TIDMWEIR
RNS Number : 2323W
Weir Group PLC
31 July 2018
The Weir Group PLC today reports its interim results for the six
months to 30 June 2018
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on the link below to open a PDF version:-
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Delivering strong profit growth in line with expectations
-- 20% increase in orders from Continuing Operations
o Minerals +12% with record aftermarket orders in Q2
o Oil & Gas +35%
-- Operating profit from Continuing Operations +38% (Total Group +62%)
o Margins +170bps to 15.1%
-- Discontinued Operations: Flow Control orders +34%; margin improvement on track
-- Strong cash generation driving further deleveraging; 5% increase in interim dividend
-- Transforming the portfolio
o Acquisition of ESCO Corporation completed in July
o Flow Control sale process planned to launch in late Q3
-- Outlook: Full Year expectations for strong constant currency
revenue and profit growth unchanged
H1 2018 H1 2017 Reported Constant
Growth Currency(2)
========================== =========== =========== ========= =============
Continuing Operations(1)
========================== =========== =========== ========= =============
Orders(2) GBP1,166m GBP976m n/a 20%
========================== =========== =========== ========= =============
Revenue GBP1,062m GBP922m 15% 23%
========================== =========== =========== ========= =============
Operating profit(3) GBP160m GBP124m 29% 38%
========================== =========== =========== ========= =============
Operating margin(3) 15.1% 13.5% 160bps 170bps
========================== =========== =========== ========= =============
Profit before
tax(3) GBP143m GBP104m 38% 47%
========================== =========== =========== ========= =============
Earnings per share(3) 46.3p 37.1p 25% n/a
========================== =========== =========== ========= =============
Total Group
========================== =========== =========== ========= =============
Operating profit(3) GBP169m GBP113m 50% 62%
========================== =========== =========== ========= =============
Reported profit GBP67m GBP47m 44% n/a
after tax
========================== =========== =========== ========= =============
Cash from operations GBP139m GBP78m 78% n/a
========================== =========== =========== ========= =============
Interim dividend
per share 15.75p 15.0p 5% n/a
========================== =========== =========== ========= =============
Return on capital
employed(4) 11.8% 7.5% 430bps n/a
========================== =========== =========== ========= =============
Net debt GBP886m(5) GBP843m(6) GBP43m n/a
========================== =========== =========== ========= =============
Jon Stanton, Chief Executive Officer, commented:
"This is a strong set of results with total Group operating
profits up by more than 60% and all our divisions showing good
momentum. It reflects the hard work of our people and the benefits
of investing early to take full advantage of positive long term
fundamentals in our main markets. With the acquisition of ESCO and
decision to sell Flow Control, we began the transformation of Weir
into a stronger Group focused on leading positions in highly
abrasive, aftermarket intensive mining and upstream oil and gas
markets.
Looking to the full year we continue to anticipate strong
constant currency revenue and profit growth in addition to further
strong cash generation and balance sheet deleveraging. Reflecting
confidence in our long term growth outlook the Board has approved a
5% increase in the interim dividend."
A live webcast of the management presentation will begin at 0800
(BST) on 31 July 2018 at www.investors.weir. A recording of the
webcast will also be available at www.investors.weir.
Enquiries:
Investors: Stephen Christie +44 (0) 141 637 7111
---------------------
Media: Raymond Buchanan +44 (0) 141 637 7111
---------------------
Brunswick: Patrick Handley/Nick
Cosgrove +44 (0) 207 404 5959
---------------------
Notes:
1 Continuing operations excludes the Flow Control division
which is currently held for sale and is reported
in discontinued operations. H1 2017 has been restated
for IFRS 15 - Revenue from Contracts with Customers.
2 2017 restated at H1 2018 average exchange rates.
3 Adjusted to exclude exceptional items and intangibles
amortisation See note 1(f) in financial statements.
Reported operating profit and profit before tax from
continuing operations were GBP107m (2017: GBP97m)
and GBP90m (2017: GBP75m) respectively. Reported
earnings per share were 26.6p (2017: 27.9p).
4 EBIT before exceptional items (excluding KOP EBIT)
divided by average net assets (excluding KOP net
assets) excluding net debt (adjusted to exclude the
net proceeds from the share issue in relation to
the ESCO acquisition) and pension deficit (net of
deferred tax asset).
5 Proceeds of GBP357m were received on 23 April 2018
following a placing of 16,699,763 shares to part
6 fund the acquisition of ESCO. This cash was held
at 30 June 2018 in advance of completion of the ESCO
acquisition on 12 July 2018. For comparison purposes
the current period excludes this cash.
6 Net debt at 31 December 2017.
Strategic priorities
Weir provides highly engineered mission-critical solutions for
mining, energy and infrastructure customers. We focus on high
abrasion applications that drive significant aftermarket demand and
require comprehensive global support. The Group's strategic
framework, 'We are Weir', is focused on outperforming in four
distinctive competencies: People, Customers, Technology and
Performance.
People
Medium term KPI
-- Improve sustainable engagement and organisational effectiveness.
Progress in the first half:
-- Safety: Maintained Total Incident Rate at 0.53; significant
reduction in the severity of incidents
-- Progressed strategic workforce planning strategy with initial
pilots scheduled to begin this year
-- Developed criteria for employee engagement measures to drive
future organisational effectiveness
Customers
Medium term KPI
-- Increase market share.
Progress in the first half:
-- Delivered c.GBP50m (+29%) in additional sales from Minerals integrated solutions strategy
-- Increased customer trials programme to drive further Minerals aftermarket gains
-- Oil & Gas 'Weir Edge' service launched reducing downtime
with faster on site root cause analysis and repair
Technology
Medium term KPI
-- Increase revenues from new solutions(1) .
Progress in year:
-- Revenues from new solutions increased 16% to GBP67m including new Simplified Frac System
-- Synertrex(R) IoT deployed to initial customer sites with
seven product lines to be fully commercialised in Q3
-- Additive manufacturing cell established supported by
dedicated taskforce to prototype initial product lines
Performance
Medium term KPI
-- Sustainably higher margins through the cycle.
Progress in year:
-- 80 value chain excellence initiatives focused on optimising
on time delivery and inventory efficiency
-- 12 IT infrastructure projects underway aimed at leveraging
global scale and further enhancing cyber security
-- Sustainability pilots launched at major manufacturing
locations - target 10% reduction in energy use
Notes:
1 Defined as products or services introduced in the
last 3 years.
H1-18 Segmental analysis
-----------------------------------------------------------------------------
Continuing operations Minerals Oil & Unallocated Total Total Total
GBPm(1) Gas expenses OE AM
---------------------- -------- ------ ----------- ------ ----- -----
Orders (constant
currency)
2018 728 438 n/a 1,166 330 836
2017 650 326 n/a 976 274 702
Variance:
- Constant currency 12% 35% 20% 21% 19%
- Like for like(2) 12% 31% 18% 19% 18%
Revenue(3)
2018 651 411 n/a 1,062 277 785
2017 (as reported) 608 314 n/a 922 224 698
Variance:
- As reported 7% 31% 15% 23% 12%
- Constant currency 13% 42% 23% 30% 20%
- Like for like(2) 13% 39% 22% 29% 19%
----- -----
Operating profit(3,4)
2018 112 63 (15) 160
2017 (as reported) 104 32 (12) 124
Variance:
- As reported 7% 98% -20% 29%
- Constant currency 13% 117% -21% 38%
- Like for like(2) 13% 132% -21% 42%
Operating margin(3,4)
2018 17.2% 15.3% n/a 15.1%
2017 (as reported) 17.2% 10.1% n/a 13.5%
Variance:
- As reported 0bps 520bps 160bps
- Constant currency 0bps 520bps 170bps
- Like for like(2) 0bps 660bps 220bps
1 The Group financial highlights and divisional
financial reviews include a mixture of GAAP measures
and those which have been derived from our reported
results in order to provide a useful basis for
measuring our operational performance. Operating
results are for continuing operations before
exceptional items and intangibles amortisation
as provided in the Consolidated Income Statement.
Details of other non-GAAP measures are provided
in note 1(f) of the financial statements.
2 Like for like excludes the impact of acquisitions
and related transactional costs.
3 Prior year restated to include IFRS 15 adjustments.
4 Adjusted to exclude exceptional items and intangibles
amortisation.
Group financial highlights
The financial highlights below primarily reflect the Continuing
Operations of the Group except as noted.
Orders at GBP1,166m (2017: GBP976m) increased 20% on a constant
currency basis reflecting an increase in activity levels in North
American oil and gas markets, coupled with strong growth in
Minerals.
Revenue of GBP1,062m (2016: GBP922m) increased 15% on a reported
basis reflecting excellent growth in both original equipment and
aftermarket across both Minerals and Oil & Gas. This was after
a foreign exchange headwind of GBP57m, with revenue on a constant
currency basis 23% ahead of prior year. The Group's order book
increased in the period with a positive book to bill ratio of 1.10
(H2 2017: 0.98).
Operating profit before exceptional items and intangibles
amortisation of GBP160m, increased by GBP36m or 29% on a reported
basis. This was impacted by an GBP8m adverse foreign exchange
movement on the translation of overseas earnings due to the
strengthening of Sterling against the majority of currencies.
Operating profit was GBP44m or 38% higher than the prior year on a
constant currency basis. Oil & Gas was higher driven by
positive North American markets, with Minerals benefiting from
strong underlying revenue growth. EBITDA before exceptional items
was GBP187m (2017: GBP148m).
Operating margin before exceptional items and intangibles
amortisation was 15.1%, an increase of 160bps on a reported basis
and 170bps on a constant currency basis. On a constant currency
basis Minerals remained flat while Oil & Gas increased by
520bps moving from 10.1% in the prior year to 15.3%. This
improvement reflects the strong market upturn and excellent
operating leverage notwithstanding the loss of profit contribution
from the EPI joint venture sold in November 2017, which last year
had a 140bps favourable impact on margins on a constant currency
basis.
Net finance costs before exceptional items were GBP17m in total
(2017: GBP21m) reflecting a reduction in average levels of net
debt, due to net proceeds of GBP357m received from the placement of
shares in April 2018 to part fund the acquisition of ESCO,
refinancing of GBP95m USD private placement to Euro commercial
paper and favourable foreign exchange translation due to the
strengthening of Sterling relative to USD.
Profit before tax before exceptional items and intangibles
amortisation increased by 38% to GBP143m (2017: GBP104m). The
reported profit before tax from continuing operations (including
exceptional items and intangibles amortisation) of GBP90m compares
to GBP75m in 2017.
A net exceptional charge of GBP25m (2017: GBP2m) was recorded in
the period, primarily related to costs associated with acquisition
of ESCO, with the remainder reflecting the continuation of specific
restructuring and rationalisation programmes which commenced in
prior periods to right size operations and discontinue certain
activities.
The tax charge for the period of GBP36m (2017: GBP23m) on profit
before tax before exceptional items and intangibles amortisation of
GBP143m (2017: GBP104m) represents an underlying effective tax rate
of 25.3% (2017: 21.8%).
Earnings per share before exceptional items and intangibles
amortisation increased by 9.2p or 25% to 46.3p (2017: 37.1p). This
reflects underlying profit growth offset by the impact of the
increased number of shares is issue following the placement of
shares in April 2018 to part fund the ESCO acquisition. Reported
earnings per share including exceptional items, intangibles
amortisation and the results of discontinued operations was 29.1p
(2017: 21.4p), an increase of 7.7p.
Cash generated from total operations increased by GBP61m or 78%
from GBP78m to GBP139m driven by the increase in total operating
profit (pre-exceptional items and intangibles amortisation) of
GBP56m.
Working capital efficiency continued to improve with inventory
turns of 2.5 and working capital as a % of sales of 26.9% compared
to 2.3 and 27.6% in the prior year respectively on a constant
currency basis.
Free cash flow from total operations was an outflow of GBP7m
(2017: GBP50m). The GBP43m improvement reflects higher operating
cashflows and reduced cash dividends, due to the higher uptake for
the scrip dividend compared to prior year, partially offset by
higher cash tax and the settlement of derivative financial
instruments.
Net debt decreased to GBP529m in the period (December 2017:
GBP843m). This includes a net cash inflow of GBP357m from the
placement of shares in April 2018, issued to part fund the
acquisition of ESCO. Excluding this cash which was held at 30 June
before being used to part fund the ESCO consideration on 12 July,
net debt increased by GBP43m to GBP886m. This was primarily driven
by adverse FX of GBP25m together with the free cash outflow, plus
exceptional cash items of GBP7m. On a lender covenant basis, the
ratio of net debt to EBITDA was 1.2 times (2.1 times excluding the
impact of the placement), compared to a covenant level of 3.5 times
and the prior year of 3.1x.
Acquisition of ESCO Corporation
The acquisition of ESCO Corporation, the world's leading
provider of ground engaging tools for surface mining and
infrastructure, for an estimated Enterprise Value of US$1,285m, was
completed on 12 July 2018. ESCO will operate as a new division of
the Weir Group and will be reported as a separate segment alongside
Minerals and Oil & Gas with effect from that date.
ESCO delivered 12% constant currency revenue growth in the first
half, benefiting from the same positive mining market conditions
seen in the Minerals division. The division remains on track to
achieve revenue of US$675m and operating profit of US$80m, for the
12 months to December 2018. Its revenue and profits are expected to
be delivered broadly evenly between pre and post completion. We
continue to target US$30m of cost synergies over the next 3
years.
Discontinued operations
Following the announcement that the Group intends to sell the
Flow Control division, the division is now classified as held for
sale. Previously reported as an individual reporting segment, the
division is now reported as a discontinued operation and the prior
period comparatives have been restated accordingly. We expect to
begin a sale process for the division in the third quarter.
Dividend
The Board has approved an interim dividend of 15.75p (2017:
15.0p). The interim dividend will be paid on 2 November 2018 to
shareholders on the register on 12 October 2018. No scrip
alternative will be offered.
Minerals
Weir Minerals is a global leader in the provision of mill
circuit technology and services as well as the market leader in
slurry handling equipment and associated aftermarket support for
abrasive high wear applications. Its differentiated technology is
used in mining, oil and gas and general industrial markets around
the world.
Constant currency
GBPm H1 2018 H1 2017(1) Growth H2 2017(1)
--------------------- -------- ---------- ------ -----------
Orders OE 222 205 9% 183
Orders AM 506 445 14% 458
Orders Total 728 650 12% 641
--------------------- -------- ---------- ------ -----------
Revenue OE 181 154 17% 196
Revenue AM 470 422 12% 455
Revenue Total 651 576 13% 651
--------------------- -------- ---------- ------ -----------
Operating profit(2) 112 99 13% 116
Operating margin(2) 17.2% 17.2% 0bps 17.8%
--------------------- -------- ---------- ------ -----------
Operating cash
flow 114 82 38% 77
--------------------- -------- ---------- ------ -----------
Book-to-bill 1.12 1.13 0.99
--------------------- -------- ---------- ------ -----------
1 2017 restated at H1 2018 average exchange rates
except for operating cash flow. Prior year restated
to include IFRS 15 adjustments.
2 Adjusted to exclude exceptional items and intangibles
amortisation.
Strong performance supported by strategic growth initiatives
-- Double-digit order growth and increasing pipeline of opportunities
-- Operating profits +13%; 90% EBITDA cash conversion
-- 2018 outlook: Profit expectations unchanged; now with strong
revenue growth and broadly stable margins
Market review
Activity in mining markets continued to grow strongly as
customers ramped up production to maximise the benefits of
supportive commodity prices. Demand was particularly good for
brownfield solutions that help debottleneck, increase throughput
and reduce downtime of existing mines. The pipeline of new projects
continued to increase driven by good long term fundamentals for
commodities such as copper, gold and lithium. Customers remained
disciplined about committing to new greenfield developments,
although a small number of projects received final approval.
There was also good growth in the division's non-mining markets
with oil sands production continuing to support aftermarket demand.
Infrastructure and construction markets also remained positive.
Operational review
The division's early investment in deploying more engineers to
customer sites to help miners improve productivity continued to
support strong order growth. Sales from integrated solutions, which
leverage the division's broad portfolio of premium products,
delivered c.GBP50m in additional orders with engineers completing
374 site audits in the period. The division also continued to grow
market share through its successful trials programme that sees it
go head to head with competitor products to demonstrate the
superior performance of Weir equipment.
The first half also saw the opening of additional service
centres in Zambia, Chile and Peru to further extend our unrivalled
service network. Technology programmes focused on continuous
improvement in the division's core products while also developing
the Group's Synertrex(R) IoT solution, with full commercialisation
in mining markets planned for the second half of 2018.
Financial review
Orders increased by 12% to GBP728m (2017: GBP650m), and
supported a strong book-to-bill of 1.12. Original equipment orders
were up 9% year-on-year and grew by more than 20% from the second
half of 2017. Aftermarket orders increased by 14%, including a
record second quarter. In total, aftermarket represented 69% of
orders (2017: 68%).
Mining end markets accounted for 75% of orders (2017: 72%).
Non-mining markets including industrial, oil sands and power
sectors grew while sand and aggregates were impacted by specific
project delays.
Revenue was 13% higher on a constant currency basis at GBP651m
(2017: GBP576m). Original equipment sales accounted for 28% (2017:
27%) of divisional revenues and were 17% higher than the prior year
driven by the strong opening order book and the early investment in
growth initiatives in 2017. Production-driven aftermarket revenues
were up 12% on a constant currency basis.
Regionally, revenues from Africa, South America, Australasia,
Middle East and Asia Pacific grew strongly, while in Europe and
North America growth was more subdued. Aftermarket revenues grew
strongly for pump and mill circuit spares particularly in our core
slurry pumps and mill circuit hoses and spools. Reported revenues
increased by 7% (2017: GBP608m), after a GBP32m foreign exchange
headwind.
Operating profit increased by 13% on a constant currency basis
to GBP112m (2017: GBP99m), driven by strong underlying growth.
Reported operating profit increased by 7% after a GBP5m foreign
exchange headwind (2017: GBP104m).
Operating margin on a constant currency basis was unchanged at
17.2% (2017: 17.2%) with strong revenue growth at consistent gross
margins offset by product mix and the full run rate impact of costs
added to support growth in 2017.
Operating cash flow increased by 38% to GBP114m (2017: GBP82m)
reflecting the increase in operating profit and working capital
efficiency.
2018 Divisional outlook
The division's profit expectations are unchanged and will now be
delivered through strong constant currency revenue growth and
broadly stable margins.
Oil & Gas
Weir Oil & Gas provides highly engineered and
mission-critical solutions to upstream markets. Products include
pressure pumping and pressure control equipment and aftermarket
spares and services. Equipment repairs, upgrades, certification and
asset management, and field services are delivered globally by Weir
Oil & Gas Services.
Constant currency LFL(1,3)
GBPm H1 2018 H1 2017(1) Growth Growth H2 2017(1)
--------------------- ------- ---------- ------ --------- ----------
Orders OE 108 69 58% 48% 81
Orders AM 330 257 28% 26% 281
Orders Total 438 326 35% 31% 362
--------------------- ------- ---------- ------ --------- ----------
Revenue OE 96 57 67% 60% 75
Revenue AM 315 232 36% 34% 297
Revenue Total 411 289 42% 39% 372
--------------------- ------- ---------- ------ --------- ----------
Operating profit(2) 63 29 117% 132% 56
Operating margin(2) 15.3% 10.1% 520bps 660bps 15.1%
--------------------- ------- ---------- ------ --------- ----------
Operating cash
flow 39 -1 5701% 44
--------------------- ------- ---------- ------ --------- ----------
Book-to-bill 1.07 1.13 0.97
--------------------- ------- ---------- ------ --------- ----------
1 2017 restated at H1 2018 average exchange rates
except for operating cash flow. Prior year restated
to include IFRS 15 adjustments.
2 Adjusted to exclude exceptional items and intangibles
amortisation. Includes contribution from joint ventures.
3 Like for like (LFL) excludes the impact of acquisitions
and related transaction integration costs. KOP was
acquired on 27 July 2017.
Excellent execution in attractive North American markets
-- Delivered significant order, revenue and margin growth
reflecting leadership in Pressure Pumping
-- International markets remained challenging but quotation activity increased
-- 2018 outlook: Strong increase in constant currency revenues
and profits; FY margins consistent with H1
Market review
North American upstream oil and gas markets grew strongly year
on year with the rig count increasing 24% in the period and US
production reaching record levels. This was underpinned by WTI oil
prices averaging US$65 for the period - comfortably above E&P
investment incentive levels. Oilfield service companies continued
to rebuild and reactivate their frack fleets supporting demand for
both original equipment and aftermarket consumables, which also
benefited from increased intensity of production. Overall, US frack
fleet utilisation was approximately 70%. Pricing improved in
certain product lines although remained competitive overall,
reflecting continued spare capacity among equipment providers.
International markets, which are later cycle, continued to be
relatively challenging with continued pricing pressure. While these
markets bottomed and there was encouraging quotation activity, they
remained highly competitive.
Operational review
The division continued to successfully ramp up production with
Pressure Pumping reaching previous peak volumes and delivering
excellent operating leverage to support further meaningful
improvement in its margins. More broadly, the division continued to
leverage its differentiated technology and service proposition
supported by a comprehensive key account management programme. This
enabled it to gain NAM market share in both Pressure Pumping and
Pressure Control, with the latter also returning to
profitability.
The division's new Simplified Frac Iron System and RFID
technologies have been well received by customers as they enable
further increases in operational safety and productivity. The 'Weir
Edge' offering was launched enabling customers to benefit from root
cause analysis by engineers on site - reducing costly downtime and
building on the division's market-leading service network.
Performance in the International businesses was weaker
reflecting market conditions and the exit from recently won
contracts in Iran following the recent re-imposition of US
sanctions.
Financial review
Orders of GBP438m (2017: GBP326m) were 35% higher and 31% higher
on a like for like basis, and 21% higher than the second half of
2017. Aftermarket orders were up 28% year-on-year and represented
75% (2017: 79%) of divisional orders. Original equipment orders
were 58% higher, driven by increased demand for pumps, power ends
and flow equipment, and strong initial demand for our new
Simplified Frac Iron System. Orders from international markets were
slightly higher.
Revenue increased by 42% to GBP411m on a constant currency basis
(2017: GBP289m) and was up 39% on a like for like basis, reflecting
order trends. Original equipment and aftermarket revenues increased
by 67% and 36% respectively, with aftermarket accounting for 77% of
total revenues (2017: 80%). Reported revenues were up 31% after the
impact of a GBP25m foreign exchange headwind (2017: GBP314m).
North American revenues increased sequentially through the first
half while international revenues were lower reflecting the
challenging market conditions.
Operating profit including joint ventures was up 117% to GBP63m
(2017: GBP29m) on a constant currency basis driven by volumes and
operating leverage, which also offset the GBP4m impact of the 2017
disposal of the EPI minority interest. Reported operating profit
increased by 98% after a GBP3m foreign exchange headwind (2017:
GBP32m).
Operating margin was up 520bps on both a constant currency and
reported basis including the negative 140bps impact on a constant
currency basis from the disposal of EPI.
Operating cash flow increased by GBP40m to GBP39m (2017: outflow
of GBP1m) primarily driven by the significantly improved
profitability of the division.
2018 Divisional outlook
The division continues to anticipate a strong increase in
constant currency revenues and profits, with any potential impacts
from moderated growth in the Permian offset by both increased
activity in other basins and the effect of higher equipment
attrition. Operating margins are expected to continue in the
mid-teens seen in H1.
Discontinued operations - Flow Control
Weir Flow Control designs and manufactures valves and pumps as
well as providing specialist support services to the global power
generation, industrial, oil and gas and other
aftermarket-orientated process industries.
Constant currency
GBPm H1 2018 H1 2017(1) Growth H2 2017(1)
--------------------- -------- ---------- ------- ----------
Orders OE 105 67 53% 86
Orders AM 101 86 19% 67
Orders Total 206 153 34% 153
--------------------- -------- ---------- ------- ----------
Revenue OE 84 91 -8% 115
Revenue AM 77 70 10% 77
Revenue Total 161 161 0% 192
--------------------- -------- ---------- ------- ----------
Operating profit(2)
/(loss) 9 -11 176% 8
Operating margin(2) 5.4% -7.2% 1260bps 4.2%
--------------------- -------- ---------- ------- ----------
Operating cash
flow 8 7 5% 15
--------------------- -------- ---------- ------- ----------
Book-to-bill 1.28 0.95 0.80
--------------------- -------- ---------- ------- ----------
1 2017 restated at H1 2018 average exchange rates
except for operating cash flow. Prior year restated
to include IFRS 15 adjustments.
2 Adjusted to exclude exceptional items and intangibles
amortisation.
Delivering significant order and profit growth
-- Very strong OE order growth driven by increased nuclear demand
-- Significant profit increase driven by strong AM performance,
operational efficiency and absence of one-offs
-- 2018 outlook: Broadly stable constant currency revenues; mid-single digit operating margins
Market review
New nuclear developments in the UK and Asia supported improved
demand for original equipment while, with the exception of coal,
power markets also supported continuing aftermarket momentum.
Project activity in downstream oil and gas also continued to
improve and there was a strong recovery in refinery
maintenance.
Operational review
The division expanded its installed base in attractive long-term
nuclear markets by winning a GBP23m contract to install pumps on
the new Hinkley Point C nuclear power station in the UK. This was
in addition to GBP10m of nuclear contract wins in Korea. Its
strategy of globalising its sales and marketing capability to fully
leverage its valve and pump product portfolio is showing
encouraging results with a growing pipeline of opportunities. The
division also continued to leverage its installed base including in
downstream oil and gas markets and delivered a fifth consecutive
quarter of year on year aftermarket growth.
Financial review
Orders increased by 34% to GBP206m (2017: GBP153m). Original
equipment orders were up 53% while aftermarket orders grew 19%.
Power markets represented 45% of orders (2017: 42%) and oil and gas
markets represented 19% (2017: 20%).
Revenue was stable on a constant currency basis at GBP161m
(2017: GBP161m), with aftermarket revenues up 10% on the prior
year. Original equipment revenues were down 8%, reflecting the
lower opening order book. Reported revenues were down 3% (2016:
GBP166m) reflecting a 3% foreign exchange headwind.
An operating profit of GBP9m (2017: (GBP11m) loss) on a constant
currency basis reflected the success of the division's growth
initiatives and the upturn in market conditions and the absence of
a GBP13m one-off charge recorded in 2017. The reported operating
profit included a GBP1m foreign exchange headwind.
Operating margin was up 1260bps against the prior year at 5.4%
(2017: loss of 7.2%) on a constant currency basis.
Operating cash flow increased by 5% to GBP8m (2017: GBP7m)
reflecting the improved profitability of the division.
2018 Divisional outlook
The division continues to expect to deliver broadly stable
constant currency revenues for the full year as it benefits from
its new sales and marketing structure. Operating profits and
margins are expected to increase, with a return to full year
mid-single digit operating margins.
Board and management changes
As previously announced, Alan Ferguson and John Mogford retired
from the Board following the 2018 Annual General Meeting. Stephen
Young succeeded Alan Ferguson as Audit Committee Chairman, with
effect from 26 April 2018. In addition Cal Collins, formerly
Chairman and CEO of ESCO Corporation, joined the Board as a
Non-Executive Director on 12 July 2018.
Jon Owens, formerly President and COO of ESCO Corporation,
joined the Group Executive on 12 July 2018 as President of the ESCO
division.
Principal risks and uncertainties
The Board considers the principal risks and uncertainties
affecting the business activities of the Group are:
-- Technology and innovation
-- Political and social risk
-- Safety, health and environment
-- IT systems and cyber security
-- Ethics, governance and control
-- Value chain management
-- Staff recruitment, retention and development
-- Market volatility
-- Contract risk
Further details of the Group's policies on principal risks and
uncertainties are contained within the Group's 2017 Annual Report,
a copy of which is available at www.annualreport.weir.
Appendix 1 - 2017 / 2018 quarterly order trends
Like-for-like
Reported growth(1) growth(2)
Division Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
-------------- ----- ----- ----- ----- ----- ----- ----- -----
OE 19% 10% 19% 0% 19% 10% 19% 0%
AM 9% 8% 11% 16% 9% 8% 11% 16%
Minerals 12% 9% 13% 11% 12% 9% 13% 11%
-------------- ----- ----- ----- ----- ----- ----- ----- -----
OE 92% 130% 91% 33% 82% 97% 84% 22%
AM 52% 46% 40% 19% 50% 43% 38% 17%
Oil & Gas 59% 60% 50% 22% 56% 52% 47% 18%
-------------- ----- ----- ----- ----- ----- ----- ----- -----
OE 34% 32% 36% 9% 32% 26% 34% 6%
AM 23% 20% 21% 17% 22% 19% 20% 17%
Continuing
Ops(1) 25% 23% 25% 15% 24% 21% 24% 13%
-------------- ----- ----- ----- ----- ----- ----- ----- -----
Book to Bill 0.99 0.96 1.15 1.05 1.00 0.96 1.15 1.05
Original
Equipment -8% -1% -3% 110% -8% -1% -3% 110%
Aftermarket 7% 17% 6% 28% 7% 17% 6% 28%
Flow Control -2% 6% 2% 61% -2% 6% 2% 61%
-------------- ----- ----- ----- ----- ----- ----- ----- -----
1 Continuing operations (excludes the Flow Control division
which has been classified as being held for sale).
2 Like-for-like excludes the impact of acquisitions. KOP was
acquired on 27 July 2017 and excluded for 2017 and 2018.
This information includes 'forward-looking statements'. All
statements other than statements of historical fact included in
this presentation, including, without limitation, those regarding
The Weir Group PLC's ("the Group") financial position, business
strategy, plans (including development plans and objectives
relating to the Group's products and services) and objectives of
management for future operations, are forward-looking statements.
These statements contain the words "anticipate", "believe",
"intend", "estimate", "expect" and words of similar meaning. Such
forward-looking statements involve known and unknown risks,
uncertainties and other important factors that could cause the
actual results, performance or achievements of the Group to be
materially different from future results, performance or
achievements expressed or implied by such forward-looking
statements. Such forward-looking statements are based on numerous
assumptions regarding the Group's present and future business
strategies and the environment in which the Group will operate in
the future. These forward-looking statements speak only as at the
date of this document. The Group expressly disclaims any obligation
or undertaking to disseminate any updates or revisions to any
forward-looking statements contained herein to reflect any change
in the Group's expectations with regard thereto or any change in
events, conditions or circumstances on which any such statement is
based. Past business and financial performance cannot be relied on
as an indication of future performance.
Consolidated Income Statement
for the period ended 30 June 2018
Restated (note
1)
Restated
(note Period ended Period ended
1) 30 June 2018 30 June 2017
Year
ended
31 December
2017
Exceptional Exceptional
Before items Before items
exceptional & intangibles exceptional & intangibles
items amortisation items amortisation
& intangibles (note & intangibles (note
Total amortisation 4) Total amortisation 4) Total
GBPm Notes GBPm GBPm GBPm GBPm GBPm GBPm
------------ --------------- ----- ------------- -------------- ------- -------------- -------------- ------
Continuing
operations
2,
1,983.0 Revenue 3 1,061.7 - 1,061.7 922.3 - 922.3
------------ --------------- ----- ------------- -------------- ------- -------------- -------------- ------
Continuing
operations
Operating
profit
before share of
results of
joint
223.3 ventures 159.4 (53.2) 106.2 117.6 (27.5) 90.1
Share of
results
of joint
10.9 ventures 0.9 - 0.9 6.9 - 6.9
------------ --------------- ----- ------------- -------------- ------- -------------- -------------- ------
Operating 2,
234.2 profit 3 160.3 (53.2) 107.1 124.5 (27.5) 97.0
(43.7) Finance costs (18.4) - (18.4) (21.5) (0.8) (22.3)
1.5 Finance income 1.4 - 1.4 0.6 - 0.6
Profit before
tax from
continuing
192.0 operations 143.3 (53.2) 90.1 103.6 (28.3) 75.3
Tax (expense)
(12.5) credit 5 (36.3) 7.7 (28.6) (22.6) 8.3 (14.3)
------------ --------------- ----- ------------- -------------- ------- -------------- -------------- ------
Profit for the
period from
continuing
179.5 operations 107.0 (45.5) 61.5 81.0 (20.0) 61.0
Profit (loss)
for the period
from
discontinued
(19.8) operations 6 7.2 (1.5) 5.7 (10.3) (3.9) (14.2)
------------ --------------- ----- ------------- -------------- ------- -------------- -------------- ------
Profit for the
159.7 period 114.2 (47.0) 67.2 70.7 (23.9) 46.8
------------ --------------- ----- ------------- -------------- ------- -------------- -------------- ------
Attributable
to:
Equity holders
159.9 of the Company 114.1 (47.0) 67.1 70.5 (23.9) 46.6
Non-controlling
(0.2) interests 0.1 - 0.1 0.2 - 0.2
------------ --------------- ----- ------------- -------------- ------- -------------- -------------- ------
159.7 114.2 (47.0) 67.2 70.7 (23.9) 46.8
------------ --------------- ----- ------------- -------------- ------- -------------- -------------- ------
Earnings per
share 7
Basic - total
72.8p operations 29.1p 21.4p
Basic -
continuing
81.7p operations 46.3p 26.6p 37.1p 27.9p
Diluted - total
72.3p operations 28.9p 21.0p
Diluted -
continuing
81.2p operations 46.0p 26.4p 36.4p 27.4p
Consolidated Statement of Comprehensive Income
for the period ended 30 June 2018
Restated Restated
(note (note
1) 1)
Year Period Period
ended ended ended
31 December 30 June 30 June
2017 2018 2017
GBPm Note GBPm GBPm
----------- -------------------------------------- ---- ------- --------
159.7 Profit for the period 67.2 46.8
Other comprehensive income
(expense)
Gains (losses) taken to equity
0.4 on cash flow hedges 1.1 (0.6)
Exchange gains (losses) on
(147.7) translation of foreign operations 3.0 (92.3)
Exchange (losses) gains on
54.0 net investment hedges (15.7) 32.9
Reclassification adjustments
(0.3) on cash flow hedges (0.9) (1.1)
Tax relating to other comprehensive
income (expense) to be reclassified
0.8 in subsequent periods 2.1 0.6
----------- -------------------------------------- ---- ------- --------
Items that are or may be reclassified
to profit or loss in subsequent
(92.8) periods (10.4) (60.5)
----------- -------------------------------------- ---- ------- --------
Remeasurements on defined benefit
(5.4) plans 12 32.0 16.0
Remeasurements on other benefit
(0.8) plans - -
Tax relating to other comprehensive
income (expense) not to be
reclassified in subsequent
1.5 periods (5.5) (2.7)
----------- -------------------------------------- ---- ------- --------
Items that will not be reclassified
to profit or loss in subsequent
(4.7) periods 26.5 13.3
----------- -------------------------------------- ---- ------- --------
Net other comprehensive income
(97.5) (expense) 16.1 (47.2)
----------- -------------------------------------- ---- ------- --------
Total net comprehensive income
62.2 (expense) for the period 83.3 (0.4)
----------- -------------------------------------- ---- ------- --------
Attributable to:
62.4 Equity holders of the Company 83.2 (0.5)
(0.2) Non-controlling interests 0.1 0.1
----------- -------------------------------------- ---- ------- --------
62.2 83.3 (0.4)
----------- -------------------------------------- ---- ------- --------
Total comprehensive income
(expense) for the period attributable
to equity holders of the Company
103.4 Continuing operations 80.2 25.0
(41.2) Discontinued operations 3.1 (25.4)
----------- -------------------------------------- ---- ------- --------
62.2 83.3 (0.4)
----------- -------------------------------------- ---- ------- --------
Consolidated Balance Sheet
at 30 June 2018
Restated Restated
(note (note
1) 1)
31 December 30 June 30 June
2017 2018 2017
GBPm Notes GBPm GBPm
----------- ----------------------------------- ----- ------- --------
ASSETS
Non-current assets
393.3 Property, plant & equipment 320.9 384.3
1,550.7 Intangible assets 1,412.1 1,539.2
19.2 Investments in joint ventures 19.0 43.0
45.6 Deferred tax assets 37.4 48.8
43.0 Other receivables 29.8 36.9
- Retirement benefit plan assets 12 - 11.1
0.3 Derivative financial instruments 13 1.0 0.1
----------- ----------------------------------- ----- ------- --------
2,052.1 Total non-current assets 1,820.2 2,063.4
----------- ----------------------------------- ----- ------- --------
Current assets
589.1 Inventories 565.3 575.8
610.4 Trade & other receivables 518.7 544.0
18.8 Construction contracts 3.7 19.1
16.7 Derivative financial instruments 13 14.5 15.0
18.1 Income tax receivable 16.2 9.5
284.6 Cash & short-term deposits 640.6 266.0
- Assets held for sale 6 452.6 -
----------- ----------------------------------- ----- ------- --------
1,537.7 Total current assets 2,211.6 1,429.4
----------- ----------------------------------- ----- ------- --------
3,589.8 Total assets 4,031.8 3,492.8
----------- ----------------------------------- ----- ------- --------
LIABILITIES
Current liabilities
388.4 Interest-bearing loans & borrowings 602.2 366.9
611.0 Trade & other payables 525.6 593.2
3.3 Construction contracts 1.9 6.3
25.8 Derivative financial instruments 13 16.1 32.5
31.2 Income tax payable 24.8 43.9
53.0 Provisions 10 37.6 71.9
- Liabilities held for sale 6 122.6 -
----------- ----------------------------------- ----- ------- --------
1,112.7 Total current liabilities 1,330.8 1,114.7
----------- ----------------------------------- ----- ------- --------
Non-current liabilities
739.4 Interest-bearing loans & borrowings 598.8 768.1
0.5 Other payables 0.2 0.6
0.7 Derivative financial instruments 13 0.4 0.1
71.9 Provisions 10 70.9 56.6
58.2 Deferred tax liabilities 59.7 92.5
137.7 Retirement benefit plan deficits 12 98.3 130.4
----------- ----------------------------------- ----- ------- --------
1,008.4 Total non-current liabilities 828.3 1,048.3
----------- ----------------------------------- ----- ------- --------
2,121.1 Total liabilities 2,159.1 2,163.0
----------- ----------------------------------- ----- ------- --------
1,468.7 NET ASSETS 1,872.7 1,329.8
----------- ----------------------------------- ----- ------- --------
CAPITAL & RESERVES
28.1 Share capital 30.4 27.3
197.9 Share premium 583.4 92.6
9.4 Merger reserve 9.4 9.4
(5.9) Treasury shares (2.4) (5.9)
0.5 Capital redemption reserve 0.5 0.5
Foreign currency translation
98.1 reserve 87.5 132.5
0.3 Hedge accounting reserve 0.5 (1.7)
1,139.0 Retained earnings 1,162.0 1,066.5
----------- ----------------------------------- ----- ------- --------
1,467.4 Shareholders' equity 1,871.3 1,321.2
1.3 Non-controlling interests 1.4 8.6
----------- ----------------------------------- ----- ------- --------
1,468.7 TOTAL EQUITY 1,872.7 1,329.8
----------- ----------------------------------- ----- ------- --------
Consolidated Cash Flow Statement
for the period ended 30 June 2018
Year Period Period
ended ended ended
31 December 30 June 30 June
2017 2018 2017
GBPm Notes GBPm GBPm
----------- ------------------------------------- ----- ------- -------
Total operations
Cash flows from operating activities 14
220.5 Cash generated from operations 139.2 78.4
Additional pension contributions
(3.0) paid (3.0) (2.0)
(28.6) Exceptional cash items (7.5) (16.9)
(60.5) Income tax paid (35.8) (15.3)
----------- ------------------------------------- ----- ------- -------
Net cash generated from operating
128.4 activities 92.9 44.2
----------- ------------------------------------- ----- ------- -------
Cash flows from investing activities
Acquisitions of subsidiaries,
(90.1) net of cash acquired 14 (2.9) (0.2)
(1.4) Investment in joint ventures - (1.4)
Purchases of property, plant
(67.8) & equipment (30.4) (26.4)
(17.6) Purchases of intangible assets (3.8) (14.3)
Other proceeds from sale of
property, plant & equipment
4.6 and intangible assets 1.8 3.3
Disposals of discontinued operations,
3.5 net of cash disposed 14 0.3 -
31.8 Disposals of joint ventures - -
1.5 Interest received 1.4 0.7
Dividends received from joint
8.0 ventures 1.6 3.3
Net cash used in from investing
(127.5) activities (32.0) (35.0)
----------- ------------------------------------- ----- ------- -------
Cash flows from financing activities
Purchase of non-controlling
(37.2) interest - (0.6)
964.4 Proceeds from borrowings 509.6 359.5
(854.7) Repayments of borrowings (469.4) (268.3)
Settlement of derivative financial
6.6 instruments (18.7) 0.5
(42.3) Interest paid (19.7) (21.7)
Dividends paid to equity holders
(74.2) of the Company 8 (38.7) (56.7)
Issue of shares, net of transaction
90.0 costs 356.6 -
- Purchase of shares for LTIP (0.8) -
----------- ------------------------------------- ----- ------- -------
Net cash generated from financing
52.6 activities 318.9 12.7
----------- ------------------------------------- ----- ------- -------
Net increase in cash & cash
53.5 equivalents 379.8 21.9
Cash & cash equivalents at
257.0 the beginning of the period 284.5 257.0
Foreign currency translation
(26.0) differences (6.6) (13.0)
----------- ------------------------------------- ----- ------- -------
Cash & cash equivalents at
284.5 the end of the period 14 657.7 265.9
----------- ------------------------------------- ----- ------- -------
The cash flows from discontinued operations included
above are disclosed separately in note 6.
Consolidated Statement of Changes in Equity
for the period ended 30 June 2018
Attributable
to
equity
Foreign holders
Capital currency Hedge of
Share Share Merger Treasury redemption translation accounting Retained the Non-controlling Total
capital premium reserve shares reserve reserve reserve earnings Company interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------- ------- ------- ------- -------- ---------- ----------- ---------- -------- ------------ --------------- -------
At 31 December
2016 27.3 86.2 9.4 (5.9) 0.5 191.8 (0.6) 1,066.4 1,375.1 8.5 1,383.6
IFRS 15
restatement
(note 1) - - - - - - - (0.6) (0.6) - (0.6)
----------------- ------- ------- ------- -------- ---------- ----------- ---------- -------- ------------ --------------- -------
Restated at
31 December
2016 27.3 86.2 9.4 (5.9) 0.5 191.8 (0.6) 1,065.8 1,374.5 8.5 1,383.0
Profit for
the period
(restated
note 1) - - - - - - - 46.6 46.6 0.2 46.8
Losses taken
to equity
on cash flow
hedges - - - - - - (0.6) - (0.6) - (0.6)
Exchange losses
on translation
of foreign
operations - - - - - (92.2) - - (92.2) (0.1) (92.3)
Exchange gains
on net
investment
hedges - - - - - 32.9 - - 32.9 - 32.9
Reclassification
adjustments
on cash flow
hedges - - - - - - (1.1) - (1.1) - (1.1)
Remeasurements
on defined
benefit plans - - - - - - - 16.0 16.0 - 16.0
Tax relating
to other
comprehensive
income - - - - - - 0.6 (2.7) (2.1) - (2.1)
----------------- ------- ------- ------- -------- ---------- ----------- ---------- -------- ------------ --------------- -------
Total net
comprehensive
(expense)
income for
the period - - - - - (59.3) (1.1) 59.9 (0.5) 0.1 (0.4)
----------------- ------- ------- ------- -------- ---------- ----------- ---------- -------- ------------ --------------- -------
Issue of shares - 6.4 - - - - - - 6.4 - 6.4
Cost of
share-based
payments
inclusive
of tax charge - - - - - - - 3.9 3.9 - 3.9
Dividends - - - - - - - (63.1) (63.1) - (63.1)
At 30 June
2017 (restated
note 1) 27.3 92.6 9.4 (5.9) 0.5 132.5 (1.7) 1,066.5 1,321.2 8.6 1,329.8
----------------- ------- ------- ------- -------- ---------- ----------- ---------- -------- ------------ --------------- -------
At 31 December
2017 28.1 197.9 9.4 (5.9) 0.5 98.1 0.3 1,141.4 1,469.8 1.3 1,471.1
IFRS 15
restatement
(note 1) - - - - - - - (2.4) (2.4) - (2.4)
----------------- ------- ------- ------- -------- ---------- ----------- ---------- -------- ------------ --------------- -------
Restated at
31 December
2017 28.1 197.9 9.4 (5.9) 0.5 98.1 0.3 1,139.0 1,467.4 1.3 1,468.7
Profit for
the period
(restated
note 1) - - - - - - - 67.1 67.1 0.1 67.2
Gains taken
to equity
on cash flow
hedges - - - - - - 1.1 - 1.1 - 1.1
Exchange gains
on translation
of foreign
operations - - - - - 3.0 - - 3.0 - 3.0
Exchange losses
on net
investment
hedges - - - - - (15.7) - - (15.7) - (15.7)
Reclassification
adjustments
on cash flow
hedges - - - - - - (0.9) - (0.9) - (0.9)
Remeasurements
on defined
benefit plans - - - - - - - 32.0 32.0 - 32.0
Tax relating
to other
comprehensive
income - - - - - 2.1 - (5.5) (3.4) - (3.4)
Total net
comprehensive
(expense)
income for
the period - - - - - (10.6) 0.2 93.6 83.2 0.1 83.3
----------------- ------- ------- ------- -------- ---------- ----------- ---------- -------- ------------ --------------- -------
Issue of shares,
net of
transaction
costs 2.3 385.5 - - - - - - 387.8 - 387.8
Cost of
share-based
payments
inclusive
of tax charge - - - - - - - 3.6 3.6 - 3.6
Dividends - - - - - - - (69.9) (69.9) - (69.9)
Purchase of
shares - - - (0.8) - - - - (0.8) - (0.8)
Exercise of
LTIP awards - - - 4.3 - - - (4.3) - - -
At 30 June
2018 30.4 583.4 9.4 (2.4) 0.5 87.5 0.5 1,162.0 1,871.3 1.4 1,872.7
----------------- ------- ------- ------- -------- ---------- ----------- ---------- -------- ------------ --------------- -------
At 31 December
2016 27.3 86.2 9.4 (5.9) 0.5 191.8 (0.6) 1,066.4 1,375.1 8.5 1,383.6
IFRS 15
restatement
(note 1) - - - - - - - (0.6) (0.6) - (0.6)
----------------- ------- ------- ------- -------- ---------- ----------- ---------- -------- ------------ --------------- -------
Restated at
31 December
2016 27.3 86.2 9.4 (5.9) 0.5 191.8 (0.6) 1,065.8 1,374.5 8.5 1,383.0
Profit (loss)
for the year
(restated
note 1) - - - - - - - 159.9 159.9 (0.2) 159.7
Gains taken
to equity
on cash flow
hedges - - - - - - 0.4 - 0.4 - 0.4
Exchange losses
on translation
of foreign
operations - - - - - (147.7) - - (147.7) - (147.7)
Exchange gains
on net
investment
hedges - - - - - 54.0 - - 54.0 - 54.0
Reclassification
adjustments
on cash flow
hedges - - - - - - (0.3) - (0.3) - (0.3)
Remeasurements
on defined
benefit plans - - - - - - - (5.4) (5.4) - (5.4)
Remeasurements
on other benefit
plans - - - - - - - (0.8) (0.8) - (0.8)
Tax relating
to other
comprehensive
income - - - - - - 0.8 1.5 2.3 - 2.3
Total net
comprehensive
(expense)
income for
the year - - - - - (93.7) 0.9 155.2 62.4 (0.2) 62.2
----------------- ------- ------- ------- -------- ---------- ----------- ---------- -------- ------------ --------------- -------
Acquisition
of
non-controlling
interests - - - - - - - 7.0 7.0 (7.0) -
Issue of shares 0.8 111.7 - - - - - - 112.5 - 112.5
Cost of
share-based
payments
inclusive
of tax credit - - - - - - - 7.7 7.7 - 7.7
Dividends - - - - - - - (96.7) (96.7) - (96.7)
At 31 December
2017 (restated
note 1) 28.1 197.9 9.4 (5.9) 0.5 98.1 0.3 1,139.0 1,467.4 1.3 1,468.7
----------------- ------- ------- ------- -------- ---------- ----------- ---------- -------- ------------ --------------- -------
Notes to the Financial Statements
1. Basis of preparation
a) General information
These interim financial statements are for the 6 month period
ended 30 June 2018 and have been prepared on the basis of the
accounting policies set out in the Group's 2017 Annual Report, with
the exception of IFRS 9 'Financial Instruments' and IFRS 15
'Revenue from Contracts with Customers', and in accordance with IAS
34 'Interim Financial Reporting (Revised)' as adopted by the
European Union and the Disclosure and Transparency Rules of the
Financial Services Authority.
These interim financial statements are unaudited but have been
formally reviewed by the auditors and their report to the Company
is set out on page 35. The information shown for the year ended 31
December 2017 does not constitute statutory accounts as defined in
Section 435 of the Companies Act 2006 and has been extracted from
the Group's 2017 Annual Report which has been filed with the
Registrar of Companies. The report of the auditors on the financial
statements contained within the Group's 2017 Annual Report was
unqualified and did not contain a statement under either Section
498(2) or Section 498(3) of the Companies Act 2006. The interim
financial statements should be read in conjunction with the annual
financial statements for the year ended 31 December 2017, which
have been prepared in accordance with IFRSs as adopted by the
European Union.
The Weir Group PLC is a limited company incorporated in Scotland
and is listed on the London Stock Exchange.
The principal activities of the Group are described in note
2.
These interim financial statements were approved by the Board of
Directors on 31 July 2018.
b) Estimates & judgements
The preparation of interim financial statements requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets, liabilities, income and expense. Actual results
may differ from these estimates.
In preparing these interim financial statements, the significant
judgements made by management in applying the Group's accounting
policies and the key sources of estimation uncertainty were the
same as those that applied to the consolidated financial statements
for the year ended 31 December 2017.
These interim financial statements have been prepared on the
going concern basis as the Directors, having considered available
relevant information, have a reasonable expectation that the Group
has adequate resources to continue to operate as a going
concern.
Taxes on income in the interim periods are accrued using the tax
rate that would be applicable to expected total annual profit or
loss.
c) New standards & interpretations
i. New standards issued but not yet effective
IFRS 16: Leases
IFRS 16 was issued in January 2016. It will result in almost all
leases being recognised on the balance sheet, as the distinction
between operating and finance leases is removed.
The standard will affect primarily the accounting for the
Group's operating leases. As at the reporting date, the Group has
non-cancellable operating lease commitments relating to continuing
operations of GBP173.5m (December 2017: GBP172.7m), GBP189.7m on a
total Group basis (December 2017: GBP186.6m). An assessment of the
impact of the new standard is ongoing. The Group will adopt the new
standard from 1 January 2019.
ii. New standards in effect
Several new amendments apply for the first time in 2018.
However, they do not result in a material impact on the half year
consolidated financial statements of the Group.
IFRS 9: Financial Instruments
IFRS 9 addresses the classification, measurement and
derecognition of financial assets and financial liabilities,
introduces new rules for hedge accounting and a new impairment
model for financial assets. The classification and measurement of
financial assets and liabilities on the face of the balance sheet
remains unchanged from that adopted under IAS 39 and no changes
were required to the hedge accounting applied within the Group as a
result of IFRS 9.
The principal impact of the new standard has been to introduce a
new approach to the impairment of financial assets which requires
entities to consider forward looking information in determining an
appropriate level of provisioning against trade receivables.
Adopting the new approach required by IFRS 9 has not resulted in
additional impairment of receivables in the period.
IFRS 15: Revenue from Contracts with Customers
The Group has adopted IFRS 15 applying the full retrospective
method. The new standard has had an immaterial impact on the
results of the Group, with the restatement of revenue as at 30 June
2017 totalling 0.3% of reported revenue of continuing operations
for the same period and 0.4% of reported revenue of continuing
operations for the year to 31 December 2017. The main changes
relate to the timing of revenue recognition, either over time or
point in time, for certain 'Engineer to order' contracts as well as
revenue adjustments for variable consideration.
d) Accounting policies
Revenue is measured at the fair value of the consideration
received or receivable which reflects the amount expected to be
received from customers, mainly the transaction price adjusted for
variable consideration. Revenue will only be recognised when the
fulfilment of performance obligations is achieved, and amounts can
be reliably measured. Revenue is shown net of sales taxes,
discounts and after eliminating sales within the Group.
i. Sale of goods
Revenue from the sale of goods is recognised in the Consolidated
Income Statement when the transfer of control has been
demonstrated, usually on despatch of goods, and reliable
measurement is possible. No revenue is recognised where recovery of
the consideration is not probable or there are significant
uncertainties regarding associated costs, or the possible return of
goods. Transfer of control can vary depending on the nature of the
products sold and the individual terms of the contract of sale.
Where the sale of product requires customer inspection, revenue is
not recognised until the inspection has been completed and approved
by the customer.
This policy is applicable to the sale of both original equipment
and spare parts, whether sold individually, in bulk or as part of a
cross-selling marketing strategy.
ii. Provision of services
Revenue from the rendering of services is generally recognised
on completion if the service contract is short-term in nature.
Where this is not the case, revenue from services is recognised in
proportion to the stage of completion of the performance
obligations at the balance sheet date. 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 to the total forecast costs of the contract. Revenue
recognition commences only when outcome of the contract can be
reliably measured, by reference to individual terms and conditions
within each service contract, and it is probable that the economic
benefits associated with the contract will flow to the Group.
iii. Construction contracts
Construction contracts usually contain discrete elements
separately transferring control to customers over the life of the
contract. The stage of completion of a contract is determined
either by reference to the proportion that contract costs incurred
for work performed to date bear to the estimated total contract
costs, or by reference to the completion of a physical proportion
of the contract work. The basis used is dependent upon the nature
of the underlying contract and takes into account the degree to
which the physical proportion of the work is subject to formal
customer acceptance procedures. Losses on contracts are recognised
in the period when such losses become probable. Construction
contracts are primarily entered into by the Group's 'Engineer to
order' businesses.
1. Basis of preparation (continued)
e) Prior period restatements
On 19 April 2018, the Group announced its intention to sell the
Flow Control division and, in line with IFRS 5: Non-current Assets
Held for Sale and Discontinued Operations, the Group has classified
the division as held for sale. Previously reported as an individual
reporting segment, the division is now reported as a discontinued
operation. As the disposal process advances, classification of
revenue, costs, assets and liabilities between continuing and
discontinued operations may be revisited. This reflects the shared
nature of certain assets and liabilities across the Group, with all
options currently being considered as we focus on maximising value
for shareholders.
During the period ended 30 June 2018, the provisional fair
values attributed to the 2017 KOP Surface Products (KOP)
acquisition were finalised. In accordance with IFRS 3: Business
Combinations, the net impact of the adjustments to the provisional
fair values has been recognised by means of an increase to goodwill
and the adjustments to the provisional amounts have been recognised
as if the accounting for the business combination had been
completed at the relevant acquisition date. As such, all affected
balances and amounts have been restated in the financial
statements.
The Consolidated Income Statement for the period ended 30 June
2017 and the year ended 31 December 2017 and the Consolidated
Balance Sheets at 30 June 2017 and 31 December 2017 have been
restated, as shown below, to reflect the above and IFRS 15
restatements detailed in 1c.
Restated Consolidated Income
Statement
for period ended 30 June
2017
Total Continuing
operations: Transfer operations: Continuing Discontinued
as to IFRS operations: operations:
previously discontinued 15 as IFRS
reported operations restatement* restated 15 restatement
GBPm GBPm GBPm GBPm GBPm
----------------------------- ------------ ------------- ------------- ------------ ---------------
Revenue 1,091.0 (165.7) (3.0) 922.3 (0.2)
------------------------------ ------------ ------------- ------------- ------------ ---------------
Operating profit before
share of results of joint
ventures 74.1 15.9 0.1 90.1 0.7
Share of results of joint
ventures 6.9 - - 6.9 -
------------------------------ ------------ ------------- ------------- ------------ ---------------
Operating profit 81.0 15.9 0.1 97.0 0.7
Finance costs (22.5) 0.2 - (22.3) -
Finance income 0.6 - - 0.6 -
------------------------------ ------------ ------------- ------------- ------------ ---------------
Profit before tax from
continuing operations 59.1 16.1 0.1 75.3 0.7
Tax expense (12.8) (1.5) - (14.3) (0.2)
------------------------------ ------------ ------------- ------------- ------------ ---------------
Profit for the period 46.3 14.6 0.1 61.0 0.5
Loss for the period from
discontinued operations (0.1) (14.6) 0.5 (14.2) 0.5
------------------------------ ------------ ------------- ------------- ------------ ---------------
Profit for the period 46.2 - 0.6 46.8 0.5
------------------------------ ------------ ------------- ------------- ------------ ---------------
Restated Consolidated Income
Statement
for year ended 31 December
2017
Total Continuing
operations: Transfer operations: Continuing Discontinued
as to IFRS operations: operations:
previously discontinued 15 as IFRS
reported operations restatement restated 15 restatement
GBPm GBPm GBPm GBPm GBPm
----------------------------- ------------ ------------- ------------- ------------ ---------------
Revenue 2,355.9 (365.4) (7.5) 1,983.0 (3.3)
------------------------------ ------------ ------------- ------------- ------------ ---------------
Operating profit before
share of results of joint
ventures 212.2 13.8 (2.7) 223.3 -
Share of results of joint
ventures 10.9 - - 10.9 -
------------------------------ ------------ ------------- ------------- ------------ ---------------
Operating profit 223.1 13.8 (2.7) 234.2 -
Finance costs (44.1) 0.4 - (43.7) -
Finance income 1.6 (0.1) - 1.5 -
------------------------------ ------------ ------------- ------------- ------------ ---------------
Profit before tax from
continuing operations 180.6 14.1 (2.7) 192.0 -
Tax expense (19.1) 5.7 0.9 (12.5) -
------------------------------ ------------ ------------- ------------- ------------ ---------------
Profit for the period 161.5 19.8 (1.8) 179.5 -
Loss for the period from
discontinued operations - (19.8) - (19.8) -
------------------------------ ------------ ------------- ------------- ------------ ---------------
Profit for the period 161.5 - (1.8) 159.7 -
------------------------------ ------------ ------------- ------------- ------------ ---------------
*Includes the profit after
tax impact for discontinued
operations.
1. Basis of preparation (continued)
Restated Consolidated Balance
Sheet (extract)
at 30 June 2017
As previously Restated
IFRS 30 June
reported 15 2017
GBPm GBPm GBPm
------------------------------------ ------------- ----- --------
Current assets
Inventories 577.5 (1.7) 575.8
Trade & other receivables 544.1 (0.1) 544.0
Construction contracts 19.5 (0.4) 19.1
Current liabilities
Trade & other payables 594.2 (1.0) 593.2
Construction contracts 7.2 (0.9) 6.3
Income tax payable 44.0 (0.1) 43.9
Provisions 72.0 (0.1) 71.9
Non-current liabilities
Deferred tax liabilities 92.6 (0.1) 92.5
------------------------------------- ------------- ----- --------
CAPITAL & RESERVES
31 December 2016 restatement - (0.6) (0.6)
30 June 2017 restatement - 0.6 0.6
------------------------------------- ------------- ----- --------
Retained earnings 1,066.5 - 1,066.5
------------------------------------- ------------- ----- --------
Restated Consolidated Balance
Sheet (extract)
at 31 December 2017
As previously KOP adjustments Restated
IFRS to fair 31 December
reported 15 values 2017
GBPm GBPm GBPm GBPm
------------------------------ ------------- ----- --------------- -----------
Non-current assets
Property, plant & equipment 392.3 - 1.0 393.3
Intangible assets 1,549.9 - 0.8 1,550.7
Deferred tax assets 45.3 0.3 - 45.6
Current assets
Inventories 586.8 2.3 - 589.1
Trade & other receivables 613.3 (1.4) (1.5) 610.4
Construction contracts 23.6 (4.8) - 18.8
Income tax receivable 18.5 0.5 (0.9) 18.1
Current liabilities
Trade & other payables 613.2 (1.6) (0.6) 611.0
Construction contracts 2.6 0.7 - 3.3
Income tax payable 31.1 0.1 - 31.2
Provisions 52.6 0.4 - 53.0
Non-current liabilities
Provisions 72.0 (0.1) - 71.9
Deferred tax liabilities 58.4 (0.2) - 58.2
CAPITAL & RESERVES
31 December 2016 restatement - (0.6) - (0.6)
31 December 2017 restatement - (1.8) - (1.8)
------------------------------- ------------- ----- --------------- -----------
Retained earnings 1,141.4 (2.4) - 1,139.0
------------------------------- ------------- ----- --------------- -----------
1. Basis of preparation (continued)
f) Non-GAAP measures
Our reported interim results are prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by
the European Union and applied in accordance with the provisions of
the Companies Act 2006. In measuring our performance, the financial
measures that we use include those which have been derived from our
reported results in order to eliminate factors which distort
period-on-period comparisons. These are considered non-GAAP
financial measures. We believe this information, along with
comparable GAAP measurements, is useful to investors in providing a
basis for measuring our operational performance. Our management
uses these financial measures, along with the most directly
comparable GAAP financial measures, in evaluating our performance
and value creation. Non-GAAP financial measures should not be
considered in isolation from, or as a substitute for, financial
information in compliance with GAAP. Non-GAAP financial measures as
reported by the Group may not be comparable with similarly titled
amounts reported by other companies.
Below we set out our definitions of non-GAAP measures and
provide reconciliations to relevant GAAP measures.
Free cash flow
Free cash flow (FCF) is defined as cash flow
from operating activities adjusted for income
taxes, net capital expenditures, net interest
payments, dividends paid, settlement of derivatives
and pension contributions. FCF reflects an additional
way of viewing our liquidity that we believe
is useful to investors as it represents cash
flows that could be used for repayment of debt
or to fund our strategic initiatives, including
acquisitions, if any.
The reconciliation of cash flow from operating
activities to FCF is as follows.
Year Period Period
ended ended ended
31 December 30 June 30 June
2017 2018 2017
GBPm GBPm GBPm
----------- ---------------------------------- ------- -------
220.5 Cash generated from operations 139.2 78.4
(60.5) Income tax paid (35.8) (15.3)
Net capital expenditure from
purchase & disposal of property,
(80.8) plant & equipment and intangibles (32.4) (37.4)
(40.8) Net interest paid (18.3) (21.0)
Dividends paid to equity holders
(74.2) of the Company (38.7) (56.7)
Dividends received from joint
8.0 ventures 1.6 3.3
Settlement of derivative financial
6.6 instruments (18.7) 0.5
- Purchase of shares for LTIP (0.8) -
Additional pension contributions
(3.0) paid (3.0) (2.0)
----------- ---------------------------------- ------- -------
(24.2) Free cash flow (6.9) (50.2)
----------- ---------------------------------- ------- -------
EBITDA
EBITDA is operating profit from continuing operations,
before exceptional items and intangibles amortisation,
excluding depreciation. EBITDA is used in conjunction
with other GAAP and non-GAAP financial measures
to assess our operating performance. A reconciliation
of EBITDA to the closest equivalent GAAP measure,
operating profit, is provided.
Restated Restated
(note (note
1) 1)
Year ended Period Period
ended ended
31 December 30 June 30 June
2017 2018 2017
GBPm GBPm GBPm
------------ ---------------------------- ------- --------
Continuing operations
234.2 Operating profit 107.1 97.0
Adjusted for:
5.7 Exceptional items (note 4) 25.2 2.3
------------ ---------------------------- ------- --------
Earnings before interest
239.9 and tax (EBIT) 132.3 99.3
Intangibles amortisation
52.0 (note 4) 28.0 25.2
Depreciation of property,
49.9 plant & equipment 26.4 23.7
341.8 EBITDA 186.7 148.2
------------ ---------------------------- ------- --------
Net debt
A breakdown of Net debt into Cash & short-term
deposits and Interest-bearing loans & borrowings
is provided in note 14.
2. Segment information
Following the announcement during the period of the Group's
intention to sell the Flow Control division, the Group has
classified Flow Control as a discontinued operation. Continuing
operations includes two operating divisions: Minerals and Oil &
Gas (previously Minerals, Oil & Gas and Flow Control). These
two divisions are organised and managed separately based on the key
markets served and each is treated as an operating segment and a
reportable segment under IFRS 8. The operating and reportable
segments were determined based on the reports reviewed by the Chief
Executive Officer which are used to make operational decisions.
The Minerals segment is the global leader in the provision of
slurry handling equipment and associated aftermarket support for
abrasive high wear applications used in the mining and oil sands
markets. The Oil & Gas segment provides products and service
solutions to upstream, production, transportation, refining and
related industries.
The Chief Executive Officer assesses the performance of the
operating segments based on operating profit from continuing
operations before exceptional items (including impairments) and
intangibles amortisation ('segment result'). Finance income and
expenditure and associated interest-bearing liabilities and
derivative financial instruments are not allocated to segments as
all treasury activity is managed centrally by the Group treasury
function. The amounts provided to the Chief Executive Officer with
respect to assets and liabilities are measured in a manner
consistent with that of the financial statements. The assets are
allocated based on the operations of the segment and the physical
location of the asset. The liabilities are allocated based on the
operations of the segment.
Transfer prices between segments are set on an arm's length
basis, in a manner similar to transactions with third parties.
The segment information for the reportable segments for the
period ended 30 June 2018, the period ended 30 June 2017 and the
year ended 31 December 2017 is disclosed below.
Total continuing
Minerals Oil & Gas operations
Restated Restated Restated
(note (note (note
1) 1) 1)
30 30 30 30 30 30
June June June June June June
2018 2017 2018 2017 2018 2017
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------------- ------- -------- ----- -------- -------- --------
Revenue
Sales to external customers 650.5 608.1 411.2 314.2 1,061.7 922.3
Inter-segment sales 1.0 0.3 0.3 0.3 1.3 0.6
------------------------------------------- ------- -------- ----- -------- -------- --------
Segment revenue 651.5 608.4 411.5 314.5 1,063.0 922.9
------------------------------------------- ------- -------- ----- --------
Eliminations (1.3) (0.6)
-------- --------
1,061.7 922.3
-------- --------
Sales to external customers
- 2017 at 2018 average
exchange rates
Sales to external customers 650.5 575.7 411.2 289.3 1,061.7 865.0
------------------------------------------- ------- -------- ----- -------- -------- --------
Segment result
Segment result before
share of results of joint
ventures 111.8 104.8 62.1 24.9 173.9 129.7
Share of results of joint
ventures - - 0.9 6.9 0.9 6.9
------------------------------------------- ------- -------- ----- -------- -------- --------
Segment result 111.8 104.8 63.0 31.8 174.8 136.6
------------------------------------------- ------- -------- ----- --------
Unallocated expenses (14.5) (12.1)
-------- --------
Operating profit before
exceptional items & intangibles
amortisation 160.3 124.5
Total exceptional items
& intangibles amortisation (53.2) (28.3)
Net finance costs before
exceptional items (17.0) (20.9)
-------- --------
Profit before tax from
continuing operations 90.1 75.3
-------- --------
Segment result - 2017
at 2018 average exchange
rates
Segment result before
share of results of joint
ventures 111.8 99.1 62.1 22.8 173.9 121.9
Share of results of joint
ventures - - 0.9 6.3 0.9 6.3
------------------------------------------- ------- -------- ----- -------- -------- --------
Segment result 111.8 99.1 63.0 29.1 174.8 128.2
------------------------------------------- ------- -------- ----- --------
Unallocated expenses (14.5) (12.0)
-------- --------
Operating profit before
exceptional items & intangibles
amortisation 160.3 116.2
-------- --------
Discontinued
Minerals Oil & Gas operations Total Group
Restated Restated Restated Restated
(note (note (note (note
1) 1) 1) 1)
30 30 30 30 30 30 30 30
June June June June June June June June
2018 2017 2018 2017 2018 2017 2018 2017
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------ ------- -------- ------- -------- ----- -------- -------- --------
Assets & liabilities
Intangible assets 603.5 621.2 766.8 750.9 - 137.6 1,370.3 1,509.7
Property, plant
& equipment 220.5 216.9 90.8 83.9 - 72.6 311.3 373.4
Working capital
assets 641.7 563.4 412.9 336.9 - 233.4 1,054.6 1,133.7
Investments in
joint ventures - - 19.0 43.0 - - 19.0 43.0
Assets held for
sale - - - - 452.6 - 452.6 -
Segment assets 1,465.7 1,401.5 1,289.5 1,214.7 452.6 443.6 3,207.8 3,059.8
------------------------ ------- -------- ------- -------- ----- --------
Unallocated assets 824.0 433.0
-------- --------
Total Group assets 4,031.8 3,492.8
-------- --------
Working capital
liabilities 310.6 314.8 170.4 168.3 - 161.6 481.0 644.7
Liabilities held
for sale - - - - 122.6 - 122.6 -
------------------------ ------- -------- ------- -------- ----- --------
Unallocated liabilities 1,555.5 1,518.3
-------- --------
Total Group liabilities 2,159.1 2,163.0
-------- --------
Unallocated assets primarily comprise cash and short-term
deposits, derivative financial instruments, income tax receivable,
deferred tax assets and retirement benefit surpluses as well as
those assets which are used for general head office purposes.
Unallocated liabilities primarily comprise interest-bearing loans
and borrowings, derivative financial instruments, income tax
payable, provisions, deferred tax liabilities and retirement
benefit deficits as well as liabilities relating to head office
activities.
Assets and liabilities held for sale have been classified as
discontinued operations for 2018 interim reporting (note 6). For
segmental reporting purposes, the 2017 comparative figures have
also been disclosed.
2. Segment information (continued)
Total
Year ended 31 December 2017 restated Oil continuing
(note 1) Minerals & Gas operations
GBPm GBPm GBPm
--------------------------------------- -------- ------ -----------
Revenue
Sales to external customers 1,279.2 703.8 1,983.0
Inter-segment sales 0.7 0.3 1.0
--------------------------------------- -------- ------ -----------
Segment revenue 1,279.9 704.1 1,984.0
--------------------------------------- -------- ------
Eliminations (1.0)
-----------
1,983.0
-----------
Sales to external customers - 2017
at 2018 average exchange rates
Sales to external customers 1,226.1 661.2 1,887.3
--------------------------------------- -------- ------ -----------
Segment result
Segment result before share of results
of joint ventures 224.6 80.6 305.2
Share of results of joint ventures - 10.9 10.9
--------------------------------------- -------- ------ -----------
Segment result 224.6 91.5 316.1
--------------------------------------- -------- ------
Unallocated expenses (24.2)
-----------
Operating profit before exceptional
items & intangibles amortisation 291.9
Total exceptional items & intangibles
amortisation (58.5)
Net finance costs before exceptional
items (41.4)
-----------
Profit before tax from continuing
operations 192.0
-----------
Segment result - 2017 at 2018 average
exchange rates
Segment result before share of results
of joint ventures 214.6 75.1 289.7
Share of results of joint ventures - 10.2 10.2
--------------------------------------- -------- ------ -----------
Segment result 214.6 85.3 299.9
--------------------------------------- -------- ------
Unallocated expenses (24.1)
-----------
Operating profit before exceptional
items & intangibles amortisation 275.8
-----------
Year ended 31 December 2017 restated Oil Discontinued Total
(note 1) Minerals & Gas operations Group
GBPm GBPm GBPm GBPm
------------------------------------- -------- ------- ------------ -------
Assets & liabilities
Intangible assets 603.0 763.1 137.5 1,503.6
Property, plant & equipment 221.3 90.3 72.1 383.7
Working capital assets 619.6 377.6 219.2 1,216.4
Investments in joint ventures - 19.2 - 19.2
------------------------------------- -------- ------- ------------ -------
Segment assets 1,443.9 1,250.2 428.8 3,122.9
------------------------------------- -------- ------- ------------
Unallocated assets 466.9
-------
Total Group assets 3,589.8
-------
Continuing operations
Working capital liabilities 350.3 181.6 123.4 655.3
Unallocated liabilities 1,465.8
-------
Total Group liabilities 2,121.1
-------
The following disclosures are given in relation
to continuing operations.
Restated Restated
(note (note
1) 1)
Year Period Period
ended ended ended
31 December 30 June 30 June
2017 2018 2017
GBPm GBPm GBPm
----------- ---------------------------------- ------- --------
An analysis of the Group's revenue
is as follows:
461.0 Original equipment 266.5 219.1
1,199.2 Aftermarket parts 647.9 571.3
----------- ---------------------------------- ------- --------
1,660.2 Sale of goods 914.4 790.4
279.5 Provision of services 137.3 126.9
43.3 Construction contracts 10.0 5.0
----------- ---------------------------------- ------- --------
1,983.0 Revenue 1,061.7 922.3
----------- ---------------------------------- ------- --------
3. Revenues & expenses
The following disclosures are given in relation
to continuing operations and exclude exceptional
items & intangibles amortisation.
Restated Restated
(note (note
1) 1)
Year Period Period
ended ended ended
31 December 30 June 30 June
2017 2018 2017
GBPm GBPm
----------- ---------------------------------- ------- --------
A reconciliation of revenue to
operating profit is as follows
1,983.0 Revenue 1,061.7 922.3
(1,316.9) Cost of sales (706.6) (619.0)
----------- ---------------------------------- ------- --------
666.1 Gross profit 355.1 303.3
4.4 Other operating income 1.0 3.5
(225.5) Selling & distribution costs (114.4) (111.5)
(164.0) Administrative expenses (82.3) (77.7)
10.9 Share of results of joint ventures 0.9 6.9
----------- ---------------------------------- ------- --------
291.9 Operating profit 160.3 124.5
----------- ---------------------------------- ------- --------
Details of exceptional items and intangibles amortisation
are provided in note 4.
4. Exceptional items & intangibles amortisation
Restated Restated
(note (note
1) 1)
Year Period Period
ended ended ended
31 December 30 June 30 June
2017 2018 2017
GBPm GBPm GBPm
----------- --------------------------------------- ------- --------
Recognised in arriving at operating
profit from continuing operations
(52.0) Intangibles amortisation (28.0) (25.2)
Exceptional item - ESCO acquisition
- related costs (24.0) -
Exceptional item - restructuring
(4.9) and rationalisation charges (1.6) (0.7)
(2.1) Exceptional item - legal claims 0.5 (1.1)
Exceptional item - gain on sale
10.4 of EPI - -
Exceptional item - fair value
adjustment to contingent consideration
(9.1) asset / liability (0.1) (0.5)
----------- --------------------------------------- ------- --------
(57.7) (53.2) (27.5)
----------- --------------------------------------- ------- --------
-
Recognised in finance costs
----------- --------------------------------------- ------- --------
Exceptional item - unwind in
respect of contingent consideration
(0.8) liability - (0.8)
----------- --------------------------------------- ------- --------
Recognised in arriving at operating
profit from discontinued operations
(3.4) Intangibles amortisation (1.1) (1.6)
Exceptional item - disposal related
- costs (0.5) -
Exceptional item - restructuring
(7.6) and rationalisation charges (0.2) (2.6)
Exceptional item - related to
(0.1) prior disposal 0.1 (0.1)
(11.1) (1.7) (4.3)
----------- --------------------------------------- ------- --------
Exceptional items in the period in relation to continuing
operations primarily relate to costs associated with the ESCO
acquisition which completed on 12 July 2018 (note 17). The majority
of these costs relate to advisor fees, due diligence and initial
integration costs. Of the GBP24.0m incurred at 30 June 2018,
GBP2.2m has been paid in cash.
Restructuring and rationalisation costs in the period are in
relation to a continuation of redundancy programs in Oil & Gas
(GBP0.8m) and Minerals (GBP0.8m). The GBP0.5m credit in relation to
legal claims relates to the receipt of an Escrow balance associated
with the Trio acquisition in 2014.
Included in discontinued operations in the period are costs
associated with the intended sale of the Flow Control division,
facility closure costs and a receipt related to the previous
disposal of Ynfiniti Engineering Systems.
In the prior period, restructuring and rationalisation charges
represented the additional cost of programmes which commenced in
earlier periods to right size operations and discontinue certain
activities. Other exceptional items related to costs of GBP1.1m
associated with the extension of a prior period legal claim, a fair
value adjustment of GBP1.0m related to the acquisition of Weir
International, offset by a GBP0.5m credit following the settlement
of Delta deferred consideration and GBP0.8m unwind of contingent
consideration liability for Weir International.
5. Tax expense
Restated Restated
(note (note
1) 1)
Year Period Period
ended ended ended
31 December 30 June 30 June
2017 2018 2017
GBPm GBPm GBPm
----------- ---------------------------------------- ------- --------
Continuing operations
4.1 Group - UK (1.2) (3.9)
(16.6) Group - overseas (27.4) (10.4)
----------- ---------------------------------------- ------- --------
Total income tax expense in the
(12.5) Consolidated Income Statement (28.6) (14.3)
----------- ---------------------------------------- ------- --------
The total income tax (expense)
credit is disclosed in the Consolidated
Income Statement as follows:
- continuing operations before
exceptional items & intangibles
(51.6) amortisation (36.3) (22.6)
(5.6) - discontinued operations (1.3) 1.3
22.1 - exceptional items 1.6 0.3
- intangibles amortisation and
17.0 impairment 6.1 8.0
----------- ---------------------------------------- ------- --------
Total income tax expense in the
(18.1) Consolidated Income Statement (29.9) (13.0)
----------- ---------------------------------------- ------- --------
Total income tax expense included
in the Group's share of results
(1.0) of joint ventures (0.6) (0.6)
----------- ---------------------------------------- ------- --------
The underlying effective tax rate for the full
financial year 2018 is estimated at 25.3% (2017
restated: 20.7%), based on the weighted average
effective tax rate across all jurisdictions. Therefore
the underlying effective tax rate used for the
half year 2018 was 25.3% (2017 restated: 21.8%).
6. Discontinued operations
Description
On 19 April 2018, the Group announced its intention
to sell the Flow Control division and, in line
with IFRS 5 'Non-current Assets Held for Sale
and Discontinued Operations', the Group has classified
the division as held for sale. The Flow Control
division designs and manufactures valves and pumps
as well as providing specialist support services
to the global power generation, industrial and
oil and gas sectors.
Previously reported as an individual reporting
segment, the division is now reported as a discontinued
operation. In compliance with IFRS 5 the results
for the period to 30 June 2018 for the division
are disclosed within one line in the income statement,
with the comparative periods also restated. In
the balance sheet the assets and liabilities of
the division, in the current period only, are
reported as current assets/liabilities held for
sale. As a discontinued operation, the division
is measured at the lower of its carrying amount
and fair value less costs to sell. When the sale
of the disposal group occurs, a gain or loss will
arise. At the time of disposal the foreign currency
translation reserve will be recycled to the income
statement and included in the gain or loss on
disposal.
Prior periods include GBP0.1m operating profit
and in December 2016 a tax credit of GBP0.1m in
relation to finalisation of American Hydro Corporation
and Ynfiniti Engineering Services disposals in
2016.
Financial performance and cash flow information
for discontinued operations
Restated (note
1)
Restated
(note Period ended Period ended
1) 30 June 2018 30 June 2017
Year
ended
31 December
2017
Before Before
exceptional Exceptional exceptional Exceptional
items items items items
& intangibles & intangibles & intangibles & intangibles
Total amortisation amortisation Total amortisation amortisation Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------- ---------------------- -------------- -------------- ----- -------------- -------------- ------
362.1 Revenue 160.7 - 160.7 165.5 - 165.5
----------- ---------------------- -------------- -------------- ----- -------------- -------------- ------
Operating profit
(13.9) (loss) 8.7 (1.7) 7.0 (11.0) (4.3) (15.3)
(0.4) Finance costs (0.2) - (0.2) (0.2) - (0.2)
0.1 Finance income 0.2 - 0.2 - - -
Profit (loss) before
tax from discontinued
(14.2) operations 8.7 (1.7) 7.0 (11.2) (4.3) (15.5)
(5.6) Tax (expense) credit (1.5) 0.2 (1.3) 0.9 0.4 1.3
----------- ---------------------- -------------- -------------- ----- -------------- -------------- ------
Profit (loss) for
the period from
discontinued
(19.8) operations 7.2 (1.5) 5.7 (10.3) (3.9) (14.2)
----------- ---------------------- -------------- -------------- ----- -------------- -------------- ------
Attributable to:
Equity holders
(19.5) of the Company 7.2 (1.5) 5.7 (10.5) (3.9) (14.4)
Non-controlling
(0.3) interests - - - 0.2 - 0.2
----------- ---------------------- -------------- -------------- ----- -------------- -------------- ------
(19.8) 7.2 (1.5) 5.7 (10.3) (3.9) (14.2)
----------- ---------------------- -------------- -------------- ----- -------------- -------------- ------
Year Period Period
ended ended ended
30 30
31 December June June
2017 2018 2017
----------- ---------------------- -------------- -------------- ----- -------------- -------------- ------
Cash flows from
15.4 operating activities 4.5 3.8
Cash flows from
(3.9) investing activities (1.7) (1.6)
Cash flows from
0.5 financing activities 0.2 (10.9)
----------- ---------------------- -------------- -------------- ----- -------------- -------------- ------
Net increase (decrease) in cash
and cash equivalents from discontinued
12.0 operations 3.0 (8.7)
----------- --------------------------------------------------------------- -------------- -------------- ------
Earnings (loss) per share
Earnings (loss) per share
from discontinued operations
were as follows.
Year Period Period
ended ended ended
30 30
31 December June June
2017 2018 2017
pence pence pence
----------- ---------------------- -------------- -------------- ----- -------------- -------------- ------
(9.0) Basic 2.5 (6.5)
(8.9) Diluted 2.3 (6.4)
----------- ---------------------- -------------- -------------- ----- -------------- -------------- ------
The following table details the assets and liabilities
classified as held for sale in the Consolidated
Balance Sheet.
30 June
2018
GBPm
---------------------------------------------- ---------
ASSETS
Property, plant & equipment 71.4
Intangible assets 135.0
Deferred tax assets 6.3
Inventories 81.3
Trade & other receivables 111.3
Construction contracts 13.0
Derivative financial instruments 0.6
Income tax receivable 1.0
Cash & short-term deposits 32.7
----------------------------------------------- ---------
Assets held for sale 452.6
----------------------------------------------- ---------
LIABILITIES
Interest-bearing loans & borrowings 1.3
Trade & other payables 98.1
Construction contracts 1.2
Income tax payable 1.4
Derivative financial instruments 1.3
Provisions 12.6
Deferred tax liabilities 0.7
Retirement benefit plan deficits 6.0
----------------------------------------------- ---------
Liabilities held for sale 122.6
----------------------------------------------- ---------
NET ASSETS 330.0
----------------------------------------------- ---------
7. Earnings per share
Basic earnings per share amounts are calculated
by dividing net profit for the period attributable
to equity holders of the Company by the weighted
average number of ordinary shares outstanding
during the period. Diluted earnings per share
amounts are calculated by dividing the net profit
attributable to equity holders of the Company
by the weighted average number of ordinary shares
outstanding during the period, adjusted for the
effects of dilutive share awards.
The following reflects the earnings and share
data used in the calculation of earnings per share.
Restated Restated
(note (note
1) 1)
Year Period Period
ended ended ended
31 December 30 June 30 June
2017 2018 2017
----------- --------------------------------------- ------- --------
Profit attributable to equity
holders of the Company
159.9 Total operations* (GBPm) 67.1 46.6
179.7 Continuing operations* (GBPm) 61.4 60.8
Continuing operations before
exceptional items & intangibles
199.1 amortisation* (GBPm) 106.9 80.8
Weighted average share capital
Basic earnings per share (number
219.9 of shares, million) 230.9 217.9
Diluted earnings per share (number
221.3 of shares, million) 232.4 222.2
----------- --------------------------------------- ------- --------
The difference between the weighted average share
capital for the purposes of the basic and the
diluted earnings per share calculations is analysed
as follows.
Year Period Period
ended ended ended
31 December 30 June 30 June
2017 2018 2017
Shares Shares Shares
Million Million Million
----------- --------------------------------------- ------- --------
Weighted average number of ordinary
shares for basic earnings per
219.9 share 230.9 217.9
Effect of dilution: LTIP awards
1.4 and share issue 1.5 4.3
----------- --------------------------------------- ------- --------
Adjusted weighted average number
of ordinary shares for diluted
221.3 earnings per share 232.4 222.2
----------- --------------------------------------- ------- --------
The profit attributable to equity holders of the
Company used in the calculation of both basic
and diluted earnings per share from continuing
operations before exceptional items and intangibles
amortisation is calculated as follows.
Restated Restated
(note (note
1) 1)
Year Period Period
ended ended ended
31 December 30 June 30 June
2017 2018 2017
GBPm GBPm GBPm
----------- --------------------------------------- ------- --------
Net profit attributable to equity
179.7 holders from continuing operations* 61.4 60.8
Exceptional items & intangibles
19.4 amortisation net of tax 45.5 20.0
----------- --------------------------------------- ------- --------
Net profit attributable to equity
holders from continuing operations
before exceptional items & intangibles
199.1 amortisation * 106.9 80.8
----------- --------------------------------------- ------- --------
Restated Restated
(note (note
1) 1)
Year Period Period
ended ended ended
31 December 30 June 30 June
2017 2018 2017
pence pence pence
----------- --------------------------------------- ------- --------
Basic earnings per share:
72.8 Total operations* 29.1 21.4
81.7 Continuing operations* 26.6 27.9
Continuing operations before
exceptional items & intangibles
90.5 amortisation* 46.3 37.1
Diluted earnings per share:
72.3 Total operations* 28.9 21.0
81.2 Continuing operations* 26.4 27.4
Continuing operations before
exceptional items & intangibles
90.0 amortisation* 46.0 36.4
----------- --------------------------------------- ------- --------
*Adjusted for GBP0.1m (2017: GBP0.2m) in respect
of non-controlling interests.
There have been no share options (2017: nil) exercised
between the reporting date and the date of signing
of these financial statements. As part of the
ESCO acquisition (note 17) consideration, 16,779,861
ordinary shares were issued on 12 July 2018.
Earnings (loss) per share from discontinued operations
are disclosed in note 6.
8. Dividends paid & proposed
Year Period Period
ended ended ended
31 December 30 June 30 June
2017 2018 2017
GBPm GBPm GBPm
----------- ----------------------------------- ------- -------
Declared & paid during the period
Equity dividends on ordinary
shares
Final dividend for 2017: 29.0p
63.1 (2016: 29.0p) 69.9 63.1
Interim dividend: see below (2017:
33.6 15.0p) - -
----------- ----------------------------------- ------- -------
96.7 69.9 63.1
----------- ----------------------------------- ------- -------
Final dividend for 2017 proposed
for approval by shareholders
65.0 at the AGM: 29.0p - -
Interim dividend for 2018 declared
- by the Board: 15.75p (2017: 15.0p) 40.9 33.5
----------- ----------------------------------- ------- -------
The Weir Group PLC Scrip Dividend Scheme allowed
shareholders on record the opportunity to elect
to receive dividends in the form of new fully
paid ordinary shares. In the current period participation
in the Scheme resulted in shares with a value
of GBP31.2m being issued and a cash dividend of
GBP38.7m for the 2017 final dividend. In the prior
year, for the 2016 final dividend, shares with
a value of GBP6.4m were issued with a cash dividend
of GBP56.7m. For the 2017 interim dividend, shares
with a value of GBP16.1m were issued with a cash
dividend of GBP17.5m.
The proposed final dividend and the declared interim
dividend are based on the number of shares in
issue, excluding treasury shares held, at the
date the financial statements were approved and
authorised for issue. The actual dividend paid
may differ due to increases or decreases in the
number of shares in issue between the date of
approval of the financial statements and the record
date for the dividend.
9. Property, plant & equipment & intangible assets
Year Period Period
ended ended ended
31 December 30 June 30 June
2017 2018 2017
GBPm GBPm GBPm
----------- -------------------------------- ------- -------
Additions of property, plant
& equipment & intangible assets
- continuing operations
7.5 Land & buildings 1.5 3.8
54.2 Plant & equipment 28.4 20.7
17.8 Intangible assets 2.7 10.1
----------- -------------------------------- ------- -------
79.5 32.6 34.6
----------- -------------------------------- ------- -------
Additions of property, plant
& equipment & intangible assets
- discontinued operations
1.8 Land & buildings 0.1 1.3
3.8 Plant & equipment 1.7 0.8
0.6 Intangible assets 0.1 0.2
----------- -------------------------------- ------- -------
6.2 1.9 2.3
----------- -------------------------------- ------- -------
10. Provisions
Warranties
& onerous
sales
contracts Asbestos-related Employee-related Exceptional Other Total
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------- ---------- ---------------- ---------------- ----------- ----- ------
At 31 December
2017 29.6 58.0 18.5 13.6 4.9 124.6
IFRS 15 restatement
(note 1) 0.3 - - - - 0.3
-------------------- ---------- ---------------- ---------------- ----------- ----- ------
At 31 December
2017 (restated
note 1) 29.9 58.0 18.5 13.6 4.9 124.9
Additions 7.2 2.9 1.2 9.3 0.5 21.1
Transferred to
liabilities held
for sale (note
6) (7.6) - (2.5) (2.0) (0.5) (12.6)
Utilised (11.4) (5.4) (1.9) (4.2) (1.2) (24.1)
Unutilised (1.0) - (0.3) (0.4) (0.1) (1.8)
Exchange adjustment - 1.3 (0.2) (0.1) - 1.0
-------------------- ---------- ---------------- ---------------- ----------- ----- ------
At 30 June 2018 17.1 56.8 14.8 16.2 3.6 108.5
-------------------- ---------- ---------------- ---------------- ----------- ----- ------
Current 13.1 10.0 1.5 11.9 1.1 37.6
Non-current 4.0 46.8 13.3 4.3 2.5 70.9
-------------------- ---------- ---------------- ---------------- ----------- ----- ------
At 30 June 2018 17.1 56.8 14.8 16.2 3.6 108.5
-------------------- ---------- ---------------- ---------------- ----------- ----- ------
Current 24.5 13.0 5.6 24.1 4.7 71.9
Non-current 6.0 36.9 10.1 3.4 0.2 56.6
-------------------- ---------- ---------------- ---------------- ----------- ----- ------
At 30 June 2017
(restated note
1) 30.5 49.9 15.7 27.5 4.9 128.5
-------------------- ---------- ---------------- ---------------- ----------- ----- ------
Current 21.6 10.7 5.3 10.7 4.7 53.0
Non-current 8.3 47.3 13.2 2.9 0.2 71.9
-------------------- ---------- ---------------- ---------------- ----------- ----- ------
At 31 December
2017 (restated
note 1) 29.9 58.0 18.5 13.6 4.9 124.9
-------------------- ---------- ---------------- ---------------- ----------- ----- ------
Warranties & onerous sales contracts
Provision has been made in respect of actual warranty and
contract penalty claims on goods sold and services provided and
allowance has been made for potential warranty claims based on past
experience for goods and services sold with a warranty guarantee.
It is expected that all costs related to such claims will have been
incurred within five years of the balance sheet date.
Provision has been made in respect of sales contracts entered
into for the sale of goods in the normal course of business where
the unavoidable costs of meeting the obligations under the
contracts exceed the economic benefits expected to be received from
the contracts. Provision is made immediately when it becomes
apparent that expected costs will exceed the expected benefits of
the contract. It is expected that the majority of these costs will
be incurred within one year of the balance sheet date.
Employee-related
Employee-related provisions arise from legal obligations, the
majority of which relate to compensation associated with periods of
service.
Asbestos-related claims
Certain of the Group's US-based subsidiaries are co-defendants
in lawsuits pending in the United States in which plaintiffs are
claiming damages arising from alleged exposure to products
previously manufactured which contained asbestos. The Group has
comprehensive insurance cover for cases of this nature with all
claims directly managed by the Group's insurers who also meet
associated defence costs. The insurers and their legal advisers
agree and execute the defence strategy between them. There are
currently no related cash flows to or from the Group, and we expect
this to continue for the foreseeable future.
In 2017, as part of our planned triennial actuarial update, a
review of both the Group's expected liability for US
asbestos-related diseases and the adequacy of the Group's insurance
policies to meet future settlement and defence costs was completed
in conjunction with external advisors. Details of the review are
included in note 22 of the 2017 Annual Report.
Due to the inherent uncertainty resulting from the changing
nature of the US litigation environment, and in conjunction with
the actuarial review, the Directors consider 10 years (2017: 10
years) of projected claims to provide a reliable estimate of the
future liability. This has resulted in a provision of GBP52.3m
(December 2017: GBP53.3m) which represents the Directors' best
estimate of the future liability. The insurance asset remains
sufficient to match the Directors' best estimate of the future
liability and therefore a corresponding asset continues to be
recognised for insurance proceeds.
In the UK, there are outstanding asbestos-related claims which
are not the subject of insurance cover. The extent of the UK
asbestos exposure involves a series of legacy employers liability
claims which all relate to former UK operations and employment
periods in the 1960's and 1970's. In 1989 the Group's employer's
liability insurer (Chester Street Employers Association Ltd) was
placed into run-off which effectively generated an uninsured
liability exposure for all future long tail disease claims with an
exposure period pre-dating 1 January 1972. All claims with a
disease exposure post 1 January 1972 are fully compensated via the
Government established Financial Services Compensation Scheme
(FSCS). Any settlement to a former employee whose service period
straddles 1972 is calculated on a pro rata basis. The Group
provides for these claims based on management's best estimate of
the likely costs given past experience of the volume and cost of
similar claims brought against the Group. The UK provision was
reviewed and adjusted accordingly for claims experience in the
period resulting in a provision of GBP4.5m (December 2017:
GBP4.7m).
Exceptional
A provision has been created for costs incurred to date on the
acquisition of ESCO. Restructuring and rationalisation charges led
to additions of GBP0.7m during the period relating to the
continuation of existing projects.
Other
Other provisions relate to penalties, duties due, legal claims
and other exposures across the Group.
11. Interest-bearing loans and borrowings
The Group utilises a number of sources of funding including
private placement debt, Euro commercial paper issuance, revolving
credit facilities and uncommitted facilities. At 30 June 2018, the
Group had GBP757.9m (2017: GBP865.6m) of private placement debt in
issue, GBP427.9m (2017: GBP269.8m) of debt issued under the
commercial paper programme whilst GBPnil (2017: GBPnil) was drawn
under the revolving credit facility. Total unamortised issue costs
at 30 June 2018 were GBP1.0m (2017: GBP2.0m).
12. Pensions & other post-employment benefit plans
31 December 30 June 30 June
2017 2018 2017
GBPm GBPm GBPm
----------- ------------------------------------ ------- -------
- Plans in surplus - 11.1
(137.7) Plans in deficit (104.3) (130.4)
Less deficit included in liabilities
- held for sale (note 6) 6.0 -
----------- ------------------------------------ ------- -------
(137.7) (98.3) (119.3)
----------- ------------------------------------ ------- -------
Plans in deficit decreased by GBP33.4m in the
period ended 30 June 2018. This was primarily
due to actuarial gains on the liability side,
resulting from changes to market conditions over
the period. A credit of GBP32.0m (2017: GBP16.0m)
has been recognised in the Consolidated Statement
of Comprehensive Income.
13. Financial instruments
31 December 30 June 30 June
2017 2018 2017
GBPm GBPm GBPm
----------- ------------------------------------ ------- -------
Included in non-current assets
Cross currency swaps designated
- as net investment hedges 1.0 -
Other forward foreign currency
0.3 contracts - 0.1
0.3 1.0 0.1
----------- ------------------------------------ ------- -------
Included in current assets
Forward foreign currency contracts
0.3 designated as cash flow hedges 1.3 0.1
Forward foreign currency contracts
designated as net investment
7.5 hedges 1.4 7.1
Other forward foreign currency
8.9 contracts 11.8 7.8
16.7 14.5 15.0
----------- ------------------------------------ ------- -------
Included in current liabilities
Forward foreign currency contracts
(0.1) designated as cash flow hedges - (1.8)
Forward foreign currency contracts
designated as net investment
(1.6) hedges (9.1) (0.1)
Cross currency swaps designated
(8.9) as net investment hedges - (17.5)
Other forward foreign currency
(15.2) contracts (7.0) (13.1)
(25.8) (16.1) (32.5)
----------- ------------------------------------ ------- -------
Included in non-current liabilities
Cross currency swaps designated
(0.7) as net investment hedges - -
Other forward foreign currency
- contracts (0.4) (0.1)
(0.7) (0.4) (0.1)
----------- ------------------------------------ ------- -------
(9.5) Net derivative financial liabilities (1.0) (17.5)
----------- ------------------------------------ ------- -------
Financial instruments now classified as held for
sale are detailed in note 6.
Carrying amounts & fair values
Set out below is a comparison of carrying amounts
and fair values of all of the Group's financial
instruments that are reported in the financial
statements.
Carrying Fair Carrying Fair Carrying Fair
amount value amount value amount value
31 December 31 December 30 30 30 30
2017 2017 June June June June
2018 2018 2017 2017
GBPm GBPm GBPm GBPm GBPm GBPm
----------- ----------- ------------------------------- -------- ------- -------- -------
Financial assets
Derivative financial
instruments recognised
at fair value through
9.2 9.2 profit or loss 11.8 11.8 7.9 7.9
Derivative financial
instruments in designated
7.8 7.8 hedge accounting relationships 3.7 3.7 7.2 7.2
Contingent consideration
0.4 0.4 receivable - - 2.9 2.9
Trade & other receivables
excluding statutory
611.7 611.7 assets & prepayments* 517.0 517.0 544.6 544.6
284.6 284.6 Cash & short term deposits* 640.6 640.6 266.0 266.0
Financial assets held
- - for sale 140.4 140.4 - -
----------- ----------- ------------------------------- -------- ------- -------- -------
913.7 913.7 1,313.5 1,313.5 828.6 828.6
----------- ----------- ------------------------------- -------- ------- -------- -------
Financial liabilities
Derivative financial
instruments recognised
at fair value through
15.2 15.2 profit or loss 7.4 7.4 13.2 13.2
Derivative financial
instruments in designated
11.3 11.3 hedge accounting relationships 9.1 9.1 19.4 19.4
Contingent consideration
3.4 3.4 payable 3.4 3.4 30.4 30.4
Amortised cost:
832.9 896.6 Fixed rate borrowings 757.6 799.9 864.8 950.4
293.8 293.8 Floating rate borrowings 427.2 427.2 269.5 269.5
Obligations under finance
1.0 1.0 leases 0.8 0.8 0.6 0.6
Bank overdrafts & short-term
0.1 0.1 borrowings* 15.4 15.4 0.1 0.1
Trade & other payables
excluding statutory
liabilities & deferred
528.9 528.9 income* 465.1 465.1 466.8 466.8
Financial liabilities
- - held for sale 65.6 65.6 - -
----------- ----------- ------------------------------- -------- ------- -------- -------
1,686.6 1,750.3 1,751.6 1,793.9 1,664.8 1,750.4
----------- ----------- ------------------------------- -------- ------- -------- -------
*The fair value of cash and short-term deposits,
trade and other receivables and trade and other
payables approximates their carrying amount due
to the short-term maturities of these instruments.
As such disclosure of the fair value hierarchy
for these items is not required.
The Group enters into derivative financial instruments with
various counterparties, principally financial institutions with
investment grade credit ratings. The derivative financial
instruments are valued using valuation techniques with market
observable inputs including spot and forward foreign exchange
rates, interest rate curves, counterparty and own credit risk. The
fair value of cross currency swaps is calculated as the present
value of the estimated future cash flows based on spot foreign
exchange rates. The fair value of forward foreign currency
contracts is calculated as the present value of the estimated
future cash flows based on spot and forward foreign exchange
rates.
The Group uses the following hierarchy for determining and
disclosing the fair value of financial instruments by valuation
technique:
Level 1: quoted (unadjusted) prices in active markets for
identical assets or liabilities;
Level 2: other techniques for which all inputs that have a
significant effect on the recorded fair value are observable,
either directly or indirectly;
Level 3: techniques which use inputs which have a significant
effect on the recorded fair value that are not based on observable
market data.
For financial instruments that are recognised at fair value on a
recurring basis, the Group determines whether transfers have
occurred between levels in the hierarchy by re-assessing
categorisation (based on the lowest level input that is significant
to the fair value measurement as a whole) at the end of each
reporting period.
The Group holds all financial instruments at level 2 fair value
measurement, with the exception of contingent consideration
assessed as level 3. Contingent consideration payable at 31
December 2017 and 30 June 2018 relates to the acquisition of Trio
in 2014. There have been no movements in the period to 30 June 2018
and no significant changes to the key performance indicators or the
inputs to the fair value calculation.
13. Financial instruments (continued)
A reconciliation of the fair value measurement
of the contingent consideration payable
is provided below.
Total
GBPm
----------------------------------------------- ------
Balance as at 31 December 2016 31.0
Fair value changes in profit or loss 0.5
Exchange movements in the period (0.5)
Contingent consideration paid (1.4)
Unwind of discount 0.8
----------------------------------------------- ------
Balance as at 30 June 2017 30.4
----------------------------------------------- ------
Balance as at 31 December 2017 and 30
June 2018 3.4
Balance as at 31 December 2016 31.0
Fair value changes in profit or loss 9.1
Exchange movements in the period 0.5
Contingent consideration paid (38.0)
Unwind of discount 0.8
----------------------------------------------- ------
Balance as at 31 December 2017 3.4
----------------------------------------------- ------
During the period ended 30 June 2018 and the year ended 31
December 2017, there were no transfers between level 1 and level 2
fair value measurements and no transfers into or out of level 3
fair value measurements.
The fair value of borrowings and obligations under finance
leases is estimated by discounting future cash flows using rates
currently available for debt on similar terms, credit risk and
remaining maturities. The fair value of cash and short-term
deposits, trade and other receivables and trade and other payables
approximates their carrying amount due to the short-term maturities
of these instruments.
The estimated fair value of the contingent consideration at the
date of acquisition is based on an assessment of the probability of
possible outcomes discounted to net present value. Subsequent
changes to the fair value of the contingent consideration are
adjusted against the cost of acquisition where they qualify as
measurement period adjustments. All other subsequent changes in the
fair value of contingent consideration classified as an asset or
liability are accounted for in accordance with relevant IFRSs. A
substantial change in the expected future results of the entities
to which contingent liabilities relate or a significant change in
the discount rate applied in the fair value calculation may result
in a change to the fair value recognised.
14. Additional cash flow information
Restated Restated
(note (note
1) 1)
Year Period Period
ended ended ended
31 December 30 June 30 June
2017 2018 2017
GBPm GBPm GBPm
----------- -------------------------------------- ------- --------
Total operations
Net cash generated from operations
Operating profit - continuing
234.2 operations 107.1 97.0
Operating profit (loss) - discontinued
(13.9) operations 7.0 (15.3)
----------- -------------------------------------- ------- --------
220.3 Operating profit - total operations 114.1 81.7
23.8 Exceptional items 25.8 5.0
55.4 Amortisation of intangible assets 29.1 26.8
(10.9) Share of results of joint ventures (0.9) (6.9)
Depreciation of property, plant
58.2 & equipment 29.1 27.9
Impairment of property, plant
0.1 & equipment 0.2 -
(1.2) Grants received - -
Losses (gains) on disposal of
(0.1) property, plant & equipment 0.4 -
Exceptional item - gains on disposal
(10.4) of joint ventures - -
Funding of pension & post-retirement
(4.8) costs (0.2) (0.8)
7.0 Employee share schemes 4.5 4.9
(0.4) Transactional foreign exchange 4.5 1.7
(0.3) (Decrease) increase in provisions (7.1) 4.3
----------- -------------------------------------- ------- --------
Cash generated from operations
336.7 before working capital cashflows 199.5 144.6
(65.7) Increase in inventories (46.9) (39.8)
Decrease (increase) in trade
& other receivables and construction
(113.0) contracts 14.4 (59.8)
(Decrease) increase in trade
& other payables and construction
62.4 contracts (27.8) 33.4
----------- -------------------------------------- ------- --------
220.4 Cash generated from operations 139.2 78.4
Additional pension contributions
(3.0) paid (3.0) (2.0)
(28.6) Exceptional cash items (7.5) (16.9)
(60.5) Income tax paid (35.8) (15.3)
----------- -------------------------------------- ------- --------
Net cash generated from operating
128.3 activities 92.9 44.2
----------- -------------------------------------- ------- --------
The employee related provision and associated
insurance asset in relation to US asbestos-related
claims disclosed in note 10 did not result in
any cash flows either to or from the Group and
therefore they have been excluded from the table
above.
Cash flows from discontinued operations
are disclosed in note 6.
Year Period Period
ended ended ended
31 December 30 June 30 June
2017 2018 2017
GBPm GBPm GBPm
----------- -------------------------------------- ------- --------
The following tables summarise the cash flows
arising on acquisitions and disposals.
On 18 April 2018, the Group acquired the assets
of Davidson Sales & Engineering, Inc., for a consideration
of GBP2.9m.
Acquisitions of subsidiaries
Acquisition of subsidiaries -
(92.5) cash paid (2.9) -
3.2 Cash and cash equivalents acquired - -
----------- -------------------------------------- ------- --------
Acquisition of subsidiaries -
(89.3) current period acquisitions (2.9) -
Prior periods acquisitions contingent
(0.8) consideration paid - (0.8)
Prior periods acquisitions completion
- adjustment - 0.6
----------- -------------------------------------- ------- --------
Total cash outflow relating to
(90.1) acquisitions (2.9) (0.2)
----------- -------------------------------------- ------- --------
Net cash inflow arising on prior
period disposal:
Prior period disposals completion
3.5 adjustment 0.3 -
----------- -------------------------------------- ------- --------
Total cash inflow relating to
3.5 prior period dispoals 0.3 -
----------- -------------------------------------- ------- --------
Cash & cash equivalents comprise the following.
Cash & cash equivalents
284.6 Cash & short-term deposits 640.6 266.0
Bank overdrafts & short-term
(0.1) borrowings (15.4) (0.1)
Cash & short-term deposits held
- for sale 32.7 -
Bank overdrafts & short-term
- borrowings held for sale (0.2) -
----------- -------------------------------------- ------- --------
284.5 657.7 265.9
----------- -------------------------------------- ------- --------
The Continuing Group has a number of cash pooling
arrangements whereby individual entities have
bank accounts with the same bank under a master
pooling facility which are subject to rights of
offset. Cash & short-term deposits of GBP640.6m
(2017: GBP266.0m) and bank overdrafts & short-term
borrowings of GBP15.4m (2017: GBP0.1m) are presented
after elimination of debit and credit balances
within individual pools of GBP0.4m (2017: GBP1.7m).
The following tables summarise the net debt position.
Year Period Period
ended ended ended
31 December 30 June 30 June
2017 2018 2017
GBPm GBPm GBPm
----------- -------------------------------------- ------- --------
Net debt comprises the following
284.6 Cash & short-term deposits 640.6 266.0
Current interest-bearing loans
(388.4) & borrowings (602.2) (366.9)
Non-current interest-bearing
(739.4) loans & borrowings (598.8) (768.1)
Assets and liabilities held for
- sale (note 6) 31.4 -
----------- -------------------------------------- ------- --------
(843.2) (529.0) (869.0)
----------- -------------------------------------- ------- --------
14. Additional cash flow information
(continued)
Reconciliation of financing
cash flows to movement
in net debt
Transferred Total
Total to Continuing
Operations assets/liabilities Operations
At 31 at 30 held at 30
December Cash Non-cash June for June
2017 movements Additions FX movements 2018 sale 2018
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ --------- ---------- --------- ------ ---------- ----------- ------------------ -----------
Third party
loans (1,128.2) (40.2) - (18.5) - (1,186.9) 1.1 (1,185.8)
Leases (1.0) 0.3 (0.1) - - (0.8) - (0.8)
Unamortised
issue costs 1.5 - - - (0.5) 1.0 - 1.0
------------------ --------- ---------- --------- ------ ---------- ----------- ------------------ -----------
Amounts included
in gross debt (1,127.7) (39.9) (0.1) (18.5) (0.5) (1,186.7) 1.1 (1,185.6)
Cash & cash
equivalents 284.5 379.8 - (6.6) - 657.7 (32.5) 625.2
------------------ --------- ---------- --------- ------ ---------- ----------- ------------------ -----------
Amounts included
in net debt (843.2) 339.9 (0.1) (25.1) (0.5) (529.0) (31.4) (560.4)
------------------ --------- ---------- --------- ------ ---------- ----------- ------------------ -----------
Financing
derivatives (9.2) 18.7 - - (8.5) 1.0 - 1.0
Contingent
consideration (3.4) - - - - (3.4) - (3.4)
------------------ --------- ---------- --------- ------ ---------- ----------- ------------------ -----------
Other liabilities
relating to
financing
activities (12.6) 18.7 - - (8.5) (2.4) - (2.4)
------------------ --------- ---------- --------- ------ ---------- ----------- ------------------ -----------
Total financing
liabilities* (1,140.3) (21.2) (0.1) (18.5) (9.0) (1,189.1) 1.1 (1,188.0)
------------------ --------- ---------- --------- ------ ---------- ----------- ------------------ -----------
*Total financing liabilities comprise gross debt
plus other liabilities relating to financing activities.
15. Related party disclosure
The following table provides the total amount
of significant transactions which have been entered
into with related parties for the relevant financial
period and outstanding balances at the period
end.
Year Period Period
ended ended ended
31 December 30 June 30 June
2017 2018 2017
GBPm GBPm GBPm
-------------- ---------------------------------------- --------- --------
Sales of goods to related parties
48.7 - joint ventures 1.4 26.7
Sales of services to related
0.5 parties - joint ventures 0.5 0.1
Purchases of goods from related
0.2 parties - joint ventures 0.1 0.2
Purchases of services from related
0.3 parties - joint ventures 0.1 0.2
Amounts owed to related parties
4.3 - group pension plans 1.3 1.8
-------------- ---------------------------------------- --------- --------
16. Exchange rates
The principal exchange rates applied in the preparation
of these interim financial statements were as
follows.
Period Period
Year ended ended ended
31 December 30 June 30 June
2017 2018 2017
------------------ ---------------------------------- --------- ----------
Average rate (per GBP)
1.29 US Dollar 1.38 1.26
1.68 Australian Dollar 1.78 1.67
1.14 Euro 1.14 1.16
1.67 Canadian Dollar 1.76 1.68
4.73 United Arab Emirates Dirham 5.06 4.62
835.52 Chilean Peso 842.00 830.80
17.15 South African Rand 16.92 16.63
4.11 Brazilian Real 4.71 4.00
75.17 Russian Rouble 81.73 73.00
------------------ ---------------------------------- --------- ----------
Closing rate (per GBP)
1.35 US Dollar 1.32 1.30
1.73 Australian Dollar 1.78 1.69
1.13 Euro 1.13 1.14
1.69 Canadian Dollar 1.73 1.69
4.97 United Arab Emirates Dirham 4.85 4.78
832.26 Chilean Peso 861.70 863.50
16.76 South African Rand 18.15 16.98
4.48 Brazilian Real 5.10 4.30
77.86 Russian Rouble 82.78 76.92
------------------ ---------------------------------- --------- ----------
17. Events after the balance sheet date
On 12 July 2018, the Group completed the acquisition of ESCO
Corporation ('ESCO') for an Enterprise Value of US$1.3bn. In order
to part fund the acquisition a placement of 16,699,763 ordinary
shares was completed on 23 April 2018 raising GBP356.6m (net of
fees). As part of the final consideration a further 16,779,861
ordinary shares were issued directly to ESCO shareholders on 12
July 2018. ESCO is the world's leading provider of ground engaging
tools for surface mining and infrastructure. ESCO will operate as a
new division of the Weir Group, and will be reported as a separate
segment alongside Minerals and Oil & Gas.
Directors' Statement of Responsibilities
The directors confirm that this set of interim financial
statements has been prepared in accordance with IAS 34 "Interim
Financial Reporting" as adopted by the European Union, and that the
interim management report herein includes a fair review of the
information required by the Disclosure and Transparency Rules of
the Financial Conduct Authority, paragraphs DTR 4.2.7 and DTR
4.2.8, namely:
-- an indication of important events that have occurred during
the first six months and their impact on the set of interim
financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
-- material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.
A list of current directors is maintained on The Weir Group PLC
website which can be found at www.global.weir.
On behalf of the Board
John Heasley
Chief Financial Officer
31 July 2018
Independent review report to The Weir Group PLC
Report on the consolidated interim financial statements
Our conclusion
We have reviewed The Weir Group PLC's consolidated interim
financial statements (the "interim financial statements") in the
interim report of The Weir Group PLC for the 6 month period ended
30 June 2018. Based on our review, nothing has come to our
attention that causes us to believe that the interim financial
statements are not prepared, in all material respects, in
accordance with International Accounting Standard 34, 'Interim
Financial Reporting', as adopted by the European Union and the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- the consolidated balance sheet as at 30 June 2018;
-- the consolidated income statement and consolidated statement
of comprehensive income for the period then ended;
-- the consolidated cash flow statement for the period then ended;
-- the consolidated statement of changes in equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the interim report
have been prepared in accordance with International Accounting
Standard 34, 'Interim Financial Reporting', as adopted by the
European Union and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
As disclosed in note 1 to the interim financial statements, the
financial reporting framework that has been applied in the
preparation of the full annual financial statements of the Group is
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The interim report, including the interim financial statements,
is the responsibility of, and has been approved by, the directors.
The directors are responsible for preparing the interim report in
accordance with the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim
financial statements in the interim report based on our review.
This report, including the conclusion, has been prepared for and
only for the company for the purpose of complying with the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We
do not, in giving this conclusion, accept or assume responsibility
for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the interim
report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
Glasgow
31 July 2018
(a) The maintenance and integrity of The Weir Group PLC website
is the responsibility of the directors; the work carried out by the
auditors does not involve consideration of these matters and,
accordingly, the auditors accept no responsibility for any changes
that may have occurred to the interim financial statements since
they were initially presented on the website.
(b) Legislation in the United Kingdom governing the preparation
and dissemination of financial information may differ from
legislation in other jurisdictions.
Shareholder Information
The Board have declared an interim dividend of 15.75p (2017:
15.0p). The dividend will be paid on 2 November 2018 to
shareholders on the register on 12 October 2018.
Financial Calendar
Ex-dividend date for interim dividend
11 October 2018
Record date for interim dividend
12 October 2018
Shareholders on the register at this date will receive the
dividend
Interim dividend paid
2 November 2018
Our Interim Report will be available to download from The Weir
Group PLC website at global.weir shortly.
Registered office and company number
1 West Regent Street
Glasgow
G2 1RW
Scotland
Registered in Scotland
Company number: SC002934
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR RMMLTMBTJBBP
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