Final Results
Weir Group PLC
21 March 2006
Press release | The Weir Group PLC
21 March 2006
THE WEIR GROUP PLC PRELIMINARY RESULTS 2005
Results for 52 weeks ended 30 December 2005
'A YEAR OF SIGNIFICANT PROGRESS'
HIGHLIGHTS
Continuing Operations
• Order input(*1) up 8.1% to £893.7m (2004: £826.5m)
• Revenue up 14.4% to £789.4m (2004: £690.1m)
• Pre-tax profit(*2) up 11.2% to £62.2m (2004: £55.9m)
• Dividend increase of 3.1% to 13.2p (2004: 12.8p)
• Successful integration of Pompe Gabbioneta
• Disposal of Techna water treatment businesses
• UK Restructuring virtually complete and delivering improved results
• Refocused business operating in strong end markets
Total Operations Continuing Operations
2005 2004 Change 2005 2004 Change
------- ------- ------ ------- ------- -------
Order Input(*1) £929.6m £895.7m +3.8% £893.7m £826.5m +8.1%
Revenue £823.7m £738.7m +11.5% £789.4m £690.1m +14.4%
Profit from
Operations(*2) £64.9m £58.2m +11.4% £66.3m £59.0m +12.3%
Pre-Tax Profit(*2) £60.7m £55.4m +9.5% £62.2m £55.9m +11.2%
Earnings per Share(*2) 23.5p 21.7p +8.3%
Dividend (*3) 13.2p 12.8p +3.1%
*1 Excludes Joint Ventures & Associates; calculated at constant 2005 exchange
rates
*2 Before restructuring costs
*3 Comprises 2005 interim and proposed final dividend
The Chairman of The Weir Group, Sir Robert Smith, commented: 'The Group made
significant progress in 2005. Our restructuring programmes have proceeded to
plan and operational improvements are beginning to gain momentum.
During the year we refocused the Group, added the specialist pump manufacturer,
Gabbioneta, to our portfolio and exited the Techna water treatment businesses.
We enter 2006 with a more robust portfolio of businesses. The benefits of our
restructuring activities, strong end markets and continued operational
improvement provide the platform for further improvements. Furthermore the
Group's strong balance sheet and cash focus provide ongoing flexibility to
pursue new capital investments and aligned acquisitions bringing increasing
returns to shareholders.'
Contact details: The Weir Group PLC Available through UBS
Mark Selway, Chief Executive Tel. 020 7567 8000 (switchboard);
Helen Walker, Public Relations Manager (Mobile: 07789 032296)
The Maitland Consultancy Tel. 020 7379 5151
Suzanne Bartch (Mobile: 07769 710 335)
Michelle Jeffery (Mobile: 07989 977 837)
FINANCIAL HIGHLIGHTS
2005 input for continuing operations at £893.7m was 8.1% higher than 2004 with
Engineering Products, Engineering Services and the Liquid Gas storage business
all showing improvement. Geographically, the main areas of input growth were the
Americas, up by 15%, Middle East and Africa up by 49% and the Indo-Pacific
region up by 11%.
Revenue from Group continuing operations grew by 14.4% to £789.4m (2004:
£690.1m) due in part to £17.8m of favourable foreign exchange translation
effects. Growth was achieved across all divisions.
Operating profit before restructuring charges and finance costs at £66.3m (2004:
£59.0m) was 12.3% above the same period in 2004. The 2005 result includes a
£2.1m benefit from foreign exchange translation, the benefit of which was
partially offset by a £0.9m foreign exchange transaction loss and a £0.6m
increase in the charge for share based payments.
Attributable profits from our Joint Ventures and Associates companies
contributed £9.2m against £7.0m in 2004.
Pre-tax profit before restructuring costs was up 11.2% on the previous year at
£62.2m (2004: £55.9m).
There were three significant items in 2005 which impacted on the pre-tax
results. The first arose from the disposal of Weir Flowguard, our small UK
pulsation dampener business, in June 2005 which crystallised an exceptional loss
of £2.1m of which goodwill write-off was £3.1m. The second related to the
previously announced restructuring of the UK Engineering Products businesses
which resulted in costs totalling £24.7m in the year. The third arose from the
sale of the water treatment businesses of Techna for an aggregate price of
£27.7m producing an exceptional second half profit after provision of future
liabilities of £6.0m.
The balance sheet remains strong with gross cash generated by operations at
£71.3m (2004: £67.0m). This was before a £10.0m exceptional pension contribution
and full year cash costs of £16.6m related to our restructuring activities.
Principally as a result of the acquisition of Gabbioneta, net debt at the year
end was £76.4m against the prior year in funds balance of £12.6m.
The Group has 16 pension schemes around the world of which six are defined
benefit schemes, the most significant being the two UK schemes. All defined
benefit schemes are closed to new members and the gross Group deficit for
retirement benefit obligations at 30 December 2005 was £61.6m (2004: £95.3m).
The Group reviews the level of the deficit on an annual basis and in 2005
contributed £10m to fund the UK pension deficit.
A tax charge of £13.8m (2004: £11.3m) gives a normalised tax rate of 26% on
profit before tax and restructuring costs, as adjusted for Joint Ventures and
Associates.
The resulting earnings per share for continuing operations, before restructuring
costs, was 23.5p (2004: 21.7p).
DIVIDEND
A final dividend of 9.65p (2004: 9.35p) is proposed making a total payment for
the year of 13.2p (2004: 12.8p). Subject to shareholder approval, the final
dividend will be paid on 1 June 2006 to shareholders on the register at the
close of business on 5 May 2006.
REVIEW OF RESULTS
To assist in meaningful comparisons, the following review of results restates
comparative 2004 figures at constant exchange rates and excludes figures the
Techna water treatment businesses Weir Westgarth, Weir Envig and Weir Entropie,
which were sold in July.
Engineering Products
The Engineering Products Division includes the operations of our Minerals, Clear
Liquid and Valves & Controls businesses which supply pumps and valves to the
flow control industry. Revenue from our continuing businesses increased 13.2% to
£505.6m (2004: £446.5m) while operating profit, excluding restructuring costs,
increased 31.5% to £42.3m (2004: £32.2m).
At the operating profit level, the margin was 8.4% compared with 7.2% in 2004,
underpinned by a continued strong performance from Minerals, while both the
Valves and Clear Liquid operating performances were in line with expectations.
Minerals had an excellent year growing order input, revenue and profit through a
combination of buoyant commodity markets, new product offerings and improvements
in operational efficiency. The 18.1% growth in order input to £324.3m (2004:
£274.7m) was driven by a strong investment climate in mining, particularly in
North and South America and Australia.
A 21% increase in orders from the Americas was due to a combination of sales
initiatives, new products and the buoyant investment climate in North and South
American mining markets. Growth in flue gas desulphurisation also contributed to
the result.
A 29% gain was achieved in the Indo Pacific reflecting the award of further
large contracts for high pressure pumping equipment from our Netherlands
operation and a significant increase in orders for flue gas desulphurisation in
the Chinese power market.
Minerals businesses have achieved significant success in expanding their
position in the higher growth markets of South America, Eastern Europe and Asia.
In 2006, we are planning to add foundry capacity in China, South America and
South Africa with an expected capital spend of approximately £5m in the year.
Going forward, while the market will inevitably soften in the medium to long
term, the Minerals businesses are expected to continue to benefit from the
favourable economic climate and make further progress in their already
established leadership positions.
Clear Liquid performed well with order input up 14.5% at £176.1m (2004:
£153.7m). The collective speciality pump businesses improved their results and
achieved good levels of growth in each of their respective markets while the
restructuring at Weir Pumps which incurred a 2005 charge of £11.8m proved
successful at stemming the losses from the UK operations.
The restructuring programme at our UK Clear Liquid business to realign our
product portfolio to become less reliant on large scale lower margin work and
more focused on higher margin niche products made good progress in 2005. Further
work is being undertaken to prepare for a move from the existing Cathcart
operations to a more suitable site.
The acquisition of Gabbioneta contributed an incremental £10.9m of turnover in
the last quarter of 2005 and increased the Group's offerings to the higher
growth oil refining industry. The integration of Gabbioneta within the Clear
Liquid operations has progressed exceptionally well with the business delivering
turnover and profits ahead of expectations.
In 2006, we expect further improvements from our Clear Liquid operations largely
driven by the benefits of UK restructuring and inclusion of Gabbioneta for the
full year.
The Valves & Controls businesses made good progress in 2005 and contributed
significantly to the profit progress in the Engineering Products Division.
The US business continued to build on its success in the Chinese power market
and will expand its activities into a wholly-owned subsidiary in Suzhou early in
2006. The increased activity in China helped offset continued softness in the
domestic power market and delivered growth in turnover and profits of the US
operation.
Weir Valves & Controls France benefited from its ongoing success in Eastern
European nuclear markets where upgrade work is being funded by the European
Union. Growth in sales and profits from these businesses is expected to continue
into 2006 and for the foreseeable future.
The previously announced restructuring of the Weir Valves & Controls UK
operation is now largely complete and incurred a charge of £12.9m, which funded
the move to a modern, appropriately sized facility and outsourcing of non
essential machining work executed on time and on budget. The second half
performance of the UK operation provides increased confidence in the delivery of
anticipated improvements and positions us well for further profit progress in
2006.
We remain encouraged by the prospects for the Valves & Controls businesses. The
anticipated growth from our investments in China and the Middle East, coupled to
progress from our UK and French operations, should deliver further progress in
2006.
Engineering Services
Input from Engineering Services increased 4.7% to £221.9m (2004: £211.9m).
Revenue increased 4.3% to £215.3m (2004: £206.4m) producing a profit of £13.1m
against £21.2m in 2004 due, not only to significantly lower business volumes in
our higher margin markets, but also increased operating costs of £1.3m incurred
as part of the Group's investment into extending our offerings in the US market.
The loss of Yorkshire Water Asset management and lower level of sales to Iraq
were key factors in the significant reduction in the UK business turnover and
profits. A number of replacement contracts have subsequently been secured and
will come on stream during 2006 and this, together with some measured
consolidation, promises improved results in the year ahead.
2005 input in the Americas grew 29% to £113m due to a combination of a large
mine refurbishment project in Canada and the growing market position of our
Service Centres in the United States of America. In the USA, we continue to
invest in our entry into the service and parts markets with full year input
growing 278% to approximately £8m. During the year, we committed an additional
£3.0m investment into laser scanning, rapid prototyping and logistics software,
all of which will enhance the quality and delivery of our global parts strategy
for the Services Division.
The Australian operations performed well in the year, growing revenue and
profits when compared to 2004 and our planned investment into larger facilities
in Western Australia is expected to provide further growth in 2006.
The expansion of our geographic position into higher growth markets continued to
progress. In December, we finalised a £5.2m Joint Venture investment in Saudi
Arabia with Olayan Group in the strategically important Middle East oil market.
We continue to see good prospects for growth within our Services Division. The
investments made in the US Service Centres, organic growth in Australia and
Canada and our most recent investment in Saudi Arabia, provide a solid
foundation for the future growth of the division.
Defence, Nuclear & Gas
Revenue from the Defence, Nuclear & Gas Division increased 24.6% to £68.4m
(2004: £54.9m) producing a profit of £6.8m against a prior year of £3.9m. 2005
input decreased marginally to £112.1m against £112.4m in the previous year.
The liquid gas storage business, Weir LGE, achieved a significant increase in
revenue and operating profit when compared to 2004. New orders from Korean
shipbuilders and the award of onshore storage work in the Middle East delivered
input of £80.2m compared with £62.7m last year. Future market demand and limited
shipbuilding capacity continue to underpin Weir LGE's growth in 2006 and beyond.
The defence and nuclear businesses delivered an increase in revenue and
operating profit when compared to 2004. Order input at £31.9m was £17.8m below
2004. Our increased presence in the UK, Australia and Canada helped deliver
higher profits from the defence operations while new nuclear decommissioning and
storage work in the UK helped grow this area of activity. 2006 is expected to
bring with it a number of significant new opportunities.
Joint Ventures and Associates
Weir's share of profit after interest and tax from Joint Ventures and Associates
of £9.2m was 31.4% above 2004 (2004: £7.0m). The increased activity and profits
from DML reflects the favourable profit taking milestones on a number of key
contracts together with the second half contribution from the Group's 49% share
of its new Joint Venture in Saudi Arabia were significant factors in the
improved result.
STRATEGY
The Group is well placed to execute the final stages of our five year plan. The
2005 corporate and restructuring activities, coupled to the generally improving
operational performances of our core businesses, is now providing the platform
for stronger results in 2006 and beyond. Our operational plans are well
developed and the re-focused business portfolio will deliver improved margins
and further robustness to our future earnings.
The Group continues to invest in developing a geographic presence in high growth
markets. Our growing infrastructure in China and plans to expand the Engineering
Products operations in the region complement the recent investments made by
Minerals and Services in India. Investments in the global parts business, the
joint venture in Saudi Arabia and the acquisition of Gabbioneta are all clear
indications of our plans for future top line growth.
Our corporate development strategy remains principally focused on sustainable
organic growth and pursuing available value adding acquisitions. 2006 will be an
important year for the Group, in which we intend to further leverage our key
strengths in higher technology, higher margin products while delivering on
decisive plans to grow our positions in the power, oil, minerals and defence and
gas markets.
Our strong balance sheet and good level of cash generation support our desire to
pursue the full range of options for future growth.
SHARE BUY BACK
The strength of the Group's cash generation and strong balance sheet led the
Board to the decision to implement a share buy back of up to £50m. As at 30
December 2005, a total of 3.28 million shares had been purchased at a total cost
of £10.7m.
THE BOARD
As previously reported, Chris Rickard, the Group Finance Director, is to be
leaving the Group due to family considerations and we are pleased to announce
the appointment of Keith Cochrane who will succeed Chris effective 1 July 2006.
Currently Group Director of Finance at Scottish Power plc, Keith comes to Weir
with the extensive experience required to support the continued development of
the Group.
In October 2005 Professor Ian Percy stood down from the Audit Committee after
serving for a period of nine years and Stephen King was appointed to the role of
Audit Committee Chairman.
OUTLOOK
In 2006, the Engineering Products division is expected to deliver growth in
revenue, margins and profits when compared to 2005.
Minerals are expecting another good year against a backdrop of buoyant commodity
markets, new product offerings and the continuing benefits being delivered from
their operational improvement activities.
The outlook for Clear Liquid businesses remains encouraging. Growth in sales
from the higher margin businesses, the full year addition of Gabbioneta and the
benefits of the restructuring at Weir Pumps are expected to produce improved
results when compared to 2005.
Valves is expected to deliver improved results from all of its operations in
2006. The completion of the UK restructuring, addition of new facilities in
China and continued strengthening of the power generation markets in the Indo
Pacific and Former Soviet Union are expected to provide a solid foundation for
further progress when compared to 2005.
In the Engineering Services Division, reduced service centre start-up costs in
the United States and improved performance in the UK and Middle East are
expected to grow margins and profits when compared to 2005.
The Defence, Nuclear & Gas Division is well positioned to deliver further
progress in 2006. Weir LGE's exceptional input during the past twelve months has
secured its order book for the medium term while defence and nuclear businesses
are well positioned to secure significant new build work in the UK, Europe and
Australia.
Our Associate business, DML, while continuing its good performance in 2006 is
not expected to achieve the favourable profit taking milestones on key contracts
that were achieved in 2005 and therefore our 2006 expectations are more in line
with 2004.
The Group remains in good financial condition with an improving order book and
high level of visibility in our most important markets. Assuming no significant
adverse movements in foreign exchange rates from current levels, overall we
expect to deliver an improved performance when compared to last year.
* * * * * * * * * * * * * * *
AUDITED RESULTS
Consolidated Income Statement
for the 52 weeks ended 30 December 2005
52 weeks ended 53 weeks ended
30 December 31 December
2005 2004
Notes £'000 £'000
-------------------------------- ------ ------ ------
Continuing operations
Revenue 2 789,384 690,063
Cost of sales (570,681) (499,221)
-------------------------------- ------ ------ ------
Gross profit 218,703 190,842
Other operating income 1,474 2,049
Selling & distribution costs (106,654) (92,624)
Administrative expenses (56,463) (48,255)
Share of results of - joint ventures 2 1,699 1,130
- associates 2 7,532 5,894
-------------------------------- ------ ------ ------
Profit from continuing operations
before restructuring costs, net
finance costs and tax 66,291 59,036
Restructuring costs 3 (24,696) -
-------------------------------- ------ ------ ------
Profit from continuing operations
before net finance costs and tax 2 41,595 59,036
Finance costs (6,612) (6,387)
Finance revenue 2,016 2,379
Other finance income - retirement benefits 489 887
-------------------------------- ------ ------ ------
Profit from continuing operations before
tax 37,488 55,915
Income tax expense 4 (13,816) (11,338)
-------------------------------- ------ ------ ------
Profit from continuing operations 23,672 44,577
Profit (loss) from discontinued operations 5 2,278 (521)
-------------------------------- ------ ------ ------
Profit for the period 25,950 44,056
-------------------------------- ------ ------ ------
Attributable to :
Equity holders of the Company 25,914 44,015
Minority interests 36 41
-------------------------------- ------ ------ ------
25,950 44,056
-------------------------------- ------ ------ ------
Earnings per share
Basic 12.6p 21.4p
Basic - discontinued 1.1p (0.3p)
Basic - continuing 11.5p 21.7p
Basic - continuing (pre restructuring costs) 23.5p 21.7p
Diluted 12.5p 21.3p
Diluted - discontinued 1.1p (0.3p)
Diluted - continuing 11.4p 21.6p
Diluted - continuing (pre restructuring costs) 23.4p 21.6p
Consolidated Balance Sheet
at 30 December 2005
30 December 31 December
2005 2004
Note £'000 £'000
-------------------------------- ------ ------ ------
ASSETS
Non-current assets
Property, plant & equipment 119,170 106,050
Intangible assets 187,527 114,707
Investments in joint ventures & associates 20,874 5,725
Deferred tax assets 17,439 24,704
Forward foreign currency contracts 431 -
-------------------------------- ------ --------- ---------
Total non-current assets 345,441 251,186
-------------------------------- ------ --------- ---------
Current assets
Inventories 122,795 93,170
Trade & other receivables 207,313 177,652
Construction contracts 28,136 45,905
Forward foreign currency contracts 2,297 -
Income tax receivable 599 1,589
Investments - 213
Cash & short term deposits 109,628 97,622
-------------------------------- ------ --------- ---------
Total current assets 470,768 416,151
-------------------------------- ------ --------- ---------
Total assets 816,209 667,337
-------------------------------- ------ --------- ---------
LIABILITIES
Current liabilities
Interest-bearing loans & borrowings 10,928 3,028
Trade & other payables 178,806 167,753
Construction contracts 39,233 29,836
Forward foreign currency contracts 4,623 -
Income tax payable 7,245 5,034
Provisions for liabilities & charges 26,117 11,418
-------------------------------- ------ --------- ---------
Total current liabilities 266,952 217,069
-------------------------------- ------ --------- ---------
Non-current liabilities
Interest-bearing loans & borrowings 175,128 81,994
Forward foreign currency contracts 3,055 -
Retirement benefit obligations 61,604 95,334
Provisions for liabilities & charges 14,594 6,958
Deferred tax liabilites 3,905 675
-------------------------------- ------ --------- ---------
Total non-current liabilities 258,286 184,961
-------------------------------- ------ --------- ---------
Total liabilities 525,238 402,030
-------------------------------- ------ --------- ---------
NET ASSETS 290,971 265,307
-------------------------------- ------ --------- ---------
CAPITAL & RESERVES
Share capital 8 26,208 25,882
Share premium 8 32,464 26,451
Treasury shares 8 (10,697) -
Capital redemption reserve 8 531 531
Foreign currency translation reserve 9,871 (4,011)
Hedge accounting reserve (3,678) -
Retained earnings 235,888 215,881
-------------------------------- ------ --------- ---------
Shareholders equity 8 290,587 264,734
Minority interest 8 384 573
-------------------------------- ------ --------- ---------
TOTAL EQUITY 8 290,971 265,307
-------------------------------- ------ --------- ---------
Consolidated Cash Flow Statement
for the 52 weeks ended 30 December 2005
52 weeks ended 53 weeks ended
30 December 31 December
2005 2004
Note £'000 £'000
-------------------------------- ------ --------- ---------
Cash flows from operating activities 7
Cash generated by operations 71,305 67,010
Exceptional pension contributions paid (10,000) (12,096)
Fundamental restructuring costs paid (16,550) -
Income tax paid (7,946) (8,815)
-------------------------------- ------ --------- ---------
Net cash generated from operating
activities 36,809 46,099
-------------------------------- ------ --------- ---------
Cash flows from investing activities
Acquisitions of subsidiaries & joint
ventures (75,588) (897)
Disposals of subsidiaries & joint ventures 14,240 4,602
Purchases of property,plant & equipment
& intangible assets (25,739) (24,250)
Proceeds from sale of property, plant &
equipment & intangible assets 355 489
Purchases of other investments - (550)
Proceeds from sale of other investments 181 782
Interest received 1,888 2,675
Dividends received 4,020 5,298
-------------------------------- ------ --------- ---------
Net cash used in investing activities (80,643) (11,851)
-------------------------------- ------ --------- ---------
Cash flows from financing activities
Proceeds from issuance of ordinary shares 6,339 5,488
Purchase of treasury shares (10,697) -
Proceeds from borrowings 169,967 80,842
Repayments of borrowings (84,475) (113,140)
Interest paid (8,262) (4,765)
Foreign exchange hedging - 2,478
Dividends paid to equity holders of the
Company (26,605) (25,688)
Dividends paid to minority interests (7) (29)
-------------------------------- ------ --------- ---------
Net cash used in financing activities 46,260 (54,814)
-------------------------------- ------ --------- ---------
Net increase (decrease) in cash and cash
equivalents 2,426 (20,566)
Cash and cash equivalents at beginning of
period 95,611 117,725
Foreign currency translation differences 5,962 (1,548)
-------------------------------- ------ --------- ---------
Cash and cash equivalents at end of
period 103,999 95,611
-------------------------------- ------ --------- ---------
Cash and cash equivalents comprises the
following:
Cash & short-term deposits 109,628 97,622
Bank overdrafts (5,629) (2,011)
-------------------------------- ------ --------- ---------
103,999 95,611
-------------------------------- ------ --------- ---------
Reconciliation of net increase (decrease)
in cash and cash equivalents to movement
in net (debt) funds
Net increase (decrease) in cash and cash
equivalents 2,426 (20,566)
Net (increase)decrease in debt (85,492) 32,298
-------------------------------- ------ --------- ---------
Change in net funds resulting from cash
flows (83,066) 11,732
Lease acquired (259) -
Lease disposed 35 -
Lease inception (147) (216)
Foreign currency translation differences (5,591) 580
-------------------------------- ------ --------- ---------
Change in net funds during the period (89,028) 12,096
Net funds at beginning of period 12,600 504
-------------------------------- ------ --------- ---------
Net (debt)funds at end of period (76,428) 12,600
-------------------------------- ------ --------- ---------
Net (debt) funds comprises the following:
Cash & short term deposits 109,628 97,622
Current interest-bearing loans & borrowings (10,928) (3,028)
Non current interest-bearing loans &
borrowings (175,128) (81,994)
-------------------------------- ------ --------- ---------
(76,428) 12,600
-------------------------------- ------ --------- ---------
Consolidated Statement of Recognised Income & Expense
for the 52 weeks ended 30 December 2005
52 weeks ended 53 weeks ended
30 December 31 December
2005 2004
£'000 £'000
--------------------------------------------------- -------- -------
Income & expense recognised directly in equity
Gains (losses) taken to equity on cash flow hedges (10,678) -
Exchange differences on translation of
foreign operations 13,882 (4,011)
Actuarial gain (loss) on defined benefit plans 22,148 (3,436)
Share of associate's actuarial gain (loss) on
defined benefit plans 4,788 (4,459)
Transfers to the income statement
On cash flow hedges 333 -
Tax on items taken directly to or transferred
from equity (2,947) 971
--------------------------------------------------- -------- -------
Net income (expense)recognised directly in equity 27,526 (10,935)
Profit for the period 25,950 44,056
--------------------------------------------------- -------- -------
Total recognised income & expense for the period 53,476 33,121
--------------------------------------------------- -------- -------
Attributable to :
Equity holders of the Company 53,386 33,080
Minority interests 90 41
--------------------------------------------------- -------- -------
53,476 33,121
--------------------------------------------------- -------- -------
Effect of changes in accounting policy:
Net gain on cash flow hedges on first time
application of IAS39 2,439 -
--------------------------------------------------- -------- -------
1. Basis of preparation
The preliminary results for the 52 weeks ended 30 December 2005 have been
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 1985. This is the first year in which the Group has
prepared its financial statements under IFRS and the comparatives have been
restated from UK Generally Accepted Accounting Practice (UK GAAP) to comply with
IFRS. An explanation of the transition to IFRS and the reconciliations from the
previously published UK GAAP financial statements to IFRS were contained in a
press release issued by the Group on 1 July 2005 (available on the Company's
website at www.weir.co.uk). The format of the balance sheet included in this
preliminary announcement differs from the initial press release and the Group's
unaudited interim report as the directors are of the opinion that the revised
format is more appropriate for a UK listed plc. The format of the income
statement included in this preliminary announcement has been updated since the
initial press release to reflect the impact of discontinued operations. The
accounting policies applied in preparing these preliminary results are contained
in the press release issued on 1 July 2005.
As previously announced, as permitted under IFRS1 'First-time adoption of IFRS',
the Group has elected to apply IAS 32 'Financial Instruments: disclosure and
presentation' and IAS 39 'Financial Instruments: recognition and measurement'
prospectively from 1 January 2005 without restating the comparative periods. The
principal impact of these standards is in respect of derivative financial
instruments which are used to manage economic exposure to movements in currency
exchange rates. Such instruments are now required to be recognised in the
balance sheet as financial assets or financial liabilities measured at their
fair value with changes in their fair value being recognised in the income
statement, except where hedge accounting is used. Hedge accounting is applied
where exchange risk is considered to be material, and, to the extent the hedge
is effective, changes in the fair value of hedge instruments are recognised
directly in equity and recycled to the income statement when the hedged item is
recognised. The net effect of this at 1 January 2005 is to increase equity by
£2.4m.
These preliminary results for the 52 weeks ended 30 December 2005 do not
constitute statutory accounts as defined in Section 240 of the Companies Act
1985. These financial statements were approved by the Board of Directors on 21
March 2006. Full accounts with an unqualified audit report will be lodged with
the Registrar in due course. Financial statements for the 53 weeks to
31 December 2004 are abridged statements; full accounts with an unqualified
audit report have been lodged with the Registrar.
2. Segment information
The following tables present revenue and profit information regarding the
Group's business segments for the 52 weeks ended 30 December 2005 and 53 weeks
ended 31 December 2004.
52 weeks ended 30 December 2005
Engineering Engineering Defence, Eliminations/ Continuing Discontinued Total
Products Services Nuclear general head Operations Operations Operations
& Gas office Total Techna *
£'000 £'000 £'000 £'000 £'000 £'000 £'000
--------------- -------- ------ ------ ------ ------ ------ ------
Revenue
Sales to
external customers 505,628 215,336 68,420 - 789,384 34,302 823,686
Inter-segment
sales 19,031 1,345 - (21,856) (1,480) 1,480 -
--------------- -------- --------- -------- -------- -------- -------- --------
Segment
revenue 524,659 216,681 68,420 (21,856) 787,904 35,782 823,686
--------------- -------- --------- -------- -------- -------- -------- --------
Result
Segment result
before
restructuring
costs 42,308 13,110 6,765 - 62,183 (668) 61,515
Restructuring
costs (24,696) - - - (24,696) - (24,696)
--------------- -------- --------- -------- -------- -------- -------- --------
Segment result 17,612 13,110 6,765 - 37,487 (668) 36,819
Share of results of
- joint ventures - 1,715 (16) - 1,699 (765) 934
- associates (5) 7,537 - - 7,532 - 7,532
--------------- -------- --------- -------- -------- -------- -------- --------
17,607 22,362 6,749 - 46,718 (1,433) 45,285
--------------- -------- --------- -------- -------- -------- -------- --------
Unallocated expenses (5,123) - (5,123)
-------- -------- --------
Profit before net
finance costs and tax 41,595 (1,433) 40,162
-------- -------- --------
53 weeks ended 31 December 2004
Engineering Engineering Defence, Eliminations/ Continuing Discontinued Total
Products Services Nuclear & general head Operations Operations Operations
& Gas office Total Techna *
£'000 £'000 £'000 £'000 £'000 £'000 £'000
--------------- -------- --------- -------- -------- -------- -------- --------
Revenue
Sales to external
customers 436,574 198,722 54,767 - 690,063 48,599 738,662
Inter-segment
sales 21,201 1,942 - (23,718) (575) 575 -
--------------- -------- --------- -------- -------- -------- -------- --------
Segment
revenue 457,775 200,664 54,767 (23,718) 689,488 49,174 738,662
--------------- -------- --------- -------- -------- -------- -------- --------
Sales to external
customers at 30
December 2005
exchange rates 446,491 206,436 54,906 - 707,833 48,841 756,674
--------------- -------- --------- -------- -------- -------- -------- --------
Result
Segment result 30,723 20,481 3,889 - 55,093 (240) 54,853
Share of results of
- joint ventures - 1,125 5 - 1,130 (589) 541
- associates (5) 5,899 - - 5,894 - 5,894
--------------- -------- --------- -------- -------- -------- -------- --------
30,718 27,505 3,894 - 62,117 (829) 61,288
--------------- -------- --------- -------- -------- -------- -------- --------
Unallocated expenses (3,081) - (3,081)
-------- -------- --------
Profit before net finance
costs and tax 59,036 (829) 58,207
-------- -------- --------
Segment result at
30 December 2005
exchange rates 32,165 21,169 3,901 - 57,235 (252) 56,983
--------------- -------- --------- -------- -------- -------- --------- --------
* Further details on discontinued operations can be found in Note 5.
3. Restructuring costs
2005 2004
£'000 £'000
---------------------------------------------- -------- -------
Reorganisation costs 21,417 -
Impairment of property, plant & equipment 1,433 -
Impairment of inventories 1,846 -
---------------------------------------------- -------- -------
24,696 -
---------------------------------------------- -------- -------
During the year, the Group incurred a loss of £24,696,000 in connection
with the previously announced fundamental restructuring activities in the
UK Engineering Products businesses. The impairment loss on property, plant
& equipment arose as a result of the relocation of the Huddersfield business
to new premises during the year, at which point some property, plant &
equipment was identified as being impaired and written down to its recoverable
amount. The recoverable amount comprises fair value less costs to sell based
upon expected market values. The impairment loss recognised in respect of
the write off of inventories arose as a result of the decision to restructure
the product portfolios in each of the businesses concerned and to exit certain
product lines, the final determination of which occurred in 2005. The remaining
reorganisation costs were primarily employee related costs and legal and
professional fees. These costs arose from activities that are not considered
to be operating in nature and accordingly have been disclosed separately as
to include them in operating activities would impair the comparability of the
financial statements. Other non fundamental restructuring activities
throughout the Group are included in operating activities.
4. Income tax expense
2005 2004
£'000 £'000
---------------------------------------------------------- -------- --------
Group - United Kingdom (864) (2,997)
Group - Overseas (13,051) (8,339)
---------------------------------------------------------- -------- --------
Total income tax expense in the
consolidated income statement (13,915) (11,336)
---------------------------------------------------------- -------- --------
The total income tax expense in the consolidated income
statement is disclosed as follows:
Income tax expense on continuing operations (13,816) (11,338)
Income tax expense on discontinued operations (99) 2
---------------------------------------------------------- -------- --------
The total income tax expense included in the Group's share of results of
joint ventures and associates is as follows:
Joint ventures (173) (21)
Associates (2,954) (2,349)
---------------------------------------------------------- -------- --------
5. Discontinued operations
On 8 July 2005, the Group disposed of the desalination and water treatment
businesses of its Techna division (Weir Westgarth, Weir Entropie and Weir
Envig) for a total cash consideration of £27.7m and on 1 June 2005 the
Group disposed of Weir Flowguard for a total cash consideration of £2.9m.
Provisions amounting to £6.1m were made for potential warranty and
indemnity claims and allowance has been made for disposal costs amounting
to £1.9m. The results of these companies are included in the consolidated
income statement as discontinued operations. Losses recognised in respect
of prior years disposals relate to warranty and indemnity claims where the
likelihood of payment has become probable based on events which occurred
during the year. The revenue and results relating to discontinued
operations were as follows:
2005 2004
£'000 £'000
---------------------------------------------------------- -------- --------
Sale of goods 1,658 3,253
Rendering of services 500 2,157
Revenue from construction contracts 32,144 43,189
---------------------------------------------------------- -------- --------
Revenue 34,302 48,599
Cost of sales (31,358) (42,320)
Other operating income 292 173
Selling & distribution costs (1,432) (3,226)
Administrative expenses (2,472) (3,466)
Share of results of joint venture (765) (589)
---------------------------------------------------------- -------- --------
Loss before net finance costs and tax (1,433) (829)
Finance costs (80) (8)
Finance revenue 8 314
---------------------------------------------------------- -------- --------
Loss before tax (1,505) (523)
Income tax (99) 2
---------------------------------------------------------- -------- --------
Loss after tax (1,604) (521)
Net gain on current year disposals 9,165 -
Losses recognised in respect of prior years disposals (5,283) -
---------------------------------------------------------- -------- --------
Profit (loss) for the period from
discontinued operations 2,278 (521)
---------------------------------------------------------- -------- --------
The income tax is analysed as follows:
On profit on ordinary activities (99) 2
On the gain on discontinuance - -
---------------------------------------------------------- -------- --------
6. Dividends paid and proposed
2005 2004
£'000 £'000
---------------------------------------------------------- -------- --------
Declared and paid during the period:
Equity dividends on ordinary shares:
Final dividend for 2004: 9.35p (2003:9.05p) 19,308 18,564
Interim dividend for 2005: 3.55p (2004:3.45p) 7,297 7,124
---------------------------------------------------------- -------- --------
26,605 25,688
---------------------------------------------------------- -------- --------
Proposed for approval by shareholders at the AGM:
Final dividend for 2005: 9.65p (2004:9.35p) 19,947 19,362
---------------------------------------------------------- -------- --------
The proposed dividend is 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 final dividend may differ due to increases
or decreases in the number of shares in issue between the date of approval
of the report and financial statements and the record date for the final
dividend.
7. Additional cash flow information
2005 2004
£'000 £'000
---------------------------------------------------------- -------- --------
Net cash generated from operations
Profit from continuing operations before
restructuring costs, net finance costs and tax 66,291 59,036
Loss from discontinued Group operations
before net finance costs and tax (668) (240)
Share of results of joint ventures & associates (9,231) (7,024)
Depreciation & amortisation 17,015 15,208
Loss (gain) on disposal of property,
plant & equipment & investments 315 (173)
Funding of pension & post retirement costs (795) (733)
Exchange 377 (203)
Employee share scheme 991 356
Increase in provisions 2,399 1,895
(Increase) decrease in inventories (18,892) 232
Increase in trade & other receivables &
construction contracts (12,317) (43,378)
Increase in trade & other payables &
construction contracts 25,820 42,034
---------------------------------------------------------- -------- --------
Cash generated by operations 71,305 67,010
Exceptional pension contributions paid (10,000) (12,096)
Fundamental restructuring costs paid (16,550) -
Income tax paid (7,946) (8,815)
---------------------------------------------------------- -------- --------
Net cash generated from operating activities 36,809 46,099
---------------------------------------------------------- -------- --------
8. Reconciliation of movements in equity
Minority Total
Attributable to equity holders of the Company interest equity
--------------------------------------------------------------
Share Share Treasury Reserves Total
capital premium shares
£'000 £'000 £'000 £'000 £'000 £'000 £'000
---------------- ------- -------- -------- -------- -------- -------- --------
At 27
December 2003 25,587 21,258 - 204,653 251,498 567 252,065
Total recognised
income and expense
for the period - - - 33,080 33,080 35 33,115
Cost of share-based
payment - - - 356 356 - 356
Dividends - - - (25,688) (25,688) (29) (25,717)
Exercise of options 295 5,193 - - 5,488 - 5,488
---------------- ------- -------- -------- -------- -------- -------- --------
At 31 December
2004 25,882 26,451 - 212,401 264,734 573 265,307
Adjustments
relating to
adoption of IAS32
and IAS39 from
1 January 2005 - - - 2,439 2,439 - 2,439
---------------- ------- -------- -------- -------- -------- -------- --------
At 1 January
2005 25,882 26,451 - 214,840 267,173 573 267,746
Total recognised
income and expense
for the period - - - 53,386 53,386 90 53,476
Cost of share-
based payment - - - 991 991 - 991
Dividends - - - (26,605) (26,605) (7) (26,612)
Exercise of
options 326 6,013 - - 6,339 - 6,339
Purchase of
treasury shares - - (10,627) - (10,627) - (10,627)
Transaction costs - - (70) - (70) - (70)
Acquisition of
minority interest - - - - - (272) (272)
---------------- ------- -------- -------- -------- -------- -------- --------
At 30
December 2005 26,208 32,464 (10,697) 242,612 290,587 384 290,971
---------------- ------- -------- -------- -------- -------- -------- --------
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