Final Results

RNS Number : 1279G

Weir Group PLC

28 February 2018

Press Release
28 February 2018
The Weir Group PLC
LEI : 549300KDR56WHY9I3D10

The Weir Group PLC today reports its full year results for the year ended 31 December 2017

Delivering strong growth and strategic progress

· Group orders¹ up 20% as demand for our leading technology and services increased in our main markets

o Minerals orders up 11%; consistently strong aftermarket growth and increased quotation activity

o Oil & Gas orders increased 67%; North American upstream increased 82%

o Flow Control orders 6% lower; aftermarket growth offset by tough original equipment conditions

· PBT² up 47% driven by excellent growth and operational leverage from Oil & Gas

o Operating margins in all three divisions increased sequentially in H2

o Second half Oil & Gas margins of 15.3%

o Full year Minerals margins reflect previously announced growth investments and one-off costs

o ROCE increased 290 basis points

· 'We are Weir' strategic framework delivering early results:

o Safety improvement: 20% reduction in Total Incident Rate;

o R&D investment up 47%; revenues generated from new solutions, up 53% to £168m;

o New Technology and People roadmaps developed

· 2018 expected to deliver strong revenue and profit growth

Continuing Operations³	2017	2016	As reported	Constant Currency¹
Orders¹	£2,395m	£1,989m	n/a	20%
Revenue	£2,356m	£1,845m	28%	19%
Operating profit²	£292m	£214m	36%	25%
Operating margin²	12.4%	11.6%	+80bps	+60bps
Profit before tax²	£250m	£170m	47%	32%
Reported profit after tax	£162m	£43m	274%	n/a
Cash from operations⁴	£221m	£293m	-25%	n/a
Earnings per share²	86.7p	61.2p	42%	n/a
Dividend per share	44.0p	44.0p	-	n/a
Return on capital employed⁵	10.4%	7.5%	+290bps	n/a
Net debt	£843m	£835m	-£8m	n/a

Jon Stanton, Chief Executive Officer, commented:

"The Group's performance in 2017 reflects the strength of Weir's leadership positions in our core markets. We worked closely with customers to identify opportunities to increase their productivity and invested early to take full advantage of improving conditions.

That proactive approach saw Minerals deliver great order momentum, underlined by the consistent growth in its high margin, cash generative aftermarket and positioned it decisively for the anticipated upturn in the mining capital cycle. Oil & Gas took full advantage of improving markets in North America to deliver an outstanding operating performance, while Flow Control turned the corner after a challenging first half. We have also made significant progress in developing the strategic framework that will drive sustainable medium term performance.

Looking to 2018, assuming market conditions remain supportive and despite anticipated foreign exchange headwinds, we expect to deliver strong revenue and profit growth and further balance sheet deleveraging."

A live webcast of the management presentation will begin at 0900 (GMT) on 28 February 2018 at www.investors.weir. A recording of the webcast will also be available at www.investors.weir.

Enquiries:
Investors: Stephen Christie	+44 (0) 7795 110456
Media: Raymond Buchanan	+44 (0) 7713 261447
Brunswick PR advisers: Patrick Handley / Diana Vaughton	+44 (0) 20 7404 5959

Notes:

1	2016 restated at 2017 average exchange rates.
2	Adjusted to exclude exceptional items and intangibles amortisation. Reported operating profit and profit before tax from continuing operations were £223m (2016: £90m) and £181m (2016: £43m) respectively. Reported earnings per share from total operations were 73.5p (2016: 17.8p).
3	Continuing operations excludes American Hydro Corporation and Ynfiniti Engineering Services, which were disposed of during H1 2016 and are reported as discontinued operations.
4	Cash from operations includes both continuing and discontinued operations.
5	Continuing operations EBIT before exceptional items (excluding KOP EBIT) divided by average net assets (excluding KOP net assets) excluding net debt and pension deficit (net of deferred tax asset).

Strategic progress

Weir provides highly engineered mission-critical solutions for global mining, oil and gas, power and other aftermarket-orientated process industries. The Group's strategic framework, 'We are Weir', is focused on outperforming in four distinctive competencies: People, Customers, Technology and Performance. Key achievements within each competency are summarised below.

People

Medium term KPI

· Improve sustainable engagement and organisational effectiveness.

Progress in year:

· 20% reduction in total incident rate to 0.53 - implemented a new Safety Charter and rolled out a Group-wide behavioural safety programme.

· Increased female representation at both Board and Senior Management levels with every business developing diversity and inclusion improvement plans to widen the Group's talent pool.

· Refreshed leadership training and undertook a global programme of increased employee engagement to embed 'We are Weir'.

Customers

Medium term KPI

· Increase market share.

Progress in year:

· Minerals grew orders ahead of sustaining capital spending and increased its order book by spending more time on customers' sites and investing in additional sales, project and product management experts in addition to opening eight new service centres.

· Oil & Gas leveraged its key account system to further embed Weir among Tier-1 oilfield service customers in North America and fully capture its share of the North American market upturn.

· Flow Control restructured its sales and marketing capability to better leverage its divisional product portfolio across a greater number of international markets and EPC customers delivering good aftermarket order growth.

Technology

Medium term KPI

· Increase revenues from new solutions¹.

Progress in year:

· Completed a new technology roadmap to be implemented from 2018 with a focus on digital solutions, advanced manufacturing, materials science and water and energy efficiency.

· Deployed Synertrex®, the Group's Internet of Things (IoT) platform, to initial customer sites within the Minerals division to enable better monitoring and maintenance of assets.

· Oil & Gas introduced the Simplified Frac Iron System that increases safety and reduced downtime on frack sites.

Performance

Medium term KPI

· Sustainably higher margins through the cycle.

Progress in year:

· Minerals reconfigured its manufacturing facilities and supply chain to increase efficiency ahead of the anticipated upturn in the mining capital cycle.

· Oil & Gas delivered an excellent operational performance, ramping up its supply chain and workforce to enable its main manufacturing facility to double manufacturing volumes while also delivering significant operating leverage.

· Baseline Value Chain Excellence scores were established for each business with improvement plans and training in place to further improve inventory turns and shorten lead times.

Notes:

1	Defined as products or services introduced in the last 3 years.

Segmental analysis
Continuing operations £m¹	Minerals	Oil & Gas	Flow Control	Unallocated expenses	Total	Total OE	Total AM
Orders (constant currency)
2017	1,347	732	316	n/a	2,395	722	1,673
2016	1,215	438	336	n/a	1,989	619	1,370
Variance:
- Constant currency	11%	67%	-6%		20%	16%	22%
- Like for Like²	11%	64%	-6%		20%	15%	22%
Revenue
2017	1,287	704	365	n/a	2,356	725	1,631
2016 (as reported)	1,112	401	332	n/a	1,845	580	1,265
Variance:
- As reported	16%	75%	10%		28%	25%	29%
- Constant currency	7%	67%	4%		19%	17%	21%
- Like for Like	7%	64%	4%		19%	16%	20%
Operating profit / (loss)³
2017	227	92	(3)	(24)	292
2016 (as reported)	217	(9)	30	(24)	214
Variance:
- As reported	5%	1118%	-109%	0%	36%
- Constant currency	-3%	1065%	-109%	0%	25%
- Like for Like	-3%	1095%	-109%	0%	27%
Operating margin³
2017	17.7%	13.0%	-0.8%	n/a	12.4%
2016 (as reported)	19.5%	-2.2%	9.1%	n/a	11.6%
Variance:
- As reported	-180bps	+1520bps	-990bps		+80bps
- Constant currency	-180bps	+1530bps	-1000bps		+60bps
- Like for Like	-180bps	+1600bps	-1000bps		+80bps

Notes:

1	The Group financial highlights and divisional financial reviews include a mixture of GAAP measures and those which have been derived from our reported results in order to provide a useful basis for measuring our operational performance. Operating results are for continuing operations before exceptional items and intangibles amortisation as provided in the Consolidated Income Statement. Details of other non-GAAP measures are provided in note 1 of the financial statements.
2	Like for like excludes the impact of acquisitions and related acquisition transaction costs.
3	Adjusted to exclude exceptional items and intangibles amortisation. KOP was acquired on 27 July 2017.

Group financial highlights

Orders of £2,395m (2016: £1,989m) increased 20% on a constant currency basis primarily due to the strong upturn in North American oil and gas markets, coupled with good growth in Minerals.

Revenue of £2,356m (2016: £1,845m) increased 28% on a reported basis reflecting both the recovery in North American Oil & Gas and a foreign exchange translation benefit of £127m. On a constant currency basis revenue was 19% ahead of prior year. The Group's order book increased in the year with a positive book to bill ratio of 1.02 (2016: 1.01).

Operating profit from continuing operations (before exceptional items and intangibles amortisation) of £292m increased by £78m or 36% on a reported basis.

The reported operating profit benefited from an £18m foreign exchange gain on the translation of overseas earnings due to the weakening of Sterling against the majority of currencies. Excluding foreign exchange gains, constant currency operating profit was £60m higher. Oil & Gas was £101m higher driven by positive North American markets, offset by Flow Control and Minerals which were £35m and £7m lower respectively. Flow Control was negatively impacted by continued depressed market conditions and resulting under-recoveries as well as a £13m one-off charge recorded in the first half in respect of legacy contract challenges. The lower Minerals profit reflects good underlying growth offset by investment in growth initiatives and costs of plant and supply chain reconfigurations. EBITDA before exceptional items was £350m (2016: £270m).

Operating margin from continuing operations (before exceptional items and intangibles amortisation) was 12.4%, an increase of 80bps on a reported basis and 60bps on a constant currency basis. On a constant currency basis Minerals decreased 180bps to 17.7%, with the second half showing a sequential increase to 18.1% as the business started to see payback on its investment in growth initiatives. Oil & Gas increased from a loss of 2.3% in the prior year on a constant currency basis to 13.0% following a strong market upturn and excellent operating leverage. Flow Control margins decreased on a constant currency basis to -0.8% from 9.2% in 2016 with the division improving in the second half to deliver mid-single digit margins.

Net finance costs before exceptional items were £42m in total (2016: £44m).

Profit before tax from continuing operations (before exceptional items and intangibles amortisation) increased by 47% to £250m (2016: £170m). The reported profit before tax from continuing operations of £181m compares to £43m in 2016.

An exceptional charge of £13m (2016: £74m) was recorded in the year, which primarily related to the finalisation of restructuring and rationalisation charges for programmes which commenced in prior periods to right size operations and discontinue certain activities. The cash outflow in respect of restructuring programmes in the year totals £29m. An exceptional gain of £10m was recognised on the sale of our 49% stake in Energy Products LLC (EPI), offset by a fair value charge of £9m on finalisation of the contingent consideration relating to the acquisition of the remaining 40% of Weir International, Flow Control's South Korea based valves business. EPI contributed £7m to Group operating profits in 2017, including a £2m one-off operational credit.

Intangibles amortisation totalled £55m in the year (2016: £50m), including an increase of £3m due to adverse foreign exchange translation.

The tax charge, before exceptional items and amortisation, for the year of £60m (2016: £38m) on profit before tax from continuing operations (before exceptional items and intangibles amortisation) of £250m (2016: £170m) represents an underlying effective tax rate of 23.9% (2016: 22.5%).

The exceptional tax credit of £41m includes a £24m credit resulting from the revaluation of the US deferred tax assets and liabilities following the reduction in the US federal tax rate from 35% to 21% and the release of previously held US tax provisions on unremitted overseas earnings, as a result of the signing into law of the United States Tax Cuts and Jobs Act on 22 December 2017.

Earnings per share from continuing operations (before exceptional items and intangibles amortisation) increased by 42% to 86.7p (2016: 61.2p). Reported earnings per share was 73.5p (2016: 17.8p).

Cash generated from operations decreased by 25% from £293m to £221m, with the increase in operating profit offset by the activity level driven growth in working capital of £119m (2016: inflow of £32m). Our working capital efficiency was demonstrated by working capital as a percentage of sales reducing from 27.1% to 25.7% and inventory turns improving from 2.2 to 2.7.

Free cash flow¹ from continuing operations was an outflow of £24m (2016: inflow of £130m). The £154m reduction reflects lower operating cash flows, higher cash tax, increased capital investment and increased cash dividend with lower uptake for the scrip dividend compared to the prior year.

The free cash outflow, plus outflows for exceptional items of £29m and other movements of £4m were partially offset by a favourable foreign exchange movement of £49m, mainly on US$ and Euro denominated debt. Cash proceeds of £32m for EPI and £3m from other investment activities were broadly offset by our purchase of the remaining 40% of Weir International for £37m. This resulted in a marginal increase in reported net debt at year-end to £843m (2016: £835m). On a lender covenant basis, the ratio of net debt to EBITDA excluding exceptional items was 2.5 times, compared to a covenant level of 3.5 times.

Dividend

The Board is recommending a final dividend of 29.0p, resulting in a total dividend of 44.0p for the year, unchanged from 2016. Dividend cover (being the ratio of earnings per share from continuing operations before exceptional items and intangibles amortisation, to dividend per share) is 2 times. If approved at the Annual General Meeting, on 26 April 2018, the final dividend will be paid on 4 June 2018 to shareholders on the register on 27 April 2018 with a scrip dividend alternative continuing to be offered, as approved at the 2016 AGM.

Board changes

As previously announced, Stephen Young joined the Board as a Non-Executive Director on 1 January 2018 and Alan Ferguson and John Mogford will both retire from the Board following the 2018 Annual General Meeting. Stephen Young will succeed Alan Ferguson as Audit Committee Chairman, with effect from 26 April 2018.

Minerals

Weir Minerals is a global leader in the provision of mill circuit technology and services as well as the market leader in slurry handling equipment and associated aftermarket support for abrasive high wear applications. Its differentiated technology is used in mining, oil and gas and general industrial markets around the world.

Constant currency £m

H1¹

2017

2016¹

Growth

Orders OE

213

191

404

353

14%

Orders AM

465

478

943

862

Input Total

678

669

1,347

1,215

11%

Revenue OE

161

210

371

346

Revenue AM

443

473

916

855

Revenue Total

604

683

1,287

1,201

Operating profit²

104

123

227

234

-3%

Operating margin²

17.1%

18.1%

17.7%

19.5%

-180bps

Operating cash flow

160

236

-32%

Book-to-bill

1.12

0.98

1.05

1.01

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

2 Adjusted to exclude exceptional items and intangibles amortisation.

Delivering strong order growth and building long-term value

· Strong order growth, up 11%, benefiting from its integrated solutions strategy and early investment

· Margins reflect additional investment to support growth and plant and supply chain reconfiguration costs

· 2018 outlook: Moderate growth in constant currency revenues with slightly higher operating margins

2017 Market review

In mining, ore production increased slightly by 1% while average ore yields continued to fall, requiring greater levels of processing to maintain the same volume of refined commodity, supporting aftermarket demand growth. While overall mining capital spending was stable, sustaining expenditure increased by 5% as miners sought to optimise production from existing assets.

Regionally, Australasia saw increased activity driven by gold and lithium markets while coal remained challenging. Similarly, Africa benefited from increased activity in gold and copper, although there was some disruption from government actions in East Africa in the second half of the year. North America and Europe benefited from improved sentiment and activity in hard rock mining markets, although North American general industrial and coal markets were relatively subdued. In Latin America, mining activity remained robust despite the impact of industrial relations issues in the first half for some of our customers.

In non-mining markets, aggregates demand remained supportive in most regions, with the US in particular increasing its investment in infrastructure. While there was no significant new investment in oil sands projects, production increased overall supporting demand for aftermarket spares and services.

2017 Operational review

As part of its continued focus on developing a broader solutions mindset, more time was spent by employees from all levels of the organisation on customer sites. This close customer intimacy gave the division improved insight, allowing it to anticipate additional demand, particularly for integrated solutions that optimise production of existing assets.

To take full advantage of these positive trends the division was proactive, investing in additional sales, engineering and project management capability. It also extended its global service centre network with new facilities in Canada, France, Poland, Sweden, the Dominican Republic and Russia, taking our total number of service centres to approximately 100. The division encountered some short-term operational challenges in North America and Europe as result of plant and supply chain reconfigurations to meet demand growth, but these had been substantially remediated by the end of the year. Good progress was made globalising newer product lines such as the comminution offering and Delta Valves while new technology introductions included advanced spools for oil sands applications.

2017 Financial review

Orders increased by 11% to £1,347m (2016: £1,215m), and supported a good book-to-bill of 1.05. Original equipment orders were up 14% year-on-year, reflecting higher sustaining expenditure by miners.

Aftermarket orders increased by 9% on a constant currency basis reflecting improved market conditions and continuing investment in the division's service network and engineering sales force. Aftermarket orders represented 70% of total input (2016: 71%).

In total, mining end markets accounted for 74% of input (2016: 73%) with orders growing strongly. Non-mining markets, including sand and aggregates and industrial markets, also performed well, while the oil sands and power sectors were stable.

Revenue was 7% higher on a constant currency basis at £1,287m (2016: £1,201m) reflecting order trends. Original equipment sales accounted for 29% (2016: 29%) of divisional revenues and were 7% higher than the prior year driven by the success of the division's integrated solutions strategy.

Regionally, revenues from Africa, South America, Australia, Europe and Asia Pacific grew, while North America was more subdued and the Middle East remained challenging. Aftermarket revenues grew strongly for pump and mill circuit spares, particularly in Latin America, China and Africa and were also supported by increased production in Canadian oil sands markets. Reported revenues increased by 16% (2016: £1,112m), after a foreign exchange translation benefit of £89m.

Operating profit reduced by 3% on a constant currency basis to £227m (2016: £234m). Good underlying growth was more than offset by £25m investment in growth initiatives and plant and supply chain reconfiguration costs of which approximately £10m is one-off in nature. This effect was mostly first half-weighted with second half operating profit 7% higher than the prior year. Reported operating profit increased by 5% after an 8% foreign exchange tailwind (2016: £217m).

Operating margin on a constant currency basis reduced by 180 bps to 17.7% (2016: 19.5%) reflecting incremental investment in supporting growth and plant and supply chain reconfigurations. These impacts were reduced in the second half as the division started to see returns on its investments with margins showing a 100bps progression compared to the first half. Product line gross margins were broadly stable.

Operating cash flow decreased by 32% to £160m (2016: £236m) reflecting investment in working capital to support current and future growth.

Capital expenditure of £41m (2016: £32m) included investment in plant reconfiguration within the division's North American manufacturing footprint and facility upgrades in Chile and the UK. The division also continued the global roll-out of its standardised ERP system.

Research and development spend increased to £16m (2016: £15m) and continued to be focused on maintaining and expanding the division's product portfolio. Developments included the initial rollout of the Group's Synertrex© technology platform to customer sites.

2018 Outlook

Miners are expected to increase sustaining capital expenditure in 2018, supporting global ore production growth. Assuming supportive market conditions continue, it is anticipated the division will deliver moderately higher constant currency revenues and slightly higher full year operating margins, with performance supported by both the strong order book and investment in growth initiatives in 2017.

Oil & Gas

Weir Oil & Gas provides highly engineered and mission-critical solutions to upstream markets. Products include pressure pumping and pressure control equipment and aftermarket spares and services. Internationally we provide equipment repairs, upgrades, certification and asset management, and field services.

Constant currency £m

H1¹

2017

2016¹

Growth

LFL^1,3 Growth

Orders OE

159

104%

93%

Orders AM

274

299

573

360

59%

58%

Input Total

347

385

732

438

67%

64%

Revenue OE

141

87%

76%

Revenue AM

247

316

563

346

63%

61%

Revenue Total

308

396

704

421

67%

64%

Operating profit/(loss)²

(9)

1065%

1095%

Operating margin²

10.1%

15.3%

13.0%

-2.3%

+1530bps

+1600bps

Operating cash flow

(1)

-9%

Book-to-bill

1.13

0.97

1.04

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

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

3 Like for like (LFL) excludes the impact of acquisitions and related transaction integration costs. KOP was acquired on 27 July 2017.

Rapidly responding to increased demand

· Strong order, revenue and margin growth with excellent operating leverage

· Later-cycle international markets remained challenging

· 2018 outlook: Strong increase in constant currency revenues and profits

2017 Market review

Activity in North American upstream markets was supported by increasing oil prices through the year. This led to increased industry investment, with the US land rig count averaging 852, a 74% increase on 2016. Oilfield service companies responded by refurbishing frack fleets with effective utilisation of the active US fleet now running at approximately 80%. Production methods continued to intensify with the number of frack stages and volume of proppant used increasing and driving increased demand for aftermarket spares and services. As the market tightened during 2017 there was a modest improvement in pricing.

Later cycle international markets entered the downturn after North America and conditions remained challenging. While the international rig count increased 2%, new investment was subdued, with continued pricing pressure and project delays.

2017 Operational review

The division delivered an excellent operating performance as demand for its solutions increased rapidly in North America. The divisional workforce grew by approximately 1,000 with its main manufacturing facility in Fort Worth, Texas, moving from one shift to three. Operating leverage benefited from previous cost reductions and good supply chain management. The division continued to innovate including introducing the Simplified Frac System which reduces the amount of iron required on a frack site, improving safety and uptime.

Internationally, the division continued to develop its pressure control offering in challenging market conditions with the acquisition of KOP Surface Products extending its geographical reach into South East Asia and accelerating its Middle East wellhead strategy.

2017 Financial review

Orders of £732m (2016: £438m) were up 67% and 64% higher on a like for like basis, reflecting the significantly increased activity levels in North America, where orders were up 82%. Aftermarket orders were up 59% year-on-year and represented 78% (2016: 82%) of divisional orders. Original equipment was 104% higher, against a weak comparator, driven primarily by increased demand for frack pumps, flow equipment and wellheads.

Orders from international markets fell moderately year-on-year but increased sequentially through the second half as activity levels improved slightly, particularly for inspection and service work.

Revenue increased by 67% to £704m on a constant currency basis (2016: £421m) and was up 64% on a like-for-like basis, reflecting order input trends. Original equipment and aftermarket revenues increased by 87% and 63% respectively, with aftermarket accounting for 80% of total revenues (2016: 82%). Reported revenues were up 75% after a 5% foreign exchange translation benefit (2016: £401m).

North American revenues increased by 78% compared to the prior year and in the second half increased sequentially by 28%, reflecting strong order trends. International revenues were also higher year-on year although against a weak comparator with a sequential improvement in line with order trends.

Operating profit including joint ventures was £92m (2016: operating loss of £9m on a constant currency and reported basis). The recovery was driven by higher activity levels and volumes in upstream North American markets and strong manufacturing overhead recoveries supported by previous cost base reductions. In North America we saw modest pricing improvements.

Operating margin at 13% was up 1530bps reflecting positive market conditions, modest pricing increases and excellent operating leverage. Margins improved sequentially through the year, with second half margins of 15.3%.

Operating cash flow declined by 9% to £43m (2016: £47m) with the significant increase in operating profit more than offset by a working capital outflow to support strong revenue growth.

Capital expenditure of £25m (2016: £8m) included the upgrading of North American service centres and ongoing replacement of the rental asset fleet.

Total Research and Development expenditure of £7m (2016: £6m) included developing the Simplified Frac System that significantly reduces the amount of iron needed on a frack site, improving safety and reducing downtime.

2018 Outlook

Assuming market conditions remain supportive at or around current levels, E&P and service companies are expected to increase capital spending in North American upstream markets. It is anticipated that international markets will continue their modest recovery. In this context, the division is expecting a strong increase in constant currency revenues and profits with mid-teens operating margins, driven by higher North American completions activity levels.

The range of external expectations for growth in 2018 is wide, reflecting very different assumptions on how the market develops through the year. Assuming current market conditions continue our base case operating plan is in line with consensus for Oil & Gas operating profit, subject to adjustment for the £7m profit contribution from the EPI business which was sold in November 2017 and current foreign exchange rates. This would represent constant currency revenue growth in our North American businesses of around 25% together with some further modest pricing gains. Further growth beyond this base case would require stronger rig count growth, higher completions activity and incremental capital investment by customers in new build capacity beyond current expectations.

Flow Control

Weir Flow Control designs and manufactures valves and pumps as well as providing specialist support services to the global power generation, industrial, oil and gas and other aftermarket-orientated process industries.

Constant currency £m

H1¹

2017

2016¹

Growth

Orders OE

159

188

-16%

Orders AM

157

148

Orders Total

158

316

336

-6%

Revenue OE

119

213

199

Revenue AM

152

151

Revenue Total

165

200

365

350

Operating (loss)/profit²

(12)

(3)

-109%

Operating margin²

-7.2%

4.6%

-0.8%

9.2%

-1000bps

Operating cash flow

-45%

Book-to-bill

0.96

0.79

0.86

0.96

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

2 Adjusted to exclude exceptional items and intangibles amortisation.

Aftermarket growth in challenging conditions

· Orders reflect challenging downstream oil and gas markets; AM growth in power and industrial markets

· Full year margins impacted by market conditions and one-off charges; H2 margins improved sequentially

· 2018 outlook: Increased constant currency profits and margins

2017 Market review

Customers continued to be cautious in both power and downstream oil and gas markets. There was limited project activity with competitive market conditions and pricing pressure a common feature. Nuclear projects in China and South Korea continued to make progress but sentiment in the United States and Europe was more subdued. Aftermarket demand was supported by ongoing maintenance schedules.

Downstream oil and gas markets, which were later to enter the downturn, remained challenging for original equipment and aftermarket demand, although there were signs of improvement towards the end of the year. Industrial markets were more positive, in line with global economic growth.

2017 Operational review

In challenging market conditions the division successfully maximised aftermarket opportunities and expanded the geographic reach of its wider product portfolio. Sales and marketing operations were reconfigured to support new global and application based initiatives while competitiveness was enhanced by value chain excellence initiatives and best cost sourcing. While one-off charges in the first half of £13m relating to legacy contract challenges at Gabbioneta impacted overall performance, the division delivered a better second half supported by higher volumes and good operating leverage. The division also made good strategic progress in the development of new technologies and expansion of its e-commerce offering.

2017 Divisional financial review

Order input decreased by 6% to £316m (2016: £336m) and was principally impacted by the significant decline in mid and downstream oil and gas markets. In addition, there was limited project activity in power markets, although there was good growth in industrial markets. Original equipment orders were down 16% led by reduced pump orders in downstream markets with valve orders relatively stable. Aftermarket orders grew 6% driven by demand for valves with pump demand stable year-on-year.

Power markets represented 44% of orders (2016: 41%). The proportion of orders from oil and gas markets decreased to 24% (2016: 30%). Emerging markets accounted for 39% of input (2016: 37%). Overall, good growth in Asia Pacific was more than offset by reductions in Africa, Middle East, North America and Europe.

Revenue increased by 4% on a constant currency basis to £365m (2016: £350m), with aftermarket revenues flat on the prior year. Original equipment revenues were up 7%, as the legacy order book unwound. Reported revenues were up 10% (2016: £332m) reflecting a 5% foreign exchange translation benefit.

An operating loss of £3m (2016: £32m profit on a constant currency basis) was recorded as a result of tough trading conditions impacting gross margins and overhead recoveries, together with the impact of £13m of one-off costs.

Operating margin for the full year was down 1000bps to -0.8% (2016: 9.2%) principally as a result of the tough trading conditions and one-off charges outlined above.

Operating cash flow of £23m (2016: £42m) reflected a good working capital performance and the reduced profitability of the division.

Capital expenditure of £5m was significantly lower than last year (2016: £15m) which included the completion of the relocation of Gabbioneta to a new manufacturing facility in Milan. Investment in research and development was unchanged at £5m (2016: £5m).

2018 Outlook

The division's main power and downstream oil and gas markets have stabilised with some early signs of improvement. The division entered the year with a lower order book but is expected to deliver broadly stable constant currency revenues for the full year as it benefits from its new sales and marketing structure. Operating profits and margins are expected to increase, with a return to mid-single digit operating margins for the full year.

Appendix 1 - 2017 quarterly input trends

	Reported growth¹					Like for like^1,2 growth
Division	Q1	Q2	Q3	Q4	FY		Q1	Q2	Q3	Q4	FY
Original Equipment	4%	25%	19%	10%	14%		4%	25%	19%	10%	14%
Aftermarket	13%	7%	9%	8%	9%		13%	7%	9%	8%	9%
Minerals	10%	12%	12%	9%	11%		10%	12%	12%	9%	11%

Original Equipment	56%	143%	92%	130%	104%		56%	143%	82%	97%	93%
Aftermarket	48%	98%	52%	46%	59%		48%	98%	50%	43%	58%
Oil & Gas	50%	106%	59%	60%	67%		50%	106%	56%	52%	64%

Original Equipment	-18%	-33%	-8%	-1%	-16%		-18%	-33%	-8%	-1%	-16%
Aftermarket	-3%	6%	7%	17%	6%		-3%	6%	7%	17%	6%
Flow Control	-11%	-15%	-2%	6%	-6%		-11%	-15%	-2%	6%	-6%

Original Equipment	5%	19%	21%	23%	16%		5%	19%	20%	18%	15%
Aftermarket	21%	27%	22%	20%	22%		21%	27%	21%	19%	22%
Continuing Ops¹	15%	24%	21%	21%	20%		15%	24%	21%	19%	20%
Book to Bill	1.14	1.06	0.95	0.94	1.02		1.14	1.06	0.95	0.94	1.02

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

²Like for like excludes the impact of acquisitions, KOP was acquired on 27 July 2017 and excluded for 2017.

Appendix 2 - 2017 Foreign Exchange (FX) rates and profit exposure

	2016 FY average FX rates	2017 FY average FX rates	Percentage of 2017 operating profits
US dollar	1.36	1.29	60%
Australian dollar	1.83	1.68	10%
Canadian dollar	1.80	1.67	12%
Euro €	1.22	1.14	2%
Chilean Peso	918.59	835.52	13%
United Arab Emirates Dirham	4.98	4.73	1%
South African rand	20.00	17.15	4%
Brazilian Real	4.75	4.11	2%
Russian rouble	91.2	75.17	2%

This information includes 'forward-looking statements'. All statements other than statements of historical fact included in this presentation, including, without limitation, those regarding The Weir Group PLC's ("the Group") financial position, business strategy, plans (including development plans and objectives relating to the Group's products and services) and objectives of management for future operations, are forward-looking statements. These statements contain the words "anticipate", "believe", "intend", "estimate", "expect" and words of similar meaning. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of the Group to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Group's present and future business strategies and the environment in which the Group will operate in the future. These forward-looking statements speak only as at the date of this document. The Group expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in the Group's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. Past business and financial performance cannot be relied on as an indication of future performance.

AUDITED RESULTS Consolidated Income Statement
for the year ended 31 December 2017


		Year ended 31 December 2017			Period ended 31 December 2016
		Before exceptional items & intangibles amortisation	Exceptional items & intangibles amortisation (note 3)	Total	Before exceptional items & intangibles amortisation	Exceptional items & intangibles amortisation (note 3)	Total
	Notes	£m	£m	£m	£m	£m	£m
Continuing operations
Revenue	2	2,355.9	-	2,355.9	1,844.9	-	1,844.9
Continuing operations
Operating profit before share of results of joint ventures		280.9	(68.7)	212.2	206.8	(123.7)	83.1
Share of results of joint ventures		10.9	-	10.9	7.2	-	7.2
Operating profit		291.8	(68.7)	223.1	214.0	(123.7)	90.3

Finance costs		(43.3)	(0.8)	(44.1)	(48.1)	(3.8)	(51.9)
Finance income		1.6	-	1.6	4.4	-	4.4
Profit before tax from continuing operations		250.1	(69.5)	180.6	170.3	(127.5)	42.8
Tax (expense) credit	4	(59.7)	40.6	(19.1)	(38.4)	38.8	0.4
Profit for the year from continuing operations		190.4	(28.9)	161.5	131.9	(88.7)	43.2
Profit (loss) for the year from discontinued operations		-	-	-	1.1	(6.1)	(5.0)
Profit for the year		190.4	(28.9)	161.5	133.0	(94.8)	38.2
Attributable to:
Equity holders of the Company		190.6	(28.9)	161.7	133.1	(94.8)	38.3
Non-controlling interests		(0.2)	-	(0.2)	(0.1)	-	(0.1)
		190.4	(28.9)	161.5	133.0	(94.8)	38.2
Earnings per share	5
Basic - total operations				73.5p			17.8p
Basic - continuing operations		86.7p		73.5p	61.2p		20.1p

Diluted - total operations				73.1p			17.7p
Diluted - continuing operations		86.1p		73.1p	60.8p		20.0p

Consolidated Statement of Comprehensive Income
for the year ended 31 December 2017

	Year ended	Period ended
	31 December 2017	31 December 2016
	£m	£m
Profit for the year	161.5	38.2
Other comprehensive income (expense)
Gains (losses) taken to equity on cash flow hedges	0.4	(0.7)
Exchange (losses) gains on translation of foreign operations	(147.7)	377.4
Reclassification of foreign currency translation reserve on discontinued operations	-	0.8
Exchange gains (losses) on net investment hedges	54.0	(142.0)
Reclassification adjustments on cash flow hedges	(0.3)	1.9
Tax relating to other comprehensive income (expense) to be reclassified in subsequent years	0.8	0.2
Items that are or may be reclassified to profit or loss in subsequent years	(92.8)	237.6

Remeasurements on defined benefit plans	(5.4)	(53.0)
Remeasurements on other benefit plans	(0.8)	-
Tax relating to other comprehensive income (expense) that will not be reclassified in subsequent years	1.5	8.6
Items that will not be reclassified to profit or loss in subsequent years	(4.7)	(44.4)

Net other comprehensive (expense) income	(97.5)	193.2

Total net comprehensive income for the year	64.0	231.4
Attributable to:
Equity holders of the Company	64.2	228.9
Non-controlling interests	(0.2)	2.5
	64.0	231.4
Total net comprehensive income (expense) for the year attributable to equity holders of the Company
Continuing operations	64.2	233.0
Discontinued operations	-	(4.1)
	64.2	228.9

Consolidated Balance Sheet
at 31 December 2017
					31 December 2017		31 December 2016
			Notes		£m		£m
ASSETS
Non-current assets
Property, plant & equipment					392.3		402.0
Intangible assets					1,549.9		1,628.8
Investments in joint ventures					19.2		40.5
Deferred tax assets					45.3		42.1
Other receivables					43.0		39.2
Retirement benefit plan assets			11		-		9.8
Derivative financial instruments			12		0.3		-
Total non-current assets					2,050.0		2,162.4
Current assets
Inventories					586.8		551.6
Trade & other receivables					613.3		481.8
Construction contracts					23.6		23.8
Derivative financial instruments			12		16.7		24.0
Income tax receivable					18.5		21.5
Cash & short-term deposits					284.6		258.6
Total current assets					1,543.5		1,361.3
Total assets					3,593.5		3,523.7
LIABILITIES
Current liabilities
Interest-bearing loans & borrowings					388.4		144.0
Trade & other payables					613.2		548.1
Construction contracts					2.6		4.2
Derivative financial instruments			12		25.8		30.2
Income tax payable					31.1		43.8
Provisions					52.6		83.2
Total current liabilities					1,113.7		853.5
Non-current liabilities
Interest-bearing loans & borrowings					739.4		949.1
Other payables					0.5		14.9
Derivative financial instruments			12		0.7		14.9
Provisions					72.0		60.2
Deferred tax liabilities					58.4		100.5
Retirement benefit plan deficits			11		137.7		147.0
Total non-current liabilities					1,008.7		1,286.6
Total liabilities					2,122.4		2,140.1
NET ASSETS					1,471.1		1,383.6
CAPITAL & RESERVES
Share capital					28.1		27.3
Share premium					197.9		86.2
Merger reserve					9.4		9.4
Treasury shares					(5.9)		(5.9)
Capital redemption reserve					0.5		0.5
Foreign currency translation reserve					98.1		191.8
Hedge accounting reserve					0.3		(0.6)
Retained earnings					1,141.4		1,066.4
Shareholders' equity					1,469.8		1,375.1
Non-controlling interests					1.3		8.5
TOTAL EQUITY					1,471.1		1,383.6

The financial statements were approved by the Board of Directors and authorised for issue on 28 February 2018.

Jon Stanton	John Heasley
Director	Director
Consolidated Cash Flow Statement
for the year ended 31 December 2017

				Year ended		Period ended
				31 December 2017		31 December 2016
		Notes		£m		£m
Cash flows from operating activities		13
Cash generated from operations				220.5		292.6
Additional pension contributions paid				(3.0)		(2.8)
Exceptional cash items		10		(28.6)		(58.1)
Income tax paid				(60.5)		(15.7)
Net cash generated from operating activities				128.4		216.0

Cash flows from investing activities
Acquisitions of subsidiaries, net of cash acquired		13		(90.1)		(10.6)
Investment in joint ventures				(1.4)		-
Purchases of property, plant & equipment				(67.8)		(50.5)
Purchases of intangible assets				(17.6)		(15.4)
Other proceeds from sale of property, plant & equipment and intangible assets				4.6		3.5
Disposals of discontinued operations, net of cash disposed		13		3.5		31.4
Disposals of joint ventures				31.8		-
Exceptional items included in asset disposal programme				-		35.7
Interest received				1.5		6.5
Dividends received from joint ventures				8.0		7.3
Net cash (used in) generated from investing activities				(127.5)		7.9

Cash flows from financing activities
Purchase of non-controlling interest		8		(37.2)		(3.4)
Proceeds from borrowings				964.4		1,328.1
Repayments of borrowings				(854.7)		(1,420.5)
Settlement of derivative financial instruments				6.6		(3.7)
Interest paid				(42.3)		(46.3)
Dividends paid to equity holders of the Company		6		(74.2)		(45.8)
Issue of shares				90.0		-
Purchase of shares for LTIP & other awards				-		(0.1)
Net cash generated from (used in) financing activities				52.6		(191.7)

Net increase in cash & cash equivalents				53.5		32.2
Cash & cash equivalents at the beginning of the year				257.0		179.3
Foreign currency translation differences				(26.0)		45.5
Cash & cash equivalents at the end of the year				284.5		257.0

Consolidated Statement of Changes in Equity
for the year ended 31 December 2017
	Share capital	Share premium	Merger reserve	Treasury shares	Capital redemption reserve	Foreign currency translation reserve	Hedge accounting reserve	Retained earnings	Attributable to equity holders of the Company	Non controlling interests	Total equity
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
At 1 January 2016	26.8	38.0	9.4	(5.8)	0.5	(41.8)	(2.0)	1,166.5	1,191.6	6.2	1,197.8
Profit (loss) for the period	-	-	-	-	-	-	-	38.3	38.3	(0.1)	38.2
Losses taken to equity on cash flow hedges	-	-	-	-	-	-	(0.7)	-	(0.7)	-	(0.7)
Exchange gains on translation of foreign operations	-	-	-	-	-	374.8	-	-	374.8	2.6	377.4
Reclassification of foreign currency translation reserve on discontinued operations	-	-	-	-	-	0.8	-	-	0.8	-	0.8
Exchange losses on net investment hedges	-	-	-	-	-	(142.0)	-	-	(142.0)	-	(142.0)
Remeasurements on defined benefit plans	-	-	-	-	-	-	-	(53.0)	(53.0)	-	(53.0)
Reclassification adjustments on cash flow hedges	-	-	-	-	-	-	1.9	-	1.9	-	1.9
Tax relating to other comprehensive income (expense)	-	-	-	-	-	-	0.2	8.6	8.8	-	8.8
Total net comprehensive income (expense) for the period	-	-	-	-	-	233.6	1.4	(6.1)	228.9	2.5	231.4
Acquisition of non-controlling interest	-	-	-	-	-	-	-	(3.8)	(3.8)	(0.2)	(4.0)
Issue of shares	0.5	48.2	-	-	-	-	-	-	48.7	-	48.7
Cost of share-based payments inclusive of tax credit	-	-	-	-	-	-	-	4.3	4.3	-	4.3
Dividends	-	-	-	-	-	-	-	(94.5)	(94.5)	-	(94.5)
Purchase of shares*	-	-	-	(0.1)	-	-	-	-	(0.1)	-	(0.1)
At 31 December 2016	27.3	86.2	9.4	(5.9)	0.5	191.8	(0.6)	1,066.4	1,375.1	8.5	1,383.6
Profit (loss) for the year	-	-	-	-	-	-	-	161.7	161.7	(0.2)	161.5
Gains taken to equity on cash flow hedges	-	-	-	-	-	-	0.4	-	0.4	-	0.4
Exchange losses on translation of foreign operations	-	-	-	-	-	(147.7)	-	-	(147.7)	-	(147.7)
Exchange gains on net investment hedges	-	-	-	-	-	54.0	-	-	54.0	-	54.0
Remeasurements on defined benefit plans	-	-	-	-	-	-	-	(5.4)	(5.4)	-	(5.4)
Remeasurements on other benefit plans	-	-	-	-	-	-	-	(0.8)	(0.8)	-	(0.8)
Reclassification adjustments on cash flow hedges	-	-	-	-	-	-	(0.3)	-	(0.3)	-	(0.3)
Tax relating to other comprehensive income (expense)	-	-	-	-	-	-	0.8	1.5	2.3	-	2.3
Total net comprehensive (expense) income for the year	-	-	-	-	-	(93.7)	0.9	157.0	64.2	(0.2)	64.0
Acquisition of non-controlling interest	-	-	-	-	-	-	-	7.0	7.0	(7.0)	-
Issue of shares	0.8	111.7	-	-	-	-	-	-	112.5	-	112.5
Cost of share-based payments inclusive of tax credit	-	-	-	-	-	-	-	7.7	7.7	-	7.7
Dividends	-	-	-	-	-	-	-	(96.7)	(96.7)	-	(96.7)
At 31 December 2017	28.1	197.9	9.4	(5.9)	0.5	98.1	0.3	1,141.4	1,469.8	1.3	1,471.1
* These shares were purchased on the open market and are held by the Estera EBT on behalf of the Group.

Notes to the Audited Results

1. Accounting policies

Basis of preparation

The audited results for the year ended 31 December 2017 ('2017') 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 2006.

The financial information set out in the audited results does not constitute the Group's statutory financial statements for the year ended 31 December 2017 within the meaning of section 434 of the Companies Act 2006 and has been extracted from the full financial statements for the year ended 31 December 2017.

Statutory financial statements for the period ended 31 December 2016 ('2016'), which received an unqualified audit report, have been delivered to the Registrar of Companies. The reports of the auditors on the financial statements for the period ended 31 December 2016 and for the year ended 31 December 2017 were unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006. The financial statements for the year ended 31 December 2017 will be delivered to the Registrar of Companies and made available to all shareholders in due course.

These financial statements are presented in Sterling. All values are rounded to the nearest 0.1 million pounds (£m) except where otherwise indicated.

The accounting policies which follow are consistent with those of the previous period. There are no new standards or interpretations which are considered to have a material impact on the annual Consolidated Financial Statements of the Group.

Exceptional items & intangibles amortisation

In order to provide the users of the financial statements with a more relevant presentation of the Group's underlying performance, on a like for like basis, profit for each period has been analysed between:

i) profit before exceptional items & intangibles amortisation; and

ii) the effect of exceptional items & intangibles amortisation.

Exceptional items are items of income and expense which, because of the nature, size and/or infrequency of the events giving rise to them, merit separate presentation. These specific items are presented on the face of the Consolidated Income Statement to provide greater clarity and a better understanding of the impact of these items on the Group's financial performance. In doing so, it also facilitates greater comparison of the Group's underlying results with prior periods and assessment of trends in financial performance. This split is consistent with how underlying business performance is measured internally.

Exceptional items may include but are not restricted to: profits or losses arising on disposal or closure of businesses; the cost of significant business restructuring; significant impairments of intangible or tangible assets; adjustments to the fair value of acquisition related items such as contingent consideration and inventory; other items deemed exceptional due to their significance, size or nature; and the related exceptional taxation.

Intangibles amortisation has been shown separately to provide visibility over the ongoing impact on the Group's Income Statement of prior and current period investment activities.

Further analysis of the items included in the column 'Exceptional items & intangibles amortisation' is provided in note 3 to the financial statements.

Non-GAAP measures
The financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and applied in accordance with the provisions of the Companies Act 2006. In measuring our performance, the financial measures that we use include those which have been derived from our reported results in order to eliminate factors which we believe distort period-on-period comparisons. These are considered non-GAAP financial measures. This information, along with comparable GAAP measurements, is useful to investors in providing a basis for measuring our operational performance. Our management uses these financial measures, along with the most directly comparable GAAP financial measures, in evaluating our performance and value creation. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information in compliance with GAAP. Non-GAAP financial measures as reported by the Group may not be comparable with similarly titled amounts reported by other companies.
Below we set out our definitions of non-GAAP measures and provide reconciliations to relevant GAAP measures.

Free cash flow
Free cash flow (FCF) is defined as cash flow from operating activities adjusted for income taxes, net capital expenditures, net interest payments, dividends paid, settlement of derivatives, purchase of shares for LTIP and other awards and pension contributions. FCF reflects an additional way of viewing our liquidity that we believe is useful to investors as it represents cash flows that could be used for repayment of debt or to fund our strategic initiatives, including acquisitions, if any. The reconciliation of cash flow from operating activities to FCF is as follows.

	2017	2016
	£m	£m
Cash generated from operations	220.5	292.6
Income tax paid	(60.5)	(15.7)
Net capital expenditure from purchase & disposal of property, plant & equipment and intangibles	(80.8)	(62.4)
Net interest paid	(40.8)	(39.8)
Dividends paid to equity holders of the Company	(74.2)	(45.8)
Dividends received from joint ventures	8.0	7.3
Settlement of derivative financial instruments	6.6	(3.7)
Purchase of shares for LTIP & other awards	-	(0.1)
Additional pension contributions paid	(3.0)	(2.8)
	(24.2)	129.6

EBITDA
EBITDA is operating profit from continuing operations, before exceptional items, intangibles amortisation and depreciation. EBITDA is used in conjunction with other GAAP and non-GAAP financial measures to assess our operating performance. A reconciliation of EBITDA to the closest equivalent GAAP measure, operating profit, is provided.

	2017	2016
	£m	£m
Continuing operations
Operating profit	223.1	90.3
Adjusted for:
Exceptional items (note 3)	13.3	73.5
Earnings before interest and tax (EBIT)	236.4	163.8
Intangibles amortisation (note 3)	55.4	50.2
Depreciation of property, plant & equipment	58.2	55.9
EBITDA	350.0	269.9

Net debt
A reconciliation of net debt to cash & short-term deposits, interest bearing loans and borrowings is provided in note 13.

2. Segment information

For management purposes, the Group is organised into three operating divisions: Minerals, Oil & Gas and Flow Control. These three divisions are organised and managed separately based on the key markets served and each is treated as an operating segment and a reportable segment under IFRS 8. The operating and reportable segments were determined based on the reports reviewed by the Chief Executive Officer which are used to make operational decisions.

The Minerals segment is the global leader in the provision of slurry handling equipment and associated aftermarket support for abrasive high wear applications used in the mining and oil sands markets. The Oil & Gas segment provides products and service solutions to upstream, production, transportation and related industries. The Flow Control segment designs and manufactures valves and pumps as well as providing specialist support services to the global power generation, industrial and oil and gas sectors.

The Chief Executive Officer assesses the performance of the operating segments based on operating profit from continuing operations before exceptional items (including impairments) and intangibles amortisation ('segment result'). Finance income and expenditure and associated interest-bearing liabilities and derivative financial instruments are not allocated to segments as all treasury activity is managed centrally by the Group treasury function. The amounts provided to the Chief Executive Officer with respect to assets and liabilities are measured in a manner consistent with that of the financial statements. The assets are allocated based on the operations of the segment and the physical location of the asset. The liabilities are allocated based on the operations of the segment.

Transfer prices between business segments are set on an arm's length basis, in a manner similar to transactions with third parties.

The segment information for the reportable segments for 2017 and 2016 is disclosed below.

	Minerals			Oil & Gas				Flow Control				Total continuing operations
	2017	2016		2017		2016		2017		2016		2017		2016
	£m	£m		£m		£m		£m		£m		£m		£m
Revenue
Sales to external customers	1,286.7	1,112.0		703.8		401.4		365.4		331.5		2,355.9		1,844.9
Inter-segment sales	3.9	6.1		0.7		12.8		15.6		14.7		20.2		33.6
Segment revenue	1,290.6	1,118.1		704.5		414.2		381.0		346.2		2,376.1		1,878.5
Eliminations												(20.2)		(33.6)
												2,355.9		1,844.9
Sales to external customers - 2016 at 2017 average exchange rates
Sales to external customers	1,286.7	1,200.5		703.8		421.4		365.4		350.3		2,355.9		1,972.2

Segment result
Segment result before share of results of joint ventures	227.3		217.0		80.6		(16.2)		(2.8)		30.1		305.1		230.9
Share of results of joint ventures	-		-		10.9		7.2		-		-		10.9		7.2
Segment result	227.3		217.0		91.5		(9.0)		(2.8)		30.1		316.0		238.1
Unallocated expenses													(24.2)		(24.1)
Operating profit before exceptional items & intangibles amortisation													291.8		214.0
Total exceptional items & intangibles amortisation													(69.5)		(127.5)
Net finance costs before exceptional items													(41.7)		(43.7)
Profit before tax from continuing operations													180.6		42.8

Segment result - 2016 at 2017 average exchange rates
Segment result before share of results of joint ventures	227.3		234.2		80.6		(17.1)		(2.8)		32.2		305.1		249.3
Share of results of joint ventures	-		-		10.9		7.6		-		-		10.9		7.6
Segment result	227.3		234.2		91.5		(9.5)		(2.8)		32.2		316.0		256.9
Unallocated expenses													(24.2)		(24.4)
Operating profit before exceptional items & intangibles amortisation													291.8		232.5

Revenues do not exceed 10% of Group revenue for any single external customer.

2. Segment information (continued)

	Minerals		Oil & Gas		Flow Control		Total Group
	2017	2016	2017	2016	2017	2016	2017	2016
	£m	£m	£m	£m	£m	£m	£m	£m
Assets & liabilities
Intangible assets	603.0	652.4	762.3	815.2	137.5	137.5	1,502.8	1,605.1
Property, plant & equipment	221.3	226.1	89.3	90.9	72.1	75.4	382.7	392.4
Working capital assets	623.9	523.0	379.1	290.2	218.8	248.0	1,221.8	1,061.2
	1,448.2	1,401.5	1,230.7	1,196.3	428.4	460.9	3,107.3	3,058.7
Investments in joint ventures	-	-	19.2	40.5	-	-	19.2	40.5
Segment assets	1,448.2	1,401.5	1,249.9	1,236.8	428.4	460.9	3,126.5	3,099.2
Unallocated assets							467.0	424.5
Total assets							3,593.5	3,523.7

Working capital liabilities	352.3	311.6	182.2	150.6	122.3	169.4	656.8	631.6
Unallocated liabilities							1,465.6	1,508.5
Total liabilities							2,122.4	2,140.1

Other segment information - total Group
Segment additions to non-current assets	43.5	33.0	25.0	10.3	6.2	15.6	74.7	58.9
Unallocated additions to non-current assets							11.0	18.9
Total additions to non-current assets							85.7	77.8

Other segment information - total Group
Segment depreciation & amortisation	45.0	42.2	51.7	49.1	11.6	12.1	108.3	103.4
Impairment of property, plant & equipment	0.1	2.3	3.6	4.1	0.3	2.0	4.0	8.4
Impairment of intangible assets	-	0.4	-	-	-	-	-	0.4
Discontinued operations							-	0.4
Unallocated depreciation & amortisation							5.3	2.7
Total depreciation, amortisation & impairment							117.6	115.3

Unallocated assets primarily comprise cash and short-term deposits, derivative financial instruments, income tax receivable, deferred tax assets and retirement benefit surpluses as well as those assets which are used for general head office purposes. Unallocated liabilities primarily comprise interest-bearing loans and borrowings, derivative financial instruments, income tax payable, provisions, deferred tax liabilities and retirement benefit deficits as well as liabilities relating to general head office activities. Segment additions to non-current assets do not include those additions which have arisen from business combinations (note 8).

2. Segment information (continued)

Geographical information

Geographical information in respect of revenue and non-current assets for 2017 and 2016 is disclosed below. Revenues are allocated based on the location to which the product is shipped. Assets are allocated based on the location of the assets and operations. Non-current assets consist of property, plant & equipment, intangible assets and investments in joint ventures.

	UK	US	Canada	Europe & FSU	Asia Pacific	Australia	South America		Middle East & Africa	Total
Year ended 31 December 2017	£m	£m	£m	£m	£m	£m	£m		£m	£m
Revenue from continuing operations
Sales to external customers	72.5	712.7	239.9	179.7	316.0	193.8	310.7		330.6	2,355.9
Non-current assets	345.4	723.0	49.0	171.2	333.5	155.7	65.1		118.5	1,961.4


	UK	US	Canada	Europe & FSU	Asia Pacific	Australia	South America		Middle East & Africa	Total
Period ended 31 December 2016	£m	£m	£m	£m	£m	£m	£m		£m	£m
Revenue from continuing operations
Sales to external customers	74.9	474.5	180.8	153.9	257.7	178.3	261.2		263.6	1,844.9
Non-current assets	366.5	847.7	44.1	168.1	290.1	157.4	63.8		133.6	2,071.3

The following disclosures are given in relation to continuing operations.
								2017		2016
								£m		£m
An analysis of the Group's revenue is as follows
Original equipment								666.9		523.2
Aftermarket parts								1,280.5		982.8
Sales of goods								1,947.4		1,506.0
Provision of services								350.4		282.1
Construction contracts								58.1		56.8
Revenue								2,355.9		1,844.9

3. Exceptional items & intangibles amortisation
	2017	2016
	£m	£m
Recognised in arriving at operating profit from continuing operations
Intangibles amortisation	(55.4)	(50.2)
Exceptional item - intangibles impairment	-	(0.4)
Exceptional item - restructuring and rationalisation charges	(12.5)	(63.8)
Exceptional item - China operations	-	(17.0)
Exceptional item - gain on sale and leaseback of properties	-	5.1
Exceptional item - legal claims	(2.1)	(1.1)
Exceptional item - gain on sale of EPI joint venture	10.4	-
Exceptional item - fair value adjustment to contingent consideration liability	(9.1)	3.7
	(68.7)	(123.7)

Recognised in finance costs
Exceptional item - unwind in respect of contingent consideration liability	(0.8)	(3.8)

Restructuring and rationalisation charges represent the committed costs of programmes to right size operations and discontinue certain activities. The restructuring and rationalisation exceptional cost of £12.5m comprises £13.4m of restructuring costs for programmes commenced in 2016 offset by the release of unutilised restructuring provisions. These relate to headcount reduction and service centre closures and comprise £4.3m net cash restructuring costs, £4.8m inventory write down and a net £3.4m relating to plant & equipment.

An exceptional gain of £10.4m has been recognised on the sale of the 49% stake in the Energy Products LLC (EPI) joint venture sold in November 2017.

An exceptional cost of £2.1m relates to the continuation of a prior period legal claim. A fair value adjustment to contingent consideration liability of £9.6m related to the acquisition of the remaining 40% of Weir International, offset by a £0.5m credit following the settlement of Delta Industrial Valves deferred consideration and £0.8m unwind of contingent consideration liability for Weir International.

4. Income tax expense

		2017	2016
		£m	£m
Group - UK		2.3	(1.6)
Group - Overseas		(21.4)	2.0
Total income tax (expense) credit in the Consolidated Income Statement		(19.1)	0.4

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

Tax (expense) credit
	- continuing operations before exceptional items & intangibles amortisation	(59.7)	(38.4)
	- exceptional items	22.9	21.0
	- intangibles amortisation and impairment	17.7	17.8
Total income tax (expense) credit in the Consolidated Income Statement		(19.1)	0.4

The total income tax expense included in the Group's share of results of joint ventures is as follows.
Joint ventures		(1.0)	(1.6)

The United States Tax Cuts and Jobs Act was signed on 22 December 2017 and included a broad range of tax reform including a reduction in the Federal rate of corporate income tax from 35% to 21% (effective 1 January 2018) as well as significant changes to business deductions and other international tax provisions including changes to the rules governing interest deductibility.

US tax reform gives rise to a transitional one-off non-cash tax credit of £24.0m included within exceptional items and primarily due to the revaluation of the Group's aggregate US deferred tax assets and deferred tax liabilities following the reduction in the US Federal rate from 35% to 21%.

5. Earnings per share
Basic earnings per share amounts are calculated by dividing net profit for the year attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share is calculated by dividing the net profit attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during the year, adjusted for the effect of dilutive share awards.
The following reflects the earnings and share data used in the calculation of earnings per share.

	2017	2016
Profit attributable to equity holders of the Company
Total operations* (£m)	161.7	38.3
Continuing operations* (£m)	161.7	43.3
Continuing operations before exceptional items & intangibles amortisation* (£m)	190.6	132.0
Weighted average share capital
Basic earnings per share (number of shares, million)	219.9	215.6
Diluted earnings per share (number of shares, million)	221.3	216.9

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.
	2017	2016
	Shares Million	Shares Million
Weighted average number of ordinary shares for basic earnings per share	219.9	215.6
Effect of dilution: LTIP awards	1.4	1.3
Adjusted weighted average number of ordinary shares for diluted earnings per share	221.3	216.9
The profit attributable to equity holders of the Company used in the calculation of both basic and diluted earnings per share from continuing operations before exceptional items and intangibles amortisation is calculated as follows.

	2017	2016
	£m	£m
Net profit attributable to equity holders from continuing operations*	161.7	43.3
Exceptional items & intangibles amortisation net of tax	28.9	88.7
Net profit attributable to equity holders from continuing operations before exceptional items & intangibles amortisation	190.6	132.0

	2017	2016
	pence	pence
Basic earnings per share:
Total operations*	73.5	17.8
Continuing operations*	73.5	20.1
Continuing operations before exceptional items & intangibles amortisation*	86.7	61.2

Diluted earnings per share:
Total operations*	73.1	17.7
Continuing operations*	73.1	20.0
Continuing operations before exceptional items & intangibles amortisation*	86.1	60.8
*Adjusted for a loss of £0.2m (2016: £0.1m) in respect of non-controlling interests.
There have been no share options (2016: nil) exercised between the reporting date and the date of signing of these financial statements.

6. Dividends paid & proposed

	2017	2016
	£m	£m
Declared & paid during the year
Equity dividends on ordinary shares
Final dividend for 2016: 29.0p (2015: 29.0p)	63.1	62.0
Interim dividend for 2017: 15.0p (2016: 15.0p)	33.6	32.5
	96.7	94.5
Proposed for approval by shareholders at the Annual General Meeting
Final dividend for 2017: 29.0p (2016: 29.0p)	65.0	63.1

In 2016 and 2017, shareholders on record were provided the opportunity to receive dividends in the form of new fully paid ordinary shares through The Weir Group PLC Scrip Dividend Scheme. Participation in the scheme resulted in a final dividend for 2016 of £6.4m share issue and a cash dividend of £56.7m (final dividend for 2015: £29.6m share issue; £32.4m cash). The interim dividend for 2017 was split £16.1m share issue and £17.5m cash dividend (interim dividend for 2016: £19.1m share issue; £13.4m cash).

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 this Annual Report and Financial Statements and the record date for the final dividend.

Dividends have been maintained in the year with dividend cover of 1.97 times (2016: 1.39 times) as explained in the Group Financial Highlights.

7. Property, plant & equipment & intangible assets

	2017	2016
	£m	£m
Additions of property, plant & equipment & intangible assets
- land & buildings	9.3	19.2
- plant & equipment	58.0	35.1
- intangible assets	18.4	23.5
	85.7	77.8
The above additions relate to the normal course of business and do not include any additions made by way of business combinations.

8. Business combinations

On 27 July 2017, the Group completed the acquisition of KOP Surface Products, a South Asian provider of advanced pressure control wellhead technologies, systems and services for a consideration of $118.0m less cash acquired of $3.9m. The acquisition was funded by the issue of shares totalling £90.0m. The provisional fair values, which are subject to finalisation during the first half of 2018, are disclosed in the table below.

There are certain intangible assets included in the £51.6m of goodwill recognised that cannot be individually separated and reliably measured due to their nature. These items include anticipated business growth, synergies and an assembled workforce.

KOP provisional fair values
			2017
			£m
Property, plant & equipment			7.9
Inventories			3.4
Intangible assets
- customer relationships			5.4
- brand name			4.4
- intellectual property			12.4
Trade & other receivables			10.4
Cash & cash equivalents			3.2
Trade & other payables			(7.0)
Provisions			(4.1)
Current tax			1.4
Deferred tax			3.5
Fair value of net assets			40.9
Goodwill arising on acquisition			51.6
Total consideration			92.5

The total net cash outflow on current year acquisitions was as follows
- cash paid			(92.5)
- cash & cash equivalents acquired			3.2
Total cash outflow (note 13)			(89.3)

The gross amount and fair value of KOP trade receivables amounts to £10.4m. It is expected that virtually all the contractual amounts will be collected.

KOP contributed £13.3m to revenue and an operating loss of £4.3m (including exceptional items and intangibles amortisation) in the period from acquisition to 31 December 2017. If the acquisition had occurred at the start of 2017 the revenue and profit for the year from acquired operations after exceptional items and intangibles amortisation, would not have been materially different from the results disclosed in the Consolidated Income Statement. Acquisition costs totalled £1.5m in the year.

8. Business combinations (continued)

Contingent consideration

	Asset		Liability
	2017	2016	2017	2016
	£m	£m	£m	£m
Opening balance	3.9	-	(31.0)	(35.9)
Liability arising on business combinations	-	-	-	(0.6)
Asset arising on business disposal	0.4	4.6	-	-
Fair value changes in profit or loss (note 3)	(0.1)	(0.4)	(9.1)	3.7
Contingent consideration (received) paid (note 13)	(3.5)	(0.6)	38.0	10.6
Unwind of discount (note 3)	-	-	(0.8)	(3.8)
Exchange movements in the year	(0.3)	0.3	(0.5)	(5.0)
Closing balance	0.4	3.9	(3.4)	(31.0)

Any contingent consideration is recognised at the date of acquisition or disposal of a subsidiary.

i) Contingent consideration receivable

The disposal of American Hydro Corporation in 2016 included a final escrow payment of £3.6m due for settlement in 2017. This balance was settled during the year with £3.5m cash received and a £0.1m adjustment recorded in discontinued operations.

An escrow receivable of £0.4m was booked in the year relating to the sale of the joint venture entity, Energy Products LLC (EPI). The balance is to be received early 2018.

ii) Contingent consideration payable

The deferred consideration payable in relation to the acquisition of Weir International in 2011 has been settled in the year following an agreement being reached to complete the purchase of the remaining minority interest. In 2017 a fair value adjustment of £9.6m and an unwind of £0.8m was recorded with payment of the closing deferred consideration in December 2017 to complete the purchase of the remaining minority interest for payment proceeds of £36.6m.

The remaining deferred consideration of £1.3m for the 2015 acquisition of Delta Valves was settled in the year. Based on final negotiations, £0.8m was paid in cash with the remainder of the balance written off as a fair value adjustment. The deferred consideration of £0.6m relating to the 2016 purchase of the remaining shareholding of Shengli Oilfield Weir Highland Pump Company Ltd (Shengli) was paid during the year.

There is contingent consideration payable of £3.4m remaining in relation to the 2014 Weir Trio acquisition. This relates to working capital balances and is now expected to be finalised in 2018. A reconciliation of fair value measurement of the contingent consideration asset and liability is provided above.

9. Interest-bearing loans & borrowings

At 31 December 2017, a total of £293.4m equivalent (2016: £142.1m equivalent) was outstanding under the Group's US$1bn commercial paper programme.

At 31 December 2017, US$nil (2016: US$40.0m) was drawn under the revolving credit facility. The US$800m multi-currency revolving credit facility matures in two tranches between September 2020 and September 2021. Total unamortised issue costs at 31 December 2017 were £1.5m (2016: £2.5m).

10. Provisions
	Warranties & onerous sales contracts	Asbestos-related	Employee-related	Exceptional rationalisation	Other	Total
	£m	£m	£m	£m	£m	£m
At 31 December 2016	23.5	52.7	16.7	47.1	3.4	143.4
Additions	21.8	15.6	4.1	7.3	3.6	52.4
Acquisitions	1.8	-	2.0	-	0.3	4.1
Utilised	(17.4)	(6.4)	(3.4)	(32.8)	(1.7)	(61.7)
Unwind	-	0.7	-	-	-	0.7
Unutilised	(4.3)	-	(0.3)	(0.9)	(0.3)	(5.8)
Transfers	5.2	-	-	(5.2)	-	-
Exchange adjustment	(1.0)	(4.6)	(0.6)	(1.9)	(0.4)	(8.5)
At 31 December 2017	29.6	58.0	18.5	13.6	4.9	124.6

Current 2017	21.2	10.7	5.3	10.7	4.7	52.6
Non-current 2017	8.4	47.3	13.2	2.9	0.2	72.0
At 31 December 2017	29.6	58.0	18.5	13.6	4.9	124.6

Current 2016	18.2	13.6	6.2	42.5	2.7	83.2
Non-current 2016	5.3	39.1	10.5	4.6	0.7	60.2
At 31 December 2016	23.5	52.7	16.7	47.1	3.4	143.4

Warranties & onerous sales contracts

Provision has been made in respect of actual warranty and contract penalty claims on goods sold and services provided and allowance has been made for potential warranty claims based on past experience for goods and services sold with a warranty guarantee. It is expected that all costs related to such claims will have been incurred within five years of the balance sheet date.

Provision has been made in respect of sales contracts entered into for the sale of goods in the normal course of business where the unavoidable costs of meeting the obligations under the contracts exceed the economic benefits expected to be received from the contracts. Provision is made immediately when it becomes apparent that expected costs will exceed the expected benefits of the contract. It is expected that the majority of these costs will be incurred within one year of the balance sheet date.

Asbestos-related claims

Certain of the Group's US-based subsidiaries are co-defendants in lawsuits pending in the United States in which plaintiffs are claiming damages arising from alleged exposure to products previously manufactured which contained asbestos. The Group has comprehensive insurance cover for cases of this nature with all claims directly managed by the Group's insurers who also meet associated defence costs. The insurers and their legal advisers agree and execute the defence strategy between them. There are currently no related cash flows to or from the Group, and we expect this to continue for the foreseeable future.

10. Provisions (continued)

There remains inherent uncertainty associated with estimating future costs in respect of asbestos-related diseases. Actuarial estimates of future indemnity and defence costs associated with asbestos-related diseases are subject to significantly greater uncertainty than actuarial estimates for other types of exposures. This uncertainty results from factors that are unique to the asbestos claims litigation and settlement process including but not limited to:

i) The possibility of future state or federal legislation applying to claims for asbestos-related diseases;

ii) The ability of the plaintiff's bar to develop and sustain new legal theory and/or develop new populations of claimants;

iii) Changes in focus of the plaintiff's bar;

iv) Changes in the Group's defence strategy; and

v) Changes in the financial condition of other co-defendants in suits naming the Group and affiliated businesses.

A review of both the Group's expected liability for US asbestos-related diseases and the adequacy of the Group's insurance policies to meet future settlement and defence costs was completed in conjunction with external advisers. The exercise was originally completed in 2014 and has been repeated in 2017 as part of our planned triennial actuarial update. This review estimated future claims experience based on an industry standard epidemiological decay model, and Weir's claims settlement history. Due to the inherent uncertainty resulting from the changing nature of the US litigation environment as outlined above, and in conjunction with the actuarial review, the Directors consider 10 years (2016: 10 years) of projected claims to provide a reliable estimate of the future liability. A provision of £53.3m represents the Directors' best estimate of the future liability, although these estimates and the period over which they are assessed will continue to be refined as the claims history develops. Confirmation was also received from external advisers that the insurance asset remains sufficient to match the Directors' best estimate of the future liability and therefore a corresponding asset continues to be recognised for insurance proceeds.

There can be no guarantee that the assumptions used to estimate the provision will result in an accurate prediction of the actual costs that may be incurred. Sensitivity analysis has been conducted which involved:

i) Increasing/decreasing the number of projected future settled claims and estimated settlement value by 10%; or

ii) Increasing/decreasing the basis of provision by 2 years.

Application of these sensitivities would not lead to a material change in the provision.

In the UK, there are outstanding asbestos-related claims which are not the subject of insurance cover. The extent of the UK asbestos exposure involves a series of legacy employers liability claims which all relate to former UK operations and employment periods in the 1960's and 1970's. In 1989 the Group's employer's liability insurer (Chester Street Employers Association Ltd) was placed into run-off which effectively generated an uninsured liability exposure for all future long tail disease claims with an exposure period pre-dating 1 January 1972. All claims with a disease exposure post 1 January 1972 are fully compensated via the Government established Financial Services Compensation Scheme (FSCS). Any settlement to a former employee whose service period straddles 1972 is calculated on a pro rata basis. The Group provides for these claims based on management's best estimate of the likely costs given past experience of the volume and cost of similar claims brought against the Group.

The UK provision was reviewed and adjusted accordingly for claims experience in the year resulting in a provision of £4.7m (2016: £5.2m).

Employee-related

Employee-related provisions arise from legal obligations, the majority of which relate to compensation associated with periods of service.

Exceptional rationalisation

Restructuring and rationalisation charges led to additions of £7.3m (2016: £63.0m) during the year which related to continued costs from 2016 restructuring projects and additional costs of £2.1m as a result of an extension of a prior period legal claim.

During 2017 a transfer has been made from exceptional rationalisation to the warranties and onerous sales contract provision. Included in the utilisation of the exceptional rationalisation provision in the year is non-cash utilisation items of £4.2m which led to a cash outflow of £28.6m.

Other

Other provisions relate to penalties, duties due, legal claims and other exposures across the Group.

11. Pensions & other post-employment benefit plans

	2017	2016
	£m	£m
Plans in surplus	-	9.8
Plans in deficit	(137.7)	(147.0)
Net liability	(137.7)	(137.2)

The net Group deficit for retirement benefit obligations at the year end was £137.7m (2016: £137.2m). The increase in deficit is a result of actuarial losses on the liability side due to changes in financial conditions offset in part by changes in demographic assumptions. This was largely offset by a gain on scheme assets, together with employer contributions and currency gains.

12. Derivative financial instruments

The Group enters into derivative financial instruments in the normal course of business in order to hedge its exposure to foreign exchange risk. Derivatives are only used for economic hedging purposes and no speculative positions are taken. Derivatives are recognised as held for trading and at fair value through profit and loss unless they are designated in IAS 39 compliant hedge relationships.

The table below summarises the types of derivative financial instrument included within each balance sheet category.

	2017	2016
	£m	£m
Included in non-current assets
Other forward foreign currency contracts	0.3	-
	0.3	-

Included in current assets
Forward foreign currency contracts designated as cash flow hedges	0.3	-
Forward foreign currency contracts designated as net investment hedges	7.5	-
Other forward foreign currency contracts	8.9	24.0
	16.7	24.0

Included in current liabilities
Forward foreign currency contracts designated as cash flow hedges	(0.1)	(1.2)
Forward foreign currency contracts designated as net investment hedges	(1.6)	(15.2)
Cross currency swaps designated as net investment hedges	(8.9)	(6.3)
Other forward foreign currency contracts	(15.2)	(7.5)
	(25.8)	(30.2)

Included in non-current liabilities
Cross currency swaps designated as net investment hedges	(0.7)	(14.7)
Other forward foreign currency contracts	-	(0.2)
	(0.7)	(14.9)
Net derivative financial liabilities	(9.5)	(21.1)

13. Additional cash flow information
			2017	2016
	Notes		£m	£m
Total operations
Net cash generated from operations
Operating profit - continuing operations			223.1		90.3
Operating loss - discontinued operations			(0.1)		(3.8)
Operating profit - total operations			223.0		86.5
Exceptional items		3	23.8		77.5
Amortisation of intangible assets			55.4		50.3
Share of results of joint ventures			(10.9)		(7.2)
Depreciation of property, plant & equipment			58.2		56.2
Impairment of property, plant & equipment			0.1		-
Grants received			(1.2)		-
Gains on disposal of property, plant & equipment			(0.1)		(1.1)
Gains on disposal of joint ventures			(10.4)		-
Funding of pension & post-retirement costs			(4.8)		(0.6)
Employee share schemes			7.0		4.1
Transactional foreign exchange			(0.4)		6.6
Decrease in provisions			(0.5)		(11.3)
Cash generated from operations before working capital cash flows			339.2		261.0
(Increase) decrease in inventories			(64.2)		7.1
(Increase) decrease in trade & other receivables and construction contracts			(117.8)		57.5
Increase (decrease) in trade & other payables and construction contracts			63.3		(33.0)
Cash generated from operations			220.5		292.6
Additional pension contributions paid			(3.0)		(2.8)
Exceptional cash items		10	(28.6)		(58.1)
Income tax paid			(60.5)		(15.7)
Net cash generated from operating activities			128.4		216.0
Exceptional items are detailed in note 3.
The employee-related provision and associated insurance asset in relation to US asbestos-related claims disclosed in note 10 will not result in any cash flows either to or from the Group and therefore they have been excluded from the table above.

13. Additional cash flow information (continued)
The following tables summarise the cash flows arising on acquisitions and disposals.
	2017	2016
	£m	£m
Acquisitions of subsidiaries
Current year acquisitions (see below)	(89.3)	-
Prior period acquisitions contingent consideration paid	(0.8)	(10.6)
	(90.1)	(10.6)

Acquisition of subsidiaries - cash paid	(92.5)	-
Cash & cash equivalents acquired	3.2	-
Acquisition of subsidiaries - current year acquisitions	(89.3)	-
Total cash outflow on current year acquisitions	(89.3)	-
Prior period acquisitions contingent consideration paid	(0.8)	(10.6)
Total cash outflow relating to acquisitions	(90.1)	(10.6)

Net cash inflow arising on prior period disposals
Consideration received in cash & cash equivalents	-	35.4
Less: cash & cash equivalents disposed of	-	(4.0)
Prior period disposals completion adjustment	3.5	-
Total cash inflow relating to prior period disposals	3.5	31.4

	2017 £m	2016 £m
Net debt comprises the following
Cash & short-term deposits	284.6	258.6
Current interest-bearing loans & borrowings	(388.4)	(144.0)
Non-current interest-bearing loans & borrowings	(739.4)	(949.1)
	(843.2)	(834.5)

Reconciliation of financing cash flows to movement in net debt
	Opening balance	Cash movements	Additions	FX	Non cash movements	Total
	£m	£m	£m	£m	£m	£m
Third party loans	(1,093.2)	(110.1)	-	75.1	-	(1,128.2)
Leases	(0.8)	0.4	(0.6)	-	-	(1.0)
Unamortised issue costs	2.5	-	-	-	(1.0)	1.5
Amounts included in gross debt	(1,091.5)	(109.7)	(0.6)	75.1	(1.0)	(1,127.7)
Cash & cash equivalents	257.0	53.5	-	(26.0)	-	284.5
Amounts included in net debt	(834.5)	(56.2)	(0.6)	49.1	(1.0)	(843.2)

Financing derivatives	(21.4)	6.6	-	-	5.6	(9.2)
Contingent consideration	(31.0)	38.0	-	(0.5)	(9.9)	(3.4)
Other liabilities relating to financing activities	(52.4)	44.6	-	(0.5)	(4.3)	(12.6)

Total financing liabilities^*	(1,143.9)	(65.1)	(0.6)	74.6	(5.3)	(1,140.3)
^*Total financing liabilities comprise gross debt plus other liabilities relating to financing activities.

14. Related party disclosure

The following table provides the total amount of significant transactions which have been entered into with related parties for the relevant financial year and outstanding balances at the year end.

		Sales to related parties - goods	Sales to related parties - services	Purchases from related parties - goods	Purchases from related parties - services	Amounts owed to related parties
Related party		£m	£m	£m	£m	£m
Joint ventures	2017	48.7	0.5	0.2	0.3	-
	2016	26.0	0.1	0.2	0.4	-
Group pension plans	2017	-	-	-	-	4.3
	2016	-	-	-	-	4.1

15. Legal claims

The Company and certain subsidiaries are, from time to time, parties to legal proceedings and claims which arise in the normal course of business. Provisions have been made where the Directors have assessed that a cash outflow is likely and they believe all other claims are remote.

16. Exchange rates
The principal exchange rates applied in the preparation of these financial statements were as follows.
	2017	2016
Average rate (per £)
US Dollar	1.29	1.36
Australian Dollar	1.68	1.83
Euro	1.14	1.22
Canadian Dollar	1.67	1.80
United Arab Emirates Dirham	4.73	4.98
Chilean Peso	835.52	918.59
South African Rand	17.15	20.00
Brazilian Real	4.11	4.75
Russian Rouble	75.17	91.20
Closing rate (per £)
US Dollar	1.35	1.22
Australian Dollar	1.73	1.70
Euro	1.13	1.17
Canadian Dollar	1.69	1.65
United Arab Emirates Dirham	4.97	4.49
Chilean Peso	832.26	813.76
South African Rand	16.76	16.63
Brazilian Real	4.48	3.97
Russian Rouble	77.86	73.89

16. Exchange rates (continued)

The Group's operating profit from continuing operations before exceptional items and intangibles amortisation was denominated in the following currencies.

Translational foreign exchange


	2017	2016
	£m	£m
US Dollar	176.4	70.0
Australian Dollar	29.0	33.8
Euro	6.8	26.2
Canadian Dollar	33.9	36.6
United Arab Emirates Dirham	3.2	5.8
Chilean Peso	39.0	35.6
South African Rand	11.1	4.9
Brazilian Real	4.9	3.6
Russian Rouble	5.2	6.9
UK Sterling	(21.6)	(11.2)
Other	3.9	1.8
Operating profit from continuing operations before exceptional items & intangibles amortisation	291.8	214.0

This information is provided by RNS

The company news service from the London Stock Exchange

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