REG - Weir Group PLC - Half-year Report
01/08/2023 07:00
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RNS Number : 8147H Weir Group PLC 01 August 2023
Very strong execution and positive book-to-bill
Upgrade to full year revenue and profit guidance
Strong demand for Weir mining equipment
• H1 Group OE orders(1), +5%; brownfield and sustainability projects
driving demand
• Strengthened pipeline for sustainable solutions, including
Redefined Mill Circuit
H1 Group AM orders(1) +1%; Minerals AM orders(1) +5%
• Positive mining production trends and installed base growth
• H1 ESCO orders(1) -3%; robust demand in mining offset by
infrastructure, as expected
Very strong execution; book-to-bill, 1.03
• Revenue(1), +16%, delivering on record opening order book
• Adjusted operating profit(1,3) of £212m, +22%
• Operating margin(1,3) of 16.3%, +80bps
• Free operating cash conversion of 51%, +22pp
Increasing balance sheet strength and returns
• Net debt to EBITDA of 1.5x with fixed-rate long dated debt
maturity profile
• Return on capital employed of 16.3%, +390bps
• Interim dividend of 17.8 pence per share, +32%
FY outlook: now expect strong growth in constant currency revenue and
operating profit
• Operating profit towards the upper end of the current range of
analysts' expectations*
• On track to deliver operating margin target of 17%
• Free operating cash conversion of 80% to 90%
H1 2023 H1 2022 As Constant currency(1) +/-
reported +/-
Continuing Operations(2)
Orders(1) £1,336m £1,311m n/a +2%
Revenue £1,300m £1,096m +19% +16%
Adjusted operating profit(3) £212m £168m +26% +22%
Adjusted operating margin(3) 16.3% 15.3% +100bps +80bps
Adjusted profit before tax(3) £188m £143m +32% n/a
Statutory profit before tax £170m £126m +35% n/a
Adjusted earnings per share(3) 53.4p 40.5p +32% n/a
Return on capital employed 16.3% 12.4% +390bps n/a
Total Group
Statutory profit after tax £126m £92m +37% n/a
Statutory earnings per share 48.8p 35.6p +37% n/a
Free operating cash conversion 51% 29% +22pp n/a
Dividend per share 17.8p 13.5p +32% n/a
Net debt(6) £842m £797m(5) -£45m n/a
(*Company compiled consensus from 30 June 2023, Group Operating Profit range
of £428m to £464m. For all other footnotes see page 4.)
Jon Stanton, Chief Executive Officer said:
"Weir has a compelling value creation opportunity underpinned by the global
energy transition and the benefits of our Performance Excellence
transformation programme.
Global decarbonisation is driving growth in demand for critical
energy-transition metals and our customers' focus on more sustainable
extraction and processing techniques necessitates the adoption of new
technologies. Weir's engineering capability, leading brands and growing
portfolio of sustainable solutions is delivering on this need and enhancing
our position as a supplier of mission critical solutions and services to the
mining industry. In addition, Performance Excellence will deliver compounding
benefits as we optimise our business to deliver margin expansion and strong
cash conversion.
In the first half of the year we performed well, winning market share, growing
orders and executing strongly to deliver significant growth in revenue and
operating profit. With a positive book-to-bill we enter the second half with a
record order book, excellent operating momentum and high activity levels in
our mining markets. After a strong performance in the first half we raise our
full year revenue and profit guidance, and have confidence in meeting our 2023
margin and cash conversion targets."
A webcast of the management presentation will begin at 08:00 (BST) on
1 August 2023 at www.investors.weir (http://www.investors.weir/) . A
recording of the webcast will also be available at www.investors.weir
(http://www.investors.weir/) .
CHIEF EXECUTIVE OFFICER'S REVIEW
Introduction
I'm delighted with our performance in the first half of the year. We continued
to make excellent progress and meet our commitments to stakeholders as a
high-quality mining focused group.
We executed strongly, capitalising on our record opening order book and
maintaining the operating momentum we carried into the year. We delivered
significant year-on-year growth in revenue, operating profit and cash
generation, while also expanding our operating margins and taking significant
steps towards achieving our full year target of 17%. We delivered
differentiated technology and solutions to help our customers with their
biggest challenges, culminating in market share gains and year-on-year order
growth, while also providing them with the essential spares and expendables to
keep their mines running.
We also made excellent strategic progress. We increased our investment in
projects on our technology roadmap, including the field trials of our
proprietary ore characterisation technology, and built our sales pipeline for
sustainable solutions, including for our Redefined Mill Circuit and Motion
Metrics(TM) offerings. In addition, we initiated key projects in our
Performance Excellence transformation programme, which will support future
margin expansion. We also had our scope 1, 2 & 3 emissions reduction
targets approved by SBTi. On safety, our total incident rate(4) (TIR) improved
by 12% year-on-year to 0.29, with particularly pleasing progress at ESCO where
TIR reduced by 39%.
Overall, our performance across all metrics reflects the hard work and
dedication of Weir colleagues across the globe, and I'd like to thank them for
their commitment and contribution to our success.
Looking ahead, the future for Weir is exciting and the long-term structural
growth opportunity for our business from decarbonisation is clear. In
addition, our Performance Excellence transformation programme will optimise
our business and create further value. Together, these factors will deliver
excellent outcomes for stakeholders and underpin our ambition to outgrow our
markets, expand our margins, convert our earnings to cash, while remaining
resilient and doing the right thing for our people and the planet.
Growth: Outgrowing our markets and maintaining positive book-to-bill
Through the first half, our mining markets saw high levels of activity. Market
prices for our main commodity exposures of copper, gold and iron were well
above our customer's cost of production and end market demand was high. While
there is growing intent amongst miners to develop large expansion projects,
conversion of the pipeline remains slow, so our customers met demand by
maximising production from existing assets; running equipment harder,
developing more complex and lower grade ore bodies and by debottlenecking and
driving efficiency in existing processes.
Ore production trends, coupled with the incremental AM demand from recent OE
installations, drove demand for our AM spares and expendables. Customers
ordered OE for debottlenecking and brownfield expansion projects, choosing
premium Weir solutions due to their differentiated technology, lowest total
cost of ownership and sustainability benefits relative to competitor
solutions. Across OE and AM, demand was at high levels across most regions,
and was particularly high in Australasia and South America, reflecting
production trends and recent market share gains.
In infrastructure, demand in our largest market of North America was stable
through the period, though well below the peak in the first half of last year.
In European infrastructure markets, demand continued to be subdued.
On a constant currency basis, the Group delivered year-on-year order growth of
2%.
AM constant currency orders grew by 1%, with growth in demand in both
divisions from hard rock mining customers and a contribution from pricing.
This growth was partially offset, as expected, by lower demand from ESCO's
infrastructure customers and Canadian oil sands customers in Minerals,
together with the non-repeat of Russia orders.
In OE, constant currency orders grew 5%. In Minerals we saw growing demand for
our mill circuit solutions, as we won market share, and also in comminution
where our offering continues to gain traction. In ESCO, we saw very strong
incremental demand for mining attachments as we won market share.
Revenue was 16% higher on a constant currency basis. This reflects strong
execution, a record opening order book, which included a particularly high
level of orders from Canadian oil sands customers, and realisation of prior
year price increases. The Group's book-to-bill was 1.03.
Margins and resilience: On track to deliver 17% operating margin in 2023
The operating environment through the first half was stable, as raw material
prices steadied and freight availability improved. While wage inflation
persisted, our market leading positions and brands enabled us to increase
prices to maintain gross margins.
On a constant currency basis adjusted operating profit grew by 22% and
adjusted operating margins were 16.3%, up 100bps on an as reported basis. This
improvement reflects strong operational efficiency, a contribution from
pricing and the non-repeat of adverse transactional FX movements seen in the
prior year, partially offset by a movement in Minerals revenue mix towards OE.
Performance Excellence will support margin expansion in the second half and
beyond, and we have strong conviction in achieving our target of £30m of
run-rate savings by 2025. In the first half, we made good progress with a
number of capacity optimisation projects, including consolidation of our
Minerals facilities in North America and optimisation of our service centre
footprint in Australia. We also mobilised our transformation project
management office and made key appointments to the team that will deliver the
transition of our Finance, HR and IS&T activities to a Global Business
Services model. An exceptional charge of £8m has been recognised in the
period relating to Performance Excellence.
Returns: Strong growth in return on capital employed and interim dividend
Free operating cash conversion was in line with expectations at 51%, and
reflects typical seasonal working capital patterns, with the outflow from the
first half expected to largely unwind through the second half. Our performance
represents a significant 22 percentage point improvement on the prior year,
with the comparator being impacted by complexities in global supply chains and
logistics channels. We remain on track to deliver our full year guidance of
80% to 90% free operating cash conversion.
Return on capital employed (ROCE) for the 12 months to the end of June was
16.3%, an increase of 390bps relative to the same measurement point in the
prior year.
In June we made our debut in the Sterling denominated bond market, placing
£300m of five-year 6.875% Sustainability-Linked Notes. The proceeds from the
placement are for general corporate purposes and to repay existing debt. The
competitive pricing reflects our recent upgrade to a full investment grade
credit rating, and the sustainability link demonstrates our commitment to
reducing our CO(2) emissions.
Reflecting high levels of confidence in our strategy and future prospects, the
Board has approved an interim dividend of 17.8 pence per share (2022: 13.5p).
This is in line with our policy and represents a 32% increase on the prior
year. The interim dividend will be paid on 3 November 2023 to Shareholders on
the register on 6 October 2023.
Safety and sustainability: Good progress
On safety, we delivered a 12% year-on-year improvement with the Group's TIR
reducing to 0.29. This represents a further significant step in our ambition
to eliminate harm in our operations, and follows the recent launch of our Zero
Harm Behaviours Framework.
In March we received SBTi approval of our absolute scope 1, 2 & 3
emissions reduction targets, and launched our first ever Climate Transition
Plan. Our work to quantify our scope 4 avoided emissions, which is a key part
of the journey to enabling us to recognise green revenue, is also progressing
well. The focus has expanded to determine the avoided emissions from our full
Redefined Mill Circuit solution, with quantification of the benefits expected
to enhance our overall customer value proposition.
Outlook
Activity levels in our mining markets are strong. Customers are focused on
maximising ore production and on improving the efficiency and sustainability
of existing operations, which is driving demand for our AM spares and
expendables and brownfield OE solutions.
With a positive book-to-bill we enter the second half of the year with a
record order book, and strong operating momentum. We now expect to deliver
strong growth in full year constant currency revenue and operating profit,
with operating profit towards the upper end of the range of analysts' current
expectations*. We remain on track to deliver our 2023 target of 17% operating
margin, supported by operational efficiencies, further price realisation and
the early financial benefits of Performance Excellence. We expect free
operating cash conversion of between 80% and 90%.
Further out, the fundamentals for our business are highly attractive. The
long-term structural growth in mining, and our technology led strategy,
underpins our ambition to deliver through-cycle mid-to-high single digit
percentage revenue growth, while our Performance Excellence programme will
deliver compounding benefits and support margin expansion above 17%. In
addition, as our capex returns to normal levels in FY24, we expect cash
conversion to increase to between 90% and 100%.
Notes:
The Group financial highlights and Divisional financial reviews include a
mixture of GAAP measures and those which have been derived from our reported
results in order to provide a useful basis for measuring our operational
performance. Adjusted results are for continuing operations before adjusting
items as presented in the Consolidated Income Statement. Details of other
alternative performance measures are provided in note 2 of the Interim
Financial Statements contained in this press release.
1. 2022 restated at 2023 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 £194m (2022: £151m). 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
£109m (2022: £36m).
4. 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.
5. Net Debt at 31 December 2022.
6. Refer to note 2 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 products and integrated solutions for smart,
efficient and sustainable processing in mining markets.
2023 First half summary
• AM orders(1) +5%; reflects mining production trends and installed
base expansion
• OE orders(1) +1%; demand for brownfield and sustainability
solutions
• Revenue(1) +20%; reflects strong execution and record opening
order book
• Book-to-bill of 1.03
2023 First half strategic review
Minerals made strong strategic progress in the first half, further building
its leadership position in the mill circuit, booking orders for new
sustainable technologies and launching its latest digital solutions. Progress
across all 4 pillars of the 'We are Weir' strategic framework are outlined
below.
People
On safety, Minerals total incident rate (TIR) for the period was 0.21 (2022:
0.15). The Division remains amongst the safest in its sector, and is on a
positive long-term trajectory towards its ambition of zero harm.
The Division continued to invest in people development and rolled-out a new
training programme to its global sales team on the Redefined Mill Circuit. The
programme is supporting teams as they promote the technology and respond to
growing customer interest in our new sustainable solutions.
Customer
Minerals continued to execute on key strategic growth initiatives, and during
the first half gained market share in our core mill circuit product
categories. We converted 100% of our competitive field trials for large mill
circuit pumps, and also rolled-out our latest cyclone technology. A particular
highlight was at a large Brazilian iron ore mine, where we upgraded the
cyclones to our latest Cavex(®) 2.0 solution. The new cyclones, which are
Synertrex(®) enabled, have improved separation and increased mineral recovery
by more than 400,000 tonnes per annum.
We also made good strategic progress in sustainable solutions, and delivered
year-on-year growth in comminution. New orders included a pebble crushing
plant for a large copper mine in South America and a crushing solution for a
potash mine in Canada.
First commercial production was achieved at the Iron Bridge magnetite mine in
Western Australia in the second quarter. The £15m per annum High Pressure
Grinding Rolls (HPGRs) service contract and regular spares orders for other
equipment will commence in the fourth quarter.
Technology
We saw very encouraging interest from customers for our Redefined Mill
Circuit, securing orders from large copper mines in South America for coarse
particle flotation (CPF) pilot circuits, in partnership with Eriez. Through
this strategic alliance we have integrated CPF technology with our latest
generation Warman(®) mill circuit pumps and Cavex(®) cyclones to provide
significantly improved recoveries and process efficiencies for our customers.
Once operational in the third quarter, these plants will be important
reference sites for the industry.
We also launched our new, proprietary digital intelli-solutions for pumps,
cyclones and HPGRs which, coupled with our Synertrex(®) 2.0 platform,
captures critical machine health data and enables remote condition monitoring.
We continued to invest in research and development of our core technologies
including new materials and polymers, and upgrades and range expansions for
our industry leading Warman(®) slurry pumps.
Performance
The Division continued to focus on optimising its product management and
global fulfilment processes and appointed its first Chief Operating Officer to
accelerate that work. Progress in the first half included the launch of a
programme to review product life cycle management and retire legacy product
variants, with initial product retirements achieved during the period. The
programme, in combination with benefits from our SAP ERP system, will drive
continued improvement in our inventory levels over time.
There was also good progress on our sustainability strategy. Solar generation
capability was installed at our South African facility, which will deliver
reductions in our scope 1 & 2 emissions.
2023 First half financial review
Constant currency £m H1 2023 H1 2022(1) Growth(1) H2 2022(1)
Orders OE 266 262 1% 293
Orders AM 714 681 5% 683
Orders Total 980 943 4% 976
Revenue OE 262 198 32% 256
Revenue AM 688 592 16% 719
Revenue Total 950 790 20% 975
Adjusted operating profit(2) 173 138 25% 186
Adjusted operating margin(2) 18.2% 17.5% +70 bps 19.0%
Operating cash flow(2) 131 106 24% 280
Book-to-bill 1.03 1.19 1.00
1. 2022 restated at 2023 average exchange rates except for operating cash
flow.
2. Profit figures before adjusting items. Operating cash flow (cash generated
from operations) excludes additional pension contributions, exceptional and
other adjusting cash items, and income tax paid. Refer to note 2 of the
Interim Financial Statements contained in this press release further details
of alternative performance measures.
Orders increased by 4% on a constant currency basis to £980m (2022: £943m),
and book-to-bill was 1.03 reflecting high levels of activity in our mining
markets. OE orders grew 1%, with particularly strong growth in Q1 (+20%). The
decrease in OE orders in Q2 reflects order phasing. AM orders grew 5%
reflecting volume growth in hard rock mining and a contribution from pricing,
partially offset, as expected, by lower volumes from customers in the Canadian
oil sands and the non-repeat of orders from Russia. Excluding orders from
Russia from the prior year comparator, AM orders were up 6%. In line with
prior years, AM orders in Q2 included a number of multi-period orders. In the
first half, AM orders represented 73% of total orders (2022: 72%). In total,
mining end markets accounted for 76% of total orders (2022: 74%).
Revenue was 20% higher on a constant current basis at £950m (2022: £790m)
reflecting strong execution, delivery of our record opening order book and a
contribution from prior year price increases. Revenue growth in North America
was particularly high, following a period of strong order growth in the
Canadian oil sands last year. Product mix moved towards OE, which represented
28% of revenue, up from 25% in the prior period.
Adjusted operating profit(2) increased 25% on a constant currency basis to
£173m (2022: £138m) as the Division maintained its gross margins, and
benefited from increased volumes and strong execution. Prior year operating
profit included a £2m adverse impact from transactional FX movements.
Adjusted operating margin(2) on a constant currency basis was 18.2% (2022:
17.5%). The year-on-year improvement of 70bps reflects strong operational
efficiency and non-repeat of the prior year adverse transactional FX movement,
partially offset by a movement in revenue mix towards OE.
Operating cash flow(2) increased by 24% to £131m (2022: £106m) reflecting
growth in operating profit, partially offset by a modest increase in working
capital outflow to £75m (2022: £67m). Working capital movements reflect an
increase in inventory to support growth in the order book, and a decrease in
payables which were elevated in the prior year due to the phasing of purchases
and temporary disruption in global supply chains.
DIVISIONAL REVIEW - ESCO
ESCO is a global leader in Ground Engaging Tools (G.E.T.), attachments, and
artificial intelligence and machine vision technologies that optimise
productivity for customers in global mining and infrastructure markets.
2023 First half summary
• Orders(1) -3%; robust demand from mining customers offset by
trends in infrastructure
• Very strong demand for mining attachments
• Revenue(1) +6%; reflects strong execution
• Book-to-bill of 1.02
2023 First half strategic review
ESCO made good strategic progress in the first half, significantly improving
safety performance, achieving key technology milestones and wining significant
market share in mining attachments. Progress across all 4 pillars of the 'We
are Weir' strategic framework are outlined below.
People
On safety, ESCO's TIR for the period was 0.65 (2022: 1.06). The significant
improvement on the prior year reflects the strong and continued focus on
safety across the Division, and the embedding of Weir safety culture and
standards at Carriere Industrial Supply (CIS now ESCO Sudbury), which was
acquired in H1 2022.
As part of the ongoing emphasis on people development, the Division ran a
successful pilot of a new leadership foundations programme which focuses on
developing key skills for first-line managers. The roll-out of the programme
will continue during the second half of the year.
Customer
During the period ESCO made further progress across its strategic growth
initiatives. The number of mines using Motion Metrics(TM) AI-enabled vision
technology increased, and new orders in the first half included a package of 5
ShovelMetrics(TM) and 5 LoaderMetrics(TM) systems which will be deployed
across all large mining machines at an iron ore mine in Western Australia.
The Division made excellent progress in growing market share in mining
attachments, with a 37% year-on-year increase in orders. A particular
highlight included converting 4 cable shovel buckets from competitor products
to ESCO technology for a large North American copper miner.
In addition, ESCO continued to expand its geographical reach with the
transition from third party distribution to our direct to customer model in
Scandinavia. The ESCO sales team is now leveraging Minerals' existing
footprint in the region to provide enhanced sales and service to customers.
Technology
Field trials of our proprietary ore characterisation technology were
successfully completed during the first half. Tests enabled critical data to
be collected and validated the performance of the technology in a real world
environment. Development has progressed to the next phase which is focused on
exploring novel illumination technologies to enhance minerals
characterisation.
New Motion Metrics(TM) capabilities and functions were launched during the
period, including an upgraded lens cleaning solution that enhances machine
vision capability and improves response times.
Other technology investments included development of a new series of mining
attachments that, once launched, will expand our addressable market.
Performance
Construction of the Division's new foundry in Xuzhou, China, remains on track
with transition to the equipment installation phase of the project expected
later this year. First production from the foundry is expected in 2024,
followed by full production in early 2025.
The Division continued to progress initiatives to reduce its environmental
impact and commenced new feasibility studies into transitioning to renewable
power at a number of its North American facilities.
2023 First half financial review
Constant currency £m H1 2023 H1 2022(1) Growth(1) H2 2022(1)
Orders OE 35 25 40% 19
Orders AM 321 343 -6% 323
Orders Total 356 368 -3% 342
Revenue OE 28 17 60% 26
Revenue AM 322 314 3% 338
Revenue Total 350 331 6% 364
Adjusted operating profit(2) 59 53 10% 57
Adjusted operating margin(2) 16.7% 16.1% +60 bps 15.7%
Operating cash flow(2) 53 25 114% 68
Book-to-bill 1.02 1.11 0.94
1. 2022 restated at 2023 average exchange rates except for operating cash
flow.
2. Profit figures before adjusting items. Operating cash flow (cash generated
from operations) excludes additional pension contributions, exceptional and
other adjusting cash items, and income tax paid. Refer to note 2 of the
Interim Financial Statements contained in this press release for further
details of alternative performance measures.
Orders decreased 3% on a constant currency basis to £356m (2022: £368m).
Year-on-year movements include growth in the contribution from CIS, which was
acquired in Q2 of the prior year, robust underlying demand from customers in
mining and a decrease in demand from infrastructure customers relative to a
very strong prior year comparator. In mining, demand was particularly strong
for our mining attachments, which is reflected in OE order growth of 40%.
Notwithstanding this, at 90%, AM continues to account for the vast majority of
the Division's orders (2022: 93%). The Division's book-to-bill was 1.02,
reflecting high levels of activity in our mining markets. In total, mining end
markets accounted for 62% of total orders (2022: 58%).
Revenue increased 6% on a constant currency basis to £350m (2022: £331m).
This reflects strong execution and further price realisation.
Adjusted operating profit(2) increased by 10% on a constant currency basis to
£59m (2022: £53m) as the Division maintained its gross margins, and
benefited from increased volumes.
Adjusted operating margin(2) on a constant currency basis was 16.7%, +60 bps
(2022: 16.1%), with the year-on-year improvement reflecting strong operational
efficiencies.
Operating cash flow(2) increased by 114% to £53m (2022: £25m), reflecting
growth in operating profit and a reduction in working capital outflow to £15m
(2022: £33m). Working capital movements reflect a modest increase in
inventory, a modest reduction in receivables and a decrease in payables which
were elevated in the prior year due to the phasing of purchases and temporary
disruption in global supply chains.
GROUP FINANCIAL REVIEW
Constant currency(1) As reported
Continuing Operations £m H1 2023 H1 2022(1) Growth H1 2022 Growth
Orders OE 301 287 5% n/a n/a
Orders AM 1,035 1,024 1% n/a n/a
Orders Total 1,336 1,311 2% n/a n/a
Revenue OE 290 215 34% 214 35%
Revenue AM 1,010 906 12% 882 15%
Revenue Total 1,300 1,121 16% 1,096 19%
Adjusted operating profit(2) 212 173 22% 168 26%
Adjusted operating margin(2) 16.3% 15.5% +80bps 15.3% +100bps
Book-to-bill 1.03 1.17 n/a n/a n/a
Total Group £m
Operating cash flow(2) 173 n/a n/a 100 73%
Free operating cash conversion 51% n/a n/a 29% +22pp
Net debt 842 n/a n/a 797(3) -45
1. 2022 restated at 2023 average exchange rates.
2. Profit figures before adjusting items. Operating cash flow (cash generated
from operations) excludes additional pension contributions, exceptional and
other adjusting cash items, and income tax paid. Refer to note 2 of the
Interim Financial Statements contained in this press release for further
details of alternative performance measures.
3. Net Debt at 31 December 2022.
Continuing operations order input at £1,336m increased 2% on a constant
currency basis. Minerals orders were up 4%, with AM growth up 5% reflecting
growth in demand from customers in hard rock mining and a contribution from
pricing partially offset by loss of Russia orders and normalisation of demand
from customers in the Canadian oil sands. OE solutions performed well against
a strong prior year. ESCO orders were down 3%, with a decrease in demand from
customers in infrastructure markets offsetting robust underlying demand from
mining customers. 77% of orders from continuing operations related to
aftermarket compared to 78% in the prior year.
Continuing operations revenue of £1,300m increased 16% on a constant
currency basis, reflecting strong execution of the opening order book,
continued strength in mining markets and price realisation. In Minerals
revenue was 20% higher on a constant currency basis at £950m (2022:
£790m). ESCO increased 6% on a constant currency basis to £350m (2022:
£331m). Aftermarket accounted for 78% of revenues from continuing operations,
down from 81% in the prior year. Reported revenues increased 19%, benefiting
from a foreign exchange translation tailwind of £25m. Overall book-to-bill at
1.03 reflects the continued strength in orders as we executed on our record
opening order book.
Continuing operations adjusted operating profit increased by £44m (26%) to
£212m on a reported basis (2022: £168m). Excluding a £5m foreign currency
translation tailwind, the constant currency increase was £39m (22%).
As explained further in the Divisional reviews, Minerals adjusted operating
profit increased by 25% on a constant currency basis to £173m (2022: £138m)
and ESCO's adjusted operating profit increased by 10% on a constant currency
basis to £59m (2022: £53m). Corporate costs of £20m (2022: £18m) are 10%
up on prior year mainly reflecting wage inflation.
Continuing operations adjusted operating margin of 16.3% is up 80bps versus
last year on a constant currency basis and up 100bps as reported. This
increase is driven by higher volumes and associated operating leverage, as
well as positive pricing action. This improvement is despite product mix
moving slightly towards OE (19% to 22%) for continuing operations. R&D as
a percentage of sales was 1.8%, down from 1.9% at December 2022, albeit spend
increased in absolute terms.
Continuing operations statutory operating profit for the period of £194m was
£43m favourable to the prior year, driven by the increase in adjusted
operating profit of £44m.
Continuing operations net finance costs were £24m (2022: £25m) with the
decrease mainly due to favourable other finance costs resulting from the
Group's net retirement benefit surplus.
Continuing operations adjusted profit before tax was £188m (2022: £143m),
after a translational foreign exchange tailwind of £5m. The statutory profit
before tax from continuing operations of £170m compares to £126m in 2022,
the increase primarily due to the increase in adjusted operating profit.
Continuing operations adjusted tax charge for the year of £50m (2022:
£38m) on profit before tax from continuing operations (before adjusting
items) of £188m (2022: £143m) represents an adjusted effective tax rate
(ETR) of 26.3% (2022: 26.4%). The decrease mainly reflects the geographic mix
of profits.
A tax credit of £6m has been recognised in relation to continuing operations
adjusting items (2022: £4m).
Continuing operations adjusting items increased to £18m (2022: £17m).
Intangibles amortisation decreased by £4m to £13m (2022: £17m). Exceptional
items totalled £1m (2022: £3m), with initial costs relating to our
Performance Excellence programme of £8m, being largely offset by the reversal
of provisions in respect of the wind down of operations in Russia of £7m as
working capital recoveries have exceeded initial expectations. Other adjusting
items which relate solely to the Group's legacy asbestos-related provisions in
the period were a charge of £4m (2022: credit £3m), primarily due to
settlements in the period, with the credit recognised in the prior year
attributable to the significant change in discount rates.
Statutory profit for the period after tax from total operations of £126m
(2022: £92m) reflects a £35m increase in profit from continuing
operations.
Adjusted earnings per share from continuing operations increased by 32% to
53.4p (2022: 40.5p). Statutory reported earnings per share from total
operations is 48.8p (2022: 35.6p).
Cash flow and net debt
Cash generated from operations increased by £73m to £173m (2022: £100m) in
the period due to a combination of higher operating profits and a reduced
outflow from working capital in the period of £88m (2022: £112m). As a
result, working capital as a percentage of sales decreased to 24% from 32% in
the prior year, remaining in line with December 2022, as working capital
levels normalised. Continuing operations utilised non-recourse invoice
discounting facilities of £40m (2022: £21m) compared to £45m at December
2022. This is largely utilising facilities provided by our customers to
receive payment on reasonable terms in certain geographies where custom
dictates very extended payment terms. Suppliers chose to utilise supply chain
financing facilities of £41m (2022: £50m) versus £54m at December 2022.
Net capital expenditure increased by £18m to £36m (2022: £18m), mainly due
to the construction of our new ESCO foundry in China. Lease payments increased
to £16m (2022: £14m), while the purchase of shares for employee share plans
decreased by £5m to £15m (2022: £20m).
Free operating cash conversion (refer to note 2 of the Interim Financial
Statements) was 51% (2022: 29%) as a result of the increased cash generated
from operations and a reduced working capital outflow.
Free cash flow (refer to note 2 of the Interim Financial Statements) from
total operations was an inflow of £24m (2022: outflow of £24m). In addition
to the movements noted above this was primarily impacted by an increase in tax
payments of £11m reflecting increased profit levels.
Net debt increased by £45m to £842m (December 2022: £797m) and includes
£118m (December 2022: £115m) in respect of IFRS 16 'Leases'. Drivers of the
increase in net debt include payment of the final 2022 dividend of £50m,
lease movement of £9m, settlement of CIS deferred consideration of £1m,
adverse translational foreign exchange and non-cash movements of £4m, plus
exceptional items of £5m which include Performance Excellence costs. These
are partially offset by the free cash inflow of £24m. Net debt to EBITDA on
a lender covenant basis was in line with December 2022 at 1.5x, compared to a
covenant level of 3.5x.
In June 2023, the Group successfully completed the issue of £300m five-year
Sustainability-Linked Notes due to mature in June 2028, which includes a
target to reduce scope 1&2 CO2 emissions by 19.1% in absolute terms by
2026 from a 2019 baseline, consistent with the Group's SBTi approved target of
30% reduction by the end of 2030. In March 2023, the Group exercised the
option to extend its US$800m multi-currency revolving credit facility by one
year which will now mature in April 2028, with the option remaining to extend
for a further year. These new arrangements followed the final US Private
Placement settlement of £167m in February and allowed the Group to cancel in
June its £300m one year term loan facility, obtained in January 2023. Overall
these actions extended the average tenor of the Group's debt financing while
ensuring there remains in place more than £800m of immediately available
liquidity.
Pensions
The IAS 19 funding position across the Group's legacy UK and North American
schemes reduced from a net surplus of £15m at 31 December 2022 to a net
surplus of £9m at 30 June 2023. This is primarily due to a £12m loss in the
UK Main plan following a pensioner buy-in, which results in 63% (December
2022: 39%) of the Main scheme liabilities now being insured. Other movements
relating to net losses in UK assets and experience losses resulting from UK
inflation were offset by gains driven by higher UK discount rates and a
reduction in deficit across our North American plans. In total, a charge of
£17m (2022: credit of £76m) has been recognised in the Consolidated
Statement of Comprehensive Income.
The strength of the funding position of the UK main scheme means that
additional pension cash contributions will reduce by £6m from 2024.
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 2022 Annual Report
1. Political and Social No change
2. Technology No change
3. Value Chain Excellence No change
4. Safety, Health and Wellbeing No change
5. People No change
6. Market No change
7. Climate No change
8. Competition No change
9. Digital No change
10. Information Security and Cyber No change
11. Ethics and Governance No change
12. Infectious Disease/Pandemics No change
Details of the Group's Principal Risks and Uncertainties are unchanged since
the publication of the 2022 Annual Report except:
• Covid-19 has been broadened to Infectious Disease/Pandemics to
reflect that, while the immediate risks posed by Covid-19 have subsided, we
recognise that we need to continue to monitor and examine the changing health
risk environment and the shifting patterns of infectious disease and their
threat to health more widely.
Further details of the Group's policies on Principal Risks and Uncertainties
are contained within the Group's 2022 Annual Report, a copy of which is
available at www.annualreport.weir
(https://cloudweir.sharepoint.com/sites/GR-GroupFinance/Shared%20Documents/Frango/2023/2023%20Interim%20Report/03%20Versions/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 - 2022 / 2023 continuing operations(1) quarterly order trends
Reported growth Life-for-like growth(3)
Division 2022 Q1 2022 Q2 2022 Q3 2022 Q4 2023 Q1 2023 Q2 2023 Q1 2023 Q2
Original Equipment -18% -3% 13% 19% 20% -12% 20% -12%
Aftermarket 23% 18% 25% 6% 5% 5% 5% 5%
Minerals 9% 11% 21% 10% 9% 0% 9% 0%
Original Equipment -17% 98% -6% 14% 39% 40% 38% 9%
Aftermarket 37% 19% 14% 1% -9% -4% -15% -2%
ESCO 32% 23% 13% 2% -6% 0% -12% -1%
Original Equipment -17% 2% 12% 19% 22% -8% 22% -10%
Aftermarket 28% 18% 21% 5% 0% 2% -2% 3%
Continuing Ops 15% 14% 19% 8% 4% 0% 3% 0%
Book-to-bill 1.22 1.13 1.02 0.95 1.04 1.01 1.04 1.01
Quarterly orders(2) £m Like-for-like orders(2,3)
Division 2022 Q1 2022 Q2 2022 Q3 2022 Q4 2023 Q1 2023 Q2 2023 Q1 2023 Q2
Original Equipment 112 150 147 146 134 132 134 132
Aftermarket 319 362 339 344 335 379 335 379
Minerals 431 512 486 490 469 511 469 511
Original Equipment 10 15 11 8 14 21 14 16
Aftermarket 180 163 163 160 164 157 153 151
ESCO 190 178 174 168 178 178 167 167
Original Equipment 122 165 158 154 148 153 148 148
Aftermarket 499 525 502 504 499 536 488 530
Continuing Ops 621 690 660 658 647 689 636 678
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 2023 average exchange rates.
3. Like-for-like excludes the impact of Carriere Industrial Supply Limited
acquired on 8 April 2022.
CONSOLIDATED INCOME STATEMENT
FOR THE 6 MONTHS ENDED 30 JUNE 2023
Year ended 31 December 2022 6 months ended 30 June 2023 6 months ended 30 June 2022
Statutory results Adjusted results Adjusting items (note 5) Statutory results Adjusted results Adjusting items Statutory results
(note 5)
£m Notes £m £m £m £m £m £m
Continuing operations
2,472.1 Revenue 3 1,299.8 - 1,299.8 1,095.5 - 1,095.5
305.0 Operating profit before share of results of joint ventures 210.3 (17.6) 192.7 166.5 (16.5) 150.0
2.5 Share of results of joint ventures 1.3 - 1.3 1.0 - 1.0
307.5 Operating profit 211.6 (17.6) 194.0 167.5 (16.5) 151.0
(51.0) Finance costs (31.1) - (31.1) (25.5) - (25.5)
3.7 Finance income 7.4 - 7.4 0.5 - 0.5
260.2 Profit before tax from continuing operations 187.9 (17.6) 170.3 142.5 (16.5) 126.0
(47.6) Tax (expense) credit 6 (49.5) 5.9 (43.6) (37.6) 3.8 (33.8)
212.6 Profit for the period from continuing operations 138.4 (11.7) 126.7 104.9 (12.7) 92.2
1.2 (Loss) profit for the period from discontinued operations 7 - (0.4) (0.4) - - -
213.8 Profit for the period 138.4 (12.1) 126.3 104.9 (12.7) 92.2
Attributable to:
213.4 Equity holders of the Company 138.1 (12.1) 126.0 104.8 (12.7) 92.1
0.4 Non-controlling interests 0.3 - 0.3 0.1 - 0.1
213.8 138.4 (12.1) 126.3 104.9 (12.7) 92.2
Earnings per share 8
82.5p Basic - total operations 48.8p 35.6p
82.0p Basic - continuing operations 53.4p 48.9p 40.5p 35.6p
82.0p Diluted - total operations 48.4p 35.4p
81.5p Diluted - continuing operations 53.1p 48.5p 40.2p 35.4p
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE 6 MONTHS ENDED 30 JUNE 2023
Year ended 6 months ended 6 months ended
31 December 2022 30 June 2023 30 June 2022
£m £m £m
213.8 Profit for the period 126.3 92.2
Other comprehensive (expense) income
- (Losses) gains taken to equity on cash flow hedges (0.1) 0.2
223.1 Exchange (losses) gains on translation of foreign operations (151.5) 220.3
0.1 Reclassification of foreign currency translation reserve on sale of - -
discontinued operations
(124.9) Exchange gains (losses) on net investment hedges 25.3 (117.2)
0.5 Reclassification adjustments on cash flow hedges 0.4 (0.1)
(0.1) Tax relating to other comprehensive expense (income) to be reclassified in - (0.1)
subsequent periods
98.7 Items that are or may be reclassified to profit or loss in subsequent periods (125.9) 103.1
Other comprehensive (expense) income not to be reclassified to profit or loss
in subsequent periods:
65.3 Remeasurements on defined benefit plans (17.0) 76.0
(16.3) Tax relating to other comprehensive expense (income) not to be reclassified in 4.3 (18.9)
subsequent periods
49.0 Items that will not be reclassified to profit or loss in subsequent periods (12.7) 57.1
147.7 Net other comprehensive (expense) income (138.6) 160.2
361.5 Total net comprehensive (expense) income for the period (12.3) 252.4
Attributable to:
360.8 Equity holders of the Company (11.6) 251.7
0.7 Non-controlling interests (0.7) 0.7
361.5 (12.3) 252.4
Total net comprehensive (expense) income for the year attributable to equity
holders of the Company
359.6 Continuing operations (11.2) 251.7
1.2 Discontinued operations (0.4) -
360.8 (11.6) 251.7
CONSOLIDATED BALANCE SHEET
AT 30 JUNE 2023
31 December 2022 30 June 2023 30 June 2022
£m Notes £m £m
ASSETS
Non-current assets
462.2 Property, plant & equipment 461.0 450.8
1,409.9 Intangible assets 1,324.0 1,426.0
15.1 Investments in joint ventures 14.8 13.5
92.5 Deferred tax assets 74.7 29.6
76.8 Other receivables 69.2 85.0
50.0 Retirement benefit plan assets 14 38.7 59.2
- Derivative financial instruments 15 0.1 -
2,106.5 Total non-current assets 1,982.5 2,064.1
Current assets
679.1 Inventories 684.7 674.1
528.9 Trade & other receivables 518.8 545.3
8.9 Derivative financial instruments 15 5.9 7.4
41.3 Income tax receivable 43.7 35.5
691.2 Cash & short-term deposits 626.9 467.0
1,949.4 Total current assets 1,880.0 1,729.3
4,055.9 Total assets 3,862.5 3,793.4
LIABILITIES
Current liabilities
406.3 Interest-bearing loans & borrowings 13 259.3 323.6
623.5 Trade & other payables 557.4 532.0
13.2 Derivative financial instruments 15 7.1 10.4
7.4 Income tax payable 2.1 4.3
35.3 Provisions 12 42.0 28.6
1,085.7 Total current liabilities 867.9 898.9
Non-current liabilities
1,082.1 Interest-bearing loans & borrowings 13 1,209.7 1,104.3
1.0 Other payables - 1.0
- Derivative financial instruments 15 - 0.4
62.9 Provisions 12 56.4 65.6
51.4 Deferred tax liabilities 35.7 30.0
34.9 Retirement benefit plan deficits 14 29.6 34.8
1,232.3 Total non-current liabilities 1,331.4 1,236.1
2,318.0 Total liabilities 2,199.3 2,135.0
1,737.9 NET ASSETS 1,663.2 1,658.4
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
(14.3) Treasury shares (20.1) (16.6)
0.5 Capital redemption reserve 0.5 0.5
(108.5) Foreign currency translation reserve (233.7) (104.0)
1.9 Hedge accounting reserve 2.2 1.5
899.5 Retained earnings 956.9 818.0
1,726.5 Shareholders' equity 1,653.2 1,646.8
11.4 Non-controlling interests 10.0 11.6
1,737.9 TOTAL EQUITY 1,663.2 1,658.4
The financial statements were approved by the Board of Directors and
authorised for issue on 1 August 2023.
JON STANTON JOHN HEASLEY
Director Director
CONSOLIDATED CASH FLOW STATEMENT
FOR THE 6 MONTHS ENDED 30 JUNE 2023
Year ended 6 months ended 6 months ended
31 December 2022 30 June 2023 30 June 2022
£m Notes £m £m
Total operations
Cash flows from operating activities 16
447.8 Cash generated from operations 172.9 100.2
(9.7) Additional pension contributions paid (7.7) (7.7)
(14.2) Exceptional and other adjusting cash items (5.2) (7.2)
(9.7) Exceptional cash items - acquired vendor liabilities - (8.9)
(93.4) Income tax paid (51.1) (40.2)
320.8 Net cash generated from operating activities 108.9 36.2
Cash flows from investing activities
(15.2) Acquisitions of subsidiaries, net of cash acquired 11 (1.0) (14.6)
(56.1) Purchases of property, plant & equipment, net of grants received (33.8) (18.4)
(6.6) Purchases of intangible assets (3.5) (2.6)
4.4 Other proceeds from sale of property, plant & equipment and intangible 1.0 2.7
assets
(0.1) Disposals of discontinued operations, net of cash disposed and disposal costs 16 (0.4) -
(2.0) Exceptional cash item - disposal of ESCO Russia - -
4.6 Interest received 6.3 1.6
2.7 Dividends received from joint ventures 1.7 1.4
(68.3) Net cash used in investing activities (29.7) (29.9)
Cash flows from financing activities
822.8 Proceeds from borrowings 510.6 752.8
(958.9) Repayments of borrowings (529.6) (863.5)
(30.5) Lease payments (15.7) (14.0)
(0.3) Settlement of derivative financial instruments (0.2) 0.2
(49.9) Interest paid (30.6) (27.1)
(66.7) Dividends paid to equity holders of the Company 9 (49.9) (31.8)
(0.3) Dividends paid to non-controlling interests (0.7) (0.1)
(20.0) Purchase of shares for employee share plans (15.0) (20.0)
(303.8) Net cash used in financing activities (131.1) (203.5)
(51.3) Net decrease in cash & cash equivalents (51.9) (197.2)
500.0 Cash & cash equivalents at the beginning of the year 477.5 500.0
28.8 Foreign currency translation differences (32.1) 31.1
477.5 Cash & cash equivalents at the end of the period 16 393.5 333.9
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE 6 MONTHS ENDED 30 JUNE 2023
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 period - - - - - - - 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 income - - - - - - (0.1) (18.9) (19.0) - (19.0)
Total net comprehensive income for the period - - - - - 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 - - - - - - - - - (0.1) (0.1)
non-controlling interests
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
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 2022 32.5 582.3 332.6 (14.3) 0.5 (108.5) 1.9 899.5 1,726.5 11.4 1,737.9
Profit for the period - - - - - - - 126.0 126.0 0.3 126.3
Losses taken to equity on cash flow hedges - - - - - - (0.1) - (0.1) - (0.1)
Exchange losses on translation of foreign operations - - - - - (150.5) - - (150.5) (1.0) (151.5)
Exchange gains on net investment hedges - - - - - 25.3 - - 25.3 - 25.3
Reclassification adjustments on cash flow hedges - - - - - - 0.4 - 0.4 - 0.4
Remeasurements on defined benefit plans - - - - - - - (17.0) (17.0) - (17.0)
Tax relating to other comprehensive expense - - - - - - - 4.3 4.3 - 4.3
Total net comprehensive (expense) income for the period - - - - - (125.2) 0.3 113.3 (11.6) (0.7) (12.3)
Cost of share-based payments inclusive of tax charge - - - - - - - 3.2 3.2 - 3.2
Dividends - - - - - - - (49.9) (49.9) - (49.9)
Purchase of shares for employee share plans - - - (15.0) - - - - (15.0) - (15.0)
Dividends to non-controlling interests - - - - - - - - - (0.7) (0.7)
Exercise of share-based payments - - - 9.2 - - - (9.2) - - -
At 30 June 2023 32.5 582.3 332.6 (20.1) 0.5 (233.7) 2.2 956.9 1,653.2 10.0 1,663.2
Share capital Share premium Merger reserve Treasury shares Capital redemption reserve Foreign currency translation reserve Hedge accounting reserve Retained earnings Attributable to equity holders of the Company Non- controlling interests Total equity
£m £m £m £m £m £m £m £m £m £m £m
At 31 December 2021 32.5 582.3 332.6 (5.3) 0.5 (206.5) 1.5 705.9 1,443.5 11.0 1,454.5
Profit for the year - - - - - - - 213.4 213.4 0.4 213.8
Exchange gains on translation of foreign operations - - - - - 222.8 - - 222.8 0.3 223.1
Reclassification of exchange gains on discontinued operations - - - - - 0.1 - - 0.1 - 0.1
Exchange losses on net investment hedges - - - - - (124.9) - - (124.9) - (124.9)
Reclassification adjustments on cash flow hedges - - - - - - 0.5 - 0.5 - 0.5
Remeasurements on defined benefit plans - - - - - - - 65.3 65.3 - 65.3
Tax relating to other comprehensive income - - - - - - (0.1) (16.3) (16.4) - (16.4)
Total net comprehensive income for the year - - - - - 98.0 0.4 262.4 360.8 0.7 361.5
Cost of share-based payments inclusive of tax credit - - - - - - - 8.9 8.9 - 8.9
Dividends - - - - - - - (66.7) (66.7) - (66.7)
Purchase of shares for employee share plans - - - (20.0) - - - - (20.0) - (20.0)
Dividends to non-controlling interests - - - - - - - - - (0.3) (0.3)
Exercise of share-based payments - - - 11.0 - - - (11.0) - - -
At 31 December 2022 32.5 582.3 332.6 (14.3) 0.5 (108.5) 1.9 899.5 1,726.5 11.4 1,737.9
1. Accounting policies
Basis of preparation
These interim financial statements are for the 6 month period ended 30 June
2023 and have been prepared on the basis of the accounting policies set out in
the Group's 2022 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 45. The
information shown for the year ended 31 December 2022 does not constitute
statutory accounts as defined in Section 435 of the Companies Act 2006 and has
been extracted from the Group's 2022 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 2022 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 2022, 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 3.
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
1 August 2023.
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 make excellent progress as a high-quality mining focused group.
The Group has executed strongly, capitalising on a record opening order book,
and maintained operating momentum. This has led to the Group delivering
significant year-on-year growth in revenue, operating profit and cash
generation, while also expanding operating margins.
As discussed in the Group Financial Review, the Group has extended the
maturity profile of its debt financing with the issue of £300m five-year
Sustainability-Linked Notes due to mature in June 2028, and exercise of the
one year extension of the revolving credit facility to April 2028. This
ensures the Group retains substantial levels of liquidity over the
medium-term.
While mining markets continue to show strength, there remains macroeconomic
and geopolitical uncertainty. Recognising these uncertainties, the Group
performed financial modelling of future cash flows, which cover a period of 12
months from the approval of the 2023 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. These considerations focused on similar areas to those
disclosed in the 2022 Annual Report. 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) Amendments to IAS 1 - Classification of liabilities as current or
non-current;
ii) Narrow scope amendments to IAS 1, Practice statement 2 and IAS 8;
iii) Amendment to IFRS 16 - Leases on sale and leaseback;
iv) Amendment to IAS 12 - Deferred tax related to assets and liabilities
arising from a single transaction; and
v) IFRS 17 'Insurance contracts' as amended in December 2021.
The above are not considered to have a material impact on the consolidated
financial statements of the Group.
On 23 May 2023, the IASB issued narrow-scope amendments to IAS 12. The
amendments provide a temporary exception from the requirement to recognise and
disclose deferred taxes arising from the substantively enacted tax law that
implements the Pillar Two model rules published by the OECD, including tax law
that implements qualified domestic minimum top-up taxes described in those
rules. The amendments to IAS 12 are required to be applied immediately and
retrospectively in accordance with IAS 8 'Accounting policies, changes in
accounting estimates and errors', including the requirement to disclose the
fact that the exception has been applied if the entity's income taxes will be
affected by substantively enacted tax law that implements the OECD's Pillar
Two model rules. The Group has prepared an accounting policy on the
recognition of deferred taxes arising from the Pillar Two model rules as
discussed in note 6.
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 2022
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.
2. 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 2022 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 5. We consider this presentation to be helpful as it allows
greater comparability of the operating performance of the business from period
to period.
EBITDA
EBITDA is operating profit from continuing operations, before exceptional
items, other adjusting items, intangibles amortisation, and excluding
depreciation of owned assets and right-of-use assets. EBITDA is a widely used
measure of a company's profitability of its operations before any effects of
indebtedness, taxes or costs required to maintain its asset base. EBITDA is
used in conjunction with other GAAP and non-GAAP financial measures to assess
our operational performance. A reconciliation of EBITDA to the closest
equivalent GAAP measure, operating profit, is provided.
Year ended 6 months ended 6 months ended
31 December 2022 30 June 2023 30 June 2022
£m £m £m
Continuing operations
307.5 Operating profit 194.0 151.0
Adjusted for:
51.4 Exceptional and other adjusting items (note 5) 4.6 (0.5)
35.9 Adjusting amortisation (note 5) 13.0 17.0
394.8 Adjusted operating profit 211.6 167.5
5.7 Non-adjusting amortisation 6.2 3.0
400.5 Adjusted earnings before interest, tax and amortisation (EBITA) 217.8 170.5
47.0 Depreciation of owned property, plant & equipment 20.4 22.7
31.4 Depreciation of right-of-use property, plant & equipment 15.8 14.8
478.9 Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) 254.0 208.0
Operating cash flow (cash generated from operations)
Operating cash flow excludes additional pension contributions, exceptional and
other adjusting cash items and income tax paid. This is a useful measure to
view or assess the underlying cash generation of the business from its
operating activities. A reconciliation to the GAAP measure 'Net cash generated
from operating activities' is provided in the Consolidated Cash Flow
Statement.
Free operating cash flow and free cash flow
Free operating cash flow (FOCF) is defined as operating cash flow (cash
generated from operations), adjusted for net capital expenditure, lease
payments, dividends received from joint ventures and purchase of shares for
employee share plans. FOCF provides a useful measure of the cash flows
generated directly from the operational activities after taking into account
other cash flows closely associated with maintaining daily operations.
Free cash flow (FCF) is defined as FOCF further adjusted for net interest,
income taxes, settlement of derivative financial instruments, additional
pension contributions and non-controlling interest dividends. FCF reflects an
additional way of viewing our available funds that we believe is useful to
investors as it represents cash flows that could be used for repayment of
debt, dividends, exceptional and other adjusting items, or to fund our
strategic initiatives, including acquisitions, if any.
The reconciliation of operating cash flows (cash generated from operations) to
FOCF and subsequently FCF is as follows.
Year ended 6 months ended 6 months ended
31 December 2022 30 June 2023 30 June 2022
£m £m £m
447.8 Operating cash flow (cash generated from operations) 172.9 100.2
(58.3) Net capital expenditure from purchase & disposal of property, plant & (36.3) (18.3)
equipment and intangibles
(30.5) Lease payments (15.7) (14.0)
2.7 Dividends received from joint ventures 1.7 1.4
(20.0) Purchase of shares for employee share plans (15.0) (20.0)
341.7 Free operating cash flow (FOCF) 107.6 49.3
(45.3) Net interest paid (24.3) (25.5)
(93.4) Income tax paid (51.1) (40.2)
(0.3) Settlement of derivative financial instruments (0.2) 0.2
(9.7) Additional pension contributions paid (7.7) (7.7)
(0.3) Dividends paid to non-controlling interests (0.7) (0.1)
192.7 Free cash flow (FCF) 23.6 (24.0)
Free operating cash conversion
Free operating cash conversion is a non-GAAP key performance measure defined
as free operating cash flow divided by adjusted operating profit on a total
Group basis. The measure is used by management to monitor the Group's ability
to generate cash relative to operating profits.
Year ended 6 months ended 6 months ended
31 December 2022 30 June 2023 30 June 2022
£m £m £m
394.8 Continuing operations 211.6 167.5
394.8 Adjusted operating profit - Total Group 211.6 167.5
341.7 Free operating cash flow (FOCF) 107.6 49.3
87% Free operating cash conversion % 51% 29%
Working capital as a percentage of sales
Working capital as a percentage of sales is calculated based on working
capital as reflected below, divided by revenue for the last 12 months, as
included in the Consolidated Income Statement. It is a measure used by
management to monitor how efficiently the Group is managing its investment in
working capital relative to revenue growth.
31 December 2022 30 June 2023 30 June 2022
£m £m £m
Working capital as included in the Consolidated Balance Sheet
76.8 Other receivables 69.2 85.0
679.1 Inventories 684.7 674.1
528.9 Trade & other receivables 518.8 545.3
(4.3) Derivative financial instruments (note 15) (1.1) (3.4)
(623.5) Trade & other payables (557.4) (532.0)
(1.0) Other payables - (1.0)
656.0 714.2 768.0
Adjusted for:
(77.9) Insurance contract assets (68.5) (86.3)
5.3 Interest accruals 4.2 4.7
2.0 Deferred consideration 1.0 2.5
(70.6) (63.3) (79.1)
585.4 Working capital 650.9 688.9
H2 revenue as reported in the prior year 1,376.6 1,033.2
H1 revenue as reported 1,299.8 1,095.5
2,472.1 Revenue 2,676.4 2,128.7
24% Working capital as a percentage of sales 24% 32%
Net debt
Net debt is a widely used liquidity metric calculated by taking cash and cash
equivalents less total current and non-current debt. A reconciliation of net
debt to cash and short-term deposits and interest-bearing loans and borrowings
is provided in note 16. It is a useful measure used by management and
investors when monitoring the capital management of the Group. Net debt,
excluding lease liabilities and converted at the exchange rates used in the
preparation of the Consolidated Income Statement, is also the basis for
covenant reporting.
3. Segment information
Continuing operations includes two operating Divisions: Minerals and ESCO.
These two Divisions are organised and managed separately based on the key
markets served and each is treated as an operating segment and a reportable
segment under IFRS 8 'Operating segments'. The operating and reportable
segments were determined based on the reports reviewed by the Chief Executive
Officer, which are used to make operational decisions.
The Minerals segment is a global leader in engineering, manufacturing and
service processing technology used in abrasive, high-wear mining applications.
Its differentiated technology is also used in infrastructure and general
industrial markets. The ESCO segment is a global leader in the provision of
Ground Engaging Tools (G.E.T.) for large mining machines. It operates
predominantly in mining and infrastructure markets where its highly engineered
technology improves productivity through extended wear life, increased safety
and reduced energy consumption.
Following the acquisition of Motion Metrics on 30 November 2021 and Carriere
Industrial Supply Limited (CIS) on 8 April 2022, these entities have been
included in the ESCO segment. Motion Metrics is a mining technology business,
which is the market-leading developer of innovative artificial intelligence
(AI) and 3D rugged Machine Vision Technology, used in mines worldwide. CIS is
a premier manufacturer and distributor of highly engineered wear parts and
aftermarket service provider to the Canadian mining industry.
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 2023 and 2022 is
disclosed below.
Minerals ESCO Total continuing operations
30 June 2023 30 June 2022 30 June 2023 30 June 2022 30 June 2023 30 June 2022
£m £m £m £m £m £m
Revenue
Sales to external customers 950.0 782.0 349.8 313.5 1,299.8 1,095.5
Inter-segment sales 0.1 - 1.6 1.2 1.7 1.2
Segment revenue 950.1 782.0 351.4 314.7 1,301.5 1,096.7
Eliminations (1.7) (1.2)
1,299.8 1,095.5
Sales to external customers - 2022 at 2023 average exchange rates
Sales to external customers 950.0 790.3 349.8 330.5 1,299.8 1,120.8
Segment result
Segment result before share of results of joint ventures 173.3 135.1 57.2 49.5 230.5 184.6
Share of results of joint ventures - - 1.3 1.0 1.3 1.0
Segment result 173.3 135.1 58.5 50.5 231.8 185.6
Corporate expenses (20.2) (18.1)
Adjusted operating profit 211.6 167.5
Adjusting items (17.6) (16.5)
Net finance costs (23.7) (25.0)
Profit before tax from continuing operations 170.3 126.0
Segment result - 2022 at 2023 average exchange rates
Segment result before share of results of joint ventures 173.3 138.2 57.2 52.2 230.5 190.4
Share of results of joint ventures - - 1.3 1.1 1.3 1.1
Segment result 173.3 138.2 58.5 53.3 231.8 191.5
Corporate expenses (20.2) (18.3)
Adjusted operating profit 211.6 173.2
Minerals ESCO Total Group
30 June 2023 30 June 2022 30 June 2023 30 June 2022 30 June 2023 30 June 2022
£m £m £m £m £m £m
Assets & liabilities
Intangible assets 562.9 606.6 761.1 818.6 1,324.0 1,425.2
Property, plant & equipment 301.9 297.5 149.0 142.5 450.9 440.0
Working capital assets 906.5 905.7 294.8 310.5 1,201.3 1,216.2
1,771.3 1,809.8 1,204.9 1,271.6 2,976.2 3,081.4
Investments in joint ventures - - 14.8 13.5 14.8 13.5
Segment assets 1,771.3 1,809.8 1,219.7 1,285.1 2,991.0 3,094.9
Corporate assets 871.5 698.5
Total assets 3,862.5 3,793.4
Working capital liabilities 467.6 449.9 122.5 140.9 590.1 590.8
Segment liabilities 467.6 449.9 122.5 140.9 590.1 590.8
Corporate liabilities 1,609.2 1,544.2
Total liabilities 2,199.3 2,135.0
Corporate 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 assets as well as those assets
which are used for general head office purposes. Corporate liabilities
primarily comprise interest-bearing loans and borrowings and related interest
accruals, derivative financial instruments, income tax payable, provisions,
deferred tax liabilities, elimination of intercompany liabilities 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 2023
and 2022 is disclosed below. Revenues are allocated based on the location to
which the product is shipped.
6 months ended 30 June 2023 UK US Canada Asia Pacific Australasia South America Middle East & Africa Europe & FSU Total
£m £m £m £m £m £m £m £m £m
Revenue from continuing operations
Sales to external customers 12.1 209.8 210.1 167.5 196.9 284.7 151.9 66.8 1,299.8
6 months ended 30 June 2022 UK US Canada Asia Pacific Australasia South America Middle East & Africa Europe & FSU Total
£m £m £m £m £m £m £m £m £m
Revenue from continuing operations
Sales to external customers 14.5 190.6 160.6 135.2 133.8 235.8 131.6 93.4 1,095.5
Year ended 31 December 2022 UK US Canada Asia Pacific Australasia South America Middle East & Africa Europe & FSU Total
£m £m £m £m £m £m £m £m £m
Revenue from continuing operations
Sales to external customers 34.8 418.1 378.3 288.2 336.3 540.8 295.3 180.3 2,472.1
Minerals ESCO Total continuing operations
Year ended 31 December 2022 £m £m £m
Revenue
Sales to external customers 1,780.5 691.6 2,472.1
Inter-segment sales 0.1 3.2 3.3
Segment revenue 1,780.6 694.8 2,475.4
Eliminations (3.3)
2,472.1
Sales to external customers - 2022 at 2023 average exchange rates
Sales to external customers 1,765.4 694.0 2,459.4
Segment result
Segment result before share of results of joint ventures 323.5 107.5 431.0
Share of results of joint ventures - 2.5 2.5
Segment result 323.5 110.0 433.5
Corporate expenses (38.7)
Adjusted operating profit 394.8
Adjusting items (87.3)
Net finance costs (47.3)
Profit before tax from continuing operations 260.2
Segment result - 2022 at 2023 average exchange rates
Segment result before share of results of joint ventures 323.8 107.9 431.7
Share of results of joint ventures - 2.5 2.5
Segment result 323.8 110.4 434.2
Corporate expenses (38.8)
Adjusted operating profit 395.4
Year ended 31 December 2022 Minerals ESCO Total Group
£m £m £m
Assets & liabilities
Intangible assets 600.8 809.0 1,409.8
Property, plant & equipment 303.4 147.6 451.0
Working capital assets 902.0 307.3 1,209.3
1,806.2 1,263.9 3,070.1
Investments in joint ventures - 15.1 15.1
Segment assets 1,806.2 1,279.0 3,085.2
Corporate assets 970.7
Total assets 4,055.9
Working capital liabilities 543.7 139.9 683.6
Segment liabilities 543.7 139.9 683.6
Corporate liabilities 1,634.4
Total liabilities 2,318.0
The following disclosures are given in relation to continuing operations.
Year ended 6 months ended 6 months ended
31 December 2022 30 June 2023 30 June 2022
£m £m £m
An analysis of the Group's revenue is as follows:
456.0 Original equipment 247.6 202.4
1,825.7 Aftermarket parts 933.0 813.6
2,281.7 Sales of goods 1,180.6 1,016.0
141.9 Provision of services - aftermarket 75.5 68.3
45.5 Construction contracts - original equipment 41.7 11.2
3.0 Subscription services 2.0 -
2,472.1 Revenue 1,299.8 1,095.5
Total continuing Minerals ESCO Total continuing operations
operations
31 December 2022 30 June 2023 30 June 2022 30 June 2023 30 June 2022 30 June 2023 30 June 2022
£m £m £m £m £m £m £m
Timing of revenue recognition
2,364.6 At a point in time 883.0 716.6 345.0 310.4 1,228.0 1,027.0
110.8 Over time 67.1 65.4 6.4 4.3 73.5 69.7
2,475.4 Segment revenue 950.1 782.0 351.4 314.7 1,301.5 1,096.7
(3.3) Eliminations (1.7) (1.2)
2,472.1 1,299.8 1,095.5
4. Revenue & expenses
The following disclosures are given in relation to continuing operations.
Year ended 31 December 2022 6 months ended 30 June 2023 6 months ended 30 June 2022
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:
2,472.1 Revenue 1,299.8 - 1,299.8 1,095.5 - 1,095.5
(1,598.2) Cost of sales (818.5) 5.4 (813.1) (692.4) (3.8) (696.2)
873.9 Gross profit 481.3 5.4 486.7 403.1 (3.8) 399.3
10.4 Other operating income 3.2 0.4 3.6 4.6 - 4.6
(284.0) Selling & distribution costs (144.2) (1.0) (145.2) (133.4) (0.1) (133.5)
(295.3) Administrative expenses (130.0) (22.4) (152.4) (107.8) (12.6) (120.4)
2.5 Share of results of joint ventures 1.3 - 1.3 1.0 - 1.0
307.5 Operating profit 211.6 (17.6) 194.0 167.5 (16.5) 151.0
Details of adjusting items are included in note 5.
5. Adjusting items
Year ended 6 months ended 6 months ended
31 December 2022 30 June 2023 30 June 2022
£m £m £m
Recognised in arriving at operating profit from continuing operations
(35.9) Intangibles amortisation (13.0) (17.0)
Exceptional items
(44.0) Russia operations wind down 7.1 (1.7)
(2.9) Performance Excellence programme (7.8) -
(2.4) Acquisition and integration related costs (0.3) (1.3)
0.4 Other restructuring and rationalisation activities - 0.3
(48.9) Total exceptional items (1.0) (2.7)
Other adjusting items
(2.5) Asbestos-related provision (3.6) 3.2
(2.5) Total other adjusting items (3.6) 3.2
(87.3) Total adjusting items (17.6) (16.5)
Continuing operations
Intangibles amortisation
Intangibles amortisation of £13.0m in the current period is in respect of
acquisition related assets. The prior period charge of £17.0m includes both
amortisation in respect of acquisition related assets and intangible assets
categorised as multi-year investment activities which have now concluded.
Exceptional items
In the year ended 31 December 2022, a charge of £44.0m was recognised in
relation to the wind down of Russia operations. The loss on disposal of the
ESCO Russia operations totalled £4.9m. Due to the tightening of sanctions
giving rise to increased uncertainty over recoverability of assets, costs of
£39.1m were recognised in the Minerals Division. This represented provision
for the majority of Weir Minerals Russia's closing third-party net assets of
£25.4m, as well as other provisions across the Minerals Division, including
provision for made to order inventory prohibited from being shipped of £7.0m,
receivables from sanctioned customers of £2.8m, and severance and incremental
warehousing costs totalling £3.9m. This led to a cash outflow of £1.2m in
the period, primarily related to severance. A net credit of £7.1m has been
recognised in the Consolidated Income Statement in the period in respect of
the reversal of previously impaired inventory and receivables, partially
offset by additional provision for newly emerging contract exposures.
A charge of £7.8m has been recognised in the period in relation to the
Group's Performance Excellence programme. The three-year programme aims to
transform the way we work with more agile and efficient business processes,
with a focus on customer and service-delivery. The programme includes capacity
optimisation, lean processes and global business services. Costs of £5.1m,
primarily relating to severance, have been recognised under the capacity
optimisation pillar of the programme in relation to the relocation of
facilities in the US and service centre restructuring in Australia. Of these
costs £2.3m have been cash settled in the period. The remaining costs of
£2.7m have been recognised in relation to the global business services pillar
of the programme, with £1.2m of this being cash settled in the period.
Exceptional items in the period include £0.3m (2022: £1.3m) for integration
related costs, following the acquisition of Carriere Industrial Supply Limited
and Motion Metrics, acquired on 8 April 2022 and 30 November 2021 respectively
(note 11). Prior period exceptional items also included £1.7m in relation to
the wind down of the Group's operations in Russia, primarily relating to
severance costs of £1.1m and a credit of £0.3m related to the reversal of
restructuring and rationalisation charges recognised in Peru and China in
prior years.
Other adjusting items
A charge of £3.6m (2022: credit of £3.2m) has been recorded in respect of
movements in the US and UK asbestos-related liabilities and associated US
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 12.
Discontinued operations
A charge of £0.4m has been recognised in the period in relation to the gain
on sale of discontinued operations (note 7). This relates to the finalisation
of certain tax indemnities under the sale and purchase agreement for the Oil
& Gas Division, which was disposed in 2021.
6. Income tax expense
Year ended 6 months ended 6 months ended
31 December 2022 30 June 2023 30 June 2022
£m £m £m
(11.8) Continuing Group - UK (6.3) (5.7)
(35.8) Continuing Group - Overseas (37.3) (28.1)
(47.6) Income tax expense in the Consolidated Income Statement for continuing (43.6) (33.8)
operations
1.2 Discontinued operations - -
(46.4) Income tax expense in the Consolidated Income Statement for total operations (43.6) (33.8)
The total income tax expense is disclosed in the Consolidated Income Statement
as follows.
Year ended 6 months ended 6 months ended
31 December 2022 30 June 2023 30 June 2022
£m £m £m
Tax (expense) credit
(92.5) - adjusted continuing operations (49.5) (37.6)
1.2 - adjusted discontinued operations - -
36.3 - exceptional and other adjusting items 3.1 (0.3)
8.6 - adjusting intangibles amortisation and impairment 2.8 4.1
(46.4) Total income tax expense in the Consolidated Income Statement for total (43.6) (33.8)
operations
The income tax expense included in continuing operations' share of results of
joint ventures is as follows.
Year ended 6 months ended 6 months ended
31 December 2022 30 June 2023 30 June 2022
£m £m £m
(0.2) Joint ventures - -
Tax charged within the 6 months ended 30 June 2023 has been calculated by
applying the effective rate of tax which is expected to apply to the Group for
the year ending 31 December 2023 using rates substantively enacted by 30 June
2023 as required by IAS 34 'Interim financial reporting'.
The normalised rate of tax of 26.3% (June 2022: 26.4%) has been calculated
using the full year projections and has been applied to profit before
adjusting items for the 6 months ended 30 June 2023.
Legislation to increase the UK corporation tax 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
25%.
Factors affecting current and future tax charges
The normalised tax rate was 0.2% above the Group's weighted average rate of
26.1%. The Group considers its normalised tax rate to be sustainable.
Unrecognised deferred tax
Included in the net deferred tax asset of £39.0m (June 2022: net liability
£0.4m) is £52.0m (June 2022: £28.0m) related to the US Group net deferred
tax assets, determined on a basis consistent with the approach adopted at year
ended 31 December 2022 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 £7.7m (June 2022: £53.0m) are not recognised but retained
by the continuing US group. The ongoing application of this model may result
in future changes to the amount of US deferred tax assets that are
unrecognised.
Pillar Two
During 2021, the Organisation for Economic Co-operation and Development (OECD)
published a framework for the introduction of a global minimum effective tax
rate of 15%, applicable to large multinational groups. On 20 July 2022, HM
Treasury released draft legislation to implement these 'Pillar Two' rules with
effect for years beginning on or after 31 December 2023, and this was
substantively enacted as part of Finance (No.2) Bill 2023 on 20 June 2023. The
Group does not account for deferred tax on top-up taxes therefore there is no
impact to deferred tax as a result of these rules. The Group is reviewing the
legislation to understand any other potential impacts.
7. Discontinued operations
The Group disposed of the Oil & Gas Division (excluding the Group's joint
venture, Arabian Metals Company (AMCO)) on 1 February 2021 to Caterpillar Inc.
(CAT). On 30 June 2021, the Group completed the sale of the remaining Oil
& Gas joint venture AMCO to Olayan Financing Company (Olayan).
In the current period, a charge of £0.4m has been recognised in relation to
the finalisation of certain tax indemnities under the sale and purchase
agreement for the Oil & Gas Division. In the year ended 31 December 2022,
a current tax credit of £1.2m was recognised in respect of Oil & Gas
Division related activity following the filing of the 2021 US tax return.
Total current year investing cash flows from discontinued operations related
to the charge in the period are £0.4m (2022: £0.1m investing cash flows).
8. Earnings per share
Basic earnings per share amounts are calculated by dividing net profit for the
year attributable to equity holders of the Company by the weighted average
number of ordinary shares 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.
Year ended 6 months ended 6 months ended
31 December 2022 30 June 2023 30 June 2022
£m £m £m
Profit attributable to equity holders of the Company
213.4 Total operations(1) 126.0 92.1
212.2 Continuing operations(1) 126.4 92.1
254.6 Continuing operations before adjusting items(2) 138.1 104.8
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 2022 30 June 2023 30 June 2022
Shares Shares Shares
million
million million
258.7 Weighted average number of ordinary shares for basic earnings per share 258.4 258.7
1.6 Effect of dilution: employee share awards 1.8 1.8
260.3 Adjusted weighted average number of ordinary shares for diluted earnings per 260.2 260.5
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.
Year ended 6 months ended 6 months ended
31 December 2022 30 June 2023 30 June 2022
£m £m £m
212.2 Net profit attributable to equity holders from continuing operations(2) 126.4 92.1
42.4 Adjusting items net of tax 11.7 12.7
254.6 Net profit attributable to equity holders from continuing operations before 138.1 104.8
adjusting items
Year ended 6 months ended 6 months ended
31 December 2022 30 June 2023 30 June 2022
pence pence pence
Basic earnings per share:
82.5 Total operations(1) 48.8 35.6
82.0 Continuing operations(2) 48.9 35.6
98.4 Continuing operations before adjusting items(2) 53.4 40.5
Diluted earnings per share:
82.0 Total operations(1) 48.4 35.4
81.5 Continuing operations(2) 48.5 35.4
97.8 Continuing operations before adjusting items(2) 53.1 40.2
(1 Adjusted for a profit of £0.3m
(2022: profit of £0.1m) in respect of non-controlling interests for both
total and continuing operations.)
(2 Adjusted for a profit of £0.3m
(2022: profit of £0.1m) in respect of non-controlling interests for
continuing operations.)
( )
There have been no share awards (2022: 725) exercised between the reporting
date and the date of signing of these interim financial statements. Those
exercised in the prior year were settled out of existing shares held in trust.
( )
9. Dividends paid & proposed
Year ended 6 months ended 6 months ended
31 December 2022 30 June 2023 30 June 2022
£m £m £m
Declared & paid during the year
Equity dividends on ordinary shares
31.8 Final dividend paid for 2022: 19.30p (2021: 12.30p) 49.9 31.8
34.9 Interim dividend paid for 2022: 13.50p (2021: 11.50p) - -
49.9 Final dividend for 2022 proposed for approval by shareholders at the AGM - -
(19.30p)
- Interim dividend proposed for 2023: 17.80p (2022: 13.50p) 46.0 34.9
An interim dividend of 17.80p has been declared for 2023 (2022: 13.50p) in
line with the capital allocation policy under which the Group intends to
distribute 33% of earnings from continuing operations before adjusting items
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.
10. Property, plant & equipment and intangible assets
Year ended 6 months ended 6 months ended
31 December 2022 30 June 2023 30 June 2022
£m £m £m
Additions of property, plant & equipment and intangible assets
4.8 - owned land & buildings 0.4 2.3
55.9 - owned plant & equipment 34.2 18.0
24.9 - right-of-use land & buildings 20.2 17.8
6.8 - right-of-use plant & equipment 3.5 2.1
6.8 - intangible assets 3.5 2.5
99.2 61.8 42.7
The above additions relate to the normal course of business and do not include
any additions made by way of business combinations. There have been no
material disposals or transfers within the period.
11. Business combinations
Carriere Industrial Supply Limited
On 8 April 2022, the Group completed the acquisition of 100% of the voting
rights of Carriere Industrial Supply Limited (CIS) for an enterprise value of
CAD$32.5m (£20.2m). The provisional fair values reported at 30 June 2022 were
revised in the second half of 2022 and included in the 2022 Annual Report as
provisional. The provisional adjustment resulted in a reduction to goodwill of
£1.7m. There have been no updates to these provisional fair values, which
were subject to finalisation in April 2023, 12 months after the acquisition as
permitted by IFRS 3 'Business combinations'. Due to the immaterial value of
the adjustment the June 2022 comparatives have not been restated in these
interim financial statements. Detail of all adjustments can be found in the
2022 Annual Report and 2022 Interim Report.
Initial consideration of £16.2m was paid on completion, with a further
deferred consideration of £2.5m recognised reflecting indemnification and
working capital hold backs. In October 2022, the Group paid a further £0.1m
in relation to the finalisation of the completion accounts process and settled
£0.5m of the deferred consideration in relation to the working capital
completion. The Group settled a further £1.0m of the deferred consideration
in April 2023, on the first anniversary of the acquisition date as per the
sale and purchase agreement. The remaining £1.0m balance will be settled on
the second anniversary of the acquisition date.
Motion Metrics
The Group completed the acquisition of 100% of the voting rights of Motion
Metrics on 30 November 2021 for an enterprise value of CAD$150.0m (£88.7m).
The final values in relation to the acquisition balance sheet were reported in
the 2022 Annual Report. The adjustment to goodwill reported in the 2022 Annual
Report was a reduction of £0.5m from the June 2022 Interim Report. Due to the
immaterial value of this adjustment, the June 2022 comparatives have not been
restated in these interim financial statements.
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 first three years following acquisition. Any
balance that becomes payable would be split, with 80% reflecting further
consideration and 20% for a new employee bonus plan. The entry point for any
contingent payment would require significant growth both in terms of revenue
and EBITDA margin by 2024. Progress has been made towards these targets and,
while the Group expects Motion Metrics to continue to grow as it leverages the
benefits of being partnered with ESCO and the opportunities within Minerals,
the entry targets are considered challenging. Due to commercial sensitivity
these targets are not disclosed. At present, the probability of Motion Metrics
exceeding these targets in order to trigger a contingent payment is considered
to remain uncertain, in part due to the relative infancy of the business. As a
result, no contingent consideration has been recorded at the balance sheet
date in both the current and prior periods. This will be reassessed in future
periods as the business develops.
12. Provisions
Warranties & contract claims Asbestos-related Employee-related Exceptional items Other Total
£m £m £m £m £m £m
At 31 December 2022 10.4 55.2 13.5 5.4 13.7 98.2
Additions 7.0 0.9 8.2 11.3 1.1 28.5
Utilised (4.1) (4.0) (9.4) (6.0) (0.3) (23.8)
Unutilised (0.1) 0.5 - (0.4) (0.1) (0.1)
Exchange adjustment (0.4) (2.5) (0.7) (0.2) (0.6) (4.4)
At 30 June 2023 12.8 50.1 11.6 10.1 13.8 98.4
Current 12.8 8.3 7.7 9.9 3.3 42.0
Non-current - 41.8 3.9 0.2 10.5 56.4
At 30 June 2023 12.8 50.1 11.6 10.1 13.8 98.4
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 10.4 8.5 7.9 5.2 3.3 35.3
Non-current - 46.7 5.6 0.2 10.4 62.9
At 31 December 2022 10.4 55.2 13.5 5.4 13.7 98.2
The impact of discounting is only relevant for the Asbestos-related category
of provision, with lower discount rates at 30 June 2023 resulting in a £0.6m
increase in the provision which is included within 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 2023, the warranties portion of the provision totalled
£9.2m (2022: £6.8m). At 30 June 2023, all of these costs relate to claims
that fall due within one year of the balance sheet date.
Provision has been made in respect of sales contracts entered into for the
sale of goods in the normal course of business where the unavoidable costs of
meeting the obligations under the contracts exceed the economic benefits
expected to be received from the contracts and before allowing for future
expected aftermarket revenue streams. Provision is made immediately when it
becomes apparent that expected costs will exceed the expected benefits of the
contract. At 30 June 2023, the contract claims element, which includes
onerous provision, was £3.6m (2022: £2.0m), all of which is expected to be
incurred within one year of the balance sheet date.
Asbestos-related claims
31 December 2022 30 June 2023 30 June 2022
£m £m £m
49.9 US asbestos-related provision - pre-1981 date of first exposure 45.0 52.6
2.8 US asbestos-related provision - post-1981 date of first exposure 2.6 2.9
52.7 US asbestos-related provision - total 47.6 55.5
2.5 UK asbestos-related provision 2.5 3.1
55.2 Total asbestos-related provision 50.1 58.6
US asbestos-related provision
Certain of the Group's US-based subsidiaries are co-defendants in lawsuits
pending in the US in which plaintiffs are claiming damages arising from
alleged exposure to products previously manufactured which contained asbestos.
The dates of alleged exposure currently range from the 1950s to the 1980s.
The Group has historically held comprehensive insurance cover for cases of
this nature and continues to do so for claims with a date of first exposure
(dofe) pre-1981. The expiration of one of the Group's insurance policies in
2019 resulted in no further insurance cover for claims with a post-1981 dofe.
All claims are directly administered by National Coordinating Counsel on
behalf of the Group's insurers who also meet associated defence costs. The
insurers, their legal advisers and in-house counsel agree and execute the
defence strategy between them.
A 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 and judgements applied is included in note 22 of
our 2022 Annual Report and Financial Statements.
In the 6 months to 30 June 2023 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 2022 30 June 2023 30 June 2022
£m £m £m
US asbestos-related provision
68.8 Gross provision 62.2 71.6
(16.1) Effect of discounting (14.6) (16.1)
52.7 Discounted US asbestos-related provision 47.6 55.5
32.0 Insurance asset 24.6 40.9
20.7 Net US asbestos-related liability 23.0 14.6
The Gross provision and Effect of discounting at 31 December 2022 have been
amended from what was initially published in the 2022 Annual Report and
Financial Statements, with both figures grossed up by £10.0m to correctly
reflect the impact of discounting. There is no further impact from this change
across the financial statements.
The insurance asset consists of £7.2m (2022: £7.4m) presented within Trade
and other receivables as a current asset, and £17.4m (2022: £33.5m) as Other
receivables within non-current assets.
There remains inherent uncertainty associated with estimating future costs in
respect of asbestos-related diseases. Actuarial estimates of future indemnity
and defence costs associated with asbestos-related diseases are subject to
significantly greater uncertainty than actuarial estimates for other types of
exposures. This uncertainty results from factors that are unique to the
asbestos claims litigation and settlement process including but not limited
to:
i) the possibility of future state or federal
legislation applying to claims for asbestos-related diseases;
ii) the ability of the plaintiff's bar to develop and
sustain new legal theory and/or develop new populations of claimants;
iii) changes in focus of the plaintiff's bar;
iv) changes in the Group's defence strategy; and
v) changes in the financial condition of other
co-defendants in suits naming the Group and affiliated businesses.
As a result, there can be no guarantee that the assumptions used to estimate
the provision will result in an accurate prediction of the actual costs that
may be incurred.
Since the last triennial update completed in 2020, we have experienced a
higher number of claims received than modelled across both, Mesothelioma and
Lung Cancer, disease types. Average settlement values have been marginally
higher for Mesothelioma cases, but lower for Lung Cancer cases. Settlements
largely occur within four years of a claim being received and the settlement
rates for Mesothelioma cases are broadly in line with the model while Lung
Cancer case settlement rates are trending below.
These variations from the model may be influenced by fluctuations in the
profile of case rates across jurisdictions coupled with the potential impact
of the Covid-19 pandemic. However, if current case numbers and average
settlement values were to continue, this may lead to the insurance asset being
eroded as early as 2025, two years earlier than initially suggested in the
2020 actuarial model.
As noted above, there are a number of uncertain factors involved in the
estimation of the provision and variations in case numbers and settlements are
to be expected from period-to-period. Sensitivity analysis reflecting
reasonably probable scenarios has been performed and is included in note 22 of
our 2022 Annual Report and Financial Statements. Our actual claims experience
will be reflected in the next triennial valuation due in the second half of
2023, and will be incorporated in our 2023 Annual Report and Financial
Statements.
The Group's US subsidiaries have been effective in managing the asbestos
litigation, in part, because the Group has access to historical project
documents and other business records going back more than 50 years, allowing
it to defend itself by determining if legacy products were present at the
location of the alleged asbestos exposure and, if so, the timing and extent of
their presence. In addition, the Group has consistently and vigorously
defended claims that are without merit.
UK asbestos-related provision
In the UK, there are outstanding asbestos-related claims that are not the
subject of insurance cover. The extent of the UK asbestos exposure involves a
series of legacy employer's liability claims that all relate to former UK
operations and employment periods in the 1950s to 1970s. In 1989, the Group's
employer's liability insurer (Chester Street Employers Association Ltd) was
placed into run-off, which effectively generated an uninsured liability
exposure for all future long-tail disease claims with an exposure period
pre-dating 1 January 1972. All claims with a disease exposure post 1 January
1972 are fully compensated via the Government-established Financial Services
Compensation Scheme. Any settlement to a former employee whose service period
straddles 1972 is calculated on a pro rata basis. The Group provides for these
claims based on management's best estimate of the likely costs given past
experience of the volume and cost of similar claims brought against the Group.
The UK provision was reviewed and adjusted accordingly for claims experience
in the year, resulting in a provision of £2.5m (2022: £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 5 where the cost is based on a reliable estimate of the obligation.
The opening balance of £5.4m includes £4.3m related to Russia, £0.4m in
relation to capacity optimisation costs as part of the Performance Excellence
programme and £0.7m for final Oil & Gas Division disposal costs related
to tax and prior year Minerals Division balances for severance and onerous
contract provisions.
Additions of £11.3m in the period mainly include £8.2m of costs related to
the Group's Performance Excellence programme, held across the Minerals
Division and Corporate. A further £2.8m in the Minerals Division relates to a
provision created for newly emerging Russia contract exposures. The
utilisation in the period of £6.0m primarily relates to the cash settlement
of costs associated with the Performance Excellence programme of £3.5m and
the Russia operations wind down of £1.2m, primarily severance costs.
The closing balance of £10.1m includes £4.8m in relation to the Group's
Performance Excellence programme, £5.0m related to the wind down of our
Russian operations and £0.3m for outstanding onerous lease contracts, legacy
restructuring projects and withholding tax assessments that are still ongoing.
Other
Other provisions include environmental obligations, penalties, duties due,
legal claims and other exposures across the Group. These balances typically
include estimates based on multiple sources of information and reports from
third-party advisers. The timing of outflows is difficult to predict as many
of them will ultimately rely on legal resolutions and the expected conclusion
is based on information currently available. Where certain outcomes are
unknown, a range of possible scenarios is calculated, with the most likely
being reflected in the provision.
13. Interest-bearing loans & borrowings
31 December 2022 30 June 2023 30 June 2022
£m £m £m
Current
213.7 Bank overdrafts 233.4 133.1
165.3 Fixed-rate notes - 164.2
27.3 Lease liabilities 25.9 26.3
406.3 259.3 323.6
Non-current
336.5 Bank loans 193.4 359.1
657.8 Fixed-rate notes 923.9 653.0
87.8 Lease liabilities 92.4 92.2
1,082.1 1,209.7 1,104.3
The Group operates a notional cash pooling arrangement in which individual
balances are not offset for reporting purposes. Cash and short-term deposits
at 30 June 2023 includes £230.1m (2022: £123.2m) that is part of this
arrangement and both cash and interest-bearing loans and borrowings are
grossed up by this amount.
The Group utilises a number of sources of funding including
Sustainability-Linked Notes, revolving credit facility, term loan, private
placement debt, commercial paper and uncommitted facilities.
In January 2023, the Group added a further £300m term loan facility to its
available financing. The facility was due to mature in January 2024, subject
to a one-year extension option, but the Group took the decision to cancel the
facility in June 2023.
In March 2023, the Group exercised the option to extend its US$800m
multi-currency revolving credit facility by one year which will now mature in
April 2028, with the option to extend for a further year. Remaining
unamortised issue costs of £2.1m plus an additional £0.5m will amortise over
the remaining term of the facility.
In June 2023, the Group completed the issue of £300m five-year
Sustainability-Linked Notes due to mature in June 2028. The notes include a
Sustainability Performance Target (SPT) to reduce scope 1&2 CO(2)
emissions by 19.1% in absolute terms by 2026 from a 2019 baseline, consistent
with the Group's SBTi approved target of 30% reduction by the end of 2030. The
notes will initially bear interest at a rate of 6.875% per annum to be paid
annually in June. The interest on the notes will be linked to achievement of
the SPT with an interest rate increase of 0.75% to 7.625% per annum for the
last interest payment due on 14 June 2028 if the Group does not attain its
SPT. These notes are in addition to the US$800m Sustainability-Linked Notes
drawn in May 2021, due to mature in May 2026, which bear interest at a rate of
2.20% per annum.
In June 2023, the Group amended its US$1bn commercial paper programme to a
US$800m commercial paper programme. At 30 June 2023, a total of £nil (2022:
£nil) was outstanding under the programme.
At 30 June 2023, a total of £nil (2022: £164.2m) was outstanding under
private placement.
At 30 June 2023, £193.4m (2022: £359.1m) was drawn under the US$800m
multi-currency revolving credit facility which is disclosed net of unamortised
issue costs of £2.6m (2022: £2.6m).
At 30 June 2023, a total of £923.9m (2022: £653.0m) was outstanding under
Sustainability-Linked Notes which is disclosed net of unamortised issue costs
of £5.2m (2022: £4.0m).
14. Pensions & other post-employment benefit plans
Year ended 6 months ended 6 months ended
31 December 2022 30 June 2023 30 June 2022
£m £m £m
50.0 Plans in surplus 38.7 59.2
(34.9) Plans in deficit (29.6) (34.8)
15.1 Net asset 9.1 24.4
The IAS 19 funding position across the Group's legacy UK and North American
schemes reduced from a net surplus of £15.1m at 31 December 2022 to a net
surplus of £9.1m at 30 June 2023. This is primarily due to a £12.0m loss in
the UK Main plan following a pensioner buy-in, which results in 63% (December
2022: 39%) of the UK Main scheme liabilities now being insured. Other
movements relating to net losses in UK assets and experience losses resulting
from UK inflation were offset by gains driven by higher UK discount rates and
a reduction in deficit across our North American plans.
15. Derivative financial instruments
The Group enters into derivative financial instruments in the normal course of
business in order to hedge its exposure to foreign exchange risk. Derivatives
are only used for economic hedging purposes and no speculative positions are
taken. Derivatives are recognised as held for trading and at fair value
through profit and loss unless they are designated in IFRS 9 compliant hedge
relationships.
The table below summarises the types of derivative financial instrument
included within each balance sheet category.
Year ended 6 months ended 6 months ended
31 December 2022 30 June 2023 30 June 2022
£m £m £m
Included in non-current assets
- Forward foreign currency contracts designated as cash flow hedges 0.1 -
- 0.1 -
Included in current assets
1.0 Forward foreign currency contracts designated as cash flow hedges 0.8 -
7.9 Other forward foreign currency contracts 5.1 7.4
8.9 5.9 7.4
Included in current liabilities
(1.9) Forward foreign currency contracts designated as cash flow hedges (0.6) (0.2)
(0.1) Forward foreign currency contracts designated as net investment hedges - (0.4)
(11.2) Other forward foreign currency contracts (6.5) (9.8)
(13.2) (7.1) (10.4)
Included in non-current liabilities
- Other forward foreign currency contracts - (0.4)
- - (0.4)
(4.3) Net derivative financial liabilities - total Group (1.1) (3.4)
Carrying amounts & fair values
Financial assets and liabilities (with the exception of derivative financial
instruments) are initially recognised at fair value net of transaction costs.
Subsequently they are recognised at either fair value or amortised cost.
Derivative financial instruments are initially recognised at fair value and
subsequently remeasured at fair value.
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.
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.
Carrying amount Fair value Carrying amount Fair value Carrying amount Fair value
31 December 2022 31 December 2022 30 June 2023 30 June 2023 30 June 2022 30 June 2022
£m £m £m £m £m £m
Financial assets - total Group
7.9 7.9 Derivative financial instruments recognised at fair value through profit or 5.1 5.1 7.4 7.4
loss
1.0 1.0 Derivative financial instruments in designated hedge accounting relationships 0.9 0.9 - -
540.9 540.9 Trade & other receivables excluding statutory assets, prepayments & 519.0 519.0 571.7 571.7
construction contract assets
691.2 691.2 Cash & short-term deposits 626.9 626.9 467.0 467.0
1,241.0 1,241.0 1,151.9 1,151.9 1,046.1 1,046.1
Financial liabilities - total Group
11.2 11.2 Derivative financial instruments recognised at fair value through profit or 6.5 6.5 10.2 10.2
loss
2.0 2.0 Derivative financial instruments in designated hedge accounting relationships 0.6 0.6 0.6 0.6
2.0 2.0 Deferred consideration payable 1.0 1.0 2.5 2.5
Amortised cost:
823.1 784.3 Fixed-rate borrowings 923.9 859.6 817.2 796.7
336.5 336.5 Floating-rate borrowings 193.4 193.4 359.1 359.1
115.1 115.1 Leases 118.3 118.3 118.5 118.5
213.7 213.7 Bank overdrafts 233.4 233.4 133.1 133.1
495.7 495.7 Trade & other payables excluding statutory liabilities & contract 438.7 438.7 441.2 441.2
liabilities
1,999.3 1,960.5 1,915.8 1,851.5 1,882.4 1,861.9
The Group operates a notional cash pooling arrangement in which individual
balances are not offset for reporting purposes. Cash and short-term deposits
at 30 June 2023 includes £230.1m (2022: £123.2m) that is part of this
arrangement and both cash and interest-bearing loans and borrowings are
grossed up by this amount.
Assets and liabilities recognised at amortised cost:
Following the settlement of private placement debt and the issue of further
Sustainability-Linked Notes, the fair value of fixed-rate borrowings has been
reassessed as a level 1 fair value measurement rather than level 2 as the full
balance is now calculated using quoted market prices. All other financial
assets and liabilities carried at cost require level 2 fair value measurement
for disclosure purposes. The fair value of floating rate borrowings
approximates the carrying value due to the variable nature of the interest
terms. 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.
Assets and liabilities recognised at fair value:
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.
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 recognised at
fair value at level 2 with the exception of contingent consideration which is
a level 3 fair value measurement. The current fair value of contingent
consideration is nil and further detail regarding the basis of valuation is
included in note 11. During the 6 months ended 30 June 2023 and the year
ended 31 December 2022, 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.
16. Additional cash flow information
Year ended 6 months ended 6 months ended
31 December 2022 30 June 2023 30 June 2022
£m Notes £m £m
Total operations
Net cash generated from operations
307.5 Operating profit 194.0 151.0
51.4 Exceptional and other adjusting items 5 4.6 (0.5)
41.6 Amortisation of intangible assets 19.2 20.0
(2.5) Share of results of joint ventures (1.3) (1.0)
47.0 Depreciation of property, plant & equipment 20.4 22.7
31.4 Depreciation of right-of-use assets 15.8 14.8
0.2 Impairment of property, plant & equipment 0.9 -
(0.2) Grants received - -
(0.6) Gains on disposal of property, plant & equipment (0.5) (0.5)
(2.9) Funding of pension & post-retirement costs (0.5) (1.7)
8.0 Employee share schemes 4.2 4.1
14.3 Transactional foreign exchange 1.3 4.9
1.2 Increase (decrease) in provisions 2.4 (1.3)
496.4 Cash generated from operations before working capital cash flows 260.5 212.5
(128.6) Increase in inventories (33.9) (104.4)
49.8 Decrease in trade & other receivables & construction contracts 8.0 17.0
30.2 (Decrease) increase in trade & other payables & construction contracts (61.7) (24.9)
447.8 Cash generated from operations 172.9 100.2
(9.7) Additional pension contributions paid (7.7) (7.7)
(14.2) Exceptional and other adjusting cash items (5.2) (7.2)
(9.7) Exceptional cash items - acquired vendor liabilities - (8.9)
(93.4) Income tax paid (51.1) (40.2)
320.8 Net cash generated from operating activities 108.9 36.2
The following tables summarise the cash flows arising on acquisitions (note
11) and disposals (note 7).
Year ended 6 months ended 6 months ended
31 December 2022 30 June 2023 30 June 2022
£m £m £m
Acquisitions of subsidiaries
16.3 Acquisition of subsidiaries - cash paid - 16.2
0.5 Acquisition of subsidiaries - deferred consideration paid 1.0 -
(1.6) Cash & cash equivalents acquired - (1.6)
15.2 Total cash outflow relating to acquisitions 1.0 14.6
Net cash outflow arising on disposals
(2.0) Consideration received net of costs paid & cash disposed of - ESCO Russia - -
(0.1) Prior period disposals - settlement of final costs and final completion (0.4) -
adjustment
(2.1) Total cash outflow relating to disposals (0.4) -
Year ended 6 months ended 6 months ended
31 December 2022 30 June 2023 30 June 2022
£m £m £m
Cash & cash equivalents comprise the following
691.2 Cash & short-term deposits 626.9 467.0
(213.7) Bank overdrafts & short-term borrowings (233.4) (133.1)
477.5 393.5 333.9
Year ended 6 months ended 6 months ended
31 December 2022 30 June 2023 30 June 2022
£m £m £m
Net debt comprises the following
691.2 Cash & short-term deposits 626.9 467.0
(406.3) Current interest-bearing loans & borrowings (note 13) (259.3) (323.6)
(1,082.1) Non-current interest-bearing loans & borrowings (note 13) (1,209.7) (1,104.3)
(797.2) (842.1) (960.9)
Reconciliation of financing cash flows to movement in net debt
Opening balance at 31 December 2022 Cash movements Additions/acquisitions Disposals FX Non-cash movements Closing balance at 30 June 2023
£m £m £m £m £m £m £m
Cash & cash equivalents 477.5 (51.9) - - (32.1) - 393.5
Third-party loans (1,165.5) 15.0 - - 25.4 - (1,125.1)
Leases (115.1) 15.7 (24.1) - 5.3 (0.1) (118.3)
Unamortised issue costs 5.9 4.0 - - - (2.1) 7.8
Amounts included in gross debt (1,274.7) 34.7 (24.1) - 30.7 (2.2) (1,235.6)
Amounts included in net debt (797.2) (17.2) (24.1) - (1.4) (2.2) (842.1)
Financing derivatives (0.1) 0.2 - - - (0.1) -
Total financing liabilities(1) (1,274.8) 34.9 (24.1) - 30.7 (2.3) (1,235.6)
( )
Opening balance at 30 June 2022 Cash movements Additions/acquisitions Disposals FX Non-cash movements Closing balance at 31 December 2022
£m £m £m £m £m £m £m
Cash & cash equivalents 333.9 147.8 - (1.9) (2.3) - 477.5
Third-party loans (1,182.9) 25.4 (0.4) - (7.6) - (1,165.5)
Leases (118.5) 16.5 (14.9) - 1.0 0.8 (115.1)
Unamortised issue costs 6.6 - - - - (0.7) 5.9
Amounts included in gross debt (1,294.8) 41.9 (15.3) - (6.6) 0.1 (1,274.7)
Amounts included in net debt (960.9) 189.7 (15.3) (1.9) (8.9) 0.1 (797.2)
Financing derivatives (0.2) 0.5 - - - (0.4) (0.1)
Total financing liabilities(1) (1,295.0) 42.4 (15.3) - (6.6) (0.3) (1,274.8)
(1. Total financing liabilities
comprise gross debt plus other liabilities relating to financing activities.)
17. Related party disclosure
The following table provides the total amount of significant transactions
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 2022 30 June 2023 30 June 2022
£m £m £m
1.1 Sales of goods to related parties - joint ventures 0.4 0.7
0.1 Sales of services to related parties - joint ventures 0.1 0.1
25.9 Purchases of goods from related parties - joint ventures 10.5 11.8
6.2 Amounts owed to related parties - joint ventures 5.0 -
8.2 Amounts owed to related parties - group pension plans 1.4 1.7
0.3 Amounts owed by related parties - joint ventures 0.1 -
18. Legal claims
The Company and certain subsidiaries are, from time-to-time, party to legal
proceedings and claims that arise in the normal course of business. Provisions
have been made where the Directors have assessed that a cash outflow is
probable. All other claims are believed to be remote or are not yet ripe.
19. Exchange rates
The principal exchange rates applied in the preparation of these financial
statements were as follows.
Year ended 6 months ended 6 months ended
31 December 2022 Average rate (per £) 30 June 2023 30 June 2022
1.24 US Dollar 1.23 1.30
1.78 Australian Dollar 1.82 1.81
1.17 Euro 1.14 1.19
1.61 Canadian Dollar 1.66 1.65
1,078.02 Chilean Peso 993.99 1,073.60
20.19 South African Rand 22.44 20.03
6.39 Brazilian Real 6.26 6.61
8.30 Chinese Yuan 8.54 8.42
97.06 Indian Rupee 101.35 98.98
Closing rate (per £)
1.21 US Dollar 1.27 1.22
1.77 Australian Dollar 1.91 1.76
1.13 Euro 1.16 1.16
1.64 Canadian Dollar 1.68 1.57
1,026.77 Chilean Peso 1,020.41 1,126.97
20.61 South African Rand 23.91 19.81
6.39 Brazilian Real 6.09 6.32
8.34 Chinese Yuan 9.22 8.16
100.05 Indian Rupee 104.25 96.17
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
b. 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
(https://cloudweir.sharepoint.com/sites/GR-GroupFinance/Shared%20Documents/Frango/2023/2023%20Interim%20Report/03%20Versions/www.global.weir)
.
On behalf of the Board
John Heasley
Chief Financial Officer
1 August 2023
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 2023 (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
2023;
• 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 ("ISRE (UK) 2410"). 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 ISRE (UK) 2410. 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
1 August 2023
Shareholder Information
The Board has approved an interim dividend of 17.8p for 2023 (2022: 13.5p).
Financial Calendar
Ex-dividend date for interim dividend
5 October 2022
Record date for interim dividend
6 October 2023
Shareholders on the register at this date will receive the dividend
Interim dividend paid
3 November 2023
Our Interim Report will be available shortly to download from The Weir Group
PLC website at www.global.weir (http://www.global.weir)
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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