REG-Annual Financial Report <Origin Href="QuoteRef">WEIR.L</Origin>
05/04/2016 17:20
The Weir Group PLC
2015 Annual Report and 2016 Annual General Meeting
The following documents have today been posted or otherwise made available to
shareholders:
2Annual Report and Financial Statements for the 52 weeks ended 1 January 2016
(the "2015 Annual Report"); 4Notice of 2016 Annual General Meeting; 6Form of
Proxy for the 2016 Annual General Meeting; 8Scrip Dividend Scheme Circular;
and 10Scrip Dividend Scheme Mandate.
In accordance with Listing Rule 9.6.1, a copy of each of these documents has
been uploaded to the National Storage Mechanism and will be available for
viewing shortly at http://www.morningstar.co.uk/uk/NSM .
The documents are also available on the Company's website at www.global.weir
and in hard copy to shareholders upon request to Investor Relations, The Weir
Group PLC, 1 West Regent Street, Glasgow, G2 1RW.
The Company's 2016 Annual General Meeting will be held at the Company's Head
Office, 1 West Regent Street, Glasgow, G2 1RW, on Thursday 28 April 2016 at
2.30pm.
The Company's full year results announcement of 24 February 2016 contained a
management report as well as the audited financial statements which were
prepared in accordance with the applicable accounting standards. The 2015
Annual Report submitted to the National Storage Mechanism today also contains
information regarding the Company's principal risks and uncertainties, related
party transactions and a responsibility statement relating to the content of
the 2015 Annual Report; an extract of this information is provided below as
required under paragraph 6.3.5 of the DTR, however this material should be
read in conjunction with and is not a substitute for reading the full 2015
Annual Report. Page numbers and cross-references in the following appendices
refer to page numbers and cross-references in the 2015 Annual Report.
APPENDICES
Appendix A: Principal risks and uncertainties
A description of the principal risks and uncertainties that the Company faces
is extracted in full and unedited form from pages 24 to 29 of the 2015 Annual
Report.
As in any business, there are risks and uncertainties which could impact the
Group's ability to achieve its objectives in the future. However, we believe
the Group's risk management and assurance framework makes this less likely.
The Board has conducted a robust assessment of the principal risks, alongside
the risk appetite statement set out on page 21, meeting the Board's
responsibilities in connection with Risk Management and Internal Control
detailed in the 2014 UK Corporate Governance Code. Each of the principal risks
is assigned an owner from amongst the Board or Group senior management team
and is either a standing agenda item at each Board meeting or subject to
formal periodic review by the Board. A summary of principal risks and the
Group's mitigating controls is presented at every Board meeting.
The Directors reviewed the Group's risk register, reassessed the validity of
the principal risks identified in the prior year and considered whether any
new principal risks have emerged or a risk is no longer considered a principal
risk. The identified principal risks were subjected to a detailed assessment
based on the following considerations:
* severity of each risk;
* existence and effectiveness of actions and internal controls which serve to
mitigate the risk;
* the overall effectiveness of the Group's control environment, including
assurance and any identified control weaknesses or failings; and
* the extent to which each of the principal risks could impact upon the
Group's viability, in financial or operational terms, due to their potential
effects on the business plan, solvency or liquidity.
The principal risks set out below are those which we believe to have the
greatest potential to impact our ability to achieve the Group's strategic
objectives or which have the greatest potential impact on the Group's
solvency or liquidity.
Risk Why we think this is important How we are mitigating the risk Changes during 2015
Global economic conditions (Risk increasing; Considered as part of Viability Statement assessment)
Changes in key markets, including commodity prices affecting mining and oil and gas, have an adverse impact on customers' expenditure plans. This may include delaying existing expenditure commitments. We need to remain sufficiently flexible to allow us to anticipate downturns, to allow us to adjust our operations accordingly, and equally to meet growth in demand when our customers' markets are buoyant and therefore capital investment is high. Otherwise, we are at risk of incurring unnecessary costs during downturns, and not maximising our potential for growth in buoyant markets. In challenging market conditions, our supply chain risks are increased. These are described in more detail on page 26. Market conditions have remained challenging during 2015, with commodity prices in oil and gas joining those in minerals markets
at recent historical lows. Necessary adjustments have been made to our operations to accommodate our customers' responses to
these market conditions.
Technology and innovation (Risk increasing; Considered as part of Viability Statement assessment)
We fail to drive innovation or to react to emerging technology developments, and therefore fail to ensure that the business continues to deliver sustainable and attractive solutions for our customers. The strength of our business is built upon a history of delivering innovative and sustainable solutions for our customers. If we fail to keep abreast of market needs or to innovate solutions, we are at risk of losing market share to our competitors and lowering margins as demand will reduce. The pace of technological innovation continues to increase as we and our competitors seek to provide customers with solutions
that improve the efficiency of their operations. To ensure we continue to retain competitive advantage in this area, our
existing research and development initiatives within the business, at WARC, and at certain universities around the world, have
been enhanced through our partnership with Imperial College London. This partnership will help the Group develop game-changing
solutions to our customers' challenges. We are also devoting additional resources to reviewing and responding to developing
technologies and have signed an agreement with Microsoft Corporation to develop Internet of Things (IoT) technology. Further
information on progress made in this area is set out in the Products and Technology section of the Sustainability Review on
pages 58 and 59.
Political and social risk (Risk unchanged; Considered as part of Viability Statement assessment)
Adverse political action, or political and social instability, in territories in which we operate may result in strategic, financial or personnel loss to the Group. We operate across the globe and therefore have to work within a wide range of political and social conditions. Adverse events may occur in the territories in which we operate that may require us to act swiftly to protect our people, our property and to maintain our competitiveness, and we need to be flexible and able to anticipate such issues. Expansions into new territories are only undertaken after rigorous assessment of the risks, including the social and political situation within the territory. In response to increased security risks, arising from changes in the political environment in certain countries where the Group
has operations, enhancements have been made to the Group's access to expert risk assessments and plans to respond to adverse
events in higher risk locations. During the course of 2015, the environment in which a number of the Group's businesses operate
continued to be challenging and uncertain, especially from a security perspective. During the year we appointed a Group Head of
Security to a newly created role designed to improve the ways in which these concerns are addressed and mitigated.
Supply chain management (Risk unchanged)
Failure to achieve supply chain management improvements and the associated reduction in costs and enhanced flexibility. If we fail to improve our supply chain management, we risk: Supply chain remains an area of strategic focus for the Group. Supply chain improvements continue to be recognised year on year
as the Group realises benefits from its focused approach to these matters. In 2015, we have seen underlying improvements in
working capital, including circa £65m in our Oil & Gas division, and substantial progress in improving on-time-delivery for all
divisions with a 21% and 20% improvement in Oil & Gas and Power & Industrial respectively. A programme of Value Chain
Excellence initiatives has been launched throughout the Group to drive supply chain improvements.
Environment, health and safety (EHS) (Risk unchanged; Considered as part of Viability Statement assessment)
Failure to adequately protect our people and other stakeholders from harm associated with a breach in EHS standards. We operate in hazardous environments, and therefore have a fundamental duty to protect our people and other stakeholders from harm whilst conducting our business. As well as the personal impact on our people resulting from a failure to meet this obligation, we would also be at risk of: The Weir Behavioural Safety system is in place to reduce the risk of safety incidents. In addition, there are initiatives to prevent the most common accident types. The Weir global EHS standards are continually reviewed. The Group is never complacent in relation to EHS matters. Committed to achieving the highest of standards, the Group continues
to set higher benchmarks for EHS compliance and roll out cohesive programmes to address EHS risks and drive safe and sustainable
working practices. Improvements have been made throughout the year to our EHS Board reporting and assurance activities and our
key performance indicators in place to measure our success in mitigating EHS risks continue to show improvement.
Contract risk (Risk decreasing; Considered as part of Viability Statement assessment)
We fail to adequately manage contract risk and as a result commit to obligations which the Group is unable to meet without incurring significant unplanned costs. In addition, failure to follow Group policies and procedures may lead to commitments without the desired level of contractual protections. We operate in an increasingly complex and competitive environment where customers are not only highly focused on price and service but are also more challenging in contract negotiations. As we offer a broader range of products and services to our customers, including those that are more technologically advanced, we risk exposing the Group to reputational and financial loss should our contract acceptance, negotiation and approval processes fail to protect the Group accordingly. Contract management has become an area of increased focus for the Group, given the competitive environment. Amongst other
initiatives, certain of the Group's policies and procedures have been reviewed and refreshed to provide employees with improved
tools to assist them in their contract management activities.
IT security and continuity (Risk unchanged)
Failure to maintain business systems or technical infrastructure that serves the business needs. Failure to successfully execute changes to these business systems or technical infrastructure; together with failure to minimise disruption and maintain business as usual activity during technical infrastructure or business system changes. Failure to adequately protect the business operations from cybercrime. Up-to-date data allows us to make informed decisions about our business. Therefore, we require reliable and efficient IT systems and infrastructure to provide our data requirements. Breaches of our IT security could have serious consequences for our business, including: IT security and continuity continues to be a matter of strategic priority for the Group. Progress to strengthen the Group's
defences in this respect is being made, including developing the Weir Cloud programme which aims to rationalise our IT
infrastructure and service.
Cost competitiveness (Risk unchanged)
Failure to deliver cost competitive products and services, or failure to deliver sufficiently differentiated products and services which justify a price premium through lowest total cost of ownership value propositions. Customers are increasingly focused on the price competitiveness of products and services as they seek to lower operating costs. If the Group fails to demonstrate the value of our products and services, it risks losing market position. Cost competitiveness remains a strategic priority for the Group. Initiatives to expand production in best-cost locations are
developing in South Africa and Malaysia and the procurement function continues to drive cost and quality improvements through
the Group's supply chain.
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