information has been restated for the year ended 31 December 2019 to reflect the change in Group structure.

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.

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Notes to the Group financial statements continued
For the year ended 31 December 2020

3. Operating segments continued
Analysis by operating segment:

Revenue from external customers

Adjusted operating profit*
Amortisation of acquired intangible assets

Segment result
Other adjustments

Operating profit
Net finance expense
Income tax expense

Profit for the year

Oil & Gas
2020

292,173

67,949
(7,380)

60,569

Water & Power
2020

Chemical, Process
& Industrial
2020

Unallocated
2020

Group
2020

157,766

154,605

–

604,544

47,037
(945)

46,092

38,553
(5,785)

32,768

(10,996)
–

(10,996)

142,543
(14,110)

128,433
(5,859)

122,574
(537)
(28,709)

93,328

Revenue from external customers

330,049

154,880

184,415

–

669,344

Oil & Gas
2019

Water & Power
2019

Chemical, Process
& Industrial
2019

Unallocated
2019

Group
2019

Adjusted operating profit*
Amortisation of acquired intangible assets

Segment result
Other adjustments

Operating profit
Net finance expense
Income tax expense

Profit for the year

75,544
(10,739)

64,805

45,095
(2,638)

42,457

41,976
(5,464)

36,512

(11,610)
–

(11,610)

* Adjusted operating profit is operating profit before the amortisation of acquired intangible assets and other adjustments (see note 4)

Depreciation
Amortisation:
– Acquired intangible assets
– Development costs
Impairment of development cost assets

Depreciation
Amortisation:
– Acquired intangible assets
– Development costs
Impairment of property, plant and equipment

Oil & Gas
2020

7,884

Power & Water
2020

4,296

Chemical, Process
& Industrial
2020

Unallocated
2020

4,184

5,785
673
525

945
565
–

Power & Water
2019

Chemical, Process
& Industrial
2019

3,785

2,638
665
–

4,507

5,464
792
–

7,380
1,204
–

Oil & Gas
2019

8,023

10,739
1,417
–

–

–
–
–

Unallocated
2019

–
–
1,935

151,005
(18,841)

132,164
(5,154)

127,010
(2,953)
(29,957)

94,100

Group
2020

16,313

14,110
2,442
525

Group
2019

16,359

18,841
2,874
1,935

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.

164

RotorkAnnual Report 2020Geographical analysis:

Revenue by location of subsidiary

UK
Italy
Rest of Europe
USA
Other Americas
Rest of World

Non-current assets:
– Goodwill
– Intangible assets
– Property, plant and equipment

2020

66,077
62,176
106,940
109,929
35,965
223,457

604,544

Rest of
World
2020

41,697
1,521
18,081

Rest of
World
2019

40,949
4,789
18,221

2019

70,779
68,448
121,118
140,965
40,732
227,302

669,344

Group
2020

223,537
25,145
101,739

Group
2019

222,052
40,848
89,062

UK
2020

61,342
19,392
40,173

UK
2019

61,342
27,585
30,402

Europe
2020

66,940
1,877
29,884

Europe
2019

63,955
4,336
30,271

USA
2020

52,830
2,355
12,376

USA
2019

55,061
4,138
8,230

Other
Americas
2020

728
–
1,225

Other
Americas
2019

745
–
1,938

4. Other adjustments
The other adjustments are adjustments that management consider to be significant and where separate disclosure enables stakeholders to assess
the underlying trading performance of the Group on a consistent basis.

The other adjustments to profit included in statutory profit are as follows:

Gain on disposal of businesses
Redundancy and executive change costs
Other restructuring costs

2020

–
(5,744)
(115)

(5,859)

2019

2,539
(2,791)
(4,902)

(5,154)

Redundancy and executive change costs
A further £5,744,000 (2019: £1,578,000) redundancy and executive change costs have been incurred as a result of the progress made with the
Growth Acceleration Programme which is in year three of the five year programme. In 2019 the Group’s operations in Taunton, UK closed resulting
in redundancy costs of £798,000. The operations in Tulsa, USA also ceased in 2019 and the production transferred to other manufacturing plants
in the USA. The closure of the Tulsa facility resulted in redundancy costs of £415,000.

Gain on disposal of business
The gain on disposal of £2,539,000 in 2019 relates to the sale of the Pittsburgh business. The assets of £1,639,000 disposed of included goodwill
(£452,000) and working capital (£1,187,000). Other costs incurred totalled £93,000. Proceeds of £4,271,000 were contractually agreed and
included in other receivables at the 2019 balance sheet date. The cash proceeds were received in 2020.

Other restructuring costs
Other restructuring costs of £115,000 in 2020 relate to changes in operating footprint in the USA. 2019 costs included £1,046,000 relating to the
closure of the Taunton facility and £2,096,000 relating to the closure of the Tulsa facility, including asset write-downs of £1,657,000. £200,000
relates to ending development and sales of products for the containment area of nuclear power plants and £1,560,000 related to the ongoing
review of the global footprint, including a £413,000 loss on disposal of a property.

Income statement disclosure
All adjustments are included in administrative expenses, with the exception of the gain on disposal of business in 2019 which is included in other
income and the 2019 loss on disposal of property is included in other expenses. The adjustments are taxable or tax deductible in the country in
which the expense is incurred.

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Notes to the Group financial statements continued
For the year ended 31 December 2020

5. Other income and expense

Gain on disposal of business (note 4)
Gain on disposal of property, plant and equipment
Other

Other income

Loss on disposal of property, plant and equipment
Other

Other expense

6. Personnel expenses

Wages and salaries (including bonus and incentive plans)
Social security costs
Pension costs (note 24)
Share-based payments (note 25)
Increase in liability for long term service leave

Average monthly number of employees during the year:
Sales, marketing and market focused staff
– Oil and Gas
– Water and Power
– Chemical, Process and Industrial
Manufacturing and other shared functions

UK
Overseas

7. Finance Income and Expense
Recognised in the income statement

Interest income
Foreign exchange gains

Finance income

Interest expense
Interest expense on lease liabilities
Interest charge on pension scheme liabilities (note 24)
Foreign exchange losses

Finance expense

166

2020

–
80
1,501

1,581

2020

226
484

710

2020

134,747
18,798
6,895
3,685
32

164,157

2020
Number

109
75
69
3,254

3,507

909
2,598

3,507

2020

1,517
877

2,394

2020

(872)
(499)
(609)
(951)

(2,931)

2019

2,539
178
158

2,875

2019

599
50

649

2019

153,879
20,947
7,363
4,702
632

187,523

2019
Number

112
77
71
3,352

3,612

971
2,641

3,612

2019

1,803
284

2,087

2019

(2,686)
(431)
(750)
(1,173)

(5,040)

RotorkAnnual Report 2020Recognised in other comprehensive income

Effective portion of changes in fair value of cash flow hedges
Fair value of cash flow hedges transferred to income statement
Foreign currency translation differences for foreign operations

Recognised in:
Hedging reserve
Translation reserve

8. Profit before tax
Profit before tax is stated after charging the following:

Depreciation of property, plant and equipment:
– Owned assets
– Assets held under lease contracts
Amortisation:
– Other intangibles
– Development costs
Impairment of development cost assets
Impairment of property, plant and equipment
Inventory write downs recognised in the year
Research and development expenditure
Exchange differences realised

Audit fees and expenses paid to Deloitte:
– Audit of the Group financial statements
– Audit of financial statements of subsidiaries of the Company

Other auditors of financial statements of subsidiaries of the Company

Total audit fees and expenses

Amounts paid to Deloitte and its associates in respect of:
– Other assurance services

2020

1,131
(1,125)
(3,913)

(3,907)

6
(3,913)

(3,907)

2019

1,125
1,423
(12,643)

(10,095)

2,548
(12,643)

(10,095)

Notes

2020

2019

i
i

iii
iii
iii
iii
ii
iii
iv

11,629
4,684

14,110
2,967
525
–
2,718
11,673
73

1,002
268

1,270
–

1,270

11,924
4,435

18,841
2,873
–
1,935
3,102
11,272
889

886
268

1,154
10

1,164

Total fees

1,328

1,220

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.

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Notes to the Group financial statements continued
For the year ended 31 December 2020

9. Income tax expense

Current tax:
UK corporation tax on profits for the year
Adjustment in respect of prior years

Overseas tax on profits for the year
Adjustment in respect of prior years

Total current tax

Deferred tax:
Origination and reversal of other temporary differences
Impact of rate change
Adjustment in respect of prior years

Total deferred tax

Total tax charge for year

Profit before tax
Profit before tax multiplied by the blended standard rate of

corporation tax in the UK of 19.0% (2019: 19.0%)

Effects of:
Different tax rates on overseas earnings
Permanent differences
Losses not recognised
Tax incentives
Impact of rate change
Adjustments to tax charge in respect of prior years

Total tax charge for year

Effective tax rate

Adjusted profit before tax (note 2b)
Total tax charge for the year
Amortisation of acquired intangible assets
Defined benefit pension schemes (note 4)
Restructuring costs (note 4)

Adjusted total tax charge for the year

Adjusted effective tax rate

2020

2019

2,711
(966)

28,034
(232)

198
(1,018)
(18)

1,745

27,802

29,547

(838)

28,709

122,037

23,187

7,613
595
292
(744)
(1,018)
(1,216)

28,709

23.5%

142,006
28,709
3,010
–
1,474

33,193

23.4%

3,777
(570)

28,082
(235)

(1,135)
173
(135)

3,207

27,847

31,054

(1,097)

29,957

124,057

23,571

6,856
1,537
(66)
(1,174)
173
(940)

29,957

24.1%

148,052
29,958
4,070
–
838

34,866

23.5%

A tax charge of £65,000 (2019: £8,000) in respect of share-based payments has been recognised directly in equity in the year.

The effective tax rate for the year is 23.5% (2019: 24.1%). The adjusted effective tax rate is 23.4% (2019: 23.5%) and is lower than the effective
tax rate for the year principally because of the tax treatment of expenses included in exceptional items.

The adjusted effective tax rate has fallen from 23.5% in 2019 to 23.4% in 2020, principally because of a reduction in the deferred tax liability
relating to unremitted earnings from India as a result of a decrease in Indian withholding tax rates from 1 April 2020. The consequent fall in the
adjusted effective tax rate has been partially offset by an increase in the proportion of the Group profits arising in higher tax jurisdictions
internationally. 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. However, the adjusted effective tax rate will still be higher than the standard UK rate due to higher rates of
tax in China, the US, South Korea, Germany, India and Australia.

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 £256,554,000 (2019: £312,364,000).

168

RotorkAnnual Report 202010. Goodwill

Cost
At 1 January
Derecognised on disposal of business
Exchange adjustments

At 31 December

Provision for impairment
At 1 January
Exchange adjustments

At 31 December

Net book value

2020

2019

243,696
–
1,417

245,113

21,644
(68)

21,576

223,537

251,848
(452)
(7,700)

243,696

21,691
(47)

21,644

222,052

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 and Gas, Water and Power, and Chemical, Process and Industrial
divisions. This is different to the prior year, with goodwill reallocated following the transition to the Group’s end-market focused divisional
structure. The 2019 impairment tests were re-run with consideration of the new CGU groupings. On this basis, the value in use calculations
exceeded the CGU carrying values after applying sensitivity analysis.

Cash generating unit

Oil and Gas
Water and Power
Chemical, Process and Industrial

Total Group

Discount rate (2020)

2020

11.8%
12.1%
12.1%

89,936
16,369
117,232

223,537

2019

86,621
16,077
117,354

222,052

Impairment testing
The Group is required to test, on an annual basis, whether goodwill has suffered any impairment.

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 we adjusted
the risk premium 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. 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, is 6.4% (2019: 5.5%).

In the period after the three year plan growth rates are forecast at 4% (2019: 5%) per annum for the next two years and at 2% (2019: 2%) for the
long-term growth rate. The 4% rate reflects a realistic market forecast for the flow control market up until 2025.

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Notes to the Group financial statements continued
For the year ended 31 December 2020

10. Goodwill continued
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.

For all CGUs the sensitivity analysis shows that if pre-tax discount rates are raised by 1%; short term growth rates are lowered by 10% in years one
to three; or long term growth rates are lowered by 1% then no impairment would arise. Each of these sensitivities are considered to be a
reasonably possible change.

There are no reasonably possible changes in assumptions that would lead to an impairment.

11. Intangible assets

Cost
31 December 2018
Internally developed
Disposals
Exchange Adjustments

31 December 2019
Internally developed
Exchange adjustments

31 December 2020

Amortisation
31 December 2018
Charge for the year
Disposals
Exchange Adjustments

31 December 2019
Charge for the year
Impairment charge

Exchange adjustments

31 December 2020

Net book value
31 December 2019

31 December 2020

Development
costs

21,707
1,937
(3,114)
(128)

20,402
1,262
105

21,769

12,598
2,874
(3,114)
(61)

12,297
2,442
525

15,307

8,105

6,462

Acquired intangible assets

Brands

52,599
–
–
(1,727)

50,872
–
210

51,082

37,591
6,035
–
(1,479)

42,147
3,212
–

169

45,528

8,725

5,554

Customer
relationships

120,191
–
–
(3,498)

116,693
–
100

116,793

86,712
10,767
–
(2,960)

94,519
9,579
–

Other

Total

22,513
–
–
(643)

21,870
–
197

22,067

18,592
2,039
–
(605)

20,026
1,319
–

196

217,010
1,937
(3,114)
(5,996)

209,837
1,262
612

211,711

155,493
21,715
(3,114)
(5,105)

168,989
16,552
525

500

104,190

21,541

186,566

22,174

12,603

1,844

526

40,848

25,145

Other acquired intangible assets represent order books and intellectual property.

The amortisation charge is recognised within administrative expenses in the income statement.

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12. Property, plant and equipment

Land and
buildings

Plant and
equipment

Cost
31 December 2018
Additions
Disposals
Exchange adjustments

31 December 2019
Additions
Disposals
Assets classified as held for sale

Exchange adjustments

31 December 2019

Depreciation
31 December 2018
Charge for the year
Disposals
Impairment Charge
Exchange adjustments

31 December 2019
Charge for the year
Disposals
Assets classified as held for sale

Exchange adjustments

31 December 2020

Net book value
31 December 2019

31 December 2020

Net book value of land and buildings can be analysed between:

Land
Buildings

Net book value at 31 December

Total

191,058
19,623
(7,548)
(5,905)

197,228
28,959
(5,657)
(1,499)

1,322

117,156
17,066
(7,385)
(4,043)

122,794
20,475
(5,157)
(134)

986

138,964

220,353

80,327
11,477
(6,101)
52
(2,457)

83,298
11,410
(4,812)
(45)

807

99,426
16,359
(6,229)
1,935
(3,325)

108,166
16,313
(5,188)
(380)

822

73,902
2,557
(163)
(1,862)

74,434
8,484
(500)
(1,365

336

81,389

19,099
4,882
(128)
1,883
(868)

24,868
4,903
(376)
(335)

29,075

90,658

119,733

49,566

52,314

39,496

48,306

89,062

100,620

2020

6,957
45,357

52,314

2019

7,060
42,506

49,566

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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. The impairment charge of £1,935,000 in 2019 arose as a result of the ongoing review of the global footprint (note 4).

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
£16,601,000 (2019: £6,050,000). Depreciation of these assets will commence when the assets are ready for their intended use.

13. Deferred tax assets and liabilities

Property, plant and equipment
Intangible assets
Employee benefits
Inventory
Other items

Net tax assets/(liabilities)
Set off of tax

Assets
2020

Liabilities
2020

504
3
10,040
4,930
3,006

(1,539)
(5,555)
–
–
(3,470)

18,483
(1,859)

(10,564)
1,859

16,624

(8,705)

Net
2020

(1,035)
(5,552)
10,040
4,930
(464)

7,919
–

7,919

Assets
2019

618
3
7,723
4,648
4,344

Liabilities
2019

(1,072)
(7,970)
–
–
(4,457)

17,336
(2,754)

(13,499)
2,754

14,582

(10,745)

Net
2019

(454)
(7,967)
7,723
4,648
(113)

3,837
–

3,837

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Notes to the Group financial statements continued
For the year ended 31 December 2020

13. Deferred tax assets and liabilities continued
Movements in the net deferred tax balance during the year are as follows:

Balance at 1 January
(Charged)credited to the income statement
Charged directly to equity in respect of share-based payments
Impact of rate change
Credited directly to equity in respect of pension schemes
Charged directly to hedging reserves in respect of cash flow hedges
Exchange differences

Balance at 31 December

2020

3,837
(179)
(65)
1,019
3,734
(18)
(407)

7,919

2019

1,615
1,086
(8)
–
1,353
(467)
258

3,837

A deferred tax asset of £16,624,000 (2019: £14,582,000) has been recognised at 31 December 2020. 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 £7,632,000 (2019: £7,632,000). This asset may be recovered if
sufficient capital profits are made in future in the companies concerned. There is no expiry date in relation to this asset.

14. Inventories

Raw materials and consumables
Work in progress
Finished goods

Included in cost of sales was £210,098,000 (2019: £196,265,000) in respect of inventories consumed in the year.

15. Trade and other receivables including assets held for sale

Current assets:
Trade receivables
Less provision for impairment of receivables

Trade receivables – net

Corporation tax

Current tax

Other non-trade receivables
Other taxes and social security
Prepayments

Other receivables

Land and buildings
Plant and equipment

Assets held for sale

2020

46,101
3,630
11,736

61,467

2019

58,153
3,751
12,001

73,905

2020

2019

117,253
(4,688)

112,565

7,180

3,348
13,629
8,891

25,868

1,030
89

1,119

135,333
(5,943)

129,390

4,830

7,674
13,373
6,511

27,558

–
–

–

As at 31 December 2020, non-current assets relating to a property in Pittsburgh, US were classified as held for sale. The assets have subsequently
been sold following the year end with completion taking place in January 2021.

16. Cash and cash equivalents

Bank balances
Cash in hand
Short term deposits

Cash and cash equivalents
Bank overdraft

Cash and cash equivalents in the consolidated statement of cash flows

172

2020

95,740
49
91,415

187,204
–

187,204

2019

78,560
108
38,944

117,612
–

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RotorkAnnual Report 2020

17. Capital and reserves

At 1 January
Issued under employee share schemes

At 31 December

Number of shares (000)

0.5p Ordinary
shares
issued
and fully
paid up
2020

4,363
7

4,370

873,955

£1 Non-
redeemable
preference
shares
2020

40
–

0.5p Ordinary
shares
issued
and fully
paid up
2019

4,358
5

4,363

872,538

£1 Non-
redeemable
preference
shares
2019

40
–

The ordinary shareholders are entitled to receive dividends as declared and are entitled to vote at meetings of the Company.

The Group received proceeds of £2,312,000 (2019: £1,501,000) in respect of the 1,417,104 (2019: 912,549) ordinary shares issued during the year:
£7,000 (2019: £5,000) was credited to share capital and £2,305,000 (2019: £1,497,000) to share premium. Further details of the share awards are
shown in note 25.

The preference shareholders 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.

Within the retained earnings reserve are own shares held. The investment in own shares held is £2,937,000 (2019: £3,485,000) and represents
997,000 (2019: 1,136,000) 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.

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:

The 2019 final dividend was postponed (final dividend for 2018: 3.70p)
3.90p interim dividend for 2020 (interim dividend for 2019: 2.20p)

2020
Payment date

–
25 September

2020

–
33,926

33,926

2019

32,248
20,039

52,287

The recommendation to pay a 3.90 pence per share final dividend in respect of 2019 was withdrawn on 31 March 2020 in response to the
uncertainty arising from the COVID-19 pandemic. The Board decided to pay this dividend as an interim dividend of 3.90 pence which was paid to
shareholders on 25 September 2020.

After the balance sheet date the following dividends per qualifying ordinary share were proposed by the directors. The dividends have not been
provided for.

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6.30p

3.90p

2020

2019

55,059

34,029

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Notes to the Group financial statements continued
For the year ended 31 December 2020

18. 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 871.7m shares (2019: 871.0m shares) being the weighted average number of ordinary shares in issue
(net of own ordinary shares held) for the year.

Net profit attributable to ordinary shareholders

Weighted average number of ordinary shares
Issued ordinary shares at 1 January
Effect of own shares held
Effect of shares issued under Sharesave plans

Weighted average number of ordinary shares during the year

Basic earnings per share

2020

93,328

871,401
17
244

871,662

10.7p

2019

94,100

870,238
387
401

871,026

10.8p

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.

Adjusted net profit attributable to ordinary shareholders

Weighted average number of ordinary shares during the year

Adjusted basic earnings per share

2020

108,813

871,662

12.5p

2019

113,187

871,026

13.0p

Diluted earnings per share
Diluted earnings per share is based on the profit for the year attributable to the ordinary shareholders and 873.3m shares (2019: 873.6m 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).

Net profit attributable to ordinary shareholders

Weighted average number of ordinary shares (diluted)
Weighted average number of ordinary shares for the year
Effect of Sharesave options
Effect of LTIP share awards

Weighted average number of ordinary shares (diluted) during the year

Diluted earnings per share

Adjusted diluted earnings per share

Adjusted net profit attributable to ordinary shareholders

Weighted average number of ordinary shares (diluted) during the year

Adjusted diluted earnings per share

2020

93,328

871,662
561
1,101

873,324

10.7p

2020

108,813

873,324

12.5p

2019

94,100

871,026
1,214
1,347

873,587

10.8p

2019

113,187

873,587

13.0p

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RotorkAnnual Report 2020
40
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4,628

5,396

69
3,685

3,754

2020

40
797

837

40
762
5,989

6,791

66
4,686

4,752

2019

40
828

868

19. 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 26.

2020

2019

Non-current liabilities
Preference shares classified as debt
Bank loans
Lease liabilities

Current liabilities
Bank loans
Lease liabilities

Terms and debt repayment schedule
The terms and conditions of outstanding bank loans and preference shares were as follows:

Currency

Interest rates

Year of maturity

Sterling
Euro

9.5%
2.35%

–
2032

Non-redeemable preference shares
Bank loans

Repayment profile
Bank loans are payable as follows:

Bank loans less than one year
Bank loans more than one and less than five years
Bank loans more than five years

Principal
2020

Interest
2020

69
728
–

797

18
99
–

117

Minimum
payments
2020

87
827
–

914

Principal
2019

66
762
–

828

Interest
2019

Minimum payments
2019

19
105
–

124

85
867
–

952

The debt repayment profile for leases is disclosed in note 27.

20. Employee benefits

Recognised liability for defined benefit obligations:
– Present value of funded obligations
– Fair value of plan assets

Other pension scheme liabilities
Employee bonuses
Long term incentive plan
Employee indemnity provision
Other employee benefits

Non-current
Current

Defined benefit pension scheme disclosures are detailed in note 24.

2020

2019

252,959
(214,442)

223,222
(193,646)

38,517
243
19,676
560
2,474
5,021

66,491

42,846
23,645

66,491

29,576
241
20,399
542
2,227
5,325

58,310

33,576
24,734

58,310

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Notes to the Group financial statements continued
For the year ended 31 December 2020

21. Provisions

Balance at 1 January 2020
Exchange differences
Charge to the income statement
Provisions utilised during the year

Balance at 31 December 2020

Maturity at 31 December 2020
Non-current
Current

Maturity at 31 December 2019
Non-current
Current

Contingent
consideration

Warranty
provision

Restructuring
provision

285
13
–
(115)

183

–
183

183

–
285

285

5,951
(24)
1,329
(2,043)

5,213

1,720
3,493

5,213

1,964
3,987

5,951

579
3
2,765
(2,535)

812

–
812

812

–
579

579

Total

6,815
(8)
4,094
(4,693)

6,208

1,720
4,488

6,208

1,964
4,851

6,815

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 relates to amounts outstanding in respect of redundancy and other restructuring costs associated with the Growth
Acceleration Programme.

22. Trade and other payables

Trade payables

Corporation tax

Current tax

Other taxes and social security
Payments on account
Other payables and accrued expenses

Other payables

23. Derivative financial instruments

Forward foreign exchange contracts – cash flow hedges
Foreign exchange swaps – cash flow hedges

Total

Less non-current portion:
Forward foreign exchange contracts – cash flow hedges

Current portion

2020

33,560

14,765

10,086
9,779
21,469

41,334

2019
Assets

1,275
921

2,196

–

2,196

2019

41,195

13,270

11,101
6,587
22,893

40,581

2019
Liabilities

176
–

176

(124)

2020
Assets

1,235
347

1,582

–

1,582

2020
Liabilities

168
–

168

–

168

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 2020 are recognised in the income statement in the period or periods
during which the hedged forecast transaction affects the income statement.

176

RotorkAnnual Report 2020
24. 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 90% 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.

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. The Schemes have a
relatively balanced investment in equities, debt instruments and property. Due to the long-term nature of the plan liabilities, the Trustees of the pension
funds consider it appropriate that a reasonable portion of the plan assets should be invested in equities and in property to leverage the return
generated by the funds.

− Interest rate risk – the Schemes’ liabilities are assessed using market yields on high quality corporate bonds to discount the liabilities. As the Schemes
hold assets such as equities the value of the assets and liabilities may not move in the same way. A decrease in the bond interest rate will increase the
Schemes’ liabilities but this will be partially offset by an increase in the return of the Schemes’ debt 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.

The High Court judgements in October 2018 and November 2020 for Lloyds Banking Group clarified that pension benefits under the UK Scheme
(including for those who have transferred out) need to be equalised between men and women for the effects of their unequal GMPs. The impact
of GMP equalisation was estimated to be a 0.5% addition to liabilities in 2018 and was introduced as a past service cost in the 2018 income
statement. This allowance has been retained and, at the 2020 year-end, has been judged sufficient to allow for the equalisation of previous
transfers out.

Movements in the present value of defined benefit obligations

Liabilities at 1 January
Administration costs
Interest cost
Benefits paid
Actuarial loss
Currency gain

Liabilities at 31 December

2020

2019

223,222
223
4,882
(7,136)
32,727
(959)

252,959

207,021
330
5,984
(15,951)
26,527
(689)

223,222

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Notes to the Group financial statements continued
For the year ended 31 December 2020

24. Pension schemes continued
i) Defined benefit pension schemes continued
Movements in fair value of plan assets

Assets at 1 January
Interest income on plan assets
Employer contributions
Benefits paid
Return on plan assets, excluding interest income on plan assets
Currency loss

Assets at 31 December

Expense recognised in the income statement

Administration costs
Net interest cost

The expense is recognised in the following line items in the income statement

Cost of sales
Administrative expenses
Other income
Net finance expense

Remeasurements over the year

Experience adjustments on plan assets
Experience adjustments on plan liabilities
Actuarial loss from changes to financial assumptions
Actuarial gain/(loss) from changes to demographic assumptions
Experience adjustments on currency

Reconciliation of net defined benefit obligation

Net defined benefit obligation at the beginning of the year
Current service costs
Administration costs
Net financing expense
Remeasurements over the year
Employer contributions

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2020

2019

193,646
4,273
10,308
(7,136)
14,157
(806)

214,442

179,728
5,234
6,622
(15,951)
18,469
(456)

193,646

2020

223
609

832

2020

84
139
–
609

832

2020

14,157
4,985
(36,808)
(904)
153

(18,417)

2020

29,576
–
223
609
18,417
(10,308)

38,517

2019

330
750

1,080

2019

112
218
–
750

1,080

2019

18,469
(3,926)
(23,586)
985
233

(7,825)

2019

27,293
–
330
750
7,825
(6,622)

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RotorkAnnual Report 2020
Liability for defined benefit obligations
The principal actuarial assumptions at 31 December 2020 (expressed as weighted averages):

Discount rate
Rate of increase in salaries
Rate of increase in pensions (post May 2000)
Rate of increase in pensions (pre May 2000)
Rate of inflation

UK scheme
(% per annum)

US scheme
(% per annum)

Weighted average
(% per annum)

2020

1.3
n/a
2.8
4.6
2.9

2019

2.1
n/a
2.8
4.6
2.9

2020

2.7
n/a
0.0
0.0
n/a

2019

3.4
n/a
0.0
0.0
n/a

2020

1.4
n/a
2.5
4.2
2.9

2019

2.2
n/a
2.5
4.1
2.9

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’ quoted assets were as follows:

Equities
Targeted return
Property
Corporate bonds
Multi-asset credit (quoted)
LDI/absolute return bonds
US deposit administration contract

Total

Actual return on the Schemes’ assets

2020
Fair value

37,042
53,155
5,238
–
19,316
81,615
18,076

214,442

18,430

2019
Fair value

35,588
50,409
11,683
47,526
–
31,940
16,500

193,646

23,703

The UK Scheme has a strategic asset allocation which was agreed after considering its liability profile, funding position, expected return of the
various asset classes and the need for diversification. The level of interest rate and inflation hedging is being increased by the use of liability driven
investment (LDI) funds. Currently the Scheme has hedged around 50% of the interest rate risk and 44% of the inflation risk of its liabilities, as
measured on a low risk gilts basis, and this will automatically increase each year (targeting 65% for both by 31 March 2022). A series of triggers
have also been agreed so that, if gilt yields rise, the pace of hedging will be accelerated.

The only change made to the demographic assumptions at the 2020 year-end is that future improvements in mortality are now based on the
CMI_2019 projection model (2019: CMI_2018).

By way of example the respective mortality tables indicate the following life expectancy:

Current age

65
45

2020
Life expectancy at age 65

2019
Life expectancy at age 65

Male

23.0
24.4

Female

23.5
25.0

Male

22.9
24.2

Female

23.3
24.8

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Notes to the Group financial statements continued
For the year ended 31 December 2020

24. Pension schemes continued
i) Defined benefit pension schemes continued
Sensitivity analysis on the Schemes’ liabilities

Adjustments to assumptions

Discount rate
Plus 1.0% pa
Minus 1.0% pa
Inflation
Plus 0.5% pa
Minus 0.5% pa
Life expectancy
Decrease mortality rates by a factor of 10%
Increase mortality rates by a factor of 10%

Approximate effect
on liabilities

(45,000)
55,600

14,900
(14,100)

8,700
(7,400)

The above sensitivities are approximate and only show the likely effect of an assumption being adjusted whilst all other assumptions remain the
same.

For the life expectancy sensitivity we have increased/decreased the mortality rates by a factor of 10%. Broadly speaking this decreases/increases
the assumed life expectancy by slightly less than one year.

The sensitivity analysis shown above 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 2019, the Group is paying deficit contributions of
£6,800,000 a year, agreed to March 2025. The next valuation will be carried out with an effective date of 31 March 2022.

The Group estimates that cash contributions to the Group’s defined benefit pension schemes during 2021 will be £7,620,000 (2020: £10,308,000).

The weighted average duration of the defined benefit obligation for the UK Scheme is approximately 21 years.

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 £6,895,000 (2019: £7,363,000).

180

RotorkAnnual Report 202025. Share-based payments
The Group awards shares under the Long Term Incentive Plan (LTIP), the Save As You Earn scheme (Sharesave plan), the Overseas profit linked
share plan (OPLSS) 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:

Sharesave plan (a)
Long Term Incentive Plan (b)
OPLSS/SIP profit linked share scheme (c)

Total expense recognised as employee costs (note 6)

2020

482
1,140
2,063

3,685

2019

577
1,513
2,612

4,702

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.

Grant date
Share price at grant date
Exercise price
Shares granted under scheme
Vesting period
Expected volatility
Risk free rate
Expected dividends expressed as a dividend yield
Probability of ceasing employment before vesting
Fair value

3 year scheme

5 year scheme

2020

2019

2020

2019

9 October
298p
243p
674,240
3 years
33.0%
(0.07)%
1.31%
2%
84p

10 October
300p
255p
658,746
3 years
29.0%
0.34%
2.00%
2%
70p

10 October
298p
243p
216,320
5 years
33.0%
(0.02)%
1.31%
2%
95p

10 October
300p
255p
184,145
5 years
29.0%
0.32%
2.00%
2%
77p

Movements in the number of share options outstanding and their weighted average prices are as follows:

At 1 January
Granted
Exercised
Forfeited

At 31 December

2020

Average
option price
per share

149p
243p
161p
248p

103p

Options

3,691,109
890,560
(1,417,104)
(254,891)

2,909,674

2019

Average
option price
per share

189p
255p
166p
199p

149p

Options

4,082,962
840,492
(912,549)
(319,796)

3,691,109

Of the 2,909,674 outstanding options (2019: 3,691,109), 334,000 are exercisable (2019: 121,000).

The Group received proceeds of £2,312,000 in respect of the 1,417,104 options exercised during the year: £7,000 was credited to share capital and
£2,305,000 to share premium. The weighted average share price at date of exercise was 300p (2019: 279p).

The weighted average remaining life of 1,735,589 (2019: 1,743,456) awards outstanding under the 3 year plan is 1.9 years. The weighted average
remaining life of 1,174,085 (2019: 1,947,653) awards outstanding under the 5 year plan is 2.2 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 over shares are made to executive directors and senior managers each year.

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Notes to the Group financial statements continued
For the year ended 31 December 2020

25. Share-based payments continued
2010 LTIP plan
Following shareholder approval of the 2010 LTIP plan at the Company’s AGM on 23 April 2010, awards of shares have been made annually to
executive and senior managers. From 2017 onwards, 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.

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 15% 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 2018, 2019 and 2020 awards, the awards will vest by comparing the average ROIC over the performance period against a set of pre-
defined targets.

The performance period for the 2017 awards ended on 31 December 2019. Messrs. PricewaterhouseCoopers LLP as independent actuaries
certified to the Remuneration Committee that there was an 84.4% vesting of this award as the Company was in the 73rd percentile relative to the
comparator group, the Group’s EPS growth was 39.6% over the performance period and the Group’s growth in economic profit was 14.3%.
These awards vested during 2020.

The performance period for the 2018 awards ended on 31 December 2020. Messrs. PricewaterhouseCoopers LLP as independent actuaries
certified to the Remuneration Committee that there was an 84.4% vesting of this award as the Company was in the 73rd percentile relative to the
comparator group, the Group’s EPS growth was 39.0% over the performance period and the Group’s growth in economic profit was 13.7%.
These awards will vest during 2021.

Grant date
Share price at grant date
Shares granted under scheme
Vesting period
Expected volatility
Risk free rate
Expected dividends expressed as a dividend yield
Probability of ceasing employment before vesting
Fair value of awards under TSR performance conditions
Fair value of awards under EPS and ROIC performance conditions

2017 Award
2018 Award
2019 Award
2020 Award

2020

2019

07 April 2020
239p
1,726,334
3 years
35.8%
(0.1)%
0.0%
5% p.a.
176p
318p

Lapsed

(107,009)
(5,853)
(31,692)
(38,776)

16 May 2019
292p
1,354,671
3 years
27.3%
0.7%
0.0%
5% p.a.
147p
292p

Outstanding
at end
of year

–
981,204
1,218,889
1,687,558

(183,330)

3,887,651

Outstanding
at start
of year

690,301
987,057
1,250,581
–

Granted
during year

–
–
–
1,726,334

2,927,939

1,726,334

Vested
during year

(583,292)
–
–
–

(583,292)

The weighted average remaining life of awards outstanding is one year.

c) Overseas profit linked share plan (OPLSS) 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.

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26. Financial instruments
Financial risk and treasury policies
The 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.

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:

Trade receivables
Other receivables
Cash and cash equivalents

Carrying amount

2020

112,565
27,480
187,204

327,249

2019

129,390
27,558
117,612

274,560

Other receivables consist principally of tax receivables and prepayments. These items do not give rise to significant credit risk.

The maximum exposure to credit risk for trade receivables at the reporting date by currency was:

Sterling
US dollar
Euro
Other

Provisions against trade receivables
The following table shows the expected credit loss (ECL) that has been recognised for trade receivables:

Carrying amount

2020

16,618
21,697
38,164
36,087

2019

17,910
30,948
43,395
37,137

112,566

129,390

Not past due
Past due 0–30 days
Past due 31–60 days
Past due 61–90 days
Past due more than 91 days

Gross
2020

82,849
18,481
6,314
3,468
6,142

117,254

Provision
2020

(3)
–
(94)
(42)
(4,549)

(4,688)

Gross
2019

98,833
17,738
7,035
3,467
8,260

135,333

Provision
2019

(20)
(7)
–
(59)
(5,857)

(5,943)

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Notes to the Group financial statements continued
For the year ended 31 December 2020

26. Financial instruments continued
Provisions against trade receivables continued
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 (2019: £7,000,000) on which interest would be payable at base rate plus 1.35% and a €5,000,000 uncommitted
overdraft facility (2019: €5,000,000) on which interest would be payable at base rate plus 1.1%.

During 2020 the Group cancelled a £60,000,000 committed Revolving Credit Facility and arranged a new £60,000,000 committed Revolving
Credit Facility which matures in June 2022. At year end this committed facility was fully undrawn, resulting in £60,000,000 being available.

The following are the contractual maturities of financial liabilities, including interest payments and excluding the impact of netting agreements:

31 December 2020

Bank loans
Lease liabilities
Trade and other payables
Contingent consideration
Foreign exchange contracts
Non-redeemable preference shares

31 December 2019

Bank loans and overdrafts
Finance lease liabilities
Trade and other payables
Contingent consideration
Foreign exchange contracts
Non-redeemable preference shares

Carrying
amount

Contractual
cash flows

Less than
12 months

1–2 years

2–5 years

More than
5 years

Analysis of contractual cash flow maturities

797
8,302
74,894
183
168
40

84,384

914
9,612
74,894
183
168
40

85,811

85
4,236
74,894
183
168
–

79,566

85
2,832
–
–
–
–

2,917

744
2,427
–
–
–
–

3,171

–
117
–
–
–
40

157

Carrying
amount

Contractual
cash flows

Less than
12 months

1–2 years

2–5 years

More than
5 years

Analysis of contractual cash flow maturities

828
10,675
81,776
285
176
40

93,780

953
11,641
81,776
285
176
40

94,871

85
5,185
81,776
285
176
–

87,507

84
3,103
–
–
–
–

3,187

784
3,069
–
–
–
–

3,853

–
284
–
–
–
40

324

Where a counterparty experiences credit stress then 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 £111,546,000 (2019: £168,714,000 ) and the gross inflow is
£112,960,000 (2019: £170,735,000).

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 2020 was a £1,414,000 asset (2019: £2,020,000 asset) comprising an asset of £1,582,000 (2019: £2,196,000) and a liability of
£168,000 (2019: £176,000). Forward exchange contracts in place at 31 December 2020 mature in 2021.

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.

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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 2020 of £250,000 (2019: £300,000)
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 2020 of £700,000 (2019: £700,000). 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:

US dollar
Euro

ii) Interest rate risk
The Group does not undertake any hedging activity in this area.

Average rate

Closing rate

2020

1.28
1.12

2019

1.28
1.14

2020

1.37
1.12

2019

1.31
1.17

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:

Fixed rate financial liabilities
Floating rate financial liabilities

2020

40
797

837

The fixed and floating rate financial liabilities comprise preference shares and bank loans. The floating rate obligations bear interest at rates
determined by reference to the relevant LIBOR or equivalent rate.

The weighted average interest rate of the fixed rate financial liabilities is 9.5% (2019: 9.5%).

The maturity profile of the Group’s financial liabilities (excluding leases) at 31 December was as follows:

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

Total

2020

69
69
659
40

837

2019

40
828

868

2019

66
66
696
40

868

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Notes to the Group financial statements continued
For the year ended 31 December 2020

26. Financial instruments continued
Provisions 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 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.

Total borrowings including lease liabilities
Total cash and cash equivalents

Group net cash

Reconciliation of changes in assets and liabilities arising from financing activities
Repayment of borrowings
Net decrease/(increase) in lease liabilities
Effect of exchange rate fluctuations

Changes in financial liabilities arising from financing activities
Net increase in cash and cash equivalents

Net increase in net cash
Net cash at start of year

Net cash at end of year

Notes

19
16

2020

(9,150)
187,204

2019

(11,543)
117,612

178,054

106,069

69
2,452
(128)

2,452
69,592

71,985
106,069

178,054

60,013
(10,673)
2,247

51,587
10,874

62,461
43,608

106,069

e) Fair values
The fair values of financial assets and liabilities, together with the carrying amounts shown in the balance sheet, were as follows:

Loans and receivables
Trade receivables
Other receivables

Financial assets
Cash and cash equivalents

Designated cash flow hedges
Foreign exchange contracts:
Financial assets
Financial liabilities

Financial liabilities at amortised cost
Bank loans
Trade and other payables
Contingent consideration
Preference shares
Lease liabilities

Carrying
amount
2020

Fair value
2020

Carrying
amount
2019

Fair value
2019

112,565
25,868

129,390
27,558

187,204

117,612

1,582
(168)

2,196
(176)

(797)
(74,894)
(183)
(40)
(8,313)

(828)
(81,776)
(285)
(40)
(10,675)

242,824

182,976

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 estimated using market foreign exchange rates at the balance sheet date. All derivative financial instruments are
categorised at Level 2 of the fair value hierarchy.

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The other financial instruments are classified as Level 3 in the fair value hierarchy and are valued as follows:

i) Trade and other receivables/payables
As the majority of receivables/payables have a remaining life of less than one year, the notional amount is deemed to reflect the fair value.

ii) Contingent consideration
As all the contingent consideration is contractually due for payment within 12 months (2019: 12 months), the carrying amount is equal to the fair
value. Further information on the contingent consideration is shown in note 21.

27. 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 £101,739,000 at
31 December 2020.

2020

Balance at 1 January
Depreciation charge for the year
Additions to right-of-use assets
Right-of-use assets disposed of
Foreign exchange differences

Balance at 31 December

Lease liabilities

Maturity analysis – contractual undiscounted cash flows
Less than one year
One to five years
More than 5 years

Total undiscounted lease liability at 31 December
Interest cost associated with future periods

Lease liabilities included in statement of financial position at 31 December

Current
Non-current

Land and
buildings

Plant and
equipment

6,987
(3,024)
1,790
(77)
53

5,729

3,110
(1,660)
772
(113)
229

2,338

Total

10,097
(4,684)
2,562
(190)
282

8,067

2020

2019

4,236
5,259
117

9,612
(1,299)

8,313

3,685
4,628

5,185
6,172
284

11,641
(966)

10,675

4,686
5,989

Amounts recognised in profit and loss
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.

Leases under IFRS16
Interest on lease liabilities
Impairment of right-of-use assets
Expenses relating to short-term leases and leases of low-value assets
Depreciation of right-of-use assets

Amounts recognised in statement of cash flows

Total cash outflow for leases

28. Capital commitments
Capital commitments at 31 December for which no provision has been made in these accounts were:

Contracted

2020

2019

499
–
1,821
4,684

2020

6,505

431
695
1,910
4,435

2019

7,058

2020

7,699

2019

8,225

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Notes to the Group financial statements continued
For the year ended 31 December 2020

29. Contingencies

Performance guarantees and indemnities

2020

5,261

2019

9,695

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.

30. 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
page 193 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.

Evoqua Water Technologies LLC is a related party of Rotork plc by virtue of Martin Lamb’s non-executive chairmanship. Sales to subsidiaries and
associates of Evoqua Water Technologies LLC totalled £nil during the year (2019: £2,000), and there was no outstanding debt at 31 December 2020
(2019: £nil).

All transactions are on an arm’s length basis and on standard business terms.

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:

Emoluments including social security costs
Post-employment benefits
Pension supplement
Share-based payments

2020

4,680
25
466
747

5,918

2019

4,242
71
344
941

5,598

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Rotork plc Company balance sheet
At 31 December 2020

Non-current assets
Property, plant and equipment
Investments
Deferred tax assets

Current assets
Amounts owed by Group undertakings
Other receivables
Cash and cash equivalents

Total assets

Equity
Share capital
Share premium
Capital redemption reserve
Retained earnings

Non-current liabilities
Preference share capital

Current liabilities
Trade payables
Current tax
Amounts owed to Group undertakings
Other payables

Total equity and liabilities

Notes

c
d
e

2020
£000

–
43,205
503

43,708

366,950
588
2,464

370,002

413,710

4,370
16,826
1,644
376,709

399,549

316
2,276
6,574
4,955

14,121

413,710

2019
£000

–
43,205
283

43,488

264,212
816
1,695

266,723

310,211

4,363
14,521
1,644
277,957

298,485

601
1,449
5,089
4,547

11,686

310,211

The Company reported a total comprehensive income for the financial year of £132,436,000 (2019: £107,775,000).

These Company financial statements, company number 00578327, were approved by the Board of Directors on 1 March 2021 and were signed on
its behalf by:

KG Hostetler and JM Davis
Directors

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Rotork plc Company statement of changes in equity
At 31 December 2020

Balance at 31 December 2018
Total comprehensive income for the year
Equity settled share-based payment transactions
Share options exercised by employees
Own ordinary shares acquired
Own ordinary shares awarded under share schemes
Dividends

Balance at 31 December 2019
Total comprehensive income for the year
Equity settled share-based payment transactions
Share options exercised by employees
Own ordinary shares acquired
Own ordinary shares awarded under share schemes
Dividends

Balance at 31 December 2020

Share
capital
£000

4,358
–
–
5
–
–
–

4,363
–
–
7
–
–
–

4,370

Share
premium
£000

13,024
–
–
1,497
–
–
–

14,521
–
–
2,305
–
–
–

16,826

Capital
redemption
reserve
£000

1,644
–
–
–
–
–
–

1,644

Retained
earnings
£000

222,737
107,775
(1,011)
–
(5,287)
6,030
(52,287)

277,957
132,436
(306)
–
(3,645)
4,193
(33,926)

376,709

Total
equity
£000

241,763
107,775
(1,011)
1,502
(5,287)
6,030
(52,287)

298,485
132,436
(306)
2,312
(3,645)
4,193
(33,926)

399,549

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Notes to the Company 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 are prepared in accordance with International Financial Reporting Standards.
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 is 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.

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Notes to the Company financial statements continued

a) Accounting policies continued
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.

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.

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

Wages and salaries (including bonus and incentive plans)
Social security costs
Pension costs
Share-based payment charge

2020

5,521
690
111
183

6,505

2019

5,122
786
101
717

6,726

During the year there were 28 (2019: 23) employees of Rotork plc plus the two (2019: two) executive directors.

Disclosures required by paragraph 1 of schedule 5 of SI2008/410 are set out in the director’s remuneration report on pages 110 to 137.

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 25 to the Group Financial Statements. The table below sets out the movement of share options under
the LTIP for employees of the Company.

2017 Award
2018 Award
2019 Award
2020 Award

Outstanding
at start
of year

232,404
540,421
504,714
–

1,277,539

Granted
during year

–
–
–
701,514

701,514

Vested
during year

(196,381)
–
–
–

(196,381)

Outstanding
at end
of year

–
540,421
504,714
701,514

Lapsed

(36,023)
–
–
–

(36,023)

1,746,649

The weighted average remaining life of awards outstanding at the year end is one year.

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RotorkAnnual Report 2020
c) Property, plant and equipment in the Company balance sheet

Cost
At 1 January 2020

At 31 December 2020

Depreciation
At 1 January 2020
Charge for year

At 31 December 2020

Net book value
At 31 December 2020

At 31 December 2019

d) Investments in the Company balance sheet
Shares in Group companies

At 1 January and 31 December

The Company has the following investments in wholly owned subsidiaries:

Subsidiary

Incorporated in

Registered address

100% owned by Rotork plc
GH Chaplain & Co (Engineers) Limited
Rotork Analysis Limited
Rotork Cleaners Limited
Rotork Control and Safety Limited
Rotork Instruments Limited
Rotork Nominees Limited
Widcombe (Developments) Limited
Rotork Controls Limited
Rotork Overseas Limited

England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales

Rotork House, Brassmill Lane, Bath BA1 3JQ
Rotork House, Brassmill Lane, Bath BA1 3JQ
Rotork House, Brassmill Lane, Bath BA1 3JQ
Rotork House, Brassmill Lane, Bath BA1 3JQ
Rotork House, Brassmill Lane, Bath BA1 3JQ
Rotork House, Brassmill Lane, Bath BA1 3JQ
Rotork House, Brassmill Lane, Bath BA1 3JQ
Rotork House, Brassmill Lane, Bath BA1 3JQ
Rotork House, Brassmill Lane, Bath BA1 3JQ

Plant and
equipment

221

221
–

221

–

Total

221

221
–

221

–

2020

43,205

2019

43,205

100% owned by Rotork Controls Limited
Rotork Actuation (Shanghai) Co Limited

Rotork Trading (Shanghai) Co Limited

Rotork Controls (India) Private Limited

China

India

Rotork UK Limited
Valvekits Limited
Rotork Americas Holdings Limited

England and Wales
England and Wales
England and Wales

100% owned by Rotork Overseas Limited
Rotork Australia Pty Limited
Rotork Controls Comercio De Atuadores LTDA

Australia
Brazil

Rotork Controls (Canada) Limited
Rotork Chile SpA
Bifold Group Limited
Rotork Midland Limited
Rotork Motorisation SAS
Rotork Controls (Deutschland) GmbH

Canada
Chile
England and Wales
England and Wales
France
Germany

Building G, No.260 Liancao Road, Minhang District, Shanghai,
PRC 201108
Room 1177,No.400,Middle Zhejiang Road, HuangPu District, Shanghai,
China
28B, Ambattur Industrial Estate (North Phase), Ambattur, Chennai 600
098, India
Rotork House, Brassmill Lane, Bath BA1 3JQ
Rotork House, Brassmill Lane, Bath BA1 3JQ
Rotork House, Brassmill Lane, Bath BA1 3JQ

Level 26, 181 William Street, Melbourne, VIC, 3000, Australia
Rodovia SP 73, 4509 – Armazem Modulo 14 – NR Cond., Indaiatuba
– SP, Brazil
#4-2850 Argentia Road, Mississauga, Ontario, L5N-8G4, Canada
Rotork es Presidente Kennedy 4700, Oficina 1001, Vitacura, Chile
Rotork House, Brassmill Lane, Bath BA1 3JQ
Rotork House, Brassmill Lane, Bath BA1 3JQ
75, rue Rateau 93126 La Courneuve Cedex, France
Siemensstr. 33, 40721 Hilden, Germany

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Notes to the Company financial statements continued

d) Investments in the Company balance sheet continued
Shares in Group companies continued

Subsidiary

Incorporated in

Registered address

Rotork Germany Holdings GmbH
Rotork Limited
Eltav Wireless Monitoring Limited
Rotork Italy Holdings Srl
Rotork Japan Co Limited
Rotork Middle East FZE

Rotork (Malaysia) Sdn Bhd

Rotork Actuation Sdn Bhd

Rotork BV
Rotork Gears Holding BV
Robusta Miry Brook BV

Rotork Norge AS
Rotork Polska zoo
Rotork Rus Limited
Rotork Controls (Singapore) Pte Limited
Rotork Africa (Pty) Limited
Rotork Controls (Korea) Co Limited

Young Tech Co Limited

Rotork Controls (Iberia) SL

Rotork Sweden AB
Rotork AG
Rotork Inc

Germany
Hong Kong
Israel
Italy
Japan
Jebel Ali Free Zone

Malaysia

Netherlands
Netherlands
Netherlands

Norway
Poland
Russia
Singapore
South Africa
South Korea

South Korea

Spain

Sweden
Switzerland
USA

Rotork Controls de Venezuela SA

Venezuela

Rotork Turkey Akıs¸ Kontrol Sistemleri Ticaret
Limited S¸ irketi

Turkey

Mühlsteig 45, 90579 Langenzenn, Germany
Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong
15 Hata’asia St. Ra’anana, Israel 4365408
Corso di Porta Vittoria 9 (Milano) Italy
2-2-24 Sengoku, Koto-ku, Tokyo, 135-0015 Japan
PUB-LC 07, near R/A 08, PO Box 262903, Jebel Ali Free Zone, Dubai,
United Arab Emirates
1-17-1, Menara Bangkok Bank, Berjaya Central Park, No 105, Jalan
Ampang, 50450 Kuala Lumpur, Malaysia
No 32, Jln anggerik Mokara 31/47, Kota Kemuning, 40460 Shah Alam,
Malaysia
Mandenmakerstraat 45, 3194 DA Hoogvliet, The Netherlands
Nijverheidstraat 25, 7581 PV Losser, The Netherlands
Strawinskylaan 3127, 8th floor, 1077 ZX Amsterdam,
The Netherlands
Ormahaugvegen 3, 5347 Ågotnes, Norway
Tarnogórska 241, 44-100 Gliwice, Poland
Offices 203-205, ul. Otradnaya 2B, bld. 3, 127273 Moscow, Russia
426 Tagore Industrial Ave, Singapore 787808
136 Kuschke Street, Meadowdale Ext3, Germiston, 1601 South Africa
509, 5th Floor Leader’s Bldg 342-1, Yatap-Dong, Bundang-gu,
Seong-nam si, Gyeonggi-do, South Korea 463-828
81, Hwanggeum-ro, 89beon-gil, Yangchon-eup, Gimpo-si, Gyeonggi-
do, Korea 10048
Larrondo Beheko Etorbidea, Edificio 2 – 48180 Loiu
(Bizkaia) Spain
Box 80, 791 22 Falun, Sweden
Fuchsacker 678, 9426 Lutzenberg, Switzerland
The Corporation Trust Company, Corporation Trust Center, 1209
Orange St., Wilmington, DE 19801 USA
Av. Casanova Torre banco plaza, piso 3 Ofic. 3D. Sabana Grande.
Caracas – Venezuela
Aydinli Mahallesi Melodi Sok. Bilmo Küçük Sanayi Sitesi No:35/2 Tuzla,
Turkey

100% owned by Valvekits Limited
Circa Engineering Limited

England and Wales

Rotork House, Brassmill Lane, Bath BA1 3JQ

100% owned by Rotork Trading (Shanghai) Co Limited
Centork Trading (Shanghai) Co. Ltd

China

Rotork Instruments Chengdu Co. Ltd

China

Room C-02, 1/F, West Area No. 2 Building, No. 29 Jiatai Road, Free
Trade Zone, Shanghai, China
Room 1201, 12/F, Unit no.1, Building No. 1, Building I, 88 Shenghe
No.1 Road, High Tech Zone, Chengdu, Sichuan,
China 610041

100% owned by Rotork UK Limited
Prokits Limited
Flowco Limited

England and Wales
England and Wales

Rotork House, Brassmill Lane, Bath BA1 3JQ
Rotork House, Brassmill Lane, Bath BA1 3JQ

100% owned by Rotork Italy Holdings Srl
Rotork Controls Italia Srl
Rotork Instruments Italy Srl
Rotork Fluid Systems Srl
Rotork Gears Srl

Italy
Italy
Italy
Italy

Viale Europa n.17 – 20090 Cusago (Milano) Italy
Viale Europa n.17 – 20090 Cusago (Milano) Italy
Via Padre Jacques Hamel, 138/B – 55016 Porcari (Lucca) Italy
Viale Europa n.17 – 20090 Cusago (Milano) Italy

100% owned by Rotork Gears Holding BV
Rotork Gears BV

Netherlands

Nijverheidstraat 25, 7581 PV, Overijssel, The Netherlands

194

RotorkAnnual Report 2020Subsidiary

Incorporated in

Registered address

100% owned by Rotork Inc
Rotork (Thailand) Limited

Rotork Controls Inc
Remote Control Inc
Ranger Acquisition Corporation

100% owned by Rotork Controls Inc
Rotork Pittsburgh LLC
6005 Enterprise Drive LLC

100% owned by Ranger Acquisition Corp
Fairchild Industrial Products Company
Rotork Tulsa Inc

Thailand

USA
USA
USA

USA
USA

100% owned by Fairchild Industrial Products Company
Fairchild Industrial Products (Sichuan) Company
Limited
Fairchild India Private Limited

China

India

35/8 Soi Ladprao124(Sawasdikarn) Ladprao Road, Plubpla,
Wangtonglang, Bangkok 10310 Thailand
675 Mile Crossing Blvd., Rochester, NY 14624, USA
77 Circuit Dr. North Kingstown, RI 02852, USA
The Corporation Trust Company, Corporation Trust Center,
1209 Orange St., Wilmington, DE 19801 USA

6005 Enterpirise Drive, Export, PA 15632, USA
6005 Enterpirise Drive, Export, PA 15632, USA

3920 West Point Blvd, Winston-Salem, NC 27103, USA
4433 W 49th Suite D, Tulsa, OK 74017, USA

Room 1201, Complex Square, No.88 West Shenghe No.1 Road,
High Tech Zone, Chengdu, Sichuan, China. 610041
56-C/BB, Janakpuri, New Delhi-110058

100% owned by Bifold Group Limited
Bifold Fluidpower (Holdings) Limited

England and Wales

Rotork House, Brassmill Lane, Bath BA1 3JQ

100% owned by Bifold Fluidpower (Holdings) Limited
Bifold Fluidpower Limited
MTS Precision Limited
Marshalsea Hydraulics Limited
Bifold Company (Manufacturing) Limited

England and Wales
England and Wales
England and Wales
England and Wales

Rotork House, Brassmill Lane, Bath BA1 3JQ
Rotork House, Brassmill Lane, Bath BA1 3JQ
Rotork House, Brassmill Lane, Bath BA1 3JQ
Rotork House, Brassmill Lane, Bath BA1 3JQ

100% owned by Bifold Fluidpower Limited
Fluidpower (Stainless Steel) Limited

England and Wales

Rotork House, Brassmill Lane, Bath BA1 3JQ

100% owned by Rotork Germany Holdings GmbH
Max Process GmbH
Schischek GmbH
Rotork GmbH

Germany
Germany
Germany

Rastenweg 10, 53489 Sinzig
Mühlsteig 45, 90579 Langenzenn
Mühlsteig 45, 90579 Langenzenn

100% owned by Rotork AG
Schischek Limited
Schischek EURL
Schischek Srl

England and Wales
France
Italy

Rotork House, Brassmill Lane, Bath BA1 3JQ
49 avenue du Président Salvador Allende, 77100 Meaux, France
Ranica (BG) – Via Adelasio 22, Italy

100% owned by Schischek GmbH (Germany)
Schischek Sales Europe Ltd

England and Wales

Mühlsteig 45, 90579 Langenzenn

100% owned by Robusta Miry Brook BV
Rotork Servo Controles de Mexico S.A de C.V

Mexico

100% owned by Rotork Controls (Iberia) SL
Actuation Iberia S.L
Centork Valve Control S.L

Spain
Spain

Centeotl 223, Col. Industrial San Antonio, C.P. 02760, Azcapotzalco,
Ciudad de Mexico, Mexico

C/ Ercilla, 21. , 48009 , Bilbao (Vizcaya), Spain
Pol. Ind. Ipintza 110, Txatxamendi 24-26 – 20100 Lezo (Gipuzkoa) –
Spain

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Notes to the Company financial statements continued

e) Deferred tax assets and liabilities in the Company balance sheet
Deferred tax assets and liabilities are attributable to the following:

Tangible fixed assets
Provisions

Movements in the net deferred tax balance during the year are as follows:

Balance at 1 January
(Debited)/credited to the income statement

Assets
2020

Liabilities
2020

8
495

503

–
–

–

Net
2020

8
495

503

Assets
2019

10
273

283

Liabilities
2019

–
–

–

2020

283
220

503

Net
2019

10
273

283

2019

293
(10)

283

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 subsequently 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 £256,554,000 (2019: £312,364,000).

f) Other receivables in the Company balance sheet

Prepayments
Other receivables

g) Other payables in the Company balance sheet

Other taxes and social security
Other payables
Accruals

2020

524
64

588

2020

154
3,317
1,484

4,955

2019

256
560

816

2019

152
3,043
1,352

4,547

The Company has a £17,000,000 gross overdraft facility (2019: £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.

During 2020 the Company cancelled a £60,000,000 committed Revolving Credit Facility and arranged a new £60,000,000 committed Revolving
Credit Facility which matures in June 2022. The facilities are available to the Company, Rotork Controls Limited and Rotork Overseas Limited.
At year end this committed facility was fully undrawn, resulting in £60,000,000 being available.

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 17 to the Group financial statements.

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RotorkAnnual Report 2020
Ten year trading history

Revenue

604,544

669,344

695,713

642,229

590,078

546,459

594,739

578,440

511,747

447,833

2020
£000

2019
£000

2018
£000

2017
£000

2016
£000

2015
£000

2014
£000

2013
£000

2012
£000

2011
£000

Cost of sales

Gross profit

(320,234)

(357,718)

(384,253)

(358,090)

(328,410)

(296,944)

(309,280)

(304,066)

(272,199)

(236,359)

284,310

311,626

311,460

284,139

261,668

249,515

285,459

274,374

239,548

211,474

Overheads

(161,736)

(184,616)

(188,542)

(198,167)

(167,891)

(145,129)

(143,232)

(135,109)

(115,081)

(99,474)

Operating profit

122,574

127,010

122,918

85,972

93,777

104,386

142,227

139,265

124,467

112,000

Adjusted* operating

profit

142,543

151,005

146,015

130,162

120,588

125,272

157,167

151,412

131,866

115,921

Amortisation of

acquired intangible
assets

Disposal of property
Other adjustments
Operating profit

(14,110)
–
(5,859)
122,574

(18,841)
–
(5,154)
127,010

(20,284)
–
(2,813)
122,918

(27,183)
–
(17,007)
85,972

(26,811)
–
–
93,777

(20,886)
–
–
104,386

(14,940)
–
–
142,227

(12,147)
–
–
139,265

(7,399)
–
–
124,467

(3,921)
–
–
112,000

Net interest

(537)

(2,953)

(2,170)

(5,386)

(2,707)

(2,517)

(1,062)

(1,268)

(273)

550

Profit before taxation
Tax expense

122,037
(28,709)

124,057
(29,957)

120,748
(29,004)

80,586
(24,973)

91,070
(23,897)

101,869
(27,012)

141,165
(37,963)

137,997
(38,488)

124,194
(34,879)

112,550
(32,149)

Profit for the year

93,328

94,100

91,744

55,613

67,173

74,857

103,202

99,509

89,315

80,401

Dividends

33,926

52,287

48,288

45,218

43,876

43,765

42,702

38,735

33,924

49,534

Basic EPS
Adjusted* EPS
Diluted EPS

10.7p
12.5p
10.7p

10.8p
13.0p
10.8p

10.5p
12.6p
10.5p

6.4p
10.6p
6.4p

7.7p
10.0p
7.7p

8.6p
10.4p
8.6p

11.9p
13.2p
11.9p

11.5p
12.5p
11.4p

10.3p
10.9p
10.3p

9.3p
9.6p
9.3p

* Adjusted is before the amortisation of acquired intangible assets, the disposal of property and other adjustments.

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Share register information

The tables below show the split of shareholder and size of shareholding in Rotork plc

Ordinary shareholder by type

Individuals
Bank or nominees
Other company
Other corporate body

Range

1-1,000
1,001-2,000
2,001-5,000
5,001-10,000
10,001-50,000
50,001-100,000
100,001 +

Source: Equiniti

Number of
holdings

2,958
778
33
22

3,791

Number of
holdings

1,222
451
621
439
606
117
335

3,791

78.0
20.5
0.9
0.6

Number of
shares

22,374,048
846,268,342
2,674,395
2,546,906

2.6
96.8
0.3
0.3

100.0

873,863,691

100.0

% Number of shares

32.2
11.9
16.4
11.6
16.0
3.1
8.8

518,955
676,180
2,077,515
3,198,849
13,212,031
8,468,996
845,711,165

0.1
0.1
0.2
0.3
1.5
1.0
96.8

100.0

873,863,691

100.0

Dividend information
The table below details the amounts of interim, final and additional dividends declared in respect of each of the last five years.

2020*
2019*
2018
2017
2016

Interim
dividend
(p)

3.90
2.30
2.20
2.05
1.95

Final
dividend
(p)

6.30
–
3.70
3.35
3.15

Total
dividends
(p)

10.20
2.30
5.90
5.40
5.10

* 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.

Financial calendar
2 March 2021
8 April 2021
9 April 2021
30 April 2021
30 April 2021
3 August 2021
24 November 2021

Preliminary announcement of annual results for 2020
Ex-dividend date for final proposed 2020 dividend
Record date for final proposed 2020 dividend
Announcement of trading update
Annual General Meeting to be held at Rotork House, Brassmill Lane, Bath, BA1 3JQ
Announcement of interim financial results for 2021
Announcement of trading update

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RotorkAnnual Report 2020Corporate directory

Company Secretary (Interim)
Sandra Forbes

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

Auditors
Deloitte LLP
2 New Street Square
London EC4A 3BZ

Financial Public Relations
FTI Consulting
200 Aldersgate
Aldersgate Street
London EC1A 4HD

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Notes

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