REG - Weir Group PLC - Full Year Results
01/03/2023 07:00
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RNS Number : 4205R Weir Group PLC 01 March 2023
Record orders, strong execution and good strategic progress
Record demand for Weir spares and equipment
• FY AM orders(1) +17%; capitalising on installed base growth and
mining production trends
• FY OE orders(1) +3%; delivering Weir's sustainable and brownfield
solutions
• Q4 mining markets positive, orders(1) +8% against a very strong
comparative
Strong execution: Medium-term targets on track
• FY revenues(1) +21%; outperforming our markets
• FY adjusted operating profit(1,2,3) of £395m, +25%
• Operating margin(2,3) of 16%; +70bps
• Free operating cash conversion of 87%
• Cumulative 17% reduction in absolute scope 1&2 emissions vs.
2019 baseline(2,6)
Increasing balance sheet strength and returns
• Lowered net debt to EBITDA to 1.5x; new £300m debt facility
agreed in January 2023
• Return on capital employed(2) of 15.2%, +320bps
• Full year dividend of 32.8p; +38%
Expecting another year of growth in 2023
• Record opening order book and positive mining markets
• Growth in constant currency revenue, profit and operating margins
• On track to deliver target of 17% operating margin in 2023
• Free operating cash conversion of 80% to 90%
2022 2021 As Constant currency(1) +/-
reported +/-
Continuing Operations(2)
Orders(1) £2,644m £2,323m n/a +14%
Revenue £2,472m £1,934m +28% +21%
Adjusted operating profit(3) £395m £296m +33% +25%
Adjusted operating margin(3) 16.0% 15.3% +70bps +60bps
Adjusted profit before tax(3) £348m £249m +40% n/a
Statutory profit before tax £260m £209m +24% n/a
Adjusted earnings per share(3) 98.4p 71.3p +38% n/a
Return on capital employed 15.2% 12.0% +320bps n/a
Total Group
Statutory profit after tax £214m £259m -17% n/a
Statutory earnings per share 82.5p 99.7p -17% n/a
Free operating cash conversion 87% 63% n/a n/a
Dividend per share 32.8p 23.8p +38% n/a
Net debt(4) £797m £773m -£24m n/a
(See footnotes on page 5)
Jon Stanton, Chief Executive Officer said:
"The value creation opportunity for Weir is compelling. The mining industry is
playing a crucial role in meeting the twin demands for decarbonisation and
economic growth, resulting in multi-decade demand growth for critical metals.
Weir is the focused mining technology leader that is well placed to
capitalise. Deeply embedded in our customer operations and offering unique
engineering expertise and innovation, our solutions are delivering excellent
outcomes for all stakeholders.
This is reflected in the proven performance of our mining businesses through
the cycle, and was further evidenced in 2022. We are making mining smarter,
more efficient and sustainable. We are growing faster than our markets,
strengthening margins and cash and reducing our CO(2) footprint. We are
underpinning our continued progress through our commitment to our future
technology roadmap with increased investment in R&D, and a sharper focus
on execution through Performance Excellence.
So our future is exciting. Reflecting high levels of confidence in this
strategy to deliver long-term sustainable profitable growth, the Board has
approved a final dividend of 19.3p, an increase of 57% on 2021."
A webcast of the management presentation will begin at 08:00 (GMT) on 1 March
2023 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/) .
CHIEF EXECUTIVE OFFICER'S REVIEW
Introduction
2022 was a landmark year for Weir. We demonstrated the benefits of focus:
winning share in favourable markets, executing strongly and taking significant
steps towards achieving our medium-term targets. We outgrew our markets and
delivered significant year-on-year growth in revenue, profit and cash
generation.
We also made excellent strategic progress. Highlights included the launch of
our redefined mill circuit, our production partnership model in ESCO and the
next generation of our proprietary digital platform, Synertrex(®). Our safety
performance improved with a 13% like-for-like reduction in the rate of total
incidents(5) (TIR), while in July, we announced our Performance Excellence
programme, which will drive further operational efficiency across the Group.
Our recent acquisitions, Motion Metrics and Carriere Industrial Supply (CIS),
both performed very well and ahead of initial expectations.
Our strong performance across all metrics reflects the outstanding work of
Weir colleagues across the globe, and I would like to take this opportunity to
thank them. Collectively, they dealt with the consequences of the horrific
Russian invasion of Ukraine, widespread disruption to global supply chains,
inflation at the highest level in a generation and the lingering effects of
both the Covid-19 pandemic and 2021 cyber incident. To have delivered so
strongly in 2022 with all of this going on is a testament to their commitment,
passion and resilience. I am extremely proud of the team.
Looking ahead, I am hugely excited about the future of Weir and our commitment
to deliver excellent outcomes for all stakeholders. In 2022 we set out a
refreshed equity case centred on our leading position in highly attractive
markets and our unique capabilities to make mining smart, efficient and
sustainable. This overall positioning and focus gives us confidence that we
can outgrow our markets, expand our margins and convert our earnings to cash,
while remaining resilient and doing the right thing for our people and the
planet, all of which was demonstrated in 2022.
Growth: Ore production trends drive strong demand for Weir solutions
Throughout the year, conditions in mining markets were highly favourable.
Across most key commodities, market prices were significantly above miners'
cost to produce and end market demand was high. This was particularly the case
for energy transition metals, such as copper, as physical inventory levels
tightened through the year.
With large greenfield expansion projects slow to convert, miners met demand by
accelerating production from existing assets and by developing harder and more
complex ore deposits. This, coupled with a growing installed base and the
effects of declining ore grades, drove record demand for our aftermarket
spares and expendables. In OE, we won market share as miners ordered Weir
solutions to debottleneck and improve the efficiency of existing assets. In
particular, we saw strong demand for our industry-leading Warman(®) mill
circuit pumps that have significant productivity and sustainability benefits
relative to competitor solutions.
Demand was strong in all regions, with North America supported by particularly
high levels of activity in the Canadian oil sands and Asia Pacific seeing a
strong recovery in Australia. Our growing geographical footprint allowed us to
capitalise on new demand in ASEAN countries as miners made strategic
investments in the region, such as in nickel expansion projects in Indonesia.
Our new service centre in Kazakhstan enabled us to support growing demand from
customers in Central Asia, including a series of recently developed copper
projects.
In infrastructure markets, demand was stable at high levels in the first half
of the year. Demand was lower in Europe during the second half as activity
levels in end markets fell. Demand also softened, to a lesser extent, in the
US during the fourth quarter.
On a constant currency basis, the Group delivered strong year-on-year order
growth of 14%.
Demand for AM was particularly strong and constant currency orders grew 17%
year-on-year, reaching record levels.
In OE, constant currency orders were up 3% year-on-year. Orders in the prior
year included the £36m Ferrexpo HPGR and £32m Indonesia electric pumps
orders, and excluding these large orders from the prior year comparator,
constant currency orders were up 16%.
Revenue was 21% higher on a constant currency basis as we converted our order
book.
Margins and resilience: Strong execution delivers operating margin(3)
expansion
In 2022 we were successful in managing a complex operating environment, where
rising levels of inflation were a mainstay and bottlenecks in global logistics
channels were present for much of the year. Our market leading positions
enabled us to increase prices and pass through all input cost inflation, while
our vertically integrated regional manufacturing model gave us protection from
supply chain challenges, and ensured our customers had continued access to our
equipment and spares to keep mines running.
Adjusted operating profit(2,3) was 25% higher than in the prior year on a
constant currency basis and operating margins(2,3) were 16.0%, up 70bps on an
as reported basis. This expansion reflects movement in Minerals revenue mix
towards AM, underlying operational efficiency and the mitigation of
inflationary pressures, and represents good progress towards our 2023 target
of 17% operating margin.
In July 2022, we launched our Performance Excellence programme outlining our
ambition to grow margins above 17% beyond 2023. The programme will drive
further operational efficiency across the Group and deliver £30m of
annualised run-rate savings in 2025, with an expected one-off cost of up to
£45m phased across the three years. Plans to deliver the programme remain on
track, and as expected, we will see the early benefits in 2023.
Returns: Free operating cash conversion target achieved
Early in 2022 we introduced a new free operating cash conversion metric, which
measures free operating cash flow relative to operating profit(3). Our target
for 2022 was to achieve between 80% and 90%.
Our focus on execution and working capital efficiency delivered significant
cash generation, particularly during the final quarter of the year, resulting
in full year free operating cash conversion of 87%.
Our strong cash conversion meant net debt to EBITDA fell to within our target
range, being 1.5x at the end of December (2021: 1.9x). While, year-on-year,
return on capital employed improved by 320bps to 15.2%.
In January 2023 we put in place a new £300m medium-term loan which, combined
with our US$800m sustainability linked bond and US$800m multi-currency
revolving credit facility, ensures the Group retains substantial levels of
liquidity at highly favourable interest rates. This was followed, in February
2023, by the repayment of the final US$200m tranche of the Group's US Private
Placement debt.
Reflecting high levels of confidence in our strategy and future prospects, the
Board has today announced a final dividend of 19.3 pence per share. This
equates to a total full year dividend of 32.8 pence per share, which is 33% of
adjusted EPS for the period, in line with our capital allocation policy.
Safety and sustainability: SBTi aligned absolute carbon reduction targets
Sustainability is core to Weir's purpose and is a critical priority for the
mining industry. In 2022, we committed to more ambitious SBTi aligned carbon
reduction targets. These included an update to absolute, rather than intensity
linked, reduction targets for scope 1&2 emissions, and also the
introduction of a scope 3 emissions reduction target. Our scope 3 emissions
include our customers' scope 1&2 emissions, and Weir solutions and
technology are playing a key role in helping our customers reduce their
emissions and deliver against their own carbon reduction targets. Indeed, our
top ten customers have all set targets to reduce scope 1&2 emissions by
between 30% and 50% by 2030.
During the year, we delivered a 3% absolute year-on-year reduction in our
scope 1&2 emissions, in the context of revenue growth of over 20%. We also
increased the amount of electricity we source from renewables to 22% as we
installed new solar panel arrays at our sites in Chile, Malaysia and South
Africa. This means we have now delivered a cumulative 17% reduction in our
absolute scope 1&2 emissions, relative to our 2019 baseline.
We also started work to quantify scope 4, avoided emissions, for key products
in our portfolio. Over time, we anticipate using the outputs of this work to
enhance our overall customer value proposition, while creating the potential
for Weir to recognise green revenue.
With respect to safety, our TIR(5) for the year was 0.41, representing a 9%
improvement on the prior year of 0.45. Excluding the impact from acquired
businesses, 2022 TIR(5) reduced by 13% to 0.39. During the year we also
enhanced our strategy on safety with the launch of our new Zero Harm
Behaviours framework, which will drive further improvements as we seek to
eliminate harm in our operations.
Compelling value creation opportunity for all stakeholders
The long-term value creation opportunity for the Group is compelling. Mining
has a critical role to play in decarbonisation as, over the coming decades,
the world needs significantly more metals to transition to Net Zero, and meet
increasing demands driven by continued GDP growth. However, to unlock the
supply needed, the mining industry must adopt new technologies and become more
sustainable.
Weir's unique world class engineering expertise, coupled with our clear
strategic framework focused on People, Customer, Technology and Performance
means we are well placed to capitalise on this opportunity.
Critical to this is our technology roadmap and R&D framework. In 2022, we
reiterated our commitment to increase our investment in R&D to 2% of
revenue, while also increasing the amount of spend allocated to addressing our
customers' biggest sustainability challenges. These can be summarised in the
five key themes of: Move less rock; Use less energy; Use water wisely; Create
less waste; and Boost with digital.
Our technology roadmap aligns to these themes, and in 2022, we launched
several new solutions. This included our redefined mill circuit, which is
underpinned by our new technology partnerships with STM for stirred mills and
Eriez for coarse particle flotation. These technologies, when packaged into an
integrated solution with our energy saving High Pressure Grinding Rolls
(HPGRs) and our industry leading cyclones and pumps, significantly reduce ore
reprocessing, improving mine productivity while reducing energy and water
consumption.
We successfully rolled out Motion Metrics(TM) products through the ESCO sales
network and integrated the technology with ESCO hardware to create a packaged
productivity solution. This underpins our production partnership model, and
has enabled us to explore new ways of working with our customers where our
revenue is linked to the productivity benefits we deliver.
Going forward, our ambition is to capitalise on our footprint in both the
mining pit and processing plant by connecting and integrating our solutions
across the full value chain to deliver compounding benefits.
Specifically, in our mine of the future, Motion Metrics(TM) vision technology
will ensure only the right rock is moved from the pit to the plant to be
processed, and data captured on critical rock characteristics will enable
processing to be optimised. Our processing technologies will reduce energy
consumption and ensure that water is used wisely, and by having only the right
ore entering the process, efforts will be expended on processing higher grade
material, rather than waste. For the waste that is produced, our
Terraflowing(™) solutions will balance water recovery with tailings
stability and energy consumption. Furthermore, our proprietary digital systems
will capture data across the whole value chain, enabling pre-emption of
potential issues and operating conditions to be optimised.
This will further strengthen our position as a critical supplier to the mining
industry as it pursues its sustainability ambitions. The combination of this
market opportunity, coupled with our unique capabilities, underpins our
commitment to deliver excellent outcomes for all our stakeholders.
Outlook
We begin 2023 with a record order book and positive conditions in mining
markets, where high levels of activity, coupled with miners' focus on
sustainable operations, are driving demand for our AM spares and brownfield OE
solutions.
In 2023, we therefore expect to deliver growth in constant currency revenue,
profit and operating margin. We are on track to deliver our target of 17%
operating margin in 2023, supported by operational efficiencies and early
benefits from Performance Excellence, and expect free operating cash
conversion of between 80% and 90%.
Further out, the long-term fundamentals for mining and our business are highly
attractive, underpinned by decarbonisation, GDP growth and the transition to
sustainable mining. We have a clear strategy to grow ahead of our markets,
with specific growth initiatives underpinning our ambition to deliver
through-cycle mid-to-high single digit percentage revenue growth. Beyond 2023,
Performance Excellence will support margin expansion above 17% and we expect
free operating cash conversion to increase to between 90% and 100%.
Board changes
After completing her full nine-year term, Mary Jo Jacobi will be stepping down
from the Board at the AGM and Ebbie Haan has decided not to seek re-election.
We are Weir strategic framework: 2022 performance
Each year the Group sets strategic and ESG measures aligned to the 'We are
Weir' framework of People, Customer, Technology and Performance. The table
below summarises our 2022 performance and rating against each of these
measures, with full details outlined in our 2022 Annual Report.
Strategic initiatives 2022 Measures 2022 Performance and rating
People Deliver on Zero Harm for our people and the environment • Retain our talent • Voluntary attrition < 11% G
Accelerate our purpose-driven culture and lead in inclusion, diversity and
equity
Create talent and capabilities for the future
• Build our digital capability • Growth in core digital team G
• Senior Leaders trained on Weir Digital Vision G
• Maintain top quartile engagement scores • Engagement score of 8.5; top quartile of benchmark G
• Improve our Safety Total Incident Rate (TIR)* • On a like-for-like basis, TIR of 0.39 (2021: 0.45) G
• Improve our gender diversity* • % of female employees improved by 0.7% G
Customer Outgrow our markets through voice-of-customer led initiatives • Execute our top 3 strategic growth initiatives in each division • Minerals executed its strategy on Integrated Solutions, spares and OE G
market share gains
Solve our customers' biggest smart, efficient and sustainable challenges
• ESCO executed its strategy on mining G.E.T., infrastructure G.E.T. and
mining buckets
Show leadership in our industries' pathway to Net Zero G
• Establish new strategic alliances • CIS acquisition; and new STM & Eriez partnerships G
• Develop our scope 4 value proposition* • Phase 1 product evaluations completed G
Technology Invest in innovating transformational solutions • Secure market acceptance of our top 3 horizon 1 innovations in each • Innovations launched; market acceptance ongoing G
division
Digitally enable everything we do
Create new business and business models from data and insights
• Digitise our current business model • Minerals: Grew Synertrex installed base G
• ESCO: CA$26m sales from Motion Metrics
G
• Create and deploy Future Back Strategy • Minimum viable proposition for priority opportunities developed and G
mobilised
• Build pipeline and commercialise sustainability focused technologies • Priority projects underway or completed G
and solutions*
• Progress our priority acceleration R&D projects* • Ore characterisation: equipment on customer site for commencement of G
trial
• Additive manufacturing: technologies successfully integrated
G
Performance Drive clear, lean and agile operations and supply chain • Improve our lean scores • Improved Level 2 & 3 scores G
Deliver high quality, efficient back-office functions
Expand margins and deliver strong cash conversion
• Grow the percentage of Group revenue covered by Finance shared • >80% Group revenue covered by Finance shared services G
services
• Reduce scope 1&2 CO(2)e vs 2019 base aligned with SBTi* • 17% absolute CO(2)e reduction achieved and verified G
• Evaluate SBTi scope 3 targets* • Scope target in process of being validated by SBTi and embedded in G
CO(2)e strategy
*ESG measures
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 2 of the Audited Results
contained in this press release.
1. 2021 restated at 2022 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 £308m (2021: £257m). 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
£321m (2021: £156m).
4. 2021 has been restated to reflect the finalisation of the Motion
Metrics opening balance sheet. Details of the restatement are provided in note
1 of the Audited Results contained in this press release.
5. Total incident rate is an industry standard indicator that measures
lost time and medical treatment injuries per 200,000 hours worked.
6. Market-based absolute CO(2) emissions. 2019 is the baseline year
for our SBTi-aligned Scope 1&2 target of 30% reduction in absolute
emissions by 2030.
DIVISIONAL REVIEW
Minerals
Minerals is a global leader in products and integrated solutions for smart,
efficient and sustainable processing in mining and infrastructure markets.
2022 Summary
• FY: AM orders(1) +18%; demand driven by mining production trends
and growth in installed base
• FY: OE orders(1) +2%; demand driven by sustainable and brownfield
solutions
• Strong execution: revenue(1) +20%; operating profit(1,2) +24%
2022 Operating Review
The Division benefited from high levels of mining activity and growth in its
installed base, which drove strong demand for spares across all product
categories, culminating in record annual AM orders. In OE, customers ordered
solutions to debottleneck and improve the efficiency of existing assets, and
in particular, we saw strong demand for our industry-leading Warman(®) slurry
pumps.
Our focus on execution delivered record levels of divisional revenue and
operating profit. Operating momentum built through the year, resulting in
strong revenue growth and operating margin expansion in the second half of the
year as we converted our growing order book.
People
Safety performance remained a priority for the Division, and this is reflected
in a 25% year-on-year reduction in total incident rate (TIR) to 0.27 (2021:
0.36). This performance positions the Division as one of the safest
organisations in its sector, and is particularly pleasing in the context of
strong revenue growth and increased levels of activity in our facilities.
People development was also in focus, with over 200 customer facing colleagues
completing our proprietary 'Mill Circuit University' training programme, while
in total around 10,000 learning and development courses were completed by
Minerals colleagues during 2022.
Customers
During the year, the Division made good progress in its geographical expansion
initiative, particularly in Central and South East Asia. Notable progress
included expansion of our installed base across multiple projects in
high-grade nickel applications in Indonesia, with £33m of OE orders received
through the year for packages of GEHO positive displacement pumps.
Across our core product lines customers continued to recognise the benefits of
our leading technology and global service network. This manifested in market
share gains across the mill circuit, as the Division converted over 75% of its
trials against competitor equipment. Furthermore, good progress was made in
delivering our comminution strategy, including our first sale of a pebble
crushing plant to a large Tier 1 copper mine in South America.
Technology
Technology highlights in the year included new partnership agreements with
Eriez, for course particle flotation technology, and STM, for tower mills.
These technologies, combined with Weir's sustainable solutions, form part of
our redefined mill circuit that has significant energy and efficiency benefits
relative to traditional technologies.
In Q4, the Division also launched the next generation of its proprietary
Synertrex(®) platform. The system provides data-driven insights on equipment
performance, enabling early identification of issues and optimised maintenance
planning, thereby improving efficiency and mine productivity.
Performance
The Division continued to drive operational efficiency, supported by
investments in both systems and capacity. Significant facility investments
included the opening of a new facility in Bangalore, which will drive
efficiencies across our operations in India, and also a new rubber mixing
facility in Malaysia.
The roll-out of SAP also progressed well, with operations in India
successfully migrating in Q3, meaning around 85% of the Division now operates
the system. The final stages of the roll-out are scheduled for 2023, with the
migration of our Middle East and Africa businesses scheduled for the first
half of the year.
2022 Financial Review
Constant currency £m H1(1) H2 2022 2021(1) Growth(1)
Orders OE 265 296 561 547 2%
Orders AM 687 689 1,376 1,170 18%
Orders Total 952 985 1,937 1,717 13%
Revenue OE 200 258 458 425 8%
Revenue AM 597 725 1,322 1,057 25%
Revenue Total 797 983 1,780 1,482 20%
Adjusted operating profit(2) 138 186 324 261 24%
Adjusted operating margin(2) 17.3% 18.9% 18.2% 17.6% 60bps
Operating cash flow(2) 106 280 386 227 70%
Book-to-bill 1.19 1.00 1.09 1.16
1. 2021 and 2022 H1 restated at 2022 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 2 of the
Audited Results contained in this press release for further details of
alternative performance measures.
Orders increased by 13% on a constant currency basis to £1,937m (2021:
£1,717m) with a book-to-bill of 1.09 reflecting strong order growth and a
focus on execution. OE orders increased 2% year-on-year, with demand
predominantly driven by brownfield solutions to debottleneck and improve the
efficiency of existing assets, as miners accelerated ore production and large
projects remained slow to convert. Through the year, we saw benefits from our
geographical expansion strategy, with our increased presence in Central and
South East Asia driving strong growth as we supplied equipment to copper and
nickel mines in the region. AM orders were up 18% year-on-year as prices of
most key commodities remained well above cost of production, incentivising
miners to increase activity levels and develop more complex and lower grade
ore bodies. Growth also reflects year-on-year price increases. AM orders
represented 71% of total orders (2021: 68%). In total, mining end markets
accounted for 75% of total orders (2021: 77%).
Revenue was 20% higher on a constant currency basis at £1,780m (2021:
£1,482m) as order activity remained strong and the Division's focus on
execution converted orders to revenue. Revenue grew through the period, with
H2 revenue 23% higher on a sequential basis. Product mix moved slightly
towards AM, which accounted for 74% of full year revenue (2021: 71%).
Adjusted operating profit increased 24% on a constant currency basis to £324m
(2021: £261m) as the Division benefited from increased volumes, favourable
mix and strong operational execution. Costs in the year included an adverse
transactional FX impact of £9m, while discretionary spend, such as travel,
returned to normal levels following lower spend during the Covid-19 pandemic.
Prior year costs also included under-recoveries due to the cyber incident in
Q3 and a one-off gain from the sale of a property in China.
Adjusted operating margin on a constant currency basis was 18.2% (2021:
17.6%), with the +60bps improvement driven by favourable mix, operating
efficiency and the non-repeat of under-recoveries from the cyber incident in
the prior year. Benefits are partially offset by the impact of adverse
transactional FX and the normalisation of discretionary spend.
Operating cash flow(2) increased by 70% to £386m (2021: £227m) reflecting
growth in operating profit and a reduced working capital outflow of £18m
(2021: outflow of £89m). Working capital movements comprised inventory build
to support the growing order book and a reduction in receivables as revenue in
H2 was more evenly loaded relative to the prior year.
ESCO
ESCO is a global leader in Ground Engaging Tools (G.E.T.), attachments, and
artificial intelligence and machine vision technologies that optimise
productivity for customers in global mining and infrastructure markets.
2022 Summary
• FY: Orders(1) +17%; demand for expendables driven by high levels
of mining activity
• Strong execution: revenue(1) +22%; operating profit(1,2) +18%
2022 Operating Review
The Division benefited from high levels of activity in mining markets, which
drove strong demand for expendables. Growth was also supported by a
contribution from acquired businesses, with both Motion Metrics and Carriere
Industrial Supply (CIS) performing ahead of expectations. The Division's focus
on execution delivered strong year-on-year growth in revenue and operating
profit.
People
In terms of safety, excluding the impact from acquired businesses, TIR was
0.90 (2021: 0.85). While an increase on the prior year, the Division achieved
a reduction in incident severity and a decrease in TIR in its North American
foundries, both of which were focus areas for the year.
Key learning and development initiatives included training programmes for the
next generation of operational leaders and the roll-out of the Division's
foundry process control training. Other highlights included technical training
for ESCO sales teams on Motion Metrics(TM) solutions.
Customers
Across our core mining G.E.T. portfolio, the Division gained market share with
positive net conversions in the year. We saw particularly strong conversion
rates in Indonesia and Australia, and in due course, expect to see a
corresponding increase in demand for expendables in these regions. In
addition, customer interest in our mining attachments proposition continued to
gain traction, with orders up significantly year-on-year, including the first
sale of cable shovel buckets to longstanding G.E.T. customers in Chile and
Canada.
The Division also made good progress on its geographical expansion initiative
and strategy to have direct channels to market in all major mining regions.
This included the acquisition of CIS and the establishment of a direct channel
to market, in partnership with Minerals, in Central Asia.
Technology
The performance of Motion Metrics was a technology highlight for the Division.
In addition to core range expansions and new module releases, the technology
was successfully integrated with ESCO's hardware to create a packaged
productivity solution that underpins ESCO's production partnership model.
During the year, the first reference site for this new model was established,
whereby our revenue is directly linked to the productivity benefits we
deliver. Incremental productivity benefits will be achieved through the
Division's proprietary ore characterisation technology, and initial field
trials of this commenced in the fourth quarter.
The Division also made progress on a number of new digital tools to support
operations. This included the launch of a new digital supply chain tool, and
the development of a digital configurator, which customers will use when
ordering mining attachments. Both systems will improve customers' buying
experience, while also driving operational efficiency.
Performance
Improving operational efficiency of foundry operations is a key priority for
the Division. Good progress was made in the year with the roll-out of digital
process optimisation tools, and the commencement of the construction of the
Division's new foundry in Xuzhou, China, which will deliver significant
efficiency and capacity benefits. Other footprint investments in the period
included a new facility in Edmonton, Canada, which will improve the efficiency
of the Division's operations in the region.
2022 Financial Review
Constant currency £m H1(1) H2 2022 2021(1) Growth(1)
Orders OE 25 19 44 39 14%
Orders AM 341 322 663 567 17%
Orders Total 366 341 707 606 17%
Revenue OE 17 26 43 37 18%
Revenue AM 312 337 649 532 22%
Revenue Total 329 363 692 569 22%
Adjusted operating profit(2) 53 57 110 93 18%
Adjusted operating margin(2) 16.1% 15.7% 15.9% 16.3% -40bps
Operating cash flow(2) 25 68 93 86 8%
Book-to-bill 1.11 0.94 1.02 1.07
1. 2021 and 2022 H1 restated at 2022 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 2 of the
Audited Results contained in this press release for further details of
alternative performance measures.
Orders increased 17% on a constant currency basis to £707m (2021: £606m).
This includes a £52m contribution from the acquisitions of Motion Metrics and
CIS. Organic order growth of 8% was driven by strong demand for mining
expendables, particularly from customers in South America, and year-on-year
price increases. In infrastructure markets, demand was stable at high levels
in the first half of the year before moving lower in Europe during the second
half and also softening, to a lesser extent, in the US during the fourth
quarter. The Division's book-to-bill for the year was 1.02 as a result of a
combination of growing orders and strong execution. AM represented 94% of
orders (2021: 94%) reflecting ESCO's business model as a provider of highly
engineered expendables to mining and infrastructure markets.
Revenue increased 22% on a constant currency basis to £692m (2021: £569m).
Mining represented 60% of revenues (2021: 56%) and infrastructure was 28%
(2021: 31%).
Adjusted operating profit increased 18% on a constant currency basis to £110m
(2021: £93m) as the Division benefited from increased volumes. In the prior
year, the Division benefited from the favourable phasing of price increases
relative to raw material purchase contract renewals, and from temporary cost
savings as discretionary spend, such as travel, was at lower levels during the
Covid-19 pandemic.
Adjusted operating margin of 15.9% was 40bps lower on a constant currency
basis (2021: 16.3%). Offsetting operational efficiencies was the reversal of
non-recurring benefits in the prior year and the dilutive effect of Motion
Metrics as it delivered significant year-on-year revenue growth and was break
even at an operating profit level. This was in line with expectation as the
business scaled rapidly while also investing significantly in R&D. In line
with the acquisition plan, we expect Motion Metrics to be accretive to ESCO
operating margins in 2023.
Operating cash flow(2) increased by 8% to £93m (2021: £86m), reflecting
growth in operating profit offset by a higher working capital outflow of £33m
(2021: outflow of £13m). Growth in working capital was driven by inventory
build and an increase in receivables, reflecting order book and revenue growth
respectively.
GROUP FINANCIAL REVIEW
Constant currency(1) As reported
Continuing Operations £m 2022 2021 Growth 2021 Growth
Orders OE 605 586 3% n/a n/a
Orders AM 2,039 1,737 17% n/a n/a
Orders Total 2,644 2,323 14% n/a n/a
Revenue OE 501 462 9% 446 12%
Revenue AM 1,971 1,589 24% 1,488 32%
Revenue Total 2,472 2,051 21% 1,934 28%
Adjusted operating profit(2) 395 316 25% 296 33%
Adjusted operating margin(2) 16.0% 15.4% 60bps 15.3% 70bps
Book-to-bill 1.07 1.13 n/a 1.14 n/a
Total Group £m
Operating cash flow(2) 448 n/a n/a 266 68%
Free operating cash conversion 87% n/a n/a 63% n/a
Net debt 797 n/a n/a 773 -24
1. 2021 restated at 2022 average exchange rates.
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 2 of the
Audited Results contained in this press release for further details of
alternative performance measures.
Continuing operations orders at £2,644m increased 14% on a constant currency
basis with growth in both Divisions. Minerals orders were up 13% with AM up
18% as prices of most key commodities remained well above cost of production,
incentivising miners to increase activity levels and develop more complex and
lower grade ore bodies. ESCO orders increased 17% including a £52m
contribution from the acquisitions of Motion Metrics and CIS, while organic
order growth was driven by strong demand for mining expendables, particularly
from customers in South America, and year-on-year price increases. 77% of
orders related to aftermarket compared to 75% in the prior year.
Continuing operations revenue of £2,472m increased 21% on a constant
currency basis. Minerals revenue grew 20% on a constant currency basis at
£1,780m (2021: £1,482m) ESCO revenue increased 22% on a constant currency
basis to £692m (2021: £569m). Aftermarket accounted for 80% of revenues, up
from 78% in the prior year. Reported revenues increased 28% (2021: £1,934m),
impacted by a foreign exchange translation tailwind of £117m. Overall
book-to-bill at 1.07 reflects strong order growth and focus on execution,
meaning that we enter 2023 with a record order book.
Continuing operations adjusted operating profit increased by £99m (33%) to
£395m on a reported basis (2021: £296m). Excluding a £20m foreign currency
translation tailwind, the constant currency increase was £79m (25%). As
explained further in the Divisional reviews, Minerals adjusted operating
profit increased on a constant currency basis to £324m (2021: £261m) and
ESCO increased by 18% on a constant currency basis to £110m (2021: £93m).
Unallocated costs are £1m higher than the prior year at £39m.
Continuing operations adjusted operating margin of 16.0% is up 60bps versus
last year on a constant currency basis and up 70bps as reported. The main
drivers of the margin improvement are increased volumes, favourable mix and
strong operational execution. These are partially offset by an adverse
transactional foreign exchange impact and re-investment in our medium-term
strategic priorities, including R&D increasing to 1.9% of sales, and the
anticipated year one dilutive effect of Motion Metrics. As expected, we saw a
return of discretionary spend, such as travel, to normal levels following
lower spend during the Covid-19 pandemic and this was broadly offset by the
non-repeat of the prior year cyber under-recoveries.
Continuing operations statutory operating profit of £308m was £51m
favourable to the prior year, with the increase in adjusted operating profit
of £99m being offset by an increase in adjusting items.
Continuing operations adjusting items increased by £47m to £87m (2021:
£40m). Intangibles amortisation increased by £1m to £36m (2021: £35m).
Exceptional items increased by £49m to £49m (2021: net nil), primarily due
to the wind down of our Russian operations, which totalled £44m. This
reflects the loss on disposal of our ESCO Russia business in September 2022,
as well as the write down of our Minerals Russia business and associated
assets as trading is wound down. Continuing operations included Russia revenue
of £52m and adjusted operating profit of £8m which was slightly ahead of the
prior year. Other exceptional items included acquisition and integration costs
relating to Motion Metrics and Carriere Industrial Supply of £2m and initial
costs relating to our Performance Excellence programme of £3m. Other
adjusting items relating to the Group's legacy US asbestos-related provision
reduced to £3m (2021: £4m).
Continuing operations net finance costs were £47m (2021: £47m) with a
reduction in finance costs of £2m being offset by lower interest income.
Finance costs decreased following the settlement of private placement debt in
February 2022, which resulted in an improved interest rate mix. This was
partially offset by a foreign currency translation headwind of £4m on USD
denominated debt.
Continuing operations adjusted profit before tax was £348m (2021: £249m),
after a foreign currency translation tailwind of £16m. The statutory profit
before tax from continuing operations of £260m compares to £209m in 2021,
the increase is primarily due to the increase in adjusted operating profit
offset by the increase in adjusting items.
Continuing operations adjusted tax charge for the year of £93m (2021:
£64m) on profit before tax from continuing operations (before adjusting
items) of £348m (2021: £249m) represents an adjusted effective tax rate
(ETR) of 26.6% (2021: 25.6%). Our ETR is principally driven by the
geographical mix of profits arising in our business and, to a lesser extent,
by the impact of Group financing and transfer pricing arrangements. A tax
credit of £45m has been recognised in relation to continuing operations
adjusting items (2021: £9m). This includes an exceptional tax credit of £32m
following the recognition of US tax attributes that were previously held off
balance sheet.
Continuing operations profit after tax before adjusting items is £255m (2021:
£185m). The statutory profit after tax for the year from continuing
operations is £213m (2021: £155m).
Discontinued operations statutory profit after tax for the year from
discontinued operations was £1m (2021: £104m) reflecting a tax credit
related to the Oil & Gas Division which was disposed in the prior year.
Statutory profit for the year after tax from total operations of £214m (2021:
£259m) reflects the increase in profit from continuing operations of £58m
offset by the reduction in discontinued operations of £103m.
Adjusted earnings per share from continuing operations increased by 38% to
98.4p (2021: 71.3p) reflecting the increased profit offset by higher effective
tax rate in the year. Statutory reported earnings per share from total
operations is 82.5p (2021: 99.7p). The weighted average number of shares in
issue was 258.7m (2021: 259.3m).
Acquisition of Carriere Industrial Supply
The Group completed the acquisition of Carriere Industrial Supply Limited on 8
April 2022 for an enterprise value of CAD$33m (£20m) less customary debt and
working capital adjustments, which resulted in initial cash consideration of
£16m and deferred consideration of £3m, of which £1m has now been paid. CIS
contributed £27m to revenue and adjusted operating profit of £6m in the
period from acquisition. These values are inclusive of revenue and margin
which would have been earned pre-acquisition on sales from ESCO to CIS under
the former distributor model.
Cash flow and net debt
Cash generated from total operations(2) increased by £182m to £448m (2021:
£266m) in the year, with the prior year including an outflow of £14m from
discontinued operations. The cash generated from continuing operations(2)
increased by £168m primarily driven by the increase in adjusted operating
profit, coupled with an improvement in working capital of £54m (2022: outflow
of £49m vs 2021: £103m). The outflow in working capital in the year reflects
our continued investment in growth, with inventory increasing as operations
prepare to execute a record closing order book. This was partially offset by a
decrease in debtors as we seek to improve our cash cycle, and despite 15%
year-on-year revenue growth in the last quarter. As a result, working capital
as a percentage of sales decreased to 24% from 28% in the prior year.
Continuing operations utilised non-recourse invoice discounting facilities,
primarily customers supply chain financing facilities, of £45m (2021: £19m)
and suppliers chose to utilise supply chain financing facilities of £54m
(2021: £33m). Net cash generated from operations is £321m (2021: £156m).
Net capital expenditure increased by £19m to £58m (2021: £39m), in part due
to the prior year including £12m net proceeds from the sale of a property in
China. Lease payments of £31m increased from £28m last year mainly due to
the acquisitions of Motion Metrics and Carriere Industrial Supply.
Free operating cash flow increased by £157m to £342m (2021: £185m)
resulting in operating cash conversion (refer to note 2 of the Audited
Results) of 87% (2021: 63%). This was a result of the above noted improvement
in cash generation, partially offset by the increase in capital expenditure in
the year. Over the medium-term, we continue to target operating cash
conversion of 90% to 100% driven by working capital efficiency and maintaining
capex and lease costs close to one times depreciation. Capex is likely to be
elevated above this level for the next year 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 2023.
Free cash flow from total operations was an inflow of £193m (2021: £62m). In
addition to the movements noted above, this was primarily impacted by an
increase in tax payments of £11m and an £11m decrease in proceeds on
settlement of derivative financial instruments.
Net debt increased by £24m to £797m (2021 restated: £773m) and includes
£115m (2021: £105m) in respect of IFRS 16 'Leases'. The movement reflects
free cash inflow of £193m, offset by foreign exchange retranslation of
£101m, dividends of £67m, acquisition of Carriere Industrial Supply of
£15m, exceptional cash flows of £26m and other movements of £8m. Net debt
to EBITDA on a lender covenant basis was 1.5 times (2021: 1.9 times) compared
to a covenant level of 3.5 times.
In April 2022, the Group completed the refinancing of its US$950m Revolving
Credit Facility (RCF), which was due to expire in June 2023. This was replaced
with a US$800m RCF, which will mature in April 2027, with the option to extend
for up to a further two years. The RCF includes a link to the Group's
sustainability goals and the covenant terms are unchanged. In January 2023,
the Group added a further £300m loan facility, which will expire in January
2024, subject to a one-year extension option. These refinancing actions result
in the Group having more than £800m of immediately available committed
facilities and cash balances following the maturity of US$200m of US Private
placement debt in February 2023.
Pensions
The net IAS 19 funding position improved from a deficit of £57m at December
2021 to a net surplus of £15m at December 2022. This is primarily due to
changes in financial assumptions, which resulted in a gain of £303m (2021:
£54m), mainly due to the rise in discount rates over the period, partially
offset by losses on plan assets of £224m (2021: gain £8m). These movements
contributed to a credit of £65m (2021: £96m) being recognised in the
Consolidated Statement of Comprehensive Income.
Appendix 1 - 2022 continuing operations(1) quarterly order trends
Reported growth
Division 2021 Q1 2021 Q2 2021 Q3 2021 Q4 2021 FY 2022 Q1 2022 Q2 2022 Q3 2022 Q4 2022 FY
Original Equipment 66% 50% 71% 9% 45% -18% -3% 13% 19% 2%
Aftermarket -1% 9% 16% 29% 13% 23% 18% 25% 6% 18%
Minerals 15% 20% 30% 23% 22% 9% 11% 21% 10% 13%
Original Equipment 76% 17% 65% -9% 36% -17% 98% -6% 14% 14%
Aftermarket -2% 31% 34% 40% 24% 37% 19% 14% 1% 17%
ESCO 2% 30% 36% 37% 25% 32% 23% 13% 2% 17%
Original Equipment 67% 48% 71% 8% 45% -17% 2% 12% 19% 3%
Aftermarket -2% 14% 21% 32% 16% 28% 18% 21% 5% 17%
Continuing Ops 11% 22% 31% 26% 22% 15% 14% 19% 8% 14%
Book-to-bill 1.22 1.20 1.14 1.01 1.14 1.22 1.13 1.02 0.95 1.07
Like-for-like growth(2)
Division 2021 Q4 2022 Q1 2022 Q2 2022 Q3 2022 Q4 2022 FY
Original Equipment 9% -18% -3% 13% 19% 2%
Aftermarket 29% 23% 18% 25% 6% 18%
Minerals 23% 9% 11% 21% 10% 13%
Original Equipment -9% -17% 98% -6% 14% 14%
Aftermarket 39% 31% 9% 5% -10% 8%
ESCO 36% 27% 13% 4% -9% 8%
Original Equipment 8% -17% 2% 12% 19% 3%
Aftermarket 32% 26% 15% 18% 1% 14%
Continuing Ops 26% 14% 12% 17% 5% 12%
Book-to-bill 1.01 1.21 1.14 1.02 0.94 1.07
Quarterly orders(3) £m
Division 2021 Q1 2021 Q2 2021 Q3 2021 Q4 2021 FY 2022 Q1 2022 Q2 2022 Q3 2022 Q4 2022 FY
Original Equipment 136 156 132 123 547 113 152 149 147 561
Aftermarket 261 309 274 326 1,170 322 365 342 347 1,376
Minerals 397 465 406 449 1,717 435 517 491 494 1,937
Original Equipment 12 8 11 8 39 10 15 11 8 44
Aftermarket 131 137 142 157 567 178 163 162 160 663
ESCO 143 145 153 165 606 188 178 173 168 707
Original Equipment 148 164 143 131 586 123 167 160 155 605
Aftermarket 392 446 416 483 1,737 500 528 504 507 2,039
Continuing Ops 540 610 559 614 2,323 623 695 664 662 2,644
Like-for-like orders(2,3) £m
Division 2021 Q4 2022 Q1 2022 Q2 2022 Q3 2022 Q4 2022 FY
Original Equipment 123 113 152 149 147 561
Aftermarket 326 322 365 342 347 1,376
Minerals 449 435 517 491 494 1,937
Original Equipment 8 10 15 11 8 44
Aftermarket 157 172 149 149 141 611
ESCO 165 182 164 160 149 655
Original Equipment 131 123 167 160 155 605
Aftermarket 483 494 514 491 488 1,987
Continuing Ops 614 617 681 651 643 2,592
Appendix 2 - Foreign exchange (FX) rates and continuing operations(1) profit
exposure
2022 average FX rates 2021 average FX rates Percentage of FY 2022 operating profits(4)
US Dollar 1.24 1.38 49%
Australian Dollar 1.78 1.83 14%
Euro 1.17 1.16 6%
Canadian Dollar 1.61 1.73 16%
Chilean Peso 1,078.02 1,043.54 14%
South African Rand 20.19 20.34 3%
Brazilian Real 6.39 7.42 3%
Chinese Yuan 8.30 8.88 3%
Indian Rupee 97.06 101.70 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 to Olayan Financing Company in June 2021.
2. Like-for-like excludes the impact of Motion Metrics acquired on 30 November
2021 and Carriere Industrial Supply Limited acquired on 8 April 2022.
3. 2021 restated at 2022 average exchange rates.
4. Profit figures before adjusting items. Refer to note 2 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 2022
Year ended 31 December 2022 Year ended 31 December 2021
Adjusted results Adjusting items (note 5) Statutory results Adjusted results Adjusting items Statutory results
(note 5)
Notes £m £m £m £m £m £m
Continuing operations
Revenue 3 2,472.1 - 2,472.1 1,933.6 - 1,933.6
Continuing operations
Operating profit before share of results of joint ventures 392.3 (87.3) 305.0 294.5 (39.6) 254.9
Share of results of joint ventures 2.5 - 2.5 1.7 - 1.7
Operating profit 394.8 (87.3) 307.5 296.2 (39.6) 256.6
Finance costs (51.0) - (51.0) (52.7) - (52.7)
Finance income 3.7 - 3.7 5.6 - 5.6
Profit before tax from continuing operations 347.5 (87.3) 260.2 249.1 (39.6) 209.5
Tax (expense) credit 6 (92.5) 44.9 (47.6) (63.8) 9.4 (54.4)
Profit for the year from continuing operations 255.0 (42.4) 212.6 185.3 (30.2) 155.1
Profit (loss) for the year from discontinued operations 7 1.2 - 1.2 (2.2) 106.1 103.9
Profit (loss) for the year 256.2 (42.4) 213.8 183.1 75.9 259.0
Attributable to:
Equity holders of the Company 255.8 (42.4) 213.4 182.6 75.9 258.5
Non-controlling interests 0.4 - 0.4 0.5 - 0.5
256.2 (42.4) 213.8 183.1 75.9 259.0
Earnings per share 8
Basic - total operations 82.5p 99.7p
Basic - continuing operations 98.4p 82.0p 71.3p 59.6p
Diluted - total operations 82.0p 99.0p
Diluted - continuing operations 97.8p 81.5p 70.8p 59.2p
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2022
Year ended Year ended
31 December 2022 31 December 2021
£m £m
Profit for the year 213.8 259.0
Other comprehensive income (expense)
Losses taken to equity on cash flow hedges - (0.2)
Exchange gains (losses) on translation of foreign operations 223.1 (29.9)
Reclassification of foreign currency translation reserve on disposal of 0.1 (103.4)
operations
Exchange losses on net investment hedges (124.9) (18.2)
Reclassification adjustments on cash flow hedges 0.5 0.1
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 98.7 (151.6)
Other comprehensive income (expense) not to be reclassified to profit or loss
in subsequent periods:
Remeasurements on defined benefit plans 65.3 96.3
Tax relating to other comprehensive income not to be reclassified in (16.3) (21.1)
subsequent periods
Items that will not be reclassified to profit or loss in subsequent periods 49.0 75.2
Net other comprehensive income (expense) 147.7 (76.4)
Total net comprehensive income for the year 361.5 182.6
Attributable to:
Equity holders of the Company 360.8 182.5
Non-controlling interests 0.7 0.1
361.5 182.6
Total net comprehensive income (expense) for the year attributable to equity
holders of the Company
Continuing operations 359.6 183.3
Discontinued operations 1.2 (0.8)
360.8 182.5
CONSOLIDATED BALANCE SHEET
AT 31 DECEMBER 2022
Restated
(note 1)
31 December 2022 31 December 2021
Notes £m £m
ASSETS
Non-current assets
Property, plant & equipment 462.2 415.9
Intangible assets 1,409.9 1,308.4
Investments in joint ventures 15.1 12.3
Deferred tax assets 92.5 57.0
Other receivables 76.8 76.5
Retirement benefit plan assets 14 50.0 -
Total non-current assets 2,106.5 1,870.1
Current assets
Inventories 679.1 516.5
Trade & other receivables 528.9 505.7
Derivative financial instruments 15 8.9 7.1
Income tax receivable 41.3 33.0
Cash & short-term deposits 691.2 564.4
Total current assets 1,949.4 1,626.7
Total assets 4,055.9 3,496.8
LIABILITIES
Current liabilities
Interest-bearing loans & borrowings 406.3 524.1
Trade & other payables 623.5 491.1
Derivative financial instruments 15 13.2 3.8
Income tax payable 7.4 7.6
Provisions 12 35.3 36.3
Total current liabilities 1,085.7 1,062.9
Non-current liabilities
Interest-bearing loans & borrowings 1,082.1 812.8
Other payables 1.0 -
Derivative financial instruments 15 - 0.1
Provisions 12 62.9 69.0
Deferred tax liabilities 51.4 40.8
Retirement benefit plan deficits 14 34.9 56.7
Total non-current liabilities 1,232.3 979.4
Total liabilities 2,318.0 2,042.3
NET ASSETS 1,737.9 1,454.5
CAPITAL & RESERVES
Share capital 32.5 32.5
Share premium 582.3 582.3
Merger reserve 332.6 332.6
Treasury shares (14.3) (5.3)
Capital redemption reserve 0.5 0.5
Foreign currency translation reserve (108.5) (206.5)
Hedge accounting reserve 1.9 1.5
Retained earnings 899.5 705.9
Shareholders' equity 1,726.5 1,443.5
Non-controlling interests 11.4 11.0
TOTAL EQUITY 1,737.9 1,454.5
The financial statements were approved by the Board of Directors and
authorised for issue on 1 March 2023.
JON STANTON JOHN HEASLEY
Director Director
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2022
Year ended Year ended
31 December 2022 31 December 2021
Notes £m £m
Total operations
Cash flows from operating activities 16
Cash generated from operations 447.8 266.0
Additional pension contributions paid (9.7) (7.8)
Exceptional and other adjusting cash items (14.2) (8.6)
Exceptional cash items - acquired vendor liabilities (9.7) (11.1)
Income tax paid (93.4) (82.4)
Net cash generated from operating activities 320.8 156.1
Cash flows from investing activities
Acquisitions of subsidiaries, net of cash acquired 16 (15.2) (67.9)
Purchases of property, plant & equipment (56.1) (44.4)
Purchases of intangible assets (6.6) (8.4)
Exceptional cash item - proceeds from sale of property - 15.8
Other proceeds from sale of property, plant & equipment and intangible 4.4 14.3
assets
Disposals of discontinued operations, net of cash disposed and disposal costs 7,16 (0.1) 258.5
Exceptional cash item - disposal of ESCO Russia 16 (2.0) -
Disposals of joint ventures 16 - 24.0
Interest received 4.6 2.6
Dividends received from joint ventures 2.7 0.7
Net cash (used in) generated from investing activities (68.3) 195.2
Cash flows from financing activities
Proceeds from borrowings 822.8 794.1
Repayments of borrowings (958.9) (903.4)
Lease payments (30.5) (27.8)
Settlement of derivative financial instruments (0.3) 10.6
Interest paid (49.9) (45.6)
Dividends paid to equity holders of the Company 9 (66.7) (29.8)
Dividends paid to non-controlling interests (0.3) (0.4)
Purchase of shares for employee share plans (20.0) (15.0)
Net cash used in financing activities (303.8) (217.3)
Net (decrease) increase in cash & cash equivalents (51.3) 134.0
Cash & cash equivalents at the beginning of the year 500.0 374.1
Foreign currency translation differences 28.8 (8.1)
Cash & cash equivalents at the end of the year 16 477.5 500.0
The cash flows from discontinued operations included above are disclosed
separately in note 7.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
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 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 for the year - - - - - (151.1) (0.1) 333.7 182.5 0.1 182.6
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)
Dividends paid to non-controlling interests - - - - - - - - - (0.4) (0.4)
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
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 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
Profit for the year - - - - - - - 213.4 213.4 0.4 213.8
Exchange gains on translation of foreign operations - - - - - 222.8 - - 222.8 0.3 223.1
Reclassification of foreign currency translation reserve on disposal of - - - - - 0.1 - - 0.1 - 0.1
operations
Exchange losses on net investment hedges - - - - - (124.9) - - (124.9) - (124.9)
Reclassification adjustments on cash flow hedges - - - - - - 0.5 - 0.5 - 0.5
Remeasurements on defined benefit plans - - - - - - - 65.3 65.3 - 65.3
Tax relating to other comprehensive income - - - - - - (0.1) (16.3) (16.4) - (16.4)
Total net comprehensive income for the year - - - - - 98.0 0.4 262.4 360.8 0.7 361.5
Cost of share-based payments inclusive of tax credit - - - - - - - 8.9 8.9 - 8.9
Dividends - - - - - - - (66.7) (66.7) - (66.7)
Purchase of shares for employee share plans - - - (20.0) - - - - (20.0) - (20.0)
Dividends to non-controlling interests - - - - - - - - - (0.3) (0.3)
Exercise of share-based payments - - - 11.0 - - - (11.0) - - -
At 31 December 2022 32.5 582.3 332.6 (14.3) 0.5 (108.5) 1.9 899.5 1,726.5 11.4 1,737.9
1. Accounting policies
A. Basis of preparation
The audited results for the year ended 31 December 2022 ("2022") 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
2022 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
2022.
Statutory financial statements for the year ended 31 December 2021 ("2021"),
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 2021 and for the year ended
31 December 2022 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 2022 will be delivered
to the Registrar of Companies and made available to all Shareholders in due
course.
These financial statements are presented in Sterling. All values are rounded
to the nearest 0.1 million pounds (£m) except where otherwise indicated.
The financial statements are also prepared on a historic cost basis except
where measured at fair value as outlined in the accounting policies.
Going concern
The Directors have a reasonable expectation that the Group has adequate
resources to continue to operate for a period of at least 12 months from the
date of approval of the financial statements. For this reason, they continue
to adopt the going concern basis of preparing the financial statements. In
forming this view the Directors have reviewed the Group's budget and
sensitivity analysis.
Basis of consolidation
The Consolidated Financial Statements include the results, cash flows and
assets and liabilities of The Weir Group PLC and its subsidiaries, and the
Group's share of results of its joint venture. For consolidation purposes,
subsidiaries and joint ventures prepare financial information for the same
reporting period as the Company using consistent accounting policies.
A subsidiary is an entity controlled, either directly or indirectly, by the
Company, where control is achieved when the Group is exposed, or has rights,
to variable returns from its involvement with the investee and has the ability
to affect those returns through its power over the investee. The results of a
subsidiary acquired during the period are included in the Group's results from
the effective date on which control is transferred to the Group. The results
of a subsidiary sold during the period are included in the Group's results up
to the effective date on which control is transferred out of the Group. All
intragroup transactions, balances, income and expenses are eliminated on
consolidation.
Non-controlling interests represent the portion of profit or loss and net
assets in subsidiaries that are not held by the Group and are presented within
equity in the Consolidated Balance Sheet, separately from the Company
Shareholders' equity.
New accounting standards, amendments and interpretations
The accounting policies that 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 2022:
i) Property, plant and equipment: Proceeds before
intended use - Amendments to IAS 16;
ii) Annual improvements to IFRS standards 2018-2020;
iii) Onerous contracts - Cost of fulfilling a contract -
Amendments to IAS 37; and
iv) Reference to conceptual framework amendments to IFRS
3.
The amendments listed above are not considered to have a material impact on
the Consolidated Financial Statements of the Group.
The following new accounting standards and interpretations have been published
but are not mandatory for 31 December 2022:
i) Amendments to IAS 1 - Classification of liabilities as current or
non-current;
ii) Narrow scope amendments to IAS 1, Practice statement 2 and IAS 8;
iii) Amendment to IFRS 16 - Leases on sale and leaseback;
iv) Amendment to IAS 12 - Deferred tax related to assets and liabilities
arising from a single transaction; and
v) IFRS 17 'Insurance contracts' as amended in December 2021.
These amendments have not been early adopted by the Group. The impact
assessment is ongoing, however, from initial review 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.
Climate change
Climate change is considered to be a key element of our overall sustainability
roadmap. 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. Climate change is not considered to have a
material impact on the financial reporting judgements and estimates arising
from our considerations. Overall, sustainability is recognised in the market
as a growth driver for Weir and a key part of our investment case. This is
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.
Specifically we note the following:
• The impact of climate change has been included in the
modelling to assess the viability and going concern status of the Group, both
in terms of the preparation of our Strategic Plan, which underpins our
viability statement modelling, and the modelling of our severe, but plausible
downside scenarios;
• Our assessment of the carrying value of goodwill and
intangible assets included consideration of scenario analysis of potential
climate change on our end markets and this did not introduce a set of
circumstances that were considered could reasonably lead to an impairment;
• The impact on the carrying value and useful lives of tangible
assets has been considered and while we continue to invest in projects to
reduce our carbon impact, there is not considered to be a material impact on
our existing asset base; and
• In May 2021, the Group successfully completed the issuance of
five-year US$800m Sustainability-Linked Notes. The cost of meeting our linked
targets in 2024 has been considered within the above modelling and the impact
is not material.
Further detail on our science-based targets and performance against them is
included in the Emissions Strategy in the Strategic Report section of the
Annual Report.
B. Prior year restatement
Following the acquisition of Motion Metrics during the year ended 31 December
2021, the Group has completed the review of the opening balance sheet (OBS)
position acquired. As part of this process, the Group has identified the
adjustments below that are required to the opening balance sheet, which was
reported in the 2021 Annual Report.
Restated Consolidated Balance Sheet (extract)
at 31 December 2021
As previously reported Adjustment to OBS Restated
£m £m £m
Non-current assets
Property, plant & equipment 415.3 0.6 415.9
Intangible assets 1,308.3 0.1 1,308.4
Current assets
Inventories 517.1 (0.6) 516.5
Income tax receivable 32.0 1.0 33.0
Current liabilities
Interest-bearing loans & borrowings 523.9 0.2 524.1
Trade & other payables 490.6 0.5 491.1
Provisions 36.5 (0.2) 36.3
Non-current liabilities
Interest-bearing loans & borrowings 812.3 0.5 812.8
Deferred tax liabilities 40.7 0.1 40.8
NET ASSETS 1,454.5 - 1,454.5
C. 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.
Critical judgments and estimates
The areas where management considers critical judgements and estimates to be
required, which are areas more likely to be materially adjusted within the
next 12 months 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 that 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 12.
iii) Deferred 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 ten-year forecast period and assumptions
over the intended use of these tax attributes during this period. The
application of this model and its underlying assumptions may result in future
changes to the deferred tax asset recognised. In particular, the recognition
of US deferred tax assets relating to deferred intra-group interest deductions
is based upon the current policy and modelling demonstrating full utilisation
of that attribute over the ten-year forecast period. If the current policy
were to change then the utilisation of this tax attribute, as demonstrated by
the model, may reduce resulting in a reduction in US deferred tax asset
recognised of a maximum of £41.2m.
Other estimates
iii) Taxation (estimate)
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
£7.1m at 31 December 2022.
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 6.
D. Accounting policies
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 have 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 items' 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 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 that 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 digitalisation strategy.
During the year, amortisation of £5.7m (2021: £5.3m) 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 that 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 note 5.
2. 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 5. We
consider this presentation to be helpful as it allows greater comparability of
the underlying performance of the business from year to year.
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 a widely used
measure of a company's profitability of its operations before any effects of
indebtedness, taxes or costs required to maintain its asset base. EBITDA is
used in conjunction with other GAAP and non-GAAP financial measures to assess
our operational performance. A reconciliation of EBITDA to the closest
equivalent GAAP measure, operating profit, is provided.
2022 2021
£m £m
Continuing operations
Operating profit 307.5 256.6
Adjusted for:
Exceptional and other adjusting items (note 5) 51.4 4.7
Adjusting amortisation (note 5) 35.9 34.9
Adjusted operating profit 394.8 296.2
Non-adjusting amortisation 5.7 5.3
Adjusted Earnings before interest, tax and amortisation (EBITA) 400.5 301.5
Depreciation of owned property, plant & equipment 47.0 43.0
Depreciation of right-of-use property, plant & equipment 31.4 27.6
Adjusted Earnings before interest, tax, depreciation and amortisation (EBITDA) 478.9 372.1
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 is a useful measure to
view or assess the underlying cash generation of the business from its
operating activities. A reconciliation to the GAAP measure 'Net cash generated
from operating activities' is provided in the Consolidated Cash Flow
Statement.
Free operating cash flow and free cash flow
Free operating cash flow (FOCF) 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. FOCF provides a useful measure of the cash flows
generated directly from the operational activities after taking into account
other cash flows closely associated with maintaining daily operations.
Free cash flow (FCF) is defined as FOCF further adjusted for net interest,
income taxes, settlement of derivative financial instruments, additional
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
FOCF and subsequently FCF is as follows.
2022 2021
£m £m
Operating cash flow (cash generated from operations) 447.8 266.0
Net capital expenditure from purchase & disposal of property, plant & (58.3) (38.5)
equipment and intangibles
Lease payments (30.5) (27.8)
Dividends received from joint ventures 2.7 0.7
Purchase of shares for employee share plans (20.0) (15.0)
Free operating cash flow (FOCF) 341.7 185.4
Net interest paid (45.3) (43.0)
Income tax paid (93.4) (82.4)
Settlement of derivative financial instruments (0.3) 10.6
Additional pension contributions paid (9.7) (7.8)
Non-controlling interest dividends (0.3) (0.4)
Free cash flow (FCF) 192.7 62.4
Free operating cash conversion
Free operating cash conversion is a non-GAAP key performance measure defined
as free operating cash flow divided by adjusted operating profit on a total
Group basis. The measure is used by management to monitor the Group's ability
to generate cash relative to operating profits.
2022 2021
£m £m
Continuing operations 394.8 296.2
Discontinued operations (note 7) - (0.3)
Adjusted operating profit - Total Group 394.8 295.9
Free operating cash flow 341.7 185.4
Free operating cash conversion % 87% 63%
Working capital as a percentage of sales
Working capital as a percentage of sales is calculated based on working
capital as reflected below, divided by revenue, as included in the
Consolidated Income Statement. It is a measure used by management to monitor
how efficiently the Group is managing its investment in working capital
relative to revenue growth.
Restated
(note 1)
2022 2021
£m £m
Working capital as included in the Consolidated Balance Sheet
Other receivables 76.8 76.5
Inventories 679.1 516.5
Trade & other receivables 528.9 505.7
Derivative financial instruments (note 15) (4.3) 3.2
Trade & other payables (623.5) (491.1)
Other payables (1.0) -
656.0 610.8
Adjusted for:
Insurance contract assets (77.9) (82.4)
Interest accruals 5.3 10.9
Deferred consideration 2.0 -
(70.6) (71.5)
Working capital 585.4 539.3
Revenue 2,472.1 1,933.6
Working capital as a percentage of sales 24% 28%
Net debt
Net debt is a widely used liquidity metric calculated by taking cash and cash
equivalents less total current and non-current debt. A reconciliation of net
debt to cash and short-term deposits and interest-bearing loans and borrowings
is provided in note 16. It is a useful measure used by management and
investors when monitoring the capital management of the Group. Net debt,
excluding lease liabilities and converted at the exchange rates used in the
preparation of the Consolidated Income Statement, is also the basis for
covenant reporting.
3. 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 'Operating Segments'. 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 a global leader in engineering, manufacturing and
service processing technology used in abrasive, high-wear mining applications.
Its differentiated technology is also used in infrastructure and general
industrial markets. The ESCO segment is a global leader in the provision of
Ground Engaging Tools (G.E.T.) for large mining machines. It operates
predominantly in mining and infrastructure markets where its highly engineered
technology improves productivity through extended wear life, increased safety
and reduced energy consumption.
Following the acquisition of Motion Metrics on 30 November 2021 and Carriere
Industrial Supply Limited (CIS) on 8 April 2022, these entities have been
included in the ESCO segment. Motion Metrics is 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. CIS is
a premier manufacturer and distributor of highly engineered wear parts and
aftermarket service provider to the Canadian mining industry.
During 2021, the Group completed the disposal of its 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 7.
The Chief Executive Officer assesses the performance of the operating segments
based on operating profit from continuing operations before exceptional and
other adjusting items ('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 2022 and 2021 is
disclosed below. Information for the former Oil & Gas Division is included
in note 7.
Minerals ESCO Total continuing operations
2022 2021 2022 2021 2022 2021
£m £m £m £m £m £m
Revenue
Sales to external customers 1,780.5 1,422.1 691.6 511.5 2,472.1 1,933.6
Inter-segment sales 0.1 - 3.2 2.1 3.3 2.1
Segment revenue 1,780.6 1,422.1 694.8 513.6 2,475.4 1,935.7
Eliminations (3.3) (2.1)
2,472.1 1,933.6
Sales to external customers - 2021 at 2022 average exchange rates
Sales to external customers 1,780.5 1,481.6 691.6 569.0 2,472.1 2,050.6
Segment result
Segment result before share of results of joint ventures 323.5 251.0 107.5 81.6 431.0 332.6
Share of results of joint ventures - - 2.5 1.7 2.5 1.7
Segment result 323.5 251.0 110.0 83.3 433.5 334.3
Unallocated expenses (38.7) (38.1)
Adjusted operating profit 394.8 296.2
Adjusting items (87.3) (39.6)
Net finance costs (47.3) (47.1)
Profit before tax from continuing operations 260.2 209.5
Segment result - 2021 at 2022 average exchange rates
Segment result before share of results of joint ventures 323.5 260.8 107.5 91.0 431.0 351.8
Share of results of joint ventures - - 2.5 1.9 2.5 1.9
Segment result 323.5 260.8 110.0 92.9 433.5 353.7
Unallocated expenses (38.7) (38.1)
Adjusted operating profit 394.8 315.6
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)
2022 2021 2022 2021 2022 2021 2022 2021
£m £m £m £m £m £m £m £m
Assets & liabilities
Intangible assets 600.8 563.8 809.0 741.8 - - 1,409.8 1,305.6
Property, plant & equipment 303.4 280.1 147.6 124.3 - - 451.0 404.4
Working capital assets 902.0 773.2 307.3 238.4 - - 1,209.3 1,011.6
1,806.2 1,617.1 1,263.9 1,104.5 - - 3,070.1 2,721.6
Investments in joint ventures - - 15.1 12.3 - - 15.1 12.3
Segment assets 1,806.2 1,617.1 1,279.0 1,116.8 - - 3,085.2 2,733.9
Unallocated assets 970.7 762.9
Total assets 4,055.9 3,496.8
Working capital liabilities 543.7 406.9 139.9 119.9 - - 683.6 526.8
Segment liabilities 543.7 406.9 139.9 119.9 - - 683.6 526.8
Unallocated liabilities 1,634.4 1,515.5
Total liabilities 2,318.0 2,042.3
Other segment information - total Group
Segment additions to non-current assets 68.7 60.2 29.4 16.8 - 0.4 98.1 77.4
Unallocated additions to non-current assets 1.1 0.2
Total additions to non-current assets 99.2 77.6
Other segment information - total Group
Segment depreciation & amortisation 73.8 66.4 43.1 34.8 - - 116.9 101.2
Segment impairment of property, plant & equipment 1.3 (1.4) - - - - 1.3 (1.4)
Segment impairment of intangible assets 0.3 0.1 - - - - 0.3 0.1
Unallocated depreciation & amortisation 3.1 9.6
Total depreciation, amortisation & impairment 121.6 109.5
The asset and liability balances include right-of-use assets and lease
liabilities.
Unallocated assets 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 primarily
comprise interest-bearing loans and 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 2022
and 2021 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 and
equipment, intangible assets and investments in joint ventures.
Year ended 31 December 2022 UK US Canada Asia Pacific Australasia 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 34.8 418.1 378.3 288.2 336.3 540.8 295.3 180.3 2,472.1
Non-current assets 310.3 765.5 177.7 184.6 210.5 82.9 105.1 50.6 1,887.2
Year ended 31 December 2021 UK US Canada Asia Australasia South America Middle East & Africa Europe & FSU Total
Pacific
£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 (restated note 1) 314.1 699.3 159.6 150.0 201.5 71.1 86.9 54.1 1,736.6
The following disclosures are given in relation to continuing operations.
2022 2021
£m £m
An analysis of the Group's revenue is as follows:
Original equipment 456.0 386.9
Aftermarket parts 1,825.7 1,366.6
Sales of goods 2,281.7 1,753.5
Provision of services - aftermarket 141.9 121.0
Construction contracts - original equipment 45.5 59.1
Subscription services 3.0 -
Revenue 2,472.1 1,933.6
Minerals ESCO Total continuing operations
2022 2021 2022 2021 2022 2021
£m £m £m £m £m £m
Timing of revenue recognition
At a point in time 1,682.7 1,290.6 681.9 508.3 2,364.6 1,798.9
Over time 97.9 131.5 12.9 5.3 110.8 136.8
Segment revenue 1,780.6 1,422.1 694.8 513.6 2,475.4 1,935.7
Eliminations (3.3) (2.1)
2,472.1 1,933.6
4. Revenue & expenses
The following disclosures are given in relation to continuing operations.
Year ended 31 December 2022 Year ended 31 December 2021
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 2,472.1 - 2,472.1 1,933.6 - 1,933.6
Cost of sales (1,573.4) (24.8) (1,598.2) (1,237.2) (4.4) (1,241.6)
Gross profit 898.7 (24.8) 873.9 696.4 (4.4) 692.0
Other operating income 10.4 - 10.4 14.6 4.8 19.4
Selling & distribution costs (279.8) (4.2) (284.0) (218.9) - (218.9)
Administrative expenses (237.0) (58.3) (295.3) (197.6) (40.0) (237.6)
Share of results of joint ventures 2.5 - 2.5 1.7 - 1.7
Operating profit 394.8 (87.3) 307.5 296.2 (39.6) 256.6
Details of adjusting items are included in note 5.
5. Adjusting items
2022 2021
£m £m
Recognised in arriving at operating profit from continuing operations
Intangibles amortisation (35.9) (34.9)
Exceptional items
Acquisition and integration related costs (2.4) (1.9)
Russian operations wind down (44.0) -
Cybersecurity incident response - (4.7)
Performance Excellence programme (2.9) -
Other restructuring and rationalisation activities 0.4 6.3
(48.9) (0.3)
Other adjusting items
Asbestos-related provision (2.5) (4.4)
Total adjusting items (87.3) (39.6)
Recognised in arriving at operating profit from discontinued operations
Exceptional items
Onerous purchase contracts - 0.9
Total adjusting items (note 7) - 0.9
Continuing operations
Intangibles amortisation
Intangibles amortisation of £35.9m (2021: £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 £2.4m of acquisition and integration
related costs, of which £1.6m relates to the acquisition of Carriere
Industrial Supply Limited (CIS) which completed on 8 April 2022 (note 11). The
charge includes an unwind of a fair value adjustment of £0.6m, recorded in
the opening balance sheet in relation to fabricated inventory products and
costs of £1.0m related to adviser fees, due diligence and initial integration
costs which were fully cash settled in the year. The remaining £0.8m (2021:
£2.8m) expense relates to further acquisition and integration costs for the
prior year acquisition of Motion Metrics, which completed on 30 November 2021
(note 11). The prior year also included an accrual reversal of £0.9m in
relation to ESCO integration costs, which were initially expensed in 2019. In
total, acquisition and integration costs have resulted in a £3.7m exceptional
cash outflow in the year, including items expensed in the prior year. We
anticipate final integration costs of approximately £2.0m in 2023 in respect
of Motion Metrics and CIS.
In March 2022, the Group announced the suspension of its business and
operations in Russia and commenced the wind down of these. In the ESCO
Division, the business transferred ownership of its Russia business to the
local management team. The legal transfer and disposal completed on 15
September 2022, which resulted in an exceptional charge of £4.9m. The net
assets, including cash balances of £1.9m, at the date of disposal were
£4.7m. Costs of disposal totalled £0.1m for legal fees. A further loss of
£0.1m has been recognised in respect of recycling the cumulative foreign
exchange gains and losses from the foreign currency translation reserve to the
income statement, which is recognised only at the time of disposal. In the
Minerals Division, the process of winding down operations of its Russian
subsidiary is complex and ongoing. An exceptional charge of £25.4m has been
recognised, which represents provision for assets on the subsidiary's balance
sheet at December 2022 of £19.5m, of which £10.2m relates to inventory and
£5.5m relates to trade receivables, where recoverability is deemed uncertain,
severance costs of £3.3m, customer penalties of £1.8m and other costs of
£0.8m mainly relating to staff retention. Exceptional charges have also been
recognised across other Minerals entities, including provisions for inventory
of £7.0m, primarily for 'made to order' items that are currently unable to be
shipped to Russia, and provision for receivables of £2.8m, primarily due from
sanctioned customers. Exiting the Russian market also led to other costs
across Europe, which totalled £3.9m and primarily reflects severance and
incremental warehousing costs as a result of delayed or cancelled shipments.
This has resulted in a total exceptional charge of £39.1m, of which £29.5m
is non-cash related. Exceptional cash outflows in respect of the Russia wind
down are £5.3m in the year, with the remainder expected to be paid in 2023.
An initial exceptional charge in respect of the Group's Performance Excellence
programme of £2.9m has been recognised in the year. The three-year programme
aims to transform the way we work with more agile and efficient business
processes, with a focus on customer and service-delivery. The programme
includes capacity optimisation, lean processes and global business services.
The charge in the year includes advisory fees of £0.7m in relation to the
Performance Excellence programme scoping and £2.2m in Australia for a service
centre restructuring, which is part of the capacity optimisation element of
the strategy. This has resulted in an exceptional cash outflow, in respect of
the Performance Excellence programme, in the year of £2.2m with a remaining
£0.6m expected in H1 2023.
An exceptional credit for other restructuring and rationalisation activities
of £0.4m represents releases of unutilised prior year provisions in China,
Malaysia and Peru.
In the prior year, restructuring and rationalisation activities primarily
represented a land sale in Sendayan, Malaysia. The land sold was part of our
restructuring decision to exit Minerals Malaysia foundry operations in 2018
and resulted in a net gain of £4.8m and an exceptional cash inflow of
£15.8m. The remaining credit of £1.5m related to a partial reversal of
charges recognised in North America and China in prior years. Other
exceptional items included cybersecurity costs of £4.7m that were incurred as
a direct result of the cybersecurity incident in September 2021. 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 and impairment of existing hardware. This
resulted in a £2.2m exceptional cash outflow in the prior year. In 2022, a
further £2.4m was paid in relation to cybersecurity costs expensed in 2021. A
further £0.6m exceptional cash was paid in the year in relation to items
expensed in the prior year.
Other adjusting items
A charge of £2.5m (2021: £4.4m) has been recorded in respect of movements in
the US asbestos-related liability and associated insurance asset, plus
settlements for post-1981 US asbestos-related claims that relate to legacy
Group products. Further details of this are included in note 12.
Discontinued operations
Exceptional items
The prior year exceptional item for discontinued operations of £0.9m related
to final adjustments to an onerous purchase contracts provision.
6. Income tax expense
2022 2021
£m £m
Continuing Group - UK (11.8) (5.2)
Continuing Group - Overseas (35.8) (49.2)
Income tax expense in the Consolidated Income Statement for continuing (47.6) (54.4)
operations
The total income tax expense is disclosed in the Consolidated Income Statement
as follows.
2022 2021
£m £m
Tax (expense) credit - adjusted results (92.5) (63.8)
- adjusting items 44.9 9.4
Continuing operations income tax expense in the Consolidated Income Statement (47.6) (54.4)
Discontinued operations income tax credit (expense) in the Consolidated Income 1.2 (6.1)
Statement
Total income tax expense in the Consolidated Income Statement (46.4) (60.5)
The tax credit of £44.9m (2021: £9.4m) which has been recognised in
adjusting items includes £8.6m (2021: £7.9m) in respect of adjusting
intangibles amortisation and impairment. The remaining £36.3m (2021: £1.5m)
relates to exceptional and other adjusting items and includes a credit of
£32.0m which arose on the recognition of US tax attributes that were
previously held off balance sheet. These attributes relate primarily to the
deferral of current tax relief on intra-group payments of interest by the US
group. Recognition is supported by the application of detailed modelling of US
taxable income over a ten-year forecast period and, in particular, the
anticipated full utilisation of these attributes over the same period.
The income tax expense included in the Continuing Group's share of results of
joint ventures is as follows.
2022 2021
£m £m
Joint ventures (0.2) (0.2)
7. Discontinued operations
In the prior year, the Group disposed of the Oil & Gas Division (excluding
the Group's joint venture, Arabian Metals Company (AMCO)) on 1 February 2021
to Caterpillar Inc. (CAT) for an enterprise value of US$375.0m and a final
consideration of £282.8m. On 30 June 2021, the Group completed the sale of
the remaining Oil & Gas joint venture AMCO to Olayan Financing Company
(Olayan). 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.
In the current year, a current tax credit of £1.2m has been recognised
following the filing of the 2021 US tax return for Oil & Gas Division
related activity.
Financial information relating to the above rebate is set out in the table
below with prior year comparatives for reference. For full disclosure of the
disposals refer to note 8 of the Group's 2021 Annual Report.
Year ended 31 December 2022 Year ended 31 December 2021
Adjusted results Adjusting items Statutory results Adjusted results Adjusting items Statutory results
(note 5) (note 5)
£m £m £m £m £m £m
Revenue - - - 25.1 - 25.1
Operating (loss) profit before share of results of joint ventures - - - (1.9) 0.9 (1.0)
Share of results of joint ventures - - - 1.6 - 1.6
Operating (loss) profit - - - (0.3) 0.9 0.6
Finance costs - - - (0.2) - (0.2)
Finance income - - - - - -
(Loss) profit before tax from discontinued operations - - - (0.5) 0.9 0.4
Tax credit (expense) 1.2 - 1.2 (1.7) - (1.7)
Profit (loss) after tax from discontinued operations 1.2 - 1.2 (2.2) 0.9 (1.3)
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
Profit (loss) for the year from discontinued operations 1.2 - 1.2 (2.2) 106.1 103.9
Reclassification of foreign currency translation reserve - (103.4)
Other comprehensive expense from discontinued operations - (1.3)
Total net comprehensive income (expense) from discontinued operations 1.2 (0.8)
The prior year reconciliation from revenue to operating profit included cost
of sales of £21.8m, other operating income of £0.3m, selling and
distribution costs of £1.4m, administrative expenses of £4.1m and share of
result of joint venture of £1.6m.
The prior year 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. In total, £103.4m was recycled from the foreign currency
translation reserve for the Oil & Gas Division, including AMCO.
Year ended Year ended
31 December 2022 31 December 2021
£m £m
Cash flows from operating activities - (16.3)
Cash flows from investing activities (0.1) (0.2)
Cash flows from financing activities - (1.1)
Net decrease in cash & cash equivalents from discontinued operations (0.1) (17.6)
Earnings per share
Earnings per share from discontinued operations were as follows.
2022 2021
pence pence
Basic 0.5 40.1
Diluted 0.5 39.8
The earnings 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 8.
8. Earnings per share
Basic earnings per share amounts are calculated by dividing net profit for the
year attributable to equity holders of the Company by the weighted average
number of ordinary shares in issue after deducting the own shares held by
employee share ownership trusts and treasury shares. Diluted earnings per
share is calculated by dividing the net profit attributable to equity holders
of the Company by the weighted average number of ordinary shares outstanding
during the year, adjusted for the effect of dilutive share awards.
The following reflects the earnings used in the calculation of earnings per
share.
2022 2021
Profit attributable to equity holders of the Company
Total operations(1) (£m) 213.4 258.5
Continuing operations(2) (£m) 212.2 154.6
Continuing operations before adjusting items(2) (£m) 254.6 184.8
( )
The following reflects the share numbers used in the calculation of earnings
per share, and the difference between the weighted average share capital for
the purposes of the basic and the diluted earnings per share calculations.
2022 2021
Shares Shares
million million
Weighted average number of ordinary shares for basic earnings per share 258.7 259.3
Effect of dilution: employee share awards 1.6 1.7
Adjusted weighted average number of ordinary shares for diluted earnings per 260.3 261.0
share
The profit attributable to equity holders of the Company used in the
calculation of both basic and diluted earnings per share from continuing
operations before adjusting items is calculated as follows.
2022 2021
£m £m
Net profit attributable to equity holders from continuing operations(2) 212.2 154.6
Adjusting items net of tax 42.4 30.2
Net profit attributable to equity holders from continuing operations before 254.6 184.8
adjusting items
2022 2021
pence pence
Basic earnings per share
Total operations(1) 82.5 99.7
Continuing operations(2) 82.0 59.6
Continuing operations before adjusting items(2) 98.4 71.3
Diluted earnings per share
Total operations(1) 82.0 99.0
Continuing operations(2) 81.5 59.2
Continuing operations before adjusting items(2) 97.8 70.8
(1. Adjusted for a profit of £0.4m (2021: profit of £0.5m) in respect of
non-controlling interests for total operations.)
(2. Adjusted for a profit of £0.4m (2021: profit of £0.5m) in respect of
non-controlling interests for continuing operations.)
( )
There have been 839 share awards (2021: 6,258) exercised between the reporting
date and the date of signing of these financial statements. They were settled
out of existing shares held in trust.
( )
Earnings per share from discontinued operations is disclosed in note 7.
9. Dividends paid & proposed
2022 2021
£m £m
Declared & paid during the year
Equity dividends on ordinary shares
Final dividend for 2021: 12.30p (2020: 0.00p) 31.8 -
Interim dividend for 2022: 13.50p (2021: 11.50p) 34.9 29.8
66.7 29.8
Proposed for approval by Shareholders at the Annual General Meeting
Final dividend for 2022: 19.30p (2021: 12.30p) 49.9 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 adjusted earnings by way of dividend. As a
result, dividend cover in 2022 is 3.0 times.
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.
10. Property, plant & equipment and intangible assets
2022 2021
£m £m
Additions of property, plant & equipment and intangible assets
- owned land & buildings 4.8 4.0
- owned plant & equipment 55.9 44.3
- right-of-use land & buildings 24.9 12.4
- right-of-use plant & equipment 6.8 8.9
- intangible assets 6.8 8.0
99.2 77.6
The above additions relate to the normal course of business and do not include
any additions made by way of business combinations.
11. Business combinations
Carriere Industrial Supply Limited
On 8 April 2022, the Group completed the acquisition of 100% of the voting
rights of Carriere Industrial Supply Limited (CIS) for an enterprise value of
CAD$32.5m (£20.2m). CIS is a Canadian-based manufacturer and distributor of
wear parts, and an aftermarket service provider to the mining industry, with
exposure across both surface and underground mining in Ontario and Quebec. The
acquisition has joined the ESCO Division and reporting segment as CIS is
already an established distributor of ESCO's core Ground Engaging Tools
(G.E.T.) products. This acquisition will maintain ESCO's leading core G.E.T.
presence in Ontario and provide opportunities to expand into fabricated
hardware and underground capabilities.
Initial consideration of £16.2m was paid on completion, with a further
deferred consideration of £2.5m recognised reflecting indemnification and
working capital hold backs. In October 2022, the Group paid a further £0.1m
in relation to the finalisation of the completion accounts process and settled
£0.5m of the deferred consideration in relation to the working capital
completion mechanism. The remaining deferred consideration of £2.0m for
indemnification is payable in two instalments; on the first and second
anniversary of the acquisition date. The final adjusted purchase price of
CAD$30.3m (£18.8m) represents the enterprise value adjusted for certain
working capital, net debt and transaction fee adjustments.
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 £3.7m 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.
2022
Carriere Industrial Supply Limited provisional fair values £m
Property, plant & equipment - owned assets 3.6
Intangible assets - customer and distributor relationships 3.1
Inventories 10.5
Trade & other receivables 7.5
Income tax receivable 0.1
Cash & cash equivalents 1.6
Interest-bearing loans & borrowings (0.4)
Trade & other payables (9.3)
Deferred tax liabilities (1.6)
Provisional fair value of net assets 15.1
Goodwill arising on acquisition 3.7
Total consideration 18.8
Cash consideration 16.3
Deferred consideration 2.5
Total consideration 18.8
The total net cash outflow on current year acquisitions was as follows:
cash consideration paid (16.3)
deferred consideration paid (0.5)
cash & cash equivalents acquired 1.6
Total cash outflow (note 16) (15.2)
The gross amount and fair value of CIS trade receivables amount to £7.5m. It
is expected that virtually all the contractual amounts will be collected.
CIS contributed £26.9m to revenue and an operating profit of £6.0m (before
adjusting items) in the period from acquisition to 31 December 2022. These
values are inclusive of revenue and margin which would have been earned
pre-acquisition on sales from ESCO to CIS under the former distributor model.
If the acquisition had occurred at the start of 2022, 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 in relation to CIS are £1.6m in the year (note 5) and are
reported within Administrative expenses (note 4).
Motion Metrics
The Group completed the acquisition of 100% of the voting rights of Motion
Metrics on 30 November 2021 for an enterprise value of CAD$150.0m (£88.7m),
which represents initial equity value consideration of £67.9m paid in cash
and adoption of £20.8m 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 has joined the ESCO Division and reporting segment reflecting
the early adoption of its technology in G.E.T. where ESCO is an established
global leader. Motion Metrics AI and Machine Vision Technology capabilities
are expected to be leveraged across the whole mining value chain served by the
Weir Group.
The provisional fair values, which were subject to finalisation within 12
months of acquisition, have been finalised and 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.
As reported Adjustment (note 1) Restated (note 1)
2021 2021 2021
Motion Metrics fair values £m £m £m
Property, plant & equipment - owned assets 0.6 (0.1) 0.5
Property, plant & equipment - right-of-use assets 0.2 0.7 0.9
Intangible assets
Brand names 3.3 - 3.3
Intellectual property & trademarks 34.0 0.1 34.1
Purchased software 0.1 - 0.1
Inventories 2.2 (0.6) 1.6
Trade & other receivables 2.3 - 2.3
Income tax receivable 0.7 1.0 1.7
Interest-bearing loans & borrowings (0.2) (0.7) (0.9)
Trade & other payables (1.6) (0.5) (2.1)
Income tax payable (0.5) - (0.5)
Provisions (20.0) 0.2 (19.8)
Deferred tax liabilities (5.3) (0.1) (5.4)
Fair value of net assets 15.8 - 15.8
Goodwill arising on acquisition 52.1 - 52.1
Total consideration 67.9 - 67.9
Cash consideration 67.9 - 67.9
Total consideration 67.9 - 67.9
The total net cash outflow on prior year acquisitions was as follows:
cash paid (67.9) - (67.9)
Total cash outflow (note 16) (67.9) - (67.9)
Contingent consideration
As part of the purchase agreement a maximum of an additional CAD$100.0m is
payable by the Group contingent on Motion Metrics exceeding specific revenue
and EBITDA targets over the first three years following acquisition. Any
balance that 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. Progress has been made towards these targets in
2022 and while the Group expects Motion Metrics to continue 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 to remain uncertain, in part due to the
relative infancy of the business. As a result, no contingent consideration has
been recorded at the balance sheet date. This will be reassessed in future
periods as the business develops.
12. Provisions
Warranties & contract claims Asbestos-related Employee-related Exceptional items Other Total
£m £m £m £m £m £m
At 31 December 2021 9.4 61.6 12.4 11.1 11.0 105.5
Restatement (note 1) - - - (0.2) - (0.2)
Restated at 31 December 2021 9.4 61.6 12.4 10.9 11.0 105.3
Additions 7.5 2.0 14.2 14.2 3.3 41.2
Utilised (7.1) (8.5) (14.1) (20.3) (1.3) (51.3)
Unutilised (0.3) (6.5) - (0.4) (0.5) (7.7)
Exchange adjustment 0.9 6.6 1.0 1.0 1.2 10.7
At 31 December 2022 10.4 55.2 13.5 5.4 13.7 98.2
Current 2022 10.4 8.5 7.9 5.2 3.3 35.3
Non-current 2022 - 46.7 5.6 0.2 10.4 62.9
At 31 December 2022 10.4 55.2 13.5 5.4 13.7 98.2
Current 2021 9.2 7.6 6.9 10.6 2.0 36.3
Non-current 2021 0.2 54.0 5.5 0.3 9.0 69.0
At 31 December 2021 (restated note 2) 9.4 61.6 12.4 10.9 11.0 105.3
The impact of discounting is only relevant for the asbestos-related category
of provision, with higher discount rates at 31 December 2022, resulting in a
£6.1m reduction in the provision, which is reflected as unutilised above.
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 2022, the warranties portion of the provision
totalled £6.6m (2021: £7.2m). At 31 December 2022, all of these costs relate
to claims that fall due within one year 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 2022, the contract claims element, which includes
onerous provision, was £3.8m (2021: £2.2m), all of which is expected to be
incurred within one year of the balance sheet date.
Asbestos-related claims
2022 2021
£m £m
US asbestos-related provision - pre-1981 date of first exposure 49.9 55.5
US asbestos-related provision - post-1981 date of first exposure 2.8 3.0
US asbestos-related provision - total 52.7 58.5
UK asbestos-related provision 2.5 3.1
Total asbestos-related provision 55.2 61.6
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.
2022 2021
Number of open claims Number Number
Opening 1,765 1,586
New 633 656
Dismissed (443) (315)
Settled (239) (162)
Closing 1,716 1,765
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.
2022 2021
Period of future claims provided 10 years 10 years
Discount rate 5.0% 2.6%
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 that 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 corporate bond 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, which includes the estimated defence costs that
would be met by the insurer. An update to the insurance asset is obtained
annually and totals £32.0m at 31 December 2022 (2021: £42.2m). Based on the
profile of the claims in the actuarial model, external advisers expect the
insurance cover and associated limits currently in place to be sufficient to
meet the settlement and associated costs until c.2027. No cash flows to or
from the Group, related to claims with an exposure date pre-1981, are expected
until the exhaustion of the insurance asset. 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.
2022 2021
US asbestos-related provision £m £m
Gross provision 58.8 67.4
Effect of discounting (6.1) (8.9)
Discounted US asbestos-related provision 52.7 58.5
Insurance asset 32.0 42.2
Net US asbestos-related liability 20.7 16.3
The net provision and insurance asset are presented in the financial
statements as follows.
2022 2021
£m £m
Provisions - current 7.8 7.1
Provisions - non-current 44.9 51.4
Trade & other receivables 7.5 6.9
Non-current other receivables 24.5 35.3
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.
Since the last triennial update completed in 2020, we have experienced a
higher number of claims received than modelled across both disease types.
Average settlement values have been higher for Mesothelioma cases, but lower
for Lung Cancer cases. Settlements largely occur within four years of a claim
being received and the settlement rates for Mesothelioma cases are broadly in
line with the model while Lung Cancer case settlement rates are trending
below.
These variations from the model may be influenced by fluctuations in the
profile of case rates across jurisdictions coupled with the potential impact
of the Covid-19 pandemic. However, if current case numbers and average
settlement values were to continue, this may lead to the insurance asset being
eroded as early as 2025, two years earlier than initially suggested in the
2020 actuarial model.
As noted above there are a number of uncertain factors involved in the
estimation of the provision and variations in case numbers and settlements are
to be expected from period-to-period. Our actual claims experience will be
reflected in the next triennial valuation due in the second half of 2023, and
will be incorporated in our 2023 Annual Report and Financial Statements.
Sensitivity analysis reflecting reasonably probable scenarios has been
conducted. The results of this analysis are shown below.
2022
Estimated impact on the discounted US asbestos-related provision of £m
Increasing the number of projected future settled claims by 15% 7.4
Increasing the estimated settlement value by 10% 4.6
Increasing the basis of provision by ten years 3.8
Decreasing the discount rate by 50bps 1.3
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 that are not the
subject of insurance cover. The extent of the UK asbestos exposure involves a
series of legacy employer's liability claims that 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 £2.5m (2021: £3.1m).
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 certain exceptional charges
included within note 5 where the cost is based on a reliable estimate of the
obligation.
The restated opening balance of £10.9m includes £8.7m for opening balance
sheet liabilities in Motion Metrics relating to restructuring taxes and
acquisition costs, cybersecurity costs of £0.4m and final Oil & Gas
Division 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.
Additions in the year total £14.2m, including acquisition and integration
costs for Motion Metrics and CIS of £1.8m, which were fully cash settled in
the year, and £2.8m in relation to the Performance Excellence programme, of
which £2.2m has been paid in the year with £0.2m held in creditors due for
payment. The remaining addition of £9.6m is in relation to the wind down of
our Minerals Russia subsidiary and includes severance, management retentions
and customer penalties. Of this balance, £5.3m has been cash settled in the
year, with the remaining £4.3m expected to be settled in 2023.
The closing balance of £5.4m includes £4.3m related to Russia, £0.4m in
relation to capacity optimisation costs as part of the Performance Excellence
programme and £0.7m for final Oil & Gas Division disposal costs related
to tax and prior year Minerals Division balances for severance 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 them 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.
13. Interest-bearing loans & borrowings
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&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. Also, in April 2021 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.
In April 2022, the Group completed the refinancing of its US$950m Revolving
Credit Facility (RCF), which was due to expire in June 2023. This was replaced
with a US$800m RCF with a syndicate of 11 global banks and will mature in
April 2027, with the option to extend for up to a further two years. The RCF
includes a link to the Group's sustainability goals, with an interest
adjustment of +/- 0.025% dependant on achievement, and the covenant terms are
unchanged.
At 31 December 2022, £336.5m was drawn under the US$800m multi-currency RCF
which, is disclosed net of unamortised issue costs of £2.4m. At 31 December
2021 £nil was drawn under the US$950m multi-currency RCF net of unamortised
issue costs of £3.0m.
At 31 December 2022, a total of £165.3m (2021: £583.6m) was outstanding
under private placement, which is disclosed net of unamortised issue costs of
£nil (2021: £0.1m).
At 31 December 2022, a total of £657.8m (2021: £586.5m) was outstanding
under Sustainability-Linked notes, which is disclosed net of unamortised issue
costs of £3.5m (2021: £4.5m).
14. Pensions & other post-employment benefit plans
2022 2021
£m £m
Net asset (liability) 15.1 (56.7)
The defined benefit pension schemes across the Group's legacy UK and North
American schemes improved to a net surplus of £15.1m (2021: deficit of
£56.7m) primarily due to changes in financial assumptions mainly due to a
rise in discount rates over the period, partially offset by losses on plan
assets.
15. 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.
2022 2021
£m £m
Included in current assets
Forward foreign currency contracts designated as cash flow hedges 1.0 -
Other forward foreign currency contracts 7.9 7.1
8.9 7.1
Included in current liabilities
Forward foreign currency contracts designated as cash flow hedges (1.9) (0.4)
Forward foreign currency contracts designated as net investment hedges (0.1) -
Other forward foreign currency contracts (11.2) (3.4)
(13.2) (3.8)
Included in non-current liabilities
Other forward foreign currency contracts - (0.1)
- (0.1)
Net derivative financial (liabilities) assets - total Group (4.3) 3.2
16. Additional cash flow information
2022 2021
Notes £m £m
Total operations
Net cash generated from operations
Operating profit - continuing operations 307.5 256.6
Operating profit - discontinued operations 7 - 0.6
Operating profit - total operations 307.5 257.2
Exceptional and other adjusting items 5 51.4 3.8
Amortisation of intangible assets 41.6 40.2
Share of results of joint ventures (2.5) (3.3)
Depreciation of property, plant & equipment 47.0 43.0
Depreciation of right-of-use assets 31.4 27.6
Impairment of property, plant & equipment 0.2 -
Grants received (0.2) (0.3)
Gains on disposal of property, plant & equipment (0.6) (4.3)
Funding of pension & post-retirement costs (2.9) (2.7)
Employee share schemes 8.0 10.9
Transactional foreign exchange 14.3 4.8
Increase in provisions 1.2 3.9
Cash generated from operations before working capital cash flows 496.4 380.8
Increase in inventories (128.6) (84.9)
Decrease (increase) in trade & other receivables & construction 49.8 (61.7)
contracts
Increase in trade & other payables & construction contracts 30.2 31.8
Cash generated from operations 447.8 266.0
Additional pension contributions paid (9.7) (7.8)
Exceptional and other adjusting cash items (14.2) (8.6)
Exceptional cash items - acquired vendor liabilities (9.7) (11.1)
Income tax paid (93.4) (82.4)
Net cash generated from operating activities 320.8 156.1
Cash flows from discontinued operations included above are disclosed
separately in note 7.
Exceptional and other adjusting items are detailed in note 5.
The following tables summarise the cash flows arising on acquisitions (note
11) and disposals (notes 5 and 7).
2022 2021
£m £m
Acquisitions of subsidiaries
Acquisition of subsidiaries - cash consideration paid 16.3 67.9
Acquisition of subsidiaries - deferred consideration paid 0.5 -
Cash & cash equivalents acquired (1.6) -
Total cash outflow relating to acquisitions 15.2 67.9
Net cash (outflow) inflow arising on disposals
Consideration received net of costs paid & cash disposed of - Oil & - 258.5
Gas Division (excluding AMCO)
Consideration received net of costs paid & cash disposed of - AMCO Joint - 24.0
Venture
Consideration received net of costs paid & cash disposed of - ESCO Russia (2.0) -
Prior period disposals - settlement of final costs and final completion (0.1) -
adjustment
Total cash (outflow) inflow relating to disposals (2.1) 282.5
2022 2021
£m £m
Cash & cash equivalents comprise the following
Cash & short-term deposits 691.2 564.4
Bank overdrafts & short-term borrowings (213.7) (64.4)
477.5 500.0
Restated
(note 1)
2022 2021
£m £m
Net debt comprises the following
Cash & short-term deposits 691.2 564.4
Current interest-bearing loans & borrowings (406.3) (524.1)
Non-current interest-bearing loans & borrowings (1,082.1) (812.8)
(797.2) (772.5)
Reconciliation of financing cash flows to movement in net debt
Restated
(note 1)
Opening balance at 31 December 2021 Cash movements Additions/ acquisitions Disposals FX Non-cash movements Closing balance at 31 December 2022
£m £m £m £m £m £m £m
Cash & cash equivalents 500.0 (51.0) 1.6 (1.9) 28.8 - 477.5
Third-party loans (1,174.7) 133.4 (0.4) - (123.8) - (1,165.5)
Leases (105.4) 30.5 (35.0) - (6.0) 0.8 (115.1)
Unamortised issue costs 7.6 2.7 - - - (4.4) 5.9
Amounts included in gross debt (1,272.5) 166.6 (35.4) - (129.8) (3.6) (1,274.7)
Amounts included in net debt (772.5) 115.6 (33.8) (1.9) (101.0) (3.6) (797.2)
Financing derivatives 1.4 0.3 - - - (1.8) (0.1)
Total financing liabilities(1) (1,271.1) 166.9 (35.4) - (129.8) (5.4) (1,274.8)
( )
( )
Restated
(note 1)
Opening balance at 31 December 2020 Cash movements Additions/acquisitions Disposals FX Non-cash movements Closing balance at 31 December 2021
£m £m £m £m £m £m £m
Cash & cash equivalents 374.1 150.1 - (16.1) (8.1) - 500.0
Third-party loans (1,252.6) 104.4 (0.2) - (26.3) - (1,174.7)
Leases (179.4) 27.8 (21.3) 65.2 2.1 0.2 (105.4)
Unamortised issue costs 6.5 5.1 - - - (4.0) 7.6
Amounts included in gross debt (1,425.5) 137.3 (21.5) 65.2 (24.2) (3.8) (1,272.5)
Amounts included in net debt (1,051.4) 287.4 (21.5) 49.1 (32.3) (3.8) (772.5)
Financing derivatives (2.5) (10.6) - - - 14.5 1.4
Total financing liabilities(1) (1,428.0) 126.7 (21.5) 65.2 (24.2) 10.7 (1,271.1)
(1. Total financing liabilities
comprise gross debt plus other liabilities relating to financing activities.)
17. Related party disclosure
The following table provides the total amount of significant transactions that
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 Amounts owed to related parties Amounts owed by related parties
Related party £m £m £m £m £m
Joint ventures 2022 1.1 0.1 25.9 6.2 0.3
2021 0.7 0.1 16.7 - 1.3
Group pension plans 2022 - - - 8.2 -
2021 - - - 5.9 -
18. Legal claims
The Company and certain subsidiaries are, from time-to-time, party to legal
proceedings and claims that 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.
19. Exchange rates
The principal exchange rates applied in the preparation of these financial
statements were as follows.
Average rate (per £) 2022 2021
US Dollar 1.24 1.38
Australian Dollar 1.78 1.83
Euro 1.17 1.16
Canadian Dollar 1.61 1.73
Chilean Peso 1,078.02 1,043.54
South African Rand 20.19 20.34
Brazilian Real 6.39 7.42
Chinese Yuan 8.30 8.88
Indian Rupee 97.06 101.70
Closing rate (per £)
US Dollar 1.21 1.35
Australian Dollar 1.77 1.86
Euro 1.13 1.19
Canadian Dollar 1.64 1.71
Chilean Peso 1,026.77 1,153.18
South African Rand 20.61 21.57
Brazilian Real 6.39 7.54
Chinese Yuan 8.34 8.60
Indian Rupee 100.05 100.66
The Group's operating profit before adjusting items from continuing operations
was denominated in the following currencies.
2022 2021
£m £m
US Dollar 192.8 131.1
Canadian Dollar 63.5 44.8
Australian Dollar 55.4 51.2
Chilean Peso 53.8 40.3
Euro 24.4 27.4
South African Rand 11.3 9.1
Brazilian Real 10.4 6.7
Chinese Yuan 10.3 6.0
Indian Rupee 7.1 4.5
UK Sterling (34.9) (27.4)
Other 0.7 2.5
Adjusted operating profit 394.8 296.2
20. Events after the balance sheet date
In January 2023, the Group added a further £300m loan facility to its
available financing. The facility will expire in January 2024, subject to a
one-year extension option. This facility has not been drawn down subsequent to
the year end and the outstanding balance remains £nil.
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