REG - Weir Group PLC - Half-year Report <Origin Href="QuoteRef">WEIR.L</Origin> - Part 2
27/07/2017 07:10
- Part 2: For the preceding part double click ID:nRSa1966Ma
(4.1) Discontinued operations (0.1) (6.4)
228.9 (1.1) 144.1
Consolidated Balance Sheet
at 30 June 2017
31 December 2016 30 June 2017 30 June 2016
£m Notes £m £m
ASSETS
Non-current assets
402.0 Property, plant & equipment 384.3 413.4
1,628.8 Intangible assets 1,539.2 1,542.8
40.5 Investments in joint ventures 43.0 39.6
42.1 Deferred tax assets 48.8 37.5
39.2 Other receivables 36.9 22.3
9.8 Retirement benefit plan assets 12 11.1 7.1
- Derivative financial instruments 13 0.1 0.3
2,162.4 Total non-current assets 2,063.4 2,063.0
Current assets
551.6 Inventories 577.5 524.6
481.8 Trade & other receivables 544.1 450.8
23.8 Construction contracts 19.5 29.0
24.0 Derivative financial instruments 13 15.0 49.0
21.5 Income tax receivable 9.5 17.6
258.6 Cash & short-term deposits 266.0 211.0
1,361.3 Total current assets 1,431.6 1,282.0
3,523.7 Total assets 3,495.0 3,345.0
LIABILITIES
Current liabilities
144.0 Interest-bearing loans & borrowings 366.9 217.2
548.1 Trade & other payables 594.2 470.1
4.2 Construction contracts 7.2 5.4
30.2 Derivative financial instruments 13 32.5 53.5
43.8 Income tax payable 44.0 30.0
83.2 Provisions 10 72.0 64.0
853.5 Total current liabilities 1,116.8 840.2
Non-current liabilities
949.1 Interest-bearing loans & borrowings 768.1 847.2
14.9 Other payables 0.6 27.3
14.9 Derivative financial instruments 13 0.1 13.8
60.2 Provisions 10 56.6 51.9
100.5 Deferred tax liabilities 92.6 116.4
147.0 Retirement benefit plan deficits 12 130.4 132.6
1,286.6 Total non-current liabilities 1,048.4 1,189.2
2,140.1 Total liabilities 2,165.2 2,029.4
1,383.6 NET ASSETS 1,329.8 1,315.6
CAPITAL & RESERVES
27.3 Share capital 27.3 27.2
86.2 Share premium 92.6 67.3
9.4 Merger reserve 9.4 9.4
(5.9) Treasury shares (5.9) (5.9)
0.5 Capital redemption reserve 0.5 0.5
191.8 Foreign currency translation reserve 132.5 117.3
(0.6) Hedge accounting reserve (1.7) (0.6)
1,066.4 Retained earnings 1,066.5 1,088.8
1,375.1 Shareholders' equity 1,321.2 1,304.0
8.5 Non-controlling interests 8.6 11.6
1,383.6 TOTAL EQUITY 1,329.8 1,315.6
Consolidated Cash Flow Statement
for the period ended 30 June 2017
Period ended Period ended Period ended
31 December 2016 30 June 2017 30 June 2016
£m Notes £m £m
Cash flows from operating activities 14
292.6 Cash generated from operations 78.4 133.0
(2.8) Additional pension contributions paid (2.0) -
(58.1) Exceptional cash items (16.9) (30.5)
(15.7) Income tax received (paid) (15.3) 2.1
216.0 Net cash generated from operating activities 44.2 104.6
Cash flows from investing activities
(10.6) Acquisitions of subsidiaries, net of cash acquired 14 (0.2) (7.1)
- Investment in joint ventures (1.4) -
(50.5) Purchases of property, plant & equipment (26.4) (22.8)
(15.4) Purchases of intangible assets (14.3) (11.3)
3.5 Other proceeds from sale of property, plant & equipment and intangible assets 3.3 0.6
31.4 Disposals of discontinued operations, net of cash disposed 14 - 30.8
35.7 Exceptional items included in asset disposal programme - -
6.5 Interest received 0.7 2.4
7.3 Dividends received from joint ventures 3.3 1.1
7.9 Net cash used in investing activities (35.0) (6.3)
Cash flows from financing activities
(3.4) Purchase of non-controlling interest (0.6) -
1,328.1 Proceeds from borrowings 359.5 143.7
(1,420.5) Repayments of borrowings (268.3) (184.6)
(3.7) Settlement of derivative financial instruments 0.5 (4.8)
(46.3) Interest paid (21.7) (21.7)
(45.8) Dividends paid to equity holders of the Company 8 (56.7) (32.4)
(0.1) Purchase of shares for LTIP & other awards - (0.1)
(191.7) Net cash used in financing activities 12.7 (99.9)
32.2 Net increase in cash & cash equivalents 21.9 (1.6)
179.3 Cash & cash equivalents at the beginning of the period 257.0 179.3
45.5 Foreign currency translation differences (13.0) 31.3
257.0 Cash & cash equivalents at the end of the period 14 265.9 209.0
The cash flows from discontinued operations included above are disclosed separately in note 6.
Consolidated Statement of Changes in Equity
for the period ended 30 June 2017
Share capital Share premium Merger reserve Treasury shares Capital redemption reserve Foreign currency translation reserve Hedge accounting reserve Retained earnings Attributable to equity holders of the Company Non-controlling interests Totalequity
£m £m £m £m £m £m £m £m £m £m £m
At 1 January 2016 26.8 38.0 9.4 (5.8) 0.5 (41.8) (2.0) 1,166.5 1,191.6 6.2 1,197.8
Profit for the period - - - - - - - 16.2 16.2 0.3 16.5
Gains taken to equity on cash flow hedges - - - - - - 0.4 - 0.4 - 0.4
Exchange gains on translation of foreign operations - - - - - 222.8 - - 222.8 2.1 224.9
Reclassification of exchange gains on discontinued operations - - - - - 0.8 - - 0.8 - 0.8
Exchange losses on net investment hedges - - - - - (69.6) - - (69.6) - (69.6)
Remeasurements on defined benefit plans - - - - - - - (40.8) (40.8) - (40.8)
Reclassification adjustments on cash flow hedges - - - - - - 1.4 - 1.4 - 1.4
Tax relating to other comprehensive income (expense) - - - - - 5.1 (0.4) 8.2 12.9 - 12.9
Total net comprehensive income (expense) for the period - - - - - 159.1 1.4 (16.4) 144.1 2.4 146.5
Proceeds from increase in non-controlling interests - - - - - - - (3.0) (3.0) 3.0 -
Cost of share-based payments inclusive of tax charge - - - - - - - 3.7 3.7 - 3.7
Dividends - - - - - - - (62.0) (62.0) - (62.0)
Purchase of shares* - - - (0.1) - - - - (0.1) - (0.1)
Issue of shares 0.4 29.3 - - - - - - 29.7 - 29.7
At 30 June 2016 27.2 67.3 9.4 (5.9) 0.5 117.3 (0.6) 1,088.8 1,304.0 11.6 1,315.6
At 31 December 2016 27.3 86.2 9.4 (5.9) 0.5 191.8 (0.6) 1,066.4 1,375.1 8.5 1,383.6
Profit for the period - - - - - - - 46.0 46.0 0.2 46.2
Losses taken to equity on cash flow hedges - - - - - - (0.6) - (0.6) - (0.6)
Exchange losses on translation of foreign operations - - - - - (92.2) - - (92.2) (0.1) (92.3)
Exchange gains on net investment hedges - - - - - 32.9 - - 32.9 - 32.9
Remeasurements on defined benefit plans - - - - - - - 16.0 16.0 - 16.0
Reclassification adjustments on cash flow hedges - - - - - - (1.1) - (1.1) - (1.1)
Tax relating to other comprehensive income - - - - - - 0.6 (2.7) (2.1) - (2.1)
Total net comprehensive (expense) income for the period - - - - - (59.3) (1.1) 59.3 (1.1) 0.1 (1.0)
Issue of shares - 6.4 - - - - - - 6.4 - 6.4
Cost of share-based payments inclusive of tax charge - - - - - - - 3.9 3.9 - 3.9
Dividends - - - - - - - (63.1) (63.1) - (63.1)
At 30 June 2017 27.3 92.6 9.4 (5.9) 0.5 132.5 (1.7) 1,066.5 1,321.2 8.6 1,329.8
At 1 January 2016 26.8 38.0 9.4 (5.8) 0.5 (41.8) (2.0) 1,166.5 1,191.6 6.2 1,197.8
Profit for the period - - - - - - - 38.3 38.3 (0.1) 38.2
Losses taken to equity on cash flow hedges - - - - - - (0.7) - (0.7) - (0.7)
Exchange gains on translation of foreign operations - - - - - 374.8 - - 374.8 2.6 377.4
Reclassification of exchange gains on discontinued operations - - - - - 0.8 - - 0.8 - 0.8
Exchange losses on net investment hedges - - - - - (142.0) - - (142.0) - (142.0)
Remeasurements on defined benefit plans - - - - - - - (53.0) (53.0) - (53.0)
Reclassification adjustments on cash flow hedges - - - - - - 1.9 - 1.9 - 1.9
Tax relating to other comprehensive income - - - - - - 0.2 8.6 8.8 - 8.8
Total net comprehensive income (expense) for the period - - - - - 233.6 1.4 (6.1) 228.9 2.5 231.4
Acquisition of non-controlling interests - - - - - - - (3.8) (3.8) (0.2) (4.0)
Issue of shares 0.5 48.2 - - - - - - 48.7 - 48.7
Cost of share-based payments inclusive of tax charge - - - - - - - 4.3 4.3 - 4.3
Dividends - - - - - - - (94.5) (94.5) - (94.5)
Purchase of shares* - - - (0.1) - - - - (0.1) - (0.1)
Exercise of LTIP awards - - - - - - - - - - -
At 31 December 2016 27.3 86.2 9.4 (5.9) 0.5 191.8 (0.6) 1,066.4 1,375.1 8.5 1,383.6
* These shares were purchased on the open market and are held by the Estera EBT on behalf of the Group.
Notes to the Financial Statements
1. Basis of preparation
a) General information
These interim financial statements are for the 6 month period ended 30 June 2017 and have been prepared on the basis of the
accounting policies set out in the Group's 2016 Annual Report and in accordance with IAS 34 "Interim Financial Reporting
(Revised)" as adopted by the European Union and the Disclosure and Transparency Rules of the Financial Services Authority.
The period ended 31 December 2016 reflects the decision previously made to alter the reporting basis to reflect a calendar
year with this period in isolation commencing on 2 January 2016, with the next annual reporting date being the full
calendar year to 31 December 2017.
These interim financial statements are unaudited but have been formally reviewed by the auditors and their report to the
Company is set out on page 29. The information shown for the period ended 31 December 2016 does not constitute statutory
accounts as defined in Section 435 of the Companies Act 2006 and has been extracted from the Group's 2016 Annual Report
which has been filed with the Registrar of Companies. The report of the auditors on the financial statements contained
within the Group's 2016 Annual Report was unqualified and did not contain a statement under either Section 498(2) or
Section 498(3) of the Companies Act 2006.
The Weir Group PLC is a limited company incorporated in Scotland and is listed on the London Stock Exchange.
The principle activities of the Group are described in note 2.
These interim financial statements were approved by the Board of Directors on 27 July 2017.
b) Estimates & Judgements
The preparation of interim financial statements requires management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported amounts of assets, liabilities, income and expense. Actual
results may differ from these estimates.
In preparing these interim financial statements, the significant judgements made by management in applying the group's
accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated
financial statements for the year ended 31 December 2016.
These interim financial statements have been prepared on the going concern basis as the Directors, having considered
available relevant information, have a reasonable expectation that the Group has adequate resources to continue to operate
as a going concern.
Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual
profit or loss.
c) New standards & interpretations
Several new amendments apply for the first time in 2017. However, they do not impact the annual consolidated financial
statements or the interim financial statements of the Group.
New standards issued but not yet effective
IFRS 15: Revenue from Contracts with Customers
The IASB has issued a new standard for the recognition of revenue. This will replace IAS 18 which covers revenue arising
from the sale of goods and the rendering of services and IAS 11 which covers construction contracts.
The new standard is based on the principle that revenue is recognised when control of a good or service transfers to a
customer.
The standard permits either a full retrospective or a modified retrospective approach for the adoption. It is effective for
first interim periods within annual reporting periods beginning on or after 1 January 2018. The Group will adopt the new
standard from 1 January 2018.
During the period the Group completed an initial entity wide impact assessment with findings indicating that the standard
is unlikely to have a material impact on the Group's financial results.
IFRS 9: Financial Instruments
IFRS 9 is effective for periods commencing 1 January 2018. IFRS 9 addresses the classification, measurement and
derecognition of financial assets and financial liabilities, introduces new rules for hedge accounting and a new impairment
model for financial assets. The changes introduced by IFRS 9 are not expected to have a significant impact on the Group.
IFRS 16: Leases
IFRS 16 is effective for periods commencing 1 January 2019, not yet endorsed for use in the European Union. Initial
planning has commenced for an assessment of the impact of this standard.
1. Basis of preparation (continued)
d) Non-GAAP measures
Our reported interim results are prepared in accordance with International Financial Reporting Standards (IFRS) as adopted
by the European Union and applied in accordance with the provisions of the Companies Act 2006. In measuring our
performance, the financial measures that we use include those which have been derived from our reported results in order to
eliminate factors which distort period-on-period comparisons. These are considered non-GAAP financial measures. We believe
this information, along with comparable GAAP measurements, is useful to investors in providing a basis for measuring our
operational performance. Our management uses these financial measures, along with the most directly comparable GAAP
financial measures, in evaluating our performance and value creation. Non-GAAP financial measures should not be considered
in isolation from, or as a substitute for, financial information in compliance with GAAP. Non-GAAP financial measures as
reported by the Group may not be comparable with similarly titled amounts reported by other companies.
Below we set out our definitions of non-GAAP measures and provide reconciliations to relevant GAAP measures.
Free cash flow
Free cash flow (FCF) is defined as cash flow from operating activities adjusted for income taxes, net
capital expenditures, net interest payments, dividends paid, settlement of derivatives and pension
contributions. FCF reflects an additional way of viewing our liquidity that we believe is useful to
investors as it represents cash flows that could be used for repayment of debt or to fund our
strategic initiatives, including acquisitions, if any.
The reconciliation of cash flow from operating activities to FCF is as follows.
Period ended Period ended Period ended
31 December 2016 30 June 2017 30 June 2016
£m £m £m
292.6 Cash flow from operating activities 78.4 133.0
(15.7) Income tax (paid) received (15.3) 2.1
(62.4) Net capital expenditure from purchase & disposal of property, plant & equipment and intangibles (37.4) (33.5)
(39.8) Net interest paid (21.0) (19.3)
(45.8) Dividends paid to equity holders of the Company (56.7) (32.4)
7.3 Dividends received from joint ventures 3.3 1.1
(3.7) Settlement of derivative financial instruments 0.5 (4.8)
(0.1) Purchase of shares for LTIP & other awards - (0.1)
(2.8) Additional pension contributions paid (2.0) -
129.6 Free cash flow (50.2) 46.1
EBITDA
EBITDA is operating profit from continuing operations, before exceptional items and intangibles amortisation, excluding depreciation. EBITDA is used in conjunction with other GAAP and non-GAAP financial measures to assess our operating performance. A reconciliation of EBITDA to the closest equivalent GAAP measure, operating profit, is provided.
Period ended Period ended Period ended
31 December 2016 30 June 2017 30 June 2016
£m £m £m
Continuing operations
90.3 Operating profit 81.0 48.7
Adjusted for:
50.2 Intangibles amortisation (note 4) 26.8 23.8
73.5 Exceptional items (note 4) 4.9 30.5
55.9 Depreciation of property, plant & equipment 27.9 26.6
269.9 EBITDA 140.6 129.6
Net debt
A breakdown of Net debt into Cash & short-term deposits and Interest-bearing loans & borrowings is provided in note 14.
2. Segment information
For management purposes, the Group is organised into three operating divisions: Minerals, Oil & Gas and Flow Control. These
three divisions are organised and managed separately based on the key markets served and each is treated as an operating
segment and a reportable segment under IFRS 8. The operating and reportable segments were determined based on the reports
reviewed by the Chief Executive Officer which are used to make operational decisions.
The Minerals segment is the global leader in the provision of slurry handling equipment and associated aftermarket support
for abrasive high wear applications used in the mining and oil sands markets. The Oil & Gas segment provides products and
service solutions to upstream, production, transportation, refining and related industries. The Flow Control segment
designs and manufactures valves and pumps as well as providing specialist support services to the global power generation,
industrial and oil and gas sectors.
The Chief Executive Officer assesses the performance of the operating segments based on operating profit from continuing
operations before exceptional items (including impairments) and intangibles amortisation ('segment result'). Finance income
and expenditure and associated interest-bearing liabilities and derivative financial instruments are not allocated to
segments as all treasury activity is managed centrally by the Group treasury function. The amounts provided to the Chief
Executive Officer with respect to assets and liabilities are measured in a manner consistent with that of the financial
statements. The assets are allocated based on the operations of the segment and the physical location of the asset. The
liabilities are allocated based on the operations of the segment.
Transfer prices between 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 the period ended 30 June 2017, the period ended 30 June 2016 and
the period ended 31 December 2016 is disclosed below.
Minerals Oil & Gas Flow Control Total continuingoperations
30 June 2017 30 June 2016 30 June 2017 30 June 2016 30 June 2017 30 June 2016 30 June 2017 30 June 2016
£m £m £m £m £m £m £m £m
Revenue
Sales to external customers 611.1 524.9 314.2 182.6 165.7 158.6 1,091.0 866.1
Inter-segment sales 1.5 2.8 0.4 5.7 6.9 6.9 8.8 15.4
Segment revenue 612.6 527.7 314.6 188.3 172.6 165.5 1,099.8 881.5
Eliminations (8.8) (15.4)
1,091.0 866.1
Sales to external customers - 2016 at 2017 average exchange rates
Sales to external customers 611.1 608.3 314.2 205.5 165.7 175.9 1,091.0 989.7
Segment result
Segment result before share of results of joint ventures 104.7 102.2 24.9 (5.0) (11.7) 13.9 117.9 111.1
Share of results of joint ventures - - 6.9 3.5 - - 6.9 3.5
Segment result 104.7 102.2 31.8 (1.5) (11.7) 13.9 124.8 114.6
Unallocated expenses (12.1) (11.6)
Operating profit before exceptional items & intangibles amortisation 112.7 103.0
Total exceptional items & intangibles amortisation (32.5) (56.2)
Net finance costs before exceptional items (19.2) (19.8)
Other finance costs - retirement benefits (1.9) (1.6)
Profit before tax from continuing operations 59.1 25.4
Segment result - 2016 at 2017 average exchange rates
Segment result before share of results of joint ventures 104.7 119.8 24.9 (5.7) (11.7) 16.5 117.9 130.6
Share of results of joint ventures - - 6.9 3.9 - - 6.9 3.9
Segment result 104.7 119.8 31.8 (1.8) (11.7) 16.5 124.8 134.5
Unallocated expenses (12.1) (11.9)
Operating profit before exceptional items &
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