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WEIR - Weir News Story

1311.5p -20.0  -1.5%

Last Trade - 18/09/20

Sector
Industrials
Size
Large Cap
Market Cap £3.40bn
Enterprise Value £4.58bn
Revenue £2.43bn
Position in Universe 201st / 1807

Weir Group PLC - Half-year Report

Wed 29th July, 2020 7:00am
RNS Number : 3885U
Weir Group PLC
29 July 2020
 

 

 

The Weir Group PLC reports its interim results for the six months ended 30 June 2020

 

Core mining technology businesses demonstrate strength and resilience

 

§ Strong execution in uniquely challenging circumstances mitigated impact of Covid-19

Safety of our people, customers and communities came first; TIR1 down 53%

Fully supporting customers while taking decisive action to reduce costs and preserve cash

Delivery of £100m Iron Bridge order on track; majority to be delivered in H2

§ Resilient aftermarket (AM) demand in core mining markets reflects mission-critical technology

Minerals orders4 -6%; AM -4% against record high H1 19, +7% sequentially on H2 19

ESCO orders4 -17%; Covid-19 disruption to infrastructure and mining de-stocking

§ Operating profit2 of £133m: mining divisions broadly flat YoY supported by cost actions

Minerals revenues4 -4%; margins maintained at 17.3%

ESCO revenues4 -10%; margins +190bps to 16.1%, +500bps since acquisition

Oil & Gas revenues4 -48%; £4m operating loss2 but positive cash from operations2

§ Balance sheet and liquidity remains robust

Operating cash flow2 of £192m; Net debt/EBITDA on covenant basis 2.6x

Refinanced main banking facilities; c.£650m of available liquidity excluding CCFF

No interim dividend proposed due to ongoing uncertainty and to support deleveraging

§ Covid-19 experience has reinforced our conviction in our strategic direction

Mining is an essential industry with a vital and attractive role for partners like Weir

Focus on technology investments is delivering smart, efficient, sustainable mining solutions

Intent to maximise value from the Oil & Gas division at the right time

§ Outlook: Guidance remains withdrawn while Covid-19 uncertainty remains

 

 

H1 2020

H1 2019

As    reported

Constant Currency4

Continuing Operations3

 

 

 

 

Orders4

£1,141m

£1,407m

n/a

-19%

Revenue

£1,095m

£1,329m

-18%

-17%

Operating profit2

£133m

£172m

-23%

-22%

Profit before tax2

£108m

£147m

-27%

n/a

Reported profit before tax

£63m

£106m

-41%

n/a

Earnings per share2

31.5p

42.2p

-25%

n/a

Total Group

 

 

 

 

Reported profit after tax

£46m

£53m

-13%

n/a

Reported earnings per share

17.6p

20.3p

-13%

n/a

Operating cash flow2

£192m

£54m

256%

n/a

Dividend per share

-

16.5p

-100%

n/a

Net debt5

£1,167m

£1,157m6

-£10m

£56m

 

See footnotes on page 6

 

Jon Stanton, Weir Group Chief Executive Officer said:

 

"Our performance in these unprecedented times has reaffirmed the fundamental strength of Weir. Across the Group, we adapted quickly to the challenges of Covid-19, putting the safety of our people and communities first, while also fully supporting our customers. Our core mining technology businesses showed their inherent resilience and the critical role they play in keeping essential activities running.  Our Oil & Gas team also skilfully navigated extremely challenging market conditions.

 

"As we look ahead, while the business is performing well, it is too early to provide guidance on the full year given ongoing uncertainty due to Covid-19.  More broadly, the long-term outlook for mining remains positive, supported by demographic trends, carbon transition, the long-term decline in ore grades and the need to reduce waste and water and energy consumption.  Weir is ideally placed to help make our mining customers' operations smarter, more efficient and sustainable and we look forward to unlocking more of these opportunities in the future."

 

A live webcast of the management presentation will begin at 0800 (BST) on 29 July 2020 at www.investors.weir.  A recording of the webcast will also be available at www.investors.weir.

 

For a printer friendly copy of this announcement, please click on the link below to open a PDF version:-  https://www.global.weir/investors/regulatory-news/.

 

Enquiries:

 

 

 

Investors: Stephen Christie

+44 (0) 141 308 3707

 

 

Media: Chris Barrie/Kevin Smith, Citigate Dewe Rogerson

+44 (0) 020 7638 9571

weir@citigatedewerogerson.com           

 

 

 

CHIEF EXECUTIVE OFFICER'S REVIEW

 

I want to use this review to illustrate how Weir has responded to the challenges of Covid-19 so far and what this period has taught us about the resilience of our core mining markets and our future strategic direction.

 

The performance of our mining businesses has been extremely robust, and their inherent resilience underlines both their high quality and the future potential of the Group as a mining technology pure play. It is also testament to the skill and hard work of all our employees during this extraordinary time and I would like to thank them for their commitment, particularly our colleagues in Oil & Gas who have delivered an excellent performance in the context of extremely challenging market conditions, with activity reaching all-time lows in North America. 

 

Strong execution in uniquely challenging circumstances

 

Putting the safety of our people, customers and communities first

 

At Weir, the safety of our people is always our number one priority. We have developed a world-class safety culture that has seen our Total Incident Rate (TIR) reduce 53% year-on-year to our lowest ever level. This foundation, alongside an operating model that promotes strong local leadership and accountability, has been crucial in helping our business adapt quickly and effectively to the unique challenges of Covid-19. 

 

Our actions have included requiring everyone who can work from home to do so, adapting our manufacturing and service facilities to support infection control procedures, including social distancing, and prioritising mental health support through our employee assistance programmes.

 

We are supporting and tracking every employee who has been diagnosed with the virus. At the time of writing, we have had c.500 confirmed cases since the start of the pandemic, from a workforce of c.13,500, and the vast majority are now fully recovered. Sadly, however, two colleagues, based in South Africa and Peru, passed away in July with Covid-19 and we are doing everything we can to support their families and colleagues. Our teams are also working hard to support local communities by manufacturing and donating PPE to health authorities, and by providing financial support to those areas where social programmes are either limited or unavailable.

 

Throughout the period we also fully supported customers benefiting from our regional manufacturing and service footprint. While a number of our operations were impacted by government shutdowns, these were temporary, and all have now reopened. Where we have been unable to visit a customer site in person, we have, in some instances, been able to leverage virtual and augmented reality technology to support remote maintenance, inspections and training. We have also prioritised support for our smaller, local suppliers, mindful of the fact that across the world there are many partners who rely on Weir.    

 

Decisive action taken to reduce costs, restructure operations and preserve cash

 

Faced with the uncertainty caused by the Covid-19 pandemic, we responded quickly to protect our business by reducing costs and preserving cash, while safeguarding those areas that will underpin our long-term growth. This included workforce reductions, curtailed travel and discretionary expenditure and suspension of 2020 bonus schemes, in addition to our earlier right-sizing of the Oil & Gas division to reflect market conditions.  In total, we expect to realise c.£75m in cost savings for the full year. However, some of these reductions will be temporary and we would expect some costs, such as performance payments and travel, to normalise as Covid-19 restrictions are lifted.

 

Our £140m cash preservation actions included withdrawal of the 2019 final dividend, delaying non-safety related capex and rephasing tax payments.  As part of our prudent approach, given ongoing uncertainties, the Board has decided not to proceed with an interim dividend, which will also support deleveraging.

 

The Board is meeting more frequently as part of a comprehensive risk assessment process which also includes weekly Group Executive meetings and daily management briefings. We have reviewed our Principal Risks and Uncertainties in light of Covid-19.  While the resultant pandemic risks and mitigating actions were largely covered in existing categories, we feel it is appropriate to add an additional risk specifically related to the pandemic.  Further information is available on page 15.  We have also stress tested a number of potential Covid-19 related downside scenarios of varying severity. These include widespread disruption to our operations and supply chain, deferment of original equipment orders and revenues, and a significant reduction in aftermarket demand.  In each of these scenarios we expect to have adequate liquidity and manageable levels of net debt, supported by a range of well-developed mitigating actions that are ready to be executed if necessary.

 

The strength of our position is supported by the successful refinancing of our main banking facilities, which was completed in June, including a new US$950m Revolving Credit Facility (RCF) and a £200m Term Loan. In addition, we have obtained access to up to £300m as part of the UK Government's Covid Corporate Financing Facility (CCFF) programme, although we are not currently accessing this funding.  Given our resilient first half performance the Group has decided to repay all direct government furlough support received, with a value of c.£1m, principally in the UK and Canada. 

 

Delivering a robust first half performance

 

In a first half dominated by the impacts of a global health crisis, the Group's overall performance was highly resilient set against a backdrop of global ore production estimated to be down 15% from pre-Covid levels in the second quarter.  Minerals delivered an excellent set of results with orders down just 6% against an extremely strong prior year comparator, which included record aftermarket demand, whilst orders and revenues actually increased sequentially from Q1 to Q2.  That performance, alongside maintaining margins and generating 74% of sales from recurring aftermarket revenues, underlines the quality of this business. 

 

ESCO's 17% order reduction reflects the impact of both Covid-19 disruption to underlying activity levels and destocking by North American distributors.  As a result of reduced capacity constraints due to the benefits of investment in our main foundries, lead times significantly reduced from the abnormally high levels in H2 2019, allowing distributors to reduce underlying safety stocks.  The division's core GET revenues, which are a better indicator of underlying demand, were more robust, down 6%, broadly similar to the performance of Mineral's aftermarket business. Infrastructure markets were significantly impacted by the shutdown of construction activity in both North America and Europe.  While this affected revenues overall, the division benefited from strong cost control and the early delivery of integration synergies supporting a 190bps improvement in margins, up 500bps since acquisition. Overall, I believe there is much to be encouraged about in the performance of our mining technology businesses through this period.

 

Oil and gas markets were already very challenging before conditions were exacerbated by the impact of both the decision by Saudi Arabia and Russia to end their production agreement, and weaker demand as a result of Covid-19's impact on global oil prices.  In North America, market activity has fallen more than 50%, reaching historic lows.  Despite this, the division has remained cash positive from operations, which is an excellent result in the circumstances and reflects strong execution by the divisional team in an extremely tough market.

 

Overall, the Group generated £192m in operating cash flow before exceptional items, reaffirming the highly cash generative nature of our business and enabling us to continue to invest in our longer-term strategic initiatives.   

 

 

 

Winning through 'We are Weir'

 

We continue to make significant progress against our 'We are Weir' strategic framework which focuses on developing our core competencies in People, Customers, Technology and Performance.

 

 

Medium-term KPI

Progress in H1 2020

 

 

 

People

Improve sustainable engagement and organisational effectiveness

·      0.2 increase in employee engagement to 8.1; 81% participation in global employee survey

·      Developed global HR management system; H2 roll-out

·      Comprehensive Inclusion and Diversity programme including all-employee training launched

 

Customers

Increase market share

·      Minerals: £83m in Integrated Solutions orders

·      ESCO: 99 net machine conversions

·      O&G: EXL gaining share in power ends and fluid ends

 

Technology

Increase revenues from new solutions7

·      £55m in revenues from new products7

·      Field testing next generation Warman® slurry pump

·      Commercialised innovative GET Toolhead® solution

 

Performance

Sustainably higher margins through the cycle

·      Minerals margins maintained

·      ESCO margins improved by 190 bps

·      Right-sized Oil & Gas for current market conditions

 

Covid-19 experience has reinforced our conviction in our strategic direction

 

What Covid-19 has taught us so far about our business and long-term strategy

 

Reflecting on the Covid-19 pandemic so far, there are valuable lessons we can draw for the future.  Firstly, mining's status as an essential industry has been confirmed, as has the vital role technology partners like Weir play in its supply chain. Secondly, our aftermarket-focused business model has reaffirmed its resilience, supported by ongoing ore production meaning that as long as mines are producing ore, they will continue to generate demand for our higher margin spares and services. Thirdly, our highly devolved operating model has been a significant advantage, enabling us to respond quickly to local circumstances, which has been particularly valuable during the pandemic where restrictions and regulations have differed by county, region and country. Finally, our customer focus has enabled us to use these extraordinary circumstances to deepen relationships, helping the miners to deliver on production targets while supporting their future growth strategies. As a result, our conviction in our own strategic direction to become a mining technology pure play has been reinforced.  

 

Delivering excellence for all our stakeholders

 

The pandemic has also highlighted the importance to the business of focusing on a broad set of stakeholders including employees, communities, customers, suppliers and investors. It has been a reminder of the reliance of every business on a support network of relationships and resources which must be nurtured over time. This concept is at the heart of our We are Weir strategic framework, with its focus on delivering excellence for all our stakeholders through strong leadership, performance culture and rigorous standards of governance. We have been particularly focused on employee engagement during the pandemic, ensuring all our people have the information they need to stay safe and support each other. This has included hosting virtual 'town hall' style meetings with thousands of employees, where everyone has the chance to ask questions and get answers from the Group Executive. This is in addition to our well-established programme of local manager briefings. We have also leveraged our employee assistance programmes to support colleagues, particularly in relation to mental health and rolled out Inclusion and Diversity (I&D) training across the Group, led by Chief Financial Officer, John Heasley, who is the Board sponsor for I&D.  Together, these initiatives have supported an increase in our employee net promoter score (eNPS) from +28 to +34.

 

 

 

Putting sustainability at the heart of our strategy

 

While Covid-19 has dominated the headlines in recent months the Environmental, Social and Governance (ESG) agenda continues to accelerate. Our customers are setting ambitious plans to achieve net zero emissions and they are looking to technology partners like Weir to provide solutions that make their operations smarter, more efficient and sustainable. That is the focus of our technology agenda and we have continued to invest in a range of innovations that reduce energy, water and waste while also making good progress on safety, engagement and reducing the environmental footprint of our own operations.

 

Priority

Target

Progress in H1 2020

Creating sustainable solutions

Enabling net zero

First order for pilot Terraflowing® tailings plant

Reducing our footprint

50% reduction in relative CO2e by 2030

Completed energy reduction pilots; moving to increase proportion of energy from renewables

Nurturing our unique culture

Leading Employee Net Promotor Score (eNPS)

eNPS of +34, up from +28 in 2019

Championing Zero Harm

Zero Total Incident Rate

53% reduction to 0.27

 

 

Dividend

As a result of ongoing Covid-19 uncertainty and to support further deleveraging the Board has decided not to recommend payment of an interim dividend.  The Board will consider whether to propose a final dividend related to the financial year ending 31 December 2020 on its normal timetable in February 2021.

 

Board changes

As previously announced Cal Collins, Non-Executive Director, has notified the Board of his intention to step down from the Board immediately following Weir's Board meeting on 3 September 2020.

 

 

Segmental analysis

 

Continuing                          operations £m3

 

Minerals

 

ESCO

 

Oil & Gas

 

Unallocated expenses

 

Total

 

Total
OE

 

Total
AM

 

Orders (constant currency)

 

 

 

 

 

 

 

 

H1 2020

724

247

170

n/a

1,141

247

894

 

H1 2019

769

297

341

 n/a

1,407

322

1,085

 

Variance:

 

 

 

 

 

 

 

 

- Constant currency

-6%

-17%

-50%

 

-19%

-23%

-18%

 

Revenue

 

 

 

 

 

 

 

 

H1 2020

653

257

185

n/a

1,095

244

851

 

H1 2019 (as reported)

706

280

343

 n/a

1,329

291

1,038

 

Variance:

 

 

 

 

 

 

 

 

- As reported

-7%

-8%

-46%

 

-18%

-16%

-18%

 

- Constant currency

-4%

-10%

-48%

 

-17%

-15%

-17%

 

Operating profit (loss)2

 

 

 

 

 

 

H1 2020

113

42

(4)

(18)

133

 

H1 2019 (as reported)

121

40

29

(18)

172

 

Variance:

 

 

 

 

 

 

- As reported

-7%

5%

-114%

4%

-23%

 

- Constant currency

-4%

2%

-114%

4%

-22%

 

Operating margin2

 

 

 

 

 

 

H1 2020

17.3%

16.1%

-2.3%

n/a

12.1%

 

H1 2019 (as reported)

17.2%

14.1%

8.5%

n/a

13.0%

 

Variance:

 

 

 

 

 

 

- As reported

+10bps

+200bps

-1090bps

 

-90bps

 

- Constant currency

0bps

+190bps

-1090bps

 

-80bps

 

 

 

Notes:

 

1

Total Incident Rate (TIR) 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.
 

 

2

Profit figures adjusted to exclude exceptional items and intangibles amortisation. Operating cash flow (cash generated from operations) excludes additional pension contributions, exceptional items and income tax paid. Reported operating profit and profit before tax from continuing operations were £87.3m (2019: £130.7m) and £62.5m (2019: £105.7m) respectively.  Net cash generated from operating activities was £144.2m (2019: used in (£15.8m)).
 

 

3

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. Operating results are for continuing operations before exceptional items and intangibles amortisation as provided in the Consolidated Income Statement. Details of alternative performance measures are provided in note 1 (e) of the financial statements. Continuing operations excludes the Flow Control division which was sold in June 2019.
 

 

4

2019 restated at H1 2020 average exchange rates.

 

5

Net Debt includes IFRS 16: Leases of £188.8m (31 December 2019: £185.0m).  

 

6

Net Debt at 31 December 2019.

 

7

Defined as products or services introduced in last 3 years.

 

 

 

 

                   

 

 

 

DIVISIONAL REVIEW

 

Minerals

 

Minerals is a global leader in the provision of mill circuit technology and services as well as the market leader in slurry-handling equipment and associated aftermarket support for abrasive high-wear applications. Its differentiated technology is used in mining, infrastructure, oil and gas and general industrial markets around the world.

 

2020 First Half Summary

 

·      Resilient aftermarket - orders and revenues up sequentially in Q2 despite Covid-19 disruptions

·      Robust margins - agile cost mitigations offsetting Covid-19 driven under-recoveries

·      Project pipeline remains active reflecting miners' long-term confidence

 

2020 First Half Market Review

The impact of Covid-19 on global mining markets has been relatively limited given the industry's essential status and commodity prices that have remained above incentive levels. Gold has been particularly strong, up 18% in the first half, while copper largely recovered from its March lows to end down just 2% for the first half. Iron ore was up 12%, reflecting recovery of demand in China in Q2 and supply concerns as a result of Covid-19. Thermal coal markets were more challenging given reduced global power consumption, while oil sands demand remained relatively robust, despite a significant reduction in Canadian oil prices.

While the vast majority of mines continued to produce ore, they implemented personnel and travel restrictions in response to the pandemic. Government shutdowns also caused a number of mines to be temporarily closed in the second quarter, particularly in South Africa, while in Canada, Peru, Mexico and Panama some operations were also temporarily suspended. These mines are now largely reopened, and we estimate only around 1% of global mines are currently shut due to Covid-19 restrictions. Industry estimates are that at its peak in Q2 there was a c.10%-15% reduction in global ore production. Regionally, aftermarket demand was robust underpinned by production trends, particularly in Chile and Brazil, which offset weakness in other regions.

Original equipment activity was more subdued as miners focused on dealing with the immediate challenges of Covid-19. This led to delays in approvals for some near-term projects, but bid activity in the longer-term pipeline remained active reflecting miners' confidence in future prospects.

2020 First Half Operating Review

The division benefited from its broad exposure to attractive commodities such as copper, gold and iron ore and the diversity of its customer base, which includes a presence in every major mining region in the world. Throughout the first half, this meant that it was able to fully meet customer demand, despite a number of manufacturing facilities being temporarily disrupted by government-mandated lockdowns, although these have now fully reopened, reflecting the division's status as an essential supplier. The division also temporarily closed a number of facilities to allow working practices to be adapted to support infection control procedures. The division benefited from its regional manufacturing footprint and localised supply chains, giving it the opportunity to shift production to alternate sites to support customers around the world. As previously announced, the division undertook a £30m cost savings programme which included a workforce reduction of 350 (4%).

Market share gains in the period included further progress in comminution markets with orders for high pressure grinding rolls (HPGRs) for gold and iron ore projects.  The division also shipped the first HPGRs for the Iron Bridge project in Western Australia. Bid activity for longer lead-time products also remained strong.

New product development in the period focused on helping to make mining operations smarter, more efficient and sustainable. This included working with key customers to develop ore hoisting and tailings management technology. The division's technical training programme also continued with more than 3,000 employees given additional training.
 

2020 First Half Financial Review

 

 

Constant currency £m

H1 2020

H1 20191

Growth

H2 20191

 

 

Orders OE

188

211

-11%

317

 

 

Orders AM

536

558

-4%

500

 

 

Orders Total

724

769

-6%

817

 

 

Revenue OE

172

173

-1%

214

 

 

Revenue AM

481

507

-5%

526

 

 

Revenue Total

653

680

-4%

740

 

 

Operating profit2

113

117

-4%

144

 

 

Operating margin2

17.3%

17.3%

0bps

19.4%

 

 

Operating cash flow2

153

81

89%

214

 

 

Book-to-bill

1.11

1.13

 

1.10

 

1 2019 restated at H1 2020 average exchange rates except for operating cash flow.

2 Profit figures adjusted to exclude exceptional items and intangibles amortisation. Operating cash flow (cash generated from operations) excludes additional pension contributions, exceptional items and income tax paid.

             

 

Orders decreased by 6% on a constant currency basis to £724m (2019: £769m) with a book-to-bill of 1.11.  Original equipment orders fell 11% reflecting project delays related to Covid-19 but were up sequentially in Q2, with a number of gold project orders offsetting weaker activity levels across other commodities.  Aftermarket orders were down 4% reflecting the disruption to mining operations from Covid-19 and a tough prior year comparative but were also up sequentially in Q2.  Aftermarket orders represented 74% of total orders (2019: 73%).  In total, mining end-market orders accounted for 76% of the total (2019: 74%). 

 

Revenue was 4% lower on a constant currency basis at £653m (2019: £680m), reflecting order trends and included c.£20m from the first deliveries to the Iron Bridge project.  Original equipment sales accounted for 26% (2019: 25%) of divisional revenues and were stable on the prior year.  Aftermarket revenues were down 5% reflecting order trends.

 

Operating profit2 decreased by 4% on a constant currency basis to £113m (2019: £117m), driven by the underlying revenue decline, with the delivery of £10m of savings from temporary reductions to travel, suspended bonus programmes, restricted discretionary spend and workforce reductions offset by £5m of cost under-recoveries from Covid-19 disruptions to our operations.

 

Operating margin2 on a constant currency basis was stable at 17.3% (2019: 17.3%) supported by the pre-emptive cost mitigation actions taken.

 

Operating cash flow2 increased by 89% to £153m (2019: £81m), reflecting significant improvement in working capital cash flows, with great focus across all functions in the value chain.

 

2020 Market Outlook

While the long-term fundamentals of mining markets remain positive, there is continued uncertainty over the macro outlook for the global economy related to Covid-19 and other geopolitical tensions.  Mining has been designated an essential business in most regions during the pandemic and the latest miners' production guidance for 2020 is only slightly below pre Covid-19 levels. Assuming commodity prices remain supportive and we do not see a significant increase in disruption to either Weir or our customers' operations from Covid-19, we would expect activity levels to remain robust.

 

 

ESCO

 

ESCO is a global leader in the provision of Ground Engaging Tools (GET) for large mining machines.  Its highly engineered technology improves productivity through extended wear life, increased safety and reduced energy consumption.  The division also applies its differentiated technology to infrastructure markets including construction, dredging and sand and aggregates. 

 

2020 First Half Summary

 

·      Mining markets relatively robust; infrastructure more challenging due to Covid-19 shutdowns

·      Previous investment and early cost mitigations delivered strong operational leverage

·      Margins up 190bps YoY and 500bps since acquisition

 

2020 First Half Market Review

The division saw similar mining trends to Minerals but was also impacted by a number of specific factors including destocking by distributors as they reduced safety inventories, and temporary mine shutdowns in Central and South America. Additionally, as workforce restrictions were put in place a number of customers chose to run down ore stockpiles in the short-term, in response to Covid-19, which reduced machine utilisation. In North America, iron ore demand was particularly impacted by the closure of automotive plants, while weakness in the oil price reduced GET demand in the oil sands for certain customers with higher operating costs.

 

Infrastructure markets, particularly construction in North America and Europe, were significantly weaker due to nationwide shutdowns although demand in Europe did begin a gradual recovery towards the end of the period. Dredging project activity continued to be resilient.

 

2020 First Half Operating Review

Performance was supported by the division's global manufacturing footprint and service facilities which include foundries in North America, Chile and China.  While there were some short-term disruptions to these facilities in the first half, the division was able to fully meet customer demand throughout.  Increased manufacturing capacity relative to 2019 allowed the division to significantly reduce lead times and increase safety stocks, which enabled distributors to reduce inventories from previously elevated levels.

 

The division reached its target of $30m of integration cost synergies, ahead of the original schedule, and continues to work with Minerals to deliver revenue synergies, with a medium term $50m target. It also took a number of mitigating actions to reduce costs, including a workforce reduction of 130 (5%) and discretionary spend cuts, in total saving an incremental £9m this year. Operational leverage benefited from previous investment in upgrading foundry capacity and safety improvements.

 

Market share gains in the first half included 99 net machine conversions leveraging the division's advanced Nemisys® GET technology. It also continued to develop its digital offering, focused on improving safety and productivity. This included securing the first order for its GET Toolhead® technology which automates GET change-out, removing people from the pit, one of the most hazardous parts of the mine.

 

As planned Andrew Neilson succeeded Jon Owens as Division President on 1 July 2020.

 

 

 

2020 First Half Financial Review

 

 

Constant currency £m

H1 2020

H1 20191

Growth

H2 20191

 

 

Orders OE

13

11

21%

16

 

 

Orders AM

234

286

-18%

250

 

 

Orders Total

247

297

-17%

266

 

 

Revenue OE

14

10

38%

15

 

 

Revenue AM

243

277

-12%

276

 

 

Revenue Total

257

287

-10%

291

 

 

Operating profit2

42

41

2%

43

 

 

Operating margin2

16.1%

14.2%

+190bps

14.9%

 

 

Operating cash flow2

49

32

53%

72

 

 

Book-to-bill

0.96

1.03

 

0.91

 

1 2019 restated at H1 2020 average exchange rates except for operating cash flow.

2 Profit figures adjusted to exclude exceptional items and intangibles amortisation. Operating cash flow (cash generated from operations) excludes additional pension contributions, exceptional items and income tax paid.

             

 

Orders decreased 17% on a constant currency basis to £247m (2019: £297m), reflecting Covid-19 disruptions in certain mines, destocking by distributors as our lead times reduced, and shutdowns in North America and European infrastructure markets. Aftermarket represented 95% of orders in line with ESCO's position as a provider of highly engineered consumables used in abrasive operating environments. 

 

Revenue, which was not impacted by destocking, decreased 10% on a constant currency basis to £257m (2019: £287m) reflecting underlying activity levels, particularly for Core GET, which was only down 6%. Mining applications represented 68% of revenues, infrastructure was 27% and other industrial markets represented 5%.

 

Operating profit2 increased by 2% to £42m (2019: £41m), as the division benefited from the delivery of the final acquisition cost synergies, efficiency improvements from our foundry investments and the additional Covid-19 related cost mitigation actions, which together offset the impact of lower revenues.

 

Operating margin2 of 16.1% was up 190bps on a constant currency basis (2019: 14.2%), reflecting the final cost synergies and additional Covid-19 cost mitigation actions offsetting the reduction in volumes. These additional Covid-19 actions included temporary reductions to travel, suspended bonus programmes, restricted discretionary spend and workforce reductions. In the first half these actions delivered £3m of savings with no significant Covid-19 costs or under-recoveries to offset thereby benefiting margins by around 100bps.

 

Operating cash flow2 increased by 53% to £49m (2019: £32m), representing strong cash conversion and increased focus on working capital across the value chain following integration into the Group.

 

2020 Market Outlook

The outlook for ESCO's mining end markets is consistent with that of the Minerals division.  Infrastructure markets have seen more significant disruption from Covid-19 lockdowns, although conditions have recently started to improve in Europe and North America. Assuming we do not see a significant increase in disruption, we would expect a gradual recovery to continue.

 
 

Oil & Gas

 

Weir Oil & Gas provides highly engineered mission-critical solutions to upstream energy markets.  Products include pressure pumping and pressure control equipment, supported by Weir Edge aftermarket spares, equipment repairs, upgrades, certification and asset management, and field services to customers around the world.

 

2020 First Half Summary

 

·      £4m operating loss2 but positive cash from operations2

·      £36m of incremental cost actions taken in 2020

·      Preserving core competencies

 

2020 First Half Market Review

The first half saw the downturn in North American markets accelerate as a result of both the ending of the Saudi Arabia / Russia production agreement and the impact of Covid-19 on demand.  These led to a significant reduction in capital spending by North American E&P producers, estimated to be c.50% in 2020.  US land rig count fell c.70% from peak to trough, with frack activity seeing more of an impact.  The number of active frack fleets in the US fell from more than 300 in March to less than 50 in May, although has recovered slightly since.  These extreme conditions led to some industry consolidation with a number of E&Ps and oilfield service companies undertaking restructuring.  International markets were less affected, although Covid-19 restrictions impacted demand and led to project delays.

 

2020 First Half Operating Review

The division took decisive action to right-size the business and protect financial performance in these extreme market conditions.  A £36m cost saving programme included a workforce reduction of 350, furloughs for two weeks out of four across North American operations, and concessions from vendors and landlords.  The division also continued to maintain enhanced credit control procedures.  While restructuring, it has also safeguarded the division's technology leadership, broader service capability and core manufacturing capacity so that it is well positioned to benefit from a future recovery.

 

Despite the extreme market conditions, the division continued to work in partnership with its customers to develop its product pipeline, including the SPM® QEM 5000 frack pump, extended life EXL power end and fluid ends, Large Bore Simplified Frac System and the division's Weir Edge aftermarket service platform.

 

The impact of Covid-19 on the division's operations was restricted to the temporary closure of a facility in the United Arab Emirates.

 

 

2020 First Half Financial Review

 

 

Constant currency £m

H1 2020

H1 20191

Growth

H2 20191

 

 

Orders OE

46

100

-54%

71

 

 

Orders AM

124

241

-48%

182

 

 

Orders Total

170

341

-50%

253

 

 

Revenue OE

58

104

-44%

79

 

 

Revenue AM

127

247

-49%

188

 

 

Revenue Total

185

351

-48%

267

 

 

Operating (loss) profit2

(4)

30

-114%

7

 

 

Operating margin2

-2.3%

8.6%

-1090bps

2.6%

 

 

Operating cash flow2

5

(16)

-129%

59

 

 

Book-to-bill

0.92

0.97

 

0.95

 

1 2019 restated at H1 2020 average exchange rates except for operating cash flow.

2 Profit figures adjusted to exclude exceptional items and intangibles amortisation. Operating cash flow (cash generated from operations) excludes additional pension contributions, exceptional items and income tax paid.

             

 

Orders of £170m (2019: £341m) were down 50% on a constant currency basis, reflecting a further significant reduction in refurbishment and replacement activity in North America compared to the prior year period.  Aftermarket orders, which represented 73% (2019: 71%) of total orders, fell 48% due to the significant reduction in refurbishment demand as frac activity levels dropped to multi-decade lows and cannibalisation continued as more fleets were cold stacked.  Original equipment orders were 54% lower reflecting the industry's focus on cash preservation. International markets were more robust but were impacted by project delays as a result of the oil price decline and Covid-19 travel restrictions.    

 

Revenue reduced by 48% on a constant currency basis to £185m (2019: £351m). Original equipment and aftermarket revenues decreased by 44% and 49% respectively, with aftermarket accounting for 69% of total revenues (2019: 70%).

 

North American revenues fell by 55% compared to the prior year reflecting the unprecedented market conditions.  International revenues were 5% higher.

 

Operating loss2 including joint ventures was £4m (2019: profit £30m on a constant currency basis). The decrease was driven by significantly lower activity levels and volumes in upstream North American markets and reduced operating leverage. The loss was all incurred in the second quarter as activity slowed and includes a £2.5m benefit from indirect taxes. There were further modest pricing declines in North America although margins benefited from product mix.

 

Operating margin2 at -2.3% was down 1090bps on a constant currency basis as a result of the significant drop in revenue, which impacted recoveries and was partially offset by the division's cost saving programme which is delivering to plan.

Operating cash flow2 increased by £21m to an inflow of £5m (2019: outflow of £16m). 

 

2020 Market Outlook

While the long-term fundamentals of oil and gas remain positive, there is continued uncertainty over the macro outlook for the global economy related to Covid-19 and other geopolitical tensions. In the short term, North American markets are operating at record low levels.  Assuming underlying conditions and Covid-19 related disruptions do not change, we expect the division to continue to be loss-making, but remain cash positive in 2020.

 

 

 

 

 

 

 

GROUP FINANCIAL REVIEW 

Continuing operations order input at £1,141m decreased 19% on a constant currency basis. This reduction has primarily arisen in Oil & Gas (-50%) due to significantly weaker market conditions, especially in North America, with our mining businesses having proven more robust through the Covid-19 pandemic. ESCO orders were down 17% as mining customers and distributors deferred orders to proactively lower inventory levels while infrastructure markets across North America and Europe were impacted by Covid-19 related customer shutdowns. Minerals orders were down 6% reflecting the impact of Covid-19 on customer operations and associated ore production. 78% of orders related to the aftermarket compared to 77% in the prior year.

 

Continuing operations revenue of £1,095m decreased 17% on a constant currency basis, broadly following the input trend, with the exception of ESCO where revenues were only down 10% compared to input of 17% reflecting customer de-stocking as our lead times reduced and they planned for lower activity levels. Minerals revenues also benefited from the first shipments of the record Iron Bridge order booked last year. Aftermarket accounted for 78% of revenues, which remains flat on the prior year. Reported revenues decreased 18%, impacted by a foreign exchange translation headwind of £11m.

 

Operating profit2 from continuing operations (before exceptional items and intangibles amortisation) decreased by £39m (23%) to £133m on a reported basis. Excluding a £2m foreign currency translation headwind, the constant currency decrease was £37m, driven principally by Oil & Gas (£34m lower) as a result of significantly lower activity levels and volumes in upstream North American markets partly mitigated by significant further restructuring efforts and a one-off indirect tax benefit of £2.5m.  There were resilient performances from Minerals (£4m lower) and ESCO (£1m higher).  Minerals operating profit reflected lower revenues with the impact of increased overhead recoveries from government mandated shutdowns in South Africa and Peru of £5m being offset by cost savings of £10m from lower bonus and travel costs as well as workforce reductions. ESCO did not experience any significant operational disruption and benefited from lower bonus and travel costs, workforce reductions of £3m, and the final acquisition cost synergies, which more than offset the margin impact of lower revenues.

 

Unallocated costs remained in line with prior year at £18m with continued support for our We are Weir strategy including investment in digital and advanced manufacturing technology as well as our all employee share plan. Reported operating profit for the period of £87m was £43m lower than the prior year due to the reduction in underlying operating profit and an increase in exceptional items of £15m partly offset by an £11m reduction in intangible amortisation.

Continuing operations net finance costs before exceptional items were £25m (2019: £25m).

 

Continuing operations profit before tax

Profit before tax from continuing operations (before exceptional items and intangibles amortisation) was £108m (2019: £147m). The reported profit before tax from continuing operations of £63m compares to £106m in 2019 due to the decrease in underlying profits. 

Continuing operations taxation

The tax charge for the period of £26m (2019: £37m) on profit before tax from continuing operations (before exceptional items and intangibles amortisation) of £108m (2019: £147m) represents an underlying effective tax rate (ETR) of 24.2% (2019: 25.3%).

Continuing operations exceptional items and intangibles amortisation

Exceptional items in the period amount to £18m (2019: £3m) with intangibles amortisation decreasing by £11m to £28m (2019: £39m).

Due to the unprecedented Covid-19 pandemic, specific one-off and/or short-term measures have been taken to protect the Group's ability to generate future cash flows, ensure the immediate health and safety of the workforce and manage supply chain issues enabling us to continue to meet customer needs. This has resulted in exceptional costs of £7m which are deemed to be non-recurring in nature and as a direct result of the Covid-19 pandemic, including £6m of severance costs across the Minerals and ESCO divisions.

The continued deep downturn in oil and gas markets through the period to June, exacerbated by Covid-19, has resulted in further steps to right-size the Oil & Gas division and certain central functions to protect short-term cash generation. This resulted in £5m of exceptional costs primarily related to severance.

Other exceptional costs of £6m included a £4m primarily non-cash IFRS 2 charge related to the completion of a Broad-based Black Economic Empowerment ("B-BBEE") ownership transaction by the Group's subsidiary, Weir Minerals South Africa (Pty) Ltd and £2m (2019: £3m) of costs associated with the continued integration of ESCO into the Group following its acquisition in July 2018.

The decrease in amortisation of £11m from 2019 is primarily a result of the Oil & Gas impairment of specific intangible assets in 2019.

A tax credit of £10m has been recognised in relation to exceptional items and intangibles amortisation (2019: £9m).

Discontinued operations 

Following the completion of the Flow Control disposal in June 2019, there was no impact in the period in the Consolidated Income Statement from discontinued operations (2019: loss of £25m). The final completion accounts settlement led to a cash outflow of £5m in the period, which was accounted for in 2019.

 

Profit for the period

Profit for the period from total operations of £46m (2019: £53m) reflects a decrease in profit from continuing operations of £32m (2019: £78m) offset by the impact of discontinued operations (2019: loss of £25m).

Earnings per share from continuing operations (before exceptional items and intangibles amortisation) decreased by 25% to 31.5p (2019: 42.2p) in line with the reduction in profits. Reported earnings per share including exceptional items, intangibles amortisation and loss from discontinued operations was 17.6p (2019: 20.3p).

Cash flow and net debt

Cash generated from total operations increased by £138m to £192m in the period with the reduction in operating profit being offset by a significant improvement in working capital, with an outflow in the period of £2m compared to £181m (continuing operations £157m) in the prior period. This reflects lower activity levels across all three divisions, as well as increased focus on inventory and receivables management across all levels and functions of the Group. The Group utilised non-recourse invoice discounting facilities of £62m (2019: £34m) and suppliers chose to utilise supply chain financing facilities of £39m (2019: £41m).

As a result, working capital as a percentage of sales decreased from 31.2% to 26.4% on a like-for-like basis. After additional pension contributions, exceptional cash items and income tax payments, net cash generated from operating activities was £144m (2019: cash used £16m).

Free cash flow (see note 1(e) of the interim financial statements) from total operations was an inflow of £65m (2019: outflow of £222m) before cash exceptional items of £14m (2019: £26m). The £287m improvement in the period mainly reflects the reduction in dividends of £79m following the Board's decision to withdraw the 2019 final dividend due to Covid-19 related uncertainty, improved working capital cash flows of £179m and a reduction in cash flows on derivative financial instruments of £37m driven by foreign exchange movements on Group funding. Capex at £39m (2019: £54m) reflected only essential spend given cash preservation actions taken in response to Covid-19 uncertainty.

This free cash flow of £65m, plus proceeds from the B-BBEE transaction of £5m, was offset by the final payment in respect of the Flow Control disposal of £5m and exceptional cash costs of £14m. This combined with an adverse translational foreign exchange movement of £66m and a net decrease in IFRS 16: Leases of £5m, resulted in a reported increase in net debt of £10m to £1,167m (December 2019: £1,157m). This includes £189m in respect of IFRS 16: Leases. Net debt to EBITDA on a covenant basis was 2.6 times (June 2019: 2.6 times; December 2019: 2.4 times) compared to a covenant level of 3.5 times.

The Group completed the refinancing of its US$950m RCF and a new £200m Term Loan in June 2020, extending maturity dates out to June 2023, with the option to extend the US$950m RCF for up to a further two years. Covenant terms remain unchanged under the new arrangements. The Group had c.£650m of immediately available committed facilities and cash balances at the end of June and access to £300m as part of the UK Government's CCFF programme, which remains unutilised, with a further £50m in uncommitted facilities available.

Pensions

The net pension liability increased to £185m from £139m at December 2019 mainly due to changes in financial assumptions, principally the discount rate. The increase is primarily driven by actuarial losses on liabilities of £98m partially offset by gains on assets of £50m and £9m contributions paid to the plans over the period.

 

Principal Risks and Uncertainties

The Group's Principal Risks and Group Risk Dashboard were reviewed to evaluate the performance of our risk and controls environment in light of the recent Covid-19 pandemic.  While there was not a specific pandemic risk previously identified, the resultant risks and mitigating actions were largely covered in existing categories.  As noted in detail in the CEO's review these mitigations included more frequent Board and Executive meetings, downturn planning, restructuring actions, plant reconfigurations, employee assistance programmes, use of remote working technology to support customers and additional employee communication.   However, the Board felt it was appropriate to consolidate these mitigations under a specific Covid-19 risk which over time may transition to a broader risk related to extremely rare so-called 'Black Swan' events.

 

Principal Risk

Pre Covid-19 Risk Trend

Post Covid-19 Risk Trend

1.   Market Volatility

Increasing

Increasing

2.   Technology

No change

No change

3.   Competition

Increasing

No change

4.   Value Chain Excellence (VCE)

No change

No change

5.   Safety, Health & Wellbeing

No change

Increasing

6.   Environmental Sustainability

Increasing

No change

7.   Digital Transformation

Increasing

No change

8.   Information Security & Cyber

Increasing

No change

9.   Staff Recruitment, Development & Retention

No change

No change

10. Political & Social

No change

Increasing

11. Covid-19

n/a

n/a

12. Ethics & Governance

No change

No change

 

Further details of the Group's policies on principal risks and uncertainties are contained within the Group's 2019 Annual Report, a copy of which is available at www.annualreport.weir

 

 

Appendix 1 - 2019 / 2020 quarterly order trends (constant currency)

 

 

Reported growth1

 

 

Like-for-like1,2 growth

 

Division

Q3

Q4

Q1

Q2

 

 

 

Q3

Q4

Q1

Q2

 

Original Equipment

72%

20%

-13%

-9%

 

 

 

72%

20%

-13%

-9%

 

Aftermarket

-5%

8%

-1%

-6%

 

 

 

-5%

8%

-1%

-6%

 

Minerals

17%

12%

-5%

-7%

 

 

 

17%

12%

-5%

-7%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Original Equipment

83%

54%

25%

16%

 

 

 

-

-

25%

16%

 

Aftermarket

22%

-18%

-8%

-28%

 

 

 

-

-

-8%

-28%

 

ESCO

25%

-16%

-7%

-26%

 

 

 

-

-

-7%

-26%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Original Equipment

-26%

7%

-41%

-71%

 

 

 

-26%

7%

-41%

-71%

 

Aftermarket

-34%

-43%

-31%

-67%

 

 

 

-34%

-43%

-31%

-67%

 

Oil & Gas

-32%

-35%

-34%

-68%

 

 

 

-32%

-35%

-34%

-68%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Original Equipment

41%

18%

-22%

-25%

 

 

 

40%

17%

-22%

-25%

 

Aftermarket

-7%

-13%

-10%

-25%

 

 

 

-15%

-11%

-10%

-25%

 

Continuing Ops1

4%

-6%

-13%

-25%

 

 

 

-

-3%

-13%

-25%

 

Book-to-bill

1.08

0.97

1.08

1.04

 

 

 

1.11

1.02

1.08

1.04

 

                             

1 Continuing operations (excludes the Flow Control division which was sold on 28 June 2019).

2 Like-for-like excludes the impact of acquisitions. ESCO was acquired on 12 July 2018 and excluded from 2018 and 2019.

 

 

 

 

Appendix 2 - Foreign Exchange (FX) rates and profit exposure

 

 

2020 HY
average
FX rates

2019 HY

average

FX rates

Percentage of FY 2019 operating profits

US Dollar

1.26

1.29

59%

Australian Dollar

1.92

1.83

9%

Canadian Dollar

1.72

1.72

15%

Euro

1.15

1.14

10%

Chilean Peso

1,023.61

872.86

12%

United Arab Emirates Dirham

4.64

4.75

1%

South African Rand

20.89

18.35

1%

Brazilian Real

6.17

4.97

2%

Russian Rouble

87.47

84.28

3%

 

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.

 

 

Consolidated Income Statement

for the period ended 30 June 2020

 

 

 

 

 

 

 

Period ended 30 June 2020

Period ended 30 June 2019

Year ended

 31 December 2019

 

 

 

Before exceptional items & intangibles amortisation

Exceptional items & intangibles amortisation (note 4)

 

Before exceptional items & intangibles amortisation

Exceptional items & intangibles amortisation (note 4)

 

Total

 

 

 

Total

Total

£m

 

 

Notes

£m

£m

£m

£m

£m

£m

 

 

Continuing operations

 

 

 

 

 

 

 

2,661.9

 

Revenue

2, 3

1,094.8

-

1,094.8

1,329.4

-

1,329.4

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

 

 

 

 

 

 

(328.4)

 

Operating profit (loss) before share of results of joint ventures

 

129.9

(45.6)

84.3

169.1

(41.5)

127.6

6.2

 

Share of results of joint ventures

 

3.0

-

3.0

3.1

-

3.1

 

 

 

 

 

 

 

 

 

 

(322.2)

 

Operating profit (loss)

2, 3

132.9

(45.6)

87.3

172.2

(41.5)

130.7

(53.9)

 

Finance costs

 

(27.3)

-

(27.3)

(26.3)

-

(26.3)

4.3

 

Finance income

 

2.5

-

2.5

1.3

-

1.3

(371.8)

 

Profit (loss) before tax from continuing operations

 

108.1

(45.6)

62.5

147.2

(41.5)

105.7

18.4

 

Tax (expense) credit

5

(26.2)

9.5

(16.7)

(37.3)

9.4

(27.9)

 

 

 

 

 

 

 

 

 

 

(353.4)

 

Profit (loss) for the period from continuing operations

 

81.9

(36.1)

45.8

109.9

(32.1)

77.8

(26.0)

 

Loss for the period from discontinued operations

6

-

-

-

(4.0)

(20.7)

(24.7)

(379.4)

 

Profit (loss) for the period

 

81.9

(36.1)

45.8

105.9

(52.8)

53.1

 

 

 

 

 

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

 

 

(379.9)

 

Equity holders of the Company

 

81.8

(36.1)

45.7

105.6

(52.8)

52.8

0.5

 

Non-controlling interests

 

0.1

-

0.1

0.3

-

0.3

(379.4)

 

 

 

81.9

(36.1)

45.8

105.9

(52.8)

53.1

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per share

7

 

 

 

 

 

 

(146.4p)

 

Basic - total operations

 

 

 

17.6p

 

 

20.3p

(136.4p)

 

Basic  - continuing operations

 

31.5p

 

17.6p

42.2p

 

29.8p

 

 

 

 

 

 

 

 

 

 

(146.4p)

 

Diluted  - total operations

 

 

 

17.5p

 

 

20.2p

(136.4p)

 

Diluted  - continuing operations

 

31.3p

 

17.5p

41.9p

 

29.6p

 

 

Consolidated Statement of Comprehensive Income

for the period ended 30 June 2020

 

Year ended

 

 

 

Period ended

Period ended

31 December 2019

 

 

 

30 June 2020

30 June 2019

£m

 

 

Notes

£m

£m

(379.4)

 

Profit (loss) for the period

 

45.8

53.1

 

 

Other comprehensive income (expense)

 

 

 

(1.3)

 

(Losses) gains taken to equity on cash flow hedges

 

(0.3)

0.2

(105.3)

 

Exchange gains (losses) on translation of foreign operations

 

117.7

27.8

(20.5)

 

Reclassification of foreign currency translation reserve on discontinued operations

 

-

(20.5)

(2.4)

 

Exchange losses on net investment hedges

 

(39.8)

(16.1)

0.7

 

Reclassification adjustments on cash flow hedges

 

1.1

0.2

(0.2)

 

Tax relating to other comprehensive expense to be reclassified in subsequent periods

 

-

(0.2)

(129.0)

 

Items that are or may be reclassified to profit or loss in subsequent periods

 

78.7

(8.6)

 

 

 

 

 

 

(5.2)

 

Remeasurements on defined benefit plans

12

(47.4)

(5.8)

(0.1)

 

Remeasurements on other benefit plans

 

-

-

0.8

 

Tax relating to other comprehensive income not to be reclassified in subsequent periods

 

9.3

1.3

(4.5)

 

Items that will not be reclassified to profit or loss in subsequent periods

 

(38.1)

(4.5)

 

 

 

 

 

 

(133.5)

 

Net other comprehensive income (expense)

 

40.6

(13.1)

 

 

 

 

 

 

(512.9)

 

Total net comprehensive income (expense) for the period

 

86.4

40.0

 

 

 

 

 

 

 

 

Attributable to:

 

 

 

(513.2)

 

Equity holders of the Company

 

86.0

39.7

0.3

 

Non-controlling interests

 

0.4

0.3

(512.9)

 

 

 

86.4

40.0

 

 

 

 

 

 

 

 

Total comprehensive income (expense) for the period attributable to equity holders of the Company

 

 

 

(466.5)

 

Continuing operations

 

86.0

87.0

(46.7)

 

Discontinued operations

 

-

(47.3)

(513.2)

 

 

 

86.0

39.7

 

 

Consolidated Balance Sheet

at 30 June 2020

 

31 December 2019

 

 

 

30 June 2020

30 June 2019

£m

 

 

Notes

£m

£m

 

 

ASSETS

 

 

 

 

 

Non-current assets

 

 

 

571.2

 

Property, plant & equipment

 

585.2

626.5

1,573.0

 

Intangible assets

 

1,657.7

2,144.9

36.6

 

Investments in joint ventures

 

38.6

38.5

61.2

 

Deferred tax assets

 

82.7

26.5

77.1

 

Other receivables

 

83.0

78.8

-

 

Retirement benefit plan surplus

12

1.5

-

4.4

 

Derivative financial instruments

13

0.4

1.0

2,323.5

 

Total non-current assets

 

2,449.1

2,916.2

 

 

 

 

 

 

 

 

Current assets

 

 

 

642.9

 

Inventories

 

692.6

746.1

557.9

 

Trade & other receivables

 

481.3

623.7

16.5

 

Derivative financial instruments

13

21.3

28.6

37.6

 

Income tax receivable

 

22.9

20.1

273.8

 

Cash & short-term deposits

 

356.7

499.0

1,528.7

 

Total current assets

 

1,574.8

1,917.5

3,852.2

 

Total assets

 

4,023.9

4,833.7

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

Current liabilities

 

 

 

534.1

 

Interest-bearing loans & borrowings

 

153.7

337.7

589.6

 

Trade & other payables

 

543.0

535.3

24.8

 

Derivative financial instruments

13

16.5

19.0

22.6

 

Income tax payable

 

8.4

21.2

42.2

 

Provisions

10

41.4

44.4

1,213.3

 

Total current liabilities

 

763.0

957.6

 

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

896.2

 

Interest-bearing loans & borrowings

 

1,369.7

1,477.4

0.3

 

Derivative financial instruments

13

0.5

0.7

61.3

 

Provisions

10

65.4

66.2

29.0

 

Deferred tax liabilities

 

30.2

79.3

138.7

 

Retirement benefit plan deficits

12

186.6

150.7

1,125.5

 

Total non-current liabilities

 

1,652.4

1,774.3

2,338.8

 

Total liabilities

 

2,415.4

2,731.9

1,513.4

 

NET ASSETS

 

1,608.5

2,101.8

 

 

 

 

 

 

 

 

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

(0.5)

 

Treasury shares

 

(0.6)

(1.6)

0.5

 

Capital redemption reserve

 

0.5

0.5

(26.7)

 

Foreign currency translation reserve

 

50.9

92.5

0.7

 

Hedge accounting reserve

 

1.5

1.7

590.6

 

Retained earnings

 

598.3

1,059.9

1,512.0

 

Shareholders' equity

 

1,598.0

2,100.4

1.4

 

Non-controlling interests

 

10.5

1.4

1,513.4

 

TOTAL EQUITY

 

1,608.5

2,101.8

 

 

Consolidated Cash Flow Statement

for the period ended 30 June 2020

 

 

 

 

 

 

Restated (note 1)

Year ended

 

 

 

Period ended

Period ended

31 December 2019

 

 

 

30 June 2020

30 June 2019

£m

 

 

Notes

£m

£m

 

 

Total operations

 

 

 

 

 

Cash flows from operating activities

14

 

 

407.6

 

Cash generated from operations

 

191.6

53.9

(12.9)

 

Additional pension contributions paid

 

(6.7)

(5.7)

(41.0)

 

Exceptional cash items

 

(14.3)

(25.6)

(90.2)

 

Income tax paid

 

(26.4)

(38.4)

263.5

 

Net cash generated from (used in) operating activities

 

144.2

(15.8)

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

(0.1)

 

Acquisitions of subsidiaries, net of cash acquired

14

-

(0.1)

(93.3)

 

Purchases of property, plant & equipment

 

(32.3)

(50.7)

(23.3)

 

Purchases of intangible assets

 

(8.4)

(9.2)

12.3

 

Other proceeds from sale of property, plant & equipment and intangible assets

 

1.6

6.3

244.7

 

Disposals of discontinued operations, net of cash disposed

14

(4.7)

252.8

2.7

 

Interest received

 

1.0

1.3

3.5

 

Dividends received from joint ventures

 

1.9

1.2

146.5

 

Net cash (used in) generated from investing activities

 

(40.9)

201.6

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

1,673.7

 

Proceeds from borrowings

 

1,133.5

1,659.4

(1,782.8)

 

Repayments of borrowings

 

(1,107.9)

(1,445.9)

(44.3)

 

Lease payments

 

(20.8)

(23.8)

(62.2)

 

Settlement of derivative financial instruments

 

(6.4)

(43.6)

(47.3)

 

Interest paid

 

(25.6)

(25.0)

-

 

Net proceeds from changes in non-controlling interests

4

5.1

-

(121.7)

 

Dividends paid to equity holders of the Company

8

-

(78.9)

(10.0)

 

Purchase of shares for employee share plans

 

(4.3)

(9.6)

(394.6)

 

Net cash (used in) generated from financing activities

 

(26.4)

32.6

 

 

 

 

 

 

15.4

 

Net increase in cash & cash equivalents

 

76.9

218.4

277.2

 

Cash & cash equivalents at the beginning of the period

 

272.1

277.2

(20.5)

 

Foreign currency translation differences

 

7.5

2.4

272.1

 

Cash & cash equivalents at the end of the period

14

356.5

498.0

 

The cash flows from discontinued operations in 2019 included above are disclosed separately in note 6.
 

Consolidated Statement of Changes in Equity

for the period ended 30 June 2020

 

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 2018

32.5

582.3

332.6

(2.1)

0.5

101.3

1.5

1,095.0

2,143.6

5.3

2,148.9

Profit for the period

-

-

-

-

-

-

-

52.8

52.8

0.3

53.1

Gains taken to equity on cash flow hedges

-

-

-

-

-

-

0.2

-

0.2

-

0.2

Exchange gains on translation of foreign operations

-

-

-

-

-

27.8

-

-

27.8

-

27.8

Reclassification of exchange gains on discontinued operations

-

-

-

-

-

(20.5)

-

-

(20.5)

-

(20.5)

Exchange losses on net investment hedges

-

-

-

-

-

(16.1)

-

-

(16.1)

-

(16.1)

Reclassification adjustments on cash flow hedges

-

-

-

-

-

-

0.2

-

0.2

-

0.2

Remeasurements on defined benefit plans

-

-

-

-

-

-

-

(5.8)

(5.8)

-

(5.8)

Tax relating to other comprehensive (expense) income

-

-

-

-

-

-

(0.2)

1.3

1.1

-

1.1

Total net comprehensive (expense) income for the period

-

-

-

-

-

(8.8)

0.2

48.3

39.7

0.3

40.0

Cost of share-based payments inclusive of tax charge

-

-

-

-

-

-

-

5.6

5.6

-

5.6

Dividends

-

-

-

-

-

-

-

(78.9)

(78.9)

-

(78.9)

Purchase of shares

-

-

-

(9.6)

-

-

-

-

(9.6)

-

(9.6)

Reduction in non-controlling interests

-

-

-

-

-

-

-

-

-

(4.2)

(4.2)

Exercise of share-based payments

-

-

-

10.1

-

-

-

(10.1)

-

-

-

At 30 June 2019

32.5

582.3

332.6

(1.6)

0.5

92.5

1.7

1,059.9

2,100.4

1.4

2,101.8

At 31 December 2019

32.5

582.3

332.6

(0.5)

0.5

(26.7)

0.7

590.6

1,512.0

1.4

1,513.4

Profit for the period

-

-

-

-

-

-

-

45.7

45.7

0.1

45.8

Losses taken to equity on cash flow hedges

-

-

-

-

-

-

(0.3)

-

(0.3)

-

(0.3)

Exchange gains on translation of foreign operations

-

-

-

-

-

117.4

-

-

117.4

0.3

117.7

Exchange losses on net investment hedges

-

-

-

-

-

(39.8)

-

-

(39.8)

-

(39.8)

Reclassification adjustments on cash flow hedges

-

-

-

-

-

-

1.1

-

1.1

-

1.1

Remeasurements on defined benefit plans

-

-

-

-

-

-

-

(47.4)

(47.4)

-

(47.4)

Tax relating to other comprehensive income

-

-

-

-

-

-

-

9.3

9.3

-

9.3

Total net comprehensive income for the period

-

-

-

-

-

77.6

0.8

7.6

86.0

0.4

86.4

Cost of share-based payments inclusive of tax charge

-

-

-

-

-

-

-

4.3

4.3

-

4.3

Purchase of shares

-

-

-

(4.3)

-

-

-

-

(4.3)

-

(4.3)

Disposal of non-controlling interest

-

-

-

-

-

-

-

-

-

(0.3)

(0.3)

Notional proceeds of increase of non-controlling interests

-

-

-

-

-

-

-

-

-

3.6

3.6

Proceeds of increase of non-controlling interests

-

-

-

-

-

-

-

-

-

5.4

5.4

Exercise of share-based payments

-

-

-

4.2

-

-

-

(4.2)

-

-

-

At 30 June 2020

32.5

582.3

332.6

(0.6)

0.5

50.9

1.5

598.3

1,598.0

10.5

1,608.5

At 31 December 2018

32.5

582.3

332.6

(2.1)

0.5

101.3

1.5

1,095.0

2,143.6

5.3

2,148.9

(Loss) profit for the year

-

-

-

-

-

-

-

(379.9)

(379.9)

0.5

(379.4)

Losses taken to equity on cash flow hedges

-

-

-

-

-

-

(1.3)

-

(1.3)

-

(1.3)

Exchange losses on translation of foreign operations

-

-

-

-

-

(105.1)

-

-

(105.1)

(0.2)

(105.3)

Reclassification of exchange gains on discontinued operations

-

-

-

-

-

(20.5)

-

-

(20.5)

-

(20.5)

Exchange losses on net investment hedges

-

-

-

-

-

(2.4)

-

-

(2.4)

-

(2.4)

Reclassification adjustments on cash flow hedges

-

-

-

-

-

-

0.7

-

0.7

-

0.7

Remeasurements on defined benefit plans

-

-

-

-

-

-

-

(5.2)

(5.2)

-

(5.2)

Remeasurements on other benefit plans

-

-

-

-

-

-

-

(0.1)

(0.1)

-

(0.1)

Tax relating to other comprehensive (expense) income

-

-

-

-

-

-

(0.2)

0.8

0.6

-

0.6

Total net comprehensive (expense) income for the year

-

-

-

-

-

(128.0)

(0.8)

(384.4)

(513.2)

0.3

(512.9)

Cost of share-based payments inclusive of tax charge

-

-

-

-

-

-

-

13.3

13.3

-

13.3

Dividends

-

-

-

-

-

-

-

(121.7)

(121.7)

-

(121.7)

Purchase of shares

-

-

-

(10.0)

-

-

-

-

(10.0)

-

(10.0)

Reduction in non-controlling interests

-

-

-

-

-

-

-

-

-

(4.2)

(4.2)

Exercise of share-based payments

-

-

-

11.6

-

-

-

(11.6)

-

-

-

At 31 December 2019

32.5

582.3

332.6

(0.5)

0.5

(26.7)

0.7

590.6

1,512.0

1.4

1,513.4

 

 

Notes to the Financial Statements

 

1. Basis of preparation

 

a) General information

 

These interim financial statements are for the 6-month period ended 30 June 2020 and have been prepared on the basis of the accounting policies set out in the Group's 2019 Annual Report, and in accordance with IAS 34: Interim Financial Reporting (Revised) as adopted by the European Union and the Disclosure and Transparency Rules of the Financial 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 38. The information shown for the year ended 31 December 2019 does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006 and has been extracted from the Group's 2019 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 2019 Annual Report was unqualified and did not contain a statement under either Section 498(2) or Section 498(3) of the Companies Act 2006. The interim financial statements should be read in conjunction with the annual consolidated financial statements for the year ended 31 December 2019, which have been prepared in accordance with IFRSs as adopted by the European Union.

 

The Weir Group PLC is a limited company, limited by shares, incorporated in Scotland, United Kingdom and is listed on the London Stock Exchange.

 

The principal activities of the Group are described in note 2.

 

These interim financial statements were approved by the Board of Directors on 29 July 2020.

 

b) 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 reacted quickly and decisively to the Covid-19 pandemic, implementing a range of prudent cost management and cash preservation actions in order to protect the business from any potential adverse impact. To date, while the Group has experienced some disruption, the impact of Covid-19 has been relatively limited and our mining businesses have continued to be highly profitable and cash generative. The Group has also successfully completed the refinancing of its main lending facilities during the period, securing good levels of liquidity over an extended maturity profile as discussed in both the Chief Executive Officer's and Finance review.

 

Given current levels of global macroeconomic uncertainty stemming from Covid-19, the Group performed additional financial modelling of future cash flows, with plausible downside scenarios considered. Under these scenarios, the Group continues to have sufficient headroom on lending facilities and related financial covenants.

 

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.

 

c) Estimates & judgements

 

The preparation of interim financial statements 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. Actual results may differ from these judgements and the resulting estimates which are reviewed on an ongoing basis.

 

The areas where management consider critical judgements and estimates to be required, are areas more likely to be materially adjusted due to estimates and assumptions turning out to be wrong. The areas identified in the preparation of the consolidated financial statements for the year ended 31 December 2019 remained relevant during the preparation of these interim financial statements, with additional consideration given to the following areas:

 

Impairment (estimate)

In the consolidated financial statements for the year ended 31 December 2019 an impairment totalling £546.2m was recognised in relation to the Oil & Gas North American Cash Generating Unit (CGU). This reflected the challenging market conditions in the North American oil and gas market and the uncertainty over the timing of market recovery which had a substantial impact on the long-term forecast cash flows.

 

Market conditions have continued to be challenging resulting in ongoing uncertainty in the short-term financial performance for both our Oil & Gas North America and Oil & Gas International CGUs. As explained in other sections of these interim financial statements, the Group has already reacted to market conditions through the implementation of the Oil & Gas restructuring and rationalisation actions and management continue to review the operational structure and business model to ensure we remain well placed to fully respond to the current market, while remaining prepared for any upturn.

 

At the balance sheet date, the estimated recoverable amount of the Oil & Gas North America CGU is equal to its carrying value. Consequently, any adverse change in assumptions, which are consistent with those disclosed in the 2019 Annual Report and Financial Statements, would, in isolation, cause an impairment loss to be recognised. An increase in the discount rate of 100bps would lead to an impairment of £52m. A reduction in the terminal growth rate by 100bps would lead to an impairment of £40m. For Oil & Gas International, an equivalent change in the discount rate or terminal growth rate would not lead to an impairment. For both CGUs, if the assumptions for long-term future cash flows did not materialise then an impairment could result.  

 

Based on the assessments performed in the preparation of these interim financial statements management consider that the carrying values of each CGU continue to remain appropriate, that the assumptions made represent their best estimate of the long term future cash flows generated by the CGUs, and that the discount rates used are appropriate given the risks associated with the specific short-term cash flows. However, it remains appropriate to disclose this as an area of significant estimation due to the size of the carrying values and the current levels of market uncertainty which could reasonably lead to changes in the carrying value as a result of future events within the next five years.

 

Forecasts for the Minerals and ESCO CGUs, which both operate mainly in the mining industry, continue to show significant levels of headroom above carrying value.

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.

 

d) New standards & interpretations

 

A number of new or amended standards became applicable for the current reporting period as listed below:

 

(a) Definition of Material - amendments to IAS 1 and IAS 8

(b) Definition of a Business - amendments to IFRS 3

(c) Revised Conceptual Framework for Financial Reporting

(d) Interest Rate Benchmark Reform - amendments to IFRS 9, IAS 39 and IFRS 7

(e) Covid-19 related rent concessions - amendment to IFRS 16

 

The Group has applied the practical expedient to all rent concessions that meet the conditions in paragraph 46B of the IFRS 16 amendment issued on 28 May 2020. The amount recognised in operating profit for the reporting period to reflect changes in lease payments that arise from rent concessions is a credit of £0.2m.

 

IFRS 16 lease cash flow reporting for the period ended 30 June 2019 has been restated to reflect updated presentation adopted for year ended 31 December 2019. As a result, cash outflows of £23.8m in respect of leases are now separately disclosed from Repayments of borrowings in the Consolidated Cash Flow Statement and included in the Free Cash Flow alternative performance measure (note 1, section e). Furthermore, note 14 has been restated to separately present the depreciation of right-of-use assets, which was previously included within Depreciation of property, plant & equipment.

 

The other new or amended standards do not result in a material impact on the half year consolidated financial statements of the Group.

 

e) Alternative performance measures

 

Our reported interim results are prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and applied in accordance with the provisions of the Companies Act 2006. In measuring our performance, the financial measures that we use include those which have been derived from our reported results in order to eliminate factors which we believe distort period-on-period comparisons. These are considered alternative performance measures. We believe this information, along with comparable GAAP measurements, is useful to investors in providing a basis for measuring our operational performance. Our management uses these financial measures, along with the most directly comparable GAAP financial measures, in evaluating our performance and value creation.  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.

 

Free cash flow

Free cash flow (FCF) is defined as cash generated from operations adjusted for income taxes, net capital expenditures, lease payments, net interest payments, dividends paid, settlement of derivatives, purchase of shares for employee share plans and other awards and pension contributions. FCF reflects an additional way of viewing our liquidity that we believe is useful to investors as it represents cash flows that could be used for repayment of debt or to fund our strategic initiatives, including acquisitions, if any.

 

The reconciliation of cash flow from operations to FCF is as follows.

 

 

 

 

 

Restated

Year ended

 

 

Period ended

Period ended

31 December 2019

 

 

30 June 2020

30 June 2019

£m

 

 

£m

£m

407.6

 

Cash generated from operations (note 14)

191.6

53.9

(90.2)

 

Income tax paid

(26.4)

(38.4)

(104.3)

 

Net capital expenditure from purchase & disposal of property, plant & equipment and intangibles

(39.1)

(53.6)

(44.3)

 

Lease payments

(20.8)

(23.8)

(44.6)

 

Net interest paid

(24.6)

(23.7)

(121.7)

 

Dividends paid to equity holders of the Company

-

(78.9)

3.5

 

Dividends received from joint ventures

1.9

1.2

(62.2)

 

Settlement of derivative financial instruments

(6.4)

(43.6)

(10.0)

 

Purchase of shares for employee share plans

(4.3)

(9.6)

(12.9)

 

Additional pension contributions paid

(6.7)

(5.7)

(79.1)

 

Free cash flow

65.2

(222.2)

 

Operating cash flow (cash generated from operations)

Operating cash flow excludes additional pension contributions, exceptional cash items and income tax paid. This reflects our view of the underlying cash generation of the business. A reconciliation to the GAAP measure 'Net cash generated from (used in) operating activities' is provided on the Consolidated Cash Flow Statement.

 

Working capital as a percentage of sales

Working capital includes inventories, trade & other receivables, trade & other payables and derivative financial instruments as included in the Consolidated Balance Sheet, adjusted to exclude insurance contract assets totalling £88.4m and £10.5m of interest accruals. This working capital measure reflects the figure used by management to monitor the performance of the business and is divided by the last 12 months of revenue, calculated from the Consolidated Income Statement, to arrive at working capital as a percentage of sales.

 

Underlying EBITDA

EBITDA is operating profit from continuing operations, before exceptional items and intangibles amortisation, excluding depreciation of owned assets. EBITDA is used in conjunction with other GAAP and non-GAAP financial measures to assess our operating performance.  A reconciliation of EBITDA to the closest equivalent GAAP measure, operating profit, is provided.

 

Year ended

 

 

Period ended

Period ended

31 December 2019

 

 

30 June 2020

30 June 2019

£m

 

 

£m

£m

 

 

Continuing operations

 

 

(322.2)

 

Operating profit (loss)

87.3

130.7

 

 

Adjusted for:

 

 

596.0

 

Exceptional items (note 4)

17.8

2.6

273.8

 

Underlying Earnings before interest and tax (EBIT)

105.1

133.3

78.3

 

Total intangibles amortisation

27.8

38.9

352.1

 

Underlying Earnings before interest, tax and amortisation (EBITA)

132.9

172.2

62.4

 

Depreciation of owned property, plant & equipment*

28.3

33.7

414.5

 

Underlying EBITDA

161.2

205.9

*The depreciation adjustment to arrive at Underlying EBITDA excludes depreciation related to right-of-use assets of £23.3m (2019: £20.3m), following the adoption of IFRS 16: Leases in 2019.

 

Net debt

A breakdown of net debt into cash & short-term deposits and interest-bearing loans & borrowings is provided in note 14.

 

 

2. Segment information

 

For management purposes, the Group is organised into three operating divisions: Minerals, ESCO and Oil & Gas. These three divisions are organised and managed separately based on the key markets served and each is treated as an operating segment and a reportable segment under IFRS 8. The operating and reportable segments were determined based on the reports reviewed by the Chief Executive Officer which are used to make operational decisions. In 2019, for strategic reasons, two procurement entities were moved from Unallocated expenses into the Minerals Division and the Oil & Gas Division and prior comparatives in Minerals and Oil & Gas have been restated to reflect transactions between the segments.

 

The Minerals segment is the global leader in the provision of slurry handling equipment and associated aftermarket support for abrasive high-wear applications used in the mining and oil sands markets. The ESCO segment is the world's leading provider of ground engaging tools for surface mining and infrastructure. The Oil & Gas segment provides products and service solutions to upstream, production, transportation and related industries.

 

The Chief Executive Officer assesses the performance of the operating segments based on operating profit from continuing operations before exceptional items (including impairments) and intangibles amortisation ('segment result'). Finance income and expenditure and associated interest-bearing liabilities and derivative financial instruments are not allocated to segments as all treasury activity is managed centrally by the Group treasury function. The amounts provided to the Chief Executive Officer with respect to assets and liabilities are measured in a manner consistent with that of the financial statements. The assets are allocated based on the operations of the segment and the physical location of the asset. The liabilities are allocated based on the operations of the segment.

 

Transfer prices between segments are set on an arm's length basis, in a manner similar to transactions with third-parties.

 

The segment information for the reportable segments for the period ended 30 June 2020, the period ended 30 June 2019 and the year ended 31 December 2019 is disclosed below. Information for discontinued operations is included in note 6.

 

 

Minerals

ESCO

Oil & Gas

Total continuing

operations

 

 

Restated

 

 

 

Restated

 

Restated

 

30 June 2020

30 June 2019

30 June 2020

30 June 2019

30 June 2020

30 June 2019

30 June 2020

30 June 2019

 

£m

£m

£m

£m

£m

£m

£m

£m

Revenue

 

 

 

 

 

 

 

 

Sales to external customers

653.0

705.6

257.3

280.4

184.5

343.4

1,094.8

1,329.4

Inter-segment sales

1.1

1.5

0.4

0.1

12.0

12.4

13.5

14.0

Segment revenue

654.1

707.1

257.7

280.5

196.5

355.8

1,108.3

1,343.4

Eliminations

 

 

 

 

 

 

(13.5)

(14.0)

 

 

 

 

 

 

 

1,094.8

1,329.4

 

 

 

 

 

 

 

 

 

Sales to external customers - 2019 at 2020 average exchange rates

 

 

 

 

 

 

 

 

Sales to external customers

653.0

679.8

257.3

287.3

184.5

351.3

1,094.8

1,318.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment result

 

 

 

 

 

 

 

 

Segment result before share of results of joint ventures

112.9

121.1

40.4

39.0

(6.1)

27.0

147.2

187.1

Share of results of joint ventures

-

-

1.1

0.7

1.9

2.4

3.0

3.1

Segment result

112.9

121.1

41.5

39.7

(4.2)

29.4

150.2

190.2

Unallocated expenses

 

 

 

 

 

 

(17.3)

(18.0)

Operating profit before exceptional items & intangibles amortisation

 

 

 

 

 

 

132.9

172.2

Total exceptional items & intangibles amortisation

 

 

 

 

 

 

(45.6)

(41.5)

Net finance costs before exceptional items

 

 

 

 

 

 

(24.8)

(25.0)

Profit before tax from continuing operations

 

 

 

 

 

 

62.5

105.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment result - 2019 at 2020 average exchange rates

 

 

 

 

 

 

 

 

Segment result before share of results of joint ventures

112.9

117.4

40.4

40.0

(6.1)

27.8

147.2

185.2

Share of results of joint ventures

-

-

1.1

0.7

1.9

2.4

3.0

3.1

Segment result

112.9

117.4

41.5

40.7

(4.2)

30.2

150.2

188.3

Unallocated expenses

 

 

 

 

 

 

(17.3)

(18.0)

Operating profit before exceptional items & intangibles amortisation

 

 

 

 

 

 

132.9

170.3

 

 

Minerals

ESCO

Oil & Gas

Total Group

 

 

Restated

 

 

 

Restated

 

Restated

 

30 June 2020

30 June 2019

30 June 2020

30 June 2019

30 June 2020

30 June 2019

30 June 2020

30 June 2019

 

£m

£m

£m

£m

£m

£m

£m

£m

Assets & liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Intangible assets

613.4

607.3

741.6

741.6

279.2

761.0

1,634.2

2,109.9

Property, plant & equipment

302.5

309.9

133.3

119.8

133.2

177.1

569.0

606.8

Working capital assets

701.1

722.9

204.8

225.1

281.8

426.7

1,187.7

1,374.7

 

1,617.0

1,640.1

1,079.7

1,086.5

694.2

1,364.8

3,390.9

4,091.4

Investments in joint ventures

-

-

14.5

16.4

24.1

22.1

38.6

38.5

Segment assets

1,617.0

1,640.1

1,094.2

1,102.9

718.3

1,386.9

3,429.5

4,129.9

Unallocated assets

 

 

 

 

 

 

594.4

703.8

Total assets

 

 

 

 

 

 

4,023.9

4,833.7

 

 

 

 

 

 

 

 

 

Working capital liabilities

411.4

376.3

83.2

67.7

99.9

156.3

594.5

600.3

Unallocated liabilities

 

 

 

 

 

 

1,820.9

2,131.6

Total liabilities

 

 

 

 

 

 

2,415.4

2,731.9

 

2. Segment information (continued)

 

Unallocated assets primarily comprise cash and short-term deposits, derivative financial instruments, income tax receivable, deferred tax assets and retirement benefit surpluses as well as those assets which are used for general head office purposes. Unallocated liabilities primarily comprise interest-bearing loans and borrowings, derivative financial instruments, income tax payable, provisions, deferred tax liabilities and retirement benefit deficits as well as liabilities relating to head office activities.

 

Geographical information

Geographical information in respect of revenue for the periods ended 30 June 2020 and 30 June 2019 and the year ended 31 December 2019 is disclosed below. Revenues are allocated based on the location to which the product is shipped.

 

Period ended 30 June 2020

UK

US

Canada

Europe & FSU

Asia Pacific

Australia

South America

Middle East & Africa

Total

 

£m

£m

£m

£m

£m

£m

£m

£m

£m

Revenue from continuing operations

 

 

 

 

 

 

 

 

 

Sales to external customers

7.8

251.7

158.3

88.8

108.1

142.5

196.7

140.9

1,094.8

 

 

 

 

 

 

 

 

 

 

Period ended 30 June 2019

UK

US

Canada

Europe & FSU

Asia Pacific

Australia

South America

Middle East & Africa

Total

 

£m

£m

£m

£m

£m

£m

£m

£m

£m

Revenue from continuing operations

 

 

 

 

 

 

 

 

 

Sales to external customers

18.8

409.7

169.7

84.4

149.0

125.6

215.6

156.6

1,329.4

 

Year ended 31 December 2019

UK

US

Canada

Europe & FSU

Asia Pacific

Australia

South America

Middle East & Africa

Total

 

£m

£m

£m

£m

£m

£m

£m

£m

£m

Revenue from continuing operations

 

 

 

 

 

 

 

 

 

Sales to external customers

28.7

742.0

366.6

186.9

298.0

263.1

445.6

331.0

2,661.9

 

Year ended 31 December 2019

Minerals

ESCO

Oil & Gas

Total

continuing

operations

 

£m

£m

£m

£m

Revenue

 

 

 

 

Sales to external customers

1,477.8

572.0

612.1

2,661.9

Inter-segment sales

2.8

0.5

27.7

31.0

Segment revenue 

1,480.6

572.5

639.8

2,692.9

Eliminations

 

 

 

(31.0)

 

 

 

 

2,661.9

 

 

 

 

 

Sales to external customers - 2019 at 2020 average exchange rates

 

 

 

 

Sales to external customers 

1,420.0

578.6

618.0

2,616.6

 

 

 

 

 

 

 

 

 

 

Segment result

 

 

 

 

Segment result before share of results of joint ventures

270.3

81.6

32.1

384.0

Share of results of joint ventures 

-

1.5

4.7

6.2

Segment result 

270.3

83.1

36.8

390.2

Unallocated expenses

 

 

 

(38.1)

Operating profit before exceptional items & intangibles amortisation

 

 

 

352.1

Total exceptional items & intangibles amortisation

 

 

 

(674.3)

Net finance costs before exceptional items

 

 

 

(49.6)

Loss before tax from continuing operations

 

 

 

(371.8)

 

 

 

 

 

 

 

 

 

 

Segment result - 2019 at 2020 average exchange rates

 

 

 

 

Segment result before share of results of joint ventures

261.2

82.6

32.4

376.2

Share of results of joint ventures 

-

1.5

4.8

6.3

Segment result 

261.2

84.1

37.2

382.5

Unallocated expenses

 

 

 

(38.1)

Operating profit before exceptional items & intangibles amortisation

 

 

 

344.4

 

 

2. Segment information (continued)

 

Year ended 31 December 2019

Minerals

ESCO

Oil & Gas

Total

Group

 

£m

£m

£m

£m

 

 

 

 

 

Assets & liabilities

 

 

 

 

Intangible assets

579.5

700.9

268.0

1,548.4

Property, plant & equipment

293.5

122.2

137.5

553.2

Working capital assets 

701.1

217.0

297.8

1,215.9

 

1,574.1

1,040.1

703.3

3,317.5

Investments in joint ventures

-

15.2

21.4

36.6

Segment assets

1,574.1

1,055.3

724.7

3,354.1

Unallocated assets

 

 

 

498.1

Total assets

 

 

 

3,852.2

 

 

 

 

 

 

 

 

 

 

Working capital liabilities

408.2

87.8

133.5

629.5

Unallocated liabilities

 

 

 

1,709.3

Total liabilities

 

 

 

2,338.8

 

The following disclosures are given in relation to continuing operations.

 

 

 

 

 

 

Year ended

 

 

Period ended

Period ended

31 December 2019

 

 

30 June 2020

30 June 2019

£m

 

 

£m

£m

 

 

An analysis of the Group's revenue is as follows:

 

 

552.5

 

Original equipment

232.2

272.5

1,740.2

 

Aftermarket parts

731.1

881.7

2,292.7

 

Sale of goods

963.3

1,154.2

313.4

 

Provision of services

120.1

156.8

55.8

 

Construction contracts

11.4

18.4

2,661.9

 

Revenue

1,094.8

1,329.4

 

 

Minerals

ESCO

Oil & Gas

Total continuing

operations

 

 

Restated

 

 

 

Restated

 

Restated

 

30 June 2020

30 June 2019

30 June 2020

30 June 2019

30 June 2020

30 June 2019

30 June 2020

30 June 2019

 

£m

£m

£m

£m

£m

£m

£m

£m

Timing of revenue recognition

 

 

 

 

 

 

 

 

At a point in time

619.0

669.4

254.6

280.5

192.3

351.5

1,065.9

1,301.4

Over time

35.1

37.7

3.1

-

4.2

4.3

42.4

42.0

Segment revenue

654.1

707.1

257.7

280.5

196.5

355.8

1,108.3

1,343.4

Eliminations

 

 

 

 

 

 

(13.5)

(14.0)

 

 

 

 

 

 

 

1,094.8

1,329.4

 

3. Revenues & expenses          

 

The following disclosures are given in relation to continuing operations and exclude exceptional items & intangibles amortisation.

 

Year ended

 

 

Period ended

Period ended

31 December 2019

 

 

30 June 2020

30 June 2019

£m

 

 

£m

£m

 

 

A reconciliation of revenue to operating profit is as follows:

 

 

2,661.9

 

Revenue

1,094.8

1,329.4

(1,787.7)

 

Cost of sales

(734.0)

(893.7)

874.2

 

Gross profit

360.8

435.7

14.6

 

Other operating income

4.3

4.9

(270.5)

 

Selling & distribution costs

(110.5)

(138.1)

(272.4)

 

Administrative expenses

(124.7)

(133.4)

6.2

 

Share of results of joint ventures

3.0

3.1

352.1

 

Operating profit

132.9

172.2

 

Details of exceptional items and intangibles amortisation are provided in note 4.
 

4. Exceptional items & intangibles amortisation

 

Year ended

 

 

Period ended

Period ended

31 December 2019

 

 

30 June 2020

30 June 2019

£m

 

 

£m

 

 

Recognised in arriving at operating profit from continuing operations

 

 

(78.3)

 

Intangibles amortisation 

(27.8)

(38.9)

(10.7)

 

Exceptional item - ESCO acquisition and integration related costs

(1.7)

(3.4)

-

 

Exceptional item - Covid-19 restructuring and other costs

(6.7)

-

(30.8)

 

Exceptional item - other restructuring and rationalisation charges

(5.0)

0.5

-

 

Exceptional item - Black Economic Empowerment transaction

(4.4)

-

(472.9)

 

Exceptional item - Oil & Gas North America impairment - intangibles and goodwill

-

-

(73.3)

 

Exceptional item - Oil & Gas North America impairment - tangible assets

-

-

(6.3)

 

Exceptional item - other intangibles impairment

-

-

(2.3)

 

Exceptional item - legacy product warranty

-

-

0.3

 

Exceptional item - legal claims

-

0.3

(674.3)

 

 

(45.6)

(41.5)

 

 

 

 

 

 

 

Recognised in arriving at operating profit from discontinued operations

 

 

(0.4)

 

Exceptional item - restructuring

-

(0.4)

(0.4)

 

 

-

(0.4)

 

Continuing operations

Included in exceptional items is £1.7m of costs associated with the integration of ESCO into the Group following its acquisition in July 2018. The majority of these costs relate to project staff and restructuring. The integration activities and associated costs are expected to complete by 31 December 2020.

 

Due to the unprecedented Covid-19 pandemic, specific one-off and/or short-term measures have been taken to protect the Group's ability to generate future cash flows, ensure the immediate health and safety of the workforce and manage supply chain issues enabling us to continue to meet customer needs. ​Where specific costs have been deemed to be non-recurring in nature and as a direct result of the Covid-19 pandemic, these have been treated as exceptional items in line with the Group's existing accounting policy. Of the £6.7m recognised to date, £5.5m relates to severance costs across the Minerals and ESCO divisions, £5.0m and £0.5m respectively, due to a reduction in headcount. The remaining £1.2m relates to incremental costs such as one-off site decontaminations, additional freight costs for existing customer orders and employee support costs, primarily for quarantined staff in the Middle East. The charge is split £0.7m in Minerals, £0.1m ESCO and £0.4m Oil & Gas. The impact of under-recoveries from mandated or voluntary site shutdowns, as well as costs for items such as disposable face masks and increased routine cleaning, have not been treated as exceptional items and are included within operating profit. Although both are related to Covid-19, these are considered "sunk costs" or of a consumable and/or recurring nature for at least the immediate to medium-term future as the pandemic continues.

 

The continued deep downturn in oil and gas markets through the period to June, exacerbated by Covid-19, has resulted in further steps to right-size the Oil & Gas division and certain central functions to protect short-term cash generation. This resulted in £5.0m costs across the Oil & Gas division (£3.4m) and Head Office (£1.6m), primarily related to severance, due to a reduction in headcount.

 

The Black Economic Empowerment transaction is a one-off charge for the completion of a Broad-based Black Economic Empowerment ("B-BBEE") ownership transaction by the Group's subsidiary, Weir Minerals South Africa (Pty) Ltd (WMSA) with Medu Capital (Pty) Ltd ("Medu Capital"). The transaction will result in WMSA being '25%+1' Black-owned (as defined in the Broad-Based Black Economic Empowerment Act 53 of 2003). The business will continue to be fully consolidated in the Group's financial statements. This ownership structure better reflects the demographics of South Africa and reiterates Weir's long-term commitment to the country and to the communities in which we operate. It will also differentiate WMSA from many of its competitors as one of the few '25%+1' empowered mining technology companies in South Africa.

 

The consideration from Medu Capital includes a payment of £5.4m received on 23 April 2020 for 40% of the '25%+1' shareholding, with the remaining 60% covered by a notional loan served by declared dividends over a maximum period of 8 years. Full entitlement to the shares (economic and voting rights) is achieved on full settlement of the notional loan. The exceptional charge of £4.4m includes £3.6m non-cash IFRS 2 charge representing the fair value of the remaining 60% shareholding with £0.8m incurred for consultancy and legal fees required to complete the transaction.

 

The prior period to 30 June 2019 included costs associated with the integration of ESCO into the Group following its acquisition in July 2018. The credits related to unutilised provisions recognised in 2018 for restructuring and rationalisation charges and legal claims.

 

Discontinued operations

The prior year exceptional item of £0.4m was for the impairment of inventory due to restructuring.
 

5. Tax expense

 

Year ended

 

 

Period ended

Period ended

31 December 2019

 

 

30 June 2020

30 June 2019

£m

 

 

£m

£m

 

 

Continuing operations

 

 

(0.9)

 

Group - UK

(1.2)

(1.2)

19.3

 

Group - overseas

(15.5)

(26.7)

18.4

 

Continuing operations total income tax (expense) credit in the Consolidated Income Statement 

(16.7)

(27.9)

 

 

 

 

 

 

 

The total income tax (expense) credit is disclosed in the Consolidated Income Statement as follows:

 

 

(73.8)

 

      - continuing operations before exceptional items & intangibles amortisation

(26.2)

(37.3)

(0.5)

 

      - discontinued operations before exceptional items and intangibles amortisation

-

(0.6)

11.2

 

      - exceptional items

3.0

(14.3)

67.3

 

      - intangibles amortisation and impairment

6.5

8.5

4.2

 

Total income tax (expense) credit in the Consolidated Income Statement 

(16.7)

(43.7)

 

 

 

 

 

(1.3)

 

Total income tax expense included in the Group's share of results of joint ventures

(0.8)

(0.6)

 

The underlying effective tax rate for the full financial year 2020 for continuing operations is estimated at 24.2% (2019: 25.3%), based on the weighted average effective tax rate across all jurisdictions. Therefore, the underlying effective tax rate used for the half year 2020 was 24.2% (2019: 25.3%).

 

On 25 April 2019 the European Commission (EC) released its full decision in relation to its State Aid investigation into the Group Financing Exemption (GFE) included within the UK's controlled foreign company (CFC) legislation. While it is narrower than the original concerns raised and confirms that the CFC legislation as amended with effect from 1 January 2019 is compliant with EU State Aid rules, the decision concludes that, up to 31 December 2018, aspects of the legislation constitute State Aid.

 

In common with other international groups, the Group has benefited from the GFE contained within the CFC legislation and may therefore be affected by the decision should it ultimately be upheld. The estimated maximum contingent liability, excluding interest, is approximately £19m.

 

The UK Government, together with a number of affected taxpayers, including the Group, have lodged annulment applications with the General Court of the European Union in response to this decision and there remains considerable uncertainty as to the outcome of both the appeals process and any recovery mechanism. The Group considers that no provision is required in respect of this issue at present and will continue to review this position.
 

6. Discontinued operations

 

The Group disposed of the Flow Control division on 28 June 2019 for an enterprise value of £275.0m and a net consideration of £263.4m, after customary working capital and debt-like adjustments. In January 2020 the Group paid £4.5m to First Reserve and wrote off £0.2m receivable from First Reserve to settle the final element of the total consideration of £258.7m which was determined as part of the agreed completion accounts process and accounted for in 2019. Previously reported as an individual reporting segment, the results of previous periods are presented in the financial statements as discontinued operations.

 

There are no financial results for the period to 30 June 2020.

 

Financial performance and cash flow information for discontinued operations

 

 

 

 

Period ended 30 June 2019

Year ended

 

 

Before exceptional items & intangibles amortisation

Exceptional items & intangibles amortisation

 

31 December 2019

 

 

 

Total

 

 

Total

£m

 

 

£m

£m

£m

150.0

 

Revenue

150.0

-

150.0

(3.3)

 

Operating loss

(2.9)

(0.4)

(3.3)

(0.5)

 

Finance costs

(0.5)

-

(0.5)

(3.8)

 

Loss before tax from discontinued operations

(3.4)

(0.4)

(3.8)

(0.5)

 

Tax expense

(0.6)

-

(0.6)

(4.3)

 

Loss after tax from discontinued operations

(4.0)

(0.4)

(4.4)

(21.7)

 

Loss on sale of the subsidiaries after income tax (see below)

-

(20.3)

(20.3)

(26.0)

 

Loss for the period from discontinued operations

(4.0)

(20.7)

(24.7)

 

 

 

 

 

 

(20.5)

 

Reclassification of foreign currency translation reserve

(20.5)

-

(20.5)

(0.2)

 

Other comprehensive expense from discontinued operations

-

-

-

(20.7)

 

Net other comprehensive expense from discontinued operations

(20.5)

-

(20.5)

 

Year ended

 

 

Period ended

31 December 2019

 

 

30 June

2019

£m

 

 

£m

(29.0)

 

Cash flows from operating activities

(28.8)

(7.5)

 

Cash flows from investing activities

(7.5)

(2.2)

 

Cash flows from financing activities

(2.2)

(38.7)

 

Net decrease in cash and cash equivalents from discontinued operations

(38.5)

 

Details of the sale of the subsidiaries

 

 

Year ended

 

31 December 2019

 

£m

Consideration received

 

Cash received

263.4

Completion accounts

(4.7)

Total disposal consideration

258.7

Carrying amount of net assets sold

(270.1)

Costs of disposal

(17.1)

Loss on sale before income tax and reclassification of foreign currency translation reserve

(28.5)

Reclassification of foreign currency translation reserve

20.5

Loss on sale before income tax

(8.0)

Income tax charge

(13.7)

Loss on sale after income tax

(21.7)

 

The carrying amount of assets and liabilities as at the date of sale were as follows.

 

 

£m

Property, plant & equipment

95.7

Intangible assets

98.4

Inventories

79.1

Trade & other receivables

150.7

Cash & short-term deposits

2.1

Trade & other payables

(140.5)

Provisions

(14.9)

Net assets

270.6

Non-controlling interests

(0.5)

Net assets attributable to equity holders of the Company

270.1

 

Loss per share

Loss per share from discontinued operations were as follows.

 

Year ended

 

 

Period ended

31 December 2019

 

 

30 June

2019

pence

 

 

pence

(10.0)

 

Basic

(9.5)

(10.0)

 

Diluted

(9.5)

 

The loss per share figures were derived by dividing the net loss attributable to equity holders of the Company from discontinued operations by the weighted average number of ordinary shares, both basic and diluted amounts, shown in note 7.
 

7. Earnings (loss) per share

 

Basic earnings (loss) per share amounts are calculated by dividing net profit (loss) for the period attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted earnings (loss) per share amounts are calculated by dividing the net profit (loss) attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during the period, adjusted for the effects of dilutive share awards.

 

The following reflects the earnings and share data used in the calculation of earnings (loss) per share.

 

Year ended

 

 

Period ended

Period ended

31 December 2019

 

 

30 June 2020

30 June 2019

 

 

Profit (loss) attributable to equity holders of the Company

 

 

(379.9)

 

  Total operations* (£m)

45.7

52.8

(353.9)

 

  Continuing operations* (£m)

45.7

77.5

228.2

 

  Continuing operations before exceptional items & intangibles amortisation* (£m)

81.8

109.6

 

 

 

 

 

 

 

Weighted average share capital

 

 

259.5

 

Basic earnings (loss) per share (number of shares, million)

259.5

259.7

261.2

 

Diluted earnings (loss) per share (number of shares, million)

261.7

261.5

 

The difference between the weighted average share capital for the purposes of the basic and the diluted earnings per share calculations is analysed as follows.

 

Year ended

 

 

Period ended

Period ended

31 December 2019

 

 

30 June 2020

30 June 2019

Shares

 

 

Shares

Shares

million

 

 

million

million

259.5

 

Weighted average number of ordinary shares for basic earnings (loss) per share

259.5

259.7

1.7

 

Effect of dilution:  employee share awards

2.2

1.8

261.2

 

Adjusted weighted average number of ordinary shares for diluted earnings (loss) per share 

261.7

261.5

 

The profit (loss) attributable to equity holders of the Company used in the calculation of both basic and diluted earnings (loss) per share from continuing operations before exceptional items and intangibles amortisation is calculated as follows.

 

Year ended

 

 

Period ended

Period ended

31 December 2019

 

 

30 June 2020

30 June 2019

£m

 

 

£m

£m

(353.9)

 

Net profit (loss) attributable to equity holders from continuing operations*

45.7

77.5

582.1

 

Exceptional items & intangibles amortisation net of tax

36.1

32.1

228.2

 

Net profit (loss) attributable to equity holders from continuing operations before exceptional items & intangibles amortisation*

 

81.8

109.6

 

Year ended

 

 

Period ended

Period ended

31 December 2019

 

 

30 June 2020

30 June 2019

pence

 

 

pence

pence

 

 

Basic earnings (loss) per share:

 

 

(146.4)

 

  Total operations*

17.6

20.3

(136.4)

 

  Continuing operations*

17.6

29.8

87.9

 

  Continuing operations before exceptional items & intangibles amortisation*

31.5

42.2

 

 

 

 

 

 

 

Diluted earnings (loss) per share:

 

 

(146.4)

 

  Total operations*

17.5

20.2

(136.4)

 

  Continuing operations*

17.5

29.6

87.4

 

  Continuing operations before exceptional items & intangibles amortisation*

31.3

41.9

*Adjusted for £0.1m (2019: £0.3m) in respect of non-controlling interests.

 

There have been no share options (2019: nil) exercised between the reporting date and the date of signing of these financial statements.

 

8. Dividends paid & proposed

 

Year ended

 

 

Period ended

Period ended

31 December 2019

 

 

30 June 2020

30 June 2019

£m

 

 

£m

£m

 

 

Declared & paid during the period

 

 

 

 

Equity dividends on ordinary shares

 

 

78.9

 

Final dividend for 2019: nil (2018: 30.45p)

-

78.9

42.8

 

Interim dividend: nil (2019: 16.50p)

-

-

121.7

 

 

-

78.9

 

 

 

 

 

79.1

 

Final dividend for 2019 proposed for approval by shareholders at the AGM: nil

-

-

-

 

Interim dividend for 2020 declared by the Board: nil (2019: 16.50p)

-

42.8

 

The proposed final dividend and declared interim dividend are based on the number of shares in issue, excluding treasury shares held, at the date the financial statements were approved and authorised for issue. In response to the Covid-19 pandemic, on 25 March 2020, the Board took the decision to withdraw the proposal to pay the final 2019 dividend as part of wider cash preservation actions taken by the Group. The Board have not proposed an interim dividend for 2020.
 

9. Property, plant & equipment, intangible and right-of-use assets

 

The following disclosures are additions to the balance sheet relating to the normal course of business and do not include any additions made by way of business combinations.

 

Year ended

 

 

Period ended

Period ended

31 December 2019

 

 

30 June 2020

30 June 2019

£m

 

 

£m

£m

 

 

Additions of property, plant & equipment, intangible & right-of-use assets - continuing operations

 

 

5.6

 

  Land & buildings

5.2

3.0

86.9

 

  Plant & equipment

27.0

42.7

23.7

 

  Intangible assets 

8.7

8.9

46.9

 

  Right-of-use assets

14.2

28.3

163.1

 

 

55.1

82.9

 

 

 

 

 

 

 

Additions of property, plant & equipment, intangible & right-of-use assets - discontinued operations

 

 

1.2

 

  Land & buildings

-

1.2

5.3

 

  Plant & equipment

-

5.3

0.4

 

  Intangible assets 

-

0.4

0.4

 

  Right-of-use assets

-

0.4

7.3

 

 

-

7.3

 

10. Provisions

 

 

Warranties & onerous sales contracts

Asbestos-related

Employee-related

Exceptional rationalisation

Other

Total

 

£m

£m

£m

£m

£m

£m

At 31 December 2019

13.5

47.6

17.8

12.8

11.8

103.5

Additions

3.7

3.3

6.3

14.2

1.6

29.1

Utilised

(5.7)

(3.7)

(6.5)

(14.8)

(0.2)

(30.9)

Unutilised

(0.2)

(0.1)

-

-

(0.3)

(0.6)

Exchange adjustment

0.6

3.2

0.6

0.6

0.7

5.7

At 30 June 2020

11.9

50.3

18.2

12.8

13.6

106.8

 

 

 

 

 

 

 

Current

11.5

7.0

8.0

11.1

3.8

41.4

Non-current

0.4

43.3

10.2

1.7

9.8

65.4

At 30 June 2020

11.9

50.3

18.2

12.8

13.6

106.8

 

 

 

 

 

 

 

Current

16.0

11.5

8.0

5.3

3.6

44.4

Non-current

1.8

40.4

10.6

3.6

9.8

66.2

At 30 June 2019

17.8

51.9

18.6

8.9

13.4

110.6

 

 

 

 

 

 

 

Current

12.4

7.2

7.7

12.0

2.9

42.2

Non-current

1.1

40.4

10.1

0.8

8.9

61.3

At 31 December 2019

13.5

47.6

17.8

12.8

11.8

103.5

 

Warranties & onerous sales contracts

Provision has been made in respect of actual warranty and contract penalty 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. It is expected that all costs related to such claims will have been incurred within five years of the balance sheet date.

 

Provision has been made in respect of sales contracts entered into for the sale of goods in the normal course of business where the unavoidable costs of meeting the obligations under the contracts exceed the economic benefits expected to be received from the contracts. Provision is made immediately when it becomes apparent that expected costs will exceed the expected benefits of the contract. It is expected that the majority of these costs will be incurred within one year of the balance sheet date.

 

Asbestos-related claims

Certain of the Group's current and former US-based subsidiaries are co-defendants in lawsuits pending in the United States in which plaintiffs are claiming damages arising from alleged exposure to products previously manufactured which contained asbestos. The Group has comprehensive insurance cover for cases of this nature with all claims directly managed by the Group's insurers who also meet associated defence costs. The insurers and their legal advisers agree and execute the defence strategy between them. There are currently no related cash flows to or from the Group, and we expect this to continue for the foreseeable future.

 

In 2017, as part of our planned triennial actuarial update, 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 advisors. Details of the review are included in note 21 of the 2019 Annual Report. The next triennial review will be completed during H2 2020, with the results reflected in the 2020 Annual Report.

 

Due to the inherent uncertainty resulting from the changing nature of the US litigation environment, and in conjunction with the actuarial review, the Directors consider 10 years (2019: 10 years) of projected claims to provide a reliable estimate of the future liability. This has resulted in a provision of £47.1m (December 2019: £44.4m) which represents the Directors' best estimate of the future liability. The insurance asset remains sufficient to match the Directors' best estimate of the future liability and therefore a corresponding asset continues to be recognised for insurance proceeds.

 

In the UK, there are outstanding asbestos-related claims which are not the subject of insurance cover. The extent of the UK asbestos exposure involves a series of legacy employer's liability claims which all relate to former UK operations and employment periods in the 1960s and 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 (FSCS). 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 period resulting in a provision of £3.2m (December 2019: £3.2m).

 

Employee-related

Employee-related provisions arise from legal obligations, the majority of which relate to compensation associated with periods of service.

 

Exceptional rationalisation

The additions in the period total £14.2m and include £6.7m related to Covid-19 restructuring and other costs, £5.0m for restructuring in relation to Oil & Gas, £0.8m in relation to Broad-based Black Economic Empowerment costs and £1.7m in relation to ESCO integration costs. Of the current year exceptional costs, £7.8m has been cash settled with the remaining balance primarily relating to outstanding severance costs.

 

Of the opening provision of £12.8m, £6.3m is still outstanding with £2.2m in Minerals and £3.7m in Oil & Gas for restructuring and rationalisation costs still to be settled.
 

10. Provisions (continued)

 

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. Where certain outcomes are unknown, a range of possible scenarios is calculated, with the most likely being reflected in the provision.

 

11. Interest-bearing loans and borrowings

 

The Group utilises a number of sources of funding including private placement debt, revolving credit facility, term loan, issuance of Euro commercial paper and uncommitted facilities.

 

During the period, the Group completed the refinancing of its main banking facilities, including a renewal of the US$950m Revolving Credit Facility (RCF) due to expire in September 2021, which has been refinanced with a syndicate of 12 global banks and will mature in June 2023 with the option to extend for up to a further two years. The Group's £300m term loan facility was also replaced, previously maturing in December 2020 and refinanced as a £200m facility to mature in March 2022. Both the RCF and term loan now include a link to the Group's sustainability goals and the covenant terms remain unchanged.

 

In February 2020, the Group entered into a new loan facility under the UK Government's Covid Corporate Financing Facility ("CCFF"). The total available amount under the facility is £300m of which £nil was drawn as at 30 June 2020 (2019: £nil) and is due to mature in May 2021.

 

At 30 June 2020, the Group had £638.2m (2019: £622.3m) of private placement debt in issue, £389.7m (2019: £402.4m) drawn under the revolving credit facility, £200.0m (2019: £300.0m) drawn on the term loan facility, £87.2m (2019: £264.9m) of debt issued under the commercial paper programme and £27.3m (2019: £28.1m) drawn on uncommitted facilities. Total unamortised issue costs at 30 June 2020 were £8.0m (2019: £1.3m).

 

12. Pensions & other post-employment benefit plans

 

31 December 2019

 

 

30 June 2020

30 June 2019

£m

 

 

£m

£m

-

 

Plan in surplus

1.5

-

(138.7)

 

Plans in deficit

(186.6)

(150.7)

(138.7)

 

Continuing plans in deficit - net

(185.1)

(150.7)

 

Plans in deficit increased by £47.9m in the period ended 30 June 2020. The deficit has increased primarily due to market conditions, mainly reflecting reductions in discount rates over the period. This is partially offset by gains on the asset side and contributions paid to the plans over the period. The plan in surplus in the period is the Canadian ESCO Corporation Limited National Pension Plan, which was previously £0.2m in deficit at December 2019. A charge of £47.4m (2019: £5.8m) has been recognised in the Consolidated Statement of Comprehensive Income.

 

 

13. Financial instruments

 

31 December 2019

 

 

30 June 2020

30 June 2019

£m

 

 

£m

£m

 

 

Included in non-current assets

 

 

4.1

 

Cross currency swaps designated as net investment hedges

0.1

0.2

0.3

 

Other forward foreign currency contracts

0.3

0.8

4.4

 

 

0.4

1.0

 

 

 

 

 

 

 

Included in current assets

 

 

0.3

 

Forward foreign currency contracts designated as cash flow hedges

4.0

0.1

1.5

 

Forward foreign currency contracts designated as net investment hedges

1.8

3.9

14.7

 

Other forward foreign currency contracts

15.5

24.6

16.5

 

 

21.3

28.6

 

 

 

 

 

 

 

Included in current liabilities

 

 

(10.3)

 

Forward foreign currency contracts designated as cash flow hedges

(0.3)

-

(0.6)

 

Forward foreign currency contracts designated as net investment hedges

-

(4.0)

(13.9)

 

Other forward foreign currency contracts

(16.2)

(15.0)

(24.8)

 

 

(16.5)

(19.0)

 

 

 

 

 

 

 

Included in non-current liabilities

 

 

(0.3)

 

Other forward foreign currency contracts

(0.5)

(0.7)

(0.3)

 

 

(0.5)

(0.7)

 

 

 

 

 

(4.2)

 

Net derivative financial assets (liabilities)

4.7

9.9

 

Carrying amounts & fair values

Set out below is a comparison of carrying amounts and fair values of all of the Group's financial instruments that are reported in the financial statements.

 

Carrying amount

Fair value

 

 

Carrying amount

Fair value

Carrying amount

Fair value

31 December 2019

31 December 2019

 

 

30 June 2020

30 June 2020

30 June 2019

30 June 2019

£m

£m

 

 

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

Financial assets

 

 

 

 

15.0

15.0

 

Derivative financial instruments recognised at fair value through profit or loss

15.8

15.8

25.4

25.4

5.9

5.9

 

Derivative financial instruments in designated hedge accounting relationships

5.9

5.9

4.2

4.2

552.9

552.9

 

Trade & other receivables excluding statutory assets, prepayments & construction contract assets

501.0

501.0

653.9

653.9

273.8

273.8

 

Cash & short-term deposits

356.7

356.7

499.0

499.0

847.6

847.6

 

 

879.4

879.4

1,182.5

1,182.5

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities

 

 

 

 

14.2

14.2

 

Derivative financial instruments recognised at fair value through profit or loss

16.7

16.7

15.7

15.7

10.9

10.9

 

Derivative financial instruments in designated hedge accounting relationships

0.3

0.3

4.0

4.0

 

 

 

Amortised cost:

 

 

 

 

595.2

640.3

 

   Fixed rate borrowings

637.8

696.3

621.8

675.5

648.4

648.4

 

   Floating rate borrowings

696.6

696.6

994.6

994.6

185.0

185.0

 

Leases

188.8

188.8

197.7

197.7

1.7

1.7

 

Bank overdrafts & short-term borrowings

0.2

0.2

1.0

1.0

511.0

511.0

 

Trade & other payables excluding statutory liabilities & contract liabilities

432.6

432.6

476.4

476.4

1,966.4

2,011.5

 

 

1,973.0

2,031.5

2,311.2

2,364.9

 

The Group enters into derivative financial instruments with various counterparties, principally financial institutions with investment grade credit ratings.  The derivative financial instruments are valued using valuation techniques with market observable inputs including spot and forward foreign exchange rates, interest rate curves, counterparty and own credit risk. The fair value of cross currency swaps is calculated as the present value of the estimated future cash flows based on spot foreign exchange rates.  The fair value of forward foreign currency contracts is calculated as the present value of the estimated future cash flows based on spot and forward foreign exchange rates.

 

The fair value of borrowings is estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities. The fair value of lease liabilities is estimated by discounting future cash flows using the rate implicit in the lease or the Group's incremental borrowing rate.  The fair value of cash and short-term deposits, trade and other receivables and trade and other payables approximates their carrying amount due to the short-term maturities of these instruments.

 

The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;

Level 2: other techniques for which all inputs that have a significant effect on the recorded fair value are observable, either directly or indirectly;

Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.

 

For financial instruments that are recognised at fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. The Group holds all financial instruments at level 2 fair value measurement.

 

During the period ended 30 June 2020 and the year ended 31 December 2019, 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.
 

14. Additional cash flow information

 

 

 

 

 

 

Restated (note 1)

Year ended

 

 

Period ended

Period ended

31 December 2019

 

 

30 June 2020

30 June 2019

£m

 

 

£m

£m

 

 

Total operations

 

 

 

 

Net cash generated from operations

 

 

(322.2)

 

Operating profit (loss) - continuing operations

87.3

130.7

(3.3)

 

Operating loss - discontinued operations

-

(3.3)

(325.5)

 

Operating profit (loss) - total operations

87.3

127.4

596.4

 

Exceptional items

17.8

3.1

78.3

 

Amortisation of intangible assets

27.8

38.9

(6.2)

 

Share of results of joint ventures

(3.0)

(3.1)

62.4

 

Depreciation of property, plant & equipment

28.3

33.7

42.4

 

Depreciation of right-of-use assets

23.3

20.3

-

 

Impairment of property, plant & equipment

-

0.1

(1.1)

 

Grants received

-

-

(2.0)

 

Gains on disposal of property, plant & equipment

(0.9)

(0.4)

(4.9)

 

Funding of pension & post-retirement costs

(1.0)

(1.3)

12.9

 

Employee share schemes

5.2

6.8

12.1

 

Transactional foreign exchange

10.2

7.5

(1.8)

 

(Decrease) increase in provisions

(1.5)

2.3

463.0

 

Cash generated from operations before working capital cash flows

193.5

235.3

(36.8)

 

Increase in inventories

(23.4)

(60.7)

64.5

 

Decrease in trade & other receivables & construction contracts

126.1

1.7

(83.1)

 

Decrease in trade & other payables & construction contracts

(104.6)

(122.4)

407.6

 

Cash generated from operations

191.6

53.9

(12.9)

 

Additional pension contributions paid

(6.7)

(5.7)

(41.0)

 

Exceptional cash items

(14.3)

(25.6)

(90.2)

 

Income tax paid

(26.4)

(38.4)

263.5

 

Net cash generated from (used in) operating activities

144.2

(15.8)

 

The employee-related provision and associated insurance asset in relation to US asbestos-related claims with an exposure date pre-1981 disclosed in note 10 did not result in any cash flows either to or from the Group and therefore they have been excluded from the table above.

 

Cash flows from discontinued operations in 2019 are disclosed separately in note 6.

 

The following tables summarise the cash flows arising on acquisitions and disposals.

 

Year ended

 

 

Period ended

Period ended

31 December 2019

 

 

30 June 2020

30 June 2019

£m

 

 

£m

£m

 

 

 

 

 

 

 

Acquisitions of subsidiaries

 

 

(0.1)

 

Acquisition of subsidiaries - cash paid

-

(0.1)

(0.1)

 

Total cash outflow relating to acquisitions

-

(0.1)

 

 

 

 

 

 

 

Net cash inflow arising on disposal

 

 

244.6

 

Consideration received net of costs paid & cash disposed of

-

252.7

0.1

 

Prior period disposals - settlement of final costs and final completion adjustment

(4.7)

0.1

244.7

 

Total cash (outflow) inflow relating to disposals

(4.7)

252.8

 

The following table summarises the net debt position.

 

Year ended

 

 

Period ended

Period ended

31 December 2019

 

 

30 June 2020

30 June 2019

£m

 

 

£m

£m

 

 

Net debt comprises the following

 

 

273.8

 

Cash & short-term deposits

356.7

499.0

(534.1)

 

Current interest-bearing loans & borrowings

(153.7)

(337.7)

(896.2)

 

Non-current interest-bearing loans & borrowings

(1,369.7)

(1,477.4)

(1,156.5)

 

 

(1,166.7)

(1,316.1)

 

 

14. Additional cash flow information (continued)

 

Reconciliation of financing cash flows to movement in net debt

 

 

Opening balance at 31 December 2019

Cash movements

Additions

FX

Non-cash movements

Closing balance at 30 June 2020

 

£m

£m

£m

£m

£m

£m

Cash & cash equivalents

272.1

76.9

-

7.5

-

356.5

 

 

 

 

 

 

 

Third party loans

(1,244.5)

(32.9)

-

(65.0)

-

(1,342.4)

Leases

(185.0)

20.8

(16.4)

(8.8)

0.6

(188.8)

Unamortised issue costs

0.9

7.3

-

-

(0.2)

8.0

Amounts included in gross debt

(1,428.6)

(4.8)

(16.4)

(73.8)

0.4

(1,523.2)

 

 

 

 

 

 

 

Amounts included in net debt

(1,156.5)

72.1

(16.4)

(66.3)

0.4

(1,166.7)

 

 

 

 

 

 

 

Financing derivatives

(3.8)

6.4

-

-

5.9

8.5

Other (liabilities) assets relating to financing activities

(3.8)

6.4

-

-

5.9

8.5

 

 

 

 

 

 

 

Total financing liabilities*

(1,432.4)

1.6

(16.4)

(73.8)

6.3

(1,514.7)

*Total financing liabilities comprise gross debt plus other liabilities or assets relating to financing activities.

 

 

Opening balance at 30 June 2019

Cash movements

Additions

FX

Non-cash movements

Closing balance at 31 December 2019

 

£m

£m

£m

£m

£m

£m

Cash & cash equivalents

498.0

(203.0)

-

(22.9)

-

272.1

 

 

 

 

 

 

 

Third party loans

(1,617.7)

322.6

-

50.6

-

(1,244.5)

Leases

(197.7)

20.5

(17.5)

9.6

0.1

(185.0)

Unamortised issue costs

1.3

-

-

-

(0.4)

0.9

Amounts included in gross debt

(1,814.1)

343.1

(17.5)

60.2

(0.3)

(1,428.6)

 

 

 

 

 

 

 

Amounts included in net debt

(1,316.1)

140.1

(17.5)

37.3

(0.3)

(1,156.5)

 

 

 

 

 

 

 

Financing derivatives

11.5

18.6

-

-

(33.9)

(3.8)

Other assets (liabilities) relating to financing activities

11.5

18.6

-

-

(33.9)

(3.8)

 

 

 

 

 

 

 

Total financing liabilities *

(1,802.6)

361.7

(17.5)

60.2

(34.2)

(1,432.4)

*Total financing liabilities comprise gross debt plus other liabilities or assets relating to financing activities.

 

15. Related party disclosure

 

The following table provides the total amount of significant transactions which have been entered into with related parties for the relevant financial period and outstanding balances at the period end.

 

Year ended

 

 

Period ended

Period ended

31 December 2019

 

 

30 June 2020

30 June 2019

£m

 

 

£m

£m

9.6

 

Sales of goods to related parties - joint ventures

4.7

2.0

0.2

 

Sales of services to related parties - joint ventures

-

1.4

21.4

 

Purchases of goods from related parties - joint ventures

9.9

11.9

0.8

 

Purchases of services from related parties - joint ventures

-

-

6.1

 

Amounts owed to related parties - group pension plans

1.2

1.6

 

16. Exchange rates

 

The principal exchange rates applied in the preparation of these interim financial statements were as follows.

 

Year ended

 

 

Period ended

31 December 2019

 

 

30 June 2020

30 June 2019

 

 

Average rate (per £)

 

 

1.28

 

US Dollar

1.26

1.29

1.84

 

Australian Dollar

1.92

1.83

1.14

 

Euro

1.15

1.14

1.69

 

Canadian Dollar

1.72

1.72

4.69

 

United Arab Emirates Dirham

4.64

4.75

897.37

 

Chilean Peso

1,023.61

872.86

18.43

 

South African Rand 

20.89

18.35

5.03

 

Brazilian Real

6.17

4.97

82.53

 

Russian Rouble

87.47

84.28

 

 

Closing rate (per £)

 

 

1.33

 

US Dollar

1.24

1.27

1.89

 

Australian Dollar

1.80

1.81

1.18

 

Euro

1.10

1.12

1.72

 

Canadian Dollar

1.69

1.66

4.87

 

United Arab Emirates Dirham

4.55

4.66

994.76

 

Chilean Peso

1,017.24

861.30

18.54

 

South African Rand 

21.51

17.91

5.33

 

Brazilian Real

6.76

4.87

82.29

 

Russian Rouble

88.10

80.15

 

Directors' Statement of Responsibilities

 

The directors confirm that this set of interim financial statements has been prepared in accordance with IAS 34 "Interim Financial Reporting" as adopted by the European Union, and that the interim management report herein includes a fair review of the information required by the Disclosure and Transparency Rules of the Financial Conduct Authority, paragraphs DTR 4.2.7 and DTR 4.2.8, namely:

 

·      an indication of important events that have occurred during the first six months and their impact on the set of interim financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

 

·      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.

 

On behalf of the Board

John Heasley

Chief Financial Officer

29 July 2020

 

 

Independent review report to The Weir Group PLC

 

Report on the interim financial statements

 

Our conclusion

We have reviewed The Weir Group PLC's interim financial statements (the "interim financial statements") in the interim report of The Weir Group PLC for the 6 month period ended 30 June 2020. 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 International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

 

What we have reviewed

The interim financial statements comprise:

·      the Consolidated Balance Sheet as at 30 June 2020;

·      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 have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

 

As disclosed in note 1 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

 

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.

 

Our responsibility is to express a conclusion on the interim financial statements in the interim report based on our review. 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.

 

 

What a review of interim financial statements involves

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

 

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

 

 

 

PricewaterhouseCoopers LLP

Chartered Accountants

Glasgow

29 July 2020

 

 

Shareholder Information

 

The Board have not declared an interim dividend for 2020 (2019: 16.50p).

 

Our Interim Report will be available to download from The Weir Group PLC website at global.weir shortly.

 

 

 

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


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
 
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