Regulatory Story
Go to market news section View chart   Print
RNS
Weir Group PLC  -  WEIR   

Half-year Report

Released 07:00 27-Jul-2017

RNS Number : 1966M
Weir Group PLC
27 July 2017
 

 

 

 

The Weir Group PLC today reports its interim results for the six months up to 30 June 2017

 

Building momentum in improving markets

 

·      Accelerated recovery in North American oil and gas reflected in updated full year outlook (17/07/2017)

69% growth in North American revenue, strong operating leverage and modest pricing improvement

Growth accelerated in Q2, driving upgrade to full year guidance

·      Mining markets also improved supported by industry investment in productivity gains

11% order growth in H1 with a book-to-bill of 1.12

H1 operating margins reflect investment in growth, phasing of revenues and plant moves

·      Flow Control was loss making as a result of one-off charges of £13m

·      Order book puts Group in position to deliver strong constant currency revenue and profit growth in 2017

Continuing Operations2

H1 2017

H1 2016

Reported Growth

Constant Currency3

Order input3

£1,199m

£1,000m

n/a

20%

Revenue

£1,091m

£866m

26%

10%

Operating profit1

£113m

£103m

9%

-8%

Operating margin1

10.3%

11.9%

-160bps

-210bps

Profit before tax1

£92m

£82m

12%

-8%

Reported profit after tax

£46m

£24m

95%

n/a

Cash from operations4

£78m

£133m

-41%

n/a

Earnings per share1

32.0p

29.6p

8%

n/a

Dividend per share

15.0p

15.0p

0%

n/a

Return on capital employed5

7.2%

8.6%

n/a

-140bps

Net debt

£869m

£835m6

-£34m

-£69m

 

Jon Stanton, Chief Executive Officer, commented: 

 

"The first half of 2017 saw the Group make good progress as we fully captured opportunities in our main markets.  In North America, the Oil & Gas division delivered a great set of results with margins rapidly improving in recent weeks.  Demand increased sequentially, demonstrating shale's position as a competitive and sustainable source of global energy supply.  Mining markets also continued to improve with good demand for Weir's technology as customers sought to increase productivity. 

 

In our two main businesses we are transitioning from an intense downturn into a recovery and growth phase.  Our focus is on ensuring we take full advantage of improving markets and further enhance our leadership positions by investing in our distinctive competencies - People, Customers, Technology, and Performance - where we have made substantial progress in the first half.    

 

Looking to the rest of the year and assuming supportive commodity prices, expectations for our Oil & Gas division were recently upgraded, while guidance for our Minerals division remains unchanged. Overall, the Group expects to deliver strong constant currency revenue and profit growth, with good cash generation and substantial de-leveraging."

 

A live webcast of the management presentation will begin at 0830 (BST) on 27 July 2017 at www.investors.weir.  A recording of the webcast will also be available at www.investors.weir.

 

Enquiries:


Investors: Stephen Christie

+44 (0) 7795 110456

Media: Raymond Buchanan

+44 (0) 7713 261447                                         

Brunswick PR advisers: Patrick Handley / Diana Vaughton

+44 (0) 20 7404 5959

 

Notes:

1

Adjusted to exclude exceptional items and intangibles amortisation.  Reported operating profit and profit before tax from continuing operations were £81m (2016: £49m) and £59m (2016: £25m) respectively.  Reported earnings per share were 21.2p (2016: 11.0p).

2

Continuing operations excludes American Hydro Corporation and Ynfiniti Engineering Services,which were disposed of during H1 2016 and are reported in discontinued operations.

3

2016 restated at H1 2017 average exchange rates.

4

Cash from operations includes continuing and discontinued operations.

5

Continuing operations EBIT before exceptional items on a constant currency basis (excluding exceptional items) divided by average net assets excluding net debt and pension deficit (net of deferred tax asset).

6

Net debt at 31 December 2016.

 



Strategic priorities

Weir provides highly engineered mission-critical solutions for global mining, oil and gas, power and other aftermarket-orientated process industries.  The Group's strategy, 'We are Weir', is focused on outperforming in four distinctive competencies: People; Customers; Technology and Performance.

People:

 

·      Safety: becoming a zero harm workplace

Excellent Group safety performance; 28% reduction in Total Incident Rate to less than 0.5

New behavioural safety programme launched

·      Learning and Development

Leadership and development programmes refreshed

New performance development system being rolled out

·      Diversity and Engagement

Diversity and Inclusion action plans developed by every business

More than 3,000 employees collaborating daily on internal social media platform

 

Customers:

 

·      Embedded customer relationships

Minerals service network expanded with additional facilities in Mexico, Kazakhstan and Philippines

E-commerce platforms for customers in the UK, France and Africa were expanded

·      Customer insight process

Oil & Gas' key account strategy grew market share with Tier-1 customers

Minerals invested in an additional 150 customer-facing roles across its regions  

·      Solutions mind-set

Minerals brownfield optimisation strategy built a strong order pipeline

Flow Control targeting reduced quotation times and leveraging division-wide key accounts

 

Technology:

 

·      Digital solutions

A range of IoT connected products successfully trialled in H1 to be launched by Minerals in H2

Oil & Gas introduced an intelligent assessment tool to monitor flowback and flare gas

·      Technology informed by the customer

SPM® QEM 3000 frack pump extending trials programme to additional Tier-1 Oil & Gas customers

Oil & Gas One Single Line (OSL) solution developed after extensive customer consultation

·      Innovation and disruptive technologies 

Chief Technology Officer is building the Group's technology blueprint 2021

£63m of H1 revenues delivered from new products; R&D investment of £15m in H1

     

Performance:

 

·      Consistent outperformance

Oil & Gas and Minerals input outperformed capital spending in their end markets

£21m in purchasing savings in H1 as the Group leveraged its global scale 

·      Value chain refocus

Long term improvement targets developed as part of a value chain excellence refresh 

Capability development programmes continue with planning and lean training across all regions  

·      Sustainable value chain

Product development focused on energy efficiency, water consumption and transformational technologies

Minerals achieved double-digit reductions in energy per tonne in foundry operations in Europe



 

 

H1-17 Segmental analysis

Continuing

operations £m1

Minerals

Oil & Gas

Flow Control

Unallocated expenses

Total

Total
OE

Total
AM

Input (constant currency)








2017

686

354

159

n/a

1,199

360

839

2016

617

201

182

 n/a

1,000

323

677

Variance:








- Constant currency

11%

76%

-13%


20%

12%

24%

Revenue








2017

611

314

166

n/a

1,091

320

771

2016 (as reported)

524

183

159

 n/a

866

279

587

Variance:








- As reported

16%

72%

4%


26%

15%

31%

- Constant currency

0%

53%

-6%


10%

1%

15%

Operating profit2







2017

105

32

(12)

(12)

113


2016 (as reported)

103

(2)

14

(12)

103


Variance:







- As reported

2%

2205%

-184%

-5%

9%


- Constant currency

-13%

1871%

-171%

-2%

-8%


Operating margin2







2017

17.1%

10.1%

-7.0%

n/a

10.3%


2016 (as reported)

19.5%

(0.8)%

8.8%

n/a

11.9%


Variance:







- As reported

-240bps

1090bps

-1580bps


-160bps


- Constant currency

-260bps

1100bps

-1640bps


-210bps


 

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 of the financial statements.

2 Adjusted to exclude exceptional items and intangibles amortisation.

 

 

 

Group financial highlights 

Order input at £1,199m (2016: £1,000m) increased 20% on a constant currency basis primarily due to the strong upturn in North American oil and gas markets, coupled with good growth in Minerals.

 

Revenue of £1,091m (2016: £866m) increased 26% on a reported basis reflecting both the recovery in North American Oil & Gas and a foreign exchange benefit of £124m. On a constant currency basis revenue was 10% ahead of prior year. The Group's order book increased in the period with a positive book to bill ratio of 1.10 (2016: 1.01), the highest level since the first quarter of 2013.

 

Operating profit from continuing operations (before exceptional items and intangibles amortisation) of £113m, increased by £10m or 9% on reported basis. 

 

The reported operating profit benefited from a £20m foreign exchange gain on the translation of overseas earnings due to the weakening of Sterling against the majority of currencies.  Excluding foreign exchange gains, constant currency operating profit was £10m lower. Net one-off costs incurred in the period, excluding exceptional items, were £9m, leaving underlying operating profit £1m lower than the prior year on a constant currency basis; Oil & Gas was higher driven by positive North American markets, offset by Flow Control and Minerals. Flow Control was negatively impacted by continued depressed market conditions and higher competition.  The lower Minerals profit reflects different phasing from last year with early investment in growth initiatives and lower GEHO® volumes during the first half, together with plant and supply chain reconfiguration costs. EBITDA before exceptional items was £141m (2016: £130m).

 

Operating margin from continuing operations (before exceptional items and intangibles amortisation) was 10.3%, a decrease of 160bps on a reported basis and 210bps on a constant currency basis. On a constant currency basis Minerals decreased 260bps to 17.1%, reflecting phasing and plant and supply chain reconfiguration costs mentioned above. Oil & Gas increased from a loss of 0.8% in the prior year to 10.1% following a strong market upturn and excellent operating leverage. Flow Control margins decreased to (7.0%) from 8.8% in H1 2016 as a result of subdued end markets and one-off legacy contract delivery challenges in the Gabbioneta business. 

 

Net finance costs before exceptional items were £21m in total (2016: £21m).

 

Profit before tax from continuing operations (before exceptional items and intangibles amortisation) increased by 12% to £92m (2016: £82m).  The reported profit before tax from continuing operations (including exceptional items and intangibles amortisation) of £59m compares to £25m in 2016.

 

An exceptional charge of £6m (2016: £32m) was recorded in the period, which primarily related to the finalisation of restructuring and rationalisation charges for programmes which commenced in prior periods to right size operations and discontinue certain activities. The cash outflow in respect of restructuring programmes in the period totals £17m. 

 

Intangibles amortisation totalled £27m in the period (2016: £24m), an increase of £3m due to adverse foreign exchange translation.

 

The result from discontinued operations in the period reflects the finalisation of balances associated with the disposal of American Hydro Corporation in 2016.

 

The tax charge, before exceptional items and amortisation, for the period of £22m (2016: £18m) on profit before tax from continuing operations (before exceptional items and intangibles amortisation) of £92m (2016: £82m) represents an underlying effective tax rate of 23.6% (2016: 21.9%).

 

Earnings per share from continuing operations (before exceptional items and intangibles amortisation) increased by 2.4p to 32.0p (2016: 29.6p).  Reported earnings per share including exceptional items, intangibles amortisation and the impact of discontinued operations was 21.1p (2016: 7.6p).

 

Cash generated from operations decreased by 41% from £133m to £78m, with the increase in operating profit offset by the activity level driven growth in working capital of £66m (2016: inflow of £6m). 

 

Free cash flow from continuing operations was an outflow of £50m (2016: inflow of £46m). The £96m reduction reflecting lower operating cashflows, higher cash tax and increased cash dividend with lower uptake for the scrip dividend compared to the prior year.

 

The free cash outflow, plus outflows for exceptional items of £17m and investments of £2m were offset by a favourable foreign exchange movement of £35m, mainly on US$ and Euro denominated debt, resulting in an increase in reported net debt at the half year to £869m (December 2016: £835m). On a lender covenant basis, the ratio of net debt to EBITDA excluding exceptional items was 3.1 times, compared to a covenant level of 3.5 times.

 

Dividend

The Board has approved an interim dividend of 15.0p (2016: 15.0p).  The interim dividend will be paid on 3 November to shareholders on the register on 22 September 2017. The scrip will be announced on 28 September 2017 and the last date for elections is 20 October 2017.

 

Board and management changes

Clare Chapman and Barbara Jeremiah will join the Board as Non-Executive Directors with effect from 1 August 2017.  Clare is the former Group People Director of BT Group plc and is currently a Non-Executive Director of Kingfisher plc and Heidrick & Struggles International, Inc.  Barbara is a former Executive Vice President, Corporate Development and Chairman's Counsel for Alcoa, the global aluminium producer, and is currently a Non-Executive Director with Aggreko plc, Russel Metals Inc and Allegheny Technologies Inc.  After more than 6 years' service, Non-Executive Director Melanie Gee is to retire from the Board with effect from 30 September 2017.  The Board would like to express its thanks to Melanie for her wise counsel, dedication and service to the Group.  Melanie will be succeeded as Chair of the Remuneration Committee by Clare Chapman with effect 1 August 2017.  Barbara Jeremiah will join both the Audit and Remuneration Committees.  There are no further details to be disclosed in relation to Clare Chapman and Barbara Jeremiah under section 9.6.13 of the Listing Rules. 

 

The Board also announces that Mary Jo Jacobi, Non-Executive Director will be appointed to the Nomination Committee with effect from 1 August 2017. 

 

As previously announced, Pauline Lafferty stepped down as Chief People Officer and will be succeeded by Rosemary McGinness who will join the Group Executive on 31 July 2017.  In addition and also previously announced, Andrew Neilson, Director of Strategy & Corporate Affairs also stepped down from the Group Executive on 30 June 2017 to take up the post of Vice-President, Finance & IT of the Minerals division. 

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 £m

H1 2017

H1 20161

Growth

H2 20161

 

Input OE

215

189

14%

169

 

Input aftermarket

471

428

10%

444

 

Input Total

686

617

11%

613

 

Revenue OE

163

179

-9%

170

 

Revenue aftermarket

448

429

4%

435

 

Revenue Total

611

608

0%

605

 

Operating profit2

105

120

-13%

117

 

Operating margin2

17.1%

19.7%

-260bps

19.3%

 

Operating cash flow

83

105

-21%

131

 

Book-to-bill

1.12

1.01


1.01

 

1 2016 restated at H1 2017 average exchange rates except for operating cash flow.

2 Adjusted to exclude exceptional items and intangibles amortisation.

 

Strong order growth

 

·      Divisional input up 11% with a significant building of a high quality order book

·      Margins reflect £5m strategic investment, £5m project phasing and c.£5m of plant & facility reconfiguration

·      Full year outlook: Moderately higher constant currency revenues and broadly stable operating margins

 

H1 2017 Market review

 

Overall capital investment by miners continued to fall for a fifth year although sustaining expenditure on maintenance and productivity improvements started to recover after a period of under-investment.  Customers focused on brownfield opportunities, with the aftermarket normalising after some initial restocking and customers seeking to take advantage of a more supportive commodity price environment. Global ore production continued to increase although copper production was impacted by industrial action at Escondida in Chile and in Grasberg, Indonesia.  Both gold and copper prices increased in the first half by 7% while iron ore prices fell 28%.

 

Regionally, Australasia increased activity with good growth in gold and lithium production, although coal markets remained challenging.  Similarly, Africa benefited from increased activity in gold and copper, particularly in West Africa.  Both North America and Europe benefited from improved sentiment and activity in hard rock mining markets.  Mining activity in South America remained robust, despite the impact of strikes in Chile, with the number of early-stage quotations for future greenfield projects increasing. 

 

In non-mining markets, oil sands production continued to be resilient driving growth in demand for aftermarket spares and services.  Comminution markets for crushing, grinding and screening saw good demand growth in North America and China, where infrastructure investment increased.

 

H1 2017 Divisional financial review

 

Order input increased by 11% to £686m (2016: £617m), and supported a strong book-to-bill of 1.12.  Original equipment orders were up 14% year-on-year, reflecting higher sustaining expenditure by miners in brownfield asset optimisation projects.

 

Aftermarket orders increased by 10% on a constant currency basis and represented 69% of total input (2016: 69%).  Mines continued to operate at more normalised production levels compared to the prior year, resulting in strong sequential and year-on-year aftermarket order growth. 

 

In total, mining end markets accounted for 72% of input (2016: 73%) with orders growing strongly.  Non-mining markets including sand and aggregates, oil sands and power sectors grew while industrial markets declined.

 

Revenue was flat on a constant currency basis at £611m (2016: £608m).  Original equipment sales accounted for 27% (2016: 29%) of divisional revenues and were 9% lower than the prior year driven by the timing of project revenues, particularly in GEHO®, the division's longest lead time business.  Production-driven aftermarket revenues were up 4% on a constant currency basis.

 

Regionally, revenues from Africa, South and North America grew, while Europe was more subdued and the Middle East was more challenging.  Aftermarket revenues grew strongly for pump and mill circuit spares particularly in Latin America and Oil Sands.  Reported revenues increased by 16% (2016: £524m), due to a foreign exchange tailwind.

 

Operating profit reduced by 13% on a constant currency basis to £105m (2016: £120m).  This reflects £5m investment in growth initiatives, £5m related to the timing of GEHO® projects, and approximately £5m of plant and supply chain reconfiguration costs. Reported operating profit increased by 2% after a 17% foreign exchange tailwind (2016: £103m).

 

Operating margin on a constant currency basis fell by 260bps to 17.1% (2016: 19.7%) reflecting investment in strategic priorities and normalised seasonal margin trends.  Gross margins were broadly stable.   

 

Operating cash flow decreased by 21% to £83m (2016: £105m) reflecting the decline in operating profit and working capital investment to support future growth.

 

2017 Divisional outlook

Mining markets are expected to remain relatively stable with miners maintaining normal maintenance schedules and continuing modest ore production growth supporting demand for aftermarket products and services. We expect further modest reductions in overall mining capital expenditure to be largely offset by increased investment in sustaining capital expenditure in plant optimisation and maintenance, which is the main focus of the division.  Overall, Minerals is expected to deliver moderately higher constant currency revenues and broadly stable full year operating margins, with performance supported by both the strong order book and investment in growth initiatives in the first half. 



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 £m

H1 2017

H1 20161

Growth

H2 20161

 

Input OE

74

38

96%

41

 

Input aftermarket

280

163

72%

205

 

Input Total

354

201

76%

246

 

Revenue OE

62

39

58%

37

 

Revenue aftermarket

252

166

52%

187

 

Revenue Total

314

205

53%

224

 

Operating profit/(loss)2

32

(2)

+1871%

(8)

 

Operating margin2

10.1%

-0.9%

+1100bps

-3.6%

 

Operating cash flow

(1)

18

-104%

29

 

Book-to-bill

1.13

0.98


1.10

 

1 2016 restated at H1 2017 average exchange rates except for operating cash flow.

2 Adjusted to exclude exceptional items and intangibles amortisation. Includes contribution from joint ventures.

 

Strong recovery in North American upstream markets

 

·      Strong order, revenue and margin growth reflected significantly increased activity in North America

·      International markets remain challenging but Group well positioned for upturn

·      Full year outlook: a material increase in constant currency revenues; low-teens operating margins in H2

 

H1 2017 Market review

 

The West Texas Intermediate oil price decreased in the first half of the year by approximately 15% and averaged US$50 per barrel through the period.  These prices were above incentive levels for a number of North American shale basins and supported increased investment in upstream markets, with the US land rig count increasing by 70%.  Service companies responded by refurbishing frack fleets with effective utilisation of the active US fleet rising to more than 90%.  The number of frack stages and volume of proppant used also increased strongly, driving demand for aftermarket spares and services.  As upstream markets tightened, pricing started to improve modestly.  Natural gas prices averaged 3.07Mbtu, above break-even prices for the major gas plays where we have seen a 39% increase in rigs since the start of 2017.

 

International markets entered the oil and gas downturn later than North America and remained challenging.  New investment was subdued, with continued pricing pressure and project delays common. 

 

H1 2017 Divisional financial review

 

Order input at £354m (2016: £201m) was 76% higher reflecting the increase in activity levels in North America as rig counts recovered and customers accelerated the refurbishments of their frack fleets, with North American order input up 102%.  On a sequential basis, quarterly orders increased through the first half and this contributed to a positive book-to-bill ratio of 1.13 for the period.  Aftermarket orders were up 72% year-on-year and represented 79% (2016: 81%) of divisional orders.  Original equipment input was 96% higher, against a weak comparator, driven primarily by increased demand for frack pumps, flow equipment and wellheads, as customers increased activity.

 

Input from international markets fell on a sequential and year-on-year basis, as customers continued to reduce activity levels and postpone orders and maintenance.   

 

Revenue increased by 53% to £314m on a constant currency basis (2016: £205m), reflecting order input trends. Original equipment and aftermarket revenues increased by 58% and 52% respectively, with aftermarket accounting for 80% of total revenues (2016: 81%). Reported revenues were up 72% after a 13% foreign exchange benefit (2016: £183m).

 

North American revenues increased sequentially through the first half, reflecting input trends.  Sequentially, international revenues grew in the first half despite challenging market conditions.

 

Operating profit including joint ventures was £32m (2016: operating loss of £2m on a constant currency and reported basis).  The recovery was driven by improved conditions in upstream North American markets where there was a significant increase in volumes, exceptionally strong manufacturing overhead recoveries supported by previous cost base reductions, and modest pricing improvement in the second quarter.      

 

Operating margin was up 1100bps reflecting positive market conditions, pricing and operating leverage.

Operating cash flow declined by £19m to £(1)m (2016: £18m) with the significant increase in operating profit more than offset by a working capital outflow to support the division's growth.

 

2017 Divisional outlook

Assuming North American upstream market conditions remain supportive, the division expects to deliver a material increase in constant currency revenues and profits, with low-teens second half operating margins. 



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 £m

H1 2017

H1 20161

Growth

H2 20161

 

Input OE

71

96

-26%

93

 

Input aftermarket

88

86

2%

61

 

Input Total

159

182

-13%

154

 

Revenue OE

95

99

-4%

101

 

Revenue aftermarket

71

77

-8%

74

 

Revenue Total

166

176

-6%

175

 

Operating (loss)/profit2

(12)

17

-171%

16

 

Operating margin2

-7.0%

9.4%

-1640bps

9.1%

 

Operating cash flow

8

18

-56%

24

 

Book-to-bill

0.96

1.04


0.88

 

1 2016 restated at H1 2017 average exchange rates except for operating cash flow.

2 Adjusted to exclude exceptional items and intangibles amortisation.

 

Later-cycle markets continue to be challenging

 

·      Limited project activity impacted OE demand; AM demand resilient

·      Margins reflect continued tough market conditions and one-off charges of £13m

·      Full year outlook: Modest revenue growth; returning to mid/high single-digit operating margins in H2

 

H1 2017 Market review

 

Customers continued to be cautious in both power and downstream oil and gas markets.  There was limited project activity with significant pricing pressure common.  Nuclear developments in China continued to make progress but sentiment in South Korea, the United States and Europe was more negative.  

 

Downstream markets, which were later to enter the downturn, remained challenging for original equipment and aftermarket demand.  Industrial markets were more positive, in line with global GDP growth.

 

H1 2017 Divisional financial review

 

Order input decreased by 13% to £159m (2016: £182m) and was principally impacted by the significant decline in mid and downstream oil and gas markets.  In addition, there was limited project activity in power markets.  Original equipment orders were down 26% led by reduced pump orders in downstream markets.  Aftermarket orders grew 2% driven by demand for valves.  

 

Power markets represented 42% of orders (2016: 38%).  The proportion of orders from oil and gas markets decreased to 20% (2016: 28%).  Emerging markets accounted for 36% of input (2016: 36%).  Overall, slight growth in Australasia was more than offset by reductions in Africa, Asia-Pacific, North America and Europe.

 

Revenue decreased by 6% on a constant currency basis to £166m (2016: £176m), with aftermarket revenues down 8% on the prior year.  Original equipment revenues were down 4%, less significant than the input shortfall as the legacy order book unwound. Reported revenues were up 4% (2016: £159m) reflecting an 11% foreign exchange tailwind.

 

An operating loss of (£12m) (2016: £17m profit on a constant currency basis) was recorded as a result of tough trading conditions impacting gross margins and overhead recoveries, and the impact of £13m of one-off costs. The reported operating loss included a £3m foreign exchange tailwind.

 

Operating margin was down 1640bps against the prior year to a loss of 7.0% (2016: 9.4%). 

 

Operating cash flow decreased by 56% to £8m (2016: £18m) reflecting the reduced profitability of the division.

 

2017 Divisional outlook

Power, mid and downstream oil and gas markets are expected to remain subdued.  The division is expected to deliver modest revenue growth for the full year with a return to normal mid to high single-digit operating margins in the second half.

 

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 2016 Annual report, a copy of which is available at www.annualreport.weir

Appendix 1 - 2016 / 2017 quarterly input trends

 


Reported growth1

Like-for-like growth2

Division

Q3

Q4

Q1

Q2


Q3

Q4

Q1

Q2

Original Equipment

-28%

34%

4%

25%


-28%

36%

4%

25%

Aftermarket

4%

19%

13%

7%


4%

19%

13%

7%

Minerals

-7%

23%

10%

12%


-7%

23%

10%

12%











Original Equipment

-24%

13%

56%

143%


-24%

13%

56%

143%

Aftermarket

-6%

0%

48%

98%


-6%

0%

48%

98%

Oil & Gas

-10%

2%

50%

106%


-10%

2%

50%

106%











Original Equipment

0%

-17%

-18%

-33%


0%

-17%

-18%

-33%

Aftermarket

-10%

-8%

-3%

6%


-10%

-8%

-3%

6%

Flow Control

-4%

-14%

-11%

-15%


-4%

-14%

-11%

-15%











Original Equipment

-20%

11%

5%

19%


-20%

11%

5%

19%

Aftermarket

-1%

10%

21%

27%


-1%

10%

21%

27%

Continuing Ops1

-7%

10%

15%

24%


-7%

10%

15%

24%

Book to Bill

1.02

0.99

1.14

1.06


1.02

0.99

1.14

1.06

1 Continuing operations (excludes American Hydro Corporation and YES which were disposed of in Q2 2016).

2 Like-for-like excludes the impact of acquisitions. Delta Valves was acquired on 8 July 2015 and excluded in Q3 and Q4 2016.

 

 

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 2017























Period ended 30 June 2017

Period ended 30 June 2016





Before exceptional items & intangibles amortisation

Exceptional items & intangibles amortisation (note 4)


Before exceptional items & intangibles amortisation

Exceptional items & intangibles amortisation (note 4)














Period ended






31 December 2016






Total




Total

Total

£m



Notes

£m

£m

£m

£m

£m

£m



Continuing operations








1,844.9


Revenue

2, 3

1,091.0

-

1,091.0

866.1

-

866.1













Continuing operations








83.1


Operating profit before share of results of joint ventures


105.8

(31.7)

74.1

99.5

(54.3)

45.2

7.2


Share of results of joint ventures


6.9

-

6.9

3.5

-

3.5











90.3


Operating profit

2, 3

112.7

(31.7)

81.0

103.0

(54.3)

48.7

(48.9)


Finance costs


(19.8)

(0.8)

(20.6)

(22.4)

(1.9)

(24.3)

4.4


Finance income


0.6

-

0.6

2.6

-

2.6

(3.0)


Other finance costs - retirement benefits


(1.9)

-

(1.9)

(1.6)

-

(1.6)











42.8


Profit before tax from continuing operations


91.6

(32.5)

59.1

81.6

(56.2)

25.4

0.4


Tax (expense) credit

5

(21.6)

8.8

(12.8)

(17.9)

16.3

(1.6)











43.2


Profit for the period from continuing operations


70.0

(23.7)

46.3

63.7

(39.9)

23.8

(5.0)


Loss for the period from discontinued operations

6

-

(0.1)

(0.1)

(0.9)

(6.4)

(7.3)

38.2


Profit for the period


70.0

(23.8)

46.2

62.8

(46.3)

16.5













Attributable to:








38.3


Equity holders of the Company


69.8

(23.8)

46.0

62.5

(46.3)

16.2

(0.1)


Non-controlling interests


0.2

-

0.2

0.3

-

0.3

38.2




70.0

(23.8)

46.2

62.8

(46.3)

16.5













Earnings per share

7







17.8p


Basic - total operations




21.1p



7.6p

20.1p


Basic  - continuing operations


32.0p


21.2p

29.6p


11.0p











17.7p


Diluted  - total operations




20.7p



7.5p

20.0p


Diluted  - continuing operations


31.4p


20.7p

29.4p


10.9p

 

 

 

Consolidated Statement of Comprehensive Income

for the period ended 30 June 2017













Period ended




Period ended

Period ended

31 December 2016




30 June 2017

30 June 2016

£m



Note

£m

£m

38.2


Profit for the period


46.2

16.5



Other comprehensive income (expense)




(0.7)


(Losses) gains taken to equity on cash flow hedges


(0.6)

0.4

377.4


Exchange (losses) gains on translation of foreign operations


(92.3)

224.9

0.8


Reclassification of exchange gains on discontinued operations


-

0.8

(142.0)


Exchange gains (losses) on net investment hedges


32.9

(69.6)

1.9


Reclassification adjustments on cash flow hedges


(1.1)

1.4

0.2


Tax relating to other comprehensive income (expense) to be reclassified in subsequent periods


0.6

4.7

237.6


Items that are or may be reclassified to profit or loss in subsequent periods


(60.5)

162.6







(53.0)


Remeasurements on defined benefit plans

12

16.0

(40.8)

8.6


Tax relating to other comprehensive (expense) income not to be reclassified in subsequent periods


(2.7)

8.2

(44.4)


Items that will not be reclassified to profit or loss in subsequent periods


13.3

(32.6)







193.2


Net other comprehensive (expense) income


(47.2)

130.0







231.4


Total net comprehensive (expense) income for the period


(1.0)

146.5









Attributable to:




228.9


Equity holders of the Company


(1.1)

144.1

2.5


Non-controlling interests


0.1

2.4

231.4




(1.0)

146.5









Total comprehensive income (expense) for the period attributable to equity holders of the Company




233.0


Continuing operations


(1.0)

150.5

(4.1)


Discontinued operations


(0.1)

(6.4)

228.9




(1.1)

144.1

 

 

 

Consolidated Balance Sheet

at 30 June 2017













31 December 2016




30 June 2017

30 June 2016

£m



Notes

£m

£m



ASSETS






Non-current assets




402.0


Property, plant & equipment


384.3

413.4

1,628.8


Intangible assets


1,539.2

1,542.8

40.5


Investments in joint ventures


43.0

39.6

42.1


Deferred tax assets


48.8

37.5

39.2


Other receivables


36.9

22.3

9.8


Retirement benefit plan assets

12

11.1

7.1

-


Derivative financial instruments

13

0.1

0.3

2,162.4


Total non-current assets


2,063.4

2,063.0









Current assets




551.6


Inventories


577.5

524.6

481.8


Trade & other receivables


544.1

450.8

23.8


Construction contracts


19.5

29.0

24.0


Derivative financial instruments

13

15.0

49.0

21.5


Income tax receivable


9.5

17.6

258.6


Cash & short-term deposits


266.0

211.0

1,361.3


Total current assets


1,431.6

1,282.0

3,523.7


Total assets


3,495.0

3,345.0









LIABILITIES






Current liabilities




144.0


Interest-bearing loans & borrowings


366.9

217.2

548.1


Trade & other payables


594.2

470.1

4.2


Construction contracts


7.2

5.4

30.2


Derivative financial instruments

13

32.5

53.5

43.8


Income tax payable


44.0

30.0

83.2


Provisions

10

72.0

64.0

853.5


Total current liabilities


1,116.8

840.2









Non-current liabilities




949.1


Interest-bearing loans & borrowings


768.1

847.2

14.9


Other payables


0.6

27.3

14.9


Derivative financial instruments

13

0.1

13.8

60.2


Provisions

10

56.6

51.9

100.5


Deferred tax liabilities


92.6

116.4

147.0


Retirement benefit plan deficits

12

130.4

132.6

1,286.6


Total non-current liabilities


1,048.4

1,189.2

2,140.1


Total liabilities


2,165.2

2,029.4

1,383.6


NET ASSETS


1,329.8

1,315.6









CAPITAL & RESERVES




27.3


Share capital


27.3

27.2

86.2


Share premium


92.6

67.3

9.4


Merger reserve


9.4

9.4

(5.9)


Treasury shares


(5.9)

(5.9)

0.5


Capital redemption reserve


0.5

0.5

191.8


Foreign currency translation reserve


132.5

117.3

(0.6)


Hedge accounting reserve


(1.7)

(0.6)

1,066.4


Retained earnings


1,066.5

1,088.8

1,375.1


Shareholders' equity


1,321.2

1,304.0

8.5


Non-controlling interests


8.6

11.6

1,383.6


TOTAL EQUITY


1,329.8

1,315.6

 

Consolidated Cash Flow Statement

for the period ended 30 June 2017







Period ended




Period ended

Period ended

31 December 2016




30 June 2017

30 June 2016

£m



Notes

£m

£m









Cash flows from operating activities

14



292.6


Cash generated from operations


78.4

133.0

(2.8)


Additional pension contributions paid


(2.0)

-

(58.1)


Exceptional cash items


(16.9)

(30.5)

(15.7)


Income tax received (paid)


(15.3)

2.1

216.0


Net cash generated from operating activities


44.2

104.6









Cash flows from investing activities




(10.6)


Acquisitions of subsidiaries, net of cash acquired

14

(0.2)

(7.1)

-


Investment in joint ventures


(1.4)

-

(50.5)


Purchases of property, plant & equipment


(26.4)

(22.8)

(15.4)


Purchases of intangible assets


(14.3)

(11.3)

3.5


Other proceeds from sale of property, plant & equipment and intangible assets


3.3

0.6

31.4


Disposals of discontinued operations, net of cash disposed

14

-

30.8

35.7


Exceptional items included in asset disposal programme


-

-

6.5


Interest received


0.7

2.4

7.3


Dividends received from joint ventures


3.3

1.1

7.9


Net cash used in investing activities


(35.0)

(6.3)









Cash flows from financing activities




(3.4)


Purchase of non-controlling interest


(0.6)

-

1,328.1


Proceeds from borrowings


359.5

143.7

(1,420.5)


Repayments of borrowings


(268.3)

(184.6)

(3.7)


Settlement of derivative financial instruments


0.5

(4.8)

(46.3)


Interest paid


(21.7)

(21.7)

(45.8)


Dividends paid to equity holders of the Company

8

(56.7)

(32.4)

(0.1)


Purchase of shares for LTIP & other awards


-

(0.1)

(191.7)


Net cash used in financing activities


12.7

(99.9)







32.2


Net increase in cash & cash equivalents


21.9

(1.6)

179.3


Cash & cash equivalents at the beginning of the period


257.0

179.3

45.5


Foreign currency translation differences


(13.0)

31.3

257.0


Cash & cash equivalents at the end of the period

14

265.9

209.0







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 2017














Share capital

Share premium

Merger reserve

Treasury shares

Capital redemption reserve

Foreign currency translation reserve

Hedge accounting reserve

Retained earnings

Attributable to equity holders of the Company

Non-controlling interests

Total

equity


£m

£m

£m

£m

£m

£m

£m

£m

£m

£m

£m

At 1 January 2016

26.8

38.0

9.4

(5.8)

0.5

(41.8)

(2.0)

1,166.5

1,191.6

6.2

1,197.8

Profit for the period

-

-

-

-

-

-

-

16.2

16.2

0.3

16.5

Gains taken to equity on cash flow hedges

-

-

-

-

-

-

0.4

-

0.4

-

0.4

Exchange gains on translation of foreign operations

-

-

-

-

-

222.8

-

-

222.8

2.1

224.9

Reclassification of exchange gains on discontinued operations

-

-

-

-

-

0.8

-

-

0.8

-

0.8

Exchange losses on net investment hedges

-

-

-

-

-

(69.6)

-

-

(69.6)

-

(69.6)

Remeasurements on defined benefit plans

-

-

-

-

-

-

-

(40.8)

(40.8)

-

(40.8)

Reclassification adjustments on cash flow hedges

-

-

-

-

-

-

1.4

-

1.4

-

1.4

Tax relating to other comprehensive income (expense)

-

-

-

-

-

5.1

(0.4)

8.2

12.9

-

12.9

Total net comprehensive income (expense) for the period

-

-

-

-

-

159.1

1.4

(16.4)

144.1

2.4

146.5

Proceeds from increase in non-controlling interests

-

-

-

-

-

-

-

(3.0)

(3.0)

3.0

-

Cost of share-based payments inclusive of tax charge

-

-

-

-

-

-

-

3.7

3.7

-

3.7

Dividends

-

-

-

-

-

-

-

(62.0)

(62.0)

-

(62.0)

Purchase of shares*

-

-

-

(0.1)

-

-

-

-

(0.1)

-

(0.1)

Issue of shares

0.4

29.3

-

-

-

-

-

-

29.7

-

29.7

At 30 June 2016

27.2

67.3

9.4

(5.9)

0.5

117.3

(0.6)

1,088.8

1,304.0

11.6

1,315.6













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

Profit for the period

-

-

-

-

-

-

-

46.0

46.0

0.2

46.2

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

Remeasurements on defined benefit plans

-

-

-

-

-

-

-

16.0

16.0

-

16.0

Reclassification adjustments on cash flow hedges

-

-

-

-

-

-

(1.1)

-

(1.1)

-

(1.1)

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)

59.3

(1.1)

0.1

(1.0)

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

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 1 January 2016

26.8

38.0

9.4

(5.8)

0.5

(41.8)

(2.0)

1,166.5

1,191.6

6.2

1,197.8

Profit for the period

-

-

-

-

-

-

-

38.3

38.3

(0.1)

38.2

Losses taken to equity on cash flow hedges

-

-

-

-

-

-

(0.7)

-

(0.7)

-

(0.7)

Exchange gains on translation of foreign operations

-

-

-

-

-

374.8

-

-

374.8

2.6

377.4

Reclassification of exchange gains on discontinued operations

-

-

-

-

-

0.8

-

-

0.8

-

0.8

Exchange losses on net investment hedges

-

-

-

-

-

(142.0)

-

-

(142.0)

-

(142.0)

Remeasurements on defined benefit plans

-

-

-

-

-

-

-

(53.0)

(53.0)

-

(53.0)

Reclassification adjustments on cash flow hedges

-

-

-

-

-

-

1.9

-

1.9

-

1.9

Tax relating to other comprehensive income

-

-

-

-

-

-

0.2

8.6

8.8

-

8.8

Total net comprehensive income (expense) for the period

-

-

-

-

-

233.6

1.4

(6.1)

228.9

2.5

231.4

Acquisition of non-controlling interests

-

-

-

-

-

-

-

(3.8)

(3.8)

(0.2)

(4.0)

Issue of shares

0.5

48.2

-

-

-

-

-

-

48.7

-

48.7

Cost of share-based payments inclusive of tax charge

-

-

-

-

-

-

-

4.3

4.3

-

4.3

Dividends

-

-

-

-

-

-

-

(94.5)

(94.5)

-

(94.5)

Purchase of shares*

-

-

-

(0.1)

-

-

-

-

(0.1)

-

(0.1)

Exercise of LTIP awards

-

-

-

-

-

-

-

-

-

-

-

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


* These shares were purchased on the open market and are held by the Estera EBT on behalf of the Group. 


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 2017 and have been prepared on the basis of the accounting policies set out in the Group's 2016 Annual Report 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. The period ended 31 December 2016 reflects the decision previously made to alter the reporting basis to reflect a calendar year with this period in isolation commencing on 2 January 2016, with the next annual reporting date being the full calendar year to 31 December 2017.

 

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 29. The information shown for the period ended 31 December 2016 does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006 and has been extracted from the Group's 2016 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 2016 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 Weir Group PLC is a limited company incorporated in Scotland and is listed on the London Stock Exchange.

 

The principle activities of the Group are described in note 2.

 

These interim financial statements were approved by the Board of Directors on 27 July 2017.

 

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 2016.

 

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

 

Several new amendments apply for the first time in 2017. However, they do not impact the annual consolidated financial statements or the interim financial statements of the Group.

 

 

New standards issued but not yet effective

 

IFRS 15: Revenue from Contracts with Customers

 

The IASB has issued a new standard for the recognition of revenue. This will replace IAS 18 which covers revenue arising from the sale of goods and the rendering of services and IAS 11 which covers construction contracts.

 

The new standard is based on the principle that revenue is recognised when control of a good or service transfers to a customer.

 

The standard permits either a full retrospective or a modified retrospective approach for the adoption. It is effective for first interim periods within annual reporting periods beginning on or after 1 January 2018. The Group will adopt the new standard from 1 January 2018.

 

During the period the Group completed an initial entity wide impact assessment with findings indicating that the standard is unlikely to have a material impact on the Group's financial results. 

 

IFRS 9: Financial Instruments

 

IFRS 9 is effective for periods commencing 1 January 2018. 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 changes introduced by IFRS 9 are not expected to have a significant impact on the Group.

 

IFRS 16: Leases

 

IFRS 16 is effective for periods commencing 1 January 2019, not yet endorsed for use in the European Union. Initial planning has commenced for an assessment of the impact of this standard.

1. Basis of preparation (continued)

 

d) 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.






Period ended



Period ended

Period ended

31 December 2016



30 June 2017

30 June 2016

£m



£m

£m

292.6


Cash flow from operating activities

78.4

133.0

(15.7)


Income tax (paid) received

(15.3)

2.1

(62.4)


Net capital expenditure from purchase & disposal of property, plant & equipment and intangibles

(37.4)

(33.5)

(39.8)


Net interest paid

(21.0)

(19.3)

(45.8)


Dividends paid to equity holders of the Company

(56.7)

(32.4)

7.3


Dividends received from joint ventures

3.3

1.1

(3.7)


Settlement of derivative financial instruments

0.5

(4.8)

(0.1)


Purchase of shares for LTIP & other awards

-

(0.1)

(2.8)


Additional pension contributions paid

(2.0)

-

129.6


Free cash flow

(50.2)

46.1






 






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.






Period ended



Period ended

Period ended

31 December 2016



30 June 2017

30 June 2016

£m



£m

£m



Continuing operations



90.3


Operating profit

81.0

48.7



Adjusted for:



50.2


Intangibles amortisation (note 4)

26.8

23.8

73.5


Exceptional items (note 4)

4.9

30.5

55.9


Depreciation of property, plant & equipment

27.9

26.6

269.9


EBITDA

140.6

129.6






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

 

For management purposes, the Group is organised into three operating divisions: Minerals, Oil & Gas and Flow Control. These three 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 Flow Control segment designs and manufactures valves and pumps as well as providing specialist support services to the global power generation, industrial and oil and gas sectors. 

 

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 2017, the period ended 30 June 2016 and the period ended 31 December 2016 is disclosed below.

 


Minerals

Oil & Gas

Flow Control

Total continuing

operations


30 June 2017

30 June 2016

30 June 2017

30 June 2016

30 June 2017

30 June 2016

30 June 2017

30 June 2016


£m

£m

£m

£m

£m

£m

£m

£m

Revenue









Sales to external customers

611.1

524.9

314.2

182.6

165.7

158.6

1,091.0

866.1

Inter-segment sales

1.5

2.8

0.4

5.7

6.9

6.9

8.8

15.4

Segment revenue

612.6

527.7

314.6

188.3

172.6

165.5

1,099.8

881.5

Eliminations







(8.8)

(15.4)








1,091.0

866.1










Sales to external customers - 2016 at 2017 average exchange rates









Sales to external customers

611.1

608.3

314.2

205.5

165.7

175.9

1,091.0

989.7




























Segment result









Segment result before share of results of joint ventures

104.7

102.2

24.9

(5.0)

(11.7)

13.9

117.9

111.1

Share of results of joint ventures

-

-

6.9

3.5

-

-

6.9

3.5

Segment result

104.7

102.2

31.8

(1.5)

(11.7)

13.9

124.8

114.6

Unallocated expenses







(12.1)

(11.6)

Operating profit before exceptional items & intangibles amortisation







112.7

103.0

Total exceptional items & intangibles amortisation







(32.5)

(56.2)

Net finance costs before exceptional items







(19.2)

(19.8)

Other finance costs - retirement benefits







(1.9)

(1.6)

Profit before tax from continuing operations







59.1

25.4



















Segment result - 2016 at 2017 average exchange rates








Segment result before share of results of joint ventures

104.7

119.8

24.9

(5.7)

(11.7)

16.5

117.9

130.6

Share of results of joint ventures

-

-

6.9

3.9

-

-

6.9

3.9

Segment result

104.7

119.8

31.8

(1.8)

(11.7)

16.5

124.8

134.5

Unallocated expenses







(12.1)

(11.9)

Operating profit before exceptional items & intangibles amortisation







112.7

122.6


























Total Group

Assets & liabilities









Intangible assets

621.2

617.7

750.9

766.4

137.6

113.6

1,509.7

1,497.7

Property, plant & equipment

216.9

215.6

83.9

119.0

72.6

74.2

373.4

408.8

Working capital assets

567.0

484.1

336.9

274.3

232.0

248.7

1,135.9

1,007.1


1,405.1

1,317.4

1,171.7

1,159.7

442.2

436.5

3,019.0

2,913.6

Investments in joint ventures

-

-

43.0

39.6

-

-

43.0

39.6

Segment assets

1,405.1

1,317.4

1,214.7

1,199.3

442.2

436.5

3,062.0

2,953.2

Unallocated assets







433.0

391.8

Total assets







3,495.0

3,345.0










Working capital liabilities

318.4

271.0

168.3

106.4

160.2

163.2

646.9

540.6

Unallocated liabilities







1,518.3

1,488.8

Total liabilities







2,165.2

2,029.4

 

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.

 

 

2. Segment information (continued)










Period ended 31 December 2016

Minerals

Oil & Gas

Flow Control

Total

continuing

operations


£m

£m

£m

£m

Revenue





Sales to external customers

1,112.0

401.4

331.5

1,844.9

Inter-segment sales

6.1

12.8

14.7

33.6

Segment revenue 

1,118.1

414.2

346.2

1,878.5

Eliminations




(33.6)





1,844.9






Sales to external customers - 2016 at 2017 average exchange rates





Sales to external customers 

1,213.7

429.6

351.1

1,994.4











Segment result





Segment result before share of results of joint ventures

217.0

(16.2)

30.1

230.9

Share of results of joint ventures 

-

7.2

-

7.2

Segment result 

217.0

(9.0)

30.1

238.1

Unallocated expenses




(24.1)

Operating profit before exceptional items & intangibles amortisation




214.0

Total exceptional items & intangibles amortisation




(127.5)

Net finance costs before exceptional items




(40.7)

Other finance costs - retirement benefits




(3.0)

Profit before tax from continuing operations




42.8











Segment result - 2016 at 2017 average exchange rates





Segment result before share of results of joint ventures

236.7

(17.6)

32.4

251.5

Share of results of joint ventures 

-

7.8

-

7.8

Segment result 

236.7

(9.8)

32.4

259.3

Unallocated expenses




(24.4)

Operating profit before exceptional items & intangibles amortisation




234.9















Total Group

Assets & liabilities





Intangible assets

652.4

815.2

137.5

1,605.1

Property, plant & equipment

226.1

90.9

75.4

392.4

Working capital assets 

523.0

290.2

248.0

1,061.2


1,401.5

1,196.3

460.9

3,058.7

Investments in joint ventures

-

40.5

-

40.5

Segment assets 

1,401.5

1,236.8

460.9

3,099.2

Unallocated assets




424.5

Total assets




3,523.7






Working capital liabilities

311.6

150.6

169.4

631.6

Unallocated liabilities




1,508.5

Total liabilities




2,140.1






 

3. Revenues & expenses








The following disclosures are given in relation to continuing operations and exclude exceptional items & intangibles amortisation.






Period ended



Period ended

Period ended

31 December 2016



30 June 2017

30 June 2016




£m

£m



A reconciliation of revenue to operating profit is as follows



1,844.9


Revenue

1,091.0

866.1

(1,241.7)


Cost of sales

(766.9)

(577.1)

603.2


Gross profit

324.1

289.0

5.6


Other operating income

3.9

1.8

(221.1)


Selling & distribution costs

(128.5)

(100.9)

(180.9)


Administrative expenses

(93.7)

(90.4)

7.2


Share of results of joint ventures

6.9

3.5

214.0


Operating profit

112.7

103.0






Details of exceptional items and intangibles amortisation are provided in note 4.

 

4. Exceptional items & intangibles amortisation






Period ended



Period ended

Period ended

31 December 2016



30 June 2017

30 June 2016

£m



£m

£m



Recognised in arriving at operating profit from continuing operations



(50.2)


Intangibles amortisation 

(26.8)

(23.8)

(0.4)


Exceptional item - intangibles impairment

-

-

(63.8)


Exceptional item - restructuring and rationalisation charges

(3.3)

(30.6)

(17.0)


Exceptional Item - China operations

-

-

5.1


Exceptional item - gain on sale and leaseback of properties

-

-

(1.1)


Exceptional item - legal claims

(1.1)

-

3.7


Exceptional item - fair value adjustment to contingent consideration liability

(0.5)

0.1

(123.7)



(31.7)

(54.3)













Recognised in finance costs



(3.8)


Exceptional item - unwind in respect of contingent consideration liability

(0.8)

(1.9)






 

Restructuring and rationalisation charges represent the additional cost of programmes which commenced in prior periods to right size operations and discontinue certain activities. The restructuring and rationalisation exceptional cost of £3.3m comprises £4.2m of restructuring costs for programmes commenced in 2016, offset by un-utilised releases of £0.9m for onerous lease contracts and the reversal of an impairment following the disposal of a North American property.

 

Other exceptional items in the period relate to costs of £1.1m associated with the extension of a prior period legal claim, a fair value adjustment of £1.0m related to the acquisition of Weir International, offset by a £0.5m credit following the settlement of Delta deferred consideration and £0.8m unwind of contingent consideration liability for Weir International.

 

5. Tax expense






Period ended



Period ended

Period ended

31 December 2016



30 June 2017

30 June 2016

£m



£m

£m



Continuing operations



(1.4)


Group - UK

(3.2)

1.3

1.8


Group - overseas

(9.6)

(2.9)

0.4


Total income tax (expense) credit in the Consolidated Income Statement 

(12.8)

(1.6)








The total income tax (expense) credit is disclosed in the Consolidated Income Statement as follows:



(38.4)


      - continuing operations before exceptional items & intangibles amortisation

(21.6)

(17.9)

21.0


      - exceptional items

0.3

8.3

17.8


      - intangibles amortisation and impairment

8.5

8.0

0.4


Total income tax (expense) credit in the Consolidated Income Statement 

(12.8)

(1.6)






(1.6)


Total income tax expense included in the Group's share of results of joint ventures

(0.6)

(0.8)






The underlying effective tax rate for the full financial year 2017 is estimated at 23.6% (full year 2016: 22.5%), based on the weighted average effective tax rate across all jurisdictions.  Therefore the underlying effective tax rate used for the half year 2017 was 23.6% (half year 2016: 21.9%).

 

 

6. Discontinued operations


Description

During the period ended 30 June 2017 there were no disposals of businesses which meet the definition of a discontinued operation under IFRS 5.










The Group disposed of Ynfiniti Engineering Services (31 May 2016), American Hydro Corporation and the trade and assets of the Montreal business of Weir Canada Inc.  (30 June 2016) for a combined consideration of £38.4m of which £3.6m was to be held in escrow for one year. £0.6m has been received in the current period with a £0.1m adjustment to deferred consideration recorded in discontinued operations. The remainder of the escrow balance is due for settlement in July 2017.  The prior year also included a maximum contingent consideration of £1.9m with £0.8m initially recognised and the balance being settled in 2016.

Exceptional items and intangibles amortisation in the prior period related to intangibles amortisation of £0.1m and a charge of £4.0m for reassessment of liabilities related to previous disposals.










Financial performance and cash flow information for discontinued operations








Period ended




Period ended 30 June 2017

Period ended 30 June 2016

31 December 2016




Before exceptional items & intangibles amortisation

Exceptional items & intangibles amortisation


Before exceptional items & intangibles amortisation

Exceptional items & intangibles amortisation


Total






Total



Total

£m




£m

£m

£m

£m

£m

£m











(3.8)


Profit (loss) before tax from discontinued operations

-

(0.1)

(0.1)

0.3

(4.1)

(3.8)

1.6


Tax (expense) credit


-

-

-

(1.2)

0.8

(0.4)











(2.2)


(Loss) profit after tax from discontinued operations


-

(0.1)

(0.1)

(0.9)

(3.3)

(4.2)

(2.8)


Loss on sale of the subsidiaries after income tax (see below)

-

-

-

-

(3.1)

(3.1)

(5.0)


(Loss) profit for the period from discontinued operations

-

(0.1)

(0.1)

(0.9)

(6.4)

(7.3)











0.8


Reclassification of foreign currency translation reserve


-

-

-

0.8

-

0.8

0.8


Other comprehensive income from discontinued operations

-

-

-

0.8

-

0.8











Period ended








Period ended

Period ended

31 December 2016








30 June 2017

30 June 2016

£m








£m

£m

(4.4)


Cash flows from operating activities






-

(4.3)

(0.4)


Cash flows from investing activities






-

(0.4)

(4.8)


Net (decrease) in cash and cash equivalents from discontinued operations


-

(4.7)











Loss per share

Loss per share from discontinued operations were as follows.










Period ended








Period ended

Period ended

31 December 2016








30 June 2017

30 June 2016

pence








pence

pence

(2.3)


Basic






-

(3.4)

(2.3)


Diluted






-

(3.4)











These loss per share figures were derived by dividing the net profit attributable to equity holders of the Company from discontinued operations by the weighted average number of ordinary shares, for both basic and diluted amounts, shown in note 7.

 

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 and shares to be issued as part of the proposed KOP acquisition).


The following reflects the earnings and share data used in the calculation of earnings per share.


Period ended



Period ended

Period ended

31 December 2016



30 June 2017

30 June 2016



Profit attributable to equity holders of the Company



38.3


  Total operations* (£m)

46.0

16.2

43.3


  Continuing operations* (£m)

46.1

23.5

132.0


  Continuing operations before exceptional items & intangibles amortisation* (£m)

69.8

63.4








Weighted average share capital



215.6


Basic earnings per share (number of shares, million)

217.9

214.3

216.9


Diluted earnings per share (number of shares, million)

222.2

215.6






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.


Period ended



Period ended

Period ended

31 December 2016



30 June 2017

30 June 2016

Shares



Shares

Shares

Million



Million

Million

215.6


Weighted average number of ordinary shares for basic earnings per share

217.9

214.3

1.3


Effect of dilution:  LTIP awards and share issue

4.3

1.3

216.9


Adjusted weighted average number of ordinary shares for diluted earnings per share 

222.2

215.6


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.


Period ended



Period ended

Period ended

31 December 2016



30 June 2017

30 June 2016

£m



£m

£m

43.3


Net profit attributable to equity holders from continuing operations*

46.1

23.5

88.7


Exceptional items & intangibles amortisation net of tax

23.7

39.9

132.0


Net profit attributable to equity holders from continuing operations before exceptional items & intangibles amortisation *

69.8

63.4






Period ended



Period ended

Period ended

31 December 2016



30 June 2017

30 June 2016

pence



pence

pence



Basic earnings per share:



17.8


  Total operations*

21.1

7.6

20.1


  Continuing operations*

21.2

11.0

61.2


  Continuing operations before exceptional items & intangibles amortisation*

32.0

29.6








Diluted earnings per share:



17.7


  Total operations*

20.7

7.5

20.0


  Continuing operations*

20.7

10.9

60.8


  Continuing operations before exceptional items & intangibles amortisation*

31.4

29.4


*Adjusted for £0.2m  (2016: £0.3m) in respect of non-controlling interests.


There have been no share options (2016: nil) exercised between the reporting date and the date of signing of these financial statements.






Loss per share from discontinued operations are disclosed in note 6.

 

8. Dividends paid & proposed


Period ended



Period ended

Period ended

31 December 2016


30 June 2017

30 June 2016

£m



£m

£m



Declared & paid during the period





Equity dividends on ordinary shares



62.0


Final dividend for 2016: 29.0p (2015: 29.0p)

63.1

62.0

32.5


Interim dividend: see below (2016: 15.0p)

-

-

94.5



63.1

62.0






63.1


Final dividend for 2016 proposed for approval by shareholders at the AGM: 29.0p

-

-

-


Interim dividend for 2017 declared by the Board: 15.0p (2016: 15.0p)

33.5

32.5


The Weir Group PLC Scrip Dividend Scheme allows 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 £6.4m being issued and a cash dividend of £56.7m for the 2016 final dividend. In the prior year, for the 2015 final dividend, shares with a value of £29.6m were issued with a cash dividend of £32.4m. For the 2016 interim dividend, shares with a value of £19.1m were issued with a cash dividend of £13.4m.

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


Period ended



Period ended

Period ended

31 December 2016



30 June 2017

30 June 2016

£m



£m

£m



Additions of property, plant & equipment & intangible assets



19.2


  Land & buildings

5.1

11.9

35.1


  Plant & equipment

21.5

12.7

23.5


  Intangible assets 

10.3

17.6

77.8



36.9

42.2






The above additions relate to the normal course of business and do not include any additions made by way of business combinations.


 

10. Provisions


Warranties & onerous sales contracts

Employee related

Exceptional rationalisation

Other

Total


£m

£m

£m

£m

£m

At 31 December 2016

23.5

69.4

47.1

3.4

143.4

Additions

9.6

1.1

5.3

2.1

18.1

Utilised

(5.7)

(2.0)

(18.5)

(0.3)

(26.5)

Unwind

-

0.6

-

-

0.6

Unutilised

(0.5)

(0.2)

(0.4)

(0.1)

(1.2)

Transfers

4.4

-

(4.4)

-

-

Exchange adjustment

(0.7)

(3.3)

(1.6)

(0.2)

(5.8)

At 30 June 2017

30.6

65.6

27.5

4.9

128.6







Current

24.6

18.6

24.1

4.7

72.0

Non-current

6.0

47.0

3.4

0.2

56.6

At 30 June 2017

30.6

65.6

27.5

4.9

128.6







Current

19.1

12.7

29.4

2.8

64.0

Non-current

4.8

40.3

6.2

0.6

51.9

At 30 June 2016

23.9

53.0

35.6

3.4

115.9







Current

18.2

19.8

42.5

2.7

83.2

Non-current

5.3

49.6

4.6

0.7

60.2

At 31 December 2016

23.5

69.4

47.1

3.4

143.4







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, some of which relate to compensation associated with periods of service, while the majority are for asbestos-related claims.

 

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 and there are currently no related cash flows to or from the Group.  We expect this to continue for the foreseeable future. 

 

During 2016, the estimates underlying the provision continued to be reassessed and refined as the Group's claims experience developed.  Since the initial review in 2014 the period of claims has been analysed to improve understanding of key drivers, including the originating State of claims, average settlement and defence costs per State and the occurrence of one-off claims and/or settlements.  While the overall level of claims experience remained relatively immature, the additional claims history provided the Group with growing confidence around our ability to estimate the level of future claims. 

 

Claims data for the current period indicates claims and indemnity costs for 2017 are broadly in line with model. The provision has decreased by £2.8m to £44.7m (£0.6m offset for unwind of discount and related utilisation and £2.8m favourable FX) in the period and the provision represents the Directors' best estimate of the future liability, although these estimates and the period over which they are assessed will continue to be refined as the claims history develops.  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.  An exercise was completed in 2016 which found based on additional claims experience the actual claims cost is lower than the provision previously held.  The provision was adjusted accordingly and the provision has remained unchanged as at 30 June 2017 based on the level of claims activity in the period.

 

Exceptional rationalisation

Restructuring and rationalisation charges led to additions of £4.2m during the period of which £2.6m relates to the Gabbioneta manufacturing facility closure in 2016 and £1.6m for other costs from 2016 restructuring projects. An extension of a prior period legal claim resulted in £1.1m of additional costs.

During 2017 a transfer has been made from exceptional rationalisation to the warranty provision. Included in the utilisation of the exceptional rationalisation provision in the period is non-cash utilisation items of £1.6m.

Other

Other provisions relate to penalties, 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 2017, the Group had £865.6m (2016: £849.5m) of private placement debt in issue,  a total of £269.8m (2016: £185.0m) was issued under the commercial paper programme whilst £nil (2016: £nil) was drawn under the revolving credit facility.  Total unamortised issue costs at 30 June 2017 were £2.0m (2016: £3.1m).

 

12. Pensions & other post-employment benefit plans


31 December 2016



30 June 2017

30 June 2016

£m



£m

£m

9.8


Plans in surplus

11.1

7.1

(147.0)


Plans in deficit

(130.4)

(132.6)

(137.2)


Net liability

(119.3)

(125.5)


The decrease in net liability of £17.9m in the period ended 30 June 2017 was primarily due to increases in value of the plan assets driven by changes in market conditions.  A credit of £16.0m (2016: charge of £40.8m) has been recognised in the Consolidated Statement of Comprehensive Income.


 

13. Financial instruments


31 December 2016



30 June 2017

30 June 2016

£m



£m

£m



Included in non-current assets



-


Other forward foreign currency contracts

0.1

0.3

-



0.1

0.3








Included in current assets



-


Forward foreign currency contracts designated as cash flow hedges

0.1

0.4

-


Forward foreign currency contracts designated as net investment hedges

7.1

-

24.0


Other forward foreign currency contracts

7.8

48.6

24.0



15.0

49.0








Included in current liabilities



(1.2)


Forward foreign currency contracts designated as cash flow hedges

(1.8)

(1.0)

(15.2)


Forward foreign currency contracts designated as net investment hedges

(0.1)

(26.7)

(6.3)


Cross currency swaps designated as net investment hedges

(17.5)

-

(7.5)


Other forward foreign currency contracts

(13.1)

(25.8)

(30.2)



(32.5)

(53.5)








Included in non-current liabilities



-


Forward foreign currency contracts designated as cash flow hedges

-

(0.4)

(14.7)


Cross currency swaps designated as net investment hedges

-

(12.4)

(0.2)


Other forward foreign currency contracts

(0.1)

(1.0)

(14.9)



(0.1)

(13.8)

(21.1)


Net derivative financial (liabilities)

(17.5)

(18.0)






 

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 amount

Fair value



Carrying amount

Fair value

Carrying amount

Fair value

31 December 2016

31 December 2016



30 June 2017

30 June 2017

30 June 2016

30 June 2016

£m

£m



£m

£m

£m

£m












Financial assets





24.0

24.0


Derivative financial instruments recognised at fair value through profit or loss

7.9

7.9

48.9

48.9

-

-


Derivative financial instruments in designated hedge accounting relationships

7.2

7.2

0.4

0.4

3.9

3.9


Contingent consideration receivable

2.9

2.9

-

-

481.8

481.8


Trade & other receivables excluding statutory assets & prepayments*

544.6

544.6

443.2

443.2

258.6

258.6


Cash & short term deposits*

266.0

266.0

211.0

211.0

768.3

768.3



828.6

828.6

703.5

703.5












Financial liabilities





7.7

7.7


Derivative financial instruments recognised at fair value through profit or loss

13.2

13.2

26.8

26.8

37.4

37.4


Derivative financial instruments in designated hedge accounting relationships

19.4

19.4

40.5

40.5

31.0

31.0


Contingent consideration payable

30.4

30.4

34.5

34.5




Amortised cost:





917.5

1,012.7


   Fixed rate borrowings

864.8

950.4

846.5

988.3

173.2

173.2


   Floating rate borrowings

269.5

269.5

215.0

215.0

0.8

0.8


Obligations under finance leases

0.6

0.6

0.9

0.9

1.6

1.6


Bank overdrafts & short-term borrowings*

0.1

0.1

2.0

2.0

443.8

443.8


Trade & other payables excluding statutory liabilities & deferred income*

466.8

466.8

384.2

384.2

1,613.0

1,708.2



1,664.8

1,750.4

1,550.4

1,692.2









*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 2016 and 30 June 2017 primarily relates to the acquisition of Weir International in 2011.  The movements in the period to 30 June 2016 include the unwind of the discount reflected in the Income Statement and the settlement of a contingent liability in relation to Trio. The contingent consideration paid in the current period related to the acquisition of Delta and the purchase of a non-controlling interest. There have been no other 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


£m

Balance as at 1 January 2016

35.9

Fair value changes in profit or loss

(0.1)

Exchange movements in the period

3.9

Contingent consideration paid

(7.1)

Unwind of discount

1.9

Balance as at 30 June 2016

34.5

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 1 January 2016

35.9

Liability arising on business combinations

0.6

Fair value changes in profit or loss

(3.7)

Exchange movements in the period

5.0

Contingent consideration paid

(10.6)

Unwind of discount

3.8

Balance as at 31 December 2016

31.0

 

During the period ended 30 June 2017 and the period ended  31 December  2016, 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


Period ended



Period ended

Period ended

31 December 2016


30 June 2017

30 June 2016

£m



£m

£m



Total operations





Net cash generated from operations



90.3


Operating profit - continuing operations

81.0

48.7

(3.8)


Operating loss - discontinued operations

(0.1)

(3.8)

86.5


Operating profit - total operations

80.9

44.9

77.5


Exceptional items

4.9

34.7

50.3


Amortisation of intangible assets

26.8

23.8

(7.2)


Share of results of joint ventures

(6.9)

(3.5)

56.2


Depreciation of property, plant & equipment

27.9

26.9

(1.1)


Gains on disposal of property, plant & equipment

-

(0.2)

(0.6)


Funding of pension & post-retirement costs

(0.8)

(0.2)

4.1


Employee share schemes

4.9

4.7

6.6


Transactional foreign exchange

1.7

1.2

(11.3)


Decrease in provisions

4.5

(5.4)

261.0


Cash generated from operations before working capital cashflows

143.9

126.9

7.1


(Increase) decrease in inventories

(42.3)

10.3

57.5


(Increase) decrease in trade & other receivables and construction contracts

(58.6)

25.7

(33.0)


Increase (decrease) in trade & other payables and construction contracts

35.4

(29.9)

292.6


Cash generated from operations

78.4

133.0

(2.8)


Additional pension contributions paid

(2.0)

-

(58.1)


Exceptional cash items

(16.9)

(30.5)

(15.7)


Income tax paid

(15.3)

2.1

216.0


Net cash generated from operating activities

44.2

104.6






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.








Period ended



Period ended

Period ended

31 December 2016


30 June 2017

30 June 2016

£m



£m

£m






The following tables summarise the cash flows arising on acquisitions and disposals.








Acquisitions of subsidiaries



(10.6)


Prior periods acquisitions contingent consideration paid

(0.8)

(7.1)

-


Prior periods acquisitions completion adjustment

0.6

-

(10.6)


Total cash outflow relating to acquisitions

(0.2)

(7.1)








Net cash inflow arising on disposal:



35.4


Consideration received in cash & cash equivalents

-

34.8

(4.0)


Less: cash and cash equivalents disposed of

-

(4.0)

31.4



-

30.8






Cash & cash equivalents comprise the following.








Cash & cash equivalents



258.6


Cash & short-term deposits

266.0

211.0

(1.6)


Bank overdrafts & short-term borrowings

(0.1)

(2.0)

257.0



265.9

209.0











The following tables summarise the net debt position.






Period ended



Period ended

Period ended

31 December 2016


30 June 2017

30 June 2016

£m



£m

£m



Reconciliation of net increase in cash & cash equivalents to movement in net debt



32.2


Net increase (decrease) in cash & cash equivalents from total operations

21.9

(1.6)

92.4


Net (increase) decrease in debt 

(91.2)

40.9

124.6


Change in net debt resulting from cash flows

(69.3)

39.3

(1.2)


Lease inceptions

-

(1.2)

0.1


Loans/leases disposed

-

(0.2)

(133.0)


Foreign currency translation differences 

34.8

(66.3)

(9.5)


Change in net debt during the period

(34.5)

(28.4)

(825.0)


Net debt at the beginning of the period

(834.5)

(825.0)

(834.5)


Net debt at the end of the period

(869.0)

(853.4)








Net debt comprises the following



258.6


Cash & short-term deposits

266.0

211.0

(144.0)


Current interest-bearing loans & borrowings

(366.9)

(217.2)

(949.1)


Non-current interest-bearing loans & borrowings

(768.1)

(847.2)

(834.5)



(869.0)

(853.4)

 

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.


Period ended



Period ended

Period ended

31 December 2016



30 June 2017

30 June 2016

£m



£m

£m

26.0


Sales of goods to related parties - joint ventures

26.7

7.7

0.1


Sales of services to related parties - joint ventures

0.1

-

0.2


Purchases of goods from related parties - joint ventures

0.2

0.5

0.4


Purchases of services from related parties - joint ventures

0.2

0.3

4.1


Amounts owed to related parties - group pension plans

1.8

1.6






 

16. Exchange rates


The principal exchange rates applied in the preparation of these interim financial statements were as follows.






Period ended



Period ended

Period ended

31 December 2016



30 June 2017

30 June 2016



Average rate (per £)



1.36


US Dollar

1.26

1.43

1.83


Australian Dollar

1.67

1.96

1.22


Euro

1.16

1.29

1.80


Canadian Dollar

1.68

1.91

4.98


United Arab Emirates Dirham

4.62

5.27

918.59


Chilean Peso

830.80

989.17

20.00


South African Rand 

16.63

22.10

4.75


Brazilian Real

4.00

5.32

91.20


Russian Rouble

73.00

100.72



Closing rate (per £)



1.22


US Dollar

1.30

1.33

1.70


Australian Dollar

1.69

1.78

1.17


Euro

1.14

1.20

1.65


Canadian Dollar

1.69

1.72

4.49


United Arab Emirates Dirham

4.78

4.87

813.76


Chilean Peso

863.50

875.31

16.63


South African Rand 

16.98

19.49

3.97


Brazilian Real

4.30

4.23

73.89


Russian Rouble

76.92

84.84

 

17. Events after the balance sheet date

 

5,060,237 ordinary shares of 12.5p each were issued on 19 July 2017, raising cash proceeds of £90m which will be used to fund the pending acquisition of KOP Surface Products.

 

 

 


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.

 

 

The directors of The Weir Group PLC are listed in the Group's 2016 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

27 July 2017

 

 

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 2017. 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 2017;

·      the consolidated income statement and consolidated 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

27 July 2017

 

(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 15.0p (2016: 15.0p).  The dividend will be paid on 3 November 2017 to shareholders on the register on 22 September 2017. Shareholders may opt to participate in the Scrip Dividend Programme (SCRIP). The price for the SCRIP dividend will be announced on 28 September 2017. The final date for receipt of SCRIP elections is 20 October 2017.

 

Financial Calendar

 

Ex-dividend date for interim dividend

21 September 2017

 

Record date for interim dividend

22 September 2017

Shareholders on the register at this date will receive the dividend

 

Final day for receipt of SCRIP elections

20 October 2017

 

Interim dividend paid

3 November 2017

 

Our Interim Report will be available to download from The Weir Group PLC website at global.weir shortly.

 

 

 

 

Disclaimer

 

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.

 

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 company news service from the London Stock Exchange
 
END
 
 
IR RFMATMBMTBIR
Close


London Stock Exchange plc is not responsible for and does not check content on this Website. Website users are responsible for checking content. Any news item (including any prospectus) which is addressed solely to the persons and countries specified therein should not be relied upon other than by such persons and/or outside the specified countries. Terms and conditions, including restrictions on use and distribution apply.

 


Half-year Report - RNS