Rotork plc

morning everyone thank you for joining us today for our 2025 four-year results presentation alongside me is Ben Peacock our CFO we're pleased to have the opportunity to walk you through our performance for the year and we'll follow our normal format with time for Q&A at the end I'm pleased with the progress made in 2025 as we continue to execute on the growth plus strategy and would like to thank all our staff at Roadtalk growth plus continues to deliver because of their hard work dedication and commitment I'd also like to take a moment to acknowledge our staff and their families in the Middle East given the current conflict in the region our priority has been their safety and I'm pleased to say all are safe and well and we will continue to monitor the ongoing developments closely moving now to the key financial highlights order growth of 6% on an OCC basis was particularly pleasing with each division driving mid single digit OCC growth despite mixed end markets sales grew 3.7% OCC and when including the contribution of NOA this increases to 5.3% on a constant currency basis CPI had a very strong second half with target segment revenues accelerating while oil and gas saw some customer-driven project delays at the end of the year, which we'll talk about in a later slide. Adjusted operating profits were very encouraging, up 100 basis points year on year to 24.6%. Margins were helped by mix and operational efficiencies. Combined with sales growth this resulted in a 10% OCC adjusted operating profit growth for the full year. Return on capital employed remained at a high level at 38.4% helped by margins and disciplined capital deployment. Our balance sheet remained strong and cash conversion was good. As expected, net cash ended the year lower, reflecting the £40 million acquisition of NOA and the £60 million of share buybacks. As part of our focus, our ongoing strategic priorities and capital allocation, today we have announced two small non-core disposals for £24 million, which we will talk about in later slides. safety performance was broadly in line with 2024 and we continue to make good progress on our safety initiatives as well as employee health and well-being we're also making strong progress on our sustainability agenda and have achieved our scope one and two emissions targets ahead of plan sustainability remains central to our strategy and we have now raised our 2030 ambition to a 60 reduction in scope one and two emissions versus our 2020 baseline this slide highlights the key strategic initiatives driving growth ahead of our end markets target segments and rotor service in 2025 we continue to see good sales growth in our target segments up eight percent OCC Highlights included strong growth in upstream electrification, allowing us to outperform a weaker underlying market, and good growth in LNG. In CPI, we outgrew subdued core markets with good performance across the main target segments, including speciality chemicals, critical HVAC, marine and mining. water and power continues to perform well with good growth in the water infrastructure and treatment markets as well as the alternative energy markets service is another strategic growth area for road talk which delivered continued good momentum and now represents 24 of group sales here we are expanding our product offering and increasing wallet share with existing customers During the period, we saw particularly strong growth in Europe, the Middle East and the US. Overall, I'm proud of our performance in 2025. Continued strategic momentum across all divisions, but particularly in CPI and Water and Power, led us to outperform mixed underlying end markets and helped offset the customer-driven project delays seen in oil and gas at the end of the year.

now over to ben who will take you through the financial details thank you geek and good morning everyone i'm pleased to report that growth plus delivered another year of good order growth and margin progression together with continued high return on capital and return to shareholders in the following slides i'll walk you through the highlights of our performance but please note that the appendix contains some more specific details on our 2025 full year results If we now turn to the numbers, order received at £783 million were up 6% versus prior year on an organic constant currency or OCC basis with all divisions delivering growth. Revenue at £777 million is 3.7% higher than prior year on an OCC basis and 3% ahead on a reported basis. CPI and water and power performed strongly with mid to high single digit revenue growth on an OCC basis. This was offset by oil and gas which saw some customer driven project delays at the end of the year. We are pleased with the integration of NOAA which contributed £11.2 million of revenue in the period. Rotalk service performed well with revenue continuing to grow faster than the group and its contribution to group sales increased to 24% versus 23% in the prior year. Adjusted operating profit of £191.5 million is 10% higher versus prior year on an OCC basis and margins at 24.6% above 140 basis points. including the foreign currency headwind of 6.1 million pounds reported operating margins are up 100 basis points the group continues to be cash generative with cash conversion at 101 percent this is down from prior year reflecting increased working capital due to delivery phasing in the second half and we closed the period with net cash of 65 million pounds our increased profitability resulted in adjusted earnings per share of 17 pence, which is an increase of 6.9% on a reported basis and our high return on capital increased further to 38.4%. Finally, the proposed four-year dividend of 8.3 pence per share is 7.1% higher than the prior year. If we now turn to the divisions and starting with oil and gas, Divisional sales grew 0.6% on an OCC basis, with good target segment growth particularly in upstream electrification and LNG. From a sector perspective, despite challenging underlying market conditions, upstream revenues grew supported by strong electrification related revenues. Despite good growth in LNG, midstream revenues were softer in the second half, impacted by customer driven project deferrals at the end of the year. downstream markets were stable year on year supported by service and brownfield related activity from a regional perspective the division experienced strong growth in EMEA offset by subdued performance in the Americas and APAC a just operating profit at £97.6 million was at 9.1% on an OCC basis the 220 basis points adjusted operating margin improvement reflects strong target segment sales growth a favourable product mix and operational efficiencies turning to CPI revenues were 7% higher year on year on an OCC basis with underlying momentum improving as the year progressed on a reported basis NOA made a good first contribution post acquisition adding 4% to divisional sales in the period By destination, America's sales were particularly strong, with good growth in the US, Mexico, Chile and Brazil. EMEA and APAC both saw modest growth. Adjusted operating profit at £58.2 million was up 9.9% on an OCC basis, with adjusted operating margins up 70 basis points to 26.1% on higher volumes. Moving to water and power, sales were up 6.1% on an OCC basis, with both sectors growing strongly but consistent with half year, power growing slightly faster than water. In target segments, we saw solid growth in water infrastructure and wastewater treatment. The Americas and APAC both delivered strong growth in a year, with EMEA performance more muted, particularly in the second half. adjusted operating profit for the division was 58 million pounds excluding foreign exchange headwinds adjusted operating profit was at six percent on an OCC basis consistent with the position at half year despite higher volumes mixed effects and hiring investment resulting in adjusted operating margins being slightly lower at 28.6 percent if we now move to the adjusted operating profit bridge this bridge shows solid profit growth of 10 OCC versus prior year driven by increased organic revenues and positive operating leverage price increases more and offset salary inflation and following increased investment in 2024 to support the growth plus strategy current period opex investments have been more limited Reflecting our operating leverage and mix, adjusted operating margins grew 140 basis points to 24.6% on an OCC basis. The currency headwind to adjusted operating profit of £6.1 million I mentioned earlier reduced the reported margin progression by 30 basis points. If we now turn to the items below operating profit, similar to last year the majority of the adjusted items relate to our business transformation program a further 25.6 million pounds was incurred in implementing a new erp system and the associated systems and processes throughout the group this is slightly lower than our previous guidance of 30 million pounds for the full year the program remains on track and the total program cost unchanged but we have adjusted phasing between 2025 and 2026. Additional adjusting items include £3.1 million of disposal and restructuring related costs for the divestment of two non-core businesses. Other costs include £1.5 million of acquisition and integration costs for NOAA and £1 million for the new facility in Changshu, China, which in total are £0.6 million incremental to the half-year reported results. Finally tax, the reported effective tax rate has increased 50 basis points while the adjusted effective tax rate at 25.3% has increased 10 basis points on last year. In terms of cash flow, we continue to be cash generative providing the funding for organic growth, strategic investments and returns to shareholders. Operating cash conversion for the period was 101%, with working capital to sales of 26.8%. We made good progress on our initial sum payables, but saw an outflow in receivables due to sales phasing at the end of the year. Positive free cash flow of £106.8 million is down on the prior year, reflecting the working capital investment and higher business transformation costs versus prior year. Free cash flow also includes overall R&D spend of £13.5 million as we continue to invest in new product development. If we now move to capital allocation, during the year we returned to shareholders dividends of £67 million and £60 million in relation to previously announced share buybacks. Additionally, we completed the acquisition of NOA for £40 million bringing total capital deployed to approximately £167 million. In relation to NOAA, the Group has also recorded £2 million of continued consideration during future years, bringing the total cost of the acquisition to £42 million. We finished the year with £65 million comprising total cash and cash equivalents of £110 million, lease liabilities of £23 million and £22 million of borrowings under the Group's £75 million revolving credit facility. the group's balance sheet continues to remain strong and provides with strategic and financial flexibility and finally on guidance for 2026 based on current exchange rates we currently estimate a neutral year-on-year impact to sales from fx we expect four-year capital expenditure of 15 million pounds an investment in our business transformation program of 25 million pounds reflecting the change in phasing between 2025 and 2026 in summary the balance sheet and cash generation of the business continues to give us strategic and financial flexibility for 2026 and we expect further progress on an OCC basis which gig will now cover in more detail we launched the growth path strategy in 2022 and with performance now at all-time highs we're seeing the clear impact of the work done over the past four years

OCC order intake growth has consistently been above 6% driven by strong momentum in our target segment of rates since launch and good growth across all three divisions. Operating margins have continued to strengthen and we don't see mid 20s as our ceiling in the medium to long term. over the past four years positive operating leverage improving mix with a shift towards electric actuators and operational efficiencies have more than offset increased investment in the business delivering a 230 basis points improvement in adjusted operating profit margins cash conversion has remained consistently high and return on capital employed has increased strongly despite bolt-on M&A reflecting discipline capital management and margin progression at the same time we've accelerated capital deployment combining targeted acquisitions share buybacks and a progressive dividend policy turning on to the next slide Our growth plus strategy is set up to leverage Rotorq's attractive business model and the structural tailwinds in our industry. Combined, we believe they will drive our long-term performance, helping us to grow ahead of our end markets and to achieve our financial ambitions of mid-to-high single-digit revenue growth and mid-20s adjusted operating muscle tailwinds that offer significant profitable growth opportunities. customer value our initiatives aimed at strengthening our internal processes to deliver an industry-leading customer experience and innovative products and services centers on extending our competitive advantage and capturing front sheet we have leading technology in key markets with products that are embedded in critical applications our differentiated route to market is built around end user requirements and a deep understanding of their processes Combined with our lean manufacturing setup, this creates a strong business model that delivers high margins and strong returns. The growth plus strategy also capitalises on the structural trends within our end markets. Automation continues to be a significant growth driver as customers upgrade existing systems and automate new projects to enhance performance, efficiency and reliability. only a quarter of industrial valves are estimated to be currently automated providing a long-term tailwind to growth electrification remains a broad industry trend with electric actuators typically providing more precise control and lower total cost of ownership electric actuators now represent around 55 of our sales and have steadily grown in our mix positioning us well to benefit from this shift digitalization is another key tailwind giving customers real-time insights into asset performance helping them to make the right decisions earlier This slide highlights some of the enhancements we've made under the hood since introducing Growth Plus to strengthen delivery and resilience in the business. Following the organisational shift from product to end markets, there has been substantial change within Road Talk to maximise the opportunities across the group. we have increased commercial investment by close to sixty percent across sales strategy and business development which has enabled the target segment growth alongside this and to maximize potential we invested in enhanced leadership training as well as strengthening our go to markets approach These changes have helped meaningfully increase our Net Promoter Score to ensure a consistently strong customer experience, a key differentiator in gaining market share and accessing new markets and customers. In addition, our product initiatives have gained momentum. new product development has accelerated with a greater emphasis on voice of customer insights and continued success in expanding both connected and service offerings we have seen good growth in new product launches and it's encouraging to see the success of our digital service offerings including i am revenues up 40 in 2025 whilst investing to deliver sustained growth these investments have been funded through ongoing operational efficiency and discipline cost management across the business enabling us to reinvest while increasing profitability all of these initiatives have made a tangible difference across the business With stronger capabilities and clearer focus, we are well set to build on this momentum and continue our growth journey to deliver our mid to high single digit revenue growth over time. This slide dives deeper into CPI and highlights the division's performance which has benefited from the initiatives previously mentioned. Since launching GrowthPlus, CPI's average growth has been 9%, with 2025 delivering 7% OCC growth, driven by strong momentum in its target segments, particularly in the second half. Despite industry forecasts pointing to double-digit falls in areas such as chemicals, the division has continued to grow. this reflects its focus on four end markets where automation electrification and digitalization are meaningful tailwinds we see a 1 billion pound serviceable addressable market for our main cpi target segments providing us an attractive runway for future growth from a low base we have grown very strongly in marine markets supported by increasing electrification of valve control on ships as well as the adoption of sustainable fuels in both new build and retrofit markets also requiring the use of electric actuators critical hvac has been another standout area delivering growth well ahead of its underlying markets Here we have successfully taken our high end premium electric products into new mission critical applications supported by electrification tailwinds in sectors such as semiconductor, data centres and battery production. The broader chemicals environment has been challenging, but we have grown in speciality chemicals due to success in automation and digitalisation upgrade projects offsetting the recent pressure in the bulk chemicals market. Mining has appeared volatile due to large nickel mining projects in 2023 which were not repeated in 2024 due to an oversupply in the market. however we've seen considerable success in this end market with a focus on automation and digitalization opportunities in copper gold and other critical minerals markets in local processing applications overall cpi's performance highlights the benefits of the changes made under growth plus a more focused commercial approach, a clearer emphasis on target segments, and a strong alignment with long-term structural growth drivers. Turning to the next slide, we are excited about the data center opportunity within CPI, which is in the critical HVAC target segment. Our current exposure is mainly in the primary cooling circuit outside of the server room. While revenues today are still relatively small, they are growing quickly, doubling in 2025. We see attractive medium-term potential as automation and electrification drive higher adoption of our products across the roughly 1,000 valves in the primary HVAC circuit outside the server room. We currently sell electric actuators and gear products into this part of the market and our portfolio is well suited, especially with the addition of NOAH, to the increasing need for precision, reliability and efficiency. As the market shifts towards liquid based cooling inside the server room we see additional opportunities in this high growth segment. Fluid control in these systems is mission critical for thermal efficiency and we believe our NOAA and Hanbay products are well positioned given their accuracy, reliability, size and speed compared to existing solutions. Having been on test with a number of customers in January, we secured a number of production orders for applications in CDUs and the technology cooling systems inside the server room with encouraging feedback. These wins reinforce our confidence in the long term potential for this market and we see opportunities in other parts of the data centre for our products. Turning to the next slide, in the water and power division we see near term opportunities in our traditional power markets and longer term opportunities in nuclear. We generate just under 10% of revenues from global power markets. around two and a half percent of this goes into alternative energy which is mainly renewables the remaining is in traditional power generation including combined cycle gas turbines our power business has a high exposure to asia and low exposure to the americas After experiencing declines through to 2024, our power business returned to mid to high single-digit revenue growth in 2025, supported by improving demand in the US, the Middle East and APAC. Looking ahead, we expect the market to continue to recover as rising electricity demand drives investment in the installed base. nuclear is within our alternative energy target segment we have a long track record in this market and have invested to re-establish our supply chains and capacity to re-enter the market in the near term we expect refurbishment related demand to be the main driver and see a potential total actuator spend of circa 3 million pounds per reactor refurbishment project Longer term, small modular reactors represent a significant opportunity given the high number of valves and the criticality of the application. The potential actuator spend per reactor is around £10 million. We are already laying the groundwork to participate in this market as it develops, although we don't expect this to turn into orders until the 2030s. Taken together, we see nuclear as a sizeable long-term opportunity for Rotor, with the total greenfield nuclear actuator market expected to be worth £5 billion between now and 2050. Oil and gas had a slower end of year as we saw some customer driven project delays in midstream markets. However, target segment initiatives continued to deliver good growth in the year. Upstream electrification continues to grow strongly as operators look to improve process control, reduce emissions and lower total cost of ownership. broader upstream markets were weak in the year with our own core upstream revenues and broader industry statistics pointing to double digit declines in midstream markets we saw good growth in LNG and had a supportive book to bill while broader midstream trends were more challenging due to the customer delays mentioned downstream markets were relatively stable in 2025 Here we focus on rotof service to provide predictive maintenance, upgrade and efficiency projects in brownfield markets. Following on from Ben's comments on the balance sheet, this slide provides an update on capital allocation. Our priorities remain unchanged. Investing organically in the business to support our leadership in intelligent flow control. maintaining a progressive dividend pursuing value creating M&A and returning excess capital to shareholders we made good progress in the year and as shown on the previous slide we have continued to increase the amount of capital deployed we acquired NOAH in March and are pleased with the integration and early performance We completed our initial £50 million buyback in October and subsequently announced another buyback at the Q3 trading update, reinforcing our commitment to achieving a net neutral balance sheet in the absence of M&A. alongside today's results we've also announced the disposal of two non-core businesses to support clearer focus on our strategic priorities for a combined total of 24 million pounds with sales of 15 million pounds in 2025. looking ahead our preference is to deploy capital into m a however we remain focused on strategic and financial discipline and given the nature of the typical bolt-on opportunities we target makes the timing difficult to predict as a result we will continue to use share buybacks to achieve a net neutral balance sheet position on an ongoing basis at year end we had 40 million pounds remaining of the current buyback which we expect to complete by the end of the first half As been highlighted, our balance sheet remains strong and the underlying cash generation of the business means there is scope to continue to do both bolt-ons and buy-backs. As we said at the half-year, we currently don't see this is an either-or decision. Turning now to the market outlook, our commentary here does not consider the potential direct and indirect impacts related to recent events in the Middle East. The region as a whole is around 10% of sales for Rotorq and we are carefully monitoring the evolving situation. However, it is too early to provide an update. For the group in 2026 we expect continued momentum in our target segments and in Rotorq service while underlying end markets are anticipated to be mixed. At the divisional level in oil and gas we expect a stable performance with a higher H2 weighting Our target segment and road talk service initiatives continue to ensure we outperform the wider oil and gas markets, where downstream markets are expected to remain stable and upstream and midstream are anticipated to remain subdued. For CPI, we see continued growth momentum. cpi builds on the structural trends of automation electrification and digitalization and remains focused on driving target segment growth in speciality chemicals mining critical hvac and marine markets whilst broader process markets are likely to remain subdued the outlook for water and power is also good global investment in water infrastructure continues to grow supported by rising water scarcity climate change and aging infrastructure modernization and resilience programs are driving activity across most markets and we expect this demand to remain robust in power we expect to see continued recovery in end markets In summary, I'm pleased with the progress advancing the GrowthPlus strategy in 2025. GrowthPlus has driven strong performance in the year with good order growth, 140 basis points OCC increase in margins and a 10% increase in adjusted operating profit. Our strategic initiatives are driving growth above underlying end market trends. Target segment growth was 8% OCC with good performance in areas such as upstream electrification and speciality chemicals where underlying markets have seen double digit declines. Rotalk service is now 24% of group sales as we continue to drive increased wallet share and broaden our product offering. The growth plus strategy is delivering strong financial performance. it's leveraging our attractive business model and structural tailwind in our markets there have been significant changes to the business since the introduction of growth plus driving performance and resulting in good profit growth in the year cpi has also been a clear example of the benefits delivering growth despite subdued end markets and offering exciting opportunities such as in data centers return on capital employed increased in the year to 38.4 percent and we accelerated capital deployment with the acquisition of noah and two buyback programs announced we expect the remaining buyback to complete by the end of the first half and given our financial strength and strong cash generation we currently see the combination of bolt-on m a and buybacks as sustainable Looking ahead, we expect target segments and service to continue to drive performance in mixed end markets. While we are mindful of the recent geopolitical uncertainty, we expect to see further progress in 2026. Thank you for your interest today. We'll now open the floor to Q&A.

We are now happy to take your questions. to register a question please use the raise hand button at the bottom of your screen which is now under the react menu if you're dialing in from a phone please press star nine on your telephone keypad to register a question to unmute yourself please press star six that's star nine to register and star six to unmute this morning please keep to three questions only Our first question this morning comes from Andrew Douglas at Jefferies. Andrew, please go ahead.

Good morning, guys. I hope you can hear me. Three questions, please, if I may. Can we start with target segments? It looks like that's grown nicely. I think it was 8%, again, outperforming the core underlying markets. Can you just walk through areas that are maybe underperforming relative to your previous guidance? It looks like everything's going well on target segments. i just want to make sure that i'm not i'm not missing anything or maybe i am missing nothing and everything's going well so just give me an update on target segments and has there been any change versus the capital markets day of 21 of any of those targets i guess just walk through kind of things that you're seeing and i know that you walked away from a few uh deals last year i'm assuming that was largely a price thing or was it a kind of a quality of of assets thing And then finally, the third question is more of a kind of an operational question. I just want to make sure from an energy cost perspective, raw material perspective, supply chains, that we're not expecting anything untoward this year. I know you guys don't have heavy manufacturing, so energy shouldn't be a problem. But I just want to make sure that things like energy costs and raw materials and supply chains aren't a problem.

yeah morning andy i got all of those so let's start with the first question um yep target segments perform really strongly eight percent occ really good really good to see fantastic work from the team back at base and actually the all-in markets performed well and you can see in the presentation today the cpi main target segments you've got speciality chems which actually helped to outgrow a very weak chemicals market so we saw growth overall you've got the marine markets mining and critical hvac they've all performed well and you can see actually over the four years they have performed extremely well so going to your second part of that question nothing's changed in terms of the end markets uh since the capital markets day the only thing that's changed is they've got a lot bigger um you know within within the cpi segments uh within water and power water really good structural growth drivers down to water scarcity water quality so that that keeps on on on going through um as we've announced we've also reinvested to to re-enter the nuclear market so that should be a good near-term opportunity for us and as i said in the presentation we've got the near-term opportunities with our large install base and then the longer term opportunities in in smr and then in oil and gas we've got the upstream electrification which is working extremely well and actually we grew upstream on the whole in 2025 when there was a market that was actually in decline so that shows really strong growth in upstream electrification LNG has also grown well i guess the one or two that haven't gone as well as what we had thought from the original were the carbon capture hydrogen markets the the alternative energies but but actually the majority have have have grown really really well so we're really pleased with that that's the first question second question in terms of the pipeline we've got a really good pipeline we're really happy with our pipeline however we do need to stay financially disciplined and and yes we have walked away from a number of deals in 2025 that's all down to price you know in terms of the quality of the assets that we're looking at we are a quality business and therefore the assets that we go after are top of their game in terms of the technology that they have but unfortunately in some of those cases you know the prices were too high and we walked away what we want to be able to do and what we have got in the pipeline are more private owned businesses like Ham Bay like Noah where we're looking to cultivate the relationships and then do bilateral deals which actually gives good financial return so that's where we're looking but that is an area where Ben and I spend a lot of our time so that's high on the agenda and then lastly in terms of the operation as you know we're an asset like company so all of our manufacturing is assembly and test so our energy usage is actually quite low so we don't see any issues there and in terms of raw material prices we haven't seen any increases however as you also know we've got really strong pricing power so whatever material increases that we do see we are quite effective at passing that through

The next question this morning comes from Lush Mahendra Raja at JP Morgan. Lush, please go ahead.

Morning, guys. Thanks for taking my questions. I've got two, if that's okay. The first is on. um midstream i guess should be thinking about some of that coming in in 2026 because i guess just sort of um you know comparing it to the guidance which also sounds maybe a bit softer i guess what are you seeing is it sort of just push out or are you seeing some hesitation and do you think some of that is um related a bit least or or is it independent um and then i guess how the types that how does your thinking um and then the second question is is just on oil and gas margins for really strong particularly in the second half despite that slow volume growth i mean is there anything to think about in there in terms of mix or or operational efficiency that you've done and i guess how should we think about that into 2026 as well okay thank you

thanks lush thanks lush i'll take the first question i'll hand over to ben for for the second if i start with the middle east in terms of the first question look it's a little bit too soon to predict what's what's going to happen in in the middle east so our outlook doesn't include the middle east at the moment our first priority has been our people we've got 70 people in the Middle East I'm pleased to say all of our 70 staff and their families are safe and well we are in regular contact with them every single day to understand what's happening on the ground so we monitor the situation really closely but as I said at the moment it's a little too soon to tell look we're mindful though that there could be some short-term disruptions in supply chains for example and then longer term as you said look if this lasts for a longer time I think people's attention will turn to energy security, and what we've seen in the past is if demand is there and supply is choked from one region, investment does go into other regions to satisfy that demand. But that's all potential at the minute. No one really knows how long this is going to go on for, so at the minute it's a little bit too early to tell. in terms of the wider oil and gas markets for us yeah we we saw some project or customer driven project delays late in december so for example we had we had two projects that were circa six million pounds we were ready to ship and our customers have just asked us to postpone them because their their projects had had been delayed those are looking to convert into the first half of this year however we we do see that those deferrals are a symptom of a weaker market especially in in in upstream and the midstream we've done incredibly well actually with our target segment strategy to actually outperform the weaker underlying markets and as i said to andy we we actually grew in the in the upstream and despite having weak markets in in the midstream lng has grown strongly but it wasn't enough in 25 to offset the the late on on deferrals so we see conditions um going through to 26 which is why we're saying oil and gas is is is stable but we're confident in our target segment strategy we're confident in road talk service that we can outperform those markets Ben, do you want to cover the margin?

Yeah, morning level and operational efficiencies. Again, we're always trying to get more volume out of our operational footprint. And again, we did some good work around that. In terms of margins, just from a group perspective, going into 2026, I think you just need to assume sort of normal operating leverage coming through on the volumes, which is around 30% to 40% drop through. Cool.

Thanks, guys.

Pretty helpful.

Let's go ahead. Harry, your line is open, please go ahead We will continue with Stefan Klepp from BNP Paribas Exxon. Stefan, please go ahead.

Hi, good morning guys. I have actually two and let's start with water and power please. So if you look at first half to second half there was a deceleration in organic growth and I would like to unpick that a little bit. last two years if i now assume that power is coming back and look at some of your growth rates of your competitors this is a pretty disappointing print so i just rather want to understand is it a timing issue or is it the structural issue and then uh on organic sorry on oil and gas again sorry for for for making you there but there was a very deceleration and execution organic and all the good things you say about your target strategy innovation and obviously after service i totally get that but i'm rather interested in the long-term picture of what's happening in your clients is it the oil side not performing is that the gas side not performing is it the mood of the industry have the have was that an over investment or why is the growth not coming through anymore because uh that is obviously a factor that we've seen in as a disappointment in h1 and obviously it's not great today yeah morning stephen thanks for the questions let me uh try and unpick some of this and then you chip in when you um when

it's right so I think the number one is road talk in the way we do business we're not really a run rate business so you can't you can't really look from quarter to quarter and look at the run rates because you also have to look at the orders so actually in water and power q4 orders were really strong and power grew really strongly so the q4 orders were strong meaning that's why we're saying the outlook into 26 is is good and overall for the full year in 2026 we're expecting good water and power growth so it really does depend on the comps and and so h h2 had had tougher comps uh and and the profile of the group i mean the first half you know we grew six percent and that was across all of the divisions

when we did our ims you know the four months trading period again we grew six percent and it was you know strong across all divisions we started to see some acceleration in cpi and then in the final two months you really started to see cpi and water and power take off so again i think if you look at overall six percent growth in revenue you know year over year i think is good and obviously we had a good first half so i think overall for the full year we feel really good like you've said i think given the acceleration in orders we got towards you know the final two months we feel good about you know that point 26 as well

so that's uh that's the water and power piece i guess the oil and gas piece again same same kind of context it's not really a run rate business and what we are seeing are our customer projects taking longer than than expected there's been a lot of investment into the oil and gas industry so some of these projects haven't come through or are not coming through as quickly as anticipated by our customers and therefore you see you know some some deferrals or some pausing or projects coming through but you know we talk to our customers regularly we know what's in the pipeline so we anticipate projects coming through into you know first and second half of of of next year so that that's really the the dynamics underlyingly though you know upstream has been quite weak midstream has also been quite weak but you know i think that for rotor we are a far far more resilient business and so in in in the past you know we may not have been able to post the the numbers or keep things flat but with our target segment strategy and with rotor service we have been able to outperform these these underlying weaker markets yeah but so my detail question was more or less is it oil or is it gas so if we if we can give color on that uh that would be great so obviously the upstream is more oil um but it's really a mixture of oil oil and gas because a lot of the projects they are they are let's say taking a bit longer and there is a mixture of oil and gas in there but but it's probably skewed more towards the oil piece thank you energy also grew really strongly so so that piece of it did did come through and grew and grew well

thank you the next question this morning comes from mark fielding at royal bank of canada mark please go ahead yeah morning um a couple of follow-ups actually really in terms of things that you've already touched on firstly can we talk about

the strength in cpi that obviously you know ben was just talking about the second half um very good momentum i suppose you know your market your end market comments still sound relatively subdued there it's more about you driving through your project wins etc i suppose just some sense of you're looking for a good year but the visibility around that in the context of you still thinking those markets are subdued probably and does that just bring a bit more lumpiness i mean it was a much bigger growth in the second half than the first you know is there any timing factors to think about on that cpi side of things um I think I'd just follow up a little bit more detail on LNG. You mentioned it a couple of times in the Q&A and the strength in it, but maybe just a little bit more detail about how you see the – well, pipeline isn't quite the right word for LNG, is it? But you know what I mean there. But how you see the sort of outlook and maybe just how big is – give us some sense of how big LNG is in the group now and maybe how does that compare to when it was previously very strong like 12, 13 years ago? Is it a much bigger business now or not?

yeah yeah good questions um if i start on the on the cpi one yeah the the general we all know the general chemical market is down you know bulk chem petrochem has been a tough market but we are playing and we have focused on what we call speciality chem so low batch run um specific chemicals are still doing really really well and and it's a testament to the target segment strategy and so the team are focused on those types of processes where you do need critical control really high-end products and we've been able to drive that that segment whereby the critical chems or the speciality chems have outgrown a very weak underlying chemicals market and that's that's the testament to the target segment strategy in terms of process so process markets again have not been great but we have really focused on critical HVAC and included in that is our data center work that that whilst you know small has doubled last year so that adds towards the growth you've got marine and you've got mining and you can see on the slide this morning from where they started four years ago they've actually grown quite phenomenally so they're of a size now where where the momentum and the growth within those those segments can carry through and and outweigh weaker underlying markets and and that was the whole ethos of our growth plus strategy in the target segment strategy you you know you will have lumpiness in in a way and as i said we're not a run rate business you can't really you know um run rate month on month or quarter on quarter but if you take the year as a whole you you can you can have a look at the trends and the trends have have been positive so so that's cpi And then LNG. I think LNG was quite big for us before. It went down to very, very low, and it's getting there. I think it will be bigger than what it was 13 years ago at its high, but it's still coming through. It's grown really, really strongly, and it continues to grow.

And can you just clarify on that LNG bit? What are your... lead times you know how far ahead are you seeing stuff so obviously some of your sort of peers on the valve side can sort of got orders in for the next few years but it's still a case of for you it's coming in a bit later but you can sort of see it in you know in discussions or yeah absolutely so we we measure our pipeline and you know it takes four to five years to get an energy plant up and running

and so we will typically lag our our customers which are the valve makers by around six to nine months just just given the lead times of of our our products so it's actually quite a good leading indicator uh for for our valve uh kind of valve maker customers if they're seeing the orders we will expect those six to nine months later great thank you thanks we have time for one last question this morning which comes from thomas alger at deutsche numis thomas please go ahead hi guys um just one from me and could we dig a little bit more into rotal service um just how has the growth evolved through the year where do you see 2026 being better or perhaps uh weaker within service obviously the overall upgrade push across your markets is pretty clear it's trying to get a sense of where you are most excited within service and i guess also maybe extending that perhaps if you could guide to the rough size of the service now within oil and gas within that please yeah if i answer some of these ben ben can fill you in on some of the specific numbers but look we're really excited about service it's a brilliant initiative for us um within the business and it gives real good resilience to to our business um the the key things in the service for us are we're really pushing our digitalization so you you know i am while still relatively small grew 40 last year so we are providing our customers more data more useful data in terms of what the actuator and val packages are doing so that we can better help them with their predictive maintenance and plan shutdowns and that's something that has been a real good drive over the last 18 months with that we are trying to drive more business through more predictive maintenance and more service contracts so they're they're the key kind of growth elements of road talk service we obviously have a really good install base and it's resilient business but the way we measure service is is spare parts and and labor so it's very pure in in in in that way service is now around 24 percent of group revenues again it's grown ahead of the group and what we want to do is keep focusing on it to to grow ahead of the group

yeah morning tom so in terms of growth rates you know this year grew sort of mid to high single digits um in the year i think the way we think about road sort of service as well i think from a margin progression perspective as well as we move to more electric and as our customers move to more electric we get more pull through on road talk service which is also accretive to group margins so for us for you know road talk services you know a big catalyst as you think about margin progression going forward as well

thanks guys thanks tom this concludes the q a session and i would now like like to hand back to gig for any closing remarks yeah thank you very much so first of all thank you everyone for your interest in in road talk today um in conclusion we've had another good year and i'm really pleased with the progress made in 2025 our growth plus initiatives are working the target segment and Rotor service are really delivering good growth and helping us to outperform weaker underlying markets in the year we delivered good order growth strong margin progression and a 10% increase in adjusted operating profit so we're really pleased with that on a capital allocation point that's accelerated during the year and we look forward to having considerable financial flexibility to pursue opportunities for value creative opportunities for our shareholder so with that thank you very much for your interest today have a good day everyone