REG - Weir Group PLC - Full Year Results
02/03/2022 07:00
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RNS Number : 2999D Weir Group PLC 02 March 2022
Press Release: 2 March 2022
The Weir Group PLC reports its Full Year results for the year ended
31 December 2021.
Positive order momentum and strong operational delivery
Strong orders driven by highly active end markets and strategic growth
initiatives
• FY: Original Equipment (OE) orders(1) +45%; Aftermarket (AM) orders(1) +16%
• Q4: Orders(1) +26% YoY and +10% sequentially on Q3
Operational execution across the Group delivered +40 bps margin(1,2,3,4)
expansion
• Swift response to cyber incident in September; financial impact at lower end
of range
• Margin expansion delivered after mitigating cyber and Covid-19 headwinds of
c.60 bps
• PBTA(2,3) of £249m in line with last year despite FX headwinds
• £266m operating cash flow(3) impacted by inventory build and disruption from
cyber incident
Accelerated delivery of smart, efficient, sustainable solutions strategy
• Acquisition of Motion Metrics accelerates technology and digital strategy
• New products(2) increased to 6% of revenues and R&D investment(2) +40 bps
• 15%(2) reduction in CO(2)e emissions since 2019; science-based targets to be
set in 2022
Prioritising safety of impacted colleagues in Ukraine and Russia
• Combined net assets c.2% of Group total, revenue and operating profit <5%
On track to deliver medium-term targets
• Clear path to 17% operating margins in 2023; adding cash conversion targets
• Subject to ongoing geopolitical uncertainty, strong growth in constant
currency revenue and profit expected in 2022
• Full year dividend of 23.8p in line with capital allocation policy
2021 2020 As Constant currency(1)
reported
Continuing Operations(2)
Orders(1) £2,196m £1,794m n/a +22%
Revenue £1,934m £1,965m -2% +2%
Adjusted operating profit(3,4) £296m £299m -1% +5%
Adjusted operating margin(3,4) 15.3% 15.2% +10 bps +40 bps
Adjusted profit before tax(3,4) £249m £249m -% n/a
Statutory profit before tax(4) £209m £178m +18% n/a
Adjusted earnings per share(3,4) 71.3p 72.3p -1% n/a
Total Group
Statutory profit (loss) after tax(4) £259m (£155m) +£414m n/a
Statutory earnings (loss) per share(4) 99.7p (59.6p) +159.3p n/a
Adjusted operating cash flow(3,4) £266m £365m -27% n/a
Dividend per share 23.8p 0.0p n/a n/a
Net debt £772m £1,051m +£279m n/a
(See footnotes on page 6)
Jon Stanton, Chief Executive Officer said:
"In 2021 we navigated successfully through a number of significant external
challenges to deliver a strong performance for the year. Order momentum was
strong, with a significant acceleration in Q4, and demand for recurring
aftermarket consumables has now surpassed pre-Covid levels.
As events continue to unfold in Ukraine and Russia, where our operations are
relatively small, our priority is the safety of our impacted colleagues; we
are doing all we can to support them and our thoughts are with them and their
families.
We start 2022 with a record order book and market conditions continue to be
favourable. Subject to ongoing geopolitical uncertainty, and with Covid-19,
inflationary and supply chain pressures likely to persist, we currently expect
to deliver strong growth in constant currency revenue and profit this year and
further progress towards our medium-term performance goals.
Longer-term, our mining technology focus places Weir at the heart of a
multi-decade growth opportunity in partnership with the global mining industry
as it delivers the minerals essential for the clean energy transition more
efficiently and sustainably."
A webcast of the management presentation will begin at 09:00 (GMT) on 2 March
2022 at www.investors.weir (http://www.investors.weir/) . A recording of the
webcast will also be available at www.investors.weir
(http://www.investors.weir/) .
Link to
PDF: http://www.rns-pdf.londonstockexchange.com/rns/2999D_1-2022-3-2.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/2999D_1-2022-3-2.pdf)
CHIEF EXECUTIVE OFFICER'S REVIEW
Introduction
At the time of writing, we have seen a rapid escalation of events in Ukraine
and Russia over the last week. Our first priority is the safety of our
impacted colleagues and their families and we are doing all we can to support
them. It is clearly a very difficult and dynamic situation, and we have
provided further detail on the business context of these developments in the
outlook on page 5.
Reflecting on 2021, it was a year of strong execution and significant
strategic progress at Weir. Market trends have been favourable, and order
momentum is strong. Economic and external factors have made for a complex
operating environment - one in which our resilience has shone through.
In that context, I am very pleased that we have delivered a good set of
results in our 150(th) anniversary year. That is down to the phenomenal
efforts of our employees who have worked safely and tirelessly to serve our
customers, protect our communities and support each other through the ongoing
Covid-19 pandemic, and during the last quarter when we also responded to a
major cybersecurity incident. This performance demonstrates the strength of
our culture and I'd like to thank all my colleagues around the world for their
commitment and hard work over the last year.
That dedication is also reflected in a creditable set of safety results. Our
total incident rate of 0.45 (2020: 0.41) keeps us among the safest companies
in our sector. Another year of life and work through the pandemic was not
without its challenges, and I am pleased that we have not wavered on our
journey to becoming a zero harm workplace.
Strong end markets and strategic growth initiatives drives order momentum
2021 saw the global economy continue to recover supporting strong demand for a
wide range of commodities, with nearly all well above incentive prices and
several at record levels. Across our main exposures of copper and iron ore,
average prices were up c.50% on 2020 and average gold prices remained at
multi-year highs. Demand for commodities was supported by the economic
recovery in the many sectors that had been impacted by Covid-19, underpinned
by global stimulus spending, whereas physical inventory shortages and
production constraints meant supply struggled to keep up. Given the strength
of commodity prices, customers were almost entirely focused on maximising ore
production with volumes and machine utilisation continuing to normalise,
reaching pre-Covid levels in Q3 and accelerating further in Q4.
Our mining market order growth was strong across all regions, with the
exception of Australia, which saw good growth in the previous year but
suffered ore production constraints in 2021. Growth was supported by two large
OE orders for high pressure grinding rolls (HPGRs) and electric-powered mine
dewatering pumps. Infrastructure markets continued their strong recovery with
sand and aggregates markets benefiting from residential housing activity,
particularly in North America. We also saw very strong growth in industrial
markets with orders up by nearly 50%.
The Group's continuing operations delivered strong order(1) growth with a 22%
improvement year-on-year. Original equipment orders(1) were up 45% as we
continued to see miners prioritise both sustainability and efficiency. This
was reflected in demand for our differentiated technology with Integrated
Solutions orders up 32%. The £36m Ferrexpo order for our Enduron® HPGRs is
an excellent example of this. It will support a significant increase in
production while reducing energy consumption by around 40% compared to
alternative solutions. Comminution orders increased by 60% this year and we
have completed investment in expanding our technology centre in Venlo, The
Netherlands to support expected future demand.
Aftermarket demand, on a constant currency basis, continued to improve and
returned to growth, increasing 16% year-on-year. Momentum accelerated in Q4,
with orders up 10% sequentially on Q3, as market conditions improved and we
leveraged our global service network to fully capture the growth
opportunities.
Good operational execution across the Group
Thanks to the resilience of our people and operations we were able to deliver
revenues 2% higher than last year on a constant currency basis against a
relatively strong comparator, while there was a 5% increase in adjusted
operating profit. Adjusted operating margins(1,2,4) were up 40 bps
year-on-year benefiting from strong operational execution and full mitigation
of inflationary pressures. This improvement in margins was delivered after
absorbing a headwind of c.60 bps from the impact of the cybersecurity incident
and the net effects of ongoing Covid-19 costs.
The continuing improvement in end market conditions was seen alongside an
increasingly challenging global logistical and inflationary backdrop. In
regions where vaccination programmes are less advanced, we saw continued
workforce constraints on miners and reduced access for third-party suppliers.
Covid-related disruptions also included government-mandated restrictions and
enforced shutdowns that reduced capacity in the period at Weir facilities in
India, Peru, Malaysia and Australia. In addition, our operations dealt with
several adverse weather events, political instability in South Africa and
Peru, and significant supply chain disruption that increased materials and
freight costs and lead times from the Group's suppliers.
From September we have successfully managed the consequences of a
sophisticated attempted ransomware attack on our business. On detecting the
threat, our cybersecurity systems and controls responded quickly and we took
robust action to protect our infrastructure and data. System restoration
across the Group was broadly completed by the end of January 2022 and we have
taken further steps to improve our future resilience. The consequences of the
attack caused us significant temporary operational disruption including
engineering, manufacturing and shipment rephasing, but our teams responded
magnificently to the challenge, pulling together to keep the business running
and minimising the impact on our customers throughout. I am pleased to report
that the financial impact of the attack was at the lower end of the range we
set out in October, in large part due to the resilience inherent in our
operating model.
Winning through our 'We are Weir' strategic framework
This time last year we announced new medium-term targets which were to grow
faster than our end markets, expand Group operating margins by 150 bps and
deliver a 30% reduction in Scope 1 and 2 emissions by 2024. I am pleased to
say that we are on track to deliver all of these. The strength of our order
intake this year is demonstrating the growth potential of the business while
the margin progression delivered was particularly pleasing in the face of the
significant headwinds discussed above. We now expect to deliver a constant
currency operating margin(2,3) of 17% in 2023, and have added medium-term
operating cash conversion targets of 90-100% reflecting the importance on cash
generation to create the balance sheet flexibility to enable us to invest in
the opportunities that lie ahead. However, capex is likely to be elevated
above normal levels for the next two years resulting in cash conversion of
between 80% and 90% over that period.
We have made significant progress with our sustainability strategy, remaining
on track to deliver a 30% reduction is CO(2)e in 2024, and have now pledged
our commitment to the Science Based Targets initiative. This means we will set
strengthened emissions reduction targets aligned with the Paris Agreement on
climate change across Scope 1, 2 and 3. We expect to announce those more
ambitious, externally validated emissions targets later this year.
Our strategic progress in 2021
Medium-term targets 2020 Benchmark(2) 2021 Progress(2)
People Improving TIR(5) • TIR of 0.41 • TIR of 0.45
Increasing Employee Net Promotor Score (eNPS) • eNPS of +42 • eNPS of +48
Customers Growing ahead of our markets through the cycle • Ore production(6) c.-3%; Group AM revenues(1) -6% • Ore production(6) c. +3%; Group AM revenues(1) +5%
Technology Increase R&D as a percentage of revenues • R&D(4): 1.3% of revenues • R&D: 1.7% of revenues
Growth in sustainable solutions • Integrated Solutions orders +3% • Integrated Solutions orders +32%
Performance Operating margin progression • Operating margin(1,3, 4) of 14.9% • Operating margin(1,3) of 15.3%
Expansion in ROCE • ROCE(4) of 12.2% • ROCE of 12.0%
30% reduction in tCO(2)e per £m revenue by 2024 vs 2019 baseline(1,7) • -12% reduction in tCO(2)e/£m to 84.4 • -15% reduction in tCO(2)e/£m to 81.0
Accelerating delivery of smarter, more efficient and sustainable solutions
Over the past five years we have repositioned the Group to focus on mining
technology, enabling us to take advantage of powerful market trends and strong
structural drivers, leveraging our leading market positions and resilient
aftermarket model. The sale of the Oil & Gas Division in February 2021 was
a significant milestone in our transformation, following which we have
continued to strengthen our foundations and drive growth aligned to our
purpose - to enable the sustainable and efficient delivery of the natural
resources essential to create a better future for the world.
We have completed this transformation because of the multi-decade growth
opportunities that exist in partnership with the mining industry. Demand for
metals will always increase with the demographic drivers of population growth
and urbanisation but these factors have now been overtaken by expected demand
from the clean energy transition. The rise of electric vehicles and transition
to renewable energy generation in the form of wind and solar is now
translating into significant increases in demand for metals like copper,
nickel and lithium.
While the outlook for demand remains extremely strong, significant longer-term
supply deficits are emerging in these commodities where it is becoming evident
that current and planned production will not be adequate to meet the levels of
electrification and renewable power generation required to get to net zero. At
the same time, the mining sector is facing the ongoing challenge of ore grade
declines that mean more material needs to be mined and processed, consuming
more energy and water and creating more waste, just to stand still on
production. These supply challenges are intensifying at the same time that
miners are under increasing pressure to decarbonise and reduce their broader
environmental impact so that they can maintain the social licence to operate
in the communities where natural resources exist.
These trends mean the mining industry will need to invest significantly in
expanding capacity while also meaningfully reducing its environmental impact
through the adoption of new technologies and novel processes. I expect this to
trigger a surge in new exploration, the expansion of existing resources, and
accelerated investment in the development of new breakthrough technologies,
all of which will provide tremendous future growth opportunities for
innovative engineering partners like Weir.
Our goal is to play a leading role in developing and deploying the
technologies that will support our customers on this journey. That means we
will continue to invest in maintaining the competitive advantages of our
existing products through advances in materials science and the
mechanical/hydraulic properties of our equipment. We will invest more in
developing new sustainable solutions to help customers reduce their emissions
and water consumption, building on the success we have had with HPGRs in
comminution, where we are now the clear market leader. We will also continue
to focus on Integrated Solutions where we can combine our existing
technologies to solve difficult problems as we are doing with technologies
such as hydro-hoisting. At the same time we are increasing our investment in
scouting and technology foresighting to identify new opportunities that have
the potential to be transformational in mining processes, such as ore
fragmentation and characterisation, and coarse particle flotation.
Underpinning our technology strategy we have invested in integrating our
engineering expertise with digital technology. This means digitising the
business as it is today, transforming business systems and processes to drive
increased automation and enhance the customer experience. For example, in our
Minerals Division we are close to completing the roll out of our digital Field
Service Management system which is further enhancing our service offering, and
all our main product lines are now enabled for Synertrex, Weir's proprietary
digital analytics platform.
Beyond this we are investing in ways to further enhance our solutions offering
through data insights. In November, we acquired Motion Metrics, which has
added world class expertise in Artificial Intelligence (AI) and 3D Machine
Vision technology and data science to the Group. Motion Metrics technology is
already used in mines worldwide and its model is highly complementary to our
aftermarket-based business. Motion Metrics has become part of the ESCO
Division and will serve as Weir's global centre of excellence for AI and
Machine Vision technology, supporting the increased digitisation of the
broader Weir product portfolio. We have already secured early orders as we
leverage Weir's global sales network and ESCO's large installed base to expand
adoption of this value enhancing technology and drive significant revenue
growth. We are making good early progress and I am excited by the
opportunities this acquisition brings to drive growth and accelerate our
journey to include data and insight as a core offering to our customers across
the Group.
Board changes
In April 2022, Charles Berry, our Chairman, will step down from the Board
after completing his nine year term and will be succeeded by Barbara Jeremiah.
Sir Jim McDonald will take over from Barbara as Senior Independent Director.
The Group has undergone a bold and highly value adding transformation under
Charles' Chairmanship and I can't thank him enough for all the support he has
given me personally during that time. His deep rooted passion for Weir will be
missed by everyone in the business and beyond, so on behalf of us all, I'd
like to thank Charles for all he has done and wish him the very best for his
retirement. Of course, Barbara has been there throughout our transformation
too and I am delighted that she will take over as our Chair. The next phase of
our journey - driving the technology-led transition to net zero in mining - is
sure to be as exciting as the last and I am looking forward to working with
Barbara as we rise to the opportunity.
Final dividend
Reflecting the high levels of confidence in our strategy and future prospects,
the Board has today announced a final dividend of 23.8 pence per share, which
is 33% of adjusted EPS for the period, in line with our capital allocation
policy of returning a third of EPS through the cycle.
Outlook
2022 has started well and the impact of September's cyber incident is now
behind us. We have a record order book and our markets are buoyant, supported
by long-term structural growth drivers. In common with most global businesses
we are managing ongoing disruption from Covid-19, as well as inflationary and
logistics challenges in the supply chain, and remain vigilant of the
heightened geopolitical risk.
Specifically, the rapid escalation of events in Ukraine and Russia has created
significant uncertainty about our operations and trading in those countries.
Our overall exposure is small, with combined Ukraine and Russia net assets of
around 2% of the Group total and combined revenue and operating profit being
less than 5%. We are actively assessing the situation closely and will update
further as required.
Subject to the ongoing geopolitical uncertainty, in 2022 we expect to deliver
strong growth in constant currency revenue and profit in line with our
medium-term targets. Looking beyond the current year, medium-term growth
prospects are exciting, underpinned by underlying macro trends which remain
extremely favourable. With our strong and resilient business, we are well
positioned to grow faster than our markets and deliver sustainable margin
improvement in the long-term.
Segmental Analysis
Continuing operations(2) Minerals ESCO Unallocated expenses Total Total OE Total AM
£m
Orders (constant currency)
FY 2021 1,651 545 n/a 2,196 568 1,628
FY 2020 1,358 436 n/a 1,794 392 1,402
Variance:
- Constant currency 22% 25% 22% 45% 16%
Revenue
FY 2021 1,422 512 n/a 1,934 446 1,488
FY 2020 (as reported) 1,469 496 n/a 1,965 491 1,474
Variance:
- As reported -3% 3% -2% -9% 1%
- Constant currency -1% 11% 2% -6% 5%
Adjusted operating profit(3)
FY 2021 251 83 (38) 296
FY 2020 (as reported)(4) 260 81 (42) 299
Variance:
- As reported -3% 3% -1%
- Constant currency -% 11% 5%
Adjusted operating margin(3)
FY 2021 17.7% 16.3% 15.3%
FY 2020 (as reported)(4) 17.7% 16.3% 15.2%
Variance:
- As reported (bps) 0 0 10
- Constant currency (bps) 20 10 40
Notes:
The Group financial highlights and Divisional financial reviews include a
mixture of GAAP measures and those which have been derived from our reported
results in order to provide a useful basis for measuring our operational
performance. Adjusted results are for continuing operations before adjusting
items as presented in the Consolidated Income Statement. Details of other
alternative performance measures are provided in note 1 of the Audited Results
contained in this press release.
1. 2020 restated at 2021 average exchange rates.
2. Continuing operations excludes the Oil & Gas Division which was sold to
Caterpillar Inc. in February 2021 and the Saudi Arabian joint venture which
was sold to Olayan Financing Company in June 2021.
3. Profit figures before adjusting items. Continuing operations statutory
operating profit was £257m (2020 restated: £228m). Total operations
operating cash flow (cash generated from operations) excludes additional
pension contributions, exceptional and other adjusting cash items, and income
tax paid. Total operations net cash generated from operating activities was
£156m (2020 restated: £266m).
4. 2020 has been restated to reflect a change in accounting treatment for
Software as a Service (SaaS) arrangements following the publication of an
Agenda Decision during the year by the International Financial Reporting
Standards Interpretations Committee. Details of the restatements are provided
in note 1 of the Audited Results contained in this press release.
5. As measured by Total Incident Rate (TIR) which represents the rate of any
incident that causes an employee, visitor, contractor, or anyone working on
behalf of Weir to require off-site medical treatment per 200,000 hours worked.
6. Weir-weighted commodity exposure - source McKinsey 2021.
7. Revenue for 2019 and 2020 is based on 2021 average exchange rates. 2019
constant currency revenue is £1,917m. Market based greenhouse gas emissions.
DIVISIONAL REVIEW
Minerals
Minerals is a global leader in engineering, manufacturing and servicing of
processing technology used in abrasive high-wear mining applications. Its
differentiated technology is also used in infrastructure and general
industrial markets.
2021 Summary
• Original equipment orders(1) +45% supported by more sustainable solutions
• Aftermarket orders(1) +13%, with Q4 +29% and +19% sequentially as mine
production recovered
• Revenues(1) -1% with operating margin(1,2) up 20 bps to 17.7%
2021 Operating Review
The Division benefited from both the strength of its market positions and its
comprehensive global service network as mining markets recovered through the
year, exceeding pre-Covid production levels in Q4. At the same time,
efficiency programmes and roll out of new ERP systems supported margin
progression, despite inflation in input costs, global supply chain disruptions
and the impact of the cybersecurity incident. This performance was achieved
while also making significant strategic progress.
People
In terms of safety performance, the total incident rate (TIR) across the
Division was 0.36 (2020: 0.25). While this represented an increase on prior
year, it remained at a low rate and we made good progress in catching hazards,
particularly at remote service areas, and in reducing common, lower severity
incidents such as hand and finger injuries and first aid events. Leading
indicators were also positive with a marked increase in the number of safety
conversations. We continued to invest in learning and development and recently
launched a new programme called, 'Leadership in Mining', delivered in
conjunction with the University of Utah, for our emerging leaders.
Customers
Customer intimacy and our global footprint is a differentiator for us and to
support our customers in expanding their operations in existing and new
geographies, we continued to extend our service network. During the year we
opened seven new service centres, including two that are co-located with ESCO.
We also opened a new £2m manufacturing plant in Turkey to support our growing
customer base in Central Asia.
Technology
We made strong progress with our Integrated Solutions strategy through
delivering tailored solutions that enhance productivity for our customers. In
2021, Integrated Solutions orders of £210m were up 32% on prior year, driven
by strong demand for our comminution and dewatering technologies. In October
we opened a second technology centre in Venlo, The Netherlands to support
further development of sustainable mining solutions. The new facility
represents a £4m investment and extends our capacity for the development and
manufacture of tailings solutions and comminution technologies. Comminution is
one of the most energy intensive processes in the mine and Weir's technologies
enable customers to improve their energy efficiency by 40%, to achieve
significant reductions in emissions. These technologies continue to gain
traction with orders up by 60% in the year.
Performance
We continued to drive operational efficiency across the Division to support
the Group margin expansion targets. Major investments in 2021 include the
upgrade to our foundry in Artarmon, Australia and a new modern plant in China,
where we consolidated our operations into a world class facility in Binhu for
slurry pumps and comminution which is already benefiting efficiency and
recoveries. We have also continued to standardise our IT platforms with 80% of
the Division now operating on SAP.
We implemented a number of energy efficiency projects during 2021 and have
further reduced emissions via renewable energy purchasing and installation.
The annualised savings of efficiency projects implemented in 2021 by the
Division would equate to a 6% saving of Minerals' 2021 CO(2)e.
2021 Financial Review
Constant currency £m H1(1) H2 2021 2020(1) Growth(1)
Orders OE 285 248 533 367 45%
Orders AM 543 575 1,118 991 13%
Orders Total 828 823 1,651 1,358 22%
Revenue OE 173 240 413 448 -8%
Revenue AM 486 523 1,009 985 2%
Revenue Total 659 763 1,422 1,433 -1%
Adjusted operating profit(2) 119 132 251 250 -%
Adjusted operating margin(2) 18.0% 17.3% 17.7% 17.5% 20 bps
Operating cash flow(2) 135 92 227 283 -20 %
Book-to-bill 1.26 1.08 1.16 0.95
1. 2020 and 2021 H1 restated at 2021 average exchange rates except for
operating cash flow.
2. Profit figures before adjusting items. Operating cash flow (cash generated
from operations) excludes additional pension contributions, exceptional and
other adjusting cash items, and income tax paid. Refer to note 1 of the
Audited Results contained in this press release further details of alternative
performance measures.
Orders increased by 22% on a constant currency basis to £1,651m (2020:
£1,358m) with a book-to-bill of 1.16 reflecting strong growth in the order
book which will underpin future revenue growth. Original equipment (OE)
orders increased by 45% reflecting higher demand for our more sustainable
solutions as we started to see our strong project pipeline convert, as
customers became more confident in the global macro backdrop and the
continuing recovery of the global economy from the impact of Covid. As well as
the two large contracts for our more sustainable technology (initial £36m
Ferrexpo order for Enduron® HPGRs and screens and a £33m order in Indonesia
to replace diesel dewatering pumps with electric alternatives) we also saw
strong growth in demand for our core Warman© centrifugal pumps. Aftermarket
(AM) orders increased by 13% with strong growth across all spares products
including pump, mill circuit and comminution. Q4 was sequentially 19% higher
than Q3, delivering an all-time AM record for the Division and reflects
activity now above pre-Covid levels. Aftermarket orders represented 68% of
total orders (2020: 73%). In total, mining end-market orders accounted
for 77% of the total (2020: 79%), as we saw a strong recovery in
industrial and oil & gas end-markets.
Revenue was 1% lower on a constant currency basis at £1,422m (2020:
£1,433m), primarily driven by a £35m reduction in OE revenues as 2020
included the majority of the deliveries for the c.£100m Iron Bridge project.
AM revenues were up 2% on a constant currency basis reflecting the positive
mining production trends. Product mix was also impacted by the non-repeat of
the Iron Bridge revenues with OE reducing to 29% of total revenues compared to
31% last year.
Adjusted operating profit(2) increased slightly on a constant currency basis
to £251m (2020: £250m) as the Division benefited from more favourable mix,
strong operational execution and initial benefits from our efficiency
programme. The strength of our market position and associated resilience was
clearly demonstrated in the year with full mitigation of inflationary
pressures achieved through sales price increases. The reversal of the prior
year temporary savings related to bonus and travel were largely offset by
lower under-recoveries as our plants faced less Covid-related disruption in
the period. However, the Division's operations were impacted by the
cybersecurity incident impacting the Group, which resulted in an estimated
£10m of under-recoveries as plants were disrupted, and also led to the
slippage of c.£10m of operating profit as some Q4 revenues were deferred into
2022.
Adjusted operating margin(2) on a constant currency basis was 17.7%
(2020: 17.5%), with the +20 bps increase driven by more favourable product
mix and initial efficiency programme benefits offset by higher spend on
R&D and the impact of the cyber incident outlined above.
Operating cash flow(2) decreased by 20% to £227m (2020:
£283m), primarily reflecting a working capital outflow of £89m as the
Division saw an inventory build in Q4 to support its growing order book for
delivery in 2022 and the impact of the cybersecurity incident, which led to
higher receivables as revenues were more back end loaded than normal in Q4.
ESCO
ESCO is a global leader in the provision of Ground Engaging Tools
(G.E.T.) for large mining machines. Its highly engineered technology improves
productivity through extended wear life, increased safety and reduced energy
consumption. The Division also applies its differentiated technology
to infrastructure markets including construction, dredging and sand and
aggregates.
2021 Summary
• Orders(1) +25%, Q4 +37% YoY and delivered sixth quarter of sequential order
growth
• Revenues(1) +11% YoY as mining and infrastructure markets recovered strongly
• Operating margins(1,2) up 10 bps YoY; strong operational leverage offset by
the reversal of temporary cost savings
2021 Operating Review
The Division benefited from its strong market position to capture growth in
infrastructure markets in both North America and Europe, alongside entering
other global construction markets in the Southern Hemisphere. The Division
also continued to extend its product offering in mining markets, driving
increased customer relevance and market share gains.
People
Our continued focus on safety delivered further improvements in performance in
2021 with TIR reducing by a further 19% to 0.85. This marks a reduction in TIR
of over 50% since the Division was acquired in 2018. We introduced hazard
identification training for our operators during the year to reinforce safe
behaviours and help drive continuous improvement. More broadly, we continued
to invest in training and development of employees, for example, with sales
skills and sustainability training for our sales teams.
Customers
We made good progress in establishing our Nemysis© GET system as the market
leader across all mining systems, delivering 215 net conversions in 2021. We
also expanded our share of large mining buckets with orders up by over 50%,
and made further progress towards our revenue synergies target of $50m. We
opened new joint facilities with Minerals in Nevada, USA, and in Almaty,
Kazakhstan and are in the final stages of permitting for our new foundry in
China, which will move into construction in 2022.
Technology
The acquisition of Motion Metrics has strengthened our capability in digitally
enabled solutions. Based in Vancouver, Canada, Motion Metrics adds
patent-protected technology to our portfolio which reduces expensive downtime
in GET applications, helping improve our differentiated technology offering
even further. The additional capability in AI and Machine Vision will also
accelerate our expansion into adjacent markets including developing smart
eco-system offerings encompassing the load and haul operations of our
customers.
Performance
Continuous improvement activities at our foundry in Portland, USA enabled us
to quickly respond to market changes, benefiting operational leverage.
Additionally, the integration of digital visualisation at our facilities
improved overall energy efficiencies. The annualised savings of efficiency
projects implemented in 2021 by the Division would equate to a 4% saving of
ESCO's 2021 CO(2)e.
2021 Financial Review
Constant currency £m H1(1) H2 2021 2020(1) Growth(1)
Orders OE 18 17 35 25 36%
Orders AM 241 269 510 411 24%
Orders Total 259 286 545 436 25%
Revenue OE 13 20 33 28 19%
Revenue AM 226 253 479 434 10%
Revenue Total 239 273 512 462 11%
Adjusted operating profit(2) 39 44 83 75 11%
Adjusted operating margin(2) 16.4% 16.2% 16.3% 16.2% 10 bps
Operating cash flow(2) 38 48 86 100 -14%
Book-to-bill 1.08 1.05 1.07 0.94
1. 2020 and 2021 H1 restated at 2021 average exchange rates except for
operating cash flow.
2. Profit figures before adjusting items. Operating cash flow (cash generated
from operations) excludes additional pension contributions, exceptional and
other adjusting cash items, and income tax paid. Refer to note 1 of the
Audited Results contained in this press release for further details of
alternative performance measures.
Orders increased 25% on a constant currency basis to £545m (2020:
£436m), reflecting a strong recovery in both mining and infrastructure
markets globally, as we saw significantly reduced Covid-19 disruptions to
customer operations. The Division had strong growth in most major regions,
particularly North America and Asia. The Division also delivered a
book-to-bill of 1.07 as order patterns normalised after the destocking seen in
2020 and the Division has now delivered 6 straight quarters of sequential
order growth. Aftermarket represented 94% of orders (2020: 94%) in line with
ESCO's position as a provider of highly engineered consumables used
in abrasive operating environments.
Revenue, which was not impacted by the destocking seen in
2020, increased 11% on a constant currency basis to £512m (2020: £462m).
Mining represented 57% of revenues (2020: 59%) and infrastructure was 31%
(2020: 28%).
Adjusted operating profit(2) increased by 11% on a constant currency basis
to £83m (2020: £75m), as the Division benefited from further operating
efficiency and strong operating leverage from higher volumes which were
partially offset by the reversal of the temporary cost savings last year to
bonus and travel. We saw significant increases in freight and raw material
costs which were fully mitigated through sales price increases.
Adjusted operating margin(2) of 16.3% was up 10 bps on a constant currency
basis (2020: 16.2%), reflecting the operational leverage from the additional
revenues largely offset by the impact of the reversal of the temporary cost
reductions to bonus and travel.
Operating cash flow(2) decreased by 14% to £86m (2020: £100m), primarily
driven by working capital, as the Division had an outflow of £13m, as
underlying activity levels and volumes ramped up, and from the impact of the
cyber incident.
GROUP FINANCIAL REVIEW
Continuing operations order input at £2,196m increased 22% on a constant
currency basis with growth in both operating Divisions as the global economy
continued to recover from the impact of Covid. Minerals orders were up 22% as
we saw higher demand for our more sustainable OE solutions and increased
aftermarket demand due to supportive commodity prices and less Covid related
mine site disruption. ESCO orders were up 25% reflecting a strong recovery in
infrastructure markets in North America and Europe and significantly reduced
Covid disruptions to mining customer operations. 74% of orders related to
aftermarket compared to 78% in the prior year.
Continuing operations revenue of £1,934m increased 2% on a constant
currency basis. In Minerals revenue was 1% lower on a constant currency
basis at £1,422m (2020: £1,433m). ESCO increased 11% on a constant
currency basis to £512m (2020: £462m). Aftermarket accounted for 77% of
revenues from continuing operations, up from 75% in the prior year. Reported
revenues decreased 2%, impacted by a foreign exchange translation headwind of
£70m. Overall book to bill at 1.14 reflects the phasing of orders and an
element of revenue slippage related to the cybersecurity incident, meaning
that we enter 2022 with a record order book.
Continuing operations adjusted operating profit decreased by £3m (-1%) to
£296m on a reported basis (2020: £299m). Excluding a £16m foreign currency
translation headwind, the constant currency increase was £13m. Prior year
operating profit has been restated to reflect a change in accounting treatment
for Software as a Service (SaaS) arrangements following the publication of an
Agenda Decision during the year by the International Financial Reporting
Standards Interpretations Committee, which led to a £7m reduction in 2020
adjusted operating profit with an equivalent £4m in 2021. Further details are
provided in note 2 of the financial statements.
As explained further in the Divisional reviews, Minerals adjusted operating
profit increased by £1m on a constant currency basis to £251m (2020:
£250m) and ESCO's adjusted operating profit increased by 11% on a constant
currency basis to £83m (2020: £75m). Across both divisions, we saw
significant inflation in raw material and freight costs. These were fully
mitigated with sales price increases underpinning our market leading positions
and ability to price accordingly. Unallocated costs are £4m lower than the
prior year at £38m primarily due to a reduction in SaaS costs.
Continuing operations adjusted operating margin of 15.3% is up 40 bps versus
last year on a constant currency basis and up 10 bps as reported. We saw an
underlying improvement in margins of 40 bps, in keeping with our medium-term
targets. This was driven by operational efficiencies including facility
consolidations, benefits from 80% of Minerals now being on a standard SAP
platform and 70% of the Group leveraging common finance shared services. This
underlying benefit was offset by c.60 bps mainly as a result of inefficiencies
and overhead under-recoveries related to the cyber-incident as processes were
disrupted. Together the net 20 bps reduction was offset by a favourable 60 bps
movement due to mix as AM increased from 75% of revenue to 77%.
Continuing operations statutory operating profit for the period of £257m was
£29m favourable to the prior year, with the decrease in adjusted operating
profit of £3m being offset by a reduction in adjusting items.
Continuing operations adjusting items reduced by £31m to £40m (2020: £71m).
Intangibles amortisation decreased by £4m to £35m (2020: £39m). Exceptional
items reduced by £19m to net nil (2020: £19m), with acquisition and
integration costs relating to Motion Metrics of £3m and costs of £5m
directly related to the cybersecurity incident response, being offset by a
£5m gain on sale of land in Malaysia and other small unutilised provision
releases totalling £3m. Other adjusting items which mainly relate to the
Group's legacy US asbestos-related provision reduced by £8m to £4m (2020:
£12m).
Continuing operations net finance costs were £47m (2020: £50m) with the
reduction mainly due to reduced net debt levels following receipt of proceeds
from the sale of the Oil & Gas Division in February 2021.
Continuing operations adjusted profit before tax was £249m (2020: £249m),
after a translational foreign exchange headwind of £15m. The statutory profit
before tax from continuing operations of £209m compares to £178m in 2020,
the increase primarily due to the reduction in adjusting items.
Continuing operations adjusted tax charge for the year of £64m (2020:
£61m) on profit before tax from continuing operations (before adjusting
items) of £249m (2020: £249m) represents an adjusted effective tax rate
(ETR) of 25.6% (2020: 24.5%). The increase mainly reflects the geographic mix
of profits.
A tax credit of £9m has been recognised in relation to continuing operations
adjusting items (2020: £16m).
Discontinued operations for the year reflect a statutory profit after tax of
£104m primarily due to the gain on disposal of the Oil & Gas Division
(excluding AMCO) of £99m and a small net gain of £6m on the sale of the
joint venture. This compares to a loss in the prior year of £288m, which
included an exceptional impairment of £209m.
On 1 February 2021, the Group completed the sale of the Oil & Gas
Division, excluding the Saudi-Arabian based joint venture Arabian Metals
Company (AMCO), to Caterpillar Inc. (CAT) for an enterprise value of $375m.
Consideration received totalled £283m. The sale of AMCO to the Group's joint
venture partner, Olayan Financing Company (Olayan), completed on 30 June 2021
for an enterprise value of $30m. Net consideration received was £24m.
Following last year's exceptional impairment, the overall gain was finalised
in 2021 following the completion of customary working capital and debt-like
adjustments, tax and recycling of net cumulative foreign exchange gains from
the foreign currency translation reserve to the income statement. The latter,
which is only accounted for following completion, amounted to £103m and was
the main driver of the gain in the year.
Statutory profit for the year after tax from total operations of £259m (2020:
loss of £154m) reflects the increases in profit from both continuing
operations of £22m and discontinued operations of £392m.
Adjusted earnings per share from continuing operations decreased by 1% to
71.3p (2020: 72.3p) reflecting the higher effective tax rate in the year.
Statutory reported earnings per share from total operations is 99.7p (2020:
loss per share 59.6p), reflecting the increase in profit from both continuing
and discontinued operations.
Acquisition of Motion Metrics
The Group completed the acquisition of Motion Metrics on 30 November 2021 for
an enterprise value of CAD$150m (£88m), which represents initial equity value
consideration of £68m paid in cash and adoption of £20m of vendor
liabilities primarily relating to tax, settlement of an employee growth
participation plan and disposal costs. Motion Metrics contributed £0.6m to
revenue and an operating loss of £0.3m (before adjusting items) in the period
from acquisition to 31 December 2021.
Cash flow and net debt
Cash generated from total operations decreased by £99m to £266m (2020:
£365m) in the year, including a decrease of £27m from discontinued
operations (2021: outflow of £14m vs 2020: inflow of £13m). The cash
generated from continuing operations decreased by £72m primarily driven by an
outflow of working capital in the period of £103m (2020: £37m). This
reflects an increase in trade and other receivables due to back-end loading of
revenues at the end of the year as operations recovered from the cybersecurity
incident, together with an increase in inventory as operations geared up to
execute a record closing order book. As a result, working capital as a
percentage of sales increased to 27.9% from 22.9% in the prior
year. Continuing operations utilised non-recourse invoice discounting
facilities of £19m (2020: £3m) and suppliers chose to utilise supply chain
financing facilities of £33m (2020: £33m).
Net capital expenditure reduced by £28m to £39m (2020: £67m), including
£12m proceeds from the sale of a property in China, as spending was
restricted in the final quarter as a result of the cybersecurity incident.
Lease payments of £28m reduced from £43m last year mainly due to the
disposal of the Oil & Gas Division while purchase of shares for employee
share plans increased by £4m to £15m (2020: £11m).
Operating cash conversion (defined as the ratio of operating cash flow less
capital expenditure, lease payments, dividends from joint ventures and
purchase of shares for employee share plans to adjusted operating profit) was
63% (2020: 91%) as a result of the above noted working capital outflow. Over
the medium-term we are targeting operating cash conversion of 90% to 100%
driven by working capital efficiency and maintaining capex and lease costs
close to 1 times depreciation. Capex is likely to be elevated above this level
for the next two years as we construct our new ESCO foundry in China and
complete our roll-out of SAP and other digital initiatives resulting in cash
conversion between 80% and 90% over that period.
Free cash flow (refer to note 1 of the Audited Results) from total operations
was an inflow of £62m (2020: £132m). In addition to the movements noted
above this was impacted by an increase in tax payments of £19m reflecting a
higher tax charge and some payment deferrals last year, a reduction in
interest payments of £8m on lower net debt and refinancing costs and a £6m
increase in proceeds on settlement of derivative financial instruments.
Net debt improved by £279m to £772m (2020: £1,051m) and includes £105m
(2020: £179m) in respect of IFRS 16: Leases. The decrease was a result of
free cash inflow of £62m, plus net proceeds from the sale of the Oil &
Gas Division and the AMCO joint venture of £283m, a reduction in lease
liabilities due to the disposal of the Oil & Gas Division of £65m, an
exceptional cash inflow from the disposal of land in Malaysia of £16m and a
net decrease in continuing IFRS 16: Leases of £10m. These movements are
partially offset by the acquisition of Motion Metrics for £68m, interim
dividend of £30m, exceptional cash costs from operating activities of £20m,
foreign exchange retranslation of £32m and other movements of £7m. Net debt
to EBITDA on a lender covenant basis was 1.9x (2020 restated: 2.8x) compared
to a covenant level of 3.5x.
In May 2021, the Group successfully completed the issuance of five-year
US$800m Sustainability-Linked Notes. This, together with the successful
refinancing in June 2020 of the Group's US$950m Revolving Credit Facility
(RCF), secures significant levels of liquidity over an extended maturity
profile. The RCF matures in June 2023 with the option to extend for up to a
further two years. These refinancing actions plus the reduction in net debt in
the period, resulted in the Group having c.£800m of immediately available
committed facilities and cash balances following the maturity of US$590m of US
Private placement debt in February 2022.
Pensions
The net pension deficit decreased to £57m from £161m at December 2020. The
decrease is primarily due to changes in market conditions, mainly the rise in
discount rates over the period, partially offset by an increase in inflation
expectations. In addition the results of the latest UK Main Scheme triennial
valuation as at 31 December 2020 led to experience gains on scheme
liabilities. A credit of £96m (2020: charge of £35m) has been recognised in
the Consolidated Statement of Comprehensive Income.
Appendix 1 - 2021 continuing operations(1) quarterly order trends
Reported growth
Division 2020 Q1 2020 Q2 2020 Q3 2020 Q4 2020 FY 2021 Q1 2021 Q2 2021 Q3 2021 Q4 2021 FY
Original Equipment -13% -9% -57% -18% -29% 66% 50% 71% 9% 45%
Aftermarket -1% -6% -5% -3% -4% -1% 9% 16% 29% 13%
Minerals -5% -7% -27% -8% -12% 15% 20% 30% 23% 22%
Original Equipment 25% 16% -23% 6% 2% 76% 17% 65% -9% 36%
Aftermarket -8% -28% -24% -2% -16% -2% 31% 34% 40% 24%
ESCO -7% -26% -24% -2% -15% 2% 30% 36% 37% 25%
Original Equipment -11% -8% -55% -17% -27% 67% 48% 71% 8% 45%
Aftermarket -4% -13% -12% -3% -8% -2% 14% 21% 32% 16%
Continuing Ops -5% -12% -26% -7% -13% 11% 22% 31% 26% 22%
Book-to-bill 1.10 1.03 0.82 0.87 0.95 1.22 1.20 1.14 1.01 1.14
Quarterly orders(2) £m
Division 2020 Q1 2020 Q2 2020 Q3 2020 Q4 2020 FY 2021 Q1 2021 Q2 2021 Q3 2021 Q4 2021 FY
Original Equipment 80 102 75 110 367 133 152 128 120 533
Aftermarket 253 270 226 242 991 249 294 262 313 1,118
Minerals 333 372 301 352 1,358 382 446 390 433 1,651
Original Equipment 6 6 6 7 25 11 7 10 7 35
Aftermarket 121 94 95 101 411 118 123 128 141 510
ESCO 127 100 101 108 436 129 130 138 148 545
Original Equipment 86 108 81 117 392 144 159 138 127 568
Aftermarket 374 364 321 343 1,402 367 417 390 454 1,628
Continuing Ops 460 472 402 460 1,794 511 576 528 581 2,196
Appendix 2 - Foreign exchange (FX) rates and continuing operations(1) profit
exposure
2021 2020 Percentage of FY 2021 operating profits(3)
average average
FX rates FX rates
US Dollar 1.38 1.28 44%
Australian Dollar 1.83 1.86 17%
Euro 1.16 1.13 9%
Canadian Dollar 1.73 1.72 15%
Chilean Peso 1,043.54 1,015.14 14%
South African Rand 20.34 21.06 3%
Brazilian Real 7.42 6.61 2%
Chinese Yuan 8.88 8.86 2%
Indian Rupee 101.70 95.12 2%
1. Continuing operations excludes the Oil & Gas Division, which was sold
to Caterpillar Inc. in February 2021 and the Saudi-Arabian joint venture which
was sold in June 2021.
2. Restated at 2021 average exchange rates.
3. Profit figures before adjusting items. Refer to note 1 of the Audited
Results contained in this press release for further details of alternative
performance measures.
This information includes 'forward-looking statements'. All statements other
than statements of historical fact included in this presentation, including,
without limitation, those regarding The Weir Group PLC's ("the Group")
financial position, business strategy, plans (including development plans and
objectives relating to the Group's products and services) and objectives of
management for future operations, are forward-looking statements. These
statements contain the words "anticipate", "believe", "intend", "estimate",
"expect" and words of similar meaning. Such forward-looking statements involve
known and unknown risks, uncertainties and other important factors that could
cause the actual results, performance or achievements of the Group to be
materially different from future results, performance or achievements
expressed or implied by such forward-looking statements. Such forward-looking
statements are based on numerous assumptions regarding the Group's present and
future business strategies and the environment in which the Group will operate
in the future. These forward-looking statements speak only as at the date of
this document. The Group expressly disclaims any obligation or undertaking to
disseminate any updates or revisions to any forward-looking statements
contained herein to reflect any change in the Group's expectations with regard
thereto or any change in events, conditions or circumstances on which any such
statement is based. Past business and financial performance cannot be relied
on as an indication of future performance.
AUDITED RESULTS
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2021
Restated (note 1)
Year ended 31 December 2021 Year ended 31 December 2020
Adjusted results Adjusting items (note 4) Statutory results Adjusted results Adjusting items Statutory results
(note 4)
Notes £m £m £m £m £m £m
Continuing operations
Revenue 2 1,933.6 - 1,933.6 1,964.7 - 1,964.7
Continuing operations
Operating profit before share of results of joint ventures 294.5 (39.6) 254.9 297.0 (70.6) 226.4
Share of results of joint ventures 1.7 - 1.7 1.6 - 1.6
Operating profit 296.2 (39.6) 256.6 298.6 (70.6) 228.0
Finance costs (52.7) - (52.7) (53.8) - (53.8)
Finance income 5.6 - 5.6 3.8 - 3.8
Profit before tax from continuing operations 249.1 (39.6) 209.5 248.6 (70.6) 178.0
Tax (expense) credit 5 (63.8) 9.4 (54.4) (60.8) 16.3 (44.5)
Profit for the year from continuing operations 185.3 (30.2) 155.1 187.8 (54.3) 133.5
(Loss) profit for the year from discontinued operations 6 (2.2) 106.1 103.9 (26.6) (261.4) (288.0)
Profit (loss) for the year 183.1 75.9 259.0 161.2 (315.7) (154.5)
Attributable to:
Equity holders of the Company 182.6 75.9 258.5 161.0 (315.7) (154.7)
Non-controlling interests 0.5 - 0.5 0.2 - 0.2
183.1 75.9 259.0 161.2 (315.7) (154.5)
Earnings (loss) per share 7
Basic - total operations 99.7p (59.6p)
Basic - continuing operations 71.3p 59.6p 72.3p 51.4p
Diluted - total operations 99.0p (59.6p)
Diluted - continuing operations 70.8p 59.2p 71.7p 50.9p
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2021
Restated
(note 1)
Year ended Year ended
31 December 2021 31 December 2020
£m £m
Profit (loss) for the year 259.0 (154.5)
Other comprehensive income (expense)
Losses taken to equity on cash flow hedges (0.2) (1.1)
Exchange losses on translation of foreign operations (29.9) (34.2)
Reclassification of foreign currency translation reserve on discontinued (103.4) -
operations
Exchange (losses) gains on net investment hedges (18.2) 6.5
Reclassification adjustments on cash flow hedges 0.1 1.9
Tax relating to other comprehensive expense to be reclassified in subsequent - 0.1
periods
Items that are or may be reclassified to profit or loss in subsequent periods (151.6) (26.8)
Other comprehensive income (expense) not to be reclassified to profit or loss
in subsequent periods:
Remeasurements on defined benefit plans 96.3 (34.5)
Remeasurements on other benefit plans - 0.2
Tax relating to other comprehensive (income) expense not to be reclassified in (21.1) 6.5
subsequent periods
Items that will not be reclassified to profit or loss in subsequent periods 75.2 (27.8)
Net other comprehensive expense (76.4) (54.6)
Total net comprehensive income (expense) for the year 182.6 (209.1)
Attributable to:
Equity holders of the Company 182.5 (210.3)
Non-controlling interests 0.1 1.2
182.6 (209.1)
Total net comprehensive income (expense) for the year attributable to equity
holders of the Company
Continuing operations 183.3 74.3
Discontinued operations (0.8) (284.6)
182.5 (210.3)
CONSOLIDATED BALANCE SHEET
AT 31 DECEMBER 2021
Restated
(note 1)
31 December 2021 31 December 2020
Notes £m £m
ASSETS
Non-current assets
Property, plant & equipment 415.3 449.5
Intangible assets 1,308.3 1,249.4
Investments in joint ventures 12.3 15.0
Deferred tax assets 57.0 54.9
Other receivables 76.5 84.6
Derivative financial instruments 14 - 0.1
Total non-current assets 1,869.4 1,853.5
Current assets
Inventories 517.1 443.6
Trade & other receivables 505.7 420.2
Derivative financial instruments 14 7.1 16.0
Income tax receivable 32.0 29.6
Cash & short-term deposits 564.4 351.7
Assets held for sale - 427.6
Total current assets 1,626.3 1,688.7
Total assets 3,495.7 3,542.2
LIABILITIES
Current liabilities
Interest-bearing loans & borrowings 523.9 26.5
Trade & other payables 490.6 413.9
Derivative financial instruments 14 3.8 18.9
Income tax payable 7.6 12.3
Provisions 36.5 29.2
Liabilities held for sale - 143.3
Total current liabilities 1,062.4 644.1
Non-current liabilities
Interest-bearing loans & borrowings 812.3 1,332.6
Other payables - 0.3
Derivative financial instruments 14 0.1 -
Provisions 69.0 76.1
Deferred tax liabilities 40.7 21.4
Retirement benefit plan deficits 13 56.7 160.8
Total non-current liabilities 978.8 1,591.2
Total liabilities 2,041.2 2,235.3
NET ASSETS 1,454.5 1,306.9
CAPITAL & RESERVES
Share capital 32.5 32.5
Share premium 582.3 582.3
Merger reserve 332.6 332.6
Treasury shares (5.3) (6.8)
Capital redemption reserve 0.5 0.5
Foreign currency translation reserve (206.5) (55.4)
Hedge accounting reserve 1.5 1.6
Retained earnings 705.9 408.3
Shareholders' equity 1,443.5 1,295.6
Non-controlling interests 11.0 11.3
TOTAL EQUITY 1,454.5 1,306.9
The financial statements were approved by the Board of Directors and
authorised for issue on 2 March 2022.
JON STANTON JOHN HEASLEY
Director Director
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2021
Restated
(note 1)
Year ended Year ended
31 December 2021 31 December 2020
Notes £m £m
Total operations
Cash flows from operating activities 15
Cash generated from operations 266.0 365.0
Additional pension contributions paid (7.8) (11.3)
Exceptional and other adjusting cash items (8.6) (24.1)
Exceptional cash items - acquired vendor liabilities (11.1) -
Income tax paid (82.4) (63.4)
Net cash generated from operating activities 156.1 266.2
Cash flows from investing activities
Acquisitions of subsidiaries, net of cash acquired 15 (67.9) -
Investment in joint ventures - 0.1
Purchases of property, plant & equipment (44.4) (59.9)
Purchases of intangible assets (8.4) (11.8)
Exceptional item - proceeds from sale of property 15.8 -
Other proceeds from sale of property, plant & equipment and intangible 14.3 4.3
assets
Disposals of discontinued operations, net of cash disposed and disposal costs 15 258.5 (6.8)
Disposals of joint ventures 15 24.0 -
Interest received 2.6 2.2
Dividends received from joint ventures 0.7 8.3
Net cash generated from (used in) investing activities 195.2 (63.6)
Cash flows from financing activities
Proceeds from borrowings 794.1 1,467.2
Repayments of borrowings (903.4) (1,455.8)
Lease payments (27.8) (43.4)
Proceeds from settlement of derivative financial instruments 10.6 5.1
Interest paid (45.6) (52.7)
Net proceeds from changes in non-controlling interests - 5.1
Dividends paid to equity holders of the Company 8 (29.8) -
Dividends paid to non-controlling interests (0.4) -
Purchase of shares for employee share plans (15.0) (10.9)
Net cash used in financing activities (217.3) (85.4)
Net increase in cash & cash equivalents 134.0 117.2
Cash & cash equivalents at the beginning of the year 374.1 272.1
Foreign currency translation differences (8.1) (15.2)
Cash & cash equivalents at the end of the year 15 500.0 374.1
The cash flows from discontinued operations included above are disclosed
separately in note 6.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2021
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 31 December 2019 32.5 582.3 332.6 (0.5) 0.5 (26.7) 0.7 590.6 1,512.0 1.4 1,513.4
Restatement - - - - - - - (5.7) (5.7) - (5.7)
(see note 1)
Restated at 32.5 582.3 332.6 (0.5) 0.5 (26.7) 0.7 584.9 1,506.3 1.4 1,507.7
31 December 2019
(Loss) profit for the year (restated note 2) - - - - - - - (154.7) (154.7) 0.2 (154.5)
Losses taken to equity on cash flow hedges - - - - - - (1.1) - (1.1) - (1.1)
Exchange (losses) gains on translation of foreign operations - - - - - (35.2) - - (35.2) 1.0 (34.2)
Exchange gains on net investment hedges - - - - - 6.5 - - 6.5 - 6.5
Reclassification adjustments on cash flow hedges - - - - - - 1.9 - 1.9 - 1.9
Remeasurements on defined benefit plans - - - - - - - (34.5) (34.5) - (34.5)
Remeasurements on other benefit plans - - - - - - - 0.2 0.2 - 0.2
Tax relating to other comprehensive (expense) income - - - - - - 0.1 6.5 6.6 - 6.6
Total net comprehensive (expense) income - - - - - (28.7) 0.9 (182.5) (210.3) 1.2 (209.1)
for the year
Cost of share-based payments inclusive of tax credit - - - - - - - 10.5 10.5 - 10.5
Purchase of shares for employee share plans - - - (10.9) - - - - (10.9) - (10.9)
Notional proceeds of increase in - - - - - - - - - 3.6 3.6
non-controlling interests
Proceeds of increase in non-controlling interests - - - - - - - - - 5.4 5.4
Proceeds from - - - - - - - - - (0.3) (0.3)
decrease in
non-controlling interests
Exercise of share-based payments - - - 4.6 - - - (4.6) - - -
At 31 December 2020 32.5 582.3 332.6 (6.8) 0.5 (55.4) 1.6 408.3 1,295.6 11.3 1,306.9
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
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 32.5 582.3 332.6 (6.8) 0.5 (55.4) 1.6 419.1 1,306.4 11.3 1,317.7
31 December 2020 as originally presented
Restatement - - - - - - - (10.8) (10.8) - (10.8)
(see note 1)
Restated at 31 December 2020 32.5 582.3 332.6 (6.8) 0.5 (55.4) 1.6 408.3 1,295.6 11.3 1,306.9
Profit for the year - - - - - - - 258.5 258.5 0.5 259.0
Losses taken to equity on cash flow hedges - - - - - - (0.2) - (0.2) - (0.2)
Exchange losses on translation of foreign operations - - - - - (29.5) - - (29.5) (0.4) (29.9)
Reclassification of exchange gains on discontinued operations - - - - - (103.4) - - (103.4) - (103.4)
Exchange losses on net investment hedges - - - - - (18.2) - - (18.2) - (18.2)
Reclassification adjustments on cash flow hedges - - - - - - 0.1 - 0.1 - 0.1
Remeasurements on defined benefit plans - - - - - - - 96.3 96.3 - 96.3
Tax relating to other comprehensive income - - - - - - - (21.1) (21.1) - (21.1)
Total net comprehensive (expense) income - - - - - (151.1) (0.1) 333.7 182.5 0.1 182.6
for the year
Cost of share-based payments inclusive of tax charge - - - - - - - 10.2 10.2 - 10.2
Dividends - - - - - - - (29.8) (29.8) - (29.8)
Purchase of shares for employee share plans - - - (15.0) - - - - (15.0) - (15.0)
Notional proceeds of increase of non-controlling interests - - - - - - - - - - -
Dividends to - - - - - - - - - (0.4) (0.4)
non-controlling interests
Proceeds from decrease in non-controlling interests - - - - - - - - - - -
Exercise of share-based payments - - - 16.5 - - - (16.5) - - -
At 31 December 2021 32.5 582.3 332.6 (5.3) 0.5 (206.5) 1.5 705.9 1,443.5 11.0 1,454.5
Accounting policies
Basis of preparation
The audited results for the year ended 31 December 2021 ("2021") have been
prepared in accordance with UK-adopted International Accounting Standards and
with the requirements of the Companies Act 2006 as applicable to those
companies reporting under those standards.
The financial information set out in the audited results does not constitute
the Group's statutory financial statements for the year ended 31 December
2021 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
2021.
Statutory financial statements for the year ended 31 December 2020 ("2020"),
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 year ended 31 December 2020 and for the year ended
31 December 2021 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 period ended 31 December 2021 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.
Climate change
As well as considering the impact of climate change across our business model,
the Directors have considered the impact on the financial statements in
accordance with the Task Force on Climate-related Financial Disclosures (TCFD)
recommendations. There has not been a material impact on the financial
reporting judgements and estimates arising from our considerations, consistent
with our assessment that climate change is not expected to have a detrimental
impact on the viability of the Group in the medium-term.
New accounting standards, amendments and interpretations
The accounting policies which follow are consistent with those of the previous
period with the exception of the following standards, amendments and
interpretations which are effective for the year ended 31 December 2021:
i) Interest Rate Benchmark Reform - Phase 2 - Amendments to IFRS 9, IAS 39,
IFRS 7 and IFRS 16;
The Group has applied the practical expedient to changes to interest rates
resulting from IBOR reform. In all circumstances the replacement of IBOR with
an economically equivalent rate has resulted in a change in the effective
interest rate for the liability affected. These changes have had no impact on
the Consolidated Income Statement for the period.
ii) IFRS 16 Covid-19 Related Rent Concessions Amendment; and
On 31 March 2021 the IASB published a further amendment to the May 2020
practical expedient for lessees. The expedient provided lessees with relief
from assessing whether a rent concession in relation to Covid-19 is a lease
modification. The 2020 amendment stated that any reduction in lease payments
affected only payments due on or before 30 June 2021. The March 2021 amendment
extends the scope of the exemption to 30 June 2022. The Group has previously
applied this exemption in 2020 and the effect in both 2020 and 2021 is not
material.
iii) IFRIC - Configuration or Customisation Costs in a Cloud Computing
Arrangement (IAS 38 Intangible Assets).
The Group has revised its accounting policy in relation to Software as a
Service (SaaS) and related configuration and customisation costs in response
to the IFRIC configuration or customisation costs in a cloud computing
arrangement (April 2021) agenda decision which clarified the interpretation of
the current accounting standard. SaaS arrangements provide the Group access to
software via payment of a subscription. Under the new guidance these contracts
are service contracts and the expense is recognised in the Consolidated Income
Statement when the service is received. The costs related to implementing the
software are split into those which configure the software and those which
generate a separate asset controlled by the Group. The configuration costs are
expensed to the Consolidated Income Statement when the service is received.
Any expenditure resulting in a separate intangible asset is capitalised in
accordance with the current Group policy.
The Group's previous accounting policy has been to capitalise SaaS
arrangements and related customisation and configuration costs as intangible
assets. In response to this agenda decision the Group has completed a review
of the costs which are no longer eligible to be capitalised as intangible
assets and this has resulted in a reclassification to operating expenditure
and the reversal of previously accumulated amortisation. This policy has been
applied retrospectively in accordance with IAS 8 resulting in a restatement of
prior year financial statements, with further details provided below.
The following new accounting standards and interpretations have been published
but are not mandatory for 31 December 2021:
i) Narrow scope amendments to IFRS 3, IAS 16, IAS 37 and annual improvements on
IFRS 1, IFRS 9, IAS 41 and IFRS 16;
ii) Amendments to IAS 1, Presentation of financial statements on classification of
liabilities;
iii) Narrow scope amendments to IAS 1, Practice statement 2 and IAS 8;
iv) Amendments to IAS 12 - deferred tax related to assets and liabilities arising
from a single transaction; and
v) IFRS 17 Insurance contracts
These amendments have not been early adopted by the Group. These standards are
not expected to have a material impact on the Group in the current or future
reporting periods or on foreseeable future transactions.
Prior year restatement
All primary statements and (loss) earnings per share have been restated to
retrospectively apply the voluntary change in accounting policy for Software
as a Service as discussed above. The directly impacted financial statement
line items in the Consolidated Balance Sheet, Consolidated Income Statement
and Consolidated Cash Flow Statement are shown below. The Consolidated Balance
Sheet as at 31 December 2019 has also been restated for Software as a Service
but is not presented below on the grounds of materiality, the impact being
reflected in the Consolidated Statement of Changes in Equity.
Restated Consolidated Balance Sheet (extract)
at 31 December 2020
As previously reported SaaS adjustment Restated 31 December 2020
£m £m £m
Non-current assets
Intangible assets 1,262.7 (13.3) 1,249.4
Current assets
Income tax receivable 29.4 0.2 29.6
Current liabilities
Income tax payable 14.6 (2.3) 12.3
CAPITAL & RESERVES
31 December 2019 1,513.4 (5.7) 1,507.7
31 December 2020 1,317.7 (10.8) 1,306.9
Retained earnings 419.1 (10.8) 408.3
Restated Consolidated Income Statement (extract)
for the year ended 31 December 2020
Adjusted results: as previously reported SaaS adjustment Adjusted results: restated Statutory results: as previously reported SaaS adjustment Statutory results: restated
£m £m £m £m £m £m
Operating profit before share of results of joint ventures 303.8 (6.8) 297.0 232.7 (6.3) 226.4
Operating profit 305.4 (6.8) 298.6 234.3 (6.3) 228.0
Profit before tax from continuing operations 255.4 (6.8) 248.6 184.3 (6.3) 178.0
Tax expense (62.1) 1.3 (60.8) (45.7) 1.2 (44.5)
Profit for the year from continuing operations 193.3 (5.5) 187.8 138.6 (5.1) 133.5
Profit (loss) for the year 166.7 (5.5) 161.2 (149.4) (5.1) (154.5)
As disclosed in note 4 certain amortisation costs are included within
adjusting items. £0.5m in relation to amortisation of SaaS was included in
adjusting items in 2020 and has subsequently been reversed as shown in the
table above.
Restated Consolidated Cash Flow Statement (extract)
for the year ended 31 December 2020
As previously reported SaaS adjustment Restated 31 December 2020
£m £m £m
Cash flows from operating activities
Cash generated from operations 372.2 (7.2) 365.0
Net cash generated from operating activities 273.4 (7.2) 266.2
Cash flows from investing activities
Purchases of intangible assets (19.0) 7.2 (11.8)
Net cash (used in) generated from investing activities (70.8) 7.2 (63.6)
As previously reported Restated
2020 2020
pence pence
Basic earnings (loss) per share:
Total operations* (57.6) (59.6)
Continuing operations** 53.3 51.4
Continuing operations before adjusting items** 74.4 72.3
Diluted earnings (loss) per share:
Total operations* (57.6) (59.6)
Continuing operations** 52.9 50.9
Continuing operations before adjusting items** 73.8 71.7
(* Adjusted for a profit of £0.2m
in respect of non-controlling interests for total operations.)
(** Adjusted for a profit of £0.2m in
respect of non-controlling interests for continuing operations.)
Adjusting items
In order to provide the users of the Consolidated Financial Statements with a
more relevant presentation of the Group's performance, statutory results for
each year has been analysed between:
i) adjusted results and;
ii) the effect of adjusting items.
The principal adjusting items are summarised below. These specific items are
presented on the face of the Consolidated Income Statement, along with the
related adjusting item's taxation, 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 years and assessment of trends in
financial performance. This split is consistent with how underlying business
performance is measured internally.
i) Intangibles amortisation
Intangibles amortisation is expensed in line with the other intangible assets
policy, with separate disclosure provided to allow visibility of the impact of
both:
a) intangible assets recognised via acquisition, which
primarily relate to items which would not normally be capitalised unless
identified as part of an acquisition opening balance sheet. The ongoing costs
associated with these assets are expensed; and
b) ongoing multi-year investment activities, which
currently include our IT transformation strategy and digitisation strategy.
During the year, amortisation of £5.3m (restated 2020: £4.6m) is included
within adjusted operating profit in relation to assets, which are no longer
part of ongoing multi-year investment activities.
ii) Exceptional items
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. 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; acquisitions and other items
deemed exceptional due to their significance, size or nature.
iii) Other adjusting items
Other adjusting items are those which do not relate to the Group's current
ongoing trading and, due to their nature, are treated as adjusting items. For
example these may include, but are not restricted to, movements in the
provision for asbestos-related claims or the associated insurance assets,
which relate to the Flow Control Division that was sold in 2019 but the
provision remains with the Group and is in run-off, or past service costs
related to pension liabilities.
Further analysis of the items included in the column 'Adjusting items' in the
Consolidated Income Statement is provided in notes 3 and 4 to the financial
statements.
Use of estimates and judgements
The Group's significant accounting policies are set out below. The preparation
of the Consolidated Financial Statements, in conformity with IFRS, requires
management to make judgements that affect the application of accounting
policies and estimates that impact the reported amounts of assets,
liabilities, income and expense.
Management bases these judgements on a combination of past experience,
professional expert advice and other evidence that is relevant to each
individual circumstance. Actual results may differ from these judgements and
the resulting estimates which are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the year in which the estimate is
revised.
Areas requiring significant judgement in the current year and on a recurring
basis are presented to the Audit Committee.
The areas where management considers critical judgements and estimates to be
required, which are areas more likely to be materially adjusted due to
inherent uncertainty regarding estimates and assumptions, are those in respect
of the following:
i) Retirement benefits (estimate)
The assumptions underlying the valuation of retirement benefit assets and
liabilities include discount rates, inflation rates and mortality assumptions
which are based on actuarial advice. Changes in these assumptions could have a
material impact on the measurement of the Group's retirement benefit
obligations.
ii) Provisions (judgement/estimate)
Management judgement is used to determine when a provision is recognised,
taking into account the commercial drivers which gave rise to it, the Group's
previous experience of similar obligations and the progress of any associated
legal proceedings. The calculation of provisions typically involves management
estimates of associated cash flows and discount rates. The key provision which
currently requires a greater degree of management judgement and estimate is
the US asbestos provision and associated insurance asset, details of which are
included in note 11.
iii) Taxation (estimate)
The level of current and deferred tax recognised in the financial statements
is dependent on subjective judgements as to the interpretation of complex
international tax regulations and, in some cases, the outcome of decisions by
tax authorities in various jurisdictions around the world, together with the
ability of the Group to utilise tax attributes within the time limits imposed
by the relevant tax legislation. The value of the recognised US Deferred Tax
Asset in relation to US tax attributes is based on expected future US taxable
profits with reference to the Group's five year strategic plan. The
application of this model may result in future changes to the deferred tax
asset recognised.
The Group faces a variety of tax risks which result from operating in a
complex global environment, including the ongoing reform of both international
and domestic tax rules in some of the Group's larger markets and the challenge
to fulfil ongoing tax compliance filing and transfer pricing obligations given
the scale and diversity of the Group's global operations.
The Group makes provision for open tax issues where it is probable that an
exposure will arise including, in a number of jurisdictions, ongoing tax
audits and uncertain tax positions including transfer pricing which are by
nature complex and can take a number of years to resolve. In all cases,
provisions are based on management's interpretation of tax law in each
country, as supported where appropriate by discussion and analysis undertaken
by the Group's external advisers, and reflect the single best estimate of the
likely outcome or the expected value for each liability. Provisions for
uncertain tax positions are included in current tax liabilities and total
£7.0m at 31 December 2021.
The Group believes it has made adequate provision for such matters although it
is possible that amounts ultimately paid will be different from the amounts
provided, but not materially within the next 12 months.
Tax disclosures are provided in note 5.
iv) Acquisition accounting (estimate and judgement)
On the acquisition of a business, management assesses: (i) the Purchase Price
Allocation (PPA) in order to attribute fair values to separately identifiable
intangible assets providing they meet the recognition criteria and (ii) the
fair values of other assets and liabilities.
The fair values of these intangible assets are dependent on estimates of
attributable future revenues, margins and cash flows, as well as appropriate
discount rates. In addition, the allocation of useful lives to acquired
intangible assets requires the application of judgement based on available
information and management expectations at the time of recognition. The
valuation of other tangible assets and liabilities involves aligning
accounting policies with those of the Group, reflecting appropriate external
market valuations for property, plant & equipment, assessing
recoverability of receivables and inventory, and exposures to unrecorded
liabilities. In deriving appropriate fair values the process will inevitably
involve the use of estimates. The disclosure in relation to business
combinations is provided in note 10.
Alternative performance measures
The Consolidated Financial Statements of The Weir Group PLC have been prepared
in accordance with UK-adopted International Accounting Standards and with the
requirements of the Companies Act 2006 as applicable to those companies
reporting under those standards. 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 alternative performance
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. Alternative performance measures should not be considered in
isolation from, or as a substitute for, financial information in compliance
with GAAP. Alternative performance 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 alternative performance measures and
provide reconciliations to relevant GAAP measures.
Adjusted results and adjusting items
The Consolidated Income Statement presents Statutory results, which are
provided on a GAAP basis, and Adjusted results (non GAAP), which are
management's primary area of focus when reviewing the performance of the
business. Adjusting items represent the difference between Statutory results
and Adjusted results and are defined within the accounting policies section
above. The accounting policy for Adjusting items should be read in conjunction
with this note. Details of each adjusting item are provided in note 4. We
consider this presentation to be helpful as it allows greater comparability of
the underlying performance of the business from year to year.
Operating cash flow (cash generated from operations)
Operating cash flow excludes additional pension contributions, exceptional and
other adjusting cash items and income tax paid. This reflects our view of the
underlying cash generation of the business. A reconciliation to the GAAP
measure 'Net cash generated from operating activities' is provided in the
Consolidated Cash Flow Statement.
Free operating cash and free cash flow
Free operating cash flow is defined as operating cash flow (cash generated
from operations), adjusted for net capital expenditure, lease payments,
dividends received from joint ventures and purchase of shares for employee
share plans. Free cash flow (FCF) is defined as free operating cash flow
further adjusted for net interest, income taxes, settlement of derivative
financial instruments, pension contributions and non-controlling interest
dividends. FCF reflects an additional way of viewing our available funds that
we believe is useful to investors as it represents cash flows that could be
used for repayment of debt, dividends, exceptional and other adjusting items,
or to fund our strategic initiatives, including acquisitions, if any.
The reconciliation of operating cash flows (cash generated from operations) to
free operating cash flow and subsequently FCF is as follows.
Restated
(note 1)
2021 2020
£m £m
Operating cash flow (cash generated from operations) 266.0 365.0
Net capital expenditure from purchase & disposal of property, plant & (38.5) (67.4)
equipment and intangibles
Lease payments (27.8) (43.4)
Dividends received from joint ventures 0.7 8.3
Purchase of shares for employee share plans (15.0) (10.9)
Free operating cash flow 185.4 251.6
Net interest paid (43.0) (50.5)
Income tax paid (82.4) (63.4)
Settlement of derivative financial instruments 10.6 5.1
Additional pension contributions paid (7.8) (11.3)
Non-controlling interest dividends (0.4) -
Free cash flow 62.4 131.5
Free operating cash conversion
Free operating cash conversion is a new non GAAP key performance measure used
by management, which is defined as free operating cash flow divided by
adjusted operating profit on a total Group basis.
Restated
(note 1)
2021 2020
£m £m
Continuing operations 296.2 298.6
Discontinued operations (0.3) (20.6)
Adjusted operating profit - Total Group 295.9 278.0
Free operating cash flow 185.4 251.6
Free operating cash conversion % 63 % 91 %
Working capital as a percentage of sales
Working capital includes inventories, trade & other receivables, trade
& other payables and derivative financial instruments as included in the
Consolidated Balance Sheet, adjusted to exclude insurance contract assets
totalling £82.2m and £10.9m of interest accruals. This working capital
measure reflects the figure used by management to monitor the performance of
the business and is divided by revenue, as included in the Consolidated Income
Statement, to arrive at working capital as a percentage of sales.
EBITDA
EBITDA is operating profit from continuing operations, before exceptional
items, other adjusting items, intangibles amortisation, and excluding
depreciation of owned assets and right-of-use assets. 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.
Restated
(note 1)
2021 2020
£m £m
Continuing operations
Operating profit 256.6 228.0
Adjusted for:
Exceptional and other adjusting items (note 4) 4.7 31.8
Adjusting amortisation (note 4) 34.9 38.8
Adjusted operating profit 296.2 298.6
Non-adjusting amortisation 5.3 4.6
Adjusted Earnings before interest, tax and amortisation (EBITA) 301.5 303.2
Depreciation of owned property, plant & equipment 43.0 43.2
Depreciation of right-of-use property, plant & equipment 27.6 29.0
Adjusted Earnings before interest, tax, depreciation and amortisation (EBITDA) 372.1 375.4
Net debt
Net debt is a common measure used by management and investors when monitoring
the capital management of the Group and is the basis for covenant reporting. A
reconciliation of net debt to cash & short-term deposits, interest-bearing
loans & borrowings is provided in note 15.
2. Segment information
Continuing operations includes two operating Divisions: Minerals and ESCO.
These two 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 ESCO segment is the
world's leading provider of ground engaging tools for large mining machines.
Following its acquisition on 30 November 2021, Motion Metrics, a mining
technology business which is the market leading developer of innovative
Artificial Intelligence (AI) and 3D rugged Machine Vision Technology used in
mines worldwide, is included within the ESCO segment.
On 5 October 2020 the Group announced an agreement had been entered into to
sell the Oil & Gas Division and, in line with IFRS 5 'Non-current Assets
Held for Sale and Discontinued Operations', the Group classified the Division
as a discontinued operation as disclosed in note 6. The sale of the Division
completed during 2021.
The Chief Executive Officer assesses the performance of the operating segments
based on operating profit from continuing operations before exceptional and
other adjusting items (including impairments) ('segment result'). Finance
income and expenditure and associated interest-bearing liabilities and
financing 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 2021 and 2020 is
disclosed below. Information for Oil & Gas is included in note 6.
Minerals ESCO Total continuing operations
Restated (note 1)
2021 2020 2021 2020 2021 2020
£m £m £m £m £m £m
Revenue
Sales to external customers 1,422.1 1,469.2 511.5 495.5 1,933.6 1,964.7
Inter-segment sales - 0.1 2.1 0.9 2.1 1.0
Segment revenue 1,422.1 1,469.3 513.6 496.4 1,935.7 1,965.7
Eliminations (2.1) (1.0)
1,933.6 1,964.7
Sales to external customers - 2020 at 2021 average exchange rates
Sales to external customers 1,422.1 1,433.2 511.5 462.3 1,933.6 1,895.5
Segment result
Segment result before share of results of joint ventures 251.0 259.9 81.6 79.5 332.6 339.4
Share of results of joint ventures - - 1.7 1.6 1.7 1.6
Segment result 251.0 259.9 83.3 81.1 334.3 341.0
Unallocated expenses (38.1) (42.4)
Adjusted operating profit 296.2 298.6
Adjusting items (39.6) (70.6)
Net finance costs (47.1) (50.0)
Profit before tax from continuing operations 209.5 178.0
Segment result - 2020 at 2021 average exchange rates
Segment result before share of results of joint ventures 251.0 250.4 81.6 73.6 332.6 324.0
Share of results of joint ventures - - 1.7 1.5 1.7 1.5
Segment result 251.0 250.4 83.3 75.1 334.3 325.5
Unallocated expenses (38.1) (42.2)
Adjusted operating profit 296.2 283.3
Revenues from any single external customer do not exceed 10% of Group revenue.
Minerals ESCO Discontinued operations Total Group
Restated (note 1) Restated (note 1) Restated (note 1)
2021 2020 2021 2020 2021 2020 2021 2020
£m £m £m £m £m £m £m £m
Assets & liabilities
Intangible assets 563.8 575.0 741.7 663.8 - - 1,305.5 1,238.8
Property, plant & equipment 280.1 311.7 123.7 124.0 - - 403.8 435.7
Working capital assets 773.2 678.7 239.0 191.0 - - 1,012.2 869.7
1,617.1 1,565.4 1,104.4 978.8 - - 2,721.5 2,544.2
Investments in joint ventures - - 12.3 15.0 - - 12.3 15.0
Segment assets held for sale - - - - - 427.6 - 427.6
Segment assets 1,617.1 1,565.4 1,116.7 993.8 - 427.6 2,733.8 2,986.8
Unallocated assets 761.9 555.4
Total assets 3,495.7 3,542.2
Working capital liabilities 406.9 365.2 119.4 83.4 - - 526.3 448.6
Segment liabilities held for sale - - - - - 143.3 - 143.3
Segment liabilities 406.9 365.2 119.4 83.4 - 143.3 526.3 591.9
Unallocated liabilities 1,514.9 1,643.4
Total liabilities 2,041.2 2,235.3
Other segment information - total Group
Segment additions to non-current assets 60.2 70.7 16.8 22.1 0.4 6.6 77.4 99.4
Unallocated additions to non-current assets 0.2 -
Total additions to non-current assets 77.6 99.4
Other segment information - total Group
Segment depreciation & amortisation 66.4 65.8 34.8 37.1 - 31.6 101.2 134.5
Segment impairment of property, plant & equipment (1.4) (0.4) - - - (1.4) (1.4) (1.8)
Segment impairment of intangible assets 0.1 - - - - 176.1 0.1 176.1
Unallocated depreciation & amortisation 9.6 12.7
Total depreciation, amortisation & impairment 109.5 321.5
The asset and liability balances include right-of-use assets and lease
liabilities.
Unallocated assets are continuing operations and primarily comprise cash and
short-term deposits, asbestos-related insurance asset, Trust Owned Life
Insurance policy investments, derivative financial instruments, income tax
receivable, deferred tax assets and elimination of intercompany as well as
those assets which are used for general head office purposes. Unallocated
liabilities are continuing operations and primarily comprise interest-bearing
loans & borrowings and related interest accruals, derivative financial
instruments, income tax payable, provisions, deferred tax liabilities,
elimination of intercompany and retirement benefit deficits as well as
liabilities relating to general head office activities. Segment additions to
non-current assets include right-of-use assets.
Geographical information
Geographical information in respect of revenue and non-current assets for 2021
and 2020 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.
Year ended 31 December 2021 UK US Canada Asia Pacific Australia South America Middle East & Africa Europe & FSU Total
£m £m £m £m £m £m £m £m £m
Revenue from continuing operations
Sales to external customers 23.8 315.9 266.0 237.9 304.0 387.5 224.1 174.4 1,933.6
Non-current assets 314.1 699.7 158.5 150.0 201.5 71.1 86.9 54.1 1,735.9
Year ended 31 December 2020 UK US Canada Asia Pacific Australia South America Middle East & Africa Europe & FSU Total
£m £m £m £m £m £m £m £m £m
Revenue from continuing operations
Sales to external customers 15.8 296.0 274.6 227.3 348.0 415.6 218.0 169.4 1,964.7
Non-current assets (restated note 1) 332.5 747.7 61.8 138.8 210.1 82.6 98.1 42.3 1,713.9
The following disclosures are given in relation to continuing operations.
2021 2020
£m £m
An analysis of the Group's revenue is as follows:
Original equipment 386.9 444.3
Aftermarket parts 1,366.6 1,358.1
Sales of goods 1,753.5 1,802.4
Provision of services - Aftermarket 121.0 116.0
Construction contracts - Original equipment 59.1 46.3
Revenue 1,933.6 1,964.7
Minerals ESCO Total continuing operations
2021 2020 2021 2020 2021 2020
£m £m £m £m £m £m
Timing of revenue recognition
At a point in time 1,290.6 1,382.1 508.3 490.1 1,798.9 1,872.2
Over time 131.5 87.2 5.3 6.3 136.8 93.5
Segment revenue 1,422.1 1,469.3 513.6 496.4 1,935.7 1,965.7
Eliminations (2.1) (1.0)
1,933.6 1,964.7
3. Revenue & expenses
The following disclosures are given in relation to continuing operations.
Restated (note 1)
Year ended 31 December 2021 Year ended 31 December 2020
Adjusted results Adjusting items Statutory results Adjusted results Adjusting items Statutory results
£m £m £m £m £m £m
A reconciliation of revenue to operating profit is as follows:
Revenue 1,933.6 - 1,933.6 1,964.7 - 1,964.7
Cost of sales (1,237.2) (4.4) (1,241.6) (1,263.6) (8.2) (1,271.8)
Gross profit 696.4 (4.4) 692.0 701.1 (8.2) 692.9
Other operating income 14.6 4.8 19.4 7.5 - 7.5
Selling & distribution costs (218.9) - (218.9) (203.5) (5.8) (209.3)
Administrative expenses (197.6) (40.0) (237.6) (208.1) (56.6) (264.7)
Share of results of joint ventures 1.7 - 1.7 1.6 - 1.6
Operating profit 296.2 (39.6) 256.6 298.6 (70.6) 228.0
Details of adjusting items are included in note 4.
4. Adjusting items
Restated
(note 1)
2021 2020
£m £m
Recognised in arriving at operating profit from continuing operations
Intangibles amortisation (34.9) (38.8)
Exceptional items
Motion Metrics acquisition and integration related costs (2.8) -
Cybersecurity incident response (4.7) -
Other restructuring and rationalisation activities 6.3 (2.0)
ESCO acquisition and integration related costs 0.9 (3.3)
Covid-19 restructuring and other costs - (9.7)
Black Economic Empowerment transaction - (4.4)
(0.3) (19.4)
Other adjusting items
Asbestos-related provision (4.4) (11.8)
Pension equalisation - (0.6)
(4.4) (12.4)
Total adjusting items (39.6) (70.6)
Recognised in arriving at operating profit from discontinued operations
Intangibles amortisation - (9.1)
Exceptional items
Impairment - Fair value adjustment - (209.2)
Onerous purchase contracts 0.9 (3.8)
Disposal related costs - (11.4)
Covid-19 restructuring and other costs - (0.7)
Other restructuring and rationalisation activities - (0.2)
0.9 (225.3)
Total adjusting items (note 6) 0.9 (234.4)
Continuing operations
Intangibles amortisation
Intangibles amortisation of £34.9m relates to acquisition related assets and
ongoing multi-year investment activities as outlined in the accounting policy
in note 1.
Exceptional items
Exceptional items in the year include £2.8m of acquisition and integration
related costs associated with the Motion Metrics acquisition, which completed
on 30 November 2021 (note 10). The majority of these costs relate to adviser
fees, due diligence and initial integration. This has resulted in a £0.9m
exceptional cash flow in the year. We anticipate further integration costs of
approximately £3m in 2022.
The Group incurred £4.7m of costs in the final quarter of 2021 as a direct
result of the cybersecurity incident in September. These costs primarily
related to specialist advisory fees incurred centrally to investigate and
respond to the incident, incremental hardware costs expensed to facilitate
business continuity during the period of recovery plus an impairment charge of
£0.1m on existing hardware. This has resulted in a £2.2m exceptional cash
outflow in the year with £2.4m expected to be settled in the first half of
2022.
An exceptional credit for other restructuring and rationalisation activities
in the year is primarily the result of a land sale in Sendayan, Malaysia. The
land sold was part of our restructuring decision to exit Minerals Malaysia
foundry operations in 2018. The land was sold in August 2021 for proceeds of
£16.6m, with a book value of £11.0m, resulting in a net gain of £4.8m after
deducting legal and tax fees of £0.8m. Overall this transaction resulted in
an exceptional cash inflow of £15.8m in the year. The remaining credit of
£1.5m relates to the partial reversal of restructuring and rationalisation
charges recognised in North America and China in prior years.
An accrual of £0.9m has been released in relation to ESCO integration costs
which were initially expensed in 2019.
In the prior year, restructuring and rationalisation activities primarily
represented actions to further right-size certain central functions as a
result of the continued deep downturn in oil and gas markets. Other
exceptional items related to costs of £3.3m associated with the integration
of ESCO, the Black Economic Empowerment transaction for ownership in Weir
Minerals South Africa (Pty) Ltd with Medu Capital (Pty) Ltd of £4.4m and
specific one-off and/or short-term costs as a direct result of the Covid-19
pandemic of £9.7m, of which £8.9m was severance.
Other adjusting items
A charge of £4.4m (2020: £11.8m) has been recorded in respect of movements
in the US asbestos-related liability and associated insurance provision, plus
settlements for post 1981 US asbestos-related claims which relate to legacy
Group products. Further details of this are included in note 11.
In the prior year, a charge of £0.6m was recognised in respect to pension
equalisation costs.
Discontinued operations
Intangibles amortisation
In line with IFRS 5 'Non-current Assets Held for Sale and Discontinued
Operations', no amortisation has been recognised in the period.
Exceptional items
In the current year a final adjustment has been made to an onerous purchase
contracts provision resulting in a credit of £0.9m (2020: charge £3.8m).
Prior year exceptional items included an adjustment of £209.2m to the
carrying value of the Oil & Gas Division to reflect the fair value less
costs to sell of the Division. This reflected the estimated proceeds from the
disposal. The fair value adjustment included £49.5m of intangible assets,
£126.6m of goodwill and £33.1m of inventory. Disposal costs of £11.4m were
incurred primarily relating to advisory and consultancy fees. Other
exceptional items related to Covid-19 costs within the Oil & Gas Division
of £0.7m and restructuring and rationalisation costs of £0.2m. The
restructuring and rationalisation costs related to severance costs of £3.0m
which were offset by credit balances of: £1.1m gain on sale of a property
written off as an exceptional in 2019, £1.0m credit for the final adjustments
in relation to the liquidation of the EPIX joint venture and £0.7m of prior
year unutilised provisions.
5. Income tax expense
Restated (note 1)
2021 2020
£m £m
Continuing Group - UK (5.2) (6.7)
Continuing Group - Overseas (49.2) (37.8)
Income tax expense in the Consolidated Income Statement for continuing (54.4) (44.5)
operations
The total income tax expense is disclosed in the Consolidated Income Statement
as follows.
Restated (note 1)
2021 2020
£m £m
Tax (expense) credit - adjusted continuing operations (63.8) (60.8)
exceptional and other adjusting items 1.5 (1.7)
adjusting intangibles amortisation and impairment 7.9 18.0
Total income tax (expense) in the Consolidated Income Statement for continuing (54.4) (44.5)
operations
The income tax expense included in the Continuing Group's share of results of
joint ventures is as follows.
2021 2020
£m £m
Joint ventures (0.2) (0.5)
6. Discontinued operations
On 5 October 2020, the Group announced it had entered into an agreement to
sell the Oil & Gas Division and, in line with IFRS 5 'Non-current Assets
Held for Sale and Discontinued Operations', the Group classified the Division
as held for sale and its results have since been reported in discontinued
operations. Following the initial announcement of the sale, the Group's joint
venture partner, Saudi Arabia-based, Arabian Metals Company (AMCO) exercised
its pre-emption right to purchase Weir's 49% stake in AMCO for an enterprise
value of US$30.0m. The Oil & Gas Division provided pressure pumping and
pressure control equipment and aftermarket support across the oilfield
equipment and services value chain, primarily to customers in North America.
The Group completed the disposal of the Oil & Gas Division (excluding
AMCO) on 1 February 2021 to Caterpillar Inc. (CAT) for an enterprise value of
US$375.0m and a net consideration of £275.3m after certain customary working
capital and debt-like adjustments. Following finalisation of working capital
and tax provision adjustments, the Group received a further £7.5m to reflect
a final consideration of £282.8m with adjustments made to net assets sold in
relation to tax as part of the agreed completion accounts process. There
remains minor offsetting balances relating to potential tax liabilities and
tariff rebates which are not reflected below as at present the amounts
relating to these items are not yet finalised and the timing of settlement is
currently unknown. These are not expected to have a significant impact on the
results disclosed below.
The sale of AMCO to Olayan Financing Company (Olayan), our joint venture
partner, completed on 30 June 2021. A consideration of US$37.8m (£27.4m) was
received compared to the original fair market value of US$30.0m agreed with
CAT. The agreement with CAT in respect of the joint venture sale was that any
proceeds received from Olayan above the fair market value would be split 90:10
in favour of CAT, subject to certain capital gains tax and dividend
retentions. This resulted in a payment to CAT of US$4.7m (£3.4m) in July 2021
and a payment of capital gains tax to the Saudi authorities of US$6.3m
(£4.6m) in August 2021.
Financial information relating to discontinued operations is set out in the
table below.
Year ended 31 December 2021 Year ended 31 December 2020
Adjusted results Adjusting items Statutory results Adjusted results Adjusting items Statutory results
(note 4) (note 4)
£m £m £m £m £m £m
Revenue 25.1 - 25.1 314.3 - 314.3
Operating (loss) profit before share of results of joint ventures (1.9) 0.9 (1.0) (24.5) (234.4) (258.9)
Share of results of joint ventures 1.6 - 1.6 3.9 - 3.9
Operating (loss) profit (0.3) 0.9 0.6 (20.6) (234.4) (255.0)
Finance costs (0.2) - (0.2) (3.3) - (3.3)
Finance income - - - 0.3 - 0.3
(Loss) profit before tax from discontinued operations (0.5) 0.9 0.4 (23.6) (234.4) (258.0)
Tax expense (1.7) - (1.7) (3.0) (27.0) (30.0)
(Loss) profit after tax from discontinued operations (2.2) 0.9 (1.3) (26.6) (261.4) (288.0)
Gain on sale of Oil & Gas Division (see below) - 99.2 99.2 - - -
Gain on sale of joint venture (see below) - 6.0 6.0 - - -
(Loss) profit for the period from discontinued operations (2.2) 106.1 103.9 (26.6) (261.4) (288.0)
Reclassification of foreign currency translation reserve (103.4) -
Other comprehensive (expense) income from discontinued operations (1.3) 3.4
Total net comprehensive expense from discontinued operations (0.8) (284.6)
The reconciliation from revenue to operating profit includes cost of sales of
£21.8m (2020: £272.6m), other operating income of £0.3m (2020: £3.3m),
selling & distribution costs of £1.4m (2020: £18.1m), administrative
expenses of £4.1m (2020: £51.4m) and share of results of joint venture of
£1.6m (2020: £3.9m).
The gain on sale is largely attributable to the recycling of cumulative
foreign exchange gains and losses from the foreign currency translation
reserve to the income statement which is recognised only at the time of sale.
For the Oil & Gas Division, excluding AMCO, the cumulative net foreign
exchange gains on retranslation of foreign operations recycled was £244.3m
offset by the cumulative net foreign exchange losses on net investment hedges
of £143.4m. In June 2021, £2.5m of cumulative foreign exchange gains on
retranslation of foreign operations was recycled in respect of the AMCO
disposal.
Year ended 31 December 2021 Year ended 31 December 2020
£m £m
Cash flows from operating activities (16.3) 20.3
Cash flows from investing activities (0.2) 3.8
Cash flows from financing activities (1.1) (18.5)
Net (decrease) increase in cash & cash equivalents from discontinued (17.6) 5.6
operations
Details of the sale of Oil & Gas Division (excluding AMCO)
Year ended 31 December 2021
£m
Consideration received
Cash received - initial settlement 275.3
Cash received - completion accounts settlement 7.5
Total disposal consideration 282.8
Carrying amount of net assets sold (282.9)
Costs of disposal (1.8)
Gain on sale of Oil & Gas Division before reclassification of foreign (1.9)
currency translation reserve and tax
Reclassification of foreign currency translation reserve 100.9
Gain on sale of Oil & Gas Division before tax 99.0
Tax credit on disposal 0.2
Gain on sale of Oil & Gas Division after tax 99.2
The carrying amount of assets and liabilities as at the date of sale were as
follows.
Period ended 1 February 2021
£m
Property, plant & equipment 117.3
Intangible assets 82.0
Investment in joint ventures 3.1
Inventories 107.6
Trade & other receivables 78.9
Cash & short-term deposits 16.1
Trade & other payables (48.8)
Leases (65.2)
Provisions (8.1)
Net assets 282.9
Details of the sale of AMCO joint venture
Year ended 31 December 2021
£m
Consideration received
Cash received 27.4
Consideration adjustment - paid to CAT (3.4)
Total disposal consideration 24.0
Carrying amount of investment held (16.1)
Costs of disposal* 0.2
Gain on sale of joint venture before reclassification of foreign currency 8.1
translation reserve and tax
Reclassification of foreign currency translation reserve 2.5
Gain on sale of joint venture before tax 10.6
Tax charge on disposal (4.6)
Gain on sale of joint venture after tax 6.0
(* Costs of disposal related to an
unutilised prior year provision for costs to sell.)
Earnings (loss) per share
Earnings (loss) per share from discontinued operations were as follows.
2021 2020
pence pence
Basic 40.1 (110.9)
Diluted 39.8 (110.9)
The earnings (loss) per share figures were derived by dividing the net profit
(loss) 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 7.
7. Earnings (loss) per share
Basic earnings (loss) per share amounts are calculated by dividing net profit
(loss) for the year attributable to equity holders of the Company by the
weighted average number of ordinary shares outstanding during the year.
Diluted earnings (loss) per share is calculated by dividing the net profit
(loss) 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 used in the calculation of earnings (loss)
per share.
Restated
(note 1)
2021 2020
Profit (loss) attributable to equity holders of the Company
Total operations* (£m) 258.5 (154.7)
Continuing operations** (£m) 154.6 133.3
Continuing operations before adjusting items** (£m) 184.8 187.6
(* Adjusted for a profit of £0.5m
(2020: profit of £0.2m) in respect of non-controlling interests for total
operations.)
(** Adjusted for a profit of £0.5m
(2020: profit of £0.2m) in respect of non-controlling interests for
continuing operations.)
The following reflects the shares numbers used in the calculation of earnings
(loss) per share, and the difference between the weighted average share
capital for the purposes of the basic and the diluted earnings (loss) per
share calculations.
2021 2020
Shares Shares
million
million
Weighted average number of ordinary shares for basic earnings per share 259.3 259.5
Effect of dilution: employee share awards 1.7 2.2
Adjusted weighted average number of ordinary shares for diluted earnings per 261.0 261.7
share
The profit (loss) attributable to equity holders of the Company used in the
calculation of both basic and diluted earnings (loss) per share from
continuing operations before adjusting items is calculated as follows.
Restated
(note 1)
2021 2020
£m £m
Net profit attributable to equity holders from continuing operations** 154.6 133.3
Adjusting items net of tax (30.2) (54.3)
Net profit attributable to equity holders from continuing operations before 184.8 187.6
adjusting items
Restated
(note 1)
2021 2020
pence pence
Basic earnings (loss) per share:
Total operations* 99.7 (59.6)
Continuing operations** 59.6 51.4
Continuing operations before adjusting items** 71.3 72.3
Diluted earnings (loss) per share:
Total operations* 99.0 (59.6)
Continuing operations** 59.2 50.9
Continuing operations before adjusting items** 70.8 71.7
(* Adjusted for a profit of £0.5m
(2020: profit of £0.2m) in respect of non-controlling interests for total
operations.)
(** Adjusted for a profit of £0.5m
(2020: profit of £0.2m) in respect of non-controlling interests for
continuing operations.)
There have been 6,258 share awards (2020: 350,896) exercised between the
reporting date and the date of signing of these financial statements. These
were settled out of existing shares held in trust.
Earnings (loss) per share from discontinued operations is disclosed in note 6.
8. Dividends paid & proposed
2021 2020
£m £m
Declared & paid during the year
Equity dividends on ordinary shares
Final dividend for 2020: 0.00p (2019: 0.00p) - -
Interim dividend for 2021: 11.50p (2020: 0.00p) 29.8 -
29.8 -
Proposed for approval by Shareholders at the Annual General Meeting
Final dividend for 2021: 12.30p (2020: 0.00p) 31.9 -
The current year dividend is in line with the capital allocation policy
announced in our 2020 Annual Report and Financial Statements, under which the
Group intends to distribute 33% of net adjusted earnings by way of dividend.
As a result dividend cover in 2021 is 3.0 times. In response to the Covid-19
pandemic, the Board did not propose an interim or final dividend for 2020.
The proposed dividend is based on the number of shares in issue, excluding
treasury shares held, at the date that 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.
9. Property, plant & equipment and intangible assets
Restated
(note 1)
2021 2020
£m £m
Additions of property, plant & equipment and intangible assets
- owned land & buildings 4.0 7.3
- owned plant & equipment 44.3 54.1
- right-of-use land & buildings 12.4 19.8
- right-of-use plant & equipment 8.9 7.8
- intangible assets 8.0 10.4
77.6 99.4
The above additions relate to the normal course of business and do not include
any additions made by way of business combinations.
10. Business combinations
The Group completed the acquisition of 100% of the voting rights of Motion
Metrics on 30 November 2021 for an enterprise value of CAD$150m (£88m), which
represents initial equity value consideration of £68m paid in cash and
adoption of £20m of vendor liabilities primarily relating to tax, settlement
of an employee growth participation plan and disposal costs.
Motion Metrics is a leading Canada-based global mining technology business and
is the market leading developer of innovative Artificial Intelligence (AI) and
3D rugged Machine Vision Technology used in mines worldwide. Its technology
helps miners increase safety, efficiency and sustainability of their
operations. As part of the agreement, Motion Metrics' Vancouver headquarters
will become Weir's global centre for excellence in AI and Machine Vision
Technology.
Motion Metrics applications are highly complementary to Weir's product
portfolio. It will join the ESCO Division and reporting segment reflecting the
early adoption of its technology in ground engaging tools (G.E.T.) where ESCO
is an established global leader. Motion Metrics AI and Machine Vision
capabilities are expected to be leveraged across the whole mining value chain
served by the Weir Group.
The provisional fair values, which are subject to finalisation within 12
months of acquisition, are disclosed in the table below. There are certain
intangible assets included in the £52.1m of goodwill recognised that cannot
be individually separated and reliably measured due to their nature. These
items include the future growth of the business, synergies and an assembled
workforce.
2021
Motion Metrics provisional fair values £m
Property, plant & equipment - owned assets 0.6
Property, plant & equipment - right-of-use assets 0.2
Intangible assets
Brand names 3.3
Intellectual property and trademarks 34.0
Purchased software 0.1
Inventories 2.2
Trade & other receivables 2.3
Income tax receivable 0.7
Interest-bearing loans & borrowings (0.2)
Trade & other payables (1.6)
Income tax payable (0.5)
Provisions (20.0)
Deferred tax liabilities (5.3)
Provisional fair value of net assets 15.8
Goodwill arising on acquisition 52.1
Total consideration 67.9
Cash consideration 67.9
Contingent consideration -
Total consideration 67.9
The total net cash outflow on current year acquisitions was as follows:
cash paid (67.9)
cash & cash equivalents acquired -
Total cash outflow (note 15) (67.9)
The gross amount and fair value of Motion Metrics trade receivables amounts to
£2.3m. It is expected that virtually all the contractual amounts will be
collected.
Motion Metrics contributed £0.6m to revenue and an operating loss of £0.3m
(before adjusting items) in the period from acquisition to 31 December 2021.
If the acquisition had occurred at the start of 2021, the revenue and
statutory profit for the year from acquired operations would not have had a
material impact on the results disclosed in the Consolidated Income Statement
and therefore are not separately disclosed. Group exceptional acquisition and
integration costs totalled £2.8m in the year (note 4).
Contingent consideration
As part of the purchase agreement a maximum of an additional CAD$100m is
payable by the Group contingent on Motion Metrics exceeding specific revenue
and EBITDA targets over the next three years. Any balance which becomes
payable would be split, with 80% reflecting further consideration and 20% for
a new employee bonus plan. The entry point for any contingent payment would
require significant growth both in terms of revenue and EBITDA margin by 2024.
While the Group expects Motion Metrics to grow as it leverages the benefits of
being partnered with ESCO, and the opportunities within Minerals, the entry
targets are considered challenging. At present the probability of Motion
Metrics exceeding these targets in order to trigger a contingent payment is
considered uncertain, in part due to the relative infancy of the business. As
a result no contingent consideration has been recorded at the acquisition
date. This will be reassessed in future periods as the business develops.
11. Provisions
Warranties & contract claims Asbestos-related Employee-related Exceptional items Other Total
£m £m £m £m £m £m
At 31 December 2020 6.5 67.7 12.5 8.5 10.1 105.3
Additions 8.2 1.4 12.4 7.7 3.3 33.0
Acquisitions - - - 20.0 - 20.0
Utilised (3.8) (8.0) (11.3) (23.4) (1.9) (48.4)
Unutilised (1.3) - (0.4) (1.2) (0.6) (3.5)
Exchange adjustment (0.2) 0.5 (0.8) (0.5) 0.1 (0.9)
At 31 December 2021 9.4 61.6 12.4 11.1 11.0 105.5
Current 2021 9.2 7.6 6.9 10.8 2.0 36.5
Non-current 2021 0.2 54.0 5.5 0.3 9.0 69.0
At 31 December 2021 9.4 61.6 12.4 11.1 11.0 105.5
Current 2020 6.1 7.7 6.8 7.7 0.9 29.2
Non-current 2020 0.4 60.0 5.7 0.8 9.2 76.1
At 31 December 2020 6.5 67.7 12.5 8.5 10.1 105.3
The impact of discounting is not material for any category of provision.
Warranties & contract claims
Provision has been made in respect of actual warranty 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. At 31 December 2021, the warranties portion of the provision
totalled £7.2m (2020: £5.7m) for continuing operations. The majority of
these costs relate to claims which fall due within one year of the balance
sheet date and 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 and before allowing for future
expected aftermarket revenue streams. Provision is made immediately when it
becomes apparent that expected costs will exceed the expected benefits of the
contract. At 31 December 2021, the contract claims element, which includes
onerous provision, was £2.2m (2020: £0.8m), all of which is expected to be
incurred within one year of the balance sheet date.
Asbestos-related claims
2021 2020
£m £m
US asbestos-related provision - pre-1981 date of first exposure 55.5 61.4
US asbestos-related provision - post-1981 date of first exposure 3.0 3.1
US asbestos-related provision - total 58.5 64.5
UK asbestos-related provision 3.1 3.2
Total asbestos-related provision 61.6 67.7
US asbestos-related provision
Certain of the Group's US-based subsidiaries are co-defendants in lawsuits
pending in the US in which plaintiffs are claiming damages arising from
alleged exposure to products previously manufactured which contained asbestos.
The dates of alleged exposure currently range from the 1950s to the 1980s.
The Group has historically held comprehensive insurance cover for cases of
this nature and continues to do so for claims with a date of first exposure
(dofe) pre-1981. The expiration of one of the Group's insurance policies in
2019 resulted in no further insurance cover for claims with a post-1981 dofe.
All claims are directly administered by National Coordinating Counsel on
behalf of the Group's insurers who also meet associated defence costs. The
insurers, their legal advisers and in-house counsel agree and execute the
defence strategy between them.
A summary of the Group's US asbestos-related claim activity is shown in the
table below.
2021 2020
Number of open claims Number Number
Opening 1,586 1,551
New 656 528
Dismissed (315) (309)
Settled (162) (184)
Closing 1,765 1,586
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 in 2020 as part of our planned triennial actuarial update. This
review was based on an industry standard epidemiological decay model, and
Weir's claims settlement history. The 2020 review reflected higher levels of
claims, particularly relating to the 1970s and 1980s, and a longer dofe
period, but lower settlement values than the previous review conducted in
2017. The actuarial model incorporates claims, with a dofe pre- and post-1981,
primarily relating to lung cancer and mesothelioma and includes estimates
relating to:
• the number of future claims received;
• settlement rates by disease type;
• mean settlement values by disease type
• ratio of defence costs to indemnity value; and
• the profile of associated cash flows through to 2049.
The actuarial model in 2020 provided a range of potential liability based on
levels of probability from 10% to 90%, which, on an undiscounted basis,
equates to £53m-£133m. The mean actuarial estimate of £91m represents the
expected undiscounted value over the range of reasonably possible outcomes.
The provision in the financial statements is based on the mean actuarial
estimate which is then adjusted each year to reflect expected settlements in
the model, discounting and restricting our estimate to ten years of future
claims.
2021 2020
Period of future claims provided 10 years 10 years
Discount rate 2.6 % 2.1 %
The period over which the provision can be reliably estimated is judged to be
ten years due to the inherent uncertainty resulting from the changing nature
of the US litigation environment detailed below, and cognisant of the broad
range of probability levels included within the actuarial model. While claims
may extend past ten years and may result in a further outflow of economic
benefits, the Directors do not believe any obligation which may arise beyond
ten years can be reliably measured at this time. The effect of extending the
claims period by a further ten years is included in the sensitivities below.
The discount rate is set based on the yield available at the balance sheet
date denominated in the same currency, and with a term broadly consistent to
that of the liabilities being provided for, with sensitivities to the discount
rate also included below.
In 2020 confirmation was also received from external advisers of the insurance
asset available and the estimated defence costs which would be met by the
insurer. An update to the insurance asset is obtained annually and based on
the profile of the claims in the actuarial model, external advisors expect the
insurance cover and associated limits currently in place to be sufficient to
meet the settlement and associated costs until c.2028. Therefore, no cash
flows to or from the Group, related to claims with an exposure date pre-1981,
are expected until that time. Claims with an exposure date post-1981 are
estimated to incur cash outflows of less than £0.4m per annum and are not
insured currently or in the future.
The table below represents the Directors' best estimate of the future
liability and corresponding insurance asset.
2021 2020
US asbestos-related provision £m £m
Gross provision 67.4 72.7
Effect of discounting (8.9) (8.2)
Discounted US asbestos-related provision 58.5 64.5
Insurance asset 42.2 52.4
Net US asbestos-related liability 16.3 12.1
The net provision and insurance asset are presented in the financial
statements as follows.
2021 2020
£m £m
Provisions - current 7.1 7.2
Provisions - non-current 51.4 57.3
Trade & other receivables 6.9 7.2
Non-current other receivables 35.3 45.2
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.
As a result, 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.
In 2021 the number of claims received has exceeded those included in the
actuarial model, while settlement costs related to claims received,
predominantly in prior years, are below those provided. These variations are
to be expected from period to period. Sensitivity analysis reflecting
reasonably probable scenarios has been conducted. The results of this analysis
are shown below.
2021
Estimated impact on the discounted US asbestos-related provision of £m
Increasing the number of projected future settled claims by 10% 5.5
Increasing the estimated settlement value by 10% 5.5
Increasing the basis of provision by ten years 5.2
Decreasing the discount rate by 50bps 1.6
Application of these sensitivities, on an individual basis, would not lead to
a material change in the provision.
The Group's US subsidiaries have been effective in managing the asbestos
litigation, in part, because the Group has access to historical project
documents and other business records going back more than 50 years, allowing
it to defend itself by determining if legacy products were present at the
location of the alleged asbestos exposure and, if so, the timing and extent of
their presence. In addition, the Group has consistently and vigorously
defended claims that are without merit.
UK asbestos-related 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 employer's liability claims which all relate to former UK
operations and employment periods in the 1950s to 1970s. 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 January 1972. All claims with a disease exposure post 1 January
1972 are fully compensated via the Government-established Financial Services
Compensation Scheme. 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.
The UK provision was reviewed and adjusted accordingly for claims experience
in the year, resulting in a provision of £3.1m (2020: £3.2m).
Employee-related
Employee-related provisions arise from legal obligations in a number of
territories in which the Group operates, the majority of which relate to
compensation associated with periods of service. A large proportion of the
provision is for long service leave. The outflow is generally dependent upon
the timing of employees' period of leave with the calculation of the majority
of the provision being based on criteria determined by the various
jurisdictions.
Exceptional items
The exceptional items provision relates to exceptional charges included within
note 4 where the cost is based on a reliable estimate of the obligation.
The opening balance of £8.5m included £6.6m which related to severance costs
in Minerals and disposal costs related to Oil & Gas. The remaining £1.9m
related to onerous contract provisions in Minerals.
Additions in the year total £7.7m, including cybersecurity costs of £4.7m
and acquisition and integration costs in relation to Motion Metrics of £2.8m.
The acquisition related balance of £20.0m reflects vendor liabilities for
Motion Metrics primarily relating to tax, settlement of an employee growth
participation plan and disposal costs, of which £11.1m was cash settled in
the year.
The closing balance of £11.1m includes £8.9m for opening balance sheet
liabilities in Motion Metrics (£8.8m restructuring taxes and £0.1m
acquisition costs) which will be cash settled in 2022, cybersecurity costs of
£0.4m and final Oil & Gas disposal costs of £0.4m. The remaining balance
of £1.4m relates to prior year balances in Minerals for severance costs and
onerous contract provisions.
Other
Other provisions include environmental obligations, penalties, duties due,
legal claims and other exposures across the Group. These balances typically
include estimates based on multiple sources of information and reports from
third-party advisers. The timing of outflows is difficult to predict as many
of these will ultimately rely on legal resolutions and the expected conclusion
is based on information currently available. Where certain outcomes are
unknown, a range of possible scenarios is calculated, with the most likely
being reflected in the provision.
12. Interest-bearing loans & borrowings
In June 2020, the Group completed the refinancing of its US$950m Revolving
Credit Facility (RCF) which was due to expire in September 2021. This was
replaced with a US$950m RCF with a syndicate of 12 global banks and will
mature in June 2023 with the option to extend for up to a further two years.
In 2020 the Group also replaced its £300m term loan facility which was
previously maturing in December 2020, with a £200m facility due to mature in
March 2022, which was subsequently settled in 2021. The RCF includes a link to
the Group's sustainability goals and the covenant terms remained unchanged.
In May 2021, the Group completed the issue of five-year US$800m
Sustainability-Linked Notes due to mature in May 2026 which includes a target
to reduce Scope 1 & Scope 2 CO(2) emissions by 30% by December 2024,
consistent with the Group's medium-term KPIs announced in the 2020 Annual
Report. The Notes will initially bear interest at a rate of 2.20% per annum to
be paid semi-annually in May and November. The interest on the Notes will be
linked to achievement of Weir's 2024 Sustainability Performance Target
('SPT'). The interest rate applicable to the Notes will increase by 0.25% to
2.45% per annum from and including the last interest payment date preceding 31
December 2024 if the Group does not attain its SPT. As a result of the
additional funding, the Group took the decision to settle its £200m term loan
facility, which was due to mature in March 2022, with a charge to the
Consolidated Income Statement of the remaining unamortised costs of £0.8m.
At 31 December 2021, £nil (2020: £468.8m) was drawn under the US$950m
multi-currency revolving credit facility which is disclosed net of unamortised
issue costs of £3.0m (2020: £5.1m).
At 31 December 2021, £nil (2020: £198.9m) was drawn under the matured
£200m term loan facility which is disclosed net of unamortised issue costs of
£nil (2020: £1.1m).
At 31 December 2021, a total of £583.6m (2020: £578.4m) was outstanding
under private placement which is disclosed net of unamortised issue costs of
£0.1m (2020: £0.3m).
At 31 December 2021, a total of £586.5m (2020: £nil) was outstanding under
Sustainability-Linked Notes which is disclosed net of unamortised issue costs
of £4.5m (2020: £nil).
13. Pensions & other post-employment benefit plans
2021 2020
£m £m
Net liability 56.7 160.8
The defined benefit pension deficit across the Group's legacy UK and North
American schemes decreased to £56.7m (2020: £160.8m) primarily due to
changes in market conditions, mainly the rise in discount rates over the
period, partially offset by an increase in inflation expectations. In addition
the results of the latest UK Main Scheme triennial valuation as at 31 December
2020 led to experience gains on scheme liabilities.
14. 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 IFRS 9 compliant hedge
relationships.
The table below summarises the types of derivative financial instrument
included within each balance sheet category.
2021 2020
£m £m
Included in non-current assets
Other forward foreign currency contracts - 0.1
- 0.1
Included in current assets
Forward foreign currency contracts designated as cash flow hedges - 0.2
Forward foreign currency contracts designated as net investment hedges - 4.3
Other forward foreign currency contracts 7.1 11.5
7.1 16.0
Included in current liabilities
Forward foreign currency contracts designated as cash flow hedges (0.4) -
Forward foreign currency contracts designated as net investment hedges - (0.1)
Cross-currency swaps designated as net investment hedges - (0.9)
Other forward foreign currency contracts (3.4) (17.9)
(3.8) (18.9)
Included in non-current liabilities
Other forward foreign currency contracts (0.1) -
(0.1) -
Net derivative financial assets (liabilities) - continuing operations 3.2 (2.8)
Net derivative financial liabilities held for sale - (0.1)
Net derivative financial assets (liabilities) - total Group 3.2 (2.9)
15. Additional cash flow information
2021 2020
Notes £m £m
Total operations
Net cash generated from operations
Operating profit - continuing operations 256.6 228.0
Operating profit (loss) - discontinued operations 6 0.6 (255.0)
Operating profit (loss) - total operations 257.2 (27.0)
Exceptional and other adjusting items 4 3.8 257.1
Amortisation of intangible assets 40.2 52.5
Share of results of joint ventures (3.3) (5.5)
Depreciation of property, plant & equipment 43.0 52.8
Depreciation of right-of-use assets 27.6 41.9
Impairment of property, plant & equipment - 0.2
Grants received (0.3) (0.4)
Gains on disposal of property, plant & equipment (4.3) (0.3)
Funding of pension & post-retirement costs (2.7) (2.6)
Employee share schemes 10.9 9.3
Transactional foreign exchange 4.8 14.5
Increase (decrease) in provisions 3.9 (7.6)
Cash generated from operations before working capital cash flows 380.8 384.9
(Increase) decrease in inventories (84.9) 44.2
(Increase) decrease in trade & other receivables & construction (61.7) 130.0
contracts
Increase (decrease) in trade & other payables & construction contracts 31.8 (194.1)
Cash generated from operations before exceptional cash items 266.0 365.0
Additional pension contributions paid (7.8) (11.3)
Exceptional and other adjusting cash items (8.6) (24.1)
Exceptional cash items - acquired vendor liabilities (11.1) -
Income tax paid (82.4) (63.4)
Net cash generated from operating activities 156.1 266.2
Cash flows from discontinued operations included above are disclosed
separately in note 6.
Exceptional and other adjusting items are detailed in note 4.
The following tables summarise the cash flows arising on acquisitions (note
10) and disposals (note 6).
2021 2020
£m £m
Acquisitions of subsidiaries
Acquisition of subsidiaries - cash paid 67.9 -
Cash & cash equivalents acquired - -
Acquisition of subsidiaries - current period acquisitions 67.9 -
Total cash outflow relating to acquisitions 67.9 -
Net cash inflow (outflow) arising on disposals
Consideration received net of costs paid & cash disposed of - Oil & 258.5 (2.1)
Gas Division (excluding AMCO)
Consideration received net of costs paid & cash disposed of - AMCO Joint 24.0 -
Venture
Prior period disposals - settlement of final costs and final completion - (4.7)
adjustment
Total cash inflow (outflow) relating to disposals 282.5 (6.8)
2021 2020
£m £m
Cash & cash equivalents comprise the following
Cash & short-term deposits 564.4 351.7
Bank overdrafts & short-term borrowings (64.4) (0.6)
Cash & short-term deposits held for sale - 23.0
500.0 374.1
2021 2020
£m £m
Net debt comprises the following
Cash & short-term deposits 564.4 351.7
Current interest-bearing loans & borrowings (523.9) (26.5)
Non-current interest-bearing loans & borrowings (812.3) (1,332.6)
Assets and liabilities held for sale - (44.0)
(771.8) (1,051.4)
Reconciliation of financing cash flows to movement in net debt
Opening balance at 31 December 2020 Cash movements Additions/ acquisitions Disposals FX Non-cash movements Closing balance at 31 December 2021 Transferred to assets/ liabilities held for sale Total continuing operations
£m £m £m £m £m £m £m £m £m
Cash & cash equivalents 374.1 150.1 - (16.1) (8.1) - 500.0 - 500.0
Third-party loans (1,252.6) 104.4 (0.2) - (26.3) - (1,174.7) - (1,174.7)
Leases (179.4) 27.8 (20.6) 65.2 2.1 0.2 (104.7) - (104.7)
Unamortised issue costs 6.5 5.1 - - - (4.0) 7.6 - 7.6
Amounts included in gross debt (1,425.5) 137.3 (20.8) 65.2 (24.2) (3.8) (1,271.8) - (1,271.8)
Amounts included in net debt (1,051.4) 287.4 (20.8) 49.1 (32.3) (3.8) (771.8) - (771.8)
Financing derivatives (2.5) (10.6) - - - 14.5 1.4 - 1.4
Total financing liabilities* (1,428.0) 126.7 (20.8) 65.2 (24.2) 10.7 (1,270.4) - (1,270.4)
(* Total financing liabilities
comprise gross debt plus other liabilities relating to financing activities.)
Opening balance at 31 December 2019 Cash movements Additions Disposals FX Non-cash movements Closing balance at 31 December 2020 Transferred to assets/ liabilities held for sale Total continuing operations
£m £m £m £m £m £m £m £m £m
Cash & cash equivalents 272.1 117.2 - - (15.2) - 374.1 23.0 351.1
Third-party loans (1,244.5) (19.2) - - 11.1 - (1,252.6) - (1,252.6)
Leases (185.0) 43.4 (39.6) - 1.2 0.6 (179.4) (67.0) (112.4)
Unamortised issue costs 0.9 7.8 - - - (2.2) 6.5 - 6.5
Amounts included in gross debt (1,428.6) 32.0 (39.6) - 12.3 (1.6) (1,425.5) (67.0) (1,358.5)
Amounts included in net debt (1,156.5) 149.2 (39.6) - (2.9) (1.6) (1,051.4) (44.0) (1,007.4)
Financing derivatives (3.8) (5.1) - - - 6.4 (2.5) - (2.5)
Total financing liabilities* (1,432.4) 26.9 (39.6) - 12.3 4.8 (1,428.0) (67.0) (1,361.0)
(* Total financing liabilities
comprise gross debt plus other liabilities relating to financing activities.)
( )
16. Related party disclosure
The following table provides the total amount of significant transactions
which have been entered into by the Group with related parties for the
relevant financial year and outstanding balances at the year 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 Amounts owed by related parties
Related party £m £m £m £m £m £m
Joint ventures 2021 0.7 0.1 16.7 - - 1.3
2020 5.9 0.1 19.3 0.3 - 0.2
Group pension plans 2021 - - - - 5.9 -
2020 - - - - 5.9 -
17. Legal claims
The Company and certain subsidiaries are, from time to time, parties to legal
proceedings and claims which arise in the normal course of business.
Provisions have been made where the Directors have assessed that a cash
outflow is probable. All other claims are believed to be remote or are not yet
ripe.
18. Exchange rates
The principal exchange rates applied in the preparation of these financial
statements were as follows.
Average rate (per £) 2021 2020
US Dollar 1.38 1.28
Australian Dollar 1.83 1.86
Euro 1.16 1.13
Canadian Dollar 1.73 1.72
Chilean Peso 1,043.54 1,015.14
South African Rand 20.34 21.06
Brazilian Real 7.42 6.61
Russian Rouble 101.45 92.76
Chinese Yuan 8.88 8.86
Indian Rupee 101.70 95.12
Closing rate (per £)
US Dollar 1.35 1.37
Australian Dollar 1.86 1.77
Euro 1.19 1.12
Canadian Dollar 1.71 1.7
Chilean Peso 1,153.18 970.26
South African Rand 21.57 20.04
Brazilian Real 7.54 7.10
Russian Rouble 101.62 101.33
Chinese Yuan 8.60 8.92
Indian Rupee 100.66 99.76
The Group's operating profit before adjusting items from continuing operations
was denominated in the following currencies.
Restated
(note 1)
2021 2020
£m £m
US Dollar 131.1 161.5
Australian Dollar 51.2 20.3
Canadian Dollar 44. 52.8
Chilean Peso 40.3 42.3
Euro 27.4 40.4
South African Rand 9.1 3.2
Brazilian Real 6.7 6.3
Chinese Yuan 6.0 7.5
Indian Rupee 4.5 7.3
Russian Rouble - 4.8
UK Sterling (27.4) (55.4)
Other 2.5 7.6
Adjusted operating profit 296.2 298.6
19. Events after the balance sheet date
Following the Russian invasion of Ukraine on 24 February 2022, there exists
uncertainty about the Group's ability to recover assets in Russia and Ukraine,
and to continue to trade with customers in those countries. Net assets
across the two countries are c.2% of the total Group and revenues and
operating profits are less than 5% of the total Group. Given the small scale
of these operations relative to the overall Group we do not consider this
event to have any bearing on the Group's ability to continue as a going
concern or the Group's longer term viability.
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