Bath-based global engineering group Rotork has hit the acquisition trail, snapping up Italian valve manufacturer M&M International for €9.7m (£6.9m). The deal was announced as the firm unveiled falls in half-year pre-tax profits and revenues due to what it described as a challenging trading environment.
Pre-tax profits during the six months to June 30 fell by 8.4% to £56.3m on revenues down by 1.6% to £274.2m. 
The firm, which makes specialist valves and flow control equipment for the global oil and gas industry, blamed the falls on the continued weakness of the oil price and geopolitical uncertainty in some of the group’s key oil and gas markets, which resulted in a challenging trading environment.
This had led to lower overall activity levels and an increased number of project deferrals and cancellations. All sectors of the industry – upstream, midstream and downstream – and been impacted, it said.
Rotork said the M&M takeover broadened its product portfolio and took the business into new markets.
The Bergamo-based firm is a leading manufacturer of specialist valves used in commercial and industrial flow control industries. Last year it generated operating profit of €1.5m on a €8.9m turnover.
Rotork, Bath’s largest manufacturer, is paying for the acquisition in cash, funded from its existing committed bank facilities.
M&M, which makes solenoid valves, piston actuated valves and automatic drain valves, will sit within the Rotork’s instruments division.
Rotork chief executive Peter France said: “M&M is an excellent addition to our instruments division which will complement Rotork Midland and provide a focal point for solenoid valve and piston actuated valve manufacturing within the group.
“This acquisition supports our strategy of broadening our product portfolio and expanding our addressable markets, and we look forward to leveraging our global sales network to support the growth of M&M as part of Rotork.”
Commenting on the half-yearly results, Mr France said directors expected the oil and gas market to remain challenging.
But he added: “Rotork has a lean business model and we constantly review our activities to optimise costs. We have responded to market conditions and accelerated a number of our ongoing cost management initiatives. At the same time we continue to see opportunities to gain market share and expand our product portfolio through organic development and acquisition. We will continue to invest in these opportunities to ensure that Rotork is well placed to make further progress over the medium to long term.
“As in previous years we anticipate that our results will be weighted to the second half. Although, and the timing of order placement remains difficult to forecast, based on our current order book and project visibility, the board expects overall performance to be in line with management expectations for the full year.”
The company accelerated its cost management programme in response to oil and gas slowdown, he said.
The order in take during the half year fell by 9.5% to £274m, leaving the firm's order book on June 30 worth £175.9m – some 4.3% lower than in December – although Sterling’s strength against the euro and the dollar accounted for the largest part of this reduction.
Mr France said: “With the general slowdown in the market we have taken actions to manage our cost base with a freeze on new recruitment and have well advanced plans to combine a number of facilities in the future.
“Group headcount as of June 30 was 3,423, a reduction of 36 from the start of the period. We have also been focused on managing overheads and material cost reduction programmes although these often will take a number of months to take effect.
“The target annualised savings from these initiatives is £8m, split equally between materials and overheads with a benefit in the current year anticipated to be £2m.
“A key part of our strategy continues to be the diversification of our business in terms of geography, end market and products. Despite the challenging market we have continued to focus on delivering organic sales growth by investing in our sales channels and our facilities. We also continue to seek acquisitions that provide us with new products, new geographies or access to a new end market.
“In the first half we acquired the actuation business of our agent in Turkey. This acquisition opens up the possibility of investing and growing our market share in this important market which will benefit all of our divisions. We continue to look for opportunities to grow both organically and by acquisition that will support our long term strategic and financial objectives.”
