Final Results
Weir Group PLC
21 March 2005
21 March 2005
THE WEIR GROUP PLC PRELIMINARY RESULTS 2004
Results for 53 weeks ended 31 December 2004
HIGHLIGHTS
• Pre-tax profit1 up 2.8%
• Order input 2 up 23.4%
• Earnings per share increased1
• Cash generation remains strong
• Dividend increase of 3.2% to 12.8p (2003: 12.4p)
• Board initiates share buy-back of up to £50m
Group Results
2004 2003 Change
Order Input2 £875.9m £709.9m +23.4%
Turnover £847.6m £793.4m +6.8%
Operating Profit1 £61.2m £63.5m -3.6%
Pre-tax Profit1 £58.3m £56.7m +2.8%
Earnings per share1 21.5p 21.4p +0.5%
Dividend 12.8p 12.4p +3.2%
Net cash £12.3m £0.5m +£11.8m
1 Excluding goodwill amortisation and exceptionals
2 Excluding joint ventures and associates; calculated at constant 2004 exchange
rates
The Chairman of The Weir Group, Sir Robert Smith, commented: 'In 2004, the
Group's operations delivered increased order input, turnover and pre-tax profit
with another good year of cash generation.
The Group remains in solid financial condition with a sound order book and a
good level of visibility in most of our markets. The positive market conditions
experienced in 2004 are expected to continue across a number of our major
sectors.
Our operational plans are well developed. We intend to fully recognise our key
strengths in higher technology and higher margin engineering products and in
2005 will restructure our under-performing activities to address the lower
margin areas of the Group. This further realignment is designed to improve the
robustness of future earnings.
The Group's strong financial position has led the Board to the decision to
implement a share buy-back of up to £50m over a 12 month period. This will
provide value to remaining shareholders through enhanced earnings per share and
return on equity, while at the same time offering a mechanism for more effective
capital structuring of the Group.
The Group's cash generation and strong balance sheet, together with the ongoing
improvements in operational performance, provide the flexibility to pursue new
capital investments and available acquisitions while delivering increasing
returns to shareholders.
Contact details: The Weir Group PLC Available through UBS
Mark Selway, Chief Executive Tel. 020 7567 8000 (switchboard);
Helen Walker, Public Relations Manager (Mobile: 07789 032296)
The Maitland Consultancy Tel. 020 7379 5151
Suzanne Bartch (Mobile: 07769 710 335)
Michelle Jeffery (Mobile: 07989 977 837)
FINANCIAL HIGHLIGHTS
2004 input was excellent with a 23% increase over 2003 and all divisions showing
improvement. Geographically the main areas of input growth were seen in the
Americas, up by 33%, Europe and the Former Soviet Union, up by 20% and
Indo-Pacific region up by 89%.
Turnover from Group operations grew by 6.8% to £847.6m (2003: £793.4m)
notwithstanding £16.9m of adverse foreign exchange translation effects at
constant exchange rates. Good growth was achieved across all our divisions,
particularly Techna, which increased turnover by 39%.
Total operating profit excluding goodwill amortisation at £61.2m (2003: £63.5m)
was 3.6% below 2003. The 2004 results include £1.9m of adverse foreign exchange
translation effects and a £0.6m first time charge for share based payments.
Operating profits from Group subsidiaries was £51.2m excluding goodwill
amortisation (2003: £53.2m) and our Joint Ventures and Associates companies
contributed £10.0m operating profit against £10.3m in 2003.
Group pre-tax profit excluding goodwill amortisation and exceptionals was up
2.8% on the previous year at £58.3m (2003: £56.7m) and reflects the beneficial
impact of £1.0m FRS17 other finance income (2003: £3.0m other finance cost).
Cash generation remained strong with cash flow from operations at £54.9m (2003:
£55.9m). This was after a £2.1m increase in further pension contributions
(2004: £12.1m vs 2003: £10.0m) and produced net funds at the year end of £12.3m
against the prior year balance of £0.5m.
A tax charge of £14.0m (2003: £13.1m) gives an actual tax rate of 24% on profit
before tax, goodwill amortisation and exceptionals.
The resulting earnings per share excluding goodwill amortisation and
exceptionals was 21.5p (2003: 21.4p).
DIVIDEND
A final dividend of 9.35p (2003: 9.05p) is proposed making a total distribution
for the year of 12.8p (2003: 12.4p). The final dividend proposed will be paid
on 1 June 2005 to shareholders on the register at the close of business on 29
April 2005.
REVIEW OF RESULTS
To assist in meaningful comparisons, the following review of results restates
comparative 2003 figures at constant 2004 exchange rates.
Engineering Products
Our Engineering Products businesses include the operations of our Minerals and
Clear Liquid pumps businesses and our Valves & Controls Division. Turnover from
our continuing businesses increased 5.4% when compared to 2003 at £439.0m (2003:
£416.3m) while operating profit decreased 7.6% to £30.9m (2003: £33.5m).
At the operating profit level, the margin was 7.0% compared with 8.0% in 2003,
underpinned by a continued strong performance from the Minerals Division.
The Minerals Division had an excellent year growing its order input, turnover
and profit through a combination of continued buoyant commodity markets, new
product offerings and the continuing benefits being delivered from our
operational improvement activity. The division's 20% growth in order input was
driven by continued strong markets in all key territories, with China continuing
to feature prominently with growing demand from the power generation market for
flue gas desulphurisation pumps.
The Clear Liquid Division performed well in 2004 growing order input 8.9% to
£153.0m (2003: £140.5m). Power orders included the award of large scale
projects in China offsetting continued softness in the North American power
market.
The input history reflects a planned realignment of our product portfolio to
become less reliant on large scale lower margin work and more focused on our
niche product areas which today represent about 60% of divisional turnover.
While we have made dramatic improvements in productivity, the overhead equation
and market mix at our UK business, Weir Pumps, continue to dampen the results of
the division. To address these issues, as stated in our announcement to the
Stock Exchange on 17 March 2005, we are proposing to restructure this business,
downsize activities and concentrate only on those sectors where we see continued
growth. This programme is currently expected to incur exceptional charges in
the order of £15.0m all of which will be cash costs.
Order input in the Valves & Controls Division responded positively to new
product and marketing initiatives. The French valve business secured large
scale nuclear orders in Ukraine, while the United States business continued to
develop its position in the Chinese market.
The results for the division were affected by the poor performance of our UK
valve business. As outlined in our January trading statement we undertook a
strategic review of this business which will result in a significant restructure
in 2005. The proposals include moving off the current site, outsourcing
non-essential operations and downsizing. This programme is currently expected
to incur exceptional charges in the order of £16.0m all of which will be cash
costs.
Both of these reorganisations are expected to return the respective businesses
to profitability in the first full year, 2006, with full recoveries of cash
outflows expected during the course of 2007.
Engineering Services
Turnover from Engineering Services increased 7.8% to £198.7m (2003: £184.4m),
producing an operating profit of £20.5m against £20.0m in 2003. This is after a
£1.5m cost in 2004, incurred as part of the Group's investment in four
Greenfield operations in the United States. At the operating profit level the
margin was therefore 10.3% against 10.9% in 2003.
Input growth of 8.5% was as a direct result of management actions to exploit the
considerable opportunities available for expanding our positioning in the key
growth markets of North America, the Middle East and Australia. The division
secured two contracts with BHP Billiton at the Ravensthorpe nickel project in
Australia.
The ongoing expansion of our geographic position into high growth markets
continued to progress throughout 2004 with the development of our greenfield
service centres in the United States and investments in the Middle East and
Malaysia. The UK, Canadian and Middle East businesses produced impressive
results, delivering growth in market share and profits during the year.
Techna
Our Techna Division includes those businesses involved in design and management
of large scale capital projects.
Turnover from our Techna Division increased 39% to £101.7m (2003: £73.1m)
resulting in a full year profit of £3.4m against a prior year profit of £0.8m.
In 2004, input increased by 78% to £179.3m against £100.6m in the previous year.
The defence and nuclear operations delivered an increase in turnover and
operating profit when compared to 2003. The UK submarine and carrier
programmes, coupled to a good level of enquiries outside of the UK, position the
business for further progress in 2005. Order input increased 24% to £49.5m
(2003: £40.0m) and is an indication of positive signs in these markets.
The desalination and water treatment businesses experienced a significant
increase in turnover and operating profit when compared to 2003. Investments in
new product research has spearheaded it to a leadership position in sulphate
removal technologies used in offshore oil exploration, including the world's
largest project for BP Plutonio in West Africa and also for Petrobras in Brazil.
Joint Ventures and Associates
Weir's share of turnover from Joint Ventures and Associates at £108.2m was 5.4%
above 2003 (2003: £102.7m). Operating profit of £10.0m (2003: £10.3m) reflects
a continued good performance from DML who manage the dockyard at Devonport and
provide support services to the naval base.
The contribution from Joint Ventures and Associates was, however, adversely
affected by a reduced contribution from the Group's north sea oil Joint Venture
with Smith International which was sold to Smith in December 2004 and a £0.6m
research and development charge for the Group's Joint Venture with Scottish &
Southern Energy into renewable energy.
STRATEGY
Since 2002, the Group has been focused on a five year programme of
transformation underpinned by a consistent set of core strategies, strong
leadership, operational excellence and continuing growth, providing the
cornerstones to deliver best in sector customer satisfaction and financial
returns.
The key management focus has been to ensure the successful execution of our
plans to develop new products, improve our operational performance and forge new
customer relationships. While improvements were delivered across all areas of
the Group, our 2004 results were impacted by the poor performance of our UK
valve operation. This business, along with Weir Pumps as highlighted
previously, will be the subject of significant restructuring in 2005.
The organic growth of our Engineering Products and Services businesses has
delivered positive results and we continue to pursue available acquisitions.
Our new product launches and continuing expansion into new markets, including
China, the Former Soviet Union and India, remain on track. Plans to conduct
further phases of restructuring are well advanced and will rebalance our sales
for stronger earnings and margins in the future.
SHARE BUY-BACK
The strength of the Group's cash generation and strong balance sheet has led the
Board to the decision to implement a share buy-back of up to £50m over a 12
month period. This will provide value to remaining shareholders through
enhanced earnings per share and return on equity, while at the same time
offering a mechanism for more effective capital structuring of the Group.
The Board believes that the buy-back programme will benefit all shareholders.
The Group's strong cash focus and balance sheet provide the ongoing flexibility
to pursue new capital investments and available acquisitions while delivering
increasing returns to shareholders.
THE BOARD
On 3 February 2005, Stephen King joined the Board as a non executive director.
His current experience in international finance and accounting will be of
particular value to the Group.
Jim Cox, who has been a non executive director since 2000 and latterly Chairman
of the Remuneration Committee, has indicated his intention not to seek
re-election at the Annual General Meeting in May 2005. His wise and helpful
counsel during his time in office has been of immense value to the Group.
OUTLOOK
In 2005 within the Engineering Products businesses, the Minerals Division is
expected to deliver another good year against a backdrop of buoyant commodity
markets. Stronger performances from our French and US Valves operations,
combined with restructuring in the UK Valves business, is expected to deliver
stronger results for the Valves Division, before restructuring costs. Our Clear
Liquid business is expected to maintain its 2004, pre-exceptional, performance,
driven by improved conditions in its niche operations.
In the Engineering Services business, our outlook remains positive with enquiry
levels indicating continued good market conditions in 2005. Ongoing investments
by the business in the USA are expected to maintain margins at similar levels to
2004.
Our Techna business entered the year with increased levels of orders booked in
all areas of our operations which are expected to translate into increased sales
and profits when compared to last year.
Our Joint Venture and Associates businesses are expected to continue their good
performance in 2005.
The Group remains in good financial condition with a much improved order book
and good level of visibility in our most important markets. Assuming no adverse
movements in foreign exchange rates from current levels and an acceptable
outcome from our reorganisation activities, we expect to deliver a good level of
progress before exceptionals in 2005.
The Group's cash generation and strong balance sheet, together with the ongoing
improvements in operational performance provide the flexibility to pursue new
capital investments and acquisitions while delivering increasing returns to
shareholders.
* * * * * * * * * *
Appointment Of Joint Corporate Stockbroker
The Group announces that, with immediate effect, it has appointed Dresdner
Kleinwort Wasserstein (DrKW) as joint corporate broker, with existing broker,
UBS.
THE WEIR GROUP RESULTS
Summary of results
AUDITED RESULTS
Consolidated Profit & Loss Account
for the 53 weeks ended 31 December 2004
Before Before
amortisation Amortisation amortisation Amortisation
of goodwill of goodwill of goodwill of goodwill
& & & &
exceptional exceptional exceptional exceptional
items items Total items items Total
2004 2004 2004 2003 2003 2003
Notes £'000 £'000 £'000 £'000 £'000 £'000
Turnover 1
Group - continuing 739,350 - 739,350 690,718 - 690,718
operations
Share of - joint ventures 8,435 - 8,435 9,211 - 9,211
- associates 99,790 - 99,790 93,488 - 93,488
847,575 - 847,575 793,417 - 793,417
Operating profit
Group - continuing 51,269 - 51,269 53,234 - 53,234
operations
- goodwill - (7,163) (7,163) - (6,927) (6,927)
amortisation
51,269 (7,163) 44,106 53,234 (6,927) 46,307
Share of - joint ventures 536 - 536 1,662 - 1,662
- associates 9,446 (289) 9,157 8,628 (183) 8,445
61,251 (7,452) 53,799 63,524 (7,110) 56,414
Exceptional items 2
Profit on disposal - - - - 1,663 1,663
of land
Interest & other income
Group net interest & other income (3,702) - (3,702) (3,534) - (3,534)
Share of joint ventures' interest 26 - 26 43 - 43
Share of associates' interest (219) - (219) (364) - (364)
Other finance income / (costs) 955 - 955 (2,969) - (2,969)
Profit on ordinary activities before 1 58,311 (7,452) 50,859 56,700 (5,447) 51,253
tax
Tax on profit on ordinary activities 3 14,014 (77) 13,937 13,051 (4,696) 8,355
Profit on ordinary activities after 44,297 (7,375) 36,922 43,649 (751) 42,898
tax
Minority interest 41 - 41 14 - 14
Profit attributable to The Weir Group PLC 44,256 (7,375) 36,881 43,635 (751) 42,884
Dividends 4 26,486 - 26,486 25,378 - 25,378
Transfer to reserves 17,770 (7,375) 10,395 18,257 (751) 17,506
Earnings per share 21.5p (3.6p) 17.9p 21.4p (0.4p) 21.0p
Diluted earnings per share 21.4p (3.6p) 17.8p 21.3p (0.3p) 21.0p
Notes to the Preliminary Results
1. Turnover & profit on ordinary activities before tax
Turnover represents the amount invoiced to third parties in respect of goods sold and services provided excluding
value added tax. In the case of long term contracts, it represents the value of work done during the year. Turnover
and profit on ordinary activities before tax were contributed as shown in the table below. For comparative purposes
2003 figures for this note have been restated at the 2004 average exchange rates with the aggregate adjustment being
made on the 'Foreign exchange translation - Group' line.
Turnover Turnover Profit Profit
2004 2003 2004 2003
£'000 £'000 £'000 £'000
Engineering Products:
Group - continuing 438,977 416,334 30,941 33,486
Share of associate 2 8 - 2
438,979 416,342 30,941 33,488
Techna:
Group - continuing 101,651 73,059 3,431 767
Share of joint venture 240 361 5 5
101,891 73,420 3,436 772
Engineering Services:
Group - continuing 198,722 184,412 20,481 20,019
Share of joint ventures 8,195 8,850 531 1,657
Share of associate 99,788 93,480 9,446 8,626
306,705 286,742 30,458 30,302
Segmental totals
Group 739,350 673,805 54,853 54,272
Joint ventures & associates 108,225 102,699 9,982 10,290
Goodwill amortisation
- Engineering Products - - (6,773) (6,652)
- Engineering Services - - (390) (214)
- Associate - - (289) (183)
Unallocated costs - - (3,584) (2,988)
Foreign exchange translation - Group - 16,913 - 1,889
847,575 793,417 53,799 56,414
Exceptional items - Engineering Products - - - 1,663
Interest & other income - - (2,940) (6,824)
847,575 793,417 50,859 51,253
2. Exceptional items
2004 2003
£'000 £'000
Profit on disposal of land - 1,663
The comparative figure for the 52 weeks to 26 December 2003 relates to the disposal of surplus land at the Manchester
site of Weir Pumps Limited, which was completed on 4 December 2003.
3. Tax
2004 2003
£'000 £'000
Group - UK 1,571 (437)
Group - overseas 9,709 10,709
Joint ventures 21 114
Associates 2,636 2,603
UK tax - exceptional - (4,634)
Tax on profit on ordinary activities 13,937 8,355
4. Dividends
2004 2003
£'000 £'000
On ordinary shares:
Interim 3.45p per 12.5p share (2003: 3.35p) 7,124 6,853
Proposed final 9.35p per 12.5p share (2003: 19,362 18,525
9.05p)
26,486 25,378
The directors recommend payment of a final dividend of 9.35p per ordinary share for 2004 (2003: 9.05p) which, with the
interim dividend of 3.45p per ordinary share (2003: 3.35p) will make a total distribution for the year of 12.8p per
ordinary share (2003: 12.4p). Subject to the approval of shareholders at the annual general meeting, payment will be
made on 1 June 2005 to ordinary shareholders on the register at close of business on 29 April 2005.
5. Basis of preparation
The preliminary results for the 53 weeks ended 31 December 2004 do not constitute statutory accounts as defined in
Section 240 of the Companies Act 1985. These statements have been prepared on the basis of the accounting policies
set out in the Group's Annual Report & Accounts and were approved by the Board of directors on 21 March 2005. Full
accounts with an unqualified audit report will be lodged with the Registrar in due course. Financial statements for
the 52 weeks to 26 December 2003 are abridged statements; full accounts with an unqualified audit report have been
lodged with the Registrar.
Consolidated Balance Sheet
at 31 December 2004
2004 2003
£'000 £'000
Fixed assets
Intangible assets - goodwill 103,916 113,933
Tangible assets 109,767 102,557
Investments
Joint ventures - share of gross assets 2,795 9,029
- share of gross liabilities 1,430 2,724
1,365 6,305
Associates 19,655 16,337
Other 548 445
21,568 23,087
Total fixed assets 235,251 239,577
Current assets
Stocks 98,330 99,671
Debtors 218,058 179,888
Cash at bank & in hand 97,287 117,898
413,675 397,457
Creditors falling due within one year
Borrowings 2,553 115,238
Other creditors 217,223 178,198
219,776 293,436
Net current assets 193,899 104,021
Total assets less current liabilities 429,150 343,598
Less
Creditors falling due after more than one year
Loans 81,063 428
Obligations under finance leases 931 1,211
Provisions for liabilities & charges 36,007 34,490
Deferred income
Grants not yet credited to profit 17 26
Minority interest 573 567
Net assets excluding retirement benefits 310,559 306,876
Retirement benefits - liability 65,075 72,691
Net assets including retirement benefits 245,484 234,185
Capital & reserves
Called up share capital 25,882 25,587
Share premium account 26,451 21,258
Capital redemption reserve 531 531
Profit & loss account 192,620 186,809
245,484 234,185
Consolidated Cash Flow Statement
for the 53 weeks ended 31 December 2004
2004 2004 2003 2003
£'000 £'000 £'000 £'000
Cash inflow from operating activities
- funds generated by operations 67,638 67,365
- exceptional pension contributions (12,096) (10,000)
- cash spent on exceptional items (628) (1,480)
54,914 55,885
Dividends received from joint ventures & associates
- joint ventures 2,312 1,248
- associates 2,986 2,626
5,298 3,874
Returns on investments & servicing of finance (2,119) (4,172)
Taxation (8,815) (7,584)
Capital expenditure & financial investment
- purchases (25,588) (18,565)
- sales 1,704 5,856
(23,884) (12,709)
Cash inflow before corporate items 25,394 35,294
Acquisitions &
disposals
- acquisitions (282) (4,563)
- acquisitions of joint ventures (615) -
- disposals of businesses 57 61
- disposal of joint venture 4,545 -
3,705 (4,502)
Equity dividends paid (25,688) (24,718)
Cash inflow before liquid resources & financing 3,411 6,074
Management of liquid resources 40,827 62,694
Financing - issue of shares 5,488 1,104
- new loans 80,842 -
- debt repaid (113,140) (51,169)
- foreign exchange hedging 2,478 2,113
(24,332) (47,952)
Increase in cash 19,906 20,816
Reconciliation of Net Cash Flow to Movement in Net Funds
for the 53 weeks ended 31 December 2004
2004 2003
£'000 £'000
Increase in cash 19,906 20,816
Cash flow from debt repaid 113,140 51,169
Cash flow from new loans (80,842) -
Cash flow from management of liquid resources (40,827) (62,694)
Change in net funds resulting from cash flows 11,377 9,291
Leases - inceptions (216) (91)
Exchange 600 (10,620)
Movement in net funds during the year 11,761 (1,420)
Net funds at 27 December 2003 504 1,924
Net funds at 31 December 2004 12,265 504
Reconciliation of Operating Profit to Net Cash Inflow from Operating
Activities:
2004 2003
£'000 £'000
Operating profit 44,106 46,307
Depreciation, goodwill amortisation & grant credits 22,371 22,174
(Gain) / loss on disposal of tangible assets & investments (173) 49
Funding of pension & post retirement costs (733) (1,497)
Increase / (decrease) in provisions 2,507 (237)
Employee share scheme 600 -
Increase in stocks (633) (2,104)
(Increase) / decrease in debtors (40,808) 9,551
Increase / (decrease) in creditors 40,401 (6,878)
Funds generated by operations 67,638 67,365
Exceptional pension contributions (12,096) (10,000)
Cash spent on exceptional environmental provision (284) (421)
Cash spent on exceptional closure costs (344) (864)
Cash spent on exceptional Warman reorganisation costs - (195)
Cash spent on exceptional items (628) (1,480)
Net cash inflow from operating activities 54,914 55,885
Statement of Total Recognised Gains & Losses
2004 2003
£'000 £'000
Profit excluding share of profit for joint ventures & associates 30,038 35,815
Share of joint ventures' profit 541 1,591
Share of associates' profit 6,302 5,478
Profit attributable to The Weir Group PLC 36,881 42,884
Actuarial (loss) / gain (3,258) 39,045
Tax thereon 918 (11,569)
Exchange differences on foreign currency net investments (2,793) 8,370
Tax thereon (51) (364)
Total recognised gains 31,697 78,366
Reconciliation of Movements in Shareholders' Funds
2004 2003
£'000 £'000
Total recognised gains 31,697 78,366
Dividends (26,486) (25,378)
Other movements
- new share capital subscribed 5,488 1,104
- employee share scheme 600 -
Net addition to shareholders' funds 11,299 54,092
Opening shareholders' funds 234,185 180,093
Closing shareholders' funds 245,484 234,185
Shareholders' funds are entirely attributable to equity interests.
This information is provided by RNS
The company news service from the London Stock Exchange
Friday, 10th January 2025
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