REG - Weir Group PLC - Half-year Report
28/07/2022 07:16
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RNS Number : 0467U Weir Group PLC 28 July 2022
The Weir Group PLC interim results for the six months ended 30 June 2022
Record aftermarket orders and strong execution
New transformation programme to expand margins above 17%
Very strong demand for Weir mining equipment and spares
• Production trends and commodity prices supporting record AM
orders(1) +23%
• Sustainable solutions driving OE demand; +18%(1) excl. prior year
large one-off orders
• Increased order book and robust opportunity pipeline looking
forward
Strong execution and pricing power; H1 adjusted operating profit of £168m,
+15%
• Revenues(1) +18%; Q2 revenue(1) +20% sequentially; positive price
and volume growth
• Input cost inflation mitigated; gross margins maintained
• H1 operating margins(3) 15.3%; sequential margin expansion in Q2
Working capital build to support order book
• Net debt to EBITDA of 2.0x
• Free operating cash flow to increase through H2; inventory unwind
expected
Launched business process transformation programme
• £30m annualised run-rate savings by 2025
• FY23 operating margin(3) target of 17% underpinned; margins(3)
beyond 17% thereafter
Outlook: continue to expect strong growth in FY22 constant currency revenue
and profit
• Operating profit towards the upper end of the range of current
analysts' expectations*
• Operating margin(3) expansion in line with prior guidance
• 80-90% free operating cash conversion
H1 2022 H1 2021 As Constant currency(1) +/-
reported +/-
Continuing Operations(2)
Orders(1) £1,282m £1,120m n/a +14%
Revenue £1,096m £900m +22% +18%
Adjusted operating profit(3,4) £168m £141m +19% +15%
Adjusted operating margin(3,4) 15.3% 15.6% -30bps -40bps
Adjusted profit before tax(3,4) £143m £118m +20% n/a
Statutory profit before tax(4) £126m £100m +26% n/a
Adjusted earnings per share(3,4) 40.5p 34.2p +18% n/a
Total Group
Statutory profit after tax(4) £92m £181m -49% n/a
Statutory earnings per share(4) 35.6p 69.9p -49% n/a
Free operating cash conversion(3,4) 29% 71% n/a n/a
Dividend per share 13.5p 11.5p +17% n/a
Net debt(9) £961m £773m(8) -£188m n/a
(*Company compiled consensus from 8 June 2022, Group Operating Profit range of
£320m to £386m. For all other footnotes see page 5.)
Jon Stanton, Chief Executive Officer said:
"Momentum continued to build through the first half as we won record orders,
executed strongly and made meaningful progress in delivering our technology
and sustainability roadmaps which underpin our growth and long term strategy.
Ore production activities, the driver of our highly resilient
aftermarket-focused business, were extremely favourable as commodity prices
were well above incentive levels and customers ordered Weir solutions to
unlock higher production and productivity. We enter the second half of the
year with a strong order book and are managing through a complex operating
environment successfully. As a result, we continue to expect to deliver strong
growth in constant currency revenue and profit this year.
Today we are excited to be announcing a programme to transform our business
processes capitalising on our now mining focused platform. We expect to
realise £30m annualised run-rate savings by 2025, which will expand operating
margins beyond 17% and maximise value for all stakeholders as we execute on
the multi decade growth opportunity which lies ahead."
A webcast of the management presentation will begin at 08:00 (BST) on 28 July
2022 at www.investors.weir (http://www.investors.weir/) . A recording of the
webcast will also be available at www.investors.weir
(http://www.investors.weir/) .
CHIEF EXECUTIVE OFFICER'S REVIEW
Introduction
I am extremely proud of our performance through the first half of 2022, with
Weir teams across the globe capitalising on highly favourable conditions in
mining markets, executing strongly and delivering for our customers. Together,
we have navigated a complex operating environment, delivered strong growth in
revenue and operating profit, and created momentum that we are carrying into
the second half of the year. We have delivered all this while continuing to
put safety first, with TIR improving 27% year-on-year to 0.33. I would like to
take this opportunity to thank my colleagues for their commitment and passion,
and to contributing to the unique culture which makes Weir so special.
Following the sale of our Oil & Gas Division, 2022 marks our first full
year as a business focused solely on mining technology. This is an inflection
point for Weir. As we continue on the journey to make mining smarter, more
efficient and sustainable, the benefits of focus are providing further
opportunities for us to optimise and grow our business.
This is evident in our current performance and in our ambition to deliver
further growth and margin expansion beyond 2023. It is also evident in our
technology roadmap, and in our challenging sustainability targets that will
enable the mining industry to deliver the natural resources needed to reach
net zero.
Record AM orders and strong operational execution
Through the first half, conditions in mining markets were extremely
favourable. Commodity prices across our main exposures of copper, gold and
iron ore were well above incentive levels, and miners focused on maximising
ore production, driving demand for our mining expendables. While large mining
projects were slow to convert, we grew our installed base as customers ordered
OE to expand and de-bottleneck existing mines. We saw particularly strong
demand for our large mill circuit pumps, which have significant productivity
and efficiency benefits relative to alternative solutions, and which will
support future AM growth. Within infrastructure markets, activity and demand
were stable at high levels.
Across mining markets demand was strong in all regions. Of note, we saw
strength in North America, driven by an increase in activity in the Canadian
oil sands, while in the US, miners sought to upgrade equipment as part of a
wider theme to modernise and improve the efficiency of onshore assets. We also
saw strong demand for aftermarket spares for our core Warman(®) centrifugal
pump range, with year-on-year growth of over 20%, as miners maximised
equipment utilisation.
The operating environment through the period was complex, driven by rising
inflation, bottlenecks in global logistics channels and Covid-19 related
disruptions. We continue to manage these complexities effectively and have
passed through all input cost inflation, maintaining our gross margins. From a
Covid-19 perspective, we have mitigated the impact of absenteeism and
lockdowns, particularly during Q1, and the mandatory temporary closure of our
ESCO foundry in Xuzhou, China, during April. The facility has since reopened
and lost production volumes have been recovered through an increase in
production during May and June. Our vertically integrated regional supply
chain has protected us from some of the challenges in global logistics
channels, and we have worked hard to ensure our customers have had continued
access to mission critical equipment and spare parts to keep mines running.
The Group delivered strong order(1) growth with a 14% improvement
year-on-year. Excluding Russia, this would have been 17%.
Demand for AM was particularly strong, with constant currency orders growing
23% relative to the prior year. This reflected strong mining activity, the
impact of year-on-year price increases and, within ESCO, a contribution from
our recent acquisitions.
With respect to OE, excluding the £36m Ferrexpo HPGR and £32m Indonesia
electric pump orders from the prior year comparator, constant currency orders
were up 18%. OE orders(1) were also up 6% relative to the second half of 2021.
Given the low volume of large project activity, our OE performance was
particularly pleasing and demonstrates the Group's ability to grow its
installed base in a lower capex environment.
Strong execution is reflected in constant currency revenue growth of 18%, with
momentum building from Q1 to Q2 to deliver sequential revenue growth of 20%.
Operating profit(3,4) was 15% ahead of the prior year on a constant currency
basis and operating margins(3,4) of 15.3% reflected strong operational
delivery and mitigation of inflationary pressures.
'We are Weir' framework
At the start of 2021, following the sale of the Oil & Gas Division, we set
out medium-term targets for the Group as a focused mining technology leader.
These were set around the four key priorities of the "We are Weir" strategic
framework, being People, Customers, Technology and Performance.
These targets have evolved to become more ambitious, including an update
earlier this year to our FY23 margin target and the introduction of free
operating cash conversion targets. Earlier this month we also updated our
sustainability targets, including new commitments for absolute reductions in
scope 1, 2 and 3 emissions which we have submitted to the Science Based
Targets initiative ("SBTi") for validation.
Our strategic progress in H1 2022
Medium-term targets 2020 Benchmark(2) 2021 Progress(2) 2022 H1 Progress
People Improving TIR(5) • TIR of 0.41 • TIR of 0.45 • TIR of 0.33
Increasing Employee Net Promotor Score (eNPS) • eNPS of +42 • eNPS of +48 • eNPS of +48
Customers Growing ahead of our markets through the cycle • Ore production(6) c.-3%; Group AM revenues(1) -6% • Ore production(6) c. +3%; Group AM revenues(1) +5% • Ore production(6) c. +3%; Group AM revenues(1) +19%
Technology Increase R&D as a percentage of revenues • R&D(4): 1.3% of revenues • R&D: 1.7% of revenues • R&D: 2.0% of revenues
• Integrated Solutions orders +3% • Integrated Solutions orders +32% • Integrated Solutions orders -39%
Growth in sustainable solutions
Performance Operating margin progression • Operating margin(3,4) of 14.9% • Operating margin(3) of 15.3% • Operating margin(3) of 15.3%
• ROCE(4) of 12.2% • ROCE of 12.0% • ROCE of 12.4%
Expansion in ROCE
• n/a • 63% • 29%
Free operating cash conversion
• -12% reduction in tCO(2)e/£m to 84.4 • -15% reduction in tCO(2)e/£m to 81.0 • Data not reported at the half year
30% reduction in tCO(2)e per £m revenue by 2024 vs 2019 baseline(7)
Delivering our full potential - new business process transformation programme
As a focused mining technology company our potential for growth and margin
expansion are becoming ever clearer, and we have reached an inflection point
where we can drive more value by becoming leaner and more efficient.
Our new transformation programme will achieve that by driving lean philosophy
across our end-to-end value chains, maximising use of global business services
for support functions and leveraging the benefits of our recent investments in
foundational systems.
The programme will deliver a £30m annualised run-rate cost benefit by 2025,
and ensure we have a scalable and efficient platform that will support future
growth. It will underpin our FY23 17% operating margin(3) target, and as the
balance of the benefits are realised, support margin expansion beyond 17%
thereafter. The cash cost to deliver the programme is expected to be up to
£45m.
Further details of the programme will be shared at a spotlight capital market
event in September.
Compelling growth opportunity: Demand for metals and mining technology
transition
The long term opportunities for the Group, in partnership with the mining
industry, are compelling. The macro trends of urbanisation and population
growth, coupled with the increasing acceleration of the transition to cleaner
energy, will drive significant demand for more metals.
At the same time, the mining industry is on the cusp of a period of
unprecedented change. As the world drives towards net zero, supply deficits
are emerging in forward facing commodities with planned production being
insufficient to meet demand. Miners are also navigating the challenges of
declining ore grades and face pressure to reduce their environmental
footprint, and are responding by accelerating production from existing assets,
reassessing capital investment plans, and adopting new technologies.
This combination of factors plays to Weir's strengths. Ore production and
capital projects are growth drivers of the Group, while making mining smarter,
more efficient and sustainable creates opportunities for innovation. Our
technology strategy is therefore critical, and we continue to increase
investment in R&D, looking at ways to use less energy and manage water
consumption through the mining process.
Underpinning our technology strategy is an increasing focus on how digital
capability and data can make mining more efficient. Motion Metrics is an
important element of that strategy. When we acquired the business its core
technology of G.E.T. tooth loss detection was active on around 80 mines,
leveraging the ESCO sales network which has access to thousands of mines
around the globe, the potential to grow the business is significant. The
initial customer response to the proposition has been very positive, and
increasingly we see opportunities to deploy Motion Metrics technology across
other applications in the mine. Earlier in the year we sold our first Motion
Metrics eco-system, where a combination of Motion Metrics products were
packaged to provide a whole mine solution for G.E.T. loss detection, boulder
detection and fragmentation measurement. The solution will improve mine
productivity and reduce energy consumption, improving the sustainability and
efficiency of the operation.
Interim dividend
With high levels of confidence in our strategy and future prospects, the Board
has today announced an interim dividend of 13.5 pence per share, up 17%, and
in line with our capital allocation policy of distributing a third of EPS
through the cycle.
Outlook
Conditions in mining markets are positive, with miners focused on maximising
production and the sector benefiting from long term structural growth drivers.
In infrastructure markets, while we now expect some softening of demand in
Europe, in North America which is our largest geographical market by some
margin, we expect demand to be stable at high levels. While the operating
environment continues to be complex, we are executing strongly and are
effectively managing inflationary and logistics challenges.
We enter the second half of the year with a strong order book and operating
momentum, and we continue to expect to deliver strong constant currency
revenue and profit growth, with operating profit towards the upper end of the
range of current analysts' expectations*. As previously outlined, we expect
second half operating margins to sequentially improve, reflecting higher
volumes and our continued focus on operational efficiencies, and full year
margins to show good progress towards our FY23 target. We expect working
capital levels will decrease in the second half, and our full year cash
conversion targets are unchanged.
Looking beyond the current year, notwithstanding some recent softening,
commodity prices are well above incentive levels, and providing this
continues, we expect mining production activity to be stable at high levels.
We expect our highly resilient aftermarket focused business to continue to
grow through the cycle, benefiting from production trends, ore grade declines
and aftermarket demand from a growing installed base. We are confident in
delivering against our medium term targets, and we expect the transformation
programme we have announced today will deliver further margin expansion beyond
2023.
(*Company compiled consensus from 8 June 2022, Group Operating Profit range of
£320m to £386m. )
Management changes
Ricardo Garib will retire as President of Weir Minerals with effect from 31
December 2022 after 43 years' service. He will be succeeded by Andrew Neilson,
who is currently President of Weir ESCO. Details of Andrew's successor will be
announced in due course.
Spotlight capital market events
• Event 1 - Growth and transformation - UK afternoon of 27 September
2022
• Event 2 - Making mining smarter, more efficient and sustainable -
Quarter four of 2022: Date TBC
Segmental analysis
Continuing operations(2) Minerals ESCO Unallocated expenses Total Total OE Total AM
£m
Orders (constant currency)
H1 2022 933 349 n/a 1,282 285 997
H1 2021 846 274 n/a 1,120 307 813
Variance:
- Constant currency 10% 27% 14% -7% 23%
Revenue
H1 2022 782 314 n/a 1,096 214 882
H1 2021 (as reported) 663 237 n/a 900 187 713
Variance:
- As reported 18% 32% 22% 14% 24%
- Constant currency 16% 24% 18% 13% 19%
Adjusted operating profit(3)
H1 2022 135 51 (18) 168
H1 2021 (as reported)(4) 120 39 (18) 141
Variance:
- As reported 13% 30% 19%
- Constant currency 11% 21% 15 %
Adjusted operating margin(3)
H1 2022 17.3% 16.1% 15.3%
H1 2021 (as reported)(4) 18.0% 16.4% 15.6%
Variance:
- As reported (bps) -70 -30 -30
- Constant currency (bps) -70 -40 -40
Notes:
The Group financial highlights and Divisional financial reviews include a
mixture of GAAP measures and those which have been derived from our reported
results in order to provide a useful basis for measuring our operational
performance. Adjusted results are for continuing operations before adjusting
items as presented in the Consolidated Income Statement. Details of other
alternative performance measures are provided in note 1 of the Interim
Financial Statements contained in this press release.
1. 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 £151m (2021 restated: £123m). 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 £36m (2021 restated: £94m).
4. 2020 and H1 2021 have been restated to reflect a change in
accounting treatment for Software as a Service (SaaS) arrangements following
the publication of an Agenda Decision during 2021 by the International
Financial Reporting Interpretations Committee. Details of the restatements are
provided in note 1 of the Interim Financial Statements contained in this press
release.
5. As measured by Total Incident Rate (TIR) which represents the rate
of any incident that causes an employee, visitor, contractor, or anyone
working on behalf of Weir to require off-site medical treatment per 200,000
hours worked.
6. Weir-weighted commodity exposure - source McKinsey 2021.
7. Revenue for 2019, 2020 and 2021 is based on 2021 average exchange
rates. Market based greenhouse gas emissions.
8. Net Debt at 31 December 2021.
9. Refer to note 1 of the Interim Financial Statements contained in
this press release for further details of alternative performance measures.
DIVISIONAL REVIEW
Minerals
Minerals is a global leader in engineering, manufacturing and servicing of
processing technology used in abrasive high-wear mining applications. Its
differentiated technology is also used in infrastructure and general
industrial markets.
2022 First half summary
• Record AM orders(1) +21%
• OE orders(1) +17%, excluding Ferrexpo and Indonesian orders in the
prior year
• Strong execution with revenue(1) +16%; Q2 revenue(1) +22%
sequentially
2022 First half operating review
The Division benefited from strong levels of mining activity, with strong
order momentum through the period culminating in record AM orders in Q2. A
focus on execution delivered year-on-year revenue growth, while strong
operating momentum delivered quarter-on-quarter sequential improvement in both
revenue and operating margins. The Division maintained its gross margin,
mitigating the impact of inflationary pressures.
People
Colleagues across the Division continued to prioritise safety, and this is
reflected in a significant year-on-year reduction in total incident rate (TIR)
from 0.33 to 0.15. This performance was particularly pleasing in the context
of strong year-on-year revenue growth, as we focused on delivering for our
customers.
People development is a key priority, and during the period a number of our
future leaders completed the "Leadership in Mining" programme, which we offer
in partnership with the University of Utah, and the "Mill Circuit University"
training programme.
Customers
We continued to extend our service centre network, opening a new facility in
Almaty in Kazakhstan, while also making commitments to build new facilities to
support mining operations at Port Hedland, Australia, and in the Tashkent
region of Uzbekistan.
The new facility in Tashkent follows a £14m OE order, booked in Q2, for a
package of Warman(®) Pumps, Cavex(®) Cyclones and Isogate(®) Valves for a
new copper concentrator in the region.
Technology
Technology development in the period included innovative upgrades and range
extensions to our small and medium size Enduron(®) screens portfolio. The new
range went into the prototype phase of development in late Q2, and is expected
to have significant efficiency benefits relative to alternatives in the
market. Furthermore, development continued on new alloys and elastomers for
hard rock slurry pumping applications.
We also signed partnership agreements with AVEVA and XMPro which will support
the Division's digital strategy, simplifying data access for customers and
giving them access to real-time decision support.
Performance
We continue to drive a number of initiatives across the Division to improve
operational efficiency. Our roll-out of SAP continues to progress well, our
business in China transitioned from its previous ERP system in Q2, and our
business in India is scheduled to make the transition in Q3.
From a footprint perspective, we opened a new facility in Bangalore, India,
which will drive cost and operational efficiencies across our operations in
the region, and in Q3, we are scheduled to open our new rubber mixing facility
in Malaysia.
2022 First half financial review
Constant currency £m H1 2022 H1 2021(1) Growth(1) H2 2021(1)
Orders OE 261 288 -10% 251
Orders AM 672 558 21% 588
Orders Total 933 846 10% 839
Revenue OE 197 175 13% 244
Revenue AM 585 499 17% 536
Revenue Total 782 674 16% 780
Adjusted operating profit(2) 135 121 11% 135
Adjusted operating margin(2) 17.3% 18.0% -70 bps 17.3%
Operating cash flow(2) 106 135 -21% 92
Book-to-bill 1.19 1.26 1.08
1. 2021 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 1 of the
Interim Financial Statements contained in this press release further details
of alternative performance measures.
Orders increased by 10% on a constant currency basis to £933m (2021: £846m)
with a book-to-bill of 1.19 reflecting strong order growth which will underpin
future revenue. Orders in the prior year included the £36m Ferrexpo HPGR and
the £32m Indonesian de-watering pumps orders. Excluding these from the prior
year comparator, orders were up 20%. As large project activity was slow to
convert, OE demand was driven by equipment for small brownfield expansions and
de-bottlenecking projects as miners sought to maximise production from
existing assets. AM orders were up 21% year-on-year as commodity prices were
well above incentive levels and we saw the benefits of increased production,
lower and harder ore grades and increased equipment utilisation. Growth also
reflects year-on-year price increases and some forward purchasing in Q1. AM
orders represented 72% of total orders (2021: 66%). In total, mining end
markets accounted for 74% of total orders (2021: 76%).
Revenue was 16% higher on a constant current basis at £782m (2021: £674m)
reflecting positive mining trends and strong execution as orders converted to
revenue. Revenue grew through the period, with Q2 revenue 22% higher on a
sequential basis. Product mix was broadly in line with the prior year, with OE
representing 25% of revenue, compared to 26% last year.
Adjusted operating profit(2) increased 11% on a constant currency basis to
£135m (2021: £121m) as the Division benefited from increased volumes and
strong execution. In line with our medium-term targets, R&D costs
increased year-on-year, while costs also include an adverse transactional FX
impact. In the prior year the Division benefited from temporary costs savings
as discretionary spend, such as travel, was at lower levels during the
Covid-19 pandemic, and also a one-off gain from the sale of a property in
China.
Adjusted operating margin(2) on a constant currency basis was, as expected, at
17.3% (2021: 18.0%). Quarter-on-quarter, operating margins grew sequentially
through the period.
Operating cash flow(2) decreased by 21% to £106m (2021: £135m), primarily
reflecting a working capital outflow of £67m. Inventory build was the primary
driver of the movement, reflecting order book growth and some supply chain and
freight disruption.
ESCO
ESCO is a global leader in the provision of Ground Engaging Tools
(G.E.T.) for large mining machines. Its highly engineered technology improves
productivity through extended wear life, increased safety and reduced energy
consumption. The Division also applies its differentiated technology
to infrastructure markets including construction, dredging and sand and
aggregates.
2022 First half summary
• High levels of mining activity
• Orders(1) +27% at record levels
• Strong execution; Operating profit(1,2) +21% YoY
2022 First half operating review
The Division capitalised on high levels of activity in both mining and
infrastructure markets, gaining market share and delivering strong
year-on-year order growth. A focus on operational execution delivered strong
year-on-year growth in revenue and operating profit, while operating momentum
built through the period with quarter-on-quarter sequential improvement in
both revenue and operating margins. The Division maintained its gross margin
and managed the impacts from a complex operating environment.
People
The Division continued to focus on safety, and excluding the impact from
acquisitions, made year-on-year progress with TIR reducing from 0.95 to 0.91.
During Q2, as part of their induction to the Group, 110 employees from
Carriere Industrial Supply (CIS) went through Weir's proprietary Zero Harm
training.
Customers
In April the Division acquired its longstanding distributor in Eastern Canada,
CIS, delivering on its strategy to have direct channels to market in all major
mining regions in the world. The acquisition also brings expertise in mining
attachments, supplementing the strong organic focus we have in this area, and
leading underground capabilities.
Across our core range of G.E.T. products, we delivered positive net
conversions as we continue to grow our market share.
Technology
The successful functional integration of Motion Metrics completed in Q1, with
focus now fully transitioned to leveraging the ESCO global sales network to
drive growth. The sale of Motion Metrics first eco-system solution represented
a significant milestone for the business.
The Division also made progress on the development and implementation of a new
digital supply chain tool, which is expected to drive end-to-end efficiencies
through its inbound and outbound supply chains.
Performance
Earlier this month construction of the Division's new foundry in Xuzhou,
China, commenced. Production from the facility is scheduled to start in late
2024.
The Division continued to drive operational efficiencies across its foundry
network, including realising the full year benefits from the digital
visualisation tools integrated into the facilities last year.
2022 First half financial review
Constant currency £m H1 2022 H1 2021(1) Growth(1) H2 2021(1)
Orders OE 24 19 26% 18
Orders AM 325 255 27% 285
Orders Total 349 274 27% 303
Revenue OE 17 14 16% 20
Revenue AM 297 239 24% 268
Revenue Total 314 253 24% 288
Adjusted operating profit(2) 51 42 21% 46
Adjusted operating margin(2) 16.1% 16.5% -40 bps 16.2%
Operating cash flow(2) 25 38 -34% 48
Book-to-bill 1.11 1.08 1.05
1. 2021 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 1 of the
Interim Financial Statements contained in this press release for further
details of alternative performance measures.
Orders increased 27% on a constant currency basis to £349m (2021: £274m).
This includes £20m of orders from the recent acquisitions of Motion Metrics
and Carriere Industrial Supply. Order growth was driven by strong demand for
mining expendables, and also reflected year-on-year price increases and a
small volume of forward purchasing in Q1. The Division delivered a
book-to-bill of 1.11 as demand, particularly within mining markets, continued
to grow. AM represented 93% of orders (2021: 93%) in line with ESCO's position
as a provider of highly engineered expendables used in abrasive applications
in mining and infrastructure markets.
Revenue increased 24% on a constant currency basis to £314m (2021: £253m).
Mining represented 56% of revenues (2021: 57%) and infrastructure was 32%
(2021: 30%).
Adjusted operating profit(2) increased by 21% on a constant currency basis to
£51m (2021: £42m), as the Division benefited from increased volumes. In line
with expectations, R&D costs increased year-on-year, while, the temporary
closure of the China foundry resulted in modest under-recoveries. In the
prior year, the Division benefited from temporary costs savings as
discretionary spend, such as travel, was at lower levels during the Covid-19
pandemic, and also the favourable phasing of price increases relative to raw
material purchase contract renewals.
Adjusted operating margin(2) of 16.1% was, as expected, adverse 40 bps on a
constant currency basis (2021: 16.5%). Quarter-on-quarter, operating margins
grew sequentially through the period.
Operating cash flow(2) decreased by 34% to £25m (2021: £38m), primarily
driven by a working capital outflow of £33m. Inventory build was the primary
driver, reflecting order book growth.
GROUP FINANCIAL REVIEW
Continuing operations order input at £1,282m increased 14% on a constant
currency basis with strong growth in both operating Divisions reflecting the
highly favourable conditions in mining markets. Minerals orders were up 10% as
we saw record aftermarket demand, while OE solutions performed well against a
strong prior year. ESCO orders were up 27% due to strong demand in mining
expendables and benefiting from the acquisitions of Motion Metrics in late
2021 and Carriere Industrial Supply (CIS) in April 2022. 78% of orders
related to aftermarket compared to 73% in the prior year.
Continuing operations revenue of £1,096m increased 18% on a constant
currency basis. In Minerals revenue was 16% higher on a constant currency
basis at £782m (2021: £674m). ESCO increased 24% on a constant
currency basis to £314m (2021: £253m). Aftermarket accounted for 80% of
revenues from continuing operations, in line with the prior year. Reported
revenues increased 22%, benefiting from a foreign exchange translation
tailwind of £27m. Overall book-to-bill at 1.17 reflects the phasing of orders
and a strong order book which will underpin future growth.
Continuing operations adjusted operating profit increased by £27m (19%) to
£168m on a reported basis (2021: £141m). Excluding a £4m foreign currency
translation tailwind, the constant currency increase was £23m (15%). Prior
year operating profit has been restated to reflect a change in accounting
treatment for Software as a Service (SaaS) arrangements following the
publication of an Agenda Decision during 2021 by the International Financial
Reporting Standards Interpretations Committee, which led to a £3m reduction
in the first half of 2021, with the full year impact being reflected in our
2021 Annual Report and Financial Statements. Further details are provided in
note 1 of the Interim Financial Statements.
As explained further in the Divisional reviews, Minerals adjusted operating
profit increased by £14m on a constant currency basis to £135m (2021:
£121m) and ESCO's adjusted operating profit increased by 21% on a constant
currency basis to £51m (2021: £42m). Unallocated costs of £18m are in line
with the prior year.
Continuing operations adjusted operating margin of 15.3% is, as expected, down
40 bps versus last year on a constant currency basis and down 30 bps as
reported. This anticipated reduction is driven by higher levels of
transactional foreign exchange given high currency volatility, increased
travel costs close to pre-Covid levels, an increase in R&D investment and
the impact of some one-off gains last year. These were offset by a slightly
favourable mix impact and strong operating leverage. R&D as a percentage
of sales was 2.0%, up from 1.7% at December 2021.
Continuing operations statutory operating profit for the period of £151m was
£29m favourable to the prior year, driven by the increase in adjusted
operating profit of £27m and a reduction in adjusting items.
Continuing operations net finance costs were £25m (2021: £22m) with the
increase mainly due to increased net debt levels and costs associated with the
refinancing of our revolving credit facility.
Continuing operations adjusted profit before tax was £143m (2021: £118m),
after a translational foreign exchange tailwind of £3m. The statutory profit
before tax from continuing operations of £126m compares to £100m in 2021,
the increase primarily due to the increase in adjusted results.
Continuing operations adjusted tax charge for the year of £38m (2021:
£30m) on profit before tax from continuing operations (before adjusting
items) of £143m (2021: £118m) represents an adjusted effective tax rate
(ETR) of 26.4% (2021: 24.9%). The increase mainly reflects the geographic mix
of profits.
A tax credit of £4m has been recognised in relation to continuing operations
adjusting items (2021: £4m).
Continuing operations adjusting items reduced to £17m (2021: £18m),
primarily reflecting intangibles amortisation which decreased by £1m to £17m
(2021: £18m). Exceptional items totalled £3m (2021: nil), with acquisition
and integration costs relating to Motion Metrics and CIS of £1m and initial
costs of £2m in respect of the wind down of operations in Russia. Other
adjusting items which relate solely to the Group's legacy US asbestos-related
provision in the period were a credit of £3m, primarily due to an increase in
discount rate assumption (2021: nil).
Statutory profit for the period after tax from total operations of £92m
(2021: £181m) reflects the £17m increase in profit from continuing
operations but a decrease of £107m from discontinued operations following the
gain on sale of the Oil & Gas Division in 2021. The gain on sale last year
was mainly driven by the recycling of cumulative net foreign exchange gains
from the foreign currency translation reserve to the income statement
(£103m).
Adjusted earnings per share from continuing operations increased by 18% to
40.5p (2021: 34.2p). Statutory reported earnings per share from total
operations is 35.6p (2021: 69.9p), with the increase in profit from continuing
operations being offset by the reduction in discontinued operations.
Acquisition of Carriere Industrial Supply Limited
The Group completed the acquisition of Carriere Industrial Supply Limited
(CIS) 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. CIS contributed
£9m to revenue and an operating profit of £1m (before adjusting items) in
the period from acquisition to 30 June 2022.
Cash flow and net debt
Cash generated from operations decreased by £40m to £100m (2021: £140m) in
the period, including a £14m benefit from discontinued operations (2021:
outflow of £14m). Cash generated from continuing operations decreased by
£54m as the impact from higher operating profits was offset by an outflow of
working capital in the period of £112m (2021: £29m). This mainly reflects
an increase in inventory to support the higher order book as well as some
supply chain and freight disruption. As a result, working capital as a
percentage of sales increased to 32.4% from 24.4% in the prior
year. Continuing operations utilised non-recourse invoice discounting
facilities of £21m (2021: £12m) and suppliers chose to utilise supply chain
financing facilities of £50m (2021: £30m).
Net capital expenditure increased by £7m to £18m (2021: £11m), with the
prior year including £12m proceeds from the sale of a property in China.
Lease payments of £14m were in line with prior year (2021: £14m), while the
purchase of shares for employee share plans increased by £5m to £20m (2021:
£15m).
Free operating cash conversion (refer to note 1 of the Interim Financial
Statements) was 29% (2021: 71%) as a result of the above noted working capital
outflow.
Free cash flow (refer to note 1 of the Interim Financial Statements) from
total operations was an outflow of £24m (2021: inflow £45m). In addition to
the movements noted above this was impacted by an increase in tax payments of
£5m reflecting a higher tax charge, an increase in interest payments of £6m
on higher net debt and refinancing costs and a £5m decrease in proceeds on
settlement of derivative financial instruments.
Net debt increased by £188m to £961m (December 2021: £773m) and includes
£119m (December 2021: £105m) in respect of IFRS 16: Leases. The increase
includes adverse foreign exchange translation of £92m in relation to our net
investment hedging strategy. The net investment hedging strategy is designed
to partially offset the impact of exchange on the translation of foreign
operations, which was a gain of £220m in the period. As a result, the net
impact of translation on net assets was positive in the period. Other drivers
of the increase in net debt include the free cash outflow of £24m, the
acquisition of CIS £15m, payment of the final 2021 dividend £32m, lease
movement of £6m and exceptional items of £16m including settlement of
opening balance sheet liabilities for Motion Metrics, acquisition costs and
previously provided cyber incident related costs. Net debt to EBITDA on a
lender covenant basis was 2.0x (2021: 1.6x) compared to a covenant level of
3.5x.
In April 2022, the Group successfully 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, in line with the
Group's Sustainability Linked Notes, and the covenant terms are unchanged.
This refinancing action resulted in the Group having c.£630m of immediately
available committed facilities and cash balances at the period end.
Pensions
The IAS 19 funding position across the Group's legacy UK and North American
schemes improved from a deficit of £57m at 31 December 2021 to a net surplus
of £24m at 30 June 2022. This is primarily due to a reduction in liabilities
as a result of changes in market conditions, driven by a significant rise in
discount rates. This is partially offset by net losses on the asset side
combined with experience losses and exchange rate movements. A credit of £76m
(2021: £51m) has been recognised in the Consolidated Statement of
Comprehensive Income.
Principal Risks and Uncertainties
The Board considers the Principal Risks and Uncertainties affecting the
business activities of the Group are:
Principal Risk Risk Trend from 2021 Annual Report
1. Political and Social Increased
2. Technology No change
3. Value Chain Excellence Increased
4. Safety, Health and Wellbeing No change
5. People No change
6. Market Increased
7. Climate Decreased
8. Competition No change
9. Digital Strategy and Roadmap No change
10. Information Security and Cyber No change
11. Covid-19 Decreased
12. Ethics and Governance No change
Further details of the Group's policies on Principal Risks and Uncertainties
are contained within the Group's 2021 Annual Report, a copy of which is
available at www.annualreport.
(file:///C%3A/Users/126183/AppData/Local/Microsoft/Windows/INetCache/Content.Outlook/OUP5VQCW/www.annualreport.weir)
weir
(file:///C%3A/Users/126183/AppData/Local/Microsoft/Windows/INetCache/Content.Outlook/OUP5VQCW/www.annualreport.weir)
.
Enquiries:
Investors: Edward Pears +44(0)141 308 3725
Media: Sally Jones +44(0)141 308 3666
Citigate Dewe Rogerson: Kevin Smith +44 (0) 207 638 9571
Weir@citigatedewerogerson.com
Appendix 1 - 2021 / 2022 continuing operations(1) quarterly order trends
Reported growth Like-for-like growth(3)
Division 2021 Q1 2021 Q2 2021 Q3 2021 Q4 2022 Q1 2022 Q2 2021 Q4 2022 Q1 2022 Q2
Original Equipment 66% 50% 71% 9% -18% -3% 9% -18% -3%
Aftermarket -1% 9% 16% 29% 23% 18% 29% 23% 18%
Minerals 15% 20% 30% 23% 9% 11% 23% 9% 11%
Original Equipment 76% 17% 65% -9% -17% 98% -9% -17% 98%
Aftermarket -2% 31% 34% 40% 37% 19% 39% 31% 9%
ESCO 2 % 30% 36% 37% 32% 23% 36% 27% 13%
Original Equipment 67% 48% 71% 8% -17% 2% 8% -17% 2%
Aftermarket -2% 14% 21% 32% 28% 18% 32% 26% 15%
Continuing Ops 11% 22% 31% 26% 15% 14% 26% 14% 12%
Book-to-bill 1.22 1.20 1.14 1.01 1.22 1.13 1.01 1.21 1.14
Quarterly orders(2) £m Like-for-like orders(2,3)
Division 2021 Q1 2021 Q2 2021 Q3 2021 Q4 2022 Q1 2022 Q2 2021 Q4 2022 Q1 2022 Q2
Original Equipment 134 154 130 121 111 150 121 111 150
Aftermarket 256 302 268 320 315 357 320 315 357
Minerals 390 456 398 441 426 507 441 426 507
Original Equipment 12 7 11 7 10 14 7 10 14
Aftermarket 124 131 135 150 170 155 149 163 142
ESCO 136 138 146 157 180 169 156 173 156
Original Equipment 146 161 141 128 121 164 128 121 164
Aftermarket 380 433 403 470 485 512 469 478 499
Continuing Ops 526 594 544 598 606 676 597 599 663
1. Continuing operations excludes the Oil & Gas Division, which was sold
to Caterpillar Inc. in February 2021 and the Saudi-Arabian joint venture which
was sold in June 2021.
2. Restated at June 2022 average exchange rates.
3. Like-for-like excludes the impact of Motion Metrics acquired on 30 November
2021 and Carriere Industrial Supply Limited acquired on 8 April 2022.
CONSOLIDATED INCOME STATEMENT
FOR THE 6 MONTHS ENDED 30 JUNE 2022
Restated (note 1)
Year ended 31 December 2021 6 months ended 30 June 2022 6 months ended 30 June 2021
Statutory results Adjusted results Adjusting items (note 4) Statutory results Adjusted results Adjusting items Statutory results
(note 4)
£m Notes £m £m £m £m £m £m
Continuing operations
1,933.6 Revenue 2 1,095.5 - 1,095.5 900.4 - 900.4
Continuing operations
254.9 Operating profit before share of results of joint ventures 166.5 (16.5) 150.0 140.3 (18.2) 122.1
1.7 Share of results of joint ventures 1.0 - 1.0 0.4 - 0.4
256.6 Operating profit 167.5 (16.5) 151.0 140.7 (18.2) 122.5
(52.7) Finance costs (25.5) - (25.5) (25.8) - (25.8)
5.6 Finance income 0.5 - 0.5 3.5 - 3.5
209.5 Profit before tax from continuing operations 142.5 (16.5) 126.0 118.4 (18.2) 100.2
(54.4) Tax (expense) credit 5 (37.6) 3.8 (33.8) (29.5) 4.1 (25.4)
155.1 Profit for the period from continuing operations 104.9 (12.7) 92.2 88.9 (14.1) 74.8
103.9 (Loss) profit for the period from discontinued operations - - - (0.5) 107.1 106.6
259.0 Profit for the period 104.9 (12.7) 92.2 88.4 93.0 181.4
Attributable to:
258.5 Equity holders of the Company 104.8 (12.7) 92.1 88.2 93.0 181.2
0.5 Non-controlling interests 0.1 - 0.1 0.2 - 0.2
259.0 104.9 (12.7) 92.2 88.4 93.0 181.4
Earnings per share 7
99.7p Basic - total operations 35.6p 69.9p
59.6p Basic - continuing operations 40.5p 35.6p 34.2p 28.8p
99.0p Diluted - total operations 35.4p 69.4p
59.2p Diluted - continuing operations 40.2p 35.4p 34.0p 28.6p
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE 6 MONTHS ENDED 30 JUNE 2022
Restated
(note 1)
Year ended 6 months ended 6 months ended
31 December 2021 30 June 2022 30 June 2021
£m £m £m
259.0 Profit for the period 92.2 181.4
Other comprehensive income
(0.2) Gains (losses) taken to equity on cash flow hedges 0.2 (0.1)
(29.9) Exchange gains (losses) on translation of foreign operations 220.3 (33.6)
(103.4) Reclassification of foreign currency translation reserve on sale of - (103.4)
discontinued operations
(18.2) Exchange (losses) gains on net investment hedges (117.2) 1.7
0.1 Reclassification adjustments on cash flow hedges (0.1) 0.1
- Tax relating to other comprehensive expense to be reclassified in subsequent (0.1) -
periods
(151.6) Items that are or may be reclassified to profit or loss in subsequent periods 103.1 (135.3)
Other comprehensive income (expense) not to be reclassified to profit or loss
in subsequent periods:
96.3 Remeasurements on defined benefit plans 76.0 50.7
(21.1) Tax relating to other comprehensive (income) expense not to be reclassified in (18.9) (10.2)
subsequent periods
75.2 Items that will not be reclassified to profit or loss in subsequent periods 57.1 40.5
(76.4) Net other comprehensive income (expense) 160.2 (94.8)
182.6 Total net comprehensive income for the period 252.4 86.6
Attributable to:
182.5 Equity holders of the Company 251.7 86.3
0.1 Non-controlling interests 0.7 0.3
182.6 252.4 86.6
Total net comprehensive income for the year attributable to equity holders of
the Company
183.3 Continuing operations 251.7 84.4
(0.8) Discontinued operations - 1.9
182.5 251.7 86.3
CONSOLIDATED BALANCE SHEET
AT 30 JUNE 2022
Restated Restated
(note 1) (note 1)
31 December 2021 30 June 2022 30 June 2021
£m Notes £m £m
ASSETS
Non-current assets
415.9 Property, plant & equipment 450.8 433.0
1,308.9 Intangible assets 1,426.0 1,216.0
12.3 Investments in joint ventures 13.5 14.2
57.0 Deferred tax assets 29.6 55.8
76.5 Other receivables 85.0 80.0
- Retirement benefit plan assets 13 59.2 -
1,870.6 Total non-current assets 2,064.1 1,799.0
Current assets
516.5 Inventories 674.1 485.4
505.7 Trade & other receivables 545.3 418.7
7.1 Derivative financial instruments 14 7.4 8.3
33.1 Income tax receivable 35.5 21.7
564.4 Cash & short-term deposits 467.0 647.0
1,626.8 Total current assets 1,729.3 1,581.1
3,497.4 Total assets 3,793.4 3,380.1
LIABILITIES
Current liabilities
524.1 Interest-bearing loans & borrowings 323.6 524.2
491.4 Trade & other payables 532.0 436.4
3.8 Derivative financial instruments 14 10.4 3.6
7.7 Income tax payable 4.3 -
36.5 Provisions 28.6 25.0
1,063.5 Total current liabilities 898.9 989.2
Non-current liabilities
812.8 Interest-bearing loans & borrowings 1,104.3 801.3
- Other payables 1.0 -
0.1 Derivative financial instruments 14 0.4 0.1
69.0 Provisions 65.6 71.1
40.8 Deferred tax liabilities 30.0 30.3
56.7 Retirement benefit plan deficits 13 34.8 103.6
979.4 Total non-current liabilities 1,236.1 1,006.4
2,042.9 Total liabilities 2,135.0 1,995.6
1,454.5 NET ASSETS 1,658.4 1,384.5
CAPITAL & RESERVES
32.5 Share capital 32.5 32.5
582.3 Share premium 582.3 582.3
332.6 Merger reserve 332.6 332.6
(5.3) Treasury shares (16.6) (6.4)
0.5 Capital redemption reserve 0.5 0.5
(206.5) Foreign currency translation reserve (104.0) (190.8)
1.5 Hedge accounting reserve 1.5 1.6
705.9 Retained earnings 818.0 620.8
1,443.5 Shareholders' equity 1,646.8 1,373.1
11.0 Non-controlling interests 11.6 11.4
1,454.5 TOTAL EQUITY 1,658.4 1,384.5
The financial statements were approved by the Board of Directors and
authorised for issue on 28 July 2022.
JON STANTON JOHN HEASLEY
Director
Director
CONSOLIDATED CASH FLOW STATEMENT
FOR THE 6 MONTHS ENDED 30 JUNE 2022
Restated
(note 1)
Year ended 6 months ended 6 months ended
31 December 2021 30 June 2022 30 June 2021
£m Notes £m £m
Total operations
Cash flows from operating activities 15
266.0 Cash generated from operations 100.2 139.8
(7.8) Additional pension contributions paid (7.7) (5.9)
(8.6) Exceptional and other adjusting cash items (7.2) (4.7)
(11.1) Exceptional cash items - acquired vendor liabilities (8.9) -
(82.4) Income tax paid (40.2) (35.0)
156.1 Net cash generated from operating activities 36.2 94.2
Cash flows from investing activities
(67.9) Acquisitions of subsidiaries, net of cash acquired 15 (14.6) -
(44.4) Purchases of property, plant & equipment (18.4) (21.1)
(8.4) Purchases of intangible assets (2.6) (3.2)
15.8 Exceptional item - proceeds from sale of property - -
14.3 Other proceeds from sale of property, plant & equipment and intangible 2.7 13.0
assets
258.5 Disposals of discontinued operations, net of cash disposed and disposal costs 15 - 251.4
24.0 Disposals of joint ventures 15 - 27.4
2.6 Interest received 1.6 1.3
0.7 Dividends received from joint ventures 1.4 0.6
195.2 Net cash (used in) generated from investing activities (29.9) 269.4
Cash flows from financing activities
794.1 Proceeds from borrowings 752.8 794.1
(903.4) Repayments of borrowings (863.5) (903.0)
(27.8) Lease payments (14.0) (13.8)
10.6 Proceeds from settlement of derivative financial instruments 0.2 5.3
(45.6) Interest paid (27.1) (20.6)
(29.8) Dividends paid to equity holders of the Company 8 (31.8) -
(0.4) Dividends paid to non-controlling interests (0.1) (0.2)
(15.0) Purchase of shares for employee share plans (20.0) (15.0)
(217.3) Net cash used in financing activities (203.5) (153.2)
134.0 Net (reduction) increase in cash & cash equivalents (197.2) 210.4
374.1 Cash & cash equivalents at the beginning of the year 500.0 374.1
(8.1) Foreign currency translation differences 31.1 (9.5)
500.0 Cash & cash equivalents at the end of the year 15 333.9 575.0
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE 6 MONTHS ENDED 30 JUNE 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 as originally presented 32.5 582.3 332.6 (6.8) 0.5 (55.4) 1.6 419.1 1,306.4 11.3 1,317.7
Restatement - - - - - - - (10.8) (10.8) - (10.8)
(see note 1)
Restated at 31 December 2020 32.5 582.3 332.6 (6.8) 0.5 (55.4) 1.6 408.3 1,295.6 11.3 1,306.9
Profit for the period (restated note 1) - - - - - - - 181.2 181.2 0.2 181.4
Losses taken to equity on cash flow hedges - - - - - - (0.1) - (0.1) - (0.1)
Exchange (losses) gains on translation of foreign operations - - - - - (33.7) - - (33.7) 0.1 (33.6)
Reclassification of exchange gains on discontinued operations - - - - - (103.4) - - (103.4) - (103.4)
Exchange gains on net investment hedges - - - - - 1.7 - - 1.7 - 1.7
Reclassification adjustments on cash flow hedges - - - - - - 0.1 - 0.1 - 0.1
Remeasurements on defined benefit plans - - - - - - - 50.7 50.7 - 50.7
Tax relating to other comprehensive income - - - - - - - (10.2) (10.2) - (10.2)
Total net comprehensive (expense) income - - - - - (135.4) - 221.7 86.3 0.3 86.6
for the year
Cost of share-based payments inclusive of tax charge - - - - - - - 6.2 6.2 - 6.2
Purchase of shares for employee share plans - - - (15.0) - - - - (15.0) - (15.0)
Dividends to - - - - - - - - - (0.2) (0.2)
non-controlling interests
Exercise of share-based payments - - - 15.4 - - - (15.4) - - -
Restated at 30 June 2021 32.5 582.3 332.6 (6.4) 0.5 (190.8) 1.6 620.8 1,373.1 11.4 1,384.5
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED)
FOR THE 6 MONTHS ENDED 30 JUNE 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 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 - - - - - - - 92.1 92.1 0.1 92.2
Gains taken to equity on cash flow hedges - - - - - - 0.2 - 0.2 - 0.2
Exchange gains on translation of foreign operations - - - - - 219.7 - - 219.7 0.6 220.3
Exchange losses on net investment hedges - - - - - (117.2) - - (117.2) - (117.2)
Reclassification adjustments on cash flow hedges - - - - - - (0.1) - (0.1) - (0.1)
Remeasurements on defined benefit plans - - - - - - - 76.0 76.0 - 76.0
Tax relating to other comprehensive expense - - - - - - (0.1) (18.9) (19.0) - (19.0)
Total net comprehensive (expense) income for the year - - - - - 102.5 - 149.2 251.7 0.7 252.4
Cost of share-based payments inclusive of tax charge - - - - - - - 3.4 3.4 - 3.4
Dividends - - - - - - - (31.8) (31.8) - (31.8)
Purchase of shares for employee share plans - - - (20.0) - - - - (20.0) - (20.0)
Dividends to non-controlling interests - - - - - - - - - (0.1) (0.1)
Exercise of share-based payments - - - 8.7 - - - (8.7) - - -
At 30 June 2022 32.5 582.3 332.6 (16.6) 0.5 (104.0) 1.5 818.0 1,646.8 11.6 1,658.4
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED)
FOR THE 6 MONTHS ENDED 30 JUNE 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 as originally presented 32.5 582.3 332.6 (6.8) 0.5 (55.4) 1.6 419.1 1,306.4 11.3 1,317.7
Restatement (see note 1) - - - - - - - (10.8) (10.8) - (10.8)
Restated at 31 December 2020 32.5 582.3 332.6 (6.8) 0.5 (55.4) 1.6 408.3 1,295.6 11.3 1,306.9
Profit for the year - - - - - - - 258.5 258.5 0.5 259.0
Losses taken to equity on cash flow hedges - - - - - - (0.2) - (0.2) - (0.2)
Exchange losses on translation of foreign operations - - - - - (29.5) - - (29.5) (0.4) (29.9)
Reclassification of exchange gains on discontinued operations - - - - - (103.4) - - (103.4) - (103.4)
Exchange losses on net investment hedges - - - - - (18.2) - - (18.2) - (18.2)
Reclassification adjustments on cash flow hedges - - - - - - 0.1 - 0.1 - 0.1
Remeasurements on defined benefit plans - - - - - - - 96.3 96.3 - 96.3
Tax relating to other comprehensive (expense) 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 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
Notes to the Interim Financial Statements
1. Accounting policies
Basis of preparation
These interim financial statements are for the 6 month period ended 30 June
2022 and have been prepared on the basis of the accounting policies set out in
the Group's 2021 Annual Report and in accordance with UK adopted IAS 34
"Interim Financial Reporting" and the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom's Financial Conduct Authority.
These interim financial statements are unaudited but have been reviewed by the
auditors and their report to the Company is set out on page 47. The
information shown for the year ended 31 December 2021 does not constitute
statutory accounts as defined in Section 435 of the Companies Act 2006 and has
been extracted from the Group's 2021 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 2021 Annual Report was unqualified and
did not contain a statement under either Section 498(2) or Section 498(3) of
the Companies Act 2006. These interim financial statements should be read in
conjunction with the annual consolidated financial statements for the year
ended 31 December 2021, which were prepared in accordance with UK-adopted
International Accounting Standards in conformity with the requirements of the
Companies Act 2006.
Significant changes in the financial position and performance of the Group
during the reporting period have been discussed in the Chief Executive
Officer's Review and the Group Financial Review. The principal activities of
the Group are described in note 2.
The Weir Group PLC is a limited company, limited by shares, incorporated in
Scotland, United Kingdom and is listed on the London Stock Exchange.
These interim financial statements are presented in Sterling. All values are
rounded to the nearest 0.1 million pounds (£m) except where otherwise
indicated.
These interim financial statements were approved by the Board of Directors on
28 July 2022.
Going concern
These interim financial statements have been prepared on the going concern
basis.
As discussed more fully in the Chief Executive Officer's review, the Group has
continued to strengthen during the period.
In spite of ongoing challenges around global logistics and inflation, the
continued impact of Covid-19 and sanctions impacting Russia, our mining
businesses have continued to be highly resilient and profitable during the
period. At June 2022, the Group has c.£630m of immediately available
committed facilities and cash balances, combined with significant headroom in
each of its financial lender covenants of net debt to EBITDA and interest
cover.
Given current levels of macroeconomic uncertainty stemming from Covid-19,
inflation, the global supply chain crisis and geopolitical risks, the Group
performed financial modelling of future cash flows, which cover a period of 12
months from the approval of the 2022 interim financial statements. The
financial modelling included reverse stress testing which focused on the level
of downside risk which would be required for the Group to breach its current
lending facilities and related financial covenants. The review indicated that
the Group continues to have sufficient headroom on both lending facilities and
related financial covenants. The circumstances which would lead to a breach
are not considered plausible.
The Directors, having considered all available relevant information, have a
reasonable expectation that the Group has adequate resources to continue to
operate as a going concern.
Climate change
As well as considering the impact of climate change across our business model,
the Directors have considered the impact on the interim financial statements
in accordance with the Task Force on Climate-related Financial Disclosures
(TCFD) recommendations. There has not been a material impact on the financial
reporting judgements and estimates arising from our considerations, consistent
with our assessment that climate change is not expected to have a detrimental
impact on the viability of the Group in the medium-term.
New accounting standards, amendments and interpretations
A number of new or amended accounting standards became applicable for the
current reporting period as listed below:
i) Property, Plant and Equipment: Proceeds before Intended Use - Amendments to
IAS 16
ii) Onerous Contracts - Cost of Fulfilling a Contract - Amendments to IAS 37
iii) Annual Improvements to IFRS Standards 2018-2020
iv) Reference to the Conceptual Framework - Amendment to IFRS 3
The above amendments are not considered to have a material impact on the
consolidated financial statements of the Group.
Restatement
30 June 2021 Software as a Service
In the statutory financial statements for the year ended 31 December 2021 the
Group revised its accounting policy in relation to Software as a Service
(SaaS) and related configuration and customisation costs in response to the
International Financial Reporting Interpretations Committee (IFRIC)
configuration or customisation costs in a cloud computing arrangement (April
2021) agenda decision which clarified the interpretation of the current
accounting standard.
In response to the IFRIC agenda decision the Group completed a review of the
costs which were no longer eligible to be capitalised as intangible assets and
this resulted in a reclassification to operating expenditure and the reversal
of previously accumulated amortisation in the statutory financial statements
for the year ended 31 December 2021. This policy was applied retrospectively
in accordance with IAS 8 resulting in a restatement of prior year financial
statements. The tables below show the impact of the restatement at 30 June
2021 on the applicable lines of the Consolidated Balance Sheet, Consolidated
Income Statement, Consolidated Cash Flow Statement and earnings per share.
Restated Consolidated Balance Sheet (extract)
at 30 June 2021
As previously reported SaaS adjustment Restated
£m £m £m
Non-current assets
Intangible assets 1,231.2 (15.2) 1,216.0
Current assets
Income tax receivable 20.8 0.9 21.7
Current liabilities
Income tax payable 2.0 (2.0) -
NET ASSETS 1,396.8 (12.3) 1,384.5
CAPITAL & RESERVES
Retained earnings 633.1 (12.3) 620.8
TOTAL EQUITY 1,396.8 (12.3) 1,384.5
Restated Consolidated Income Statement (extract)
for the 6 months ended 30 June 2021
Adjusted results: as previously reported SaaS adjustment Adjusted results: restated Statutory results: as previously reported SaaS adjustment Statutory results: restated
£m £m £m £m £m £m
Operating profit before share of results of joint ventures 142.9 (2.6) 140.3 124.0 (1.9) 122.1
Operating profit 143.3 (2.6) 140.7 124.4 (1.9) 122.5
Profit before tax from continuing operations 121.0 (2.6) 118.4 102.1 (1.9) 100.2
Tax expense (30.0) 0.5 (29.5) (25.8) 0.4 (25.4)
Profit for the year from continuing operations 91.0 (2.1) 88.9 76.3 (1.5) 74.8
Profit (loss) for the year 90.5 (2.1) 88.4 182.9 (1.5) 181.4
Restated Consolidated Cash Flow Statement (extract)
for the 6 months ended 30 June 2021
As previously reported SaaS adjustment Restated
£m £m £m
Cash flows from operating activities
Cash generated from operations 143.0 (3.2) 139.8
Net cash generated from operating activities 97.4 (3.2) 94.2
Cash flows from investing activities
Purchases of intangible assets (6.4) 3.2 (3.2)
Net cash (used in) generated from investing activities 266.2 3.2 269.4
As previously reported Restated
2021 2021
pence pence
Basic earnings per share:
Total operations* 70.5 69.9
Continuing operations* 29.4 28.8
Continuing operations before adjusting items* 35.0 34.2
Diluted earnings per share:
Total operations* 70.0 69.4
Continuing operations* 29.2 28.6
Continuing operations before adjusting items* 34.8 34.0
(*Adjusted for £0.2m in respect of non-controlling interests.)
31 December 2021 business combinations
Following the acquisition of Motion Metrics during the year ended 31 December
2021, the Group has continued to review the opening balance sheet (OBS)
position acquired. This exercise will be finalised within 12 months of the
acquisition date (30 November 2021) as part of the 2022 Annual Report. As part
of this process to date, the Group has identified the adjustments below which
are required to the opening balance sheet which was reported in the 2021
Annual Report. Further details are provided in note 10.
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 0.6 1,308.9
Current assets
Inventories 517.1 (0.6) 516.5
Income tax receivable 32.0 1.1 33.1
Current liabilities
Interest-bearing loans & borrowings 523.9 0.2 524.1
Trade & other payables 490.6 0.8 491.4
Income tax payable 7.6 0.1 7.7
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
Use of estimates and judgements
The preparation of interim 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.
The areas of judgement and estimate identified in the preparation of the
consolidated financial statements for the year ended 31 December 2021
continue to be relevant to the preparation of these interim financial
statements, with additional consideration given to the following area.
Taxation (estimate)
Taxes on income in the interim periods are accrued using the tax rate that
would be applicable to expected total annual profit or loss.
Alternative performance measures
The reported interim 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 of
our 2021 Annual Report. The accounting policy for Adjusting items should be
read in conjunction with this note. Details of each adjusting item are
provided in note 4. We consider this presentation to be helpful as it allows
greater comparability of the operating performance of the business from period
to period.
Operating cash flow (cash generated from operations)
Operating cash flow excludes additional pension contributions, exceptional and
other adjusting cash items and income tax paid. This reflects our view of
business as usual cash generation. A reconciliation to the GAAP measure 'Net
cash generated from operating activities' is provided in the Consolidated Cash
Flow Statement.
Free operating cash and free cash flow
Free operating cash flow is defined as operating cash flow (cash generated
from operations), adjusted for net capital expenditure, lease payments,
dividends received from joint ventures and purchase of shares for employee
share plans. This is considered a helpful measure of cash generation as it
focuses on cash generated after reflecting the cash flows required to support
broader business operating activities.
Free cash flow (FCF) is defined as free operating cash flow further adjusted
for net interest, income taxes, settlement of derivative financial
instruments, additional pension contributions paid and non-controlling
interest dividends. FCF reflects an additional way of viewing our available
funds that we believe is useful to investors as it represents cash flows that
could be used for repayment of debt, dividends, exceptional and other
adjusting items, or to fund our strategic initiatives, including acquisitions,
if any.
The reconciliation of operating cash flows (cash generated from operations) to
free operating cash flow and subsequently FCF is as follows.
Restated
(note 1)
Year ended 6 months ended 6 months ended
31 December 2021 30 June 2022 30 June 2021
£m £m £m
266.0 Operating cash flow (cash generated from operations) 100.2 139.8
(38.5) Net capital expenditure from purchase & disposal of property, plant & (18.3) (11.3)
equipment and intangibles
(27.8) Lease payments (14.0) (13.8)
0.7 Dividends received from joint ventures 1.4 0.6
(15.0) Purchase of shares for employee share plans (20.0) (15.0)
185.4 Free operating cash flow 49.3 100.3
(43.0) Net interest paid (25.5) (19.3)
(82.4) Income tax paid (40.2) (35.0)
10.6 Proceeds from settlement of derivative financial instruments 0.2 5.3
(7.8) Additional pension contributions paid (7.7) (5.9)
(0.4) Non-controlling interest dividends (0.1) (0.2)
62.4 Free cash flow (24.0) 45.2
Free operating cash conversion
Free operating cash conversion is a non-GAAP key performance measure used by
management, which is defined as free operating cash flow divided by adjusted
operating profit on a total Group basis. This is considered to be a useful
measure of the Group's efficiency at generating cash from the operating
results of its core operations.
Restated
(note 1)
Year ended 6 months ended 6 months ended
31 December 2021 30 June 2022 30 June 2021
£m £m £m
296.2 Continuing operations 167.5 140.7
(0.3) Discontinued operations - (0.3)
295.9 Adjusted operating profit - Total Group 167.5 140.4
185.4 Free operating cash flow 49.3 100.3
63 % Free operating cash conversion % 29 % 71 %
Working capital as a percentage of sales
Working capital includes inventories, trade & other receivables, trade
& other payables and derivative financial instruments as included in the
Consolidated Balance Sheet, adjusted to exclude insurance contract assets
totalling £86.3m, deferred consideration payable of £2.5m, and £4.7m of
interest accruals. This working capital measure reflects the figure used by
management to monitor the performance of the business and is divided by
revenue for the last twelve months, as included in the Consolidated Income
Statement, to arrive at working capital as a percentage of sales.
EBITDA
EBITDA is operating profit from continuing operations, before exceptional
items, other adjusting items, intangibles amortisation, and excluding
depreciation of owned assets and right-of-use assets. EBITDA is used in
conjunction with other GAAP and non-GAAP financial measures to assess our
operating performance. A reconciliation of EBITDA to the closest equivalent
GAAP measure, operating profit, is provided.
Restated
(note 1)
Year ended 6 months ended 6 months ended
31 December 2021 30 June 2022 30 June 2021
£m £m £m
Continuing operations
256.6 Operating profit 151.0 122.5
Adjusted for:
4.7 Exceptional and other adjusting items (note 4) (0.5) 0.2
34.9 Adjusting amortisation (note 4) 17.0 18.0
296.2 Adjusted operating profit 167.5 140.7
5.3 Non-adjusting amortisation 3.0 1.9
301.5 Adjusted Earnings before interest, tax and amortisation (EBITA) 170.5 142.6
43.0 Depreciation of owned property, plant & equipment 22.7 21.1
27.6 Depreciation of right-of-use property, plant & equipment 14.8 14.0
372.1 Adjusted Earnings before interest, tax, depreciation and amortisation (EBITDA) 208.0 177.7
Net debt
Net debt is a common measure used by management and investors when monitoring
the capital management of the Group and is the basis for covenant reporting. A
reconciliation of net debt to cash & short-term deposits, interest-bearing
loans & borrowings is provided in note 15.
2. Segment information
Continuing operations includes two operating Divisions: Minerals and ESCO.
These two Divisions are organised and managed separately based on the key
markets served and each is treated as an operating segment and a reportable
segment under IFRS 8. The operating and reportable segments were determined
based on the reports reviewed by the Chief Executive Officer which are used to
make operational decisions.
The Minerals segment is the global leader in the provision of slurry handling
equipment and associated aftermarket support for abrasive high-wear
applications used in the mining and oil sands markets. The ESCO segment is the
world's leading provider of ground engaging tools for large mining machines.
Following 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, while
CIS is a premier manufacturer and distributor of highly engineered wear parts
and aftermarket service provider to the Canadian mining industry.
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.
Minerals ESCO Total continuing operations
Restated (note 1) Restated (note 1) Restated (note 1)
30 June 2022 30 June 2021 30 June 2022 30 June 2021 30 June 2022 30 June 2021
£m £m £m £m £m £m
Revenue
Sales to external customers 782.0 663.1 313.5 237.3 1,095.5 900.4
Inter-segment sales - 0.1 1.2 0.9 1.2 1.0
Segment revenue 782.0 663.2 314.7 238.2 1,096.7 901.4
Eliminations (1.2) (1.0)
1,095.5 900.4
Sales to external customers - 2021 at 2022 average exchange rates
Sales to external customers 782.0 673.8 313.5 253.3 1,095.5 927.1
Segment result
Segment result before share of results of joint ventures 135.1 119.6 49.5 38.4 184.6 158.0
Share of results of joint ventures - - 1.0 0.4 1.0 0.4
Segment result 135.1 119.6 50.5 38.8 185.6 158.4
Unallocated expenses (18.1) (17.7)
Adjusted operating profit 167.5 140.7
Adjusting items (16.5) (18.2)
Net finance costs (25.0) (22.3)
Profit before tax from continuing operations 126.0 100.2
Segment result - 2021 at 2022 average exchange rates
Segment result before share of results of joint ventures 135.1 121.2 49.5 41.2 184.6 162.4
Share of results of joint ventures - - 1.0 0.5 1.0 0.5
Segment result 135.1 121.2 50.5 41.7 185.6 162.9
Unallocated expenses (18.1) (17.8)
Adjusted operating profit 167.5 145.1
2. Segment information (continued)
Minerals ESCO Total Group
Restated (note 1) Restated (note 1) Restated (note 1)
30 June 2022 30 June 2021 30 June 2022 30 June 2021 30 June 2022 30 June 2021
£m £m £m £m £m £m
Assets & liabilities
Intangible assets 606.6 562.6 818.6 647.6 1,425.2 1,210.2
Property, plant & equipment 297.5 298.2 142.5 122.1 440.0 420.3
Working capital assets 905.7 695.6 310.5 212.4 1,216.2 908.0
1,809.8 1,556.4 1,271.6 982.1 3,081.4 2,538.5
Investments in joint ventures - - 13.5 14.2 13.5 14.2
Segment assets 1,809.8 1,556.4 1,285.1 996.3 3,094.9 2,552.7
Unallocated assets 698.5 827.4
Total assets 3,793.4 3,380.1
Working capital liabilities 449.9 373.7 140.9 90.6 590.8 464.3
Segment liabilities 449.9 373.7 140.9 90.6 590.8 464.3
Unallocated liabilities 1,544.2 1,531.3
Total liabilities 2,135.0 1,995.6
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 & 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.
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.
6 months ended 30 June 2022 UK US Canada Asia Pacific Australia South America Middle East & Africa Europe & FSU Total
£m £m £m £m £m £m £m £m £m
Revenue from continuing operations
Sales to external customers 14.5 190.6 160.6 135.2 133.8 235.8 131.6 93.4 1,095.5
6 months ended 30 June 2021 UK US Canada Asia Pacific Australia South America Middle East & Africa Europe & FSU Total
£m £m £m £m £m £m £m £m £m
Revenue from continuing operations
Sales to external customers 8.3 141.3 127.5 100.7 149.3 188.5 108.0 76.8 900.4
Year ended 31 December 2021 UK US Canada Asia Pacific Australia South America Middle East & Africa Europe & FSU Total
£m £m £m £m £m £m £m £m £m
Revenue from continuing operations
Sales to external customers 23.8 315.9 266.0 237.9 304.0 387.5 224.1 174.4 1,933.6
Minerals ESCO Total continuing operations
Year ended 31 December 2021 £m £m £m
Revenue
Sales to external customers 1,422.1 511.5 1,933.6
Inter-segment sales - 2.1 2.1
Segment revenue 1,422.1 513.6 1,935.7
Eliminations (2.1)
1,933.6
Sales to external customers - 2021 at 2022 average exchange rates
Sales to external customers 1,453.7 541.5 1,995.2
Segment result
Segment result before share of results of joint ventures 251.0 81.6 332.6
Share of results of joint ventures - 1.7 1.7
Segment result 251.0 83.3 334.3
Unallocated expenses (38.1)
Adjusted operating profit 296.2
Adjusting items (39.6)
Net finance costs (47.1)
Profit before tax from continuing operations 209.5
Segment result - 2021 at 2022 average exchange rates
Segment result before share of results of joint ventures 255.8 86.5 342.3
Share of results of joint ventures - 1.8 1.8
Segment result 255.8 88.3 344.1
Unallocated expenses (38.1)
Adjusted operating profit 306.0
Year ended 31 December 2021 (restated note 1) Minerals ESCO Total Group
£m £m £m
Assets & liabilities
Intangible assets 563.8 742.3 1,306.1
Property, plant & equipment 280.1 124.3 404.4
Working capital assets 773.2 238.4 1,011.6
1,617.1 1,105.0 2,722.1
Investments in joint ventures - 12.3 12.3
Segment assets 1,617.1 1,117.3 2,734.4
Unallocated assets 763.0
Total assets 3,497.4
Working capital liabilities 406.9 120.2 527.1
Segment liabilities 406.9 120.2 527.1
Unallocated liabilities 1,515.8
Total liabilities 2,042.9
The following disclosures are given in relation to continuing operations.
Year ended 6 months ended 6 months ended
31 December 2021 30 June 2022 30 June 2021
£m £m £m
An analysis of the Group's revenue is as follows:
386.9 Original equipment 202.4 187.0
1,366.6 Aftermarket parts 813.6 654.5
1,753.5 Sales of goods 1,016.0 841.5
121.0 Provision of services - Aftermarket 68.3 58.9
59.1 Construction contracts - Original equipment 11.2 -
1,933.6 Revenue 1,095.5 900.4
Minerals ESCO Total continuing operations
30 June 2022 30 June 2021 30 June 2022 30 June 2021 30 June 2022 30 June 2021
£m £m £m £m £m £m
Timing of revenue recognition
At a point in time 716.6 622.0 310.4 235.6 1,027.0 857.6
Over time 65.4 41.2 4.3 2.6 69.7 43.8
Segment revenue 782.0 663.2 314.7 238.2 1,096.7 901.4
Eliminations (1.2) (1.0)
1,095.5 900.4
3. Revenue & expenses
The following disclosures are given in relation to continuing operations.
Restated (note 1)
Year ended 31 December 2021 6 months ended 30 June 2022 6 months ended 30 June 2021
Statutory results Adjusted results Adjusting items Statutory results Adjusted results Adjusting items Statutory results
£m £m £m £m £m £m £m
A reconciliation of revenue to operating profit is as follows:
1,933.6 Revenue 1,095.5 - 1,095.5 900.4 - 900.4
(1,241.6) Cost of sales (692.4) (3.8) (696.2) (571.2) (1.5) (572.7)
692.0 Gross profit 403.1 (3.8) 399.3 329.2 (1.5) 327.7
19.4 Other operating income 4.6 - 4.6 7.8 - 7.8
(218.9) Selling & distribution costs (133.4) (0.1) (133.5) (101.6) - (101.6)
(237.6) Administrative expenses (107.8) (12.6) (120.4) (95.1) (16.7) (111.8)
1.7 Share of results of joint ventures 1.0 - 1.0 0.4 - 0.4
256.6 Operating profit 167.5 (16.5) 151.0 140.7 (18.2) 122.5
Details of adjusting items are included in note 4.
4. Adjusting items
Restated
(note 1)
Year ended 6 months ended 6 months ended
31 December 2021 30 June 2022 30 June 2021
£m £m £m
Recognised in arriving at operating profit from continuing operations
(34.9) Intangibles amortisation (17.0) (18.0)
Exceptional items
(1.9) Acquisition and integration related costs (1.3) -
- Russia operations wind down (1.7) -
(4.7) Cybersecurity incident response - -
6.3 Other restructuring and rationalisation activities 0.3 -
(0.3) Total Exceptional items (2.7) -
Other adjusting items
(4.4) Asbestos-related provision 3.2 (0.2)
(4.4) Total Other adjusting items 3.2 (0.2)
(39.6) Total adjusting items (16.5) (18.2)
Recognised in arriving at operating profit from discontinued operations
Exceptional items
0.9 Onerous purchase contracts - 0.9
0.9 Total Exceptional items - 0.9
0.9 Total adjusting items - 0.9
Continuing operations
Intangibles amortisation
Intangibles amortisation of £17.0m relates to acquisition related assets and
ongoing multi-year investment activities.
Exceptional items
Exceptional items in the period include £1.3m for acquisition and integration
related costs, of which £0.9m relates to the acquisition of Carriere
Industrial Supply Limited which completed on 8 April 2022 (note 10). The
majority of these costs relate to adviser fees, due diligence and initial
integration. The remaining £0.4m expense relates to further Motion Metrics
integration costs following its acquisition on 30 November 2021. The prior
year exceptional included a charge of £2.8m for Motion Metrics acquisition
and integration costs and a credit £0.9m for an accrual release in relation
to ESCO integration costs. In total acquisition and integration costs have
resulted in a £2.8m exceptional cash outflow in the 6 months to 30 June 2022,
including items expensed in the prior year.
In March 2022, the Group announced the suspension of its business and
operations in Russia and has since commenced the wind down of those
operations. As a result, an initial £1.7m exceptional cost has been
recognised in the period. This primarily reflects severance costs of which
£1.1m has been cash settled in the period. In the ESCO Division, a potential
business transfer to local management is being considered, with no costs being
recognised in the period as this review continues.
The remaining credit of £0.3m relates to the reversal of restructuring and
rationalisation charges recognised in Peru and China in prior years.
The Group incurred £4.7m of costs in the final quarter of 2021 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 during the period of recovery plus an impairment charge of
£0.1m on existing hardware. This resulted in a £2.2m exceptional cash
outflow in the year to 31 December 2021 and a further £2.2m cash outflow in
the period to 30 June 2022 in respect of the 2021 expense.
There were no exceptional items recognised in the prior period to 30 June
2021.
Other adjusting items
A credit of £3.2m (June 2021: charge £0.2m) has been recorded in respect of
movements in the US asbestos-related liability and associated insurance
provision, plus settlements for post 1981 US asbestos-related claims which
relate to legacy Group products. Further details of this are included in note
11.
Discontinued operations
There are no financial results for the period to 30 June 2022 for discontinued
operations following the disposal of these in 2021. An exceptional credit of
£0.9m was recognised in the prior period to 30 June 2021 as a result of a
final adjustment to the onerous purchase contracts provision.
5. Income tax expense
Restated (note 1)
Year ended 6 months ended 6 months ended
31 December 2021 30 June 2022 30 June 2021
£m £m £m
(9.8) Continuing Group - UK (5.7) (2.0)
(44.6) Continuing Group - Overseas (28.1) (23.4)
(54.4) Income tax expense in the Consolidated Income Statement for continuing (33.8) (25.4)
operations
(6.1) Discontinued operations - (4.2)
(60.5) Income tax expense in the Consolidated Income Statement for total operations (33.8) (29.6)
The total income tax expense is disclosed in the Consolidated Income Statement
as follows.
Restated (note 1)
Year ended 6 months ended 6 months ended
31 December 2021 30 June 2022 30 June 2021
£m £m £m
Tax (expense) credit
(63.8) - adjusted continuing operations (37.6) (29.5)
(1.7) - adjusted discontinued operations - -
(2.9) - exceptional and other adjusting items (0.3) (4.2)
7.9 - adjusting intangibles amortisation and impairment 4.1 4.1
(60.5) Total income tax (expense) in the Consolidated Income Statement for total (33.8) (29.6)
operations
The income tax expense included in the Continuing Group's share of results of
joint ventures is as follows.
Year ended 6 months ended 6 months ended
31 December 2021 30 June 2022 30 June 2021
£m £m
(0.2) Joint ventures - (0.4)
Tax charged within the 6 months ended 30 June 2022 has been calculated by
applying the effective rate of tax which is expected to apply to the Group for
the period ending 31 December 2022 using rates substantively enacted by 30
June 2022 as required by IAS 34 'Interim Financial Reporting'.
The normalised rate of tax of 26.4% (restated for continuing operations at 30
June 2021: 24.9%) has been calculated using the full year projections and has
been applied to profit before exceptionals for the 6 months ended 30 June
2022.
Legislation to increase in the UK rate from 19% to 25% from April 2023 was
substantively enacted as part of Finance Bill 2021 (on 25 May 2021). As a
result, at 30 June 2022, deferred tax balances have been calculated at 19% or
25% depending upon when the balance is expected to unwind.
Factors affecting current and future tax charges
The normalised tax rate was 0.1% below the Group's weighted average rate of
26.5%. The Group considers its normalised tax rate to be sustainable.
Unrecognised Deferred Tax
Included in the net Deferred Tax Liability of £0.4m is £28.0m related to the
US Group Deferred Tax Assets, determined on a basis consistent with the
approach adopted at year ended 31 December 2021 following the application of a
model which estimates the future forecast levels of US taxable income with
reference to the Group's five year strategic plan. Consistent with this
approach, US deferred tax assets totalling £53.0m are not recognised but
retained by the continuing US group, in connection with the disposal of the US
entities within the Oil & Gas Division. The ongoing application of this
model may result in future changes to the amount of US deferred tax assets
that are unrecognised.
6. Discontinued operations
There are no financial results for the period to 30 June 2022 in respect of
discontinued operations following the disposal of the Oil & Gas Division
to Caterpillar Inc on 1 February 2021 and Saudi Arabia-based joint venture,
Arabian Metals Company to Olayan Financing Company on 30 June 2021. The
Group's 2021 Annual Report (note 8) provides full disclosure on the two
transactions.
7. 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 outstanding during the year. 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.
Restated
(note 1)
Year ended 6 months ended 6 months ended
31 December 2021 30 June 2022 30 June 2021
Profit attributable to equity holders of the Company
258.5 Total operations* (£m) 92.1 181.2
154.6 Continuing operations** (£m) 92.1 74.6
184.8 Continuing operations before adjusting items** (£m) 104.8 88.7
(* Adjusted for a profit of £0.1m
(2021: profit of £0.2m) in respect of non-controlling interests for total
operations.)
(** Adjusted for a profit of £0.1m
(2021: profit of £0.2m) in respect of non-controlling interests for
continuing operations.)
( )
The following reflects the number of shares 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.
Year ended 6 months ended 6 months ended
31 December 2021 30 June 2022 30 June 2021
Shares Shares Shares
million
million million
259.3 Weighted average number of ordinary shares for basic earnings per share 258.7 259.3
1.7 Effect of dilution: employee share awards 1.8 1.8
261.0 Adjusted weighted average number of ordinary shares for diluted earnings per 260.5 261.1
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.
Restated
(note 1)
Year ended 6 months ended 6 months ended
31 December 2021 30 June 2022 30 June 2021
£m £m
154.6 Net profit attributable to equity holders from continuing operations** 92.1 74.6
30.2 Adjusting items net of tax 12.7 14.1
184.8 Net profit attributable to equity holders from continuing operations before 104.8 88.7
adjusting items
Restated
(note 1)
Year ended 6 months ended 6 months ended
31 December 2021 30 June 2022 30 June 2021
pence pence
Basic earnings per share:
99.7 Total operations* 35.6 69.9
59.6 Continuing operations** 35.6 28.8
71.3 Continuing operations before adjusting items** 40.5 34.2
Diluted earnings per share:
99.0 Total operations* 35.4 69.4
59.2 Continuing operations** 35.4 28.6
70.8 Continuing operations before adjusting items** 40.2 34.0
(* Adjusted for a profit of £0.1m
(2021: profit of £0.2m) in respect of non-controlling interests for total
operations.)
(** Adjusted for a profit of £0.1m
(2021: profit of £0.2m) in respect of non-controlling interests for
continuing operations.)
( )
There have been 725 share awards (2021: nil) exercised between the reporting
date and the date of signing of these financial statements. These were settled
out of existing shares held in trust.
8. Dividends paid & proposed
Year ended 6 months ended 6 months ended
31 December 2021 30 June 2022 30 June 2021
£m £m £m
Declared & paid during the year
Equity dividends on ordinary shares
- Final dividend paid for 2021: 12.3p (2020: nil) 31.8 -
29.8 Interim dividend paid for 2021: 11.5p (2020: nil) - -
31.9 Final dividend for 2021 proposed for approval by shareholders at the AGM - -
(12.3p)
- Interim dividend proposed for 2022: 13.5p (2021: 11.5p) 34.9 29.8
An interim dividend of 13.5p has been declared for 2022 (2021: 11.5p) in line
with the capital allocation policy under which the Group intends to distribute
33% of net adjusted earnings by way of dividend.
The proposed interim 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 interim dividend may differ due
to increases or decreases in the number of shares in issue between the date of
approval of this Interim Report and Financial Statements and the record date
for the interim dividend.
9. Property, plant & equipment and intangible assets
Restated
(note 1)
Year ended 6 months ended 6 months ended
31 December 2021 30 June 2022 30 June 2021
£m £m £m
Additions of property, plant & equipment and intangible assets
4.0 - owned land & buildings 2.3 0.9
44.3 - owned plant & equipment 18.0 21.1
12.4 - right-of-use land & buildings 17.8 6.9
8.9 - right-of-use plant & equipment 2.1 4.4
8.0 - intangible assets 2.5 3.0
77.6 42.7 36.3
The above additions relate to the normal course of business and do not include
any additions made by way of business combinations.
10. Business combinations
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 GET products. This
acquisition will maintain ESCO's leading core GET 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 payable reflecting indemnification
and working capital hold backs. The settlement of the working capital hold
back is expected to be in the second half of the year subject to finalisation
of the closing accounts process, with the indemnification hold back payable in
two installments on the first and second anniversary of the acquisition date.
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 £5.3m 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. An update to the provisional fair values including, where
appropriate, the recognition of separable intangible assets will be provided
in the 2022 Annual Report.
2022
Carriere Industrial Supply Limited provisional fair values £m
Property, plant & equipment - owned assets 3.6
Property, plant & equipment - right-of-use assets -
Intangible assets -
Inventories 10.6
Trade & other receivables 5.8
Cash & cash equivalents 1.6
Trade & other payables (7.6)
Deferred tax liabilities (0.6)
Provisional fair value of net assets 13.4
Goodwill arising on acquisition 5.3
Total consideration 18.7
Cash consideration 16.2
Deferred consideration 2.5
Total consideration 18.7
The total net cash outflow on current year acquisitions was as follows:
Carriere Industrial Supply Limited
cash paid (16.2)
cash & cash equivalents acquired 1.6
Total cash outflow (note 15) (14.6)
The gross amount and fair value of CIS trade receivables amounts to £5.8m. It
is expected that virtually all the contractual amounts will be collected.
CIS contributed £9.3m to revenue and an operating profit of £1.3m (before
adjusting items) in the period from acquisition to 30 June 2022. If the
acquisition had occurred at the start of 2022 the revenue and statutory profit
for the period 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 were £0.9m in the period (note 4) and are reported
within Administrative expenses (note 3).
In November 2021, the Group completed the acquisition of 100% of the voting
rights of Motion Metrics, a leading Canada-based global mining technology
business with market leading development in innovative Artificial Intelligence
(AI) and 3D rugged Machine Vision Technology. The Group purchased Motion
Metrics for an enterprise value of CAD$150m (£88m), which represented the
initial equity value consideration of £68m paid in cash and £20m of vendor
liabilities. The remaining £9m vendor liabilities outstanding at 31 December
2021 have been cash settled in the period to 30 June 2022. The acquisition is
reported within the ESCO segment.
The provisional opening balance sheet reported in the 2021 Annual Report has
been updated based on the review performed to date, as reflected in the table
below. This has resulted in the restatement of the balance sheet at 31
December 2021 as reflected in note 1. The provisional fair values will be
finalised within 12 months of the acquisition date (30 November 2021) and the
final opening balance sheet will be reported in the 2022 Annual Report.
As reported Adjustment Restated
(note 1) (note 1)
2021 2021 2021
Motion Metrics provisional 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 and 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 1.1 1.8
Interest-bearing loans & borrowings (0.2) (0.7) (0.9)
Trade & other payables (1.6) (0.8) (2.4)
Income tax payable (0.5) (0.1) (0.6)
Provisions (20.0) - (20.0)
Deferred tax liabilities (5.3) (0.1) (5.4)
Provisional fair value of net assets 15.8 (0.5) 15.3
Goodwill arising on acquisition 52.1 0.5 52.6
Total consideration 67.9 - 67.9
Cash consideration 67.9 - 67.9
Contingent consideration - - -
Total consideration 67.9 - 67.9
The total net cash outflow on current year acquisitions was as follows:
cash paid (67.9) - (67.9)
cash & cash equivalents acquired - - -
Total cash outflow (note 15) (67.9) - (67.9)
Contingent consideration
As noted in the 2021 Annual Report, as part of the purchase agreement a
maximum of an additional CAD$100m is payable by the Group contingent on Motion
Metrics exceeding specific revenue and EBITDA targets over the next three
years. In the period following acquisition, the probability of Motion Metrics
exceeding these targets in order to trigger a contingent payment is still
considered uncertain, in part due to the relative infancy of the business. As
a result, no contingent consideration has been recorded at the reporting date
and this will continue to be reassessed in future periods as the business
develops.
Group exceptional acquisition and integration costs in relation to Motion
Metrics were £0.4m in the period (note 4) and are reported within
Administrative expenses (note 3).
11. 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
Additions 2.2 0.6 7.0 3.0 0.9 13.7
Utilised (3.4) (3.7) (7.0) (12.8) (0.6) (27.5)
Unutilised (0.2) (5.8) - (0.3) (0.2) (6.5)
Exchange adjustment 0.8 5.9 0.6 0.5 1.2 9.0
At 30 June 2022 8.8 58.6 13.0 1.5 12.3 94.2
Current 8.8 8.2 8.0 1.4 2.2 28.6
Non-current - 50.4 5.0 0.1 10.1 65.6
At 30 June 2022 8.8 58.6 13.0 1.5 12.3 94.2
Current 5.8 7.5 6.8 2.4 2.5 25.0
Non-current 0.1 55.0 5.6 1.0 9.4 71.1
At 30 June 2021 5.9 62.5 12.4 3.4 11.9 96.1
Current 9.2 7.6 6.9 10.8 2.0 36.5
Non-current 0.2 54.0 5.5 0.3 9.0 69.0
At 31 December 2021 9.4 61.6 12.4 11.1 11.0 105.5
The impact of discounting is only relevant for the Asbestos-related category
of provision, with higher discount rates at 30 June 2022 resulting in a £5.8m
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 30 June 2022, the warranties portion of the provision totalled
£6.8m (2021: £4.6m) for continuing operations. At 30 June 2022, all of these
costs relate to claims which fall due within one year of the balance sheet
date. Prior to this, some costs were non-current but expected to be incurred
within five years of the balance sheet date.
Provision has been made in respect of sales contracts entered into for the
sale of goods in the normal course of business where the unavoidable costs of
meeting the obligations under the contracts exceed the economic benefits
expected to be received from the contracts and before allowing for future
expected aftermarket revenue streams. Provision is made immediately when it
becomes apparent that expected costs will exceed the expected benefits of the
contract. At 30 June 2022, the contract claims element, which includes
onerous provision, was £2.0m (2021: £1.3m), all of which is expected to be
incurred within one year of the balance sheet date.
Asbestos-related claims
31 December 2021 30 June 2022 30 June 2021
£m £m £m
55.5 US asbestos-related provision - pre-1981 date of first exposure 52.6 56.5
3.0 US asbestos-related provision - post-1981 date of first exposure 2.9 2.9
58.5 US asbestos-related provision - total 55.5 59.4
3.1 UK asbestos-related provision 3.1 3.1
61.6 Total asbestos-related provision 58.6 62.5
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 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. Further details of this review, the resulting US asbestos-related
provision and insurance asset, judgements applied and relevant sensitivity
analysis is included in note 21 of our 2021 Annual Report and Financial
Statements.
In the 6 months to 30 June 2022 the US asbestos-related provision was updated
for changes in discount rate, period end FX rates and adjusted in line with
the actuarial model to reflect expected settlements and the estimate of ten
years of future claims. The insurance asset was updated to reflect settlements
in the period. The table below represents the Directors' best estimate of the
future liability and corresponding insurance asset.
31 December 2021 30 June 2022 30 June 2021
£m US asbestos-related provision £m £m
67.4 Gross provision 71.6 69.0
(8.9) Effect of discounting (16.1) (9.6)
58.5 Discounted US asbestos-related provision 55.5 59.4
42.2 Insurance asset 40.9 47.2
16.3 Net US asbestos-related liability 14.6 12.2
The insurance asset consists of £7.4m (2021: £6.8m) presented within Trade
& other receivables as a current asset, and £33.5m (2021: £40.4m) as
Other receivables within non-current assets.
Since the latest triennial actuarial update conducted in 2020 the number of
claims received has exceeded those included in the actuarial model. While
settlement costs related to claims received through 2021 were below those
provided, there has been an increase in average settlement values in the first
half of 2022. These variations are to be expected from period to period and
the sensitivity analysis reflecting reasonably probable scenarios conducted at
31 December 2021 is considered to still be appropriate.
Ultimately, there is 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.
The Group's US subsidiaries have been effective in managing the asbestos
litigation, in part, because the Group has access to historical project
documents and other business records going back more than 50 years, allowing
it to defend itself by determining if legacy products were present at the
location of the alleged asbestos exposure and, if so, the timing and extent of
their presence. In addition, the Group has consistently and vigorously
defended claims that are without merit.
UK asbestos-related provision
In the UK, there are outstanding asbestos-related claims which are not the
subject of insurance cover. The extent of the UK asbestos exposure involves a
series of legacy employer's liability claims which all relate to former UK
operations and employment periods in the 1950s to 1970s. In 1989 the Group's
employer's liability insurer (Chester Street Employers Association Ltd) was
placed into run-off which effectively generated an uninsured liability
exposure for all future long-tail disease claims with an exposure period
pre-dating 1 January 1972. All claims with a disease exposure post 1 January
1972 are fully compensated via the Government-established Financial Services
Compensation Scheme. Any settlement to a former employee whose service period
straddles 1972 is calculated on a pro rata basis. The Group provides for these
claims based on management's best estimate of the likely costs given past
experience of the volume and cost of similar claims brought against the Group.
The UK provision was reviewed and adjusted accordingly for claims experience
in the year, resulting in a provision of £3.1m (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 exceptional charges included within
note 4 where the cost is based on a reliable estimate of the obligation.
The opening balance of £11.1m included £8.9m for opening balance sheet
liabilities in Motion Metrics, cybersecurity costs of £0.4m and final Oil
& Gas disposal costs of £0.4m. The remaining opening balance of £1.4m
relates to prior year balances in Minerals for severance costs and onerous
contract provisions.
Additions of £3.0m in the period include £1.3m for acquisition and
integration costs in relation to Carriere Industrial Supply Limited and Motion
Metrics, and £1.7m for redundancy and customer penalties related to initial
wind down actions associated with our Russian operations in the Minerals
Division. The utilisation in the period of £12.8m primarily relates to the
cash settlement of the majority of the opening provision, including Motion
Metrics acquisition vendor liabilities, plus partial settlement of acquisition
and integration costs and Russia wind down costs.
The closing balance of £1.5m primarily relates to customer and onerous lease
contracts, the wind down of our Russian operations and outstanding
integration costs.
Other
Other provisions include environmental obligations, penalties, duties due,
legal claims and other exposures across the Group. These balances typically
include estimates based on multiple sources of information and reports from
third-party advisers. The timing of outflows is difficult to predict as many
of these will ultimately rely on legal resolutions and the expected conclusion
is based on information currently available. Where certain outcomes are
unknown, a range of possible scenarios is calculated, with the most likely
being reflected in the provision.
12. Interest-bearing loans & borrowings
The Group utlises a number of sources of funding including private placement
debt, Sustainability-Linked Notes, revolving credit facility and uncommitted
facilities
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 and the covenant terms are
unchanged.
At 30 June 2022, £359.1m (2021: £nil) was drawn under the US$800m
multi-currency revolving credit facility which is disclosed net of unamortised
issue costs of £2.6m (2021: £4.0m).
At 30 June 2022, a total of £164.2m (2021: £572.5m) was outstanding under
private placement which is disclosed net of unamortised issue costs of £nil
(2021: £0.2m).
At 30 June 2022, a total of £653.0m (2021: £579.7m) was outstanding under
Sustainability-Linked Notes which is disclosed net of unamortised issue costs
of £4.0m (2021: £4.7m).
The Group operates a notional cash pooling arrangement in which individual
balances are not offset for reporting purposes. Cash & short-term
deposits at 30 June 2022 includes £123.2m (2021: £72.0m) that is part of
this arrangement and both cash and interest-bearing loans & borrowings are
grossed up by this amount.
13. Pensions & other post-employment benefit plans
Year ended 6 months ended 6 months ended
31 December 2021 30 June 2022 30 June 2021
£m £m £m
- Plans in surplus 59.2 -
(56.7) Plans in deficit (34.8) (103.6)
(56.7) Net asset (liability) 24.4 (103.6)
The IAS 19 funding position across the Group's legacy UK and North American
schemes improved from a deficit of £56.7m at 31 December 2021 to a net
surplus of £24.4m at 30 June 2022. This is primarily due to a reduction in
liabilities due to changes in market conditions, driven by a significant rise
in discount rates as well as updates to mortality assumptions and
contributions paid to the plans over the period. This is partially offset by
net losses on the asset side combined with experience losses and exchange rate
movements.
14. 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.
Year ended 6 months ended 6 months ended
31 December 2021 30 June 2022 30 June 2021
£m £m £m
Included in current assets
- Forward foreign currency contracts designated as cash flow hedges - 0.2
- Cross currency swaps designated as net investment hedges - 2.9
7.1 Other forward foreign currency contracts 7.4 5.2
7.1 7.4 8.3
Included in current liabilities
(0.4) Forward foreign currency contracts designated as cash flow hedges (0.2) (0.4)
- Forward foreign currency contracts designated as net investment hedges (0.4) (0.3)
(3.4) Other forward foreign currency contracts (9.8) (2.9)
(3.8) (10.4) (3.6)
Included in non-current liabilities
(0.1) Other forward foreign currency contracts (0.4) (0.1)
(0.1) (0.4) (0.1)
3.2 Net derivative financial (liabilities) assets - total Group (3.4) 4.6
Carrying amounts & fair values
Set out below is a comparison of carrying amounts and fair values of all of
the Group's financial instruments that are reported in the financial
statements.
Restated (note 1)
Carrying amount Fair value Carrying amount Fair value Carrying amount Fair value
31 December 2021 31 December 2021 30 June 2022 30 June 2022 30 June 2021 30 June 2021
£m £m £m £m £m £m
Financial assets - total Group
7.1 7.1 Derivative financial instruments recognised at fair value through profit or 7.4 7.4 5.2 5.2
loss
- - Derivative financial instruments in designated hedge accounting relationships - - 3.1 3.1
507.5 507.5 Trade & other receivables excluding statutory assets, prepayments & 571.7 571.7 449.1 449.1
construction contract assets
564.4 564.4 Cash & short-term deposits 467.0 467.0 647.0 647.0
1,079.0 1,079.0 1,046.1 1,046.1 1,104.4 1,104.4
Financial liabilities - total Group
3.5 3.5 Derivative financial instruments recognised at fair value through profit or 10.2 10.2 3.0 3.0
loss
0.4 0.4 Derivative financial instruments in designated hedge accounting relationships 0.6 0.6 0.7 0.7
- - Deferred consideration payable 2.5 2.5 - -
Amortised cost:
1,170.1 1,211.1 Fixed-rate borrowings 817.2 796.7 1,147.3 1,213.2
(3.0) (3.0) Floating-rate borrowings 359.1 359.1 (4.0) (4.0)
105.4 105.4 Leases 118.5 118.5 110.2 110.2
64.4 64.4 Bank overdrafts & short-term borrowings 133.1 133.1 72.0 72.0
410.5 410.5 Trade & other payables excluding statutory liabilities & contract 441.2 441.2 355.4 355.4
liabilities
1,751.3 1,792.3 1,882.4 1,861.9 1,684.6 1,750.5
The Group operates a notional cash pooling arrangement in which individual
balances are not offset for reporting purposes. Cash & short-term deposits
at 30 June 2022 includes £123.2m (2021: £72.0m) that is part of this
arrangement and both cash and interest-bearing loans & borrowings are
grossed up by this amount.
The Group enters into derivative financial instruments with various
counterparties, principally financial institutions with investment grade
credit ratings. The derivative financial instruments are valued using
valuation techniques with market observable inputs including spot and forward
foreign exchange rates, interest rate curves, counterparty and own credit
risk. The fair value of cross currency swaps is calculated as the present
value of the estimated future cash flows based on spot foreign exchange rates.
The fair value of forward foreign currency contracts is calculated as the
present value of the estimated future cash flows based on spot and forward
foreign exchange rates.
The fair value of borrowings is estimated by discounting future cash flows
using rates currently available for debt on similar terms, credit risk and
remaining maturities. The fair value of lease liabilities is disclosed in line
with the carrying value which is estimated by discounting future cash flows
using the rate implicit in the lease or the Group's incremental borrowing
rate. The fair value of cash and short-term deposits, trade and other
receivables and trade and other payables approximates their carrying amount
due to the short-term maturities of these instruments.
The Group uses the following hierarchy for determining and disclosing the fair
value of financial instruments by valuation technique:
Level 1: Quoted (unadjusted) prices in active markets for identical assets or
liabilities;
Level 2: Other techniques for which all inputs that have a significant effect on the
recorded fair value are observable, either directly or indirectly;
Level 3: Techniques which use inputs which have a significant effect on the recorded
fair value that are not based on observable market data.
For financial instruments that are recognised at fair value on a recurring
basis, the Group determines whether transfers have occurred between levels in
the hierarchy by re-assessing categorisation (based on the lowest level input
that is significant to the fair value measurement as a whole) at the end of
each reporting period. The Group holds all financial instruments at level 2
fair value measurement.
During the 6 months ended 30 June 2022 and the year ended 31 December 2021,
there were no transfers between level 1 and level 2 fair value measurements
and no transfers into or out of level 3 fair value measurements.
15. Additional cash flow information
Restated (note 1)
Year ended 6 months ended 6 months ended
31 December 2021 30 June 2022 30 June 2021
£m Notes £m £m
Total operations
Net cash generated from operations
256.6 Operating profit - continuing operations 151.0 122.5
0.6 Operating profit - discontinued operations 6 - 0.6
257.2 Operating profit - total operations 151.0 123.1
3.8 Exceptional and other adjusting items 4 (0.5) (0.7)
40.2 Amortisation of intangible assets 20.0 19.9
(3.3) Share of results of joint ventures (1.0) (2.0)
43.0 Depreciation of property, plant & equipment 22.7 21.1
27.6 Depreciation of right-of-use assets 14.8 14.0
(0.3) Grants received - -
(4.3) Gains on disposal of property, plant & equipment (0.5) (4.1)
(2.7) Funding of pension & post-retirement costs (1.7) (1.3)
10.9 Employee share schemes 4.1 7.5
4.8 Transactional foreign exchange 4.9 2.6
3.9 (Decrease) increase in provisions (1.3) 1.1
380.8 Cash generated from operations before working capital cash flows 212.5 181.2
(84.9) Increase in inventories (104.4) (45.4)
(61.7) Decrease (increase) in trade & other receivables & construction 17.0 6.3
contracts
31.8 (Decrease) increase in trade & other payables & construction contracts (24.9) (2.3)
266.0 Cash generated from operations 100.2 139.8
(7.8) Additional pension contributions paid (7.7) (5.9)
(8.6) Exceptional and other adjusting cash items (7.2) (4.7)
(11.1) Exceptional cash items - acquired vendor liabilities (8.9) -
(82.4) Income tax paid (40.2) (35.0)
156.1 Net cash generated from operating activities 36.2 94.2
Exceptional and other adjusting items are detailed in note 4.
The following tables summarise the cash flows arising on acquisitions (note
10) and disposals.
Year ended 6 months ended 6 months ended
31 December 2021 30 June 2022 30 June 2021
£m £m £m
Acquisitions of subsidiaries
(67.9) Current period acquisitions (see below) (14.6) -
67.9 Acquisition of subsidiaries - cash paid 16.2 -
- Cash & cash equivalents acquired (1.6) -
67.9 Acquisition of subsidiaries - current period acquisitions 14.6 -
67.9 Total cash outflow on current period acquisitions 14.6 -
67.9 Total cash outflow relating to acquisitions 14.6 -
Net cash inflow arising on disposals
258.5 Consideration received net of costs paid & cash disposed of - Oil & - 251.4
Gas Division (excluding AMCO)
24.0 Consideration received net of costs paid & cash disposed of - AMCO Joint - 27.4
Venture
282.5 Total cash inflow relating to disposals - 278.8
Year ended 6 months ended 6 months ended
31 December 2021 30 June 2022 30 June 2021
£m £m £m
Cash & cash equivalents comprise the following
564.4 Cash & short-term deposits 467.0 647.0
(64.4) Bank overdrafts & short-term borrowings (133.1) (72.0)
500.0 333.9 575.0
Restated (note 1)
Year ended 6 months ended 6 months ended
31 December 2021 30 June 2022 30 June 2021
£m £m £m
Net debt comprises the following
564.4 Cash & short-term deposits 467.0 647.0
(524.1) Current interest-bearing loans & borrowings (323.6) (524.2)
(812.8) Non-current interest-bearing loans & borrowings (1,104.3) (801.3)
(772.5) (960.9) (678.5)
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 30 June 2022
£m £m £m £m £m £m £m
Cash & cash equivalents 500.0 (198.8) 1.6 - 31.1 - 333.9
Third-party loans (1,174.7) 108.0 - - (116.2) - (1,182.9)
Leases (105.4) 14.0 (20.1) - (7.0) - (118.5)
Unamortised issue costs 7.6 2.7 - - - (3.7) 6.6
Amounts included in gross debt (1,272.5) 124.7 (20.1) - (123.2) (3.7) (1,294.8)
Amounts included in net debt (772.5) (74.1) (18.5) - (92.1) (3.7) (960.9)
Financing derivatives 1.4 (0.2) - - - (1.4) (0.2)
Other liabilities relating to financing activities 1.4 (0.2) - - - (1.4) (0.2)
Total financing liabilities* (1,271.1) 124.5 (20.1) - (123.2) (5.1) (1,295.0)
(* Total financing liabilities
comprise gross debt plus other liabilities relating to financing activities.)
( )
( )
Restated (note 1)
Opening balance at 30 June 2021 Cash movements Additions Disposals FX Non-cash movements Closing balance at 31 December 2021
£m £m £m £m £m £m £m
Cash & cash equivalents 575.0 (76.4) - - 1.4 - 500.0
Third-party loans (1,152.2) 0.2 (0.2) - (22.5) - (1,174.7)
Leases (110.2) 14.0 (9.2) - (0.2) 0.2 (105.4)
Unamortised issue costs 8.9 0.4 - - - (1.7) 7.6
Amounts included in gross debt (1,253.5) 14.6 (9.4) - (22.7) (1.5) (1,272.5)
Amounts included in net debt (678.5) (61.8) (9.4) - (21.3) (1.5) (772.5)
Financing derivatives 5.4 (5.3) - - - 1.3 1.4
Other liabilities relating to financing activities 5.4 (5.3) - - - 1.3 1.4
Total financing liabilities* (1,248.1) 9.3 (9.4) - (22.7) (0.2) (1,271.1)
(* Total financing liabilities
comprise gross debt plus other liabilities relating to financing activities.)
16. Related party disclosure
The following table provides the total amount of significant transactions
which have been entered into by the Group with related parties for the
relevant financial period and outstanding balances at the period end.
Year ended 6 months ended 6 months ended
31 December 2021 30 June 2022 30 June 2021
£m £m £m
0.7 Sales of goods to related parties - joint ventures 0.7 0.3
0.1 Sales of services to related parties - joint ventures 0.1 0.1
16.7 Purchases of goods from related parties - joint ventures 11.8 7.4
5.9 Amounts owed to related parties - group pension plans 1.7 1.4
1.3 Amounts owed by related parties - joint ventures - -
17. Exchange rates
The principal exchange rates applied in the preparation of these financial
statements were as follows.
Year ended 6 months ended 6 months ended
31 December 2021 Average rate (per £) 30 June 2022 30 June 2021
1.38 US Dollar 1.30 1.39
1.83 Australian Dollar 1.81 1.80
1.16 Euro 1.19 1.15
1.73 Canadian Dollar 1.65 1.73
1,043.54 Chilean Peso 1,073.60 998.75
20.34 South African Rand 20.03 20.19
7.42 Brazilian Real 6.61 7.47
8.88 Chinese Yuan 8.42 8.99
101.70 Indian Rupee 98.98 101.75
Closing rate (per £)
1.35 US Dollar 1.22 1.38
1.86 Australian Dollar 1.76 1.84
1.19 Euro 1.16 1.16
1.71 Canadian Dollar 1.57 1.71
1,153.18 Chilean Peso 1,126.97 1,010.33
21.57 South African Rand 19.81 19.76
7.54 Brazilian Real 6.32 6.89
8.60 Chinese Yuan 8.16 8.91
100.66 Indian Rupee 96.17 102.58
Directors' Statement of Responsibilities
The directors confirm that these condensed interim financial statements have
been prepared in accordance with UK adopted International Accounting Standard
34 "Interim Financial Reporting", and the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom's Financial Conduct Authority and that
the interim management report includes a fair review of the information
required by DTR 4.2.7 and DTR 4.2.8, namely:
a. an indication of important events that have occurred during the
first six months and their impact on the condensed set of financial
statements, and a description of the principal risks and uncertainties for the
remaining six months of the financial year; and
a. material related-party transactions in the first six months and any
material changes in the related-party transactions described in the last
annual report.
A list of current directors is maintained on The Weir Group PLC website which
can be found at www.global.weir
(file:///C%3A/Users/126183/AppData/Local/Microsoft/Windows/INetCache/Content.Outlook/OUP5VQCW/www.global.weir)
.
On behalf of the Board
John Heasley
Chief Financial Officer
28 July 2022
Independent review report to The Weir Group PLC
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed The Weir Group PLC's condensed consolidated interim financial
statements (the "interim financial statements") in the Interim Report of The
Weir Group PLC for the 6 month period ended 30 June 2022 (the "period").
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
The interim financial statements comprise:
• the Consolidated Balance Sheet as at 30 June
2022;
• the Consolidated Income Statement and
Consolidated Statement of Comprehensive Income for the period then ended;
• the Consolidated Cash Flow Statement for the
period then ended;
• the Consolidated Statement of Changes in
Equity for the period then ended; and
• the explanatory notes to the interim financial
statements.
The interim financial statements included in the Interim Report of The Weir
Group PLC have been prepared in accordance with UK adopted International
Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, 'Review of Interim Financial Information Performed by
the Independent Auditor of the Entity' issued by the Financial Reporting
Council for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and, consequently, does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express
an audit opinion.
We have read the other information contained in the Interim Report and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the interim financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on the review
procedures performed in accordance with this ISRE. However, future events or
conditions may cause the group to cease to continue as a going concern.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The Interim Report, including the interim financial statements, is the
responsibility of, and has been approved by the directors. The directors are
responsible for preparing the Interim Report in accordance with the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority. In preparing the Interim Report, including the interim
financial statements, the directors are responsible for assessing the group's
ability to continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of accounting
unless the directors either intend to liquidate the group or to cease
operations, or have no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim financial
statements in the Interim Report based on our review. Our conclusion,
including our Conclusions relating to going concern, is based on procedures
that are less extensive than audit procedures, as described in the Basis for
conclusion paragraph of this report. This report, including the conclusion,
has been prepared for and only for the company for the purpose of complying
with the Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We do not, in
giving this conclusion, accept or assume responsibility for any other purpose
or to any other person to whom this report is shown or into whose hands it may
come save where expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
Glasgow
28 July 2022
Shareholder Information
The Board have declared an interim dividend of 13.5p for 2022 (2021: 11.5p).
Financial Calendar
Ex-dividend date for interim dividend
6 October 2022
Record date for interim dividend
7 October 2022
Shareholders on the register at this date will receive the dividend
Interim dividend paid
4 November 2022
Our Interim Report will be available to download from The Weir Group PLC
website at www.global.weir
(file:///C%3A/Users/126183/AppData/Local/Microsoft/Windows/INetCache/Content.Outlook/OUP5VQCW/www.global.weir)
immediately after the management presentation.
Disclaimer
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.
Registered office and company number
1 West Regent Street
Glasgow
G2 1RW
Scotland
Registered in Scotland
Company number: SC002934
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