Interim Results
Weir Group PLC
21 August 2007
THE WEIR GROUP PLC INTERIM RESULTS 2007
Results for 26 weeks ended 29 June 2007
HIGHLIGHTS
• Revenue(*2) up 13% to £458.7m (2006: £406.4m)
• Profit before tax(*2) up 40% to £45.4m (2006: £32.4m)
• Earnings per share(*2) up 35% to 15.8p (2006: 11.7p)
• Cash generated from operations £51.9m, up £6.7m (2006: £45.2m)
• Dividend increase of 11% to 4.15p (2006: 3.75p)
• £78.7m exceptional profit on disposal of non core businesses
• Acquisition of SPM in the upstream oil sector for US$653m
2007 2006 Change
Continuing Operations
Order input(*1) £547.6m £539.7m +1%
Revenue(*2) £458.7m £406.4m +13%
Operating profit(*2) £44.2m £33.2m +33%
Profit before tax(*2) £45.4m £32.4m +40%
Earnings per share(*2) 15.8p 11.7p +35%
Total Operations
Profit for the period £117.9m £27.4m +330%
Earnings per share 56.7p 13.3p +326%
Dividend per share 4.15p 3.75p +11%
Net funds (debt) £124.0m (£64.8m) +£188.8m
*1 Excludes Joint Ventures; calculated at 2007 average exchange rates
*2 Continuing Operations, adjusted to exclude exceptional items
The Chairman of The Weir Group, Sir Robert Smith, commented: 'In the first half
of 2007, the Group's continuing operations delivered significantly improved
revenue, profit and earnings per share when compared to the same period in 2006.
This improved performance, together with the continuing strength of the order
book and the recent acquisition of SPM provide a positive outlook for the
balance of the year.
In consideration of the excellent first half results and our increased
confidence in the outlook for the second half of the year, the Board has
declared an 11% increase in the dividend to 4.15p per share.'
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)
Maitland Tel. 020 7379 5151
Suzanne Bartch (Mobile: 07769 710 335)
Peter Ogden
FINANCIAL HIGHLIGHTS
2007 first half order input(*1) at £547.6m was 1% above the same period in 2006
reflecting Engineering Products highest ever level of bookings which offset a
considerable decline in Defence, Nuclear and Gas following their exceptional
input in the first half of 2006. Engineering Products order input grew 23% to
£374.3m (2006: £305.5m) with good progress from Minerals and Clear Liquid more
than offsetting a small reduction in Valves. Services order input at £131.1m was
marginally ahead of the same period in 2006, while Defence, Nuclear & Gas at
£42.2m was substantially below the £103.4m of input last year.
Revenue from Group continuing operations increased 13% to £458.7m (2006:
£406.4m), 18% in constant currency terms. On this basis, Engineering Products
grew 23% to £294.8m (2006: £238.7m) with excellent performances from Minerals,
Clear Liquid and Valves. Engineering Services revenue in the first half
increased 10% to £111.2m (2006: £101.0m) with good progress in Canada, the UK
and Australia. The Defence, Nuclear & Gas Division grew their revenue 9% to
£52.7m (2006: £48.3m) largely due to achievement of key milestones on new
contracts at Weir LGE and Weir Strachan & Henshaw.
First half operating profit(*2) at £44.2m (2006: £33.2m) was 33% above the same
period in 2006. On a constant currency basis, Engineering Products operating
profit(*2) increased 47% to £34.6m (2006: £23.6m) with the combination of strong
end markets and continued operational progress contributing to excellent
progress in the first half of the year. Services operating profit(*2) increased
41% to £8.2m (2006: £5.8m) while Defence, Nuclear & Gas achieved consistent
results year on year of £4.1m (2006: £4.1m).
Joint Ventures contributed £1.6m against £1.3m in the same period last year with
good progress from our Services businesses in Abu Dhabi and Saudi Arabia.
After recognising net finance costs of £0.4m (2006: £3.2m) and other pension
finance income of £1.6m (2006: £2.4m), profit before tax(*2) was £45.4m (2006:
£32.4m), 40% up on the same period last year.
A tax charge of £12.6m (2006: £8.2m) represents a normalised rate of 28% in
respect of continuing operations. Earnings per share(*2) were 15.8p (2006:
11.7p), an increase of 35%.
Profits from discontinued operations, comprising Weir Pumps and the Group's
24.5% interest in DML, were £85.1m with exceptional gains on sale of £78.7m
arising on the disposal of both operations. Basic earnings per share for total
operations rose to 56.7p against 13.3p in the comparable period last year.
Cash generated from continuing operations increased to £51.9m (2006: £45.2m)
with further improvements evident in the Group's working capital management.
Together with proceeds of £128.6m from the disposals of Weir Pumps and the
Group's share of DML, this resulted in net funds of £124m at 29 June 2007.
DIVIDEND
An interim dividend of 4.15p (2006: 3.75p) is declared and will be paid on 9
November 2007 to shareholders on the register at the close of business on 12
October 2007.
REVIEW OF RESULTS
To assist in meaningful comparisons, the review of continuing results in this
announcement restates comparative 2006 figures at 2007 average exchange rates
and excludes the results of Weir Pumps and the Group's interest in DML.
Engineering Products
The Engineering Products Division includes the operations of our Minerals, Clear
Liquid and Valves businesses. First half order input grew 23% to £374.3m (2006:
£305.5m) with good progress in Minerals and Clear Liquid more than offsetting a
marginal decline in Valves. Revenue from continuing businesses increased 23% to
£294.8m (2006: £238.7m) while operating profit(*2) increased 47% to £34.6m
(2006: £23.6m).
At the operating profit level, the margin was 11.7% compared with 9.9% in 2006.
This margin increase was underpinned by a continued strong performance from
Minerals and significant progress from both Valves and Clear Liquid. The
continued positive effects of Gabbioneta in Clear Liquid and restructuring
benefits in Valves were significant contributors to the improved performance.
Minerals
Order input grew 34% to £263.1m (2006: £196.7m) driven in part by the continued
strong mining markets across the globe and large project awards in Brasil. The
North American operation benefited from the growing market for flue gas
desulphurisation where we have gained a significant position and recorded £21.5m
of new orders in the first half of the year.
Revenue at £193.7m (2006: £164.8m) was 18% higher than the first half of 2006
and included significant new project work shipped from our operations in the
USA, Brasil, Africa and the Netherlands.
The new Chinese operation, consisting of a modern foundry, assembly and test
facilities was officially opened in June of this year and is expected to grow to
a multi-shift operation in the second half of the year.
The combination of our presence in China and our growing position in India
provides the division with critical customer support facilities and the Group
with key assets and infrastructure in these low cost emerging markets.
To further expand the range of products offered to mining customers, Minerals
has developed a range of mine dewatering products which will be complemented by
the acquisition (subject to regulatory approvals) of Multiflo, a privately-owned
mine dewatering business located in Brisbane, Australia for A$22m. The business
has an annual turnover of A$17m and provides engineered dewatering pumps to the
Australian and Indonesian markets.
Clear Liquid
Clear Liquid performed well in the first half of the year, growing its order
input, revenue, operating profit and margins when compared to the same period in
2006.
First half input at £73.8m (2006: £70.6m) was 5% above the first half of 2006
and masks excellent momentum in our speciality businesses which collectively
grew 15%, offsetting a 9% decline at Gabbioneta compared to the first half of
2006 which had included several large one off orders for the Middle East.
Revenue at £67.6m (2006: £46.9m) was 44% higher than the first half of 2006 with
all companies contributing to the gains and Gabbioneta doubling its revenue on
the back of significant new work booked in the first half of 2006.
The most significant event impacting Clear Liquid in the first half was the
disposal of Weir Pumps in Glasgow, the business's lowest margin operation, which
was sold to the Clyde Blowers group of companies in May for a cash consideration
of £45.5m. The revised portfolio with the addition of SPM provides an increased
focus on the oil and gas market and a higher proportion of sales into the
aftermarket.
Valves
Valves performed in line with expectations in the first half of the year growing
revenue, profits and margins when compared to the same period in 2006.
Order input at £37.4m was 2% below the first half of 2006. This marginal decline
was due entirely to the exceptional level of nuclear orders from the EU which
featured prominently in last year's results and which were not expected to
repeat this year.
Revenue at £33.5m was 24% above the first half of 2006 with significant growth
recorded in our UK operation and good progress elsewhere.
The Chinese operation, while still small in Group terms, is now fully
operational and traded profitably in the first half of the year. The business
was successful in achieving global quality certification which will trigger the
supply of low cost sub-assembly work to its sister companies.
Future demand for nuclear safety valves, coupled to significant new developments
in North America, underpinned our decision to relocate our Salem operation to a
larger world class facility in Massachusetts, with the move expected to be
completed in the final quarter of this year.
Engineering Services
Services delivered on their expected turnaround in the first half of 2007
growing input, revenue, margins and profit against the same period last year.
Input at £131.1m was only marginally ahead of 2006 and reflects a conscious
decision to focus the division's efforts on the mining, power and oil sectors
and to reduce our exposure to lower margin water and general industrial
activities.
Revenue at £111.2m was 10% above the first half of 2006 with good levels of
growth recorded in our UK, Canada and Australian operations offsetting planned
reductions in the Middle East and USA.
Services operating profit(*2) increased 41% to £8.2m (2006: £5.8m) with the
benefits of last year's restructuring evident in the results. First half margins
increased to 7.4% against 5.8% in 2006.
The good performance in the first half of 2007 and continued strength of key end
markets provides a high level of confidence in further progress being made in
the second half of the year.
Defence, Nuclear & Gas
The Defence, Nuclear & Gas businesses are involved in the design and manufacture
of specialist engineering equipment for the naval and energy markets.
First half revenue from the division increased 9% to £52.7m (2006: £48.3m) and
produced a consistent first half operating profit of £4.1m in both years. As
expected, due to unprecedented levels of order growth in the past two years,
order input in the first half decreased by 59% to £42.2m against £103.4m in the
previous year.
The defence and nuclear business, Weir Strachan & Henshaw, delivered higher
revenue and operating profit when compared to the first half of 2006. Order
input at £30.4m was £28.4m below the same period in 2006 which included a £37m
contract to engineer weapons handling systems for the Spanish Navy.
The liquid gas storage business, Weir LGE, produced higher revenue and lower
operating profit when compared to the first half of 2006 reflecting the
favourable profit taking position on major projects last year. The significant
existing order book, coupled to planned milestones on major new projects,
continue to underpin Weir LGE's revenue and profit position in 2007 and beyond.
Joint Ventures
Weir's share of profit after tax from Joint Ventures at £1.6m (2006: £1.3m)
reflects the good performances from Services Joint Ventures in Saudi Arabia and
Abu Dhabi.
STRATEGY
The Group remains focused on a programme underpinned by the core principles of
operational excellence and continued expansion in higher margin, higher growth
markets. In the year to date, we have significantly re-shaped our portfolio of
businesses by selling off the lower margin, higher risk Weir Pumps business and
disposing of our minority interest in DML.
On 21 June 2007, the Group announced the acquisition of SPM which, following
shareholder approval, was concluded on 19 July 2007. All indications during our
brief period of ownership reinforce the strategic merit of this purchase and
build our confidence in the financial expectations for the balance of the year.
The Group is also pleased to announce the acquisition of Multiflo, a privately
owned Australian pump business, for a consideration of A$22m. The business
provides complementary products to our Minerals dewatering portfolio and will be
consolidated into Minerals on completion.
The Group continues to invest in organic development and extending our
geographic presence in high growth markets. Our continued investments in new and
upgraded facilities and ongoing search for high quality aligned acquisitions
underpin our near term plans for top line growth.
The Group's strong balance sheet and good level of cash generation support our
intention to pursue the full range of options for future growth.
OUTLOOK
In the second half of 2007, the Engineering Products Division is expected to
deliver growth in revenue and profits when compared to the same period in 2006.
The Engineering Services Division will benefit from last year's restructuring
and is forecast to deliver margin and profit growth in the second half of the
year.
The Defence, Nuclear & Gas Division is positioned to deliver equivalent revenue
and profit to that achieved in the second half of the year.
Joint Ventures are also expected to continue their good contribution.
Overall, the Group's performance in the first half of 2007, clearly demonstrates
the improved earnings capability of the Group. The sustained strength of the
order book and addition of SPM are expected to deliver a good level of progress
in the second half of the year. After including profits from discontinued
operations of £6.4m, we expect profit before tax(*3) to be around the upper end
of current market estimates(*4) on a consistent basis.
*3 Continuing operations, before intangible asset amortisation.
*4 Note: the range of market estimates for profit before tax and exceptional
items for 2007, based on Reuters estimates, is £101m to £112m before
addback of an intangible assets amortisation charge of c£3m.
Consolidated Income Statement
-----------------------------
52 weeks 26 weeks ended 29 June 2007 26 weeks ended 30 June 2006
ended 29 Before Before
Dec 2006 exceptional Exceptional exceptional Exceptional
Total items items Total items items Total
£m Notes £m £m £m £m £m £m
-----------------------------------------------------------------------------------------------------------------------
Continuing operations
870.4 Revenue 2 458.7 - 458.7 406.4 - 406.4
(623.6) Cost of sales (319.9) - (319.9) (285.2) - (285.2)
-----------------------------------------------------------------------------------------------------------------------
246.8 Gross profit 138.8 - 138.8 121.2 - 121.2
6.7 Other operating income 3 0.9 - 0.9 0.3 - 0.3
(110.7) Selling & distribution costs (55.1) - (55.1) (54.3) - (54.3)
(52.3) Administrative expenses 3 (42.0) - (42.0) (35.3) - (35.3)
(1.8) Restructuring costs 3 - - - - (1.8) (1.8)
Share of results of joint
2.4 ventures 1.6 - 1.6 1.3 - 1.3
-----------------------------------------------------------------------------------------------------------------------
91.1 Operating profit 2 44.2 - 44.2 33.2 (1.8) 31.4
(10.8) Finance costs (4.6) - (4.6) (5.9) - (5.9)
5.3 Finance income 4.2 - 4.2 2.7 - 2.7
Other finance income
4.9 - retirement benefits 1.6 - 1.6 2.4 - 2.4
-----------------------------------------------------------------------------------------------------------------------
Profit before tax from
90.5 continuing operations 45.4 - 45.4 32.4 (1.8) 30.6
(21.6) Tax expense 4 (12.6) - (12.6) (8.2) 0.5 (7.7)
-----------------------------------------------------------------------------------------------------------------------
Profit for the period from
68.9 continuing operations 32.8 - 32.8 24.2 (1.3) 22.9
Profit for the period from
12.7 discontinued operations 5 6.4 78.7 85.1 4.5 - 4.5
-----------------------------------------------------------------------------------------------------------------------
81.6 Profit for the period 39.2 78.7 117.9 28.7 (1.3) 27.4
=======================================================================================================================
Attributable to:
81.6 Equity holders of the Company 39.2 78.7 117.9 28.7 (1.3) 27.4
=======================================================================================================================
Earnings per share 6
39.4p Basic - total operations 18.8p 56.7p 13.9p 13.3p
33.3p Basic - continuing operations 15.8p 15.8p 11.7p 11.1p
38.8p Diluted - total operations 18.6p 56.0p 13.7p 13.1p
32.8p Diluted - continuing operations 15.6p 15.6p 11.6p 11.0p
Consolidated Balance Sheet
--------------------------
29 Dec 2006 29 June 2007 30 June 2006
£m Note £m £m
-----------------------------------------------------------------------------------------------------------------------
ASSETS
Non-current assets
116.6 Property, plant & equipment 104.4 114.4
- Investment property 4.9 -
180.1 Intangible assets 182.6 184.5
33.5 Investments in joint ventures & associates 7.7 25.5
19.3 Deferred tax assets 16.2 9.8
7.8 Retirement benefit plan surpluses 19.0 -
4.9 Forward foreign currency contracts 2.5 2.5
-----------------------------------------------------------------------------------------------------------------------
362.2 Total non-current assets 337.3 336.7
-----------------------------------------------------------------------------------------------------------------------
Current assets
120.9 Inventories 128.4 128.2
203.8 Trade & other receivables 212.8 194.4
34.9 Construction contracts 21.0 31.9
6.5 Forward foreign currency contracts 4.8 4.1
0.1 Income tax receivable 1.2 1.2
- Assets classified as held for sale - 1.9
146.3 Cash & short term deposits 278.0 118.1
-----------------------------------------------------------------------------------------------------------------------
512.5 Total current assets 646.2 479.8
-----------------------------------------------------------------------------------------------------------------------
874.7 Total assets 983.5 816.5
=======================================================================================================================
LIABILITIES
Current liabilities
7.5 Interest-bearing loans & borrowings 3.3 12.6
212.4 Trade & other payables 215.9 184.4
46.3 Construction contracts 50.8 44.4
3.0 Forward foreign currency contracts 4.2 2.8
19.4 Income tax payable 24.1 9.6
27.3 Provisions 15.5 22.0
-----------------------------------------------------------------------------------------------------------------------
315.9 Total current liabilities 313.8 275.8
-----------------------------------------------------------------------------------------------------------------------
Non-current liabilities
145.9 Interest-bearing loans & borrowings 150.7 170.3
1.8 Forward foreign currency contracts 1.7 1.5
13.6 Provisions 20.7 14.7
13.9 Deferred tax liabilities 14.1 4.5
11.7 Retirement benefit plan deficits 10.0 43.7
-----------------------------------------------------------------------------------------------------------------------
186.9 Total non-current liabilities 197.2 234.7
-----------------------------------------------------------------------------------------------------------------------
502.8 Total liabilities 511.0 510.5
=======================================================================================================================
371.9 NET ASSETS 472.5 306.0
=======================================================================================================================
CAPITAL & RESERVES
26.4 Share capital 26.5 26.3
35.4 Share premium 37.0 33.6
(10.7) Treasury shares (9.5) (10.7)
0.5 Capital redemption reserve 0.5 0.5
(2.9) Foreign currency translation reserve (5.4) 0.7
3.5 Hedge accounting reserve 1.5 0.9
319.3 Retained earnings 421.5 254.3
-----------------------------------------------------------------------------------------------------------------------
371.5 Shareholders equity 472.1 305.6
0.4 Minority interest 0.4 0.4
-----------------------------------------------------------------------------------------------------------------------
371.9 TOTAL EQUITY 8 472.5 306.0
=======================================================================================================================
Consolidated Cash Flow Statement
--------------------------------
52 weeks ended 26 weeks ended 26 weeks ended
29 Dec 2006 29 June 2007 30 June 2006
£m Notes £m £m
-----------------------------------------------------------------------------------------------------------------------
Continuing operations
Cash flows from operating activities
111.0 Cash generated from operations 9 51.9 45.2
(7.0) Additional pension contributions paid - -
(3.3) Fundamental restructuring costs paid - (3.0)
(16.5) Income tax paid (12.0) (6.4)
-----------------------------------------------------------------------------------------------------------------------
84.2 Net cash generated from operating activities 39.9 35.8
-----------------------------------------------------------------------------------------------------------------------
Continuing operations
Cash flows from investing activities
(2.1) Acquisitions of subsidiaries - (2.0)
(1.8) Disposals of subsidiaries & associate 128.6 (0.6)
(24.7) Purchases of property, plant & equipment & intangible assets (11.5) (9.8)
8.3 Exceptional proceeds on sale of property - -
Other proceeds from sale of property, plant & equipment &
0.8 intangible assets 0.4 0.3
5.3 Interest received 4.0 2.6
- Dividend received from discontinued associate 2.4 -
1.5 Other dividends received 1.4 -
-----------------------------------------------------------------------------------------------------------------------
(12.7) Net cash used in investing activities 125.3 (9.5)
-----------------------------------------------------------------------------------------------------------------------
Continuing operations
Cash flows from financing activities
3.1 Proceeds from issue of ordinary shares 1.7 1.2
90.7 Proceeds from borrowings - 88.6
(110.2) Repayments of borrowings (4.2) (93.4)
(10.2) Interest paid (4.8) (3.8)
(27.7) Dividends paid to equity holders of the Company (22.4) (20.0)
-----------------------------------------------------------------------------------------------------------------------
(54.3) Net cash used in financing activities (29.7) (27.4)
-----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash & cash equivalents from
17.2 continuing operations 135.5 (1.1)
20.2 Net increase in cash & cash equivalents from discontinued operations - 5.3
104.0 Cash & cash equivalents at beginning of period 139.1 104.0
(2.3) Foreign currency translation differences 0.4 (2.4)
-----------------------------------------------------------------------------------------------------------------------
139.1 Cash & cash equivalents at end of period 275.0 105.8
=======================================================================================================================
Cash & cash equivalents comprises the following:
146.3 Cash & short-term deposits 278.0 118.1
(7.2) Bank overdrafts (3.0) (12.3)
-----------------------------------------------------------------------------------------------------------------------
139.1 275.0 105.8
=======================================================================================================================
Reconciliation of net increase (decrease) in cash & cash
equivalents to movement in net funds (debt)
Net increase (decrease) in cash & cash equivalents from
17.2 continuing operations 135.5 (1.1)
Net increase in cash & cash equivalents from discontinued
20.2 operations 5 - 5.3
19.5 Net decrease in debt 4.2 4.8
-----------------------------------------------------------------------------------------------------------------------
56.9 Change in net funds (debt) resulting from cash flows 139.7 9.0
12.4 Foreign currency translation differences (8.6) 2.6
-----------------------------------------------------------------------------------------------------------------------
69.3 Change in net funds (debt) during the period 131.1 11.6
(76.4) Net debt at beginning of period (7.1) (76.4)
-----------------------------------------------------------------------------------------------------------------------
(7.1) Net funds (debt) at end of period 124.0 (64.8)
=======================================================================================================================
Consolidated Statement of Recognised Income & Expense
-----------------------------------------------------
52 weeks ended 26 weeks ended 26 weeks ended
29 Dec 2006 29 June 2007 30 June 2006
£m £m £m
-----------------------------------------------------------------------------------------------------------------------
Income & expense recognised directly in equity
11.5 Gains taken to equity on cash flow hedges 1.4 6.5
(12.8) Exchange differences on translation of foreign operations (2.5) (9.2)
33.0 Actuarial gain on defined benefit plans 10.3 14.7
4.4 Share of associate's actuarial gain on defined benefit plans - -
Transfers to the income statement
(1.1) On cash flow hedges (0.1) 0.1
- On cash flow hedges - discontinued operations (4.3) -
(12.5) Tax on items taken directly to or transferred from equity (2.1) (6.4)
-----------------------------------------------------------------------------------------------------------------------
22.5 Net income recognised directly in equity 2.7 5.7
81.6 Profit for the period 117.9 27.4
-----------------------------------------------------------------------------------------------------------------------
104.1 Total recognised income & expense for the period 120.6 33.1
=======================================================================================================================
Attributable to:
104.1 Equity holders of the Company 120.6 33.1
=======================================================================================================================
Notes to the Financial Statements
1. Basis of preparation
These interim financial statements have been prepared on the basis of the accounting policies set out in
the Group's 2006 Annual Report. In preparing these interim financial statements the Group has also applied
IAS40 'Investment Property' resulting in a reclassification, amounting to £4.9m, from property, plant &
equipment to investment property in the balance sheet. There has been no adjustment necessary to the
measurement basis of the property and as such there is no other impact from the adoption of this
accounting policy, which is detailed below, in these interim financial statements. The Group has not
applied IAS34 'Interim Financial Reporting', which is not mandatory for UK groups, in the preparation of
these interim financial statements.
The format of the consolidated cash flow statement presented in these interim financial statements differs
from that used in the Group's 2006 Annual Report. The format of the consolidated cash flow statement
included within these interim financial statements, which presents cash flows for continuing operations
only, has been adopted as it presents information in a format that is more relevant to users of the
financial statements. The comparative information has been restated to present the cash flows from
discontinued operations separately from continuing operations.
The interim financial statements are unaudited but have been formally reviewed by the auditors and their
report to the Company is set out on page 16. The information shown for the 52 weeks ended 29 December 2006
does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985 and has been
extracted from the Group's 2006 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 2006 Annual Report was
unqualified and did not contain a statement under either Section 237(2) or Section 237(3) of the Companies
Act 1985.
These interim financial statements were approved by the Board of Directors on 21 August 2007.
Investment property
The Group has one property which is currently being held to earn rentals and for capital appreciation
rather than for use in the production or supply of goods and services and as such this property is
classified as investment property. Investment property is stated at cost less accumulated depreciation.
Depreciation is provided on a straight-line basis over 40 years. Freehold land is not depreciated.
2. Segment information - Continuing Operations
The following table presents revenue and profit information on the Group's continuing operations for the 26
weeks ended 29 June 2007 and the 26 weeks ended 30 June 2006. For comparative purposes, sales to external
customers and segment result before exceptional items for the 26 weeks ended 30 June 2006 have been
restated to 2007 average exchange rates.
Engineering Engineering Defence, Nuclear Total Continuing
Products Services & Gas Operations
June June June June June June June June
2007 2006 2007 2006 2007 2006 2007 2006
£m £m £m £m £m £m £m £m
-----------------------------------------------------------------------------------------------------------------------
Revenue
Sales to external customers 294.8 251.2 111.2 106.9 52.7 48.3 458.7 406.4
Inter-segment sales 9.5 8.2 0.9 0.7 - - 10.4 8.9
-----------------------------------------------------------------------------------------------------------------------
Segment revenue 304.3 259.4 112.1 107.6 52.7 48.3 469.1 415.3
=======================================================================================================================
Sales to external customers at
2007 average exchange rates 294.8 238.7 111.2 101.0 52.7 48.3 458.7 388.0
=======================================================================================================================
Result
Segment result before
exceptional items 34.6 25.4 8.2 6.2 4.1 4.1 46.9 35.7
Exceptional costs - (1.8) - - - - - (1.8)
-----------------------------------------------------------------------------------------------------------------------
Segment result after
exceptional items 34.6 23.6 8.2 6.2 4.1 4.1 46.9 33.9
Share of results of
joint ventures - - 1.6 1.3 - - 1.6 1.3
-----------------------------------------------------------------------------------------------------------------------
34.6 23.6 9.8 7.5 4.1 4.1 48.5 35.2
===================================================================
Unallocated expenses (4.3) (3.8)
------------------
Operating profit 44.2 31.4
==================
Segment result before
exceptional items at 2007
average exchange rates 34.6 23.6 8.2 5.8 4.1 4.1 46.9 33.5
=======================================================================================================================
The following table presents revenue and profit information on the Group's continuing operations for the 52
weeks ended 29 December 2006. For comparative purposes, sales to external customers and segment result
before exceptional items have been restated to 2007 average exchange rates.
Total
Engineering Engineering Defence, Continuing
Products Services Nuclear & Gas Operations
Dec 2006 Dec 2006 Dec 2006 Dec 2006
£m £m £m £m
-----------------------------------------------------------------------------------------------------------------------
Revenue
Sales to external customers 538.0 225.2 107.2 870.4
Inter-segment sales 16.3 1.6 - 17.9
-----------------------------------------------------------------------------------------------------------------------
Segment revenue 554.3 226.8 107.2 888.3
=======================================================================================================================
Sales to external customers at
2007 average exchange rates 522.7 217.8 107.1 847.6
=======================================================================================================================
Result
Segment result before exceptional items 58.4 12.4 9.8 80.6
Exceptional income (costs) (net) 5.0 - - 5.0
-----------------------------------------------------------------------------------------------------------------------
Segment result after exceptional items 63.4 12.4 9.8 85.6
Share of results of joint ventures - 2.4 - 2.4
-----------------------------------------------------------------------------------------------------------------------
63.4 14.8 9.8 88.0
====================================================
Unallocated expenses (7.6)
Unallocated exceptional income 10.7
----------
Operating profit 91.1
==========
Segment result before exceptional
items at 2007 average exchange rates 56.2 12.2 9.8 78.2
=======================================================================================================================
3. Exceptional items
52 weeks ended 26 weeks ended 26 weeks ended
29 Dec 2006 29 June 2007 30 June 2006
£m £m £m
-----------------------------------------------------------------------------------------------------------------------
Recognised in arriving at operating profit from continuing operations
6.8 Profit on sale of property (included in other operating income) - -
10.7 Pension plan gain (included in administrative expenses) - -
(1.8) Restructuring costs - (1.8)
-----------------------------------------------------------------------------------------------------------------------
15.7 - (1.8)
=======================================================================================================================
4. Income tax expense
52 weeks ended 26 weeks ended 26 weeks ended
29 Dec 2006 29 June 2007 30 June 2006
£m £m £m
-----------------------------------------------------------------------------------------------------------------------
(1.6) Group - United Kingdom (4.6) (2.0)
(21.0) Group - overseas (10.9) (6.0)
-----------------------------------------------------------------------------------------------------------------------
(22.6) Total income tax expense in the consolidated income statement (15.5) (8.0)
========================================================================================================================
The total income tax expense is disclosed in the consolidated
income statement as follows:
Tax (expense) credit
(18.9) - continuing operations before exceptional items (12.6) (8.2)
(1.0) - within profit from discontinued operations before exceptional items (1.4) (0.3)
(2.7) - exceptional items (1.5) 0.5
=======================================================================================================================
The total income tax expense included in the Group's share of results
of joint ventures & associates is as follows:
(0.4) Joint ventures (0.2) (0.2)
(3.3) Associate (within profit from discontinued operations) (1.3) (1.4)
=======================================================================================================================
5. Discontinued operations
On 8 May 2007, the Group disposed of its Glasgow-based pump manufacturing operation Weir Pumps for a total cash
consideration of £45.5m resulting in a gain on disposal of £23.8m after a tax charge of £1.5m. Of the disposal
proceeds, £1.7m has been allocated to the ongoing lease of the Cathcart site by the purchaser and has been deferred.
The net assets disposed of amounted to £13.7m and direct disposal costs and provisions amounted to £9.1m, including
estimated costs of £3.3m associated with separating the discontinued operations of Weir Pumps from the remaining
Weir Engineering Services and Materials and Foundry operations. The net gain suspended in equity on cash flow hedges,
amounting to £4.3m, has been recycled to the income statement as part of the gain on sale in accordance with IAS39.
On 28 June 2007, the Group completed the sale of its 24.5% interest in its associate, Devonport Management Limited,
for a total cash consideration of £85.7m. Approval of the sale was obtained from the Ministry of Defence on 26 June
2007, at which time the investment became held for sale. The carrying value of the investment at the date of sale was
£26.8m. Costs and provisions associated with the disposal amounted to £4.0m resulting in a gain on disposal of
£54.9m after a tax charge of £nil.
The results of Weir Pumps and the Group's share of the results of Devonport Management Limited have been included in
the consolidated income statement as discontinued operations for all periods presented. The net gain of £78.7m made
on these disposals has been recorded as an exceptional item in the consolidated income statement. Profits recognised
in respect of prior periods' disposals relate to the negotiated settlement of claims connected to prior period
disposals. The revenue, results and cash flows relating to discontinued operations are as follows:
52 weeks ended 26 weeks ended 26 weeks ended
29 Dec 2006 29 June 2007 30 June 2006
£m £m £m
-----------------------------------------------------------------------------------------------------------------------
29.9 Sale of goods 9.9 13.5
40.6 Revenue from construction contracts 12.1 18.3
-----------------------------------------------------------------------------------------------------------------------
70.5 Revenue 22.0 31.8
(55.9) Cost of sales (14.1) (25.0)
2.2 Other operating income 0.2 0.4
(8.6) Selling & distribution costs (2.7) (4.1)
(4.0) Administrative expenses (1.5) (1.8)
8.1 Share of results of associate (after tax) 3.3 3.5
-----------------------------------------------------------------------------------------------------------------------
12.3 Operating profit 7.2 4.8
(1.0) Tax expense (0.8) (0.3)
-----------------------------------------------------------------------------------------------------------------------
11.3 Profit after tax 6.4 4.5
1.4 Profits recognised in respect of prior periods' disposals (after tax) - -
-----------------------------------------------------------------------------------------------------------------------
12.7 Profit for the period from discontinued operations - before exceptional items 6.4 4.5
- Net gain on current period disposals - exceptional items (after tax) 78.7 -
-----------------------------------------------------------------------------------------------------------------------
12.7 Profit for the period from discontinued operations 85.1 4.5
=======================================================================================================================
22.9 Cash from operating activities 0.5 6.0
(2.7) Cash from investing activities (0.5) (0.7)
-----------------------------------------------------------------------------------------------------------------------
20.2 - 5.3
=======================================================================================================================
6. Earnings per share
Basic earnings per share amounts are calculated by dividing net profit for the period attributable to ordinary 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 ordinary equity holders of the
Company by the weighted average number of ordinary shares outstanding during the period (adjusted for the effects of
dilutive options and L-TIP awards). The following reflects the profit and share data used in the calculation of
earnings per share:
52 weeks ended 26 weeks ended 26 weeks ended
29 Dec 2006 29 June 2007 30 June 2006
£m £m £m
-----------------------------------------------------------------------------------------------------------------------
Basic earnings per share
Profit attributable to equity holders of the Company
81.6 - Total operations 117.9 27.4
68.6 - Total operations (before exceptional items) 39.2 28.7
68.9 - Continuing 32.8 22.9
55.9 - Continuing (before exceptional items) 32.8 24.2
207.1 Weighted average share capital (number of shares, million) 208.0 206.7
=======================================================================================================================
Diluted earnings per share
Profit attributable to equity holders of the Company
81.6 - Total operations 117.9 27.4
68.6 - Total operations (before exceptional items) 39.2 28.7
68.9 - Continuing 32.8 22.9
55.9 - Continuing (before exceptional items) 32.8 24.2
210.1 Weighted average share capital (number of shares, million) 210.6 209.1
=======================================================================================================================
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:
52 weeks ended 26 weeks ended 26 weeks ended
29 Dec 2006 29 June 2007 30 June 2006
Shares Shares Shares
Million Million Million
-----------------------------------------------------------------------------------------------------------------------
207.1 Weighted average number of ordinary shares for basic earnings per share 208.0 206.7
1.0 Effect of dilution: share options 0.6 1.2
2.0 L-TIP awards 2.0 1.2
-----------------------------------------------------------------------------------------------------------------------
Adjusted weighted average number of ordinary shares for diluted
210.1 earnings per share 210.6 209.1
=======================================================================================================================
The profit attributable to equity holders of the Company used in the calculation of both basic and diluted earnings per
share on total operations before exceptional items is calculated as follows:
52 weeks ended 26 weeks ended 26 weeks ended
29 Dec 2006 29 June 2007 30 June 2006
£m £m £m
-----------------------------------------------------------------------------------------------------------------------
81.6 Net profit attributable to ordinary shareholders 117.9 27.4
(13.0) Exceptional items net of tax (78.7) 1.3
-----------------------------------------------------------------------------------------------------------------------
68.6 Net profit attributable to ordinary shareholders 39.2 28.7
=======================================================================================================================
The profit attributable to equity holders of the Company used in the calculation of both basic and diluted earnings per
share on continuing operations before exceptional items is calculated as follows:
52 weeks ended 26 weeks ended 26 weeks ended
29 Dec 2006 29 June 2007 30 June 2006
£m £m £m
-----------------------------------------------------------------------------------------------------------------------
Net profit attributable to ordinary shareholders from
68.9 continuing operations 32.8 22.9
(13.0) Exceptional items net of tax - 1.3
-----------------------------------------------------------------------------------------------------------------------
55.9 Net profit attributable to ordinary shareholders 32.8 24.2
=======================================================================================================================
7. Dividends paid & proposed
52 weeks ended 26 weeks ended 26 weeks ended
29 Dec 2006 29 June 2007 30 June 2006
£m £m £m
-----------------------------------------------------------------------------------------------------------------------
Declared & paid during the period
Equity dividends on ordinary shares
19.9 Final dividend: 10.75p (2005: 9.65p) 22.4 20.0
7.8 Interim dividend: see below (2006: 3.75p) - -
-----------------------------------------------------------------------------------------------------------------------
27.7 22.4 20.0
=======================================================================================================================
Final dividend for 2006 proposed for approval by shareholders
22.3 at the AGM: 10.75p - -
- Interim dividend for 2007 declared by the Board: 4.15p (2006: 3.75p) 8.7 7.8
=======================================================================================================================
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.
8. Reconciliation of movements in equity
52 weeks ended 26 weeks ended 26 weeks ended
29 Dec 2006 29 June 2007 30 June 2006
£m £m £m
-----------------------------------------------------------------------------------------------------------------------
104.1 Total recognised income & expense for the period 120.6 33.1
1.4 Cost of share-based payments 0.7 0.7
(27.7) Dividends (22.4) (20.0)
3.1 Exercise of options & L-TIP awards 1.7 1.2
-----------------------------------------------------------------------------------------------------------------------
80.9 Net movement in equity 100.6 15.0
291.0 Opening equity 371.9 291.0
-----------------------------------------------------------------------------------------------------------------------
371.9 Closing equity 472.5 306.0
=======================================================================================================================
9. Cash generated from operations
52 weeks ended 26 weeks ended 26 weeks ended
29 Dec 2006 29 June 2007 30 June 2006
£m £m £m
-----------------------------------------------------------------------------------------------------------------------
Continuing operations
75.4 Operating profit before exceptional items 44.2 33.2
(2.4) Share of results of joint ventures (1.6) (1.3)
17.5 Depreciation & amortisation 8.8 8.6
0.2 Loss on disposal of property, plant & equipment 0.1 -
(0.9) Funding of pension & post-retirement costs (0.7) (0.2)
- Exchange (0.1) 0.3
1.4 Employee share schemes 0.7 0.7
1.9 (Decrease) increase in provisions (0.1) (0.8)
(6.6) Increase in inventories (14.5) (8.5)
Increase in trade & other receivables, construction contracts and
(20.1) forward foreign currency contracts (9.4) (0.9)
Increase in trade & other payables, construction contracts and
44.6 forward foreign currency contracts 24.5 14.1
-----------------------------------------------------------------------------------------------------------------------
111.0 Cash generated from operations 51.9 45.2
=======================================================================================================================
10. Exchange rates
The principal exchange rates applied in the preparation of these interim financial statements were as follows:
52 weeks ended 26 weeks ended 26 weeks ended
29 Dec 2006 29 June 2007 30 June 2006
-----------------------------------------------------------------------------------------------------------------------
Average rate
1.86 US dollar (per £) 1.98 1.80
2.45 Australian dollar (per £) 2.44 2.42
1.47 Euro (per £) 1.48 1.45
2.10 Canadian dollar (per £) 2.22 2.03
=======================================================================================================================
Closing rate
1.96 US dollar (per £) 2.00 1.83
2.48 Australian dollar (per £) 2.37 2.48
1.49 Euro (per £) 1.49 1.44
2.28 Canadian dollar (per £) 2.12 2.03
=======================================================================================================================
Interim Results
Copies of the interim results will be available from:
The Weir Group PLC
Clydesdale Bank Exchange
20 Waterloo Street
Glasgow
G2 6DB
Interim Dividend Payable:
9 November 2007
The interim dividend will be paid to shareholders on the register at close of
business on 12 October 2007.
Details contained in the interim report can be downloaded from The Weir Group
website at:
www.weir.co.uk.
Independent Review Report to The Weir Group PLC
Introduction
We have been instructed by the Company to review the financial information for
the 26 weeks ended 29 June 2007 which comprises the Consolidated Income
Statement, Consolidated Balance Sheet, Consolidated Cash Flow Statement,
Consolidated Statement of Recognised Income & Expenditure and the related notes
1 to 10. We have read the other information contained in the interim report and
considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.
This report is made solely to the Company in accordance with guidance contained
in Bulletin 1999/4 'Review of interim financial information' issued by the
Auditing Practices Board. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the Company, for our work,
for this report, or for the conclusions we have formed.
Directors responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
'Review of interim financial information' issued by the Auditing Practices Board
for use in the United Kingdom. A review consists principally of making enquiries
of Group management and applying analytical procedures to the financial
information and underlying financial data, and based thereon, assessing whether
the accounting policies and presentation have been consistently applied, unless
otherwise disclosed. A review excludes audit procedures such as tests of
controls and verification of assets, liabilities and transactions. It is
substantially less in scope than an audit performed in accordance with
International Standards on Auditing (UK and Ireland) and therefore provides a
lower level of assurance than an audit. Accordingly we do not express an audit
opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the 26 weeks ended
29 June 2007.
Ernst & Young LLP
Glasgow
21 August 2007
This information is provided by RNS
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