Preliminary Results 2011

RNS Number : 3256Y

Weir Group PLC

29 February 2012

 



The Weir Group PLC Date: 29 February 2012

THE WEIR GROUP PLC PRELIMINARY RESULTS 2011

RECORD PERFORMANCE IN 2011

The Weir Group PLC, a global engineering solutions provider to the mining, oil & gas and power markets, today reports its preliminary results for the 52 week period ended 30 December 2011.

Continuing Operations	2011	2010	Change
Order input(*1)	£2,467m	£1,896m	+30%
Revenue	£2,292m	£1,635m	+40%
Operating profit(*2)	£413m	£310m	+33%
Operating margin(*2)	18.0%	18.9%	-90 bps
Profit before tax(*2)	£396m	£295m	+34%
Cash from operations	£303m	£275m	+10%
Earnings per share(*2)	133.6p	100.4p	+33%
Dividend per share	33.0p	27.0p	+22%
Return on Capital Employed(*3)	29.2%	27.0%	+220 bps
Net debt	£673m	£284m

(*1)2010 restated at 2011 average exchange rates
(*2)Adjusted to exclude exceptional items and intangibles amortisation.  Reported operating profit, profit before tax and earnings per share were £409m (2010: £292m); £392m (2010: £277m) and 132.1p (2010: 94.3p) respectively.
(*3)Continuing operations EBIT (excluding exceptional pension gain) divided by average net assets excluding net debt, pension deficit (net of deferred tax asset) and, for 2011, Seaboard net assets.

   HIGHLIGHTS

§ Growth ahead of strong markets: order input up 30%, revenue up 40%;

§ Record performance by Minerals and Oil & Gas Divisions;

§ Upstream oil and gas revenues doubled to US$982m with input of US$1,160m;

§ Momentum continued in H2 with order input and revenue ahead of H1;

§ Strategic progress with two value enhancing acquisitions during the year and ongoing organic growth initiatives;

§ Pre-tax profits up 34% to £396m;

§ Full year dividend increased by 22% to 33.0p;

§ Strong orderbook entering 2012.

Keith Cochrane, Chief Executive, commented:

"Weir achieved in 2011 its stated ambition of doubling 2009 profits by 2014. This excellent performance was due to the ability of the Group to execute effectively our growth plans in positive conditions in our principal end markets. We also progressed our strategic agenda with new product introductions, two acquisitions which further increase our exposure to fast growing markets and revenue growth from organic initiatives.

The Group enters 2012 with a strong order book and with our clear strategy and flexible business model we expect a year of further good progress consistent with current consensus expectations."

Contact details:  The Weir Group PLC
Victoria Ferrier, Head of Investor Relations		(Mobile: [phone])
Jonathan Milne, Communications Manager		(Mobile: [phone])
Maitland		Tel. [phone]
Peter Ogden
Rowan Brown

A live webcast of today's presentation commences at 9am GMT at www.weir.co.uk.

BUSINESS OVERVIEW

Against an uncertain macro-economic environment, conditions in the Group's two principal markets remained positive. In mining, continued growth in emerging market demand alongside forecast shortages of key commodities triggered a significant pick-up in capital spending with a number of greenfield projects underway. In oil and gas, North American upstream markets experienced further rapid growth from onshore drilling in oil and liquids rich shale formations with US domestic oil production at its highest level for nearly a decade. Power markets remained subdued, with safety assessments delaying new nuclear developments following the Fukushima incident.

Weir made good strategic progress as it grew ahead of its chosen end markets, with continued focused investment in capacity and technology. Product innovation and expansion of its sales and service footprint helped Minerals to successfully take a broader product portfolio to all major mining markets. The acquisition of Seaboard in December 2011, a leading US manufacturer of wellhead solutions, has helped broaden the product portfolio and service footprint in fast growing upstream oil and gas markets, whilst the acquisition of Novatech, completed in February 2012, will further enhance the hydraulic fracturing pump aftermarket portfolio. HIM Tech in South Korea, now Weir International, has expanded the control valves offering and added engineering capability. Integration of the three businesses into the Group is progressing well with proforma 2011 revenues and earnings before interest, tax and amortisation (EBITA) of £172m and £43m respectively.

Each division introduced core new products during the period and engineering resources increased with additional recruitment and the development of Group-wide engineering initiatives including the establishment of the Weir Advanced Research Centre at Strathclyde University, aimed at developing breakthrough technologies. The work of the Oil & Gas Forum, a cross-divisional initiative, has successfully focused Weir's Group-wide capability on North America's oil and gas sector. This progress has been supported by continuing focus on operational excellence and functional initiatives.

FINANCIAL HIGHLIGHTS

The results include a full twelve months from each of the 2010 acquisitions, six months trading for Weir International but no contribution from Seaboard as this acquisition was completed just prior to the end of 2011.

Order input at £2,467m on a constant currency basis increased 30% on 2010 and was 24% higher on a like-for-like basis (excluding the impact of acquisitions). Original equipment orders were up 36% (32% like-for-like), driven by continued expansion of the North American pressure pumping market and increasing mining capital expenditure.  Aftermarket orders were up 25% (17% like-for-like) with increased activity levels across the Group's main markets and market share gains across the Oil & Gas and Minerals product ranges and represented 52% (2010: 54%) of total input in 2011. 

Revenue grew by 40% to £2,292m on a constant currency basis, with like-for-like revenues up 33%. Original equipment represented 48% of revenues with aftermarket sales accounting for 52%, a shift towards original equipment when compared to last year.  The continued strength of our North American businesses resulted in our exposure to emerging markets decreasing to 35% (2010: 39%) although emerging markets revenues have increased 25% in absolute terms. Together the acquisitions made in 2010 contributed £171m of revenue against a 2010 proforma annualised figure of £151m.  

Operating profit from continuing operations before exceptional items and intangibles amortisation increased by 33% to £413m (2010: £310m) after a negative currency translation impact of £2m, with the strengthening of sterling relative to the average US dollar rate in the prior year largely offset by weakness against the Australian dollar. Excluding this impact, year-on-year growth in constant currency was 34%, with the increase in underlying performance driven by growth in upstream oil and gas operations, strong performances across the Minerals portfolio and the impact of 2010 acquisitions within Power & Industrial. One-off acquisition related transaction and integration costs and other restructuring costs of £16.6m (2010: £11.0m) include £5.1m of costs associated with the acquisition of Seaboard. The 2010 acquisitions contributed £21m to earnings before interest, tax and amortisation against a 2010 proforma annualised contribution of £15.5m. The profit contribution from other Group companies was £3m (2010: £3.5m) while central costs were £14m (2010: £12m). EBITDA increased by 31% to £450m (2010: £344m). 

Operating margin decreased from 18.9% (18.8% on a constant currency basis) to 18.0%.   Excluding one-off costs and acquisitions, the underlying operating margin was 19.3% (2010: 19.7%), with margin improvement in Oil & Gas offset by a reduction in Minerals margins as execution against strategic growth initiatives had the expected impact on revenue mix.

Net finance costs were £17m (2010: £15m) due to higher average net debt than the prior year given the timing of acquisitions in 2010 and include an exceptional cost of £0.7m (2010: £nil).

Profit before tax from continuing operations but before exceptional items and intangibles amortisation increased by 34% to £396m (2010: £295m).  Reported profit before tax from continuing operations increased by 42% to £392m (2010: £277m) after intangibles amortisation of £23m (2010: £18m) and an exceptional pension past service gain of £19m.

Tax charge for the year of £114m (2010: £83m) on profit before tax from continuing operations before exceptional items and intangibles amortisation of £396m (2010: £295m) represents an underlying effective tax rate of 28.8% (2010: 28.1%), reflecting a greater proportion of US profit which is taxed at a higher rate.

Discontinued operations The sale of the former Weir Pumps facility at Cathcart, Glasgow to Clyde Union was completed in December 2011. Net proceeds on the sale were £25m giving rise to a gain on disposal of £20m taking account of disposal costs and other costs arising from discontinued operations. This gain has been recorded as an exceptional item within discontinued operations in the year.

Earnings per share from continuing operations before exceptional items and intangibles amortisation increased by 33% to 133.6p (2010: 100.4p).  Reported earnings per share including exceptional items, intangibles amortisation and discontinued operations was 141.5p (2010: 87.9p) reflecting the net post-tax charge of £3m for exceptional items and intangibles amortisation from continuing operations and the exceptional gain on sale of investment property within discontinued operations of £20m.  

Cash generated from operations before working capital movements increased by 34% to £458m (2010: £342m).  Working capital outflows of £155m (2010: £67m) were driven by receivables increases in line with revenue growth, the impact on inventory of the shift in orders towards longer cycle original equipment projects and the impact of the 2010 and 2011 acquisitions. Net cash generated from operations increased by 10% from £275m to £303m representing an EBITDA to cash conversion ratio of 67% (2010: 80%), a direct result of the investment in working capital. Capital expenditure increased from £51m in 2010 to £95m, principally in support of Minerals and Oil & Gas growth plans. Free cash flow from continuing operations was £29m (2010: £80m) and from discontinued operations was £25m (2010: outflow £19m). Outflows in respect of acquisitions were £441m giving a year end net debt position of £673m (2010: £284m). On a reported basis, the ratio of net debt to EBITDA was 1.5 times and on a proforma basis including the Seaboard and Weir International acquisitions from the beginning of 2011 was 1.3 times.

Return on capital employed is 29.2% for 2011, an increase of 220 basis points on the return of 27.0% in 2010.

Dividend The Board is recommending a 22% increase in the full year dividend, with a final dividend of 25.8p (2010: 21.0p) making a total of 33.0p for the year (2010: 27.0p). If approved at the annual general meeting it will be paid on 1 June 2012 to shareholders on the register on 4 May 2012.

DIVISIONAL HIGHLIGHTS

MINERALS

Weir Minerals is the global leader in the provision of slurry handling equipment and associated aftermarket support for abrasive high wear applications used in mining, oil sands and flue gas desulphurisation markets.

	2011	2010	Change
Order input1	£1,263m	£996m	+27%
Revenue1	£1,216m	£911m	+33%
Operating profit1,2	£214m	£176m	+22%
Operating margin1,2	17.6%	19.3%	-170 bps
1 2010 restated at 2011 average exchange rates
2 Adjusted to exclude intangibles amortisation

Capital expenditure in the mining sector increased by over 20% in 2011, as miners broke ground on a number of greenfield developments and brownfield expansions.  Activity levels increased particularly strongly in South America, Australia and Asia Pacific, driven by copper and iron ore projects, while promising progress was seen in North America, Africa, Eastern Europe and the Middle East. In contrast, activity levels in Western Europe remained low due to macro-economic concerns in the region.

Although the timing of orders for large projects is unpredictable, quotation activity continued at elevated levels throughout the year, despite falling industrial metal prices in the second half of the year. Global ore production increased by an estimated 5% in 2011, again driven by increasing demand from China and other emerging markets, particularly for copper, iron ore and coal.

Sustained high oil prices supported increased investment and activity levels in the North American oil sands market, with new project developments and increased production across the market.

Delivery of the division's strategic priorities of product innovation, extending service coverage and growing complementary product sales enabled it to capitalise on high levels of investment and increased production volumes in its end markets. Global sales of a full dewatering portfolio nearly doubled and included the successful delivery of a dewatering 'mega barge' to a North American oil sands project, an engineering first for the Group. In its first full year within the Group, Linatex has been an important driver of growth in ancillary products and services, a key strategic focus as the division broadens its offering of mill circuit solutions. In addition, annualised synergies of more than US$15m were achieved from the Linatex integration against initial expectations of between US$5m and US$10m. The opening of new service centres in major mining markets increased local support for customers and enhanced the division's opportunities to drive sales of the broader portfolio.

Order input increased by 27% to £1,263m (2010: £996m). On a like-for-like basis, excluding the impact of the September 2010 acquisition of Linatex, which contributed £108m (2010: £27m), order input increased 19%. Original equipment orders grew 24% (23% like-for-like). Aftermarket orders grew 29% and 16% on a like-for-like basis, benefiting from the strategic focus on the sale of ancillary products and services with organic growth of 26%. Original equipment orders represented 42% of total input (2010: 43%) and 45% (2010: 43%) excluding the impact of Linatex.

The division secured orders from every major greenfield and brownfield project in South America, with greenfield projects driving strong demand for slurry and dewatering pumps. Orders were received for GEHO® positive displacement pumps for iron ore and copper pipeline transportation projects totalling £40m. Elsewhere, notable orders included a £6m contract to supply a range of pumps and hoses for a Canadian oil sands project. Strong growth in ancillary products and services included the supply of cyclones and mill liners to a Polish copper mine, valves, cyclones and hoses for a large Russian gold mining project and a £2m order for Linatex screens for a North American iron ore project. Emerging markets accounted for 48% of input (2010: 51%), with order growth from North American and European markets rising by 35% and 57% respectively. 

Revenue increased by 33% to £1,216m (2010: £911m). Like-for-like revenues increased 26%, reflecting high activity levels across all main mining markets throughout the year, excluding Western Europe. Original equipment sales accounted for 42% of revenues (2010: 39%) or 45% (2010: 39%) on a like-for-like basis.

Operating profit increased by 22% to £214m (2010: £176m) as the division benefited from strong revenue growth and a full year profit contribution from Linatex of £14m, including synergies realised in the year. 

Operating margin declined to 17.6% (2010: 19.3%), reflecting a shift in mix towards original equipment deliveries, investment to support strategic growth initiatives and an increased proportion of lower margin ancillary products and service revenues.

Capital expenditure was £49m (2010: £30m) and research and development spend increased by 28% to £10m. The division invested in expanding its main facility in Africa to support the growth of Linatex products, foundry upgrades and the opening of 15 new service centres across major mining markets.

OIL & GAS

Weir Oil & Gas designs and manufactures high pressure well service pumps, wellhead solutions and related flow control equipment focused on unconventional oil and gas markets and highly engineered centrifugal pumps for use in the refining industry. Weir Oil & Gas Services provides comprehensive engineering services focused on the upstream oil and gas sector.

	2011	2010	Change
Order input1	£865m	£609m	+42%
Revenue1	£743m	£451m	+65%
Operating profit1,2	£183m	£114m	+61%
Operating margin1,2	24.7%	25.2%	-50 bps
1 2010 restated at 2011 average exchange rates
2 Adjusted to exclude intangibles amortisation

The North American upstream market experienced a second year of rapid growth, underpinned by increased horizontal drilling of oil and liquids rich shale formations. Average US horizontal rig count, a leading indicator of upstream pressure pumping demand, increased 22% on 2010, with the rate of growth moderating in the final quarter of the year, while greater operating efficiency resulted in an estimated 32% increase in horizontal wells drilled. Oil and liquids rich shale drilling now accounts for over half of all activity in North America such that US domestic oil production rose to its highest level for nearly a decade. Conversely, falling US natural gas prices, driven by excess supply from the abundance of unconventional sources, led to an 11% reduction in the number of North American rigs targeting gas formations. Outside North America, China, Poland, Argentina and Australia started to develop their own significant shale resources with exploratory drilling underway, while elsewhere there is growing international interest.  

Middle East services markets benefited from investment in Iraqi and Saudi Arabian oilfield developments to increase production levels while downstream markets continue to be challenging.

The division has again delivered a record financial performance, ahead of expectations, benefiting from rapid growth in the upstream shale markets and the ability to respond quickly to these trends. During 2011, manufacturing and support capacity was added, new products were introduced and the service centre footprint was extended as the division sought to meet growing customer demands. Good progress was also made at the Middle East Service operations, while downstream performance was impacted by competitive market conditions. No contribution has been recognised for the two week post-acquisition period of Seaboard given the close proximity to the year end.

Order input increased by 42% to £865m (2010: £609m). Upstream operations achieved input growth of 58% to a record £723m (US$1,160m), benefiting from strong market conditions, higher operating intensities and market share gains. This reflects a strengthening in orders through the second half with growth of 18% against the first half of the year with a new input record established in the fourth quarter as we saw significant forward ordering for delivery in the first half of 2012. Demand for original equipment continued to be driven by increased utilisation, fleet expansion and a replacement cycle accelerated by longer duration, higher pressure applications while aftermarket demand is benefiting from a growing installed base.  Input across downstream and service operations fell by 5% with growth in the Middle East service markets benefiting from growing activity in Iraq, offset by a challenging downstream market.

Revenue increased 65% to £743m (2010: £451m). Upstream revenues more than doubled to £613m (US$982m), benefiting from the strong opening order book, positive original equipment and aftermarket trends and market share increases over the year. This was achieved by the acceleration of capacity expansion plans, additional third party outsourcing and greater use of the Group's North American existing capacity alongside the opening of four new service centres.  

Operating profit including joint ventures increased by 61% to £183m (2010: £114m) driven by the substantial increase in upstream activity and growing profits from the Middle East service operations offset by a substantially reduced contribution from the downstream operations. In addition, one-off restructuring and transaction costs of £11m have been expensed, including those for the Seaboard acquisition.

Operating margin was 24.7% in 2011 (2010: 25.2%), with a positive mix effect from the upstream business and improving margins at the Middle East service operations being offset by lower downstream margins reflecting reduced activity and one-off costs. Excluding one-off costs margins were 26.1%.

Capital expenditure increased to £32m (2010: £17m) and research and development spend rose by 13% to £5m as the division invested in its growth plans. During the year, Weir SPM developed its machining capacity at the Fort Worth facility and added to a North American service footprint that now includes 27 centres. A state of the art plunger facility was installed at Weir Mesa to expand capacity and further investment was made in the Edmonton and Houston operations to expand supply chain capability. A planned investment of US$75m to further increase manufacturing and service capacity at Weir SPM is to be completed in 2012, as previously announced. Investment at Weir Shengli Highland, the Group's Chinese joint venture, enabled manufacture of its first pumps towards the end of 2011.

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.

	2011	2010	Change
Order input1	£312m	£264m	+18%
Revenue1	£307m	£244m	+26%
Operating profit1,2	£27m	£26m	+3%
Operating margin1,2	8.7%	10.7%	-200bps
1 2010 restated at 2011 average exchange rates
2 Adjusted to exclude intangibles amortisation

The global nuclear market, active in the early part of the year, slowed following the Fukushima reactor incident with new build projects and non-essential maintenance and repair work delayed. Demand for original equipment and spares across European and US thermal power markets remained subdued while growth continued in emerging markets, particularly India.  The oil and gas markets saw good project activity in the Middle East and Asia-Pacific. The North American hydro power market saw good levels of activity with a number of significant projects started in the year. The European renewables market remained challenging while opportunities across South America and Africa emerged during the year. General industrial and municipal markets remained subdued with unrest in Libya leading to the cessation of all project activity in February 2011.

During the year, the division has focused on extending its product offering and routes to market, leveraging its low cost supply chain and integrating its 2010 and 2011 acquisitions. Good progress has been made against these strategic objectives, with a growing emerging market presence. The division has retained its focus on global power markets, particularly nuclear and hydro and at the same time is targeting the growing opportunities in the oil and gas sector for many of the division's products and fully participating in the Oil & Gas Forum. The sub-sea rotary gate valve has been one example of this, with sales of the product to a broader range of oil and gas customers.

Order input increased by 18% to £312m (2010: £264m) with a £63m (2010: £17m) contribution from the 2010 and 2011 acquisitions and like-for-like growth of 1%. Nuclear input at £72m (2010: £82m) reflected the broader global slowdown in new projects and maintenance activity following the Fukushima reactor incident, despite the division securing a large contract for a South Korean reactor project. Control and safety valve orders were up 34% benefiting from strategic investment in 2010. Strong domestic markets supported positive input trends at Weir BDK with the ability to now package a broader range of valve types already achieving good results while Weir American Hydro saw increased project activity levels. The proportion of orders from the power sector was 57% (2010: 61%). 

Revenue increased by 26% to £307m (2010: £244m) with a positive contribution from the 2010 and 2011 acquisitions. Underlying like-for-like revenues were up 1% but impacted by reduced power-focused maintenance activity and the cessation of work in Libya. Revenues from emerging markets increased by 17% as the division benefits from its increased presence.

Operating profit increased by £1m to £27m (2010: £26m). There was a £6m contribution from current and prior year acquisitions compared to £1m in 2010, although this was offset by acquisition related costs of £3m (2010: £3m). A provision of £2m was charged in the year for Libya working capital exposures while further incremental investment was made in building business capability in support of the division's strategic growth plans.

Operating margin fell to 8.7% from 10.7% in 2010. While margins benefited from a positive contribution from the acquisitions, they were impacted by one-off costs, the Libya trading and provision impact and further investment in our strategic growth plans. Excluding acquisition related and other one-off costs, margins were 10.6% (2010: 11.7%).

Capital expenditure of £13m (2010: £3m) was invested as the division added resources to support organic growth with the expansion of nuclear valve capacity in Marseille, France, the construction of a control valves manufacturing facility in Suzhou, China and investment in a new service centre in Montreal, Canada to better support Weir American Hydro's customers in the Canadian market.

STRATEGY

Weir will continue to extend its position in the minerals, oil and gas and power sectors and aims to deliver growth ahead of these end markets. These are high growth, long cycle markets with positive fundamentals. This strategy is delivered through sustainable organic growth supplemented by targeted acquisitions consistent with our disciplined financial criteria. The Group invests in people, technology and infrastructure to develop and maintain the strong and lean operating platform from which it grows market share and creates competitive advantage. The strategy is underpinned by our three pillars - Innovation, Collaboration and Global Capability.

In 2012, we will continue to pursue this strategy as we aim to grow ahead of our end markets. We will successfully integrate Seaboard and Novatech to leverage products, skills and geographic reach. We will deliver on our Weir SPM multi-site expansion plans and add capacity in the Minerals Division. We will build on the new products momentum with a specific focus on Oil & Gas Forum initiatives and enhance supply chain performance to drive operational efficiency and increase customer responsiveness. We will improve operational and safety performance through ongoing investment and the work of the Environment, Health and Safety excellence committee.

MANAGEMENT CHANGES

Keith Ruddock will join the Group as General Counsel and Company Secretary from 9 May 2012, following the retirement of Alan Mitchelson, Group Legal & Commercial Director, at the Group's annual general meeting. Keith joins from Royal Dutch Shell PLC, where he is presently General Counsel for Upstream International, Shell's largest business unit, based in The Hague. He has extensive international commercial and legal experience, having worked in the Middle East, North America, Africa, Australasia and Europe and was a member of Shell's Upstream International leadership team. 

After more than 10 years as Divisional Managing Director, Weir Minerals, Scot Smith will be leaving the Weir Group to pursue other opportunities. A search process to appoint his successor is now underway and both internal and external candidates will be considered. Scot's departure date has not been confirmed but is expected to be in the second half of the year.

POST- BALANCE SHEET EVENTS

On 22 February 2012 the Group completed the acquisition of Novatech LLC for an equivalent enterprise value of US$176m (£112m).

On 16 February 2012, the Group issued US$1bn of senior unsecured fixed rate notes through a private placement to US investors with maturities of 7, 10 and 11 years and an average interest rate of 4.16%. The proceeds were used to repay the US$380m bridging loan taken out to fund the Seaboard acquisition, to fund the acquisition of Novatech and repay other borrowing facilities.

OUTLOOK 

MINERALS

Market fundamentals remain strong, driven by continued urbanisation and industrialisation in emerging markets and their increasing demand for raw materials. This increased demand, coupled with declining ore grades, supports the continued high level of investment planned by miners over the coming years, although industry-wide resource and skill shortages are likely to smooth and extend the current capital cycle. Forecasts show global mining capital expenditure remaining above 2011 levels through to 2015. Global ore production is expected to grow by around 5% per annum over the same period, supporting aftermarket products and services growth.

In 2012, our expectations are that mining activity levels will remain robust and we expect moderate growth in original equipment input, albeit the timing of orders for large projects is hard to predict. Market forecasts of ore production volume growth and a continuing focus on ancillary products and services mean that we anticipate good progress in shorter cycle aftermarket orders. Together with delivery of its strong opening order book, this is expected to result in higher 2012 revenues and operating profits compared to 2011, while operating margins will stabilise at a broadly similar level.

OIL & GAS

Weir Oil & Gas remains well positioned to deliver further growth. Current forecasts for 2012 indicate overall modest growth in average horizontal rig count in North America with a reduction in gas drilling offset by the continued shift towards oil and liquids rich drilling.

We expect 2012 original equipment input for SPM and Mesa to be lower than 2011 as pressure pumping market supply and demand move into balance, lead times reduce and the effects of forward ordering in 2011 unwind. This will be partly offset by good aftermarket input growth, driven by the larger installed base, continuing high activity levels and our recent and planned capacity additions. As a result, with a record opening order book providing good visibility over the first half, we now expect 2012 full year revenues from these operations to slightly exceed US$1 billion, somewhat ahead of our previous expectations.

The outlook for Seaboard and Novatech is in line with our expectations at the time of acquisition. Further growth is expected in the Middle East in 2012, underpinned by increased activity in Iraq and Saudi Arabia. A modest improvement in the 2012 performance of downstream operations is anticipated.

The medium term outlook for upstream remains positive with continued investment and associated infrastructure development anticipated in the North American onshore oil and gas sector. Responsible shale development was identified in 2012 by President Obama as a key part of the US energy future. Outside North America, international shale development is expected to grow, with exploration already underway in the large shale formations of Argentina, China and Australia.  

POWER & INDUSTRIAL

Current market conditions remain mixed with global economic concerns and ongoing delays in both new power plant build programmes and maintenance activities offset by continuing good opportunities to drive growth through our strategic initiatives and recent acquisitions. The oil and gas sector will continue to offer good opportunities in 2012 and we are hopeful of a pick up in nuclear activity as safety recommendations following the Fukushima incident are reflected in new build designs and generate increased service and aftermarket demand from the installed base. The global power market outlook across the medium term remains positive given a structural shortage of power in emerging markets extending over a number of years while growing environmental requirements and ageing plant drives growth in developed markets. An improved financial performance is expected in 2012 as the division benefits from a strong opening orderbook, a reduction in one-off costs and an increased focus on opportunities in oil and gas markets.

SUMMARY

The Group enters 2012 with a strong order book and with our clear strategy and flexible business model we expect a year of further good progress consistent with current consensus expectations.

Medium term, the Group remains well positioned to benefit from the growth in our end markets. Demand for minerals, oil and gas and power is underpinned by continuing population growth and industrialisation in developing economies. Growing desire for energy security will support the international development of unconventional oil and gas resources and industrialisation, environmental concerns and ageing power plants will accelerate the need for new and refurbished power infrastructure.

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.

AUDITED RESULTS
Consolidated Income Statement
for the 52 weeks ended 30 December 2011
			52 weeks ended 30 December 2011							52 weeks ended 31 December 2010
			Before exceptional items & intangibles amortisation		Exceptional items & intangibles amortisation (note 3)			Total		Before exceptional items & intangibles amortisation	Exceptional items & intangibles amortisation (note 3)		Total
	Notes		£m		£m			£m		£m	£m		£m
Continuing operations
Revenue		2	2,292.0		-			2,292.0		1,635.0	-		1,635.0
Continuing operations
Operating profit before share of results of joint ventures			407.9		(4.1)			403.8		305.1	(18.2)		286.9
Share of results of joint ventures		2	4.8		-			4.8		4.6	-		4.6
Operating profit			412.7		(4.1)			408.6		309.7	(18.2)		291.5
Finance costs			(19.4)		(0.7)			(20.1)		(14.9)	-		(14.9)
Finance income			4.3		-			4.3		1.5	-		1.5
Other finance costs - retirement benefits			(1.3)		-			(1.3)		(1.6)	-		(1.6)
Profit before tax from continuing operations			396.3		(4.8)			391.5		294.7	(18.2)		276.5
Tax expense		4	(114.2)		1.7			(112.5)		(82.8)	5.4		(77.4)
Profit for the period from continuing operations			282.1		(3.1)			279.0		211.9	(12.8)		199.1
Profit (loss) for the period from discontinued operations		5	-		19.9			19.9		-	(13.6)		(13.6)
Profit for the period			282.1		16.8			298.9		211.9	(26.4)		185.5
Attributable to
Equity holders of the Company			282.1		16.8			298.9		211.5	(26.4)		185.1
Non-controlling interests			-		-			-		0.4	-		0.4
			282.1		16.8			298.9		211.9	(26.4)		185.5
Earnings per share		6
Basic - total operations								141.5p					87.9p
Basic - continuing operations			133.6p					132.1p		100.4p			94.3p
Diluted - total operations								140.1p					86.9p
Diluted - continuing operations			132.2p					130.7p		99.2p			93.2p
Consolidated Statement of Comprehensive Income
for the 52 weeks ended 30 December 2011
										52 weeks ended 30 December 2011	52 weeks ended 31 December 2010
										£m	£m
Profit for the period										298.9	185.5
Other comprehensive income
Losses taken to equity on cash flow hedges										(1.1)	(0.2)
Exchange (losses) gains on translation of foreign operations										(18.9)	56.9
Exchange losses on net investment hedges										(1.4)	(17.3)
Actuarial losses on defined benefit plans										(45.0)	(3.4)
Reclassification adjustments taken to the income statement on cash flow hedges										(1.5)	(0.1)
Tax relating to other comprehensive income										12.2	1.5
Net other comprehensive (expense) income										(55.7)	37.4
Total net comprehensive income for the period										243.2	222.9
Attributable to
Equity holders of the Company										243.2	222.5
Non-controlling interests										-	0.4
										243.2	222.9

Consolidated Balance Sheet
at 30 December 2011
						30 December 2011	31 December 2010 Restated (note 1)
					Notes	£m	£m
ASSETS
Non-current assets
Property, plant & equipment						321.8		257.4
Investment property						-		3.9
Intangible assets						1,332.6		954.6
Investments in joint ventures						11.4		10.3
Deferred tax assets						38.0		27.5
Derivative financial instruments					11	0.1		0.6
Total non-current assets						1,703.9		1,254.3
Current assets
Inventories						469.8		310.1
Trade & other receivables						517.2		351.4
Construction contracts						19.6		16.2
Derivative financial instruments					11	6.4		9.2
Income tax receivable						11.5		0.4
Cash & short-term deposits						113.9		84.0
Total current assets						1,138.4		771.3
Total assets						2,842.3		2,025.6
LIABILITIES
Current liabilities
Interest-bearing loans & borrowings						92.0		6.3
Trade & other payables						565.4		410.3
Construction contracts						26.8		21.8
Derivative financial instruments					11	24.4		20.9
Income tax payable						33.4		29.7
Provisions						53.7		45.4
Total current liabilities						795.7		534.4
Non-current liabilities
Interest-bearing loans & borrowings						695.1		361.3
Other payables						15.5		1.7
Derivative financial instruments					11	15.2		27.5
Provisions						36.6		38.5
Deferred tax liabilities						81.4		75.5
Retirement benefit plan deficits					10	84.7		65.0
Total non-current liabilities						928.5		569.5
Total liabilities						1,724.2		1,103.9
NET ASSETS						1,118.1		921.7
CAPITAL & RESERVES
Share capital						26.6		26.6
Share premium						38.0		38.0
Treasury shares						(5.6)		(6.8)
Capital redemption reserve						0.5		0.5
Foreign currency translation reserve						83.5		103.8
Hedge accounting reserve						(1.6)		0.4
Retained earnings						974.6		758.8
Shareholders equity						1,116.0		921.3
Non-controlling interests						2.1		0.4
TOTAL EQUITY						1,118.1		921.7

Consolidated Cash Flow Statement
for the 52 weeks ended 30 December 2011
						52 weeks ended 30 December 2011	52 weeks ended 31 December 2010
					Notes	£m	£m
Continuing operations
Cash flows from operating activities					12
Cash generated from operations						302.6	274.9
Additional pension contributions paid						(6.6)	(9.3)
Income tax paid						(97.3)	(72.4)
Net cash generated from operating activities						198.7	193.2
Continuing operations
Cash flows from investing activities
Acquisitions of subsidiaries					12	(386.0)	(203.4)
Disposals of subsidiaries					12	-	(0.7)
Purchases of property, plant & equipment & intangible assets					8	(95.4)	(50.9)
Other proceeds from sale of property, plant & equipment & intangible assets						4.0	2.9
Interest received						4.3	1.6
Dividends received from joint ventures						4.1	4.2
Net cash used in investing activities						(469.0)	(246.3)
Continuing operations
Cash flows from financing activities
Purchase of shares for equity settled share-based incentives						(0.4)	-
Proceeds from borrowings						469.0	356.3
Repayments of borrowings						(50.8)	(190.8)
Settlement of external debt of subsidiary on acquisition					12	(55.4)	-
Settlement of derivative financial instruments						(10.9)	(13.4)
Interest paid						(17.7)	(10.8)
Proceeds from increase in non-controlling interests						1.7	-
Dividends paid to non-controlling interests						-	(0.2)
Dividends paid to equity holders of the Company						(59.5)	(46.7)
Net cash generated from financing activities						276.0	94.4
Net increase in cash & cash equivalents from continuing operations						5.7	41.3
Net decrease in cash & cash equivalents from discontinued operations - operating activities						-	(18.6)
Net increase in cash & cash equivalents from discontinued operations - investing activities						24.6	-
Cash & cash equivalents at the beginning of the period						79.5	55.7
Foreign currency translation differences						(1.2)	1.1
Cash & cash equivalents at the end of the period					12	108.6	79.5

Consolidated Statement of Changes in Equity
for the 52 weeks ended 30 December 2011
	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 1 January 2010	26.6		38.0		(7.9)	0.5		64.0		0.6		620.4		742.2		0.2		742.4
Profit for the period	-		-		-	-		-		-		185.1		185.1		0.4		185.5
Losses taken to equity on cash flow hedges	-		-		-	-		-		(0.2)		-		(0.2)		-		(0.2)
Exchange gains on translation of foreign operations	-		-		-	-		56.9		-		-		56.9		-		56.9
Exchange losses on net investment hedges	-		-		-	-		(17.3)		-		-		(17.3)		-		(17.3)
Actuarial losses on defined benefit plans	-		-		-	-		-		-		(3.4)		(3.4)		-		(3.4)
Reclassification adjustments taken to the income statement on cash flow hedges	-		-		-	-		-		(0.1)		-		(0.1)		-		(0.1)
Tax relating to other comprehensive income	-		-		-	-		0.2		0.1		1.2		1.5		-		1.5
Total net comprehensive income for the period	-		-		-	-		39.8		(0.2)		182.9		222.5		0.4		222.9
Cost of share-based payments inclusive of tax credits	-		-		-	-		-		-		3.3		3.3		-		3.3
Dividends	-		-		-	-		-		-		(46.7)		(46.7)		(0.2)		(46.9)
Exercise of LTIP awards	-		-		1.1	-		-		-		(1.1)		-		-		-
At 31 December 2010	26.6		38.0		(6.8)	0.5		103.8		0.4		758.8		921.3		0.4		921.7
Profit for the period	-		-		-	-		-		-		298.9		298.9		-		298.9
Losses taken to equity on cash flow hedges	-		-		-	-		-		(1.1)		-		(1.1)		-		(1.1)
Exchange losses on translation of foreign operations	-		-		-	-		(18.9)		-		-		(18.9)		-		(18.9)
Exchange losses on net investment hedges	-		-		-	-		(1.4)		-		-		(1.4)		-		(1.4)
Actuarial losses on defined benefit plans	-		-		-	-		-		-		(45.0)		(45.0)		-		(45.0)
Reclassification adjustments taken to the income statement on cash flow hedges	-		-		-	-		-		(1.5)		-		(1.5)		-		(1.5)
Tax relating to other comprehensive income	-		-		-	-		-		0.6		11.6		12.2		-		12.2
Total net comprehensive income for the period	-		-		-	-		(20.3)		(2.0)		265.5		243.2		-		243.2
Proceeds from increase in non-controlling interests	-		-		-	-		-		-		-		-		1.7		1.7
Cost of share-based payments inclusive of tax credits	-		-		-	-		-		-		11.0		11.0		-		11.0
Dividends	-		-		-	-		-		-		(59.5)		(59.5)		-		(59.5)
Exercise of LTIP awards	-		-		1.2	-		-		-		(1.2)		-		-		-
At 30 December 2011	26.6		38.0		(5.6)	0.5		83.5		(1.6)		974.6		1,116.0		2.1		1,118.1

Notes to the Group Financial Statements

1. Accounting policies

Basis of preparation

The preliminary results for the 52 weeks ended 30 December 2011 ("2011") have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and applied in accordance with the provisions of The Companies Act 2006.  The accounting policies applied in preparing these preliminary results are unchanged from those set out in the Group's 2010 annual report except as described below. The following standards and interpretations have been adopted in these financial statements and have not had a material impact on the Group's financial statements in the period of initial application.

IAS24 Related Party Disclosures (Revised)    IAS32 Classification of Rights Issues (amendment to IAS32 Financial Instruments: Presentation)    Improvements to IFRS (issued 2010)    IFRIC14 Amendment to IFRIC14 Prepayments of a Minimum Funding Requirement    IFRIC19 Extinguishing Financial Liabilities with Equity Instruments

These financial statements are presented in sterling.  All values are rounded to the nearest 0.1 million pounds (£m) except when otherwise indicated. In order to provide the users of the financial statements with a more relevant presentation of the Group's underlying performance, profit for each financial year has been analysed between:

i)    profit before exceptional items and intangibles amortisation; and

ii)   the effect of exceptional items and intangibles amortisation.

a.   Exceptional items are items of income and expense which, because of the nature, size and / or infrequency of the events giving rise to them, merit separate presentation to allow a better understanding of the elements of the Group's financial performance for the period and are presented on the face of the income statement to facilitate                     comparisons with prior periods and assessment of trends in financial performance. Exceptional items include the movement on contingent consideration which, due to its                         nature, is separately disclosed on the face of the Consolidated Income Statement.

b.   Intangibles amortisation, including impairment, has been shown separately to provide increased visibility over the impact of increased acquisition activity on intangible assets.

Further analysis of the items included in the column "Exceptional items & intangibles amortisation" is provided in note 3 to the financial statements. During the 52 weeks ended 30 December 2011, the provisional fair values attributed to the 2010 acquisitions were finalised. In accordance with IFRS3, the net impact of the adjustments to the provisional fair values has been recognised by means of a decrease 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. To this effect, the Consolidated Balance Sheet and affected notes present restated comparative information for the 52 weeks ended 31 December 2010. There was no material impact on the Consolidated Income Statement for the 52 weeks ended 31 December 2010. Further details of the adjustments made to the provisional fair values can be found in note 9.

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 designs and manufactures pumps, hydrocyclones, valves and other complementary equipment for the mining, flue gas desulphurisation and oil sands markets. The Oil & Gas segment manufactures pumps and ancillary equipment and provides aftermarket support for the global upstream and downstream oil and gas markets. The Power & Industrial segment designs, manufactures and provides aftermarket support for rotating and flow control equipment to the global power generation and industrial sectors. All other segments, which are disclosed as Group companies, include the results of Liquid Gas Equipment which supplies equipment to the liquefied petroleum gas marine and onshore markets.  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 are not allocated to segments as all treasury activity is managed centrally by the Group treasury function. Transfer prices between business segments are set on an arm's length basis in a manner similar to transactions with third parties. The segment information for the reportable segments for the 52 weeks ended 30 December 2011 and the 52 weeks ended 31 December 2010 is disclosed below. Minerals Oil & Gas Power & Industrial Total continuing operations 2011 2010 2011 2010 2011 2010 2011 2010 £m £m £m £m £m £m £m £m Revenue Sales to external customers 1,216.3 901.4 742.7 461.7 306.7 246.0 2,265.7 1,609.1 Inter-segment sales 5.2 1.8 14.7 7.5 6.6 3.5 26.5 12.8 Segment revenue 1,221.5 903.2 757.4 469.2 313.3 249.5 2,292.2 1,621.9 Group companies sales to external customers 26.3 25.9 Eliminations (26.5) (12.8) 2,292.0 1,635.0 Sales to external customers - at 2011 average exchange rates Sales to external customers 1,216.3 911.4 742.7 451.0 306.7 243.5 2,265.7 1,605.9 Group companies sales to external customers 26.3 25.9 2,292.0 1,631.8 Result Segment result before share of results of joint ventures 213.9 174.5 178.3 112.8 26.8 26.3 419.0 313.6 Share of results of joint ventures - - 4.8 4.6 - - 4.8 4.6 Segment result 213.9 174.5 183.1 117.4 26.8 26.3 423.8 318.2 Group companies 3.0 3.5 Unallocated expenses (14.1) (12.0) Operating profit before exceptional items & intangibles amortisation 412.7 309.7 Exceptional items & intangibles amortisation (4.8) (18.2) Net finance costs before exceptional items (15.1) (13.4) Other finance costs - retirement benefits (1.3) (1.6) Profit before tax from continuing operations 391.5 276.5 Segment result - at 2011 average exchange rates Segment result before share of results of joint ventures 213.9 176.0 178.3 109.7 26.8 26.0 419.0 311.7 Share of results of joint ventures - - 4.8 4.1 - - 4.8 4.1 Segment result 213.9 176.0 183.1 113.8 26.8 26.0 423.8 315.8 Group companies 3.0 3.5 Unallocated expenses (14.1) (12.0) Operating profit before exceptional items & intangibles amortisation 412.7 307.3 There are no material revenues derived from a single external customer. 3. Exceptional items & intangibles amortisation 2011 2010 £m £m Recognised in arriving at operating profit from continuing operations Intangibles amortisation (23.1) (18.2) Exceptional item - past service gain on UK defined benefit scheme 19.0 - (4.1) (18.2) Recognised in finance costs Exceptional item - unwind of discount in respect of contingent consideration (0.7) - Recognised in arriving at profit (loss) for the period from discontinued operations Exceptional items (note 5) 19.9 (13.6) 4. Income tax expense 2011 2010 £m £m Group - UK (11.4) (9.4) Group - overseas (101.1) (68.0) Total income tax expense in the Consolidated Income Statement (112.5) (77.4) The total income tax expense is disclosed in the Consolidated Income Statement as follows. Tax expense - continuing operations before exceptional items & intangibles amortisation (114.2) (82.8)                     - exceptional items (4.8) -                     - intangibles amortisation 6.5 5.4 Total income tax expense in the Consolidated Income Statement (112.5) (77.4) The total income tax expense included in the Group's share of results of joint ventures is as follows. Joint ventures (0.8) (0.8) 5. Discontinued operations There were no disposals of businesses during the 52 weeks ended 30 December 2011 or the 52 weeks ended 31 December 2010. In December 2011, the Group disposed of the former Weir Pumps site at Cathcart to SPX Clyde UK Limited for cash proceeds of £25.0m resulting in a net gain of £19.9m (net of tax of £nil) after taking account of disposal costs and other costs arising from discontinued operations. Since the property was used by the Weir Pumps business, which was sold in 2007, the net gain is shown as a profit from discontinued operations. In December 2010, the Group pleaded guilty to two charges of breaching UN sanctions in connection with a number of Oil for Food programme contracts awarded between 2000 and 2002. This resulted in a confiscation order of £13.9m and a fine of £3.0m. Since the business involved was sold in 2007, these costs, along with £1.7m of related legal and professional fees, offset by the release of £5.0m of provision and accruals, were shown as a loss from discontinued operations. Earnings (losses) per share from discontinued operations were as follows. 2011 2010 pence pence Basic 9.4 (6.5) Diluted 9.3 (6.4) These earnings (losses) per share figures were derived by dividing the net profit attributable to equity holders of the Company from discontinued operations of £19.9m (2010: loss of £13.6m) by the weighted average number of ordinary shares for both basic and diluted amounts shown in note 6. 6. 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. 2011 2010 Profit attributable to equity holders of the Company     Total operations * (£m) 298.9 185.1     Continuing operations * (£m) 279.0 198.7     Continuing operations before exceptional items & intangibles amortisation * (£m) 282.1 211.5 Weighted average share capital     Basic earnings per share (number of shares, million) 211.2 210.6     Diluted earnings per share (number of shares, million) 213.4 213.1 The difference between the weighted average share capital for the purposes of the basic and the diluted earnings per share calculations is analysed as follows 2011 2010 Shares Million Shares Million Weighted average number of ordinary shares for basic earnings per share 211.2 210.6 Effect of dilution: LTIP awards 2.2 2.5 Adjusted weighted average number of ordinary shares for diluted earnings per share  213.4 213.1 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. 2011 2010 £m £m Net profit attributable to equity holders from continuing operations * 279.0 198.7 Exceptional items & intangibles amortisation net of tax 3.1 12.8 Net profit attributable to equity holders from continuing operations before exceptional items & intangibles amortisation * 282.1 211.5 * Adjusted for £nil (2010: £0.4m) in respect of non-controlling interests. There have been no share options (2010: nil) exercised between the reporting date and the date of signing of these financial statements. 7. Dividends paid & proposed 2011 2010 £m £m Declared & paid during the period Equity dividends on ordinary shares Final dividend for 2010: 21.0p (2009: 16.2p) 44.3 34.1 Interim dividend for 2011: 7.2p (2010: 6.0p) 15.2 12.6 59.5 46.7 Proposed for approval by shareholders at the annual general meeting Final dividend for 2011: 25.8p (2010: 21.0p) 54.5 44.3 The proposed dividend is based on the number of shares in issue, excluding treasury shares held, at the date the financial statements were approved and authorised for issue.  The final dividend may differ due to increases or decreases in the number of shares in issue between the date of approval of the report and financial statements and the record date for the final dividend. 8. Property, plant & equipment & intangible assets 2011 2010 £m £m Purchases of property, plant & equipment & intangible assets  - land & buildings 18.0 3.4  - plant & equipment 72.1 42.8  - intangible assets 5.3 4.7 95.4 50.9 Impairment of plant & equipment 0.4 0.2 The impairment charge of £0.4m relates to specific assets in one location which are unable to be transferred to that operation's new location. In 2010 the impairment charge of £0.2m related to specific assets in a number of locations across the Group where associated product lines had been changed or updated to reflect changing market conditions. 9. Business combinations On 1 July 2011, the Group acquired a majority interest in the South Korean valves business formerly operated by HIM Tech Co Ltd. The Group acquired 60% of the voting shares of a new Korean company, Weir International Co. Ltd, into which the HIM Tech valves business has been transferred. Located in Ansan, near Seoul, the business designs and manufactures control and choke valves for severe service power generation and oil and gas applications. The acquisition was structured as an initial 60% purchase including an earn out based on EBITDA achieved in 2013 and 2014. The remaining 40% is subject to put and call options exercisable between 2014 and 2019 and based upon an EBITDA multiple of profits in the two years preceding the exercise of the option. The cash consideration paid was £9.8m and the estimated fair value of the contingent consideration is £14.0m. This is based on as assessment of the probability of possible outcomes discounted to net present value. The range of possible outcomes on an undiscounted basis is between zero and £33.4m. Costs associated with the acquisition amounting to £0.5m have been charged to the income statement in the 52 weeks ended 30 December 2011. On 14 December 2011, the Group finalised the acquisition of 100% of the voting shares of Seaboard Holdings Inc. ("Weir Seaboard"), an independent wellhead solutions provider focused on the growing North American unconventional oil and gas drilling and production markets, based in Houston, Texas, for a total cash consideration of £432.1m. In addition, an amount of £9.1m has been recognised in respect of contingent consideration relating to tax refunds. Costs associated with the acquisition amounting to £5.1m have been charged to the income statement in the 52 weeks ended 30 December 2011. The fair values on acquisition of these business combinations are provisional due to the timing of the transactions and will be finalised during the following financial year. No allocation has been made in the determination of the provisional fair values from goodwill to identifiable intangible assets. External advisers are assisting with this allocation, the process has commenced and initial draft reports are due in April 2012. This allocation will be finalised along with all other fair values in the next financial year. There will be certain intangible assets included in the £403.2m of goodwill recognised that cannot be individually separated and reliably measured from the acquiree due to their nature. These items include anticipated business growth, synergies and an assembled workforce. None of the goodwill is expected to be deductible for tax purposes.  The provisional fair value of the trade receivables amounts to £41.2m. The gross amount of trade receivables is £43.3m. Provisional fair values Weir Seaboard Weir International Total 2011 2011 2011 £m £m £m Property, plant & equipment 23.1 0.1 23.2 Inventories 29.6 0.7 30.3 Trade & other receivables 42.3 1.1 43.4 Cash & cash equivalents 2.2 0.2 2.4 Interest-bearing loans & borrowings (55.4) (0.2) (55.6) Trade & other payables (41.5) (1.6) (43.1) Provisions (1.5) - (1.5) Income tax 6.3 (0.1) 6.2 Deferred tax 1.1 - 1.1 Fair value of net assets 6.2 0.2 6.4 Goodwill arising on acquisition 379.6 23.6 403.2 Total consideration 385.8 23.8 409.6 Cash consideration 432.1 9.8 441.9 Settlement of external debt of subsidiaries on acquisition (55.4) - (55.4) Contingent consideration 9.1 14.0 23.1 Total consideration 385.8 23.8 409.6 The cash outflow on acquisition was as follows Cash & cash equivalents acquired 2.2 0.2 2.4 Cash paid (432.1) (9.8) (441.9) Net cash outflow              (429.9) (9.6) (439.5) The contribution from Weir Seaboard and Weir International since their respective dates of acquisition to the 2011 revenue of the Group and 2011 profit for the period from continuing operations of the Group is deemed to be immaterial. The combined continuing operations revenue and profit for the period from continuing operations of the Group, assuming that Weir Seaboard and Weir International had been acquired at the start of 2011, would have been £2,425.4m and £277.5m respectively. 9. Business combinations (continued) During the 52 weeks ended 31 December 2010, the Group acquired five businesses of which Linatex was the most significant. The other acquisitions were Petroleum Certification Services ("PCS"), the valves business of BDK Engineering Industries Limited, American Hydro Corporation and Ynfiniti Engineering Services SL ("YES"). The YES acquisition was structured as an initial 76% purchase with the remaining 24% being subject to a put and call option exercisable between 2014 and 2016 and based upon an EBITDA multiple of profits in the two years preceding the exercise of the option. The contingent consideration recognised at the acquisition date was estimated at £12.0m (€14m) based on an assessment undertaken shortly after the acquisition date of the probability of the possible outcomes discounted to net present value. In conjunction with the finalisation of the provisional fair values, the contingent consideration payable has been reduced to £1.7m. In the 2010 annual report and accounts, the fair values on acquisition of the above businesses were provisional, with the exception of PCS, due to the timing of the transactions. The fair values have been finalised in 2011 resulting in adjustments to the provisional fair values attributed. The following table summarises the adjustments made to the provisional fair values during the measurement period. Provisional fair values Adjustments to provisional fair values Restated fair values Linatex Other Total Linatex Other Total Linatex Other Total 2010 2010 2010 2010 2010 2010 2010 2010 2010 £m £m £m £m £m £m £m £m £m Property, plant & equipment  - land & buildings 15.9 4.3 20.2 (0.6) - (0.6) 15.3 4.3 19.6  - plant & equipment 12.5 4.3 16.8 (1.5) (0.2) (1.7) 11.0 4.1 15.1 Intangible assets - - -  - brand name 36.5 3.6 40.1 - 7.5 7.5 36.5 11.1 47.6  - customer relationships 9.0 13.6 22.6 - 5.1 5.1 9.0 18.7 27.7  - purchased software - 0.1 0.1 - - - - 0.1 0.1  - intellectual property & trade marks 26.2 14.5 40.7 - (7.5) (7.5) 26.2 7.0 33.2  - other - 3.7 3.7 - - - - 3.7 3.7 Inventories 15.5 6.1 21.6 - (0.1) (0.1) 15.5 6.0 21.5 Trade & other receivables 12.0 12.4 24.4 - (1.2) (1.2) 12.0 11.2 23.2 Construction contract assets - 3.0 3.0 - - - - 3.0 3.0 Cash & cash equivalents 3.1 - 3.1 - - - 3.1 - 3.1 Interest-bearing loans & borrowings (15.8) - (15.8) - - - (15.8) - (15.8) Trade & other payables (13.3) (6.4) (19.7) (0.1) (1.1) (1.2) (13.4) (7.5) (20.9) Construction contract liabilities - (3.9) (3.9) - - - - (3.9) (3.9) Provisions  - warranty (1.1) (4.2) (5.3) (0.2) (3.5) (3.7) (1.3) (7.7) (9.0)  - employee related (1.2) - (1.2) (0.2) - (0.2) (1.4) - (1.4)  - other (0.1) (0.5) (0.6) - - - (0.1) (0.5) (0.6) Income tax (1.7) (0.4) (2.1) 0.2 0.2 0.4 (1.5) (0.2) (1.7) Deferred tax (16.9) 0.1 (16.8) 1.1 - 1.1 (15.8) 0.1 (15.7) Fair value of net assets 80.6 50.3 130.9 (1.3) (0.8) (2.1) 79.3 49.5 128.8 Goodwill arising on acquisition 31.1 55.5 86.6 1.3 (9.6) (8.3) 32.4 45.9 78.3 Total consideration 111.7 105.8 217.5 - (10.4) (10.4) 111.7 95.4 207.1 Cash consideration 111.7 95.5 207.2 - (0.4) (0.4) 111.7 95.1 206.8 Settlement of pre-existing relationship balances - (0.8) (0.8) - - - - (0.8) (0.8) Contingent consideration - 12.0 12.0 - (10.3) (10.3) - 1.7 1.7 Net amount recoverable on business combinations - (0.9) (0.9) - 0.3 0.3 - (0.6) (0.6) Total consideration 111.7 105.8 217.5 - (10.4) (10.4) 111.7 95.4 207.1 The cash outflow on acquisition was as follows Cash & cash equivalents acquired 3.1 - 3.1 - - - 3.1 - 3.1 Cash paid (111.7) (95.5) (207.2) - 0.4 0.4 (111.7) (95.1) (206.8) Settlement of pre-existing relationship balances - 0.8 0.8 - - - - 0.8 0.8 Net cash outflow (108.6) (94.7) (203.3) - 0.4 0.4 (108.6) (94.3) (202.9) 10. Pensions & other post-employment benefit plans 2011 2010 £m £m Plans in deficit 84.7 65.0 The net Group deficit for retirement benefit obligations increased from £65.0m to £84.7m reflecting equity / bond market performance and yield movements offset by a £19.0m past service gain recognised as an exceptional item in the Consolidated Income Statement (note 3). The past service gain of £19.0m has arisen as a result of a decision by the Trustees of The Weir Group Pension and Retirement Saving Scheme that, following the Government's recent change in legislation, certain elements of pension will now increase in line with Consumer Prices Index (CPI) rather than the Retail Prices Index (RPI). This decision was announced to the members of the scheme in July 2011. 11. Derivative financial instruments Set out in the table below is a summary of the types of derivative financial instruments included within each balance sheet category. 2011 2010 £m £m Included in non-current assets Forward foreign currency contracts designated as cash flow hedges 0.1 0.4 Other forward foreign currency contracts - 0.2 0.1 0.6 Included in current assets Forward foreign currency contracts designated as cash flow hedges 0.6 0.9 Forward foreign currency contracts designated as net investment hedges - 0.2 Other forward foreign currency contracts 5.8 8.1 6.4 9.2 Included in current liabilities Forward foreign currency contracts designated as cash flow hedges 2.1 0.5 Forward foreign currency contracts designated as net investment hedges 0.4 - Cross currency swaps designated as net investment hedges 12.9 12.2 Other forward foreign currency contracts 9.0 8.2 24.4 20.9 Included in non-current liabilities Forward foreign currency contracts designated as cash flow hedges 0.7 0.6 Cross currency swaps designated as net investment hedges 14.3 26.8 Other forward foreign currency contracts 0.2 0.1 15.2 27.5 Net derivative financial liabilities 33.1 38.6 12. Additional cash flow information 2011 2010 £m £m Continuing operations Net cash generated from operations Operating profit 408.6 291.5 Share of results of joint ventures (4.8) (4.6) Depreciation & amortisation of property, plant & equipment & intangible assets 60.4 52.3 Impairment of plant & equipment 0.4 0.2 (Gains) losses on disposal of property, plant & equipment (0.8) 0.1 Defined benefit plans past service gain (19.0) - Funding of pension & post-retirement costs (1.3) (1.8) Employee share schemes 4.9 3.0 Net foreign exchange including derivative financial instruments 4.5 (0.5) Increase in provisions 5.0 2.1 Cash generated from operations before working capital cash flows 457.9 342.3 Increase in inventories (137.6) (39.9) Increase in trade & other receivables & construction contracts (127.8) (61.8) Increase in trade & other payables & construction contracts  110.1 34.3 Cash generated from operations 302.6 274.9 Additional pension contributions paid (6.6) (9.3) Income tax paid (97.3) (72.4) Net cash generated from operating activities 198.7 193.2 Acquisitions of subsidiaries The settlement of the external debt of Seaboard on acquisition has been classified as a financing cash flow in accordance with IAS7.  The following tables summarise the cashflows arising on acquisitions: 2011 2010 £m £m Current period acquisitions (see below) (384.1) (203.3) Previous periods acquisitions deferred consideration paid (1.9) (0.1) (386.0) (203.4) Settlement of external debt of subsidiary on acquisition (55.4) - Acquisition of subsidiaries - current year acquisitions (384.1) (203.3) Total cash outflow on acquisition of subsidiaries - current year (note 9) (439.5) (203.3) Previous periods acquisitions deferred consideration paid (1.9) (0.1) Total cash outflow relating to acquisitions (441.4) (203.4) Disposals of subsidiaries Previous periods disposals - (0.7) Cash and cash equivalents comprise the following Cash & short term deposits 113.9 84.0 Bank overdrafts & short-term borrowings (5.3) (4.5) 108.6 79.5 Reconciliation of net increase in cash & cash equivalents to movement in net debt Net increase in cash & cash equivalents from continuing operations 5.7 41.3 Net decrease in cash & cash equivalents from discontinued operations - operating activities (note 5) - (18.6) Net increase in cash & cash equivalents from discontinued operations - investing activities (note 5) 24.6 - Net increase in debt (362.8) (165.5) Change in net debt resulting from cash flows (332.5) (142.8) Lease inceptions (0.9) (0.2) Leases acquired - (0.3) Loans acquired (55.6) (15.5) Foreign currency translation differences (0.6) (5.6) Change in net debt during the period (389.6) (164.4) Net debt at the beginning of the period (283.6) (119.2) Net debt at the end of the period (673.2) (283.6) Net debt comprises the following Cash & short-term deposits 113.9 84.0 Current interest-bearing loans & borrowings (92.0) (6.3) Non-current interest-bearing loans & borrowings (695.1) (361.3) (673.2) (283.6) 13. Related party disclosures The following table provides the total amount of significant transactions which have been entered into with related parties for the relevant financial year and outstanding balances at the period end. 2011 2010 £m £m Sales of goods to related parties - joint ventures 0.7 0.6 Sales of services to related parties - joint ventures - 0.2 Purchases of goods from related parties - joint ventures 2.4 0.1 Amounts owed to related parties - group pension plans 1.5 0.2 14. 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.  The Company is subject to a claim relating to a civil action for damages arising from the UN Oil for Food Programme which has been raised in the United States against just under 100 companies. This action will be robustly defended. 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. 15. Exchange rates The principal exchange rates applied in the preparation of these financial statements were as follows. 2011 2010 Average rate (per £) US dollar 1.60 1.55 Australian dollar 1.56 1.68 Euro 1.15 1.17 Canadian dollar 1.59 1.59 Brazilian real 2.68 2.72 Chilean peso 774.99 788.31 South African rand 11.64 11.32 Closing rate (per £) US dollar 1.55 1.56 Australian dollar 1.51 1.52 Euro 1.20 1.17 Canadian dollar 1.58 1.55 Brazilian real 2.89 2.59 Chilean peso 805.90 729.68 South African rand 12.53 10.27 The Group's operating profit from continuing operations before exceptional items and intangibles amortisation was denominated in the following currencies. 2011 2010 £m £m US dollar 253.5 163.6 Australian dollar 57.0 39.7 Euro 27.7 47.3 Canadian dollar 29.5 8.3 Brazilian real 11.7 8.7 Chilean peso 24.4 19.6 South African rand 8.4 8.1 Other 0.5 14.4 Operating profit from continuing operations before exceptional items & intangibles amortisation 412.7 309.7 16. Events after the balance sheet date On 22 February 2012, the Group completed the acquisition of Novatech LLC for an equivalent enterprise value of US$176m (£112m). On 16 February 2012, the Group issued US$1bn of senior unsecured fixed rate notes through a private placement to US investors with maturities of 7, 10 and 11 years and an average interest rate of 4.16%.  The proceeds were used to repay the US$380m bridging loan taken out to fund the Seaboard acquisition, to fund the acquisition of Novatech and repay other borrowing facilities.

 

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