REG - Weir Group PLC - Final Results <Origin Href="QuoteRef">WEIR.L</Origin> - Part 3
22/02/2017 07:06
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33.4
Segment assets 1,401.5 1,176.5 1,236.8 1,130.3 460.9 437.3 3,099.2 2,744.1
Discontinued operations - 37.3
Unallocated assets 424.5 290.5
Total assets 3,523.7 3,071.9
Working capital liabilities 311.6 254.8 150.6 124.3 169.4 181.5 631.6 560.6
Discontinued operations - 7.9
Unallocated liabilities 1,508.5 1,305.6
Total liabilities 2,140.1 1,874.1
Other segment information - total Group
Segment additions to non-current assets 33.0 36.2 10.3 23.7 15.6 18.7 58.9 78.6
Discontinued operations - 1.1
Unallocated additions to non-current assets 18.9 10.2
Total additions to non-current assets 77.8 89.9
Other segment information - total Group
Segment depreciation & amortisation 42.2 42.9 49.1 55.7 12.1 12.2 103.4 110.8
Impairment of property, plant & equipment 2.3 2.9 4.1 32.6 2.0 0.7 8.4 36.2
Impairment of intangible assets 0.4 - - 225.5 - - 0.4 225.5
Discontinued operations 0.4 28.0
Unallocated depreciation & amortisation 2.7 3.0
Total depreciation, amortisation & impairment 115.3 403.5
Unallocated assets primarily comprise cash and short-term deposits, derivative financial instruments, income tax receivable
and 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.
2. Segment information (continued)
Geographical information
Geographical information in respect of revenue and non-current assets for 2016 and 2015 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 USA 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
Period ended 1 January 2016 (Restated note 1) UK USA Canada Europe & FSU Asia Pacific Australia South America Middle East & Africa Total
£m £m £m £m £m £m £m £m £m
Revenue from continuing operations
Sales to external customers 93.5 541.4 181.6 137.6 247.2 146.6 244.1 287.8 1,879.8
Non-current assets 178.8 895.8 48.5 135.0 269.9 155.2 44.6 105.7 1,833.5
The following disclosures are given in relation to continuing operations.
Restated(note 1)
2016 2015
£m £m
An analysis of the Group's revenue is as follows
Original equipment 523.2 526.6
Aftermarket parts 982.8 939.5
Sales of goods 1,506.0 1,466.1
Aftermarket services 282.1 366.4
Revenue from construction contracts 56.8 47.3
Revenue 1,844.9 1,879.8
3. Exceptional items & intangibles amortisation
Restated(note 1)
2016 2015
£m £m
Recognised in arriving at operating profit (loss) from continuing operations
Intangibles amortisation (50.2) (51.8)
Exceptional item - intangibles impairment (0.4) (225.5)
Exceptional item - restructuring and rationalisation charges (63.8) (116.4)
Exceptional item - China operations (17.0) -
Exceptional item - gain on sale and leaseback of properties 5.1 -
Exceptional item - legal claims (1.1) -
Exceptional item - charging of fair value inventory uplift - (2.4)
Exceptional item - release of expired indemnity provisions for LGE Process disposal - 3.8
Exceptional item - fair value adjustment to contingent consideration liability 3.7 1.7
(123.7) (390.6)
Recognised in finance costs
Exceptional item - unwind in respect of contingent consideration liability (3.8) (2.4)
Restructuring and rationalisation charges represent the committed cost of 2016 programmes to right size operations and
realign certain activities in light of the prolonged downturn across the Group's major end markets. Actions included
headcount reductions, rationalisation of product lines and service centre closures, with the main impact being on Minerals
and Oil & Gas. The total continuing operations exceptional cost of £63.8m comprises £48.7m of cash restructuring costs, an
impairment charge of £4.3m relating to inventory, £3.1m relating to receivables and £7.7m in relation to plant & equipment.
The cash outflow in respect of restructuring programmes in the period totals £56.7m with £38.6m relating to 2016 and the
remainder to costs incurred in prior years.
A number of warranty, associated inventory and contract liabilities and other unprovided liabilities were identified in our
China business during the period primarily relating to Trio which was acquired for $220m in 2014. The liabilities which
primarily result from poor product performance and inventory management over the periods before and after acquisition total
£17.0m. Of this total £9.1m is likely to result in a cash outflow, of which £0.3m was settled in the period, with the
balance relating to asset write downs. Consideration has been given to IAS 8 'Accounting Policies, Changes in Accounting
Estimates and Errors' with no prior year restatement required as a consequence of the identified liabilities. Local
management changes and engineering enhancements to legacy products have been completed and the business remains an
important part of the Minerals strategy going forward.
An exceptional gain of £5.1m has been recognised on the sale of three North American properties disposed and leased back
under the 2016 asset disposal programme.
The other exceptional items in the period relate to a fair value adjustment of £3.7m, mainly for Delta Valves and Weir
International, £3.8m unwind to contingent consideration liability, being Weir International, £0.4m impairment of intangible
assets related to product development and £1.1m of costs associated with the finalisation of prior period legal claims,
with the cost being a cash outflow in the year.
Exceptional costs arising on discontinued operations are summarised in note 5.
4. Income tax expense
Restated
(note 1)
2016 2015
£m £m
Group - UK (1.6) (6.5)
Group - Overseas 2.0 24.2
Total income tax credit (expense) in the Consolidated Income Statement 0.4 17.7
The total income tax credit (expense) is disclosed in the Consolidated Income Statement as follows.
Tax (expense) credit - continuing operations before exceptional items & intangibles amortisation (38.4) (52.3)
- exceptional items 21.0 32.2
- intangibles amortisation and impairment 17.8 37.8
Total income tax credit in the Consolidated Income Statement 0.4 17.7
The total income tax expense included in the Group's share of results of joint ventures is as follows.
Joint ventures (1.6) (1.6)
5. Discontinued operations
On 24 February 2016, the Group announced its
intention to sell its non-core renewable
assets within the Flow Control division:
principally Ynfiniti Engineering Services SL
and American Hydro Corporation. The Group
initiated an active programme to sell these
businesses and the associated assets and
liabilities were consequently accounted for as
held for sale.
The Group disposed of Ynfiniti Engineering
Services SL (31 May 2016), American Hydro
Corporation and the trade and assets of the
Montreal business of Weir Canada Inc. (30 June
2016) for a combined consideration of £38.4m
of which £3.6m will be held in escrow for one
year. In addition, there is a maximum
contingent consideration of £1.9m and based on
expectations at the date of disposal £0.8m was
recognised, of which £0.6m was subsequently
received during the year, with the remainder
being written off. The results of these
businesses are presented in the financial
statements as discontinued operations.
Financial information relating to the
discontinued operations for the period to the
date of disposal is set out in the table
below. Comparative figures have been restated
accordingly. The exceptional items and
intangibles amortisation recognised in the 52
weeks ended 1 January 2016 relate to
impairment of goodwill of £25.9m and
intangibles amortisation of £0.7m.
Exceptional items and intangibles amortisation
in the current period relate to intangibles
amortisation of £0.1m and a charge of £4.0m
for reassessment of liabilities related to
previous disposals. There were no disposals
of core businesses during the prior period.
Financial performance and cash flow
information for discontinued operations
Period ended 31 December 2016 Period ended 1 January 2016
Before exceptional items & intangibles amortisation Exceptional items & intangibles amortisation Total Before exceptional items & intangibles amortisation Exceptionalitems & intangibles amortisation Total
£m £m £m £m £m £m
Discontinued operations
Revenue 19.3 - 19.3 37.9 - 37.9
Discontinued operations
Operating profit (loss) 0.3 (4.1) (3.8) 1.4 (26.6) (25.2)
Finance costs - - - (0.3) - (0.3)
Profit (loss) before tax from discontinued 0.3 (4.1) (3.8) 1.1 (26.6) (25.5)
operations
Tax credit (expense) 0.8 0.8 1.6 (0.2) 3.3 3.1
Profit (loss) after tax from discontinued 1.1 (3.3) (2.2) 0.9 (23.3) (22.4)
operations
Loss on sale of the subsidiaries after income - (2.8) (2.8) - - -
tax (see below)
Profit (loss) for the period from discontinued 1.1 (6.1) (5.0) 0.9 (23.3) (22.4)
operations
Reclassification of foreign currency 0.8 - 0.8 - - -
translation reserve
Other comprehensive income from discontinued 0.8 - 0.8 - - -
operations
Period ended 31 December 2016 Period ended 1 January 2016
£m £m
Cash flows from operating activities (4.4) 2.4
Cash flows from investing activities (0.4) (0.4)
Net (decrease) increase in cash and cash (4.8) 2.0
equivalents from discontinued operations
Details of the sale of the subsidiaries
Period ended 31 December 2016
£m
Consideration received
Cash received 34.8
Cash in escrow 3.6
Contingent consideration 0.6
Total disposal consideration 39.0
Carrying amount of net assets sold (46.6)
Costs of disposal (0.5)
Loss on sale before income tax and (8.1)
reclassification of foreign currency
translation reserve
Reclassification of foreign currency (0.8)
translation reserve
Income tax credit on loss 6.1
Loss on sale after income tax (2.8)
The carrying amount of assets and liabilities
as at the date of sale were as follows.
Period ended 31 December 2016
£m
Property, plant & equipment 17.2
Intangible assets 21.1
Inventories 0.9
Trade & other receivables 10.9
Cash & short-term deposits 4.0
Trade & other payables (7.1)
Provisions (0.4)
Net assets 46.6
Loss per share
Loss per share from discontinued operations
were as follows.
2016 2015
pence pence
Basic (2.3) (10.5)
Diluted (2.3) (10.5)
These earnings per share figures were derived
by dividing the net profit attributable to
equity holders of the Company from
discontinued operations by the weighted
average number of ordinary shares, for both
basic and diluted amounts, shown in note 6.
6. Earnings (loss) 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 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 period (adjusted for the effect of
dilutive share awards).
The following reflects the earnings and share
data used in the calculation of earnings per
share.
2016 2015
Profit (loss) attributable to equity holders
of the Company
Total operations* (£m) 38.3 (178.7)
Continuing operations* (£m) 43.3 (156.3)
Continuing operations before exceptional items 132.0 166.7
& intangibles amortisation* (£m)
Weighted average share capital
Basic earnings per share (number of shares, 215.6 213.7
million)
Diluted earnings per share (number of shares, 216.9 213.7
million)
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.
2016 2015
Shares Million Shares Million
Weighted average number of ordinary shares for basic earnings per share 215.6 213.7
Effect of dilution: LTIP and deferred bonus awards 1.3 -
Adjusted weighted average number of ordinary shares for diluted earnings per share 216.9 213.7
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.
2016 2015
£m £m
Net profit (loss) attributable to equity holders from continuing operations* 43.3 (156.3)
Exceptional items & intangibles amortisation net of tax 88.7 323.0
Net profit attributable to equity holders from continuing operations before exceptional items & intangibles amortisation 132.0 166.7
2016 2015
pence pence
Basic earnings (loss) per share:
Total operations* 17.8 (83.6)
Continuing operations* 20.1 (73.1)
Continuing operations before exceptional items & intangibles amortisation* 61.2 78.0
Diluted earnings (loss) per share:
Total operations* 17.7 (83.6)
Continuing operations* 20.0 (73.1)
Continuing operations before exceptional items & intangibles amortisation* 60.8 78.0
*Adjusted for a loss of £0.1m (2015: £0.3m) in respect of non-controlling interests.
There have been no share options (2015: nil) exercised between the reporting date and the date of signing of these financial statements.
Earnings per share from discontinued operations are disclosed in note 5.
7. Dividends paid & proposed
2016 2015
£m £m
Declared & paid during the period
Equity dividends on ordinary shares
Final dividend for 2015: 29.0p (2014: 29.0p) 62.0 61.9
Interim dividend for 2016: 15.0p (2015: 15.0p) 32.5 32.1
94.5 94.0
Proposed for approval by shareholders at the Annual General Meeting
Final dividend for 2016: 29.0p (2015: 29.0p) 63.1 62.1
For the 2015 final and 2016 interim dividends, 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 shares with a value of £29.6m being issued and a cash dividend of £32.4m for the 2015 final settlement, and shares with a value of £19.1m being issued and a cash dividend of £13.4m for the 2016 interim settlement.
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 annual report and financial statements and the record date for the final dividend.
8. Property, plant & equipment & intangible assets
2016 2015
£m £m
Additions of property, plant & equipment & intangible assets
- land & buildings 19.2 13.1
- plant & equipment 35.1 58.6
- intangible assets 23.5 18.2
77.8 89.9
The above additions relate to the normal course of business and do not include any additions made by way of business combinations.
9. Interest-bearing loans & borrowings
At 31 December 2016, a total of £142.1m equivalent (2015: £166.4m equivalent) was outstanding under the Group's US$1bn
commercial paper programme.
At 31 December 2016, US$40.0m (2015: US$70.0m) 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 2016 were £2.5m (2015: £3.6m).
10. Provisions
Warranties & onerous sales contracts Employee related Exceptionalrationalisation Other Total
£m £m £m £m £m
At 1 January 2016 27.6 50.6 36.3 2.5 117.0
Additions 9.5 18.4 63.0 1.1 92.0
Disposal of business (0.4) - - - (0.4)
Utilised (13.9) (7.7) (58.1) (0.5) (80.2)
Unwind - 0.7 - - 0.7
Unutilised (3.2) (2.8) (0.5) (0.3) (6.8)
Exchange adjustment 3.9 10.2 6.4 0.6 21.1
At 31 December 2016 23.5 69.4 47.1 3.4 143.4
Current 2016 18.2 19.8 42.5 2.7 83.2
Non-current 2016 5.3 49.6 4.6 0.7 60.2
At 31 December 2016 23.5 69.4 47.1 3.4 143.4
Current 2015 21.9 10.9 35.8 1.7 70.3
Non-current 2015 5.7 39.7 0.5 0.8 46.7
At 1 January 2016 27.6 50.6 36.3 2.5 117.0
Warranties and 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.
Employee related
Employee related provisions arise from legal obligations, some of which relate to compensation associated with periods of
service, while the majority are for asbestos-related claims.
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 and there are currently no related cash flows to or from the Group. We expect this to continue for the foreseeable
future.
A review was completed in 2014, in conjunction with external advisors, to assess the adequacy of the Group's insurance
policies to meet future settlement and defence costs. As a result of this review a provision of £28m was recorded in 2014
with an equivalent receivable for insurance proceeds based on an estimate of settlement and defence costs for existing and
projected claims received in the subsequent five year period. The cash flows associated with this claim profile were
assessed as extending to a period of ten years from the balance sheet date. During the prior period costs were charged
against the provision and additional charges were made to the provision to reflect new claims.
During the current period, the estimates underlying the provision have continued to be reassessed and refined as the
Group's claims experience has developed. Since the initial review in 2014 the period of claims has been analysed to
improve understanding of key drivers, including the originating State of claims, average settlement and defence costs per
State and the occurrence of one-off claims and/or settlements. While the overall level of claims experience remains
relatively immature, the additional claims history provides the Group with growing confidence around our ability to
estimate the level of future claims.
As a result the provision has been updated to reflect ten years of projected future claims. This has increased cash flows
in the model to sixteen years from the balance sheet date. On this basis the provision has been increased by £19.4m
(including £7.2m adverse FX) to £47.5m at December 2016. The corresponding insurance asset has been increased by an
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