REG - Weir Group PLC - Final Results <Origin Href="QuoteRef">WEIR.L</Origin> - Part 2
28/02/2018 07:05
- Part 2: For the preceding part double click ID:nRSb1279Ga
Profit before tax from continuing operations 250.1 (69.5) 180.6 170.3 (127.5) 42.8
Tax (expense) credit 4 (59.7) 40.6 (19.1) (38.4) 38.8 0.4
Profit for the year from continuing operations 190.4 (28.9) 161.5 131.9 (88.7) 43.2
Profit (loss) for the year from discontinued operations - - - 1.1 (6.1) (5.0)
Profit for the year 190.4 (28.9) 161.5 133.0 (94.8) 38.2
Attributable to:
Equity holders of the Company 190.6 (28.9) 161.7 133.1 (94.8) 38.3
Non-controlling interests (0.2) - (0.2) (0.1) - (0.1)
190.4 (28.9) 161.5 133.0 (94.8) 38.2
Earnings per share 5
Basic - total operations 73.5p 17.8p
Basic - continuing operations 86.7p 73.5p 61.2p 20.1p
Diluted - total operations 73.1p 17.7p
Diluted - continuing operations 86.1p 73.1p 60.8p 20.0p
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2017
Year ended Period ended
31 December 2017 31 December 2016
£m £m
Profit for the year 161.5 38.2
Other comprehensive income (expense)
Gains (losses) taken to equity on cash flow hedges 0.4 (0.7)
Exchange (losses) gains on translation of foreign operations (147.7) 377.4
Reclassification of foreign currency translation reserve on discontinued operations - 0.8
Exchange gains (losses) on net investment hedges 54.0 (142.0)
Reclassification adjustments on cash flow hedges (0.3) 1.9
Tax relating to other comprehensive income (expense) to be reclassified in subsequent years 0.8 0.2
Items that are or may be reclassified to profit or loss in subsequent years (92.8) 237.6
Remeasurements on defined benefit plans (5.4) (53.0)
Remeasurements on other benefit plans (0.8) -
Tax relating to other comprehensive income (expense) that will not be reclassified in subsequent years 1.5 8.6
Items that will not be reclassified to profit or loss in subsequent years (4.7) (44.4)
Net other comprehensive (expense) income (97.5) 193.2
Total net comprehensive income for the year 64.0 231.4
Attributable to:
Equity holders of the Company 64.2 228.9
Non-controlling interests (0.2) 2.5
64.0 231.4
Total net comprehensive income (expense) for the year attributable to equity holders of the Company
Continuing operations 64.2 233.0
Discontinued operations - (4.1)
64.2 228.9
Consolidated Balance Sheet
at 31 December 2017
31 December 31 December
2017 2016
Notes £m £m
ASSETS
Non-current assets
Property, plant & equipment 392.3 402.0
Intangible assets 1,549.9 1,628.8
Investments in joint ventures 19.2 40.5
Deferred tax assets 45.3 42.1
Other receivables 43.0 39.2
Retirement benefit plan assets 11 - 9.8
Derivative financial instruments 12 0.3 -
Total non-current assets 2,050.0 2,162.4
Current assets
Inventories 586.8 551.6
Trade & other receivables 613.3 481.8
Construction contracts 23.6 23.8
Derivative financial instruments 12 16.7 24.0
Income tax receivable 18.5 21.5
Cash & short-term deposits 284.6 258.6
Total current assets 1,543.5 1,361.3
Total assets 3,593.5 3,523.7
LIABILITIES
Current liabilities
Interest-bearing loans & borrowings 388.4 144.0
Trade & other payables 613.2 548.1
Construction contracts 2.6 4.2
Derivative financial instruments 12 25.8 30.2
Income tax payable 31.1 43.8
Provisions 52.6 83.2
Total current liabilities 1,113.7 853.5
Non-current liabilities
Interest-bearing loans & borrowings 739.4 949.1
Other payables 0.5 14.9
Derivative financial instruments 12 0.7 14.9
Provisions 72.0 60.2
Deferred tax liabilities 58.4 100.5
Retirement benefit plan deficits 11 137.7 147.0
Total non-current liabilities 1,008.7 1,286.6
Total liabilities 2,122.4 2,140.1
NET ASSETS 1,471.1 1,383.6
CAPITAL & RESERVES
Share capital 28.1 27.3
Share premium 197.9 86.2
Merger reserve 9.4 9.4
Treasury shares (5.9) (5.9)
Capital redemption reserve 0.5 0.5
Foreign currency translation reserve 98.1 191.8
Hedge accounting reserve 0.3 (0.6)
Retained earnings 1,141.4 1,066.4
Shareholders' equity 1,469.8 1,375.1
Non-controlling interests 1.3 8.5
TOTAL EQUITY 1,471.1 1,383.6
The financial statements were approved by the Board of Directors and authorised for issue on 28 February 2018.
Jon Stanton John Heasley
Director Director
Consolidated Cash Flow Statement
for the year ended 31 December 2017
Year ended Period ended
31 December 2017 31 December 2016
Notes £m £m
Cash flows from operating activities 13
Cash generated from operations 220.5 292.6
Additional pension contributions paid (3.0) (2.8)
Exceptional cash items 10 (28.6) (58.1)
Income tax paid (60.5) (15.7)
Net cash generated from operating activities 128.4 216.0
Cash flows from investing activities
Acquisitions of subsidiaries, net of cash acquired 13 (90.1) (10.6)
Investment in joint ventures (1.4) -
Purchases of property, plant & equipment (67.8) (50.5)
Purchases of intangible assets (17.6) (15.4)
Other proceeds from sale of property, plant & equipment and intangible assets 4.6 3.5
Disposals of discontinued operations, net of cash disposed 13 3.5 31.4
Disposals of joint ventures 31.8 -
Exceptional items included in asset disposal programme - 35.7
Interest received 1.5 6.5
Dividends received from joint ventures 8.0 7.3
Net cash (used in) generated from investing activities (127.5) 7.9
Cash flows from financing activities
Purchase of non-controlling interest 8 (37.2) (3.4)
Proceeds from borrowings 964.4 1,328.1
Repayments of borrowings (854.7) (1,420.5)
Settlement of derivative financial instruments 6.6 (3.7)
Interest paid (42.3) (46.3)
Dividends paid to equity holders of the Company 6 (74.2) (45.8)
Issue of shares 90.0 -
Purchase of shares for LTIP & other awards - (0.1)
Net cash generated from (used in) financing activities 52.6 (191.7)
Net increase in cash & cash equivalents 53.5 32.2
Cash & cash equivalents at the beginning of the year 257.0 179.3
Foreign currency translation differences (26.0) 45.5
Cash & cash equivalents at the end of the year 284.5 257.0
Consolidated Statement of Changes in Equity
for the year ended 31 December 2017
Share capital Share premium Merger reserve Treasury shares Capital redemption reserve Foreign currency translation reserve Hedge accounting reserve Retained earnings Attributable to equity Non Total equity
holders of the Company controlling
interests
£m £m £m £m £m £m £m £m £m £m £m
At 1 January 2016 26.8 38.0 9.4 (5.8) 0.5 (41.8) (2.0) 1,166.5 1,191.6 6.2 1,197.8
Profit (loss) for the period - - - - - - - 38.3 38.3 (0.1) 38.2
Losses taken to equity on cash flow hedges - - - - - - (0.7) - (0.7) - (0.7)
Exchange gains on translation of foreign operations - - - - - 374.8 - - 374.8 2.6 377.4
Reclassification of foreign currency translation reserve on discontinued operations - - - - - 0.8 - - 0.8 - 0.8
Exchange losses on net investment hedges - - - - - (142.0) - - (142.0) - (142.0)
Remeasurements on defined benefit plans - - - - - - - (53.0) (53.0) - (53.0)
Reclassification adjustments on cash flow hedges - - - - - - 1.9 - 1.9 - 1.9
Tax relating to other comprehensive income (expense) - - - - - - 0.2 8.6 8.8 - 8.8
Total net comprehensive income (expense) for the period - - - - - 233.6 1.4 (6.1) 228.9 2.5 231.4
Acquisition of non-controlling interest - - - - - - - (3.8) (3.8) (0.2) (4.0)
Issue of shares 0.5 48.2 - - - - - - 48.7 - 48.7
Cost of share-based payments inclusive of tax credit - - - - - - - 4.3 4.3 - 4.3
Dividends - - - - - - - (94.5) (94.5) - (94.5)
Purchase of shares* - - - (0.1) - - - - (0.1) - (0.1)
At 31 December 2016 27.3 86.2 9.4 (5.9) 0.5 191.8 (0.6) 1,066.4 1,375.1 8.5 1,383.6
Profit (loss) for the year - - - - - - - 161.7 161.7 (0.2) 161.5
Gains taken to equity on cash flow hedges - - - - - - 0.4 - 0.4 - 0.4
Exchange losses on translation of foreign operations - - - - - (147.7) - - (147.7) - (147.7)
Exchange gains on net investment hedges - - - - - 54.0 - - 54.0 - 54.0
Remeasurements on defined benefit plans - - - - - - - (5.4) (5.4) - - Part 2: For the preceding part double click ID:nRSb1279Ga
from operating activities 13
Cash generated from operations 220.5 292.6
Additional pension contributions paid (3.0) (2.8)
Exceptional cash items 10 (28.6) (58.1)
Income tax paid (60.5) (15.7)
Net cash generated from operating activities 128.4 216.0
Cash flows from investing activities
Acquisitions of subsidiaries, net of cash acquired 13 (90.1) (10.6)
Investment in joint ventures (1.4) -
Purchases of property, plant & equipment (67.8) (50.5)
Purchases of intangible assets (17.6) (15.4)
Other proceeds from sale of property, plant & equipment and intangible 4.6 3.5
assets
Disposals of discontinued operations, net of cash disposed 13 3.5 31.4
Disposals of joint ventures 31.8 -
Exceptional items included in asset disposal programme - 35.7
Interest received 1.5 6.5
Dividends received from joint ventures 8.0 7.3
Net cash (used in) generated from investing activities (127.5) 7.9
Cash flows from financing activities
Purchase of non-controlling interest 8 (37.2) (3.4)
Proceeds from borrowings 964.4 1,328.1
Repayments of borrowings (854.7) (1,420.5)
Settlement of derivative financial instruments 6.6 (3.7)
Interest paid (42.3) (46.3)
Dividends paid to equity holders of the Company 6 (74.2) (45.8)
Issue of shares 90.0 -
Purchase of shares for LTIP & other awards - (0.1)
Net cash generated from (used in) financing activities 52.6 (191.7)
Net increase in cash & cash equivalents 53.5 32.2
Cash & cash equivalents at the beginning of the year 257.0 179.3
Foreign currency translation differences (26.0) 45.5
Cash & cash equivalents at the end of the year 284.5 257.0
Consolidated Statement of Changes in Equity
for the year ended 31 December 2017
Share capital Share premium Merger reserve Treasury shares Capital redemption reserve Foreign currency translation reserve Hedge accounting reserve Retained earnings Attributable to equity holders of the Company Non controlling interests Total equity
£m £m £m £m £m £m £m £m £m £m £m
At 1 January 2016 26.8 38.0 9.4 (5.8) 0.5 (41.8) (2.0) 1,166.5 1,191.6 6.2 1,197.8
Profit (loss) for the period - - - - - - - 38.3 38.3 (0.1) 38.2
Losses taken to equity on cash flow hedges - - - - - - (0.7) - (0.7) - (0.7)
Exchange gains on translation of foreign operations - - - - - 374.8 - - 374.8 2.6 377.4
Reclassification of foreign currency translation reserve on discontinued - - - - - 0.8 - - 0.8 - 0.8
operations
Exchange losses on net investment hedges - - - - - (142.0) - - (142.0) - (142.0)
Remeasurements on defined benefit plans - - - - - - - (53.0) (53.0) - (53.0)
Reclassification adjustments on cash flow hedges - - - - - - 1.9 - 1.9 - 1.9
Tax relating to other comprehensive income (expense) - - - - - - 0.2 8.6 8.8 - 8.8
Total net comprehensive income (expense) for the period - - - - - 233.6 1.4 (6.1) 228.9 2.5 231.4
Acquisition of non-controlling interest - - - - - - - (3.8) (3.8) (0.2) (4.0)
Issue of shares 0.5 48.2 - - - - - - 48.7 - 48.7
Cost of share-based payments inclusive of tax credit - - - - - - - 4.3 4.3 - 4.3
Dividends - - - - - - - (94.5) (94.5) - (94.5)
Purchase of shares* - - - (0.1) - - - - (0.1) - (0.1)
At 31 December 2016 27.3 86.2 9.4 (5.9) 0.5 191.8 (0.6) 1,066.4 1,375.1 8.5 1,383.6
Profit (loss) for the year - - - - - - - 161.7 161.7 (0.2) 161.5
Gains taken to equity on cash flow hedges - - - - - - 0.4 - 0.4 - 0.4
Exchange losses on translation of foreign operations - - - - - (147.7) - - (147.7) - (147.7)
Exchange gains on net investment hedges - - - - - 54.0 - - 54.0 - 54.0
Remeasurements on defined benefit plans - - - - - - - (5.4) (5.4) - (5.4)
Remeasurements on other benefit plans - - - - - - - (0.8) (0.8) - (0.8)
Reclassification adjustments on cash flow hedges - - - - - - (0.3) - (0.3) - (0.3)
Tax relating to other comprehensive income (expense) - - - - - - 0.8 1.5 2.3 - 2.3
Total net comprehensive (expense) income for the year - - - - - (93.7) 0.9 157.0 64.2 (0.2) 64.0
Acquisition of non-controlling interest - - - - - - - 7.0 7.0 (7.0) -
Issue of shares 0.8 111.7 - - - - - - 112.5 - 112.5
Cost of share-based payments inclusive of tax credit - - - - - - - 7.7 7.7 - 7.7
Dividends - - - - - - - (96.7) (96.7) - (96.7)
At 31 December 2017 28.1 197.9 9.4 (5.9) 0.5 98.1 0.3 1,141.4 1,469.8 1.3 1,471.1
* These shares were purchased on the open market and are held by the Estera
EBT on behalf of the Group.
Notes to the Audited Results
1. Accounting policies
Basis of preparation
The audited results for the year ended 31 December 2017 ('2017') have been
prepared in accordance with International Financial Reporting Standards (IFRS)
as adopted by the European Union and applied in accordance with the provisions
of the Companies Act 2006.
The financial information set out in the audited results does not constitute
the Group's statutory financial statements for the year ended 31 December 2017
within the meaning of section 434 of the Companies Act 2006 and has been
extracted from the full financial statements for the year ended 31 December
2017.
Statutory financial statements for the period ended 31 December 2016 ('2016'),
which received an unqualified audit report, have been delivered to the
Registrar of Companies. The reports of the auditors on the financial
statements for the period ended 31 December 2016 and for the year ended 31
December 2017 were unqualified and did not contain a statement under either
section 498(2) or section 498(3) of the Companies Act 2006. The financial
statements for the year ended 31 December 2017 will be delivered to the
Registrar of Companies and made available to all shareholders in due course.
These financial statements are presented in Sterling. All values are rounded
to the nearest 0.1 million pounds (£m) except where otherwise indicated.
The accounting policies which follow are consistent with those of the previous
period. There are no new standards or interpretations which are considered
to have a material impact on the annual Consolidated Financial Statements of
the Group.
Exceptional items & intangibles amortisation
In order to provide the users of the financial statements with a more relevant
presentation of the Group's underlying performance, on a like for like basis,
profit for each period has been analysed between:
i) profit before exceptional items & intangibles amortisation; and
ii) the effect of exceptional items & intangibles amortisation.
Exceptional items are items of income and expense which, because of the
nature, size and/or infrequency of the events giving rise to them, merit
separate presentation. These specific items are presented on the face of the
Consolidated Income Statement to provide greater clarity and a better
understanding of the impact of these items on the Group's financial
performance. In doing so, it also facilitates greater comparison of the
Group's underlying results with prior periods and assessment of trends in
financial performance. This split is consistent with how underlying business
performance is measured internally.
Exceptional items may include but are not restricted to: profits or losses
arising on disposal or closure of businesses; the cost of significant business
restructuring; significant impairments of intangible or tangible assets;
adjustments to the fair value of acquisition related items such as contingent
consideration and inventory; other items deemed exceptional due to their
significance, size or nature; and the related exceptional taxation.
Intangibles amortisation has been shown separately to provide visibility over
the ongoing impact on the Group's Income Statement of prior and current period
investment activities.
Further analysis of the items included in the column 'Exceptional items &
intangibles amortisation' is provided in note 3 to the financial statements.
Non-GAAP measures
The financial statements are prepared in accordance with International
Financial Reporting Standards (IFRS) as adopted by the European Union and
applied in accordance with the provisions of the Companies Act 2006. In
measuring our performance, the financial measures that we use include those
which have been derived from our reported results in order to eliminate
factors which we believe distort period-on-period comparisons. These are
considered non-GAAP financial measures. This information, along with
comparable GAAP measurements, is useful to investors in providing a basis for
measuring our operational performance. Our management uses these financial
measures, along with the most directly comparable GAAP financial measures, in
evaluating our performance and value creation. Non-GAAP financial measures
should not be considered in isolation from, or as a substitute for, financial
information in compliance with GAAP. Non-GAAP financial measures as reported
by the Group may not be comparable with similarly titled amounts reported by
other companies.
Below we set out our definitions of non-GAAP measures and provide
reconciliations to relevant GAAP measures.
Free cash flow
Free cash flow (FCF) is defined as cash flow from operating activities
adjusted for income taxes, net capital expenditures, net interest payments,
dividends paid, settlement of derivatives, purchase of shares for LTIP and
other awards and pension contributions. FCF reflects an a (5.4)
Remeasurements on other benefit plans - - - - - - - (0.8) (0.8) - (0.8)
Reclassification adjustments on cash flow hedges - - - - - - (0.3) - (0.3) - (0.3)
Tax relating to other comprehensive income (expense) - - - - - - 0.8 1.5 2.3 - 2.3
Total net comprehensive (expense) income for the year - - - - - (93.7) 0.9 157.0 64.2 (0.2) 64.0
Acquisition of non-controlling interest - - - - - - - 7.0 7.0 (7.0) -
Issue of shares 0.8 111.7 - - - - - - 112.5 - 112.5
Cost of share-based payments inclusive of tax credit - - - - - - - 7.7 7.7 - 7.7
Dividends - - - - - - - (96.7) (96.7) - (96.7)
At 31 December 2017 28.1 197.9 9.4 (5.9) 0.5 98.1 0.3 1,141.4 1,469.8 1.3 1,471.1
* These shares were purchased on the open market and are held by the Estera EBT on behalf of the Group.
Notes to the Audited Results
1. Accounting policies
Basis of preparation
The audited results for the year ended 31 December 2017 ('2017') have been prepared in accordance with International
Financial Reporting Standards (IFRS) as adopted by the European Union and applied in accordance with the provisions of the
Companies Act 2006.
The financial information set out in the audited results does not constitute the Group's statutory financial statements for
the year ended 31 December 2017 within the meaning of section 434 of the Companies Act 2006 and has been extracted from the
full financial statements for the year ended 31 December 2017.
Statutory financial statements for the period ended 31 December 2016 ('2016'), which received an unqualified audit report,
have been delivered to the Registrar of Companies. The reports of the auditors on the financial statements for the period
ended 31 December 2016 and for the year ended 31 December 2017 were unqualified and did not contain a statement under
either section 498(2) or section 498(3) of the Companies Act 2006. The financial statements for the year ended 31 December
2017 will be delivered to the Registrar of Companies and made available to all shareholders in due course.
These financial statements are presented in Sterling. All values are rounded to the nearest 0.1 million pounds (£m) except
where otherwise indicated.
The accounting policies which follow are consistent with those of the previous period. There are no new standards or
interpretations which are considered to have a material impact on the annual Consolidated Financial Statements of the
Group.
Exceptional items & intangibles amortisation
In order to provide the users of the financial statements with a more relevant presentation of the Group's underlying
performance, on a like for like basis, profit for each period has been analysed between:
i) profit before exceptional items & intangibles amortisation; and
ii) the effect of exceptional items & intangibles amortisation.
Exceptional items are items of income and expense which, because of the nature, size and/or infrequency of the events
giving rise to them, merit separate presentation. These specific items are presented on the face of the Consolidated
Income Statement to provide greater clarity and a better understanding of the impact of these items on the Group's
financial performance. In doing so, it also facilitates greater comparison of the Group's underlying results with prior
periods and assessment of trends in financial performance. This split is consistent with how underlying business
performance is measured internally.
Exceptional items may include but are not restricted to: profits or losses arising on disposal or closure of businesses;
the cost of significant business restructuring; significant impairments of intangible or tangible assets; adjustments to
the fair value of acquisition related items such as contingent consideration and inventory; other items deemed exceptional
due to their significance, size or nature; and the related exceptional taxation.
Intangibles amortisation has been shown separately to provide visibility over the ongoing impact on the Group's Income
Statement of prior and current period investment activities.
Further analysis of the items included in the column 'Exceptional items & intangibles amortisation' is provided in note 3
to the financial statements.
Non-GAAP measures
The financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and applied in accordance
with the provisions of the Companies Act 2006. In measuring our performance, the financial measures that we use include those which have been derived from our reported
results in order to eliminate factors which we believe distort period-on-period comparisons. These are considered non-GAAP financial measures. This information, along
with comparable GAAP measurements, is useful to investors in providing a basis for measuring our operational performance. Our management uses these financial measures,
along with the most directly comparable GAAP financial measures, in evaluating our performance and value creation. Non-GAAP financial measures should not be considered
in isolation from, or as a substitute for, financial information in compliance with GAAP. Non-GAAP financial measures as reported by the Group may not be comparable with
similarly titled amounts reported by other companies.
Below we set out our definitions of non-GAAP measures and provide reconciliations to relevant GAAP measures.
Free cash flow
Free cash flow (FCF) is defined as cash flow from operating activities adjusted for income taxes, net capital expenditures, net interest payments, dividends paid,
settlement of derivatives, purchase of shares for LTIP and other awards and pension contributions. FCF reflects an additional way of viewing our liquidity that we
believe is useful to investors as it represents cash flows that could be used for repayment of debt or to fund our strategic initiatives, including acquisitions, if any.
The reconciliation of cash flow from operating activities to FCF is as follows.
2017 2016
£m £m
Cash generated from operations 220.5 292.6
Income tax paid (60.5) (15.7)
Net capital expenditure from purchase & disposal of property, plant & equipment and intangibles (80.8) (62.4)
Net interest paid (40.8) (39.8)
Dividends paid to equity holders of the Company (74.2) (45.8)
Dividends received from joint ventures 8.0 7.3
Settlement of derivative financial instruments 6.6 (3.7)
Purchase of shares for LTIP & other awards - (0.1)
Additional pension contributions paid (3.0) (2.8)
(24.2) 129.6
EBITDA
EBITDA is operating profit from continuing operations, before exceptional items, intangibles amortisation and depreciation. EBITDA is used in conjunction with other GAAP
and non-GAAP financial measures to assess our operating performance. A reconciliation of EBITDA to the closest equivalent GAAP measure, operating profit, is provided.
2017 2016
£m £m
Continuing operations
Operating profit 223.1 90.3
Adjusted for:
Exceptional items (note 3) 13.3 73.5
Earnings before interest and tax (EBIT) 236.4 163.8
Intangibles amortisation (note 3) 55.4 50.2
Depreciation of property, plant & equipment 58.2 55.9
EBITDA 350.0 269.9
Net debt
A reconciliation of net debt to cash & short-term deposits, interest bearing loans and borrowings is provided in note 13.
2. Segment information
For management purposes, the Group is organised into three operating divisions: Minerals, Oil & Gas and Flow Control. These
three divisions are organised and managed separately based on the key markets served and each is treated as an operating
segment and a reportable segment under IFRS 8. The operating and reportable segments were determined based on the reports
reviewed by the Chief Executive Officer which are used to make operational decisions.
The Minerals segment is the global leader in the provision of slurry handling equipment and associated aftermarket support
for abrasive high wear applications used in the mining and oil sands markets. The Oil & Gas segment provides products and
service solutions to upstream, production, transportation and related industries. The Flow Control segment designs and
manufactures valves and pumps as well as providing specialist support services to the global power generation, industrial
and oil and gas sectors.
The Chief Executive Officer assesses the performance of the operating segments based on operating profit from continuing
operations before exceptional items (including impairments) and intangibles amortisation ('segment result'). Finance income
and expenditure and associated interest-bearing liabilities and derivative financial instruments are not allocated to
segments as all treasury activity is managed centrally by the Group treasury function. The amounts provided to the Chief
Executive Officer with respect to assets and liabilities are measured in a manner consistent with that of the financial
statements. The assets are allocated based on the operations of the segment and the physical location of the asset. The
liabilities are allocated based on the operations of the segment.
Transfer prices between business segments are set on an arm's length basis, in a manner similar to transactions with third
parties.
The segment information for the reportable segments for 2017 and 2016 is disclosed below.
Minerals Oil & Gas Flow Control Total continuing operations
2017 2016 2017 2016 2017 2016 2017 2016
£m £m £m £m £m £m £m £m
Revenue
Sales to external customers 1,286.7 1,112.0 703.8 401.4 365.4 331.5 2,355.9 1,844.9
Inter-segment sales 3.9 6.1 0.7 12.8 15.6 14.7 20.2 33.6
Segment revenue 1,290.6 1,118.1 704.5 414.2 381.0 346.2 2,376.1 1,878.5
Eliminations (20.2) (33.6)
2,355.9 1,844.9
Sales to external customers - 2016 at 2017 average exchange rates
Sales to external customers 1,286.7 1,200.5 703.8 421.4 365.4 350.3 2,355.9 1,972.2
Segment result
Segment result before share of results of joint ventures 227.3 217.0 80.6 (16.2) (2.8) 30.1 305.1 230.9
Share of results of joint ventures - - 10.9 7.2 - - 10.9 7.2
Segment result 227.3 217.0 91.5 (9.0) (2.8) 30.1 316.0 238.1
Unallocated expenses (24.2) (24.1)
Operating profit before exceptional items & intangibles amortisation 291.8 214.0
Total exceptional items & intangibles amortisation (69.5) (127.5)
Net finance costs before exceptional items (41.7) (43.7)
Profit before tax from continuing operations 180.6 42.8
Segment result - 2016 at 2017 average exchange rates
Segment result before share of results of joint ventures 227.3 234.2 80.6 (17.1) (2.8) 32.2 305.1 249.3
Share of results of joint ventures - - 10.9 7.6 - - 10.9 7.6
Segment result 227.3 234.2 91.5 (9.5) (2.8) 32.2 316.0 256.9
Unallocated expenses (24.2) (24.4)
Operating profit before exceptional items & intangibles amortisation 291.8 232.5
Revenues do not exceed 10% of Group revenue for any single external customer.
2. Segment information (continued)
Minerals Oil & Gas Flow Control Total Group
2017 2016 2017 2016 2017 2016 2017 2016
£m £m £m £m £m £m £m £m
Assets & liabilities
Intangible assets 603.0 652.4 762.3 815.2 137.5 137.5 1,502.8 1,605.1
Property, plant & equipment 221.3 226.1 89.3 90.9 72.1 75.4 382.7 392.4
Working capital assets 623.9 523.0 379.1 290.2 218.8 248.0 1,221.8 1,061.2
1,448.2 1,401.5 1,230.7 1,196.3 428.4 460.9 3,107.3 3,058.7
Investments in joint ventures - - 19.2 40.5 - - 19.2 40.5
Segment assets 1,448.2 1,401.5 1,249.9 1,236.8 428.4 460.9 3,126.5 3,099.2
Unallocated assets 467.0 424.5
Total assets 3,593.5 3,523.7
Working capital liabilities 352.3 311.6 182.2 150.6 122.3 169.4 656.8 631.6
Unallocated liabilities 1,465.6 1,508.5
Total liabilities 2,122.4 2,140.1
Other segment information - total Group
Segment additions to non-current assets 43.5 33.0 25.0 10.3 6.2 15.6 74.7 58.9
Unallocated additions to non-current assets 11.0 18.9
Total additions to non-current assets 85.7 77.8
Other segment information - total Group
Segment depreciation & amortisation 45.0 42.2 51.7 49.1 11.6 12.1 108.3 103.4
Impairment of property, plant & equipment 0.1 2.3 3.6 4.1 0.3 2.0 4.0 8.4
Impairment of intangible assets - 0.4 - - - - - 0.4
Discontinued operations - 0.4
Unallocated depreciation & amortisation 5.3 2.7
Total depreciation, amortisation & impairment 117.6 115.3
Unallocated assets primarily comprise
- More to follow, for following part double click ID:nRSb1279Gc dditional way of
viewing our liquidity that we believe is useful to investors as it represents
cash flows that could be used for repayment of debt or to fund our strategic
initiatives, including acquisitions, if any. The reconciliation of cash flow
from operating activities to FCF is as follows.
2017 2016
£m £m
Cash generated from operations 220.5 292.6
Income tax paid (60.5) (15.7)
Net capital expenditure from purchase & disposal of property, plant & (80.8) (62.4)
equipment and intangibles
Net interest paid (40.8) (39.8)
Dividends paid to equity holders of the Company (74.2) (45.8)
Dividends received from joint ventures 8.0 7.3
Settlement of derivative financial instruments 6.6 (3.7)
Purchase of shares for LTIP & other awards - (0.1)
Additional pension contributions paid (3.0) (2.8)
(24.2) 129.6
EBITDA
EBITDA is operating profit from continuing operations, before exceptional
items, intangibles amortisation and depreciation. EBITDA is used in
conjunction with other GAAP and non-GAAP financial measures to assess our
operating performance. A reconciliation of EBITDA to the closest equivalent
GAAP measure, operating profit, is provided.
2017 2016
£m £m
Continuing operations
Operating profit 223.1 90.3
Adjusted for:
Exceptional items (note 3) 13.3 73.5
Earnings before interest and tax (EBIT) 236.4 163.8
Intangibles amortisation (note 3) 55.4 50.2
Depreciation of property, plant & equipment 58.2 55.9
EBITDA 350.0 269.9
Net debt
A reconciliation of net debt to cash & short-term deposits, interest
bearing loans and borrowings is provided in note 13.
2. Segment information
For management purposes, the Group is organised into three operating
divisions: Minerals, Oil & Gas and Flow Control. These three divisions are
organised and managed separately based on the key markets served and each is
treated as an operating segment and a reportable segment under IFRS 8. The
operating and reportable segments were determined based on the reports
reviewed by the Chief Executive Officer which are used to make operational
decisions.
The Minerals segment is the global leader in the provision of slurry handling
equipment and associated aftermarket support for abrasive high wear
applications used in the mining and oil sands markets. The Oil & Gas
segment provides products and service solutions to upstream, production,
transportation and related industries. The Flow Control segment designs and
manufactures valves and pumps as well as providing specialist support services
to the global power generation, industrial and oil and gas sectors.
The Chief Executive Officer assesses the performance of the operating segments
based on operating profit from continuing operations before exceptional items
(including impairments) and intangibles amortisation ('segment result').
Finance income and expenditure and associated interest-bearing liabilities and
derivative financial instruments are not allocated to segments as all treasury
activity is managed centrally by the Group treasury function. The amounts
provided to the Chief Executive Officer with respect to assets and liabilities
are measured in a manner consistent with that of the financial statements. The
assets are allocated based on the operations of the segment and the physical
location of the asset. The liabilities are allocated based on the operations
of the segment.
Transfer prices between business segments are set on an arm's length basis, in
a manner similar to transactions with third parties.
The segment information for the reportable segments for 2017 and 2016 is
disclosed below.
Minerals Oil & Gas Flow Control Total continuing operations
2017 2016 2017 2016 2017 2016 2017 2016
£m £m £m £m £m £m £m £m
Revenue
Sales to external customers 1,286.7 1,112.0 703.8 401.4 365.4 331.5 2,355.9 1,844.9
Inter-segment sales 3.9 6.1 0.7 12.8 15.6 14.7 20.2 33.6
Segment revenue 1,290.6 1,118.1 704.5 414.2 381.0 346.2 2,376.1 1,878.5
Eliminations (20.2) (33.6)
2,355.9 1,844.9
Sales to external customers - 2016 at 2017 average exchange rates
Sales to external customers 1,286.7 1,200.5 703.8 421.4 365.4 350.3 2,355.9 1,972.2
Segment result
Segment result before share of results of joint ventures 227.3 217.0 80.6 (16.2) (2.8) 30.1 305.1 230.9
Share of results of joint ventures - - 10.9 7.2 - - 10.9 7.2
Segment result 227.3 217.0 91.5 (9.0) (2.8) 30.1 316.0 238.1
Unallocated expenses (24.2) (24.1)
Operating profit before exceptional items & intangibles amortisation 291.8 214.0
Total exceptional items & intangibles amortisation (69.5) (127.5)
Net finance costs before exceptional items (41.7) (43.7)
Profit before tax from continuing operations 180.6 42.8
Segment result - 2016 at 2017 average exchange rates
Segment result before share of results of joint ventures 227.3 234.2 80.6 (17.1) (2.8) 32.2 305.1 249.3
Share of results of joint ventures - - 10.9 7.6 - - 10.9 7.6
Segment result 227.3 234.2 91.5 (9.5) (2.8) 32.2 316.0 256.9
Unallocated expenses (24.2) (24.4)
Operating profit before exceptional items & intangibles amortisation 291.8 232.5
Revenues do not exceed 10% of Group revenue for any single external customer.
2. Segment information (continued)
Minerals Oil & Gas Flow Control Total Group
2017 2016 2017 2016 2017 2016 2017 2016
£m £m £m £m £m £m £m £m
Assets & liabilities
Intangible assets 603.0 652.4 762.3 815.2 137.5 137.5 1,502.8 1,605.1
Property, plant & equipment 221.3 226.1 89.3 90.9 72.1 75.4 382.7 392.4
Working capital assets 623.9 523.0 379.1 290.2 218.8 248.0 1,221.8 1,061.2
1,448.2 1,401.5 1,230.7 1,196.3 428.4 460.9 3,107.3 3,058.7
Investments in joint ventures - - 19.2 40.5 - - 19.2 40.5
Segment assets 1,448.2 1,401.5 1,249.9 1,236.8 428.4 460.9 3,126.5 3,099.2
Unallocated assets 467.0 424.5
Total assets 3,593.5 3,523.7
Working capital liabilities 352.3 311.6 182.2 150.6 122.3 169.4 656.8 631.6
Unallocated liabilities 1,465.6 1,508.5
Total liabilities 2,122.4 2,140.1
Other segment information - total Group
Segment additions to non-current assets 43.5 33.0 25.0 10.3 6.2 15.6 74.7 58.9
Unallocated additions to non-current assets 11.0 18.9
Total additions to non-current assets 85.7 77.8
Other segment information - total Group
Segment depreciation & amortisation 45.0 42.2 51.7 49.1 11.6 12.1 108.3 103.4
Impairment of property, plant & equipment 0.1 2.3 3.6 4.1 0.3 2.0 4.0 8.4
Impairment of intangible assets - 0.4 - - - - - 0.4
Discontinued operations - 0.4
Unallocated depreciation & amortisation 5.3 2.7
Total depreciation, amortisation & impairment 117.6 115.3
Unallocated assets primarily comprise cash and short-term deposits, derivative
financial instruments, income tax receivable, deferred tax assets and
retirement benefit surpluses as well as those assets which are used for
general head office purposes. Unallocated liabilities primarily comprise
interest-bearing loans and borrowings, derivative financial instruments,
income tax payable, provisions, deferred tax liabilities and retirement
benefit deficits as well as liabilities relating to general head office
activities. Segment additions to non-current assets do not include those
additions which have arisen from business combinations (note 8).
2. Segment information (continued)
Geographical information
Geographical information in respect of revenue and non-current assets for 2017
and 2016 is disclosed below. Revenues are allocated based on the location to
which the product is shipped. Assets are allocated based on the location of
the assets and operations. Non-current assets consist of property, plant &
equipment, intangible assets and investments in joint ventures.
UK US Canada Europe & FSU Asia Pacific Australia South America Middle East & Africa Total
Year ended 31 December 2017 £m £m £m £m £m £m £m £m £m
Revenue from continuing operations
Sales to external customers 72.5 712.7 239.9 179.7 316.0 193.8 310.7 330.6 2,355.9
Non-current assets 345.4 723.0 49.0 171.2 333.5 155.7 65.1 118.5 1,961.4
UK US Canada Europe & FSU Asia Pacific Australia South America Middle East & Africa Total
Period ended 31 December 2016 £m £m £m £m £m £m £m £m £m
Revenue from continuing operations
Sales to external customers 74.9 474.5 180.8 153.9 257.7 178.3 261.2 263.6 1,844.9
Non-current assets 366.5 847.7 44.1 168.1 290.1 157.4 63.8 133.6 2,071.3
The following disclosures are given in relation to continuing operations.
2017 2016
£m £m
An analysis of the Group's revenue is as follows
Original equipment 666.9 523.2
Aftermarket parts 1,280.5 982.8
Sales of goods 1,947.4 1,506.0
Provision of services 350.4 282.1
Construction contracts 58.1 56.8
Revenue 2,355.9 1,844.9
3. Exceptional items & intangibles amortisation
2017 2016
£m £m
Recognised in arriving at operating profit from continuing operations
Intangibles amortisation (55.4) (50.2)
Exceptional item - intangibles impairment - (0.4)
Exceptional item - restructuring and rationalisation charges (12.5) (63.8)
Exceptional item - China operations - (17.0)
Exceptional item - gain on sale and leaseback of properties - 5.1
Exceptional item - legal claims (2.1) (1.1)
Exceptional item - gain on sale of EPI joint venture 10.4 -
Exceptional item - fair value adjustment to contingent consideration liability (9.1) 3.7
(68.7) (123.7)
Recognised in finance costs
Exceptional item - unwind in respect of contingent consideration liability (0.8) (3.8)
Restructuring and rationalisation charges represent the committed costs of
programmes to right size operations and discontinue certain activities. The
restructuring and rationalisation exceptional cost of £12.5m comprises
£13.4m of restructuring costs for programmes commenced in 2016 offset by the
release of unutilised restructuring provisions. These relate to headcount
reduction and service centre closures and comprise £4.3m net cash
restructuring costs, £4.8m inventory write down and a net £3.4m relating to
plant & equipment.
An exceptional gain of £10.4m has been recognised on the sale of the 49%
stake in the Energy Products LLC (EPI) joint venture sold in November 2017.
An exceptional cost of £2.1m relates to the continuation of a prior period
legal claim. A fair value adjustment to contingent consideration liability of
£9.6m related to the acquisition of the remaining 40% of Weir International,
offset by a £0.5m credit following the settlement of Delta Industrial Valves
deferred consideration and £0.8m unwind of contingent consideration liability
for Weir International.
4. Income tax expense
2017 2016
£m £m
Group - UK 2.3 (1.6)
Group - Overseas (21.4) 2.0
Total income tax (expense) credit in the Consolidated Income Statement (19.1) 0.4
The total income tax credit (expense) is disclosed in the Consolidated Income
Statement as follows.
Tax (expense) credit
- continuing operations before exceptional items & intangibles (59.7) (38.4)
amortisation
- exceptional items 22.9 21.0
- intangibles amortisation and impairment 17.7 17.8
Total income tax (expense) credit in the Consolidated Income Statement (19.1) 0.4
The total income tax expense included in the Group's share of results of joint
ventures is as follows.
Joint ventures (1.0) (1.6)
The United States Tax Cuts and Jobs Act was signed on 22 December 2017 and
included a broad range of tax reform including a reduction in the Federal rate
of corporate income tax from 35% to 21% (effective 1 January 2018) as well as
significant changes to business deductions and other international tax
provisions including changes to the rules governing interest deductibility.
US tax reform gives rise to a transitional one-off non-cash tax credit of
£24.0m included within exceptional items and primarily due to the revaluation
of the Group's aggregate US deferred tax assets and deferred tax liabilities
following the reduction in the US Federal rate from 35% to 21%.
5. Earnings per share
Basic earnings per share amounts are calculated by dividing net profit for the
year attributable to equity holders of the Company by the weighted average
number of ordinary shares outstanding during the year. Diluted earnings per
share is calculated by dividing the net profit attributable to equity holders
of the Company by the weighted average number of ordinary shares outstanding
during the year, adjusted for the effect of dilutive share awards.
The following reflects the earnings and share data used in the calculation of
earnings per share.
2017 2016
Profit attributable to equity holders of the Company
Total operations* (£m) 161.7 38.3
Continuing operations* (£m) 161.7 43.3
Continuing operations before exceptional items & intangibles 190.6 132.0
amortisation* (£m)
Weighted average share capital
Basic earnings per share (number of shares, million) 219.9 215.6
Diluted earnings per share (number of shares, million) 221.3 216.9
The difference between the weighted average share capital for the purposes of
the basic and the diluted earnings per share calculations is analysed as
follows.
2017 2016
Shares Shares
Million Million
Weighted average number of ordinary shares for basic earnings per share 219.9 215.6
Effect of dilution: LTIP awards 1.4 1.3
Adjusted weighted average number of ordinary shares for diluted earnings per 221.3 216.9
share
The profit attributable to equity holders of the Company used in the
calculation of both basic and diluted earnings per share from continuing
operations before exceptional items and intangibles amortisation is calculated
as follows.
2017 2016
£m £m
Net profit attributable to equity holders from continuing operations* 161.7 43.3
Exceptional items & intangibles amortisation net of tax 28.9 88.7
Net profit attributable to equity holders from continuing operations before 190.6 132.0
exceptional items & intangibles amortisation
2017 2016
pence pence
Basic earnings per share:
Total operations* 73.5 17.8
Continuing operations* 73.5 20.1
Continuing operations before exceptional items & intangibles 86.7 61.2
amortisation*
Diluted earnings per share:
Total operations* 73.1 17.7
Continuing operations* 73.1 20.0
Continuing operations before exceptional items & intangibles 86.1 60.8
amortisation*
*Adjusted for a loss of £0.2m (2016: £0.1m) in respect of non-controlling
interests.
There have been no share options (2016: nil) exercised between the reporting
date and the date of signing of these financial statements.
6. Dividends paid & proposed
2017 2016
£m £m
Declared & paid during the year
Equity dividends on ordinary shares
Final dividend for 2016: 29.0p (2015: 29.0p) 63.1 62.0
Interim dividend for 2017: 15.0p (2016: 15.0p) 33.6 32.5
96.7 94.5
Proposed for approval by shareholders at the Annual General Meeting
Final dividend for 2017: 29.0p (2016: 29.0p) 65.0 63.1
In 2016 and 2017, shareholders on record were provided the opportunity to
receive dividends in the form of new fully paid ordinary shares through The
Weir Group PLC Scrip Dividend Scheme. Participation in the scheme resulted in
a final dividend for 2016 of £6.4m share issue and a cash dividend of £56.7m
(final dividend for 2015: £29.6m share issue; £32.4m cash). The interim
dividend for 2017 was split £16.1m share issue and £17.5m cash dividend
(interim dividend for 2016: £19.1m share issue; £13.4m cash).
The proposed dividend is based on the number of shares in issue, excluding
treasury shares held, at the date the financial statements were approved and
authorised for issue. The final dividend may differ due to increases or
decreases in the number of shares in issue between the date of approval of
this Annual Report and Financial Statements and the record date for the final
dividend.
Dividends have been maintained in the year with dividend cover of 1.97 times
(2016: 1.39 times) as explained in the Group Financial Highlights.
7. Property, plant & equipment & intangible assets
2017 2016
£m £m
Additions of property, plant & equipment & intangible assets
- land & buildings 9.3 19.2
- plant & equipment 58.0 35.1
- intangible assets 18.4 23.5
85.7 77.8
The above additions relate to the normal course of business and do not include
any additions made by way of business combinations.
8. Business combinations
On 27 July 2017, the Group completed the acquisition of KOP Surface Products,
a South Asian provider of advanced pressure control wellhead technologies,
systems and services for a consideration of $118.0m less cash acquired of
$3.9m. The acquisition was funded by the issue of shares totalling £90.0m.
The provisional fair values, which are subject to finalisation during the
first half of 2018, are disclosed in the table below.
There are certain intangible assets included in the £51.6m of goodwill
recognised that cannot be individually separated and reliably measured due to
their nature. These items include anticipated business growth, synergies and
an assembled workforce.
KOP provisional fair values
2017
£m
Property, plant & equipment 7.9
Inventories 3.4
Intangible assets
- customer relationships 5.4
- brand name 4.4
- intellectual property 12.4
Trade & other receivables 10.4
Cash & cash equivalents 3.2
Trade & other payables (7.0)
Provisions (4.1)
Current tax 1.4
Deferred tax 3.5
Fair value of net assets 40.9
Goodwill arising on acquisition 51.6
Total consideration 92.5
The total net cash outflow on current year acquisitions was as follows
- cash paid (92.5)
- cash & cash equivalents acquired 3.2
Total cash outflow (note 13) (89.3)
The gross amount and fair value of KOP trade receivables amounts to £10.4m.
It is expected that virtually all the contractual amounts will be collected.
KOP contributed £13.3m to revenue and an operating loss of £4.3m (including
exceptional items and intangibles amortisation) in the period from acquisition
to 31 December 2017. If the acquisition had occurred at the start of 2017
the revenue and profit for the year from acquired operations after exceptional
items and intangibles amortisation, would not have been materially different
from the results disclosed in the Consolidated Income Statement. Acquisition
costs totalled £1.5m in the year.
8. Business combinations (continued)
Contingent consideration
Asset Liability
2017 2016 2017 2016
£m £m £m £m
Opening balance 3.9 - (31.0) (35.9)
Liability arising on business combinations - - - (0.6)
Asset arising on business disposal 0.4 4.6 - -
Fair value changes in profit or loss (note 3) (0.1) (0.4) (9.1) 3.7
Contingent consideration (received) paid (note 13) (3.5) (0.6) 38.0 10.6
Unwind of discount (note 3) - - (0.8) (3.8)
Exchange movements in the year (0.3) 0.3 (0.5) (5.0)
Closing balance 0.4 3.9 (3.4) (31.0)
Any contingent consideration is recognised at the date of acquisition or
disposal of a subsidiary.
i) Contingent consideration receivable
The disposal of American Hydro Corporation in 2016 included a final escrow
payment of £3.6m due for settlement in 2017. This balance was settled during
the year with £3.5m cash received and a £0.1m adjustment recorded in
discontinued operations.
An escrow receivable of £0.4m was booked in the year relating to the sale of
the joint venture entity, Energy Products LLC (EPI). The balance is to be
received early 2018.
ii) Contingent consideration payable
The deferred consideration payable in relation to the acquisition of Weir
International in 2011 has been settled in the year following an agreement
being reached to complete the purchase of the remaining minority interest. In
2017 a fair value adjustment of £9.6m and an unwind of £0.8m was recorded
with payment of the closing deferred consideration in December 2017 to
complete the purchase of the remaining minority interest for payment proceeds
of £36.6m.
The remaining deferred consideration of £1.3m for the 2015 acquisition of
Delta Valves was settled in the year. Based on final negotiations, £0.8m was
paid in cash with the remainder of the balance written off as a fair value
adjustment. The deferred consideration of £0.6m relating to the 2016 purchase
of the remaining shareholding of Shengli Oilfield Weir Highland Pump Company
Ltd (Shengli) was paid during the year.
There is contingent consideration payable of £3.4m remaining in relation to
the 2014 Weir Trio acquisition. This relates to working capital balances and
is now expected to be finalised in 2018. A reconciliation of fair value
measurement of the contingent consideration asset and liability is provided
above.
9. Interest-bearing loans & borrowings
At 31 December 2017, a total of £293.4m equivalent (2016: £142.1m
equivalent) was outstanding under the Group's US$1bn commercial paper
programme.
At 31 December 2017, US$nil (2016: US$40.0m) was drawn under the revolving
credit facility. The US$800m multi-currency revolving credit facility matures
in two tranches between September 2020 and September 2021. Total unamortised
issue costs at 31 December 2017 were £1.5m (2016: £2.5m).
10. Provisions
Warranties & onerous sales contracts Asbestos-related Employee-related Exceptional Other Total
rationalisation
£m £m £m £m £m £m
At 31 December 2016 23.5 52.7 16.7 47.1 3.4 143.4
Additions 21.8 15.6 4.1 7.3 3.6 52.4
Acquisitions 1.8 - 2.0 - 0.3 4.1
Utilised (17.4) (6.4) (3.4) (32.8) (1.7) (61.7)
Unwind - 0.7 - - - 0.7
Unutilised (4.3) - (0.3) (0.9) (0.3) (5.8)
Transfers 5.2 - - (5.2) - -
Exchange adjustment (1.0) (4.6) (0.6) (1.9) (0.4) (8.5)
At 31 December 2017 29.6 58.0 18.5 13.6 4.9 124.6
Current 2017 21.2 10.7 5.3 10.7 4.7 52.6
Non-current 2017 8.4 47.3 13.2 2.9 0.2 72.0
At 31 December 2017 29.6 58.0 18.5 13.6 4.9 124.6
Current 2016 18.2 13.6 6.2 42.5 2.7 83.2
Non-current 2016 5.3 39.1 10.5 4.6 0.7 60.2
At 31 December 2016 23.5 52.7 16.7 47.1 3.4 143.4
Warranties & onerous sales contracts
Provision has been made in respect of actual warranty and contract penalty
claims on goods sold and services provided and allowance has been made for
potential warranty claims based on past experience for goods and services sold
with a warranty guarantee. It is expected that all costs related to such
claims will have been incurred within five years of the balance sheet date.
Provision has been made in respect of sales contracts entered into for the
sale of goods in the normal course of business where the unavoidable costs of
meeting the obligations under the contracts exceed the economic benefits
expected to be received from the contracts. Provision is made immediately when
it becomes apparent that expected costs will exceed the expected benefits of
the contract. It is expected that the majority of these costs will be incurred
within one year of the balance sheet date.
Asbestos-related claims
Certain of the Group's US-based subsidiaries are co-defendants in lawsuits
pending in the United States in which plaintiffs are claiming damages arising
from alleged exposure to products previously manufactured which contained
asbestos. The Group has comprehensive insurance cover for cases of this nature
with all claims directly managed by the Group's insurers who also meet
associated defence costs. The insurers and their legal advisers agree and
execute the defence strategy between them. There are currently no related cash
flows to or from the Group, and we expect this to continue for the foreseeable
future.
10. Provisions (continued)
There remains inherent uncertainty associated with estimating future costs in
respect of asbestos-related diseases. Actuarial estimates of future indemnity
and defence costs associated with asbestos-related diseases are subject to
significantly greater uncertainty than actuarial estimates for other types of
exposures. This uncertainty results from factors that are unique to the
asbestos claims litigation and settlement process including but not limited
to:
i) The possibility of future state or federal
legislation applying to claims for asbestos-related diseases;
ii) The ability of the plaintiff's bar to develop and
sustain new legal theory and/or develop new populations of claimants;
iii) Changes in focus of the plaintiff's bar;
iv) Changes in the Group's defence strategy; and
v) Changes in the financial condition of other
co-defendants in suits naming the Group and affiliated businesses.
A review of both the Group's expected liability for US asbestos-related
diseases and the adequacy of the Group's insurance policies to meet future
settlement and defence costs was completed in conjunction with external
advisers. The exercise was originally completed in 2014 and has been repeated
in 2017 as part of our planned triennial actuarial update. This review
estimated future claims experience based on an industry standard
epidemiological decay model, and Weir's claims settlement history. Due to the
inherent uncertainty resulting from the changing nature of the US litigation
environment as outlined above, and in conjunction with the actuarial review,
the Directors consider 10 years (2016: 10 years) of projected claims to
provide a reliable estimate of the future liability. A provision of £53.3m
represents the Directors' best estimate of the future liability, although
these estimates and the period over which they are assessed will continue to
be refined as the claims history develops. Confirmation was also received
from external advisers that the insurance asset remains sufficient to match
the Directors' best estimate of the future liability and therefore a
corresponding asset continues to be recognised for insurance proceeds.
There can be no guarantee that the assumptions used to estimate the provision
will result in an accurate prediction of the actual costs that may be
incurred. Sensitivity analysis has been conducted which involved:
i) Increasing/decreasing the number of projected
future settled claims and estimated settlement value by 10%; or
ii) Increasing/decreasing the basis of provision by 2
years.
Application of these sensitivities would not lead to a material change in the
provision.
In the UK, there are outstanding asbestos-related claims which are not the
subject of insurance cover. The extent of the UK asbestos exposure involves a
series of legacy employers liability claims which all relate to former UK
operations and employment
- More to follow, for following part double click ID:nRSb1279GcRecent news on Weir
See all newsREG - Weir Group PLC - Holding(s) in Company
AnnouncementREG - Weir Group PLC - Holding(s) in Company
AnnouncementRCS - Weir Group PLC - Weir receives 'A' score from CDP
AnnouncementRCS - Weir Group PLC - Weir and Olayan announce key milestone
AnnouncementREG - Weir Group PLC - Directorate change
Announcement