REG - Weir Group PLC - Final Results <Origin Href="QuoteRef">WEIR.L</Origin> - Part 4
22/02/2017 07:06
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equivalent amount.
The increase to ten years of projected claims reflects our growing confidence in the claims data available but also the
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 plaintiff's bar to develop and sustain new legal theory and/or develop new populations of
claimants;
iii) Changes in focus of 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.
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 increasing the number of
projected future settled claims and estimated settlement value. An increase or decrease of 10% on the settlement value or
number of settled claims would not lead to a material change in the provision.
A provision of £47.5m 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. A corresponding asset
continues to be recognised for insurance proceeds.
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 periods in the 1960's and 1970's. In 1989 the Group's employer's liability insurer (Chester Street Employers
Association Ltd) was placed into run-off which effectively generated an uninsured liability exposure for all future long
tail disease claims with an exposure period pre-dating 1 Jan 1972. All claims with a disease exposure post 1 January 1972
are fully compensated via the Government established Financial Services Compensation Scheme (FSCS). Any settlement to a
former employee whose service period straddles 1972 is calculated on a pro rata basis. The Group provides for these claims
based on management's best estimate of the likely costs given past experience of the volume and cost of similar claims
brought against the Group. An exercise was completed in 2016 which found based on additional claims experience the actual
claims cost is lower than the provision previously held. The provision has been adjusted accordingly.
Exceptional rationalisation
In light of the prolonged downturn across the Group's major end markets, the Group has provided an additional £63.0m (2015:
£47.6m) during the period. The provision incorporates committed costs for cash restructuring costs. Identification of a
number of pre and post-acquisition liabilities, predominantly in Trio China, has resulted in additional provision in 2016.
The majority of the provision will be utilised in 2017.
Other
Other provisions relate to dilapidations and various other legal claims and exposures across the Group.
11. Pensions & other post-employment benefit plans
2016 2015
£m £m
Plans in surplus 9.8 8.2
Plans in deficit (147.0) (90.0)
Net liability 137.2 81.8
The net Group deficit for retirement benefit obligations at the period end was £137.2m (2015: £81.8m) is due to actuarial
assumptions including a reduction in the discount rate reflecting a reduction in high quality corporate bond yields. This
combined with the increase in inflation, pensions in payment and change in demographic assumptions led to an increase in
the pension liability which is partially offset by actuarial gains on the asset side.
12. Additional cash flow information
2016 2015
Notes £m £m
Total operations
Net cash generated from operations
Operating profit (loss) - continuing operations 90.3 (133.1)
Operating loss - discontinued operations (3.8) (25.2)
Operating profit (loss) - total operations 86.5 (158.3)
Exceptional items 3, 5 77.5 364.7
Amortisation of intangible assets 50.3 52.5
Share of results of joint ventures (7.2) (8.3)
Depreciation of property, plant & equipment 56.2 63.4
Impairment of property, plant & equipment - 0.3
Gains on disposal of property, plant & equipment (1.1) (1.6)
Funding of pension & post-retirement costs (0.6) -
Employee share schemes 4.0 (2.3)
Transactional foreign exchange 6.6 4.5
Decrease in provisions (11.2) (5.7)
Cash generated from operations before working capital cash flows 261.0 309.2
Decrease in inventories 7.1 25.2
Decrease in trade & other receivables and construction contracts 57.5 189.3
Decrease in trade & other payables and construction contracts (33.0) (127.2)
Cash generated from operations 292.6 396.5
Additional pension contributions paid (2.8) (2.6)
Exceptional cash items 3 (58.1) (33.4)
Income tax paid (15.7) (50.4)
Net cash generated from operating activities 216.0 310.1
Exceptional items are detailed in note 3.
The employee-related provision and associated insurance asset in relation to US asbestos-related claims disclosed in note 10 will not result in any cash flows either to or from the Group and therefore they have been excluded from the table above.The cash flows from discontinued operations included above are disclosed separately in note 5.
12. Additional cash flow information (continued)
The following tables summarise the cash flows arising on acquisitions and disposals.
2016 2015
£m £m
Acquisitions of subsidiaries
Current period acquisitions (see below) - (12.9)
Prior period acquisitions contingent consideration paid (10.6) (2.8)
Prior period acquisitions completion adjustment - 1.6
(10.6) (14.1)
Acquisition of subsidiaries - cash paid - (14.4)
Cash & cash equivalents acquired - 1.5
Acquisition of subsidiaries - current period acquisitions - (12.9)
Settlement of external debt of subsidiary on acquisition - (1.2)
Total cash outflow on current period acquisitions - (14.1)
Prior period acquisitions contingent consideration paid (10.6) (2.8)
Prior period acquisitions completion adjustment - 1.6
Total cash outflow relating to acquisitions (10.6) (15.3)
Net cash inflow arising on disposal
Consideration received in cash & cash equivalents 35.4 -
Less: cash & cash equivalents disposed of (4.0) -
Total cash inflow relating to disposals 31.4 -
2016 2015
£m £m
Reconciliation of net increase in cash & cash equivalents to movement in net debt
Net increase in cash & cash equivalents from total operations 32.2 34.2
Net decrease in debt 92.4 49.4
Change in net debt resulting from cash flows 124.6 83.6
Lease inceptions (1.2) (0.1)
Loans/leases disposed 0.1 -
Foreign currency translation differences (133.0) (47.8)
Change in net debt during the period (9.5) 35.7
Net debt at the beginning of the period (825.0) (860.7)
Net debt at the end of the period (834.5) (825.0)
Net debt comprises the following
Cash & short-term deposits 258.6 184.0
Current interest-bearing loans & borrowings (144.0) (195.6)
Non-current interest-bearing loans & borrowings (949.1) (813.4)
(834.5) (825.0)
(825.0)
The Group has a number of cash pooling arrangements whereby individual entities have bank accounts with the same bank under
a master pooling facility which are subject to rights of offset. Cash & short-term deposits of £258.6m (2015: £184.0m) and
bank overdrafts & short-term borrowings of £1.6m (2015: £4.7m) are presented after elimination of debit and credit balances
within individual pools of £2.3m (2015: £405.6m).
13. Derivative financial instruments
The Group enters into derivative financial instruments in the normal course of business in order to hedge its exposure to
foreign exchange risk. Derivatives are only used for economic hedging purposes and no speculative positions are taken.
Derivatives are recognised as held for trading and at fair value through profit and loss unless they are designated in IAS
39 compliant hedge relationships.
The table below summarises the types of derivative financial instrument included within each balance sheet category.
2016 2015
£m £m
Included in non-current assets
Forward foreign currency contracts designated as cash flow hedges - 0.1
Cross currency swaps designated as net investment hedges - 8.3
Other forward foreign currency contracts - 0.1
- 8.5
Included in current assets
Forward foreign currency contracts designated as cash flow hedges - 0.2
Forward foreign currency contracts designated as net investment hedges - 0.9
Other forward foreign currency contracts 24.0 13.1
24.0 14.2
Included in current liabilities
Forward foreign currency contracts designated as cash flow hedges (1.2) (1.5)
Forward foreign currency contracts designated as net investment hedges (15.2) (4.4)
Cross currency swaps designated as net investment hedges (6.3) -
Other forward foreign currency contracts (7.5) (8.2)
(30.2) (14.1)
Included in non-current liabilities
Forward foreign currency contracts designated as cash flow hedges - (0.9)
Cross currency swaps designated as net investment hedges (14.7) (4.8)
Other forward foreign currency contracts (0.2) (0.1)
(14.9) (5.8)
Net derivative financial (liabilities) assets (21.1) 2.8
14. Related party disclosure
The following table provides the total amount of significant transactions which have been entered into with related parties
for the relevant financial year and outstanding balances at the period end.
Sales to related parties - goods Sales to related parties - services Purchases from related parties - goods Purchases from related parties - services Amounts owed to related parties
Related party £m £m £m £m £m
Joint ventures 2016 26.0 0.1 0.2 0.4 -
2015 18.4 0.4 1.4 0.8 -
Group pension plans 2016 - - - - 4.1
2015 - - - - 2.1
15. Exchange rates
The principal exchange rates applied in the preparation of these financial statements were as follows.
2016 2015
Average rate (per £)
US Dollar 1.36 1.53
Australian Dollar 1.83 2.04
Euro 1.22 1.38
Canadian Dollar 1.80 1.96
United Arab Emirates Dirham 4.98 5.61
Chilean Peso 918.59 1,000.85
South African Rand 20.00 19.53
Brazilian Real 4.75 5.10
Russian Rouble 91.20 93.65
Closing rate (per £)
US Dollar 1.22 1.47
Australian Dollar 1.70 2.02
Euro 1.17 1.36
Canadian Dollar 1.65 2.04
United Arab Emirates Dirham 4.49 5.41
Chilean Peso 813.76 1,044.14
South African Rand 16.63 22.81
Brazilian Real 3.97 5.84
Russian Rouble 73.89 107.45
The Group's operating profit from continuing operations before exceptional items and intangibles amortisation was denominated in the following currencies.
Restated (note1)
2016 2015
£m £m
US Dollar 70.0 112.8
Australian Dollar 33.8 31.6
Euro 26.2 22.3
Canadian Dollar 36.6 30.6
United Arab Emirates Dirham 5.8 21.6
Chilean Peso 35.6 30.6
South African Rand 4.9 1.3
Brazilian Real 3.6 4.3
Russian Rouble 6.9 3.8
UK Sterling (11.2) (13.0)
Other 1.8 11.6
Operating profit from continuing operations before exceptional items & intangibles amortisation 214.0 257.5
This information is provided by RNS
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