Half-yearly report
The Weir Group PLC
31 July 2014
FIRST HALF RESULTS IN-LINE WITH EXPECTATIONS: FULL YEAR GUIDANCE UNCHANGED
The Weir Group PLC, a global engineering solutions provider to the energy and natural resources industries, today reports its 2014 interim results for the period ended 4 July 2014.
| Results for 26 weeks ended | 4 July 2014 | 28 June 2013 | Reported Growth | Constant Currency1 |
| Continuing operations | ||||
| Order input1 | £1,240m | £1,130m | +10% | |
| Revenue | £1,144m | £1,198m | -5% | +6% |
| Operating profit2 | £201m | £217m | -7% | +4% |
| Operating margin2 | 17.6% | 18.1% | -50bps | -40bps |
| Profit before tax2 | £182m | £193m | -6% | +7% |
| Cash from operations | £150m | £183m | -18% | |
| Earnings per share2 | 61.4p | 66.4p | -8% | |
| Dividend per share | 15.0p | 8.8p | +70% | |
| Net debt | £751m | £747m3 | -£4m | |
| Return on Capital Employed4 | 18.6% | 19.3% | -70bps | |
| Notes: | ||||
| 1. 2013 restated at 2014 average exchange rates. | ||||
| 2. Adjusted to exclude exceptional items and intangibles amortisation. Reported operating profit and profit before tax were £178m (2013: £195m) and £158m (2013: £165m) respectively. Reported earnings per share were 53.8p (2013: 56.6p). | ||||
| 3. Net debt at 3 January 2014. | ||||
| 4. Continuing operations EBIT before exceptional items (excluding Mathena and R Wales EBIT and exceptional items) divided by average net assets (excluding Mathena and R Wales net assets) excluding net debt and pension deficit (net of deferred tax asset). | ||||
HIGHLIGHTS1
- 10% order growth year on year and 9% up on H2-2013
- Positive aftermarket momentum across the Group: 15% order input growth
- Strong growth in upstream Oil & Gas: divisional input up 40% year on year
- Adverse foreign currency exchange rate movements: £23m (11%) operating profit impact
- Mining market remains challenging, margins impacted by industrial action in South Africa
- New products performing well: £51m input from HPGRs and premium fluid ends
- Dividend rephased: Interim up 70% to represent approximately one-third of full year dividend
1 All comparatives are on a constant currency basis, unless otherwise stated.
Keith Cochrane, Chief Executive, commented:
"Weir has delivered a good underlying first half performance in line with expectations. The benefits of our diverse portfolio were evident as the impacts of previously identified downside and upside risks offset each other. Double digit growth in Oil & Gas was partially offset by challenging mining end market conditions and the impacts of prolonged industrial action in South Africa. Value Chain Excellence initiatives continued to make progress, leveraging Weir's global scale to deliver significant savings.
"We anticipate strong revenue and profit growth in the second half of 2014, assuming no further deterioration or disruption in mining end markets. As a result we remain on track to meet our full year expectations of good constant currency revenue and profit growth with Group margins broadly in line with 2013 levels. Reported results will continue to be affected by foreign currency headwinds, which strengthened over the first half."
FIRST HALF OVERVIEW
Overall, first half results were in line with expectations on a constant currency basis. Value Chain Excellence initiatives supported profitability across the Group, including £25m of gross savings in the first half from procurement initiatives. Results were also underpinned by growing orders for the Group's expanded product portfolio with strong growth in HPGR (High Pressure Grinding Rolls) and premium fluid end product lines. Adverse foreign currency movements reduced reported operating profits by 11%.
The Minerals division delivered a resilient first half performance in what continued to be challenging mining market conditions. Original equipment orders declined, reflecting the absence of greenfield projects and customer caution in committing to brownfield expansions. Despite the effects of industrial action in South Africa aftermarket orders continued to grow. Operating profits were lower than the prior year, slightly behind original expectations as a result of the industrial unrest. Margins declined slightly reflecting a higher mix of lower-margin products, increased investment in new products and the impact of materially lower revenues in Africa.
The recovery in upstream North American Oil & Gas markets accelerated, leading to strong double digit input and revenue growth, ahead of prior expectations for this division. Pressure Pumping benefited from the normalisation of customer inventory levels and a stronger than anticipated demand for original equipment. Margins strengthened year-on-year, reflecting operational leverage in Pressure Pumping offset by continued investment in developing the Pressure Control offering.
Input in the Power & Industrial division benefited from the early stages of a recovery in North American hydro markets. Strong revenue growth was more than offset by a decline in margins, as a result of lower high-margin nuclear valve revenues such that operating profit was lower than the prior year period.
SEGMENTAL ANALYSIS
| Continuing Operations £m | Minerals | Oil & Gas | Power & Industrial | Unallocated Expenses | Total | Total OE | Total AM |
| Input (constant currency) | |||||||
| 2014 | 566 | 499 | 175 | - | 1,240 | 418 | 822 |
| 2013 | 611 | 355 | 164 | - | 1,130 | 415 | 715 |
| Growth: | |||||||
| - Constant currency | -7% | 40% | 7% | - | 10% | 1% | 15% |
| Revenue | |||||||
| 2014 | 548 | 435 | 161 | - | 1,144 | 393 | 751 |
| 2013 (as reported) | 659 | 381 | 158 | - | 1,198 | 440 | 758 |
| Growth: | |||||||
| - As reported | -17% | 14% | 2% | - | -5% | -11% | -1% |
| - Constant currency | -5% | 23% | 9% | - | 6% | -2% | +11% |
| Operating profit | |||||||
| 2014 | 104 | 98 | 9 | (10) | 201 | ||
| 2013 (as reported) | 130 | 83 | 12 | (8) | 217 | ||
| Growth: | |||||||
| - As reported | -20% | 18% | -22% | 23% | -7% | ||
| - Constant currency | -9% | 27% | -16% | 24% | 4% | ||
| Operating margin | |||||||
| 2014 | 19.0% | 22.5% | 5.7% | - | 17.6% | ||
| 2013 (as reported) | 19.8% | 21.8% | 7.5% | - | 18.1% | ||
| Growth: | |||||||
| - As reported | -80bps | 70bps | -180bps | - | -50bps | ||
| - Constant currency | -80bps | 80bps | -160bps | - | -40bps | ||
FINANCIAL HIGHLIGHTS
Order input at £1,240m increased 10% in constant currency terms. Original equipment orders were up 1% with good growth in Oil & Gas, in particular in Pressure Pumping where we have seen an increase in pump orders, broadly offsetting reduced order levels in Minerals. Aftermarket orders were up 15%, with all divisions reporting year on year growth, and represented 66% of overall input (2013: 63%).
Revenue increased by 6% to £1,144m on a constant currency basis, down 5% as reported. Original equipment represented 34% of revenues with aftermarket revenues accounting for 66% (2013: 37% and 63% respectively). The proportion of total Group revenues from emerging markets decreased slightly to 31% (2013: 37%), a combination of the effects of industrial action in South Africa, good absolute growth in North America and the depreciation of emerging market currencies. A positive book to bill ratio of 1.08 was recorded in the period (2013: 1.05) supporting good order book growth.
Operating profit from continuing operations before exceptional items and intangibles amortisation, on a constant currency basis, was up 4% on last year at £201m. This performance was driven by good growth in Oil & Gas which more than offset the impacts of market trends and industrial unrest in Minerals. Profits in Power & Industrial were lower than the prior period. On a reported basis, after a significant net negative currency translation impact of £23m, operating profit from continuing operations before exceptional items and intangibles amortisation was down 7% to £201m (2013: £217m). EBITDA was £231m (2013: £246m).
Operating margin was 17.6%, a reduction of 50bps on the prior year period and 40bps lower on a constant currency basis (2013: 18.1% and 18.0% on a constant currency basis). This was a result of lower margins in Minerals partially offset by stronger margins in Oil & Gas.
Net finance costs before exceptional items were £19m in total (2013: £24m) with the reduction due to lower levels of average net debt and benefit from the movement in the US$ to Sterling exchange rate.
Profit before tax from continuing operations before exceptional items and intangibles amortisation, on a constant currency basis, increased by 7% to £182m. On a reported basis, profit before tax and intangibles amortisation decreased by £11m on the equivalent prior year period (2013: £193m). Reported profit before tax from continuing operations decreased by £7m to £158m (2013: £165m) after intangibles amortisation of £21m (2013: £22m) and exceptional items of £3m (2013: £6m). Exceptional items in the current period comprised costs of £2m associated with the proposed acquisition of Metso and exceptional finance costs of £1m (2013: £6m), representing the unwind of the discount on contingent consideration liabilities.
Tax charge for the period of £49m (2013: £51m) on profit before tax from continuing operations before exceptional items and intangibles amortisation of £182m (2013: £193m) represents an underlying effective tax rate of 27.0% (2013: 26.6%), primarily reflecting an increase in the proportion of US profits.
Earnings per share from continuing operations before exceptional items and intangibles amortisation decreased by 5.0p to 61.4p (2013: 66.4p). Reported earnings per share including exceptional items, intangibles amortisation and the impact of discontinued operations was 53.8p (2013: 56.6p).
Cash generated from operations, before working capital cash flows, decreased by 7% to £229m (2013: £246m). Working capital outflows of £79m (2013: £63m) were primarily in Oil & Gas where strong growth in the second quarter drove higher inventory and receivables. In addition, the platinum strikes in Minerals Africa resulted in higher than anticipated inventory levels in that region. Cash generated from operations decreased by 18% from £183m to £150m representing an EBITDA to cash conversion ratio of 65% (2013: 74%). Net capital expenditure was broadly in line with the prior year period at £42m (2013: £40m) with continued investment in Malaysia and our Pressure Control rental offering. Free cash flow from continuing operations was an outflow of £21m (2013: inflow of £8m). Net debt was £751m at the half year (December 2013: £747m). On a reported and pro-forma basis, the ratio of net debt to EBITDA was 1.5 times.
Return on capital employed of 18.6% for the 12 months to 4 July 2014 was down on the prior year period (2013: 19.3%) reflecting the increase in the invested capital base more than offsetting the underlying profit growth in the period.
Dividend The Board is recommending a 70% increase in the interim dividend to 15.0p (2013: 8.8p) with the intention of rephasing the full year dividend such that the interim payment will represent approximately one-third of the total dividend for 2014. The interim dividend will be paid on 7 November to shareholders on the register on 10 October 2014. The Board's progressive dividend policy and full-year dividend expectations remain unchanged.
DIVISIONAL HIGHLIGHTS
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 & gas and general industrial markets around the world.
| £ m - Constant Currency | H1 2014 | H1 20131 | Growth | H2 20131 | |
| Input OE | 171 | 235 | -27% | 210 | |
| Input aftermarket | 395 | 376 | +5% | 359 | |
| Input Total | 566 | 611 | -7% | 569 | |
| Revenue OE | 181 | 219 | -18% | 226 | |
| Revenue aftermarket | 367 | 359 | +2% | 375 | |
| Revenue Total | 548 | 578 | -5% | 601 | |
| EBITA2 | 104 | 114 | -9% | 129 | |
| Operating margin2 | 19.0% | 19.8% | -80bps | 21.4% | |
| Book to bill | 1.03 | 1.06 | -3% | 0.95 | |
| 1 2013 restated at 2014 average exchange rates. | |||||
| 2 Adjusted to exclude exceptional items and intangibles amortisation. | |||||
Market drivers
Commodity markets were mixed with a limited recovery in precious and industrial metal prices offset by a material decline in iron ore prices. As anticipated, the first half of 2014 has seen a continued reduction in mining capital expenditure with an absence of new greenfield projects and customers displaying caution in proceeding with brownfield investment.
Miners maintained their focus on reducing costs and optimising current assets by extending the life of wear parts and reducing the cost per tonne of ore production. Global ore production increased for most commodities, with the exception of platinum where the five-month strike in South Africa impacted volumes. Production in West Africa was also impacted by the Ebola virus outbreak and the depressed gold price. In South America a number of greenfield sites reached commissioning with Toromocho commencing production and a further three large mines in the region scheduled to commence operation later this year or in early 2015. Mining markets in Europe and North America remained subdued although activity in Australia and Brasil picked up somewhat on the prior period.
In non-mining markets lower project activity levels impacted oil sands, power and general industrial markets.
Strategic progress
The division's comminution (crushing, grinding and screening) strategy gained further traction over the period. A large HPGR order was secured in Europe and a strong pipeline of further opportunities is being pursued. Development of the cone crusher product line continued to plan as part of the division's strategy to extend its comminution offering. A new vertical slurry pump was launched with retrofit capability for existing customers, enabling upgrades at reduced cost, while the world's largest slurry pump was installed at a Chilean mine, with further opportunities identified for this new product. In oil and gas end markets good progress was made in extending the range of swellable packers, utilising the division's rubber technologies. The first benefits of the Anglo American global framework agreement were seen in the first half and discussions regarding similar agreements with other customers continue to progress.
The best cost sourcing strategy is progressing well with increasing volumes being sourced through the recently acquired Malaysian and South African foundries. Detailed planning is underway for the development of the Malaysian campus while global capacity planning will be supported by the roll out of a common ERP platform across the division over the next three years. Cost reduction measures were implemented in Europe, North America and South America, reflecting challenging end market conditions. Value Chain Excellence initiatives also helped support performance with a focus on leveraging Group-wide procurement savings.
Order input decreased by 7% on a constant currency basis to £566m (2013: £611m) with good aftermarket growth more than offset by a material fall in original equipment orders and the impact of industrial action in South Africa. Original equipment orders fell by 27% year on year with a reduction in the number of brownfield projects reaching the procurement stage, although a good level of quotation activity continued through the period. OE input increased strongly in the second quarter compared to the first as a result of a large HPGR order. Aftermarket input accelerated through the period and increased by 5%, with good growth supported by underlying ore production trends and the commissioning of greenfield sites. Aftermarket input represented 70% of the total, compared to 61% in the prior year.
The division made good progress in comminution with input of £34m in the first half. Slurry pump orders were materially lower year on year, reflecting the limited number of large contract wins in the period. Orders from non-mining markets also fell compared to a prior year period which included large contract wins in waste water and coal bed methane markets. Input from oil and gas markets fell as lower oil sands project activity was partially offset by higher swellable packer orders.
Regionally input in Australia and Brasil was ahead of the prior period while a large HPGR order underpinned growth in Europe. This was more than offset by declines in North America, Africa and the rest of South America, reflecting market conditions. Emerging markets represented 45% of input (2013: 46%).
Revenue fell by 5% on a constant currency basis to £548m (2013: £578m). Original equipment revenues declined by 18% and accounted for 33% of revenues (2013: 38%). Production-driven aftermarket revenues increased by 2%, slightly lower than original expectations as a result of the strike in South Africa. Revenue from Africa was £27m lower year on year. The book to bill ratio remained positive in the period at 1.03 (2013: 1.06). Reported revenues declined by 17%, reflecting a 12% foreign exchange headwind (2013 reported: £659m).
Operating profit decreased by 9% on a constant currency basis to £104m (2013: £114m), reflecting lower revenues and a fall in the contribution from African operations of £7m. Reported operating profit fell by 20% after a 12% foreign exchange headwind (2013 reported: £130m).
Operating margin decreased by 80bps to 19.0% (2013: 19.8%), reflecting a higher mix of lower margin products, increased investment in the comminution platform and a c.35bps impact from materially lower revenues in Africa. These adverse factors were somewhat offset by the benefit of cost reduction and procurement initiatives and a higher proportion of aftermarket revenues.
OIL & GAS
Weir Oil & Gas provides superior products and service solutions to upstream, production, transportation, refining and related industries. Upstream products include pressure pumping equipment and services and pressure control products and rental services. Equipment repairs, upgrades, certification and asset management & field services are delivered globally by Weir Oil & Gas Services. Downstream products include API 610 pumps and spare parts.
| £m - Constant Currency | H1 2014 | H1 20131 | Growth | H2 20131 | |
| Input OE | 160 | 97 | +64% | 112 | |
| Input aftermarket | 339 | 258 | +32% | 293 | |
| Input Total | 499 | 355 | +40% | 405 | |
| Revenue OE | 123 | 103 | +19% | 109 | |
| Revenue aftermarket | 312 | 250 | +25% | 284 | |
| Revenue Total | 435 | 353 | +23% | 393 | |
| EBITA2 | 98 | 77 | +27% | 92 | |
| Operating margin2 | 22.5% | 21.7% | +80bps | 23.4% | |
| Book to bill | 1.15 | 1.01 | +14% | 1.03 | |
| 1 2013 restated at 2014 average exchange rates. | |||||
| 2 Adjusted to exclude exceptional items and intangibles amortisation. | |||||
Market drivers
Oil prices in excess of $100/barrel remained supportive of strong on-going activity levels. In North America, natural gas spot prices briefly spiked as a result of the harsh winter weather but largely remained around $4.5/MMBtu and not sufficient to stimulate a recovery in activity, despite gas storage levels remaining below seasonal norms. The average onshore US rig count was 3% higher than the prior year, growing steadily through the period, while the number of wells drilled increased by nearly 5% as a result of continued drilling efficiency measures such as pad drilling. Growth was centred around oil and liquid rich basins, particularly the Permian, while Canadian markets enjoyed a more normal spring break following last year's extensive flooding. Activity continues to be dominated by unconventional drilling with the horizontal rig count now accounting for 68% of activity (2013: 61%), underpinning good demand growth in pressure pumping markets.
Pressure pumping aftermarket activity also benefited from the continuing trend towards longer laterals, 24/7 operations and a higher number of stages per well. Replacement original equipment demand increased somewhat as a result of the higher frac fleet utilisation, which reached an estimated 83% by the end of the second quarter. International demand continued to grow, although Chinese markets paused following the material capacity additions made in 2013. Pressure control markets also saw good growth, supported by the growing well count. The positive effects of the higher mix of horizontal drilling, which requires more complex pressure control solutions, was partially offset by the greater proportion of activity in lower pressure oil and liquids basins such as the Permian and Bakken.
In the Middle East, increased investment supported higher activity levels in Saudi Arabia while Iraq continued to increase production as oilfields are refurbished. Mid and downstream market growth was centred around LNG and refining developments in emerging markets.
Strategic progress
The division continued to strengthen its market-leading service centre network and bundle its broad product offering to customers. Pressure Pumping announced an agreement with Rolls Royce Power Systems company MTU to produce an integrated frac power system, enabling the pump, engine and transmission to work more effectively and thereby boosting customer efficiency and reducing downtime. Pressure Pumping also launched a number of new products including an enhanced heavy-duty cement pump and an automated relief valve control system, while the recently introduced range of premium fluid ends rapidly gained market acceptance.
Pressure Control rolled out its frac flowback and zipper manifold rental offering, gaining traction in the Bakken basin in North Dakota, and strengthened its operational capabilities to support the broader offering. In July 2014 the division expanded its presence in Canada through the acquisition of an CAD$8m revenue wellhead supplier based in Saskatchewan. In Australia a large flow back contract was secured while manufacturing of flow control products for the Chinese market was localised, improving cost competitiveness and responsiveness as part of the division's global manufacturing strategy.
Strong growth continued in the Middle-East based Services business with a US$98m contract with LUKOIL in Southern Iraq to service and maintain a processing plant near Basra, establishing Weir as a leading O&M provider in the country. Gabbioneta continued to make good progress in expanding its product range into midstream markets and saw the first benefits of a combined market approach with the Group's other speciality centrifugal pump businesses.
Order input of £499m (2013: £355m) was up 40% on a constant currency basis with strong double digit growth from each business within the division. Second quarter orders were ahead of the first quarter. Original equipment input increased 64% against a prior year period which was depressed by excess frac fleet capacity. Aftermarket input was up 32% year on year against a prior year comparator which was impacted by customers overstocking of wear components.
Pressure Pumping input was more than 50% higher year on year, ahead of expectations, with the continuation of quarterly growth trends seen over the course of 2013. Strong growth was seen in the flow control product line as the division's comprehensive product and service offering enabled it to gain market share. Fluid end orders more than doubled, supported by differentiated new products which accounted for nearly 40% of orders. Original equipment demand also grew strongly from a low base and benefited from the first signs of a frac pump replacement cycle, for delivery in the second half. Pressure Control increased its share of rigs served in North America and order input was supported by the expansion of its product and service offering, including securing a first bundling contract in the Bakken.
Services capitalised on end market conditions in Saudi Arabia, expanded into Oman and extended the service offering across each territory. Gabbioneta enjoyed strong order growth and secured a number of large contracts from LNG and refinery projects across the Middle East and Asia.
Revenue was 23% higher on a constant currency basis at £435m (2013: £353m), increasing through the period and reflecting the strong order input trends across the business. Original equipment revenues increased 19% with shorter cycle aftermarket revenues up 25%. Pressure Pumping enjoyed strong revenue growth, ahead of expectations, while Gabbioneta was slightly down year on year as a result of customers delaying delivery dates. The division rebuilt its order book with a positive book to bill ratio of 1.15 in the period (2013: 1.01). Reported revenues increased by 14% after a 7% foreign exchange headwind (2013 reported: £381m).
Operating profit including joint ventures on a constant currency basis was 27% higher at £98m (2013: £77m), driven by strong Pressure Pumping profit growth. Reported operating profit increased by 18% after a 7% foreign exchange headwind (2013 reported: £83m).
Operating margin increased 80bps to 22.5% (2013: 21.7%), reflecting positive operating leverage in Pressure Pumping partially offset by lower margins in Pressure Control, as a result of increased investment in operational capabilities and product mix, and start-up costs in Services in relation to the previously announced major LUKOIL contract.
POWER & INDUSTRIAL
Weir Power & Industrial designs and manufactures valves, pumps and turbines as well as providing specialist support services to the global power generation, industrial and oil and gas sectors.
| £m - Constant Currency | H1 2014 | H1 20131 | Growth | H2 20131 | |
| Input OE | 87 | 82 | +7% | 85 | |
| Input aftermarket | 88 | 82 | +7% | 77 | |
| Input Total | 175 | 164 | +7% | 162 | |
| Revenue OE | 90 | 78 | +16% | 93 | |
| Revenue aftermarket | 71 | 70 | +2% | 72 | |
| Revenue Total | 161 | 148 | +9% | 165 | |
| EBITA2 | 9 | 11 | -16% | 19 | |
| Operating margin2 | 5.7% | 7.3% | -160bps | 11.3% | |
| Book to bill | 1.08 | 1.11 | -3% | 0.98 | |
| 1 2013 restated at 2014 average exchange rates. | |||||
| 2 Adjusted to exclude exceptional items and intangibles amortisation. | |||||
Market drivers
Oil and gas and power project activity was subdued as customers delayed developments and displayed more caution in committing to large capital projects. Nuclear new build activity continues to pick up but is unlikely to progress to the procurement stages until next year. Within oil and gas markets LNG activity remained robust, while the North American hydro market rebounded from the depressed levels of 2013. Aftermarket activity continued to grow as customers seek to increase output from existing assets.
Strategic progress
Valves strategic initiatives contributed to strong aftermarket order growth while competitiveness in commercial safety valves was enhanced through low cost sourcing, including utilising the Group's best cost foundry in Malaysia. Valves operational performance was much improved year on year and underpinned strong revenue growth while the business expanded further in oil and gas end markets, establishing a strong position in LNG safety valves. Hydro continued to use its technology and deep end market understanding to develop strong partnerships with customers.
Order input was up 7% on a constant currency basis at £175m (2013: £164m) with strong Hydro growth partially offset by declines in Services and Specialty Pumps. Valves input momentum was driven by good growth in China and India with lower project related orders offset by good aftermarket growth from the growing installed base. In total both divisional original equipment and aftermarket orders increased by 7% with second quarter input ahead of the first quarter. The proportion of orders from oil and gas markets increased to 16% (2013: 10%) supported by the division's strategy of expanding into adjacent sectors. Emerging markets accounted for 35% of input, in line with the prior period.
Revenue was 9% higher on a constant currency basis at £161m (2013: £148m), supported by a strong opening order book and double digit Valves growth. A positive book to bill ratio of 1.08 was achieved in the period (2013: 1.11). Reported revenues increased by 2% after a 6% foreign exchange headwind (2013 reported: £158m).
Operating profit on a constant currency basis was 16% lower at £9m (2013: £11m) as margins declined. Reported operating profit fell by 22% after an 8% foreign exchange headwind (2013 reported: £12m).
Operating margin declined by 160bps to 5.7% (2013: 7.3%), slightly below expectations as a result of the product mix within Valves. The prior year period contained the final delivery of pre-Fukishima high-margin nuclear safety valve orders, with volumes replaced by lower margin commercial valve opportunities.
BOARD AND MANAGEMENT CHANGES
Steve Noon, Divisional Managing Director, Oil & Gas, will retire at the end of 2014 and be succeeded by Paul Coppinger, currently President, Pressure Pumping, within the Oil & Gas division. Paul joined Weir in 2011, prior to which he was President of the Energy segment within Circor International.
RISKS & UNCERTAINTIES
The principal risks and uncertainties affecting the business activities of the Group remain those detailed on pages 28 to 30 of the 2013 Annual Report, a copy of which is available on the Group website at weir.co.uk. The Board considers that these remain a current reflection of the risks and uncertainties facing the business for the remaining 26 weeks of the financial year.
OUTLOOK
Minerals
We continue to expect sequential growth in both aftermarket and original equipment revenue in the second half although results will be impacted by the metalworkers strike in South Africa, which closed our manufacturing operations and resulted in an estimated £3m profit impact in July. Assuming no further deterioration or disruption in mining end markets, full year divisional constant currency revenues are now expected to be slightly down on 2013, lower than previous expectations and reflecting first half original equipment orders and the impacts of industrial action in South Africa. We continue to expect sequential margin improvement in the second half such that full year margins will be slightly lower than 2013 and in line with prior guidance.
Oil & Gas
Supported by the higher opening order book full year constant currency revenues are anticipated to be higher than previous expectations, with full year revenue growth broadly in line with the first half. Full year divisional operating margins are expected to be in line with the second half of 2013, in line with prior expectations, with second half margin improvement supported by operational leverage in Pressure Pumping and the benefits of prior investment in operational capabilities in Pressure Control.
Power & Industrial
We continue to expect strong full year constant currency divisional revenue growth, in line with prior guidance and supported by the opening order book. Although margins are expected to improve substantially in the second half, full year divisional operating margins will be broadly in line with 2013, below previous expectations as a result of the first half performance and the recent suspension of operations in Libya.
Summary
We expect the Group to continue to benefit from its global presence and diverse exposure across structural growth markets. The Group is well positioned to take full advantage of the range of opportunities across these end markets in the second half of the year.
We anticipate strong revenue and profit growth in the second half of 2014, assuming no further deterioration or disruption in mining end markets. As a result we remain on track to meet our full year expectations of good constant currency revenue and profit growth with Group margins broadly in line with 2013 levels. Reported results will continue to be affected by foreign currency headwinds, which strengthened over the first half.
ENQUIRIES
| Raymond Buchanan, Communications | +44 (0)771 326 1447 |
| Ross Easton, Communications | +44 (0)792 019 0994 |
| Brunswick, Patrick Handley/Nina Coad | +44 (0)207 404 5959 |
INVESTOR AND ANALYST WEBCAST
A live webcast of the presentation to the investment community will be held at 8:30am (BST) on 31st July 2014. Participants must register by visiting weir.co.uk where there are also copies of this release and the slide presentation.
COMPANY INFORMATION
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| APPENDIX - 2013 / 2014 INPUT TRENDS | |||||||||
| Reported Growth | Like for Like1 | ||||||||
| 2013 | 2014 | 2013 | 2014 | ||||||
| Division | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | |
| OE | 0% | 19% | -27% | -28% | 0% | 19% | -27% | -28% | |
| AM | 7% | 7% | 4% | 6% | 5% | 5% | 4% | 6% | |
| Minerals | 4% | 11% | -7% | -8% | 3% | 9% | -7% | -8% | |
| OE | 11% | 2% | 33% | 99% | 11% | 2% | 33% | 99% | |
| AM | 45% | 69% | 33% | 31% | 32% | 56% | 33% | 31% | |
| Oil & Gas | 33% | 45% | 33% | 47% | 24% | 37% | 33% | 47% | |
| OE | -17% | 5% | 19% | -4% | -17% | 5% | 19% | -4% | |
| AM | -23% | 45% | -9% | 20% | -23% | 45% | -9% | 20% | |
| Power & Industrial | -19% | 22% | 5% | 8% | -19% | 22% | 5% | 8% | |
| OE | -4% | 4% | -2% | 4% | -1% | 11% | -2% | 4% | |
| AM | 15% | 30% | 13% | 17% | 10% | 25% | 13% | 17% | |
| Continuing Ops | 7% | 20% | 7% | 12% | 5% | 20% | 7% | 12% | |
| 1 Like for like excludes the impact of acquisitions, disposals and related transaction and integration costs. | |||||||||
Disclaimer:
This information includes 'forward-looking statements'. All statements other than statements of historical fact included in this presentation, including, without limitation, those regarding the Weir Group's financial position, business strategy, plans (including development plans and objectives relating to the Company'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 Company 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 Company's present and future business strategies and the environment in which the Company will operate in the future. These forward-looking statements speak only as at the date of this document. The Company 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 Company's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. Past business and financial performance cannot be relied on as an indication of future performance.
| Consolidated Income Statement | |||||||||
| for the 26 weeks ended 4 July 2014 | |||||||||
| 26 weeks ended 4 July 2014 | 26 weeks ended 28 June 2013 | ||||||||
| Before exceptional items & intangibles amortisation | Exceptional items & intangibles amortisation (note 3) | Before exceptional items & intangibles amortisation | Exceptional items & intangibles amortisation (note 3) | ||||||
| 53 weeks ended | |||||||||
| 3 Jan 2014 | |||||||||
| Total | Total | Total | |||||||
| £m | Notes | £m | £m | £m | £m | £m | £m | ||
| Continuing operations | |||||||||
| 2,429.8 | Revenue | 2 | 1,143.7 | - | 1,143.7 | 1,198.1 | - | 1,198.1 | |
| Continuing operations | |||||||||
| 481.9 | Operating profit before share of results of joint ventures | 196.9 | (23.1) | 173.8 | 213.4 | (22.0) | 191.4 | ||
| 8.4 | Share of results of joint ventures | 4.3 | - | 4.3 | 3.7 | - | 3.7 | ||
| 490.3 | Operating profit | 2 | 201.2 | (23.1) | 178.1 | 217.1 | (22.0) | 195.1 | |
| (58.6) | Finance costs | (18.5) | (1.0) | (19.5) | (25.9) | (5.8) | (31.7) | ||
| 3.0 | Finance income | 0.7 | - | 0.7 | 3.7 | - | 3.7 | ||
| (3.5) | Other finance costs - retirement benefits | (1.6) | - | (1.6) | (1.8) | - | (1.8) | ||
| 431.2 | Profit before tax from continuing operations | 181.8 | (24.1) | 157.7 | 193.1 | (27.8) | 165.3 | ||
| (95.5) | Tax expense | 4 | (49.0) | 6.9 | (42.1) | (51.4) | 7.0 | (44.4) | |
| 335.7 | Profit for the period from continuing operations | 132.8 | (17.2) | 115.6 | 141.7 | (20.8) | 120.9 | ||
| - | Profit for the period from discontinued operations | - | 1.0 | 1.0 | - | - | - | ||
| 335.7 | Profit for the period | 132.8 | (16.2) | 116.6 | 141.7 | (20.8) | 120.9 | ||
| Attributable to | |||||||||
| 334.9 | Equity holders of the Company | 130.9 | (16.2) | 114.7 | 141.2 | (20.8) | 120.4 | ||
| 0.8 | Non-controlling interests | 1.9 | - | 1.9 | 0.5 | - | 0.5 | ||
| 335.7 | 132.8 | (16.2) | 116.6 | 141.7 | (20.8) | 120.9 | |||
| Earnings per share | 5 | ||||||||
| 157.2p | Basic - total operations | 53.8p | 56.6p | ||||||
| 157.2p | Basic - continuing operations | 61.4p | 53.3p | 66.4p | 56.6p | ||||
| 156.6p | Diluted - total operations | 53.6p | 56.3p | ||||||
| 156.6p | Diluted - continuing operations | 61.2p | 53.1p | 66.0p | 56.3p | ||||
| Consolidated Statement of Comprehensive Income | |||||
| for the 26 weeks ended 4 July 2014 | |||||
| 53 weeks ended | 26 weeks ended | 26 weeks ended | |||
| 3 Jan 2014 | 4 July 2014 | 28 June 2013 | |||
| £m | Note | £m | £m | ||
| 335.7 | Profit for the period | 116.6 | 120.9 | ||
| Other comprehensive income (expense) | |||||
| 0.1 | Gains (losses) taken to equity on cash flow hedges | 0.7 | (1.7) | ||
| (111.3) | Exchange (losses) gains on translation of foreign operations | (99.3) | 97.6 | ||
| 16.5 | Exchange gains (losses) on net investment hedges | 36.8 | (68.6) | ||
| 0.2 | Reclassification adjustments on cash flow hedges | - | (0.3) | ||
| 0.3 | Tax relating to other comprehensive income (expense) to be reclassified in subsequent periods | (0.1) | 0.5 | ||
| (94.2) | Items that are or may be reclassified to profit or loss in subsequent periods | (61.9) | 27.5 | ||
| 8.0 | Remeasurements on defined benefit plans | 9 | (3.6) | 21.3 | |
| (2.2) | Tax relating to other comprehensive (expense) income not to be reclassified in subsequent periods | 0.7 | (4.3) | ||
| 5.8 | Items that will not be reclassified to profit or loss in subsequent periods | (2.9) | 17.0 | ||
| (88.4) | Net other comprehensive (expense) income | (64.8) | 44.5 | ||
| 247.3 | Total net comprehensive income for the period | 51.8 | 165.4 | ||
| Attributable to | |||||
| 246.5 | Equity holders of the Company | 50.1 | 164.5 | ||
| 0.8 | Non-controlling interests | 1.7 | 0.9 | ||
| 247.3 | 51.8 | 165.4 | |||
| Consolidated Balance Sheet | |||||
| at 4 July 2014 | |||||
| 28 June 2013 | |||||
| 3 Jan 2014 | 4 July 2014 | Restated (note 1) | |||
| £m | Notes | £m | £m | ||
| ASSETS | |||||
| Non-current assets | |||||
| 398.7 | Property, plant & equipment | 393.3 | 412.7 | ||
| 1,614.5 | Intangible assets | 1,540.3 | 1,749.9 | ||
| 27.1 | Investments in joint ventures | 28.8 | 28.6 | ||
| 17.2 | Deferred tax assets | 19.9 | 30.7 | ||
| 1.1 | Derivative financial instruments | 10 | 3.0 | 0.6 | |
| 2,058.6 | Total non-current assets | 1,985.3 | 2,222.5 | ||
| Current assets | |||||
| 485.0 | Inventories | 505.0 | 531.9 | ||
| 497.1 | Trade & other receivables | 522.5 | 519.9 | ||
| 28.3 | Construction contracts | 29.2 | 31.0 | ||
| 11.1 | Derivative financial instruments | 10 | 15.8 | 12.4 | |
| 2.3 | Income tax receivable | 0.9 | 2.2 | ||
| 79.1 | Cash & short-term deposits | 82.6 | 78.5 | ||
| 1,102.9 | Total current assets | 1,156.0 | 1,175.9 | ||
| 3,161.5 | Total assets | 3,141.3 | 3,398.4 | ||
| LIABILITIES | |||||
| Current liabilities | |||||
| 26.5 | Interest-bearing loans & borrowings | 129.8 | 115.0 | ||
| 476.8 | Trade & other payables | 459.4 | 523.1 | ||
| 12.1 | Construction contracts | 15.2 | 11.5 | ||
| 9.6 | Derivative financial instruments | 10 | 15.3 | 17.4 | |
| 36.7 | Income tax payable | 42.9 | 31.3 | ||
| 28.9 | Provisions | 27.2 | 36.3 | ||
| 590.6 | Total current liabilities | 689.8 | 734.6 | ||
| Non-current liabilities | |||||
| 799.6 | Interest-bearing loans & borrowings | 704.0 | 913.5 | ||
| 22.4 | Other payables | 20.4 | 46.6 | ||
| 0.6 | Derivative financial instruments | 10 | 0.4 | 5.1 | |
| 25.7 | Provisions | 24.0 | 30.4 | ||
| 165.5 | Deferred tax liabilities | 154.6 | 181.5 | ||
| 70.4 | Retirement benefit plan deficits | 9 | 75.3 | 68.7 | |
| 1,084.2 | Total non-current liabilities | 978.7 | 1,245.8 | ||
| 1,674.8 | Total liabilities | 1,668.5 | 1,980.4 | ||
| 1,486.7 | NET ASSETS | 1,472.8 | 1,418.0 | ||
| CAPITAL & RESERVES | |||||
| 26.7 | Share capital | 26.7 | 26.7 | ||
| 38.0 | Share premium | 38.0 | 38.0 | ||
| (5.8) | Treasury shares | (5.8) | (5.8) | ||
| 0.5 | Capital redemption reserve | 0.5 | 0.5 | ||
| (57.3) | Foreign currency translation reserve | (119.6) | 66.1 | ||
| 0.8 | Hedge accounting reserve | 1.4 | (1.3) | ||
| 1,479.3 | Retained earnings | 1,525.3 | 1,289.2 | ||
| 1,482.2 | Shareholders equity | 1,466.5 | 1,413.4 | ||
| 4.5 | Non-controlling interests | 6.3 | 4.6 | ||
| 1,486.7 | TOTAL EQUITY | 1,472.8 | 1,418.0 | ||
| Consolidated Cash Flow Statement | |||||
| for the 26 weeks ended 4 July 2014 | |||||
| 53 weeks ended | 26 weeks ended | 26 weeks ended | |||
| 3 Jan 2014 | 4 July 2014 | 28 June 2013 | |||
| £m | Notes | £m | £m | ||
| Continuing operations | |||||
| Cash flows from operating activities | |||||
| 473.9 | Cash generated from operations | 11 | 149.6 | 183.0 | |
| (12.1) | Additional pension contributions paid | - | (2.5) | ||
| (71.9) | Income tax paid | (41.5) | (37.8) | ||
| 389.9 | Net cash generated from operating activities | 108.1 | 142.7 | ||
| Continuing operations | |||||
| Cash flows from investing activities | |||||
| (201.2) | Acquisitions of subsidiaries | 11 | (4.8) | (199.0) | |
| (0.3) | Disposals of subsidiaries | 11 | - | (0.2) | |
| (108.4) | Purchases of property, plant & equipment & intangible assets | (48.2) | (43.8) | ||
| 11.1 | Other proceeds from sale of property, plant & equipment & intangible assets | 6.3 | 3.4 | ||
| 2.8 | Interest received | 5.2 | 0.8 | ||
| (14.0) | Investment in joint ventures | - | (14.0) | ||
| 6.1 | Dividends received from joint ventures | 2.0 | 2.1 | ||
| (303.9) | Net cash used in investing activities | (39.5) | (250.7) | ||
| Continuing operations | |||||
| Cash flows from financing activities | |||||
| (2.2) | Purchase of shares for equity settled share-based incentives | - | (2.2) | ||
| 312.5 | Proceeds from borrowings | 153.6 | 72.3 | ||
| (572.0) | Repayments of borrowings | (111.9) | (183.6) | ||
| (1.3) | Settlement of external debt of subsidiary on acquisition | - | (1.3) | ||
| (5.0) | Settlement of derivative financial instruments | (0.1) | (10.2) | ||
| (43.3) | Interest paid | (23.4) | (21.5) | ||
| 0.6 | Proceeds from increase in non-controlling interests | 0.1 | 0.5 | ||
| (82.6) | Dividends paid to equity holders of the Company | 6 | (70.8) | (63.8) | |
| (393.3) | Net cash generated (used in) financing activities | (52.5) | (209.8) | ||
| (307.3) | Net (decrease) increase in cash & cash equivalents from continuing operations | 16.1 | (317.8) | ||
| 384.2 | Cash & cash equivalents at the beginning of the period | 68.6 | 384.2 | ||
| (8.3) | Foreign currency translation differences | (8.0) | 1.1 | ||
| 68.6 | Cash & cash equivalents at the end of the period | 11 | 76.7 | 67.5 | |
| Consolidated Statement of Changes in Equity | ||||||||||
| for the 26 weeks ended 4 July 2014 | ||||||||||
| Share capital | Share premium | 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 | |
| At 28 December 2012 | 26.7 | 38.0 | (5.6) | 0.5 | 37.5 | 0.2 | 1,209.8 | 1,307.1 | 3.2 | 1,310.3 |
| Profit for the period | - | - | - | - | - | - | 120.4 | 120.4 | 0.5 | 120.9 |
| Losses taken to equity on cash flow hedges | - | - | - | - | - | (1.7) | - | (1.7) | - | (1.7) |
| Exchange gains on translation of foreign operations | - | - | - | - | 97.2 | - | - | 97.2 | 0.4 | 97.6 |
| Exchange losses on net investment hedges | - | - | - | - | (68.6) | - | - | (68.6) | - | (68.6) |
| Remeasurements on defined benefit plans | - | - | - | - | - | - | 21.3 | 21.3 | - | 21.3 |
| Reclassification adjustments taken to the income statement on cash flow hedges | - | - | - | - | - | (0.3) | - | (0.3) | - | (0.3) |
| Tax relating to other comprehensive income | - | - | - | - | - | 0.5 | (4.3) | (3.8) | - | (3.8) |
| Total net comprehensive income for the period | - | - | - | - | 28.6 | (1.5) | 137.4 | 164.5 | 0.9 | 165.4 |
| Proceeds from increase in non-controlling interests | - | - | - | - | - | - | - | - | 0.5 | 0.5 |
| Cost of share-based payments inclusive of tax credits | - | - | - | - | - | - | 7.0 | 7.0 | - | 7.0 |
| Dividends | - | - | - | - | - | - | (63.8) | (63.8) | - | (63.8) |
| Purchase of shares* | - | - | (1.4) | - | - | - | - | (1.4) | - | (1.4) |
| Exercise of LTIP awards | - | - | 1.2 | - | - | - | (1.2) | - | - | - |
| At 28 June 2013 | 26.7 | 38.0 | (5.8) | 0.5 | 66.1 | (1.3) | 1,289.2 | 1,413.4 | 4.6 | 1,418.0 |
| At 3 January 2014 | 26.7 | 38.0 | (5.8) | 0.5 | (57.3) | 0.8 | 1,479.3 | 1,482.2 | 4.5 | 1,486.7 |
| Profit for the period | - | - | - | - | - | - | 114.7 | 114.7 | 1.9 | 116.6 |
| Gains taken to equity on cash flow hedges | - | - | - | - | - | 0.7 | - | 0.7 | - | 0.7 |
| Exchange losses on translation of foreign operations | - | - | - | - | (99.1) | - | - | (99.1) | (0.2) | (99.3) |
| Exchange gains on net investment hedges | - | - | - | - | 36.8 | - | - | 36.8 | - | 36.8 |
| Remeasurements on defined benefit plans | - | - | - | - | - | - | (3.6) | (3.6) | - | (3.6) |
| Tax relating to other comprehensive income | - | - | - | - | - | (0.1) | 0.7 | 0.6 | - | 0.6 |
| Total net comprehensive income for the period | - | - | - | - | (62.3) | 0.6 | 111.8 | 50.1 | 1.7 | 51.8 |
| Proceeds from increase in non-controlling interests | - | - | - | - | - | - | - | - | 0.1 | 0.1 |
| Cost of share-based payments inclusive of tax charge | - | - | - | - | - | - | 5.0 | 5.0 | - | 5.0 |
| Dividends | - | - | - | - | - | - | (70.8) | (70.8) | - | (70.8) |
| At 4 July 2014 | 26.7 | 38.0 | (5.8) | 0.5 | (119.6) | 1.4 | 1,525.3 | 1,466.5 | 6.3 | 1,472.8 |
| At 28 December 2012 | 26.7 | 38.0 | (5.6) | 0.5 | 37.5 | 0.2 | 1,209.8 | 1,307.1 | 3.2 | 1,310.3 |
| Profit for the period | - | - | - | - | - | - | 334.9 | 334.9 | 0.8 | 335.7 |
| Gains taken to equity on cash flow hedges | - | - | - | - | - | 0.1 | - | 0.1 | - | 0.1 |
| Exchange losses on translation of foreign operations | - | - | - | - | (111.3) | - | - | (111.3) | - | (111.3) |
| Exchange gains on net investment hedges | - | - | - | - | 16.5 | - | - | 16.5 | - | 16.5 |
| Remeasurements on defined benefit plans | - | - | - | - | - | - | 8.0 | 8.0 | - | 8.0 |
| Reclassification adjustments taken to the income statement on cash flow hedges | - | - | - | - | - | 0.2 | - | 0.2 | - | 0.2 |
| Tax relating to other comprehensive income | - | - | - | - | - | 0.3 | (2.2) | (1.9) | - | (1.9) |
| Total net comprehensive income for the period | - | - | - | - | (94.8) | 0.6 | 340.7 | 246.5 | 0.8 | 247.3 |
| Proceeds from increase in non-controlling interests | - | - | - | - | - | - | - | - | 0.5 | 0.5 |
| Cost of share-based payments inclusive of tax credits | - | - | - | - | - | - | 12.6 | 12.6 | - | 12.6 |
| Dividends | - | - | - | - | - | - | (82.6) | (82.6) | - | (82.6) |
| Purchase of shares* | - | - | (1.4) | - | - | - | - | (1.4) | - | (1.4) |
| Exercise of LTIP awards | - | - | 1.2 | - | - | - | (1.2) | - | - | - |
| At 3 January 2014 | 26.7 | 38.0 | (5.8) | 0.5 | (57.3) | 0.8 | 1,479.3 | 1,482.2 | 4.5 | 1,486.7 |
| * These shares were purchased on the open market and are held by the Appleby EBT on behalf of the Group for satisfaction of any future vesting of the deferred bonus plan. | ||||||||||
Notes to the Financial Statements
1. Basis of preparation
These interim condensed financial statements are for the 26 weeks ended 4 July 2014 and have been prepared on the basis of the accounting policies set out in the Group's 2013 Annual Report and in accordance with IAS34 "Interim Financial Reporting (revised)" as adopted by the European Union and the Disclosure and Transparency Rules of the Financial Services Authority. These interim condensed financial statements have been prepared on the going concern basis as the directors, having considered available relevant information, have a reasonable expectation that the Group has adequate resources to continue to operate for the foreseeable future.
Several new standards and amendments apply for the first time in 2014. However, they do not impact the annual consolidated financial statements of the Group or the interim condensed consolidated financial statements of the Group.
During the 53 weeks ended 3 January 2014, the provisional fair values attributed to the 2013 acquisitions were finalised. In accordance with IFRS3, the net impact of the adjustments to the provisional fair values has been recognised by means of an increase to goodwill and the adjustments to the provisional amounts have been recognised as if the accounting for the business combinations had been completed at the relevant acquisition dates. As such, all affected balances and amounts have been restated in the financial statements. The table below reflects the adjustments made to finalise the fair values. To this effect, the Consolidated Balance Sheet and affected notes present restated comparative information as at 28 June 2013.
| Provisional fair values | Final fair values | Adjustments to fair values | |
| 28 June 2013 | 28 June 2013 | ||
| £m | £m | £m | |
| Property, plant & equipment | 27.9 | 24.5 | -3.4 |
| Inventories | 2.9 | 2.7 | -0.2 |
| Trade & other receivables | 15.1 | 14.7 | -0.4 |
| Trade & other payables | -7.0 | -7.8 | -0.8 |
| Provisions | -0.9 | -0.8 | 0.1 |
| Deferred tax on intangibles | -6.2 | -5.7 | 0.5 |
| Goodwill arising on acquisition | 91.3 | 95.5 | 4.2 |
| Impact on Net Assets | - |
There was no material impact on the Consolidated Income Statement or Consolidated Statement of Comprehensive Income as a result of the finalisation of the provisional fair values.
These interim condensed financial statements are unaudited but have been formally reviewed by the auditors and their report to the Company is set out on page 28. The information shown for the 53 weeks ended 3 January 2014 does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006 and has been extracted from the Group's 2013 Annual Report which has been filed with the Registrar of Companies. The report of the auditors on the financial statements contained within the Group's 2013 Annual Report was unqualified and did not contain a statement under either Section 498(2) or Section 498(3) of the Companies Act 2006.
These interim condensed financial statements were approved by the Board of Directors on 31 July 2014.
2. Segment information
For management purposes the Group is organised into three operating divisions: Minerals, Oil & Gas and Power & Industrial. 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 IFRS8. The operating and reportable segments were determined based on the reports reviewed by the Chief Executive which are used to make operational decisions.
The Minerals segment is the global leader in the provision of slurry handling equipment and associated aftermarket support for abrasive high wear applications used in the mining and oil sands markets. The Oil & Gas segment provides products and service solutions to upstream, production, transportation, refining and related industries. The Power & Industrial segment designs and manufactures valves, pumps and turbines as well as providing specialist support services to the global power generation, industrial and oil and gas sectors.
The Chief Executive assesses the performance of the operating segments based on operating profit from continuing operations before exceptional items and intangibles amortisation, including impairment ('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 with respect to assets and liabilities are measured in a manner consistent with that of the financial statements. The assets are allocated based on the operations of the segment and the physical location of the asset. The liabilities are allocated based on the operations of the segment.
Transfer prices between segments are set on an arm's length basis in a manner similar to transactions with third parties.
The segment information for the reportable segments for the 26 weeks ended 4 July 2014, the 26 weeks ended 28 June 2013 and the 53 weeks ended 3 January 2014 is disclosed below.
| Minerals | Oil & Gas | Power & Industrial | Total continuing operations | |||||
| 4 July 2014 | 28 June 2013 | 4 July 2014 | 28 June 2013 | 4 July 2014 | 28 June 2013 | 4 July 2014 | 28 June 2013 | |
| £m | £m | £m | £m | £m | £m | £m | £m | |
| Revenue | ||||||||
| Sales to external customers | 547.7 | 658.5 | 434.7 | 381.6 | 161.3 | 158.0 | 1,143.7 | 1,198.1 |
| Inter-segment sales | 1.5 | 4.9 | 6.9 | 7.0 | 3.4 | 2.7 | 11.8 | 14.6 |
| Segment revenue | 549.2 | 663.4 | 441.6 | 388.6 | 164.7 | 160.7 | 1,155.5 | 1,212.7 |
| Elimination of inter-segment sales | (11.8) | (14.6) | ||||||
| 1,143.7 | 1,198.1 | |||||||
| Sales to external customers - 2013 at 2014 average exchange rates | ||||||||
| Sales to external customers | 547.7 | 577.7 | 434.7 | 353.4 | 161.3 | 147.8 | 1,143.7 | 1,078.9 |
| Result | ||||||||
| Segment result before share of results of joint ventures | 104.0 | 130.1 | 93.4 | 79.4 | 9.2 | 11.8 | 206.6 | 221.3 |
| Share of results of joint ventures | - | - | 4.3 | 3.7 | - | - | 4.3 | 3.7 |
| Segment result | 104.0 | 130.1 | 97.7 | 83.1 | 9.2 | 11.8 | 210.9 | 225.0 |
| Unallocated expenses | (9.7) | (7.9) | ||||||
| Operating profit before exceptional items & intangibles amortisation | 201.2 | 217.1 | ||||||
| Exceptional items & intangibles amortisation | (24.1) | (27.8) | ||||||
| Net finance costs before exceptional items | (17.8) | (22.2) | ||||||
| Other finance costs - retirement benefits | (1.6) | (1.8) | ||||||
| Profit before tax from continuing operations | 157.7 | 165.3 | ||||||
| Segment result - 2013 at 2014 average exchange rates | ||||||||
| Segment result before share of results of joint ventures | 104.0 | 114.4 | 93.4 | 73.4 | 9.2 | 10.9 | 206.6 | 198.7 |
| Share of results of joint ventures | - | - | 4.3 | 3.4 | - | - | 4.3 | 3.4 |
| Segment result | 104.0 | 114.4 | 97.7 | 76.8 | 9.2 | 10.9 | 210.9 | 202.1 |
| Unallocated expenses | (9.7) | (7.9) | ||||||
| Operating profit before exceptional items & intangibles amortisation | 201.2 | 194.2 | ||||||
| Total assets (restated note 1) | ||||||||
| Intangible assets | 384.2 | 430.5 | 1,049.9 | 1,206.2 | 98.7 | 110.6 | 1,532.8 | 1,747.3 |
| Property, plant & equipment | 199.9 | 204.1 | 142.3 | 151.9 | 49.4 | 55.1 | 391.6 | 411.1 |
| Working capital assets | 460.9 | 507.1 | 433.1 | 397.1 | 170.6 | 180.0 | 1,064.6 | 1,084.2 |
| 1,045.0 | 1,141.7 | 1,625.3 | 1,755.2 | 318.7 | 345.7 | 2,989.0 | 3,242.6 | |
| Investments in joint ventures | - | - | 28.8 | 28.6 | - | - | 28.8 | 28.6 |
| Segment assets | 1,045.0 | 1,141.7 | 1,654.1 | 1,783.8 | 318.7 | 345.7 | 3,017.8 | 3,271.2 |
| Unallocated assets | 123.5 | 127.2 | ||||||
| Total assets | 3,141.3 | 3,398.4 | ||||||
| Working capital liabilities | 234.2 | 259.8 | 159.3 | 106.2 | 97.7 | 64.6 | 491.2 | 430.6 |
| Unallocated liabilities | 1,177.3 | 1,549.8 | ||||||
| Total liabilities | 1,668.5 | 1,980.4 | ||||||
| 53 weeks ended 3 January 2014 | Minerals | Oil & Gas | Power & Industrial | Total continuing operations |
| £m | £m | £m | £m | |
| Revenue | ||||
| Sales to external customers | 1,304.3 | 795.9 | 329.6 | 2,429.8 |
| Inter-segment sales | 4.4 | 15.7 | 7.3 | 27.4 |
| Segment revenue | 1,308.7 | 811.6 | 336.9 | 2,457.2 |
| Elimination of inter-segment sales | (27.4) | |||
| 2,429.8 | ||||
| Sales to external customers - 2013 at 2014 average exchange rates | ||||
| Sales to external customers | 1,178.7 | 746.1 | 313.1 | 2,237.9 |
| Result | ||||
| Segment result before share of results of joint ventures | 268.7 | 172.1 | 31.3 | 472.1 |
| Share of results of joint ventures | - | 8.4 | - | 8.4 |
| Segment result | 268.7 | 180.5 | 31.3 | 480.5 |
| Unallocated expenses | (14.0) | |||
| Operating profit before exceptional items & intangibles amortisation | 466.5 | |||
| Exceptional items & intangibles amortisation | 13.1 | |||
| Net finance costs before exceptional items | (44.9) | |||
| Other finance costs - retirement benefits | (3.5) | |||
| Profit before tax from continuing operations | 431.2 | |||
| Segment result - 2013 at 2014 average exchange rates | ||||
| Segment result before share of results of joint ventures | 243.2 | 160.9 | 29.5 | 433.6 |
| Share of results of joint ventures | - | 7.9 | - | 7.9 |
| Segment result | 243.2 | 168.8 | 29.5 | 441.5 |
| Unallocated expenses | (13.9) | |||
| Operating profit before exceptional items & intangibles amortisation | 427.6 | |||
| Total assets | ||||
| Intangible assets | 397.0 | 1,109.4 | 101.6 | 1,608.0 |
| Property, plant & equipment | 198.7 | 147.2 | 50.9 | 396.8 |
| Working capital assets | 449.6 | 390.9 | 176.2 | 1,016.7 |
| 1,045.3 | 1,647.5 | 328.7 | 3,021.5 | |
| Investments in joint ventures | - | 27.1 | - | 27.1 |
| Segment assets | 1,045.3 | 1,674.6 | 328.7 | 3,048.6 |
| Unallocated assets | 112.9 | |||
| Total assets | 3,161.5 | |||
| Working capital liabilities | 243.4 | 149.9 | 87.3 | 480.6 |
| Unallocated liabilities | 1,194.2 | |||
| Total liabilities | 1,674.8 |
| 3. Exceptional items & intangibles amortisation | |||
| 53 weeks ended | 26 weeks ended | 26 weeks ended | |
| 3 Jan 2014 | 4 July 2014 | 28 June 2013 | |
| £m | £m | £m | |
| Recognised in arriving at operating profit from continuing operations | |||
| (46.7) | Intangibles amortisation | (20.7) | (22.0) |
| - | Exceptional item - proposed Metso acquisition costs | (2.4) | - |
| 67.8 | Exceptional item - release of Mathena contingent consideration liability | - | - |
| 2.7 | Exceptional item - pension curtailment gain | - | - |
| 23.8 | (23.1) | (22.0) | |
| Recognised in finance costs | |||
| (10.7) | Exceptional item - unwind of discount in respect of contingent consideration liability | (1.0) | (5.8) |
| Recognised in arriving at profit for the period from discontinued operations | |||
| - | Exceptional item - release of unutilised tax warranty provisions regarding previous disposals | 1.0 | - |
| 4. Tax expense | |||
| 53 weeks ended | 26 weeks ended | 26 weeks ended | |
| 3 Jan 2014 | 4 July 2014 | 28 June 2013 | |
| £m | £m | £m | |
| (12.1) | Group - UK | (3.0) | (3.4) |
| (83.4) | Group - overseas | (39.1) | (41.0) |
| (95.5) | Total income tax expense in the Consolidated Income Statement | (42.1) | (44.4) |
| The total income tax expense is disclosed in the Consolidated Income Statement as follows: | |||
| (107.5) | - continuing operations before exceptional items & intangibles amortisation | (49.0) | (51.4) |
| (0.5) | - exceptional items | 0.3 | - |
| 12.5 | - intangibles amortisation | 6.6 | 7.0 |
| (95.5) | Total income tax expense in the Consolidated Income Statement | (42.1) | (44.4) |
| (1.2) | Total income tax expense included in the Group's share of results of joint ventures | (0.7) | (0.7) |
| 5. Earnings per share | |||
| Basic earnings per share amounts are calculated by dividing net profit for the period attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted earnings per share amounts are calculated by dividing the net profit attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during the period (adjusted for the effects of dilutive share awards). | |||
| The following reflects the profit and share data used in the calculation of earnings per share. | |||
| 53 weeks ended | 26 weeks ended | 26 weeks ended | |
| 3 Jan 2014 | 4 July 2014 | 28 June 2013 | |
| Profit attributable to equity holders of the Company | |||
| 334.9 | Total operations * (£m) | 114.7 | 120.4 |
| 334.9 | Continuing operations * (£m) | 113.7 | 120.4 |
| 309.8 | Continuing operations before exceptional items & intangibles amortisation * (£m) | 130.9 | 141.2 |
| Weighted average share capital | |||
| 213.0 | Basic earnings per share (number of shares, million) | 213.2 | 212.8 |
| 213.8 | Diluted earnings per share (number of shares, million) | 214.0 | 213.8 |
| 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. | |||
| 53 weeks ended | 26 weeks ended | 26 weeks ended | |
| 3 Jan 2014 | 4 July 2014 | 28 June 2013 | |
| Shares | Shares | Shares | |
| Million | Million | Million | |
| 213.0 | Weighted average number of ordinary shares for basic earnings per share | 213.2 | 212.8 |
| 0.8 | Effect of dilution: LTIP awards | 0.8 | 1.0 |
| 213.8 | Adjusted weighted average number of ordinary shares for diluted earnings per share | 214.0 | 213.8 |
| The profit attributable to equity holders of the Company used in the calculation of both basic and diluted earnings per share on continuing operations before exceptional items and intangibles amortisation is calculated as follows. | |||
| 53 weeks ended | 26 weeks ended | 26 weeks ended | |
| 3 Jan 2014 | 4 July 2014 | 28 June 2013 | |
| £m | £m | £m | |
| 334.9 | Net profit attributable to equity holders from continuing operations * | 114.7 | 120.4 |
| (25.1) | Exceptional items & intangibles amortisation net of tax | 16.2 | 20.8 |
| 309.8 | Net profit attributable to equity holders from continuing operations before exceptional items & intangibles amortisation * | 130.9 | 141.2 |
| 53 weeks ended | 26 weeks ended | 26 weeks ended | |
| 3 Jan 2014 | 4 July 2014 | 28 June 2013 | |
| pence | pence | pence | |
| Basic earnings per share: | |||
| 157.2 | Total operations* | 53.8 | 56.6 |
| 157.2 | Continuing operations* | 53.3 | 56.6 |
| 145.4 | Continuing operations before exceptional items & intangibles amortisation* | 61.4 | 66.4 |
| Diluted earnings per share: | |||
| 156.6 | Total operations* | 53.6 | 56.3 |
| 156.6 | Continuing operations* | 53.1 | 56.3 |
| 144.9 | Continuing operations before exceptional items & intangibles amortisation* | 61.2 | 66.0 |
| *Adjusted for £1.9m (2013: £0.5m) in respect of non-controlling interests. | |||
| There have been no share options (2013: nil) exercised between the reporting date and the date of signing of these financial statements. | |||
| 6. Dividends paid & proposed | |||
| 53 weeks ended | 26 weeks ended | 26 weeks ended | |
| 3 Jan 2014 | 4 July 2014 | 28 June 2013 | |
| £m | £m | £m | |
| Declared & paid during the period | |||
| Equity dividends on ordinary shares | |||
| 63.8 | Final dividend for 2013: 33.2p (2012: 30.0p) | 70.8 | 63.8 |
| 18.8 | Interim dividend: see below (2013: 8.8p) | - | - |
| 82.6 | 70.8 | 63.8 | |
| 70.8 | Final dividend for 2013 proposed for approval by shareholders at the AGM: 33.2p | - | - |
| - | Interim dividend for 2014 declared by the Board: 15.0p (2013: 8.8p) | 32.0 | 18.8 |
| The proposed final dividend and the declared interim dividend are based on the number of shares in issue, excluding treasury shares held, at the date the financial statements were approved and authorised for issue. The actual dividend paid may differ due to increases or decreases in the number of shares in issue between the date of approval of the financial statements and the record date for the dividend. | |||
| 7. Property, plant & equipment & intangible assets | |||
| 53 weeks ended | 26 weeks ended | 26 weeks ended | |
| 3 Jan 2014 | 4 July 2014 | 28 June 2013 | |
| £m | £m | £m | |
| Additions of property, plant & equipment & intangible assets | |||
| 17.4 | Land & buildings | 3.8 | 5.6 |
| 73.0 | Plant & equipment | 38.6 | 33.1 |
| 21.2 | Intangible assets | 6.7 | 9.0 |
| 111.6 | 49.1 | 47.7 | |
8. Interest-bearing loans and borrowings
As at 4 July 2014, £40.8m was drawn under the new revolving credit facility. At 28 June 2013 £63m was drawn under the previous revolving credit facility and £102.3m was outstanding on the amortising term loan. Total unamortised issue costs at 4 July 2014 were £4.4m (2013: £4.9m).
On the 5 July 2013, the Group repaid the outstanding unamortised portion of the US$300m amortising term loan and replaced the borrowings under that agreement with an equivalent draw down under the U$800m revolving credit facility which was entered into in 2010. Also in July 2013 the Group completed the negotiation of a new US$800m 5 year Revolving Credit Facility with a syndicate of 12 banks which replaced the previous facility of US$800m.
| 9. Pensions & other post-employment benefit plans | |||
| 3 Jan 2014 | 4 July 2014 | 28 June 2013 | |
| £m | £m | £m | |
| 70.4 | Plans in deficit | 75.3 | 68.7 |
| The increase in deficit of £4.9m in the 26 weeks ended 4 July 2014 was primarily due to a fall in corporate bond yields, resulting in an increase to the liabilities, which has been partially offset by positive asset returns and by a small reduction in the long term expectations for inflation. Of this deficit £3.6m has been recognised in the Consolidated Statement of Comprehensive Income. | |||
| 10. Financial instruments | |||
| 3 Jan 2014 | 4 July 2014 | 28 June 2013 | |
| £m | £m | £m | |
| Included in non-current assets | |||
| 0.6 | Forward foreign currency contracts designated as cash flow hedges | 1.1 | 0.3 |
| 0.1 | Cross currency swaps designated as net investment hedges | 1.7 | - |
| 0.4 | Other forward foreign currency contracts | 0.2 | 0.3 |
| 1.1 | 3.0 | 0.6 | |
| Included in current assets | |||
| 0.7 | Forward foreign currency contracts designated as cash flow hedges | 1.2 | 0.3 |
| 0.4 | Forward foreign currency contracts designated as net investment hedges | 3.9 | - |
| - | Cross currency swaps designated as net investment hedges | 0.6 | - |
| 10.0 | Other forward foreign currency contracts | 10.1 | 12.1 |
| 11.1 | 15.8 | 12.4 | |
| Included in current liabilities | |||
| (0.1) | Forward foreign currency contracts designated as cash flow hedges | (0.5) | (1.2) |
| (0.2) | Forward foreign currency contracts designated as net investment hedges | (0.8) | (5.9) |
| (9.3) | Other forward foreign currency contracts | (14.0) | (10.3) |
| (9.6) | (15.3) | (17.4) | |
| Included in non-current liabilities | |||
| (0.2) | Forward foreign currency contracts designated as cash flow hedges | (0.3) | (0.8) |
| (0.3) | Cross currency swaps designated as net investment hedges | - | (4.1) |
| (0.1) | Other forward foreign currency contracts | (0.1) | (0.2) |
| (0.6) | (0.4) | (5.1) | |
| 2.0 | Net derivative financial assets (liabilities) | 3.1 | (9.5) |
| Carrying amounts & fair values | ||||||
| Set out below is a comparison of carrying amounts and fair values of all of the Group's financial instruments that are reported in the financial instruments. | ||||||
| Carrying amount | Fair value | Carrying amount | Fair value | Carrying amount | Fair value | |
| 3 January 2014 | 3 January 2014 | 4 July 2014 | 4 July 2014 | 28 June 2013 | 28 June 2013 | |
| £m | £m | £m | £m | £m | £m | |
| Financial assets | ||||||
| 10.4 | 10.4 | Derivative financial instruments recognised at fair value through profit or loss | 10.3 | 10.3 | 12.4 | 12.4 |
| 1.8 | 1.8 | Derivative financial instruments in designated hedge accounting relationships | 8.5 | 8.5 | 0.6 | 0.6 |
| 467.1 | 467.1 | Trade & other receivables excluding statutory assets & prepayments | 490.4 | 490.4 | 490.3 | 490.3 |
| 79.1 | 79.1 | Cash & short term deposits | 82.6 | 82.6 | 78.5 | 78.5 |
| 558.4 | 558.4 | 591.8 | 591.8 | 581.8 | 581.8 | |
| Financial liabilities | ||||||
| (9.4) | (9.4) | Derivative financial instruments recognised at fair value through profit or loss | (14.1) | (14.1) | (10.5) | (10.5) |
| (0.8) | (0.8) | Derivative financial instruments in designated hedge accounting relationships | (1.6) | (1.6) | (12.1) | (12.1) |
| (27.7) | (27.7) | Contingent consideration | (24.0) | (24.0) | (95.6) | (95.6) |
| Amortised cost | ||||||
| (10.5) | (10.5) | Bank overdrafts & short-term borrowings | (5.9) | (5.9) | (11.0) | (11.0) |
| (395.8) | (395.8) | Trade & other payables excluding statutory liabilities & deferred income | (380.0) | (380.0) | (384.5) | (384.5) |
| (0.5) | (0.5) | Obligations under finance leases | (0.4) | (0.4) | (0.7) | (0.7) |
| (56.1) | (56.1) | Floating rate borrowings | (98.0) | (98.0) | (202.4) | (202.4) |
| (759.0) | (716.2) | Fixed rate borrowings | (729.5) | (701.9) | (814.4) | (796.6) |
| (1,259.8) | (1,217.0) | (1,253.5) | (1,225.9) | (1,531.2) | (1,513.4) | |
The Group enters into derivative financial instruments with various counterparties, principally financial institutions with investment grade credit ratings. The derivative financial instruments are valued using valuation techniques with market observable inputs including spot and forward foreign exchange rates, interest rate curves, counterparty and own credit risk. The fair value of cross currency swaps is calculated as the present value of the estimated future cash flows based on spot foreign exchange rates. The fair value of forward foreign currency contracts is calculated as the present value of the estimated future cash flows based on spot and forward foreign exchange rates.
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly;
Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.
For financial instruments that are recognised at fair value on a recurring basis, the Group determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
The Group hold all financial instruments at level 2 fair value measurement, with the exception of contingent consideration assessed as level 3. Contingent consideration at 3 January 2014 and 4 July 2014 primarily relates to the acquisition of Weir International in 2011. In the period to 4 July 2014 there has been no significant change to the key performance indicators or the inputs to the fair value calculation, resulting in only the unwind of the discount being reflected in the Income Statement for the period.
A reconciliation of the fair value measurement of the contingent consideration liability is provided below.
| Total | |||||
| £m | |||||
| Balance as at 28 December 2012 | 24.5 | ||||
| Liability arising on business combinations | 61.7 | ||||
| Exchange movements in the period | 3.3 | ||||
| Unwind of discount | 5.8 | ||||
| Balance as at 28 June 2013 | 95.3 | ||||
| Fair value changes in profit or loss | (67.8) | ||||
| Exchange movements in the period | (4.4) | ||||
| Contingent consideration paid | (0.3) | ||||
| Unwind of discount | 4.9 | ||||
| Balance as at 3 January 2014 | 27.7 | ||||
| Exchange movements in the period | 0.1 | ||||
| Contingent consideration paid | (4.8) | ||||
| Unwind of discount | 1.0 | ||||
| Balance as at 4 July 2014 | 24.0 |
During the 26 weeks ended 4 July 2014 and the 53 weeks ended 3 January 2014, there were no transfers between level 1 and level 2 fair value measurements. From 29 June 2013 contingent consideration has been assessed as level 3 and there has been no further transfers into or out of level 3 fair value measurements.
The fair value of borrowings and obligations under finance leases is estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities. The fair value of cash and short-term deposits, trade and other receivables and trade and other payables approximates their carrying amount due to the short-term maturities of these instruments.
The estimated fair value of the contingent consideration at the date of acquisition is based on an assessment of the probability of possible outcomes discounted to net present value. Subsequent changes to the fair value of the contingent consideration are adjusted against the cost of acquisition where they qualify as measurement period adjustments. All other subsequent changes in the fair value of contingent consideration classified as an asset or liability are accounted for in accordance with relevant IFRSs.
| 11. Additional cash flow information | ||||
| 53 weeks ended | 26 weeks ended | 26 weeks ended | ||
| 3 Jan 2014 | 4 July 2014 | 28 June 2013 | ||
| £m | £m | £m | ||
| Continuing operations | ||||
| Cash generated from operations | ||||
| 490.3 | Operating profit | 178.1 | 195.1 | |
| (70.5) | Non cash exceptional items | 1.7 | - | |
| (8.4) | Share of results of joint ventures | (4.3) | (3.7) | |
| 59.1 | Depreciation of property, plant & equipment | 29.8 | 29.1 | |
| 46.7 | Amortisation of intangible assets | 20.7 | 22.0 | |
| (1.3) | Gains on disposal of property, plant & equipment | (0.5) | (0.4) | |
| (0.5) | Funding of pension & post-retirement costs | 0.1 | (0.5) | |
| 8.7 | Employee share schemes | 5.0 | 4.7 | |
| 4.1 | Net foreign exchange including derivative financial instruments | (0.7) | 4.0 | |
| (13.4) | Decrease in provisions | (1.0) | (4.5) | |
| 514.8 | Cash generated from operations before working capital cashflows | 228.9 | 245.8 | |
| 1.6 | (Increase) decrease in inventories | (38.2) | (3.9) | |
| (37.1) | (Increase) decrease in trade & other receivables & construction contracts | (40.0) | (18.1) | |
| (5.4) | (Decrease) increase in trade & other payables & construction contracts | (1.1) | (40.8) | |
| 473.9 | Cash generated from operations | 149.6 | 183.0 | |
| (12.1) | Additional pension contributions paid | - | (2.5) | |
| (71.9) | Income tax paid | (41.5) | (37.8) | |
| 389.9 | Net cash generated from operating activities | 108.1 | 142.7 | |
| The following tables summarise the cashflows arising on acquisitions: | ||||
| Acquisitions of subsidiaries | ||||
| (200.9) | Current period acquisitions (see below) | - | (199.0) | |
| (0.3) | Previous periods acquisitions contingent consideration paid | (4.8) | - | |
| (201.2) | (4.8) | (199.0) | ||
| (207.4) | Acquisition of subsidiaries - cash paid | - | (205.5) | |
| 6.5 | Cash and cash equivalents acquired | - | 6.5 | |
| (200.9) | Acquisition of subsidiaries - current year acquisitions | - | (199.0) | |
| (1.3) | Settlement of external debt of subsidiary on acquisition | - | (1.3) | |
| (202.2) | Total cash outflow on acquisition of subsidiaries - current year | - | (200.3) | |
| (0.3) | Previous periods acquisitions contingent consideration paid | (4.8) | - | |
| (202.5) | Total cash outflow relating to acquisitions | (4.8) | (200.3) | |
| Disposals of subsidiaries | ||||
| (0.3) | Previous periods disposals - proceeds | - | (0.2) | |
| Cash & cash equivalents comprise the following | ||||
| 79.1 | Cash & short-term deposits | 82.6 | 78.5 | |
| (10.5) | Bank overdrafts & short-term borrowings | (5.9) | (11.0) | |
| 68.6 | 76.7 | 67.5 | ||
| The following tables summarise the net debt position: | ||||
| Reconciliation of net increase (decrease) in cash & cash equivalents to movement in net debt | ||||
| (307.3) | Net increase (decrease) in cash & cash equivalents from continuing operations | 16.1 | (317.8) | |
| 260.7 | Net (increase) decrease in debt | (41.7) | 112.6 | |
| (46.6) | Change in net debt resulting from cash flows | (25.6) | (205.2) | |
| (0.1) | Lease inceptions | (0.4) | - | |
| (1.5) | Loans acquired | - | (1.5) | |
| (9.9) | Foreign currency translation differences & amortisation of issue costs | 21.8 | (54.4) | |
| (58.1) | Change in net debt during the period | (4.2) | (261.1) | |
| (688.9) | Net debt at the beginning of the period | (747.0) | (688.9) | |
| (747.0) | Net debt at the end of the period | (751.2) | (950.0) | |
| Net debt comprises the following | ||||
| 79.1 | Cash & short-term deposits | 82.6 | 78.5 | |
| (26.5) | Current interest-bearing loans & borrowings | (129.8) | (115.0) | |
| (799.6) | Non-current interest-bearing loans & borrowings | (704.0) | (913.5) | |
| (747.0) | (751.2) | (950.0) | ||
| 12. Related party disclosure | ||||
| The following table provides the total amount of significant transactions which have been entered into with related parties for the relevant financial period and outstanding balances at the period end. | ||||
| 53 weeks ended | 26 weeks ended | 26 weeks ended | ||
| 3 Jan 2014 | 4 July 2014 | 28 June 2013 | ||
| £m | £m | £m | ||
| 5.6 | Sales of goods to related parties - joint ventures | 8.7 | 1.6 | |
| 0.5 | Sales of services to related parties - joint ventures | 0.1 | - | |
| 2.7 | Purchases of goods from related parties - joint ventures | 2.8 | - | |
| 1.7 | Purchases of services from related parties - joint ventures | 0.3 | 1.2 | |
| 2.3 | Amounts owed to related parties - group pension plans | 0.7 | 1.2 | |
13. 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.
On 6 February 2013, an Opinion & Order was filed with the United States District Court, Southern District of New York dismissing the claim against the Company (being one of many companies targeted) relating to a civil action for damages arising from the UN Oil for Food programme which was raised in the US. Subsequently the Iraqi Government filed notice of appeal. A hearing of this appeal took place in the 2nd Circuit Court of Appeals on 18 February 2014. The decision of the Court of Appeals is still awaited at the time of publication. It is the Company's intention to continue to defend this action vigorously.
To the extent not already provided for, the directors do not anticipate that the outcome of these proceedings and claims, either individually or in aggregate, will have a material adverse effect upon the Group's financial position.
| 14. Exchange rates | ||||
| The principal exchange rates applied in the preparation of these interim condensed financial statements were as follows. | ||||
| 53 weeks ended | 26 weeks ended | 26 weeks ended | ||
| 3 Jan 2014 | 4 July 2014 | 28 June 2013 | ||
| Average rate (per £) | ||||
| 1.56 | US dollar | 1.67 | 1.54 | |
| 1.61 | Australian dollar | 1.82 | 1.51 | |
| 1.18 | Euro | 1.22 | 1.18 | |
| 1.61 | Canadian dollar | 1.83 | 1.57 | |
| 3.36 | Brazilian real | 3.83 | 3.13 | |
| 771.29 | Chilean peso | 924.75 | 736.46 | |
| 15.01 | South African rand | 17.88 | 14.17 | |
| Closing rate (per £) | ||||
| 1.64 | US dollar | 1.71 | 1.52 | |
| 1.83 | Australian dollar | 1.83 | 1.64 | |
| 1.21 | Euro | 1.26 | 1.17 | |
| 1.74 | Canadian dollar | 1.82 | 1.60 | |
| 3.91 | Brazilian real | 3.80 | 3.33 | |
| 869.82 | Chilean peso | 941.50 | 768.21 | |
| 17.50 | South African rand | 18.42 | 15.20 | |
Directors' Statement of Responsibilities
The directors confirm that this condensed set of financial statements has been prepared in accordance with IAS34 "Interim Financial Reporting" as adopted by the European Union, and that the interim management report herein includes a fair review of the information required by the Disclosure and Transparency Rules of the Financial Conduct Authority, paragraphs DTR 4.2.7 and DTR 4.2.8.
The directors of The Weir Group PLC are listed in the Group's 2013 Annual Report.
A list of current directors is maintained on The Weir Group PLC website which can be found at www.weir.co.uk.
On behalf of the Board
Jon Stanton
Finance Director
31 July 2014
Independent Review Report to The Weir Group PLC
Introduction
We have been engaged by the Company to review the condensed set of financial statements in the Interim report for the 26 weeks ended 4 July 2014 which comprises the Consolidated Income Statement, Consolidated Statement of Comprehensive Income, Consolidated Balance Sheet, Consolidated Cash Flow Statement, Consolidated Statement of Changes in Equity and the related notes 1 to 14. We have read the other information contained in the Interim report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.
Directors Responsibilities
The Interim report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the Interim report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this Interim report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the Interim report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the Interim report for the 26 weeks ended 4 July 2014 is not prepared, in all material respects, in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
Glasgow
31 July 2014
Shareholder Information
The Board have declared an interim dividend of 15.0p (2013: 8.8p). The dividend will be paid on 7 November 2014 to shareholders on the register on 10 October 2014. Shareholders may have their dividends reinvested in Weir Group shares by participating in its Dividend Reinvestment Plan (DRIP). If you wish to participate in the DRIP, please apply online at www.investorcentre.co.uk or alternatively, you can complete a DRIP mandate form obtainable from the Company's registrar, Computershare Investor Services. The final date for receipt of DRIP elections is 17 October 2014.
Financial Calendar
Ex-dividend date for interim dividend
9 October 2014
Record date for interim dividend
10 October 2014
Shareholders on the register at this date will receive the dividend
Final day for receipt of DRIP elections
17 October 2014
Interim dividend paid
7 November 2014
Our Interim Report will be available to download from The Weir Group PLC website at weir.co.uk shortly.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: The Weir Group PLC via Globenewswire
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