TIDMWEIR
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
o Safety of our people, customers and communities came first;
TIR(1) down 53%
o Fully supporting customers while taking decisive action to
reduce costs and preserve cash
o Delivery of GBP100m Iron Bridge order on track; majority to be
delivered in H2
-- Resilient aftermarket (AM) demand in core mining markets
reflects mission-critical technology
o Minerals orders(4) -6%; AM -4% against record high H1 19, +7%
sequentially on H2 19
o ESCO orders(4) -17%; Covid-19 disruption to infrastructure and
mining de-stocking
-- Operating profit(2) of GBP133m: mining divisions broadly flat
YoY supported by cost actions
o Minerals revenues(4) -4%; margins maintained at 17.3%
o ESCO revenues(4) -10%; margins +190bps to 16.1%, +500bps since
acquisition
o Oil & Gas revenues (4) -48%; GBP4m operating loss(2) but
positive cash from operations(2)
-- Balance sheet and liquidity remains robust
o Operating cash flow(2) of GBP192m; Net debt/EBITDA on covenant
basis 2.6x
o Refinanced main banking facilities; c.GBP650m of available
liquidity excluding CCFF
o No interim dividend proposed due to ongoing uncertainty and to
support deleveraging
-- Covid-19 experience has reinforced our conviction in our
strategic direction
o Mining is an essential industry with a vital and attractive
role for partners like Weir
o Focus on technology investments is delivering smart,
efficient, sustainable mining solutions
o 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-- Outlook: Guidance remains withdrawn while Covid-19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
Currency(4)
Continuing Operations(3)
========================== ========== ========== ============ =============
Orders(4) GBP1,141m GBP1,407m n/a -19%
========================== ========== ========== ============ =============
Revenue GBP1,095m GBP1,329m -18% -17%
========================== ========== ========== ============ =============
Operating profit(2) GBP133m GBP172m -23% -22%
========================== ========== ========== ============ =============
Profit before tax(2) GBP108m GBP147m -27% n/a
========================== ========== ========== ============ =============
Reported profit before GBP63m GBP106m -41% n/a
tax
========================== ========== ========== ============ =============
Earnings per share(2) 31.5p 42.2p -25% n/a
========================== ========== ========== ============ =============
Total Group
========================== ========== ========== ============ =============
Reported profit after GBP46m GBP53m -13% n/a
tax
========================== ========== ========== ============ =============
Reported earnings per
share 17.6p 20.3p -13% n/a
========================== ========== ========== ============ =============
Operating cash flow(2) GBP192m GBP54m 256% n/a
========================== ========== ========== ============ =============
Dividend per share - 16.5p -100% n/a
========================== ========== ========== ============ =============
Net debt(5) GBP1,167m GBP1,157m -GBP10m GBP56m
(6)
========================== ========== ========== ============ =============
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 +44 (0) 020 7638 9571
Dewe Rogerson 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.GBP75m 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 GBP140m 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
GBP200m Term Loan. In addition, we have obtained access to up to
GBP300m 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.GBP1m, 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 GBP192m 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 Progress in H1 2020
KPI
-------------- ----------------------- ----------------------------------------------------------------
Improve sustainable
engagement * 0.2 increase in employee engagement to 8.1; 81%
People and organisational participation in global employee survey
effectiveness
* Developed global HR management system; H2 roll-out
* Comprehensive Inclusion and Diversity programme
including all-employee training launched
-------------- ----------------------- ------------------------------------------------------------------
Increase market
Customers share * Minerals: GBP83m in Integrated Solutions orders
* ESCO: 99 net machine conversions
* O&G: EXL gaining share in power ends and fluid ends
-------------- ----------------------- ------------------------------------------------------------------
Increase revenues
Technology from new solutions(7) * GBP55m in revenues from new products(7)
* Field testing next generation Warman(R) slurry pump
* Commercialised innovative GET Toolhead(R) solution
-------------- ----------------------- ------------------------------------------------------------------
Sustainably
Performance higher margins * Minerals margins maintained
through the
cycle
* 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 Enabling net zero First order for pilot Terraflowing(R)
solutions tailings plant
--------------------- -------------------- --------------------------------------
Reducing our 50% reduction Completed energy reduction pilots;
footprint in relative CO(2) moving to increase proportion
e by 2030 of energy from renewables
--------------------- -------------------- --------------------------------------
Nurturing our Leading Employee eNPS of +34, up from +28 in
unique culture Net Promotor Score 2019
(eNPS)
--------------------- -------------------- --------------------------------------
Championing Zero Zero Total Incident 53% reduction to 0.27
Harm Rate
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 Minerals ESCO Oil & Unallocated Total Total Total
GBPm(3) Gas expenses OE 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:
-19
- Constant currency -6% -17% -50% % -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:
-18
- As reported -7% -8% -46% % -16% -18%
-17
- Constant currency -4% -10% -48% % -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 margin(2)
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 GBP87.3m (2019:
GBP130.7m) and GBP62.5m (2019: GBP105.7m) respectively. Net
cash generated from operating activities was GBP144.2m (2019:
used in (GBP15.8m)).
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 GBP188.8m (31 December
2019: GBP185.0m).
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 GBP30m 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 GBPm H1 2020 H1 2019(1) Growth H2 2019(1)
----------------------------- --------- ------------- ------- -------------
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 profit(2) 113 117 -4% 144
Operating margin(2) 17.3% 17.3% 0bps 19.4%
----------------------------- --------- ------------- ------- -------------
Operating cash flow(2) 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 GBP724m
(2019: GBP769m) 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 GBP653m
(2019: GBP680m), reflecting order trends and included c.GBP20m 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 profit(2) decreased by 4% on a constant currency basis
to GBP113m (2019: GBP117m), driven by the underlying revenue
decline, with the delivery of GBP10m of savings from temporary
reductions to travel, suspended bonus programmes, restricted
discretionary spend and workforce reductions offset by GBP5m of
cost under-recoveries from Covid-19 disruptions to our
operations.
Operating margin(2) on a constant currency basis was stable at
17.3% (2019: 17.3%) supported by the pre-emptive cost mitigation
actions taken.
Operating cash flow(2) increased by 89% to GBP153m (2019:
GBP81m), 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 GBP9m 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(R) 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(R) 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 GBPm H1 2020 H1 2019(1) Growth H2 2019(1)
----------------------------- --------- ------------ -------- -------------
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 profit(2) 42 41 2% 43
Operating margin(2) 16.1% 14.2% +190bps 14.9%
----------------------------- --------- ------------ -------- -------------
Operating cash flow(2) 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 GBP247m
(2019: GBP297m), 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 GBP257m (2019: GBP287m) 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 profit(2) increased by 2% to GBP42m (2019: GBP41m), 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 margin(2) 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 GBP 3m of savings with no
significant Covid-19 costs or under-recoveries to offset thereby
benefiting margins by around 100bps.
Operating cash flow(2) increased by 53% to GBP49m (2019:
GBP32m), 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
-- GBP4m operating loss(2) but positive cash from operations(2)
-- GBP36m 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
GBP36m 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(R) 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 GBPm H1 2020 H1 2019(1) Growth H2 2019(1)
------------------------------- -------- ----------- --------- ------------
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) profit(2) (4) 30 -114% 7
Operating margin(2) -2.3% 8.6% -1090bps 2.6%
------------------------------- -------- ----------- --------- ------------
Operating cash flow(2) 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 GBP170m (2019: GBP341m) 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 GBP185m
(2019: GBP351m). 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 loss(2) including joint ventures was GBP4m (2019:
profit GBP30m 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 GBP2.5m benefit from indirect taxes. There were further
modest pricing declines in North America although margins benefited
from product mix.
Operating margin(2) 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 flow(2) increased by GBP21m to an inflow of GBP5m
(2019: outflow of GBP16m).
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 GBP1,141m 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 GBP1,095m 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 GBP11m.
Operating profit(2) from continuing operations (before
exceptional items and intangibles amortisation) decreased by GBP39m
(23%) to GBP133m on a reported basis. Excluding a GBP2m foreign
currency translation headwind, the constant currency decrease was
GBP37m, driven principally by Oil & Gas (GBP34m 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
GBP2.5m. There were resilient performances from Minerals (GBP4m
lower) and ESCO (GBP1m higher). Minerals operating profit reflected
lower revenues with the impact of increased overhead recoveries
from government mandated shutdowns in South Africa and Peru of
GBP5m being offset by cost savings of GBP10m 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 GBP3m,
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 GBP18m
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 GBP87m was GBP43m lower than the prior year due to the
reduction in underlying operating profit and an increase in
exceptional items of GBP15m partly offset by an GBP11m reduction in
intangible amortisation.
Continuing operations net finance costs before exceptional items were GBP25m (2019: GBP25m).
Continuing operations profit before tax
Profit before tax from continuing operations (before exceptional
items and intangibles amortisation) was GBP108m (2019: GBP147m).
The reported profit before tax from continuing operations of GBP63m
compares to GBP106m in 2019 due to the decrease in underlying
profits.
Continuing operations taxation
The tax charge for the period of GBP26m (2019: GBP37m) on profit
before tax from continuing operations (before exceptional items and
intangibles amortisation) of GBP108m (2019: GBP147m) 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 GBP18m (2019: GBP3m)
with intangibles amortisation decreasing by GBP11m to GBP28m (2019:
GBP39m).
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 GBP7m which are deemed to be non-recurring in
nature and as a direct result of the Covid-19 pandemic, including
GBP6m 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
GBP5m of exceptional costs primarily related to severance.
Other exceptional costs of GBP6m included a GBP4m 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 GBP2m
(2019: GBP3m) of costs associated with the continued integration of
ESCO into the Group following its acquisition in July 2018.
The decrease in amortisation of GBP11m from 2019 is primarily a
result of the Oil & Gas impairment of specific intangible
assets in 2019.
A tax credit of GBP10m has been recognised in relation to
exceptional items and intangibles amortisation (2019: GBP9m).
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 GBP25m). The
final completion accounts settlement led to a cash outflow of GBP5m
in the period, which was accounted for in 2019.
Profit for the period
Profit for the period from total operations of GBP46m (2019:
GBP53m) reflects a decrease in profit from continuing operations of
GBP32m (2019: GBP78m) offset by the impact of discontinued
operations (2019: loss of GBP25m).
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 GBP138m to
GBP192m 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 GBP2m compared to GBP181m (continuing
operations GBP157m) 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 GBP62m (2019: GBP34m) and suppliers chose
to utilise supply chain financing facilities of GBP39m (2019:
GBP41m).
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 GBP144m
(2019: cash used GBP16m).
Free cash flow (see note 1(e) of the interim financial
statements) from total operations was an inflow of GBP65m (2019:
outflow of GBP222m) before cash exceptional items of GBP14m (2019:
GBP26m). The GBP287m improvement in the period mainly reflects the
reduction in dividends of GBP79m following the Board's decision to
withdraw the 2019 final dividend due to Covid-19 related
uncertainty, improved working capital cash flows of GBP179m and a
reduction in cash flows on derivative financial instruments of
GBP37m driven by foreign exchange movements on Group funding. Capex
at GBP39m (2019: GBP54m) reflected only essential spend given cash
preservation actions taken in response to Covid-19 uncertainty.
This free cash flow of GBP65m, plus proceeds from the B-BBEE
transaction of GBP5m, was offset by the final payment in respect of
the Flow Control disposal of GBP5m and exceptional cash costs of
GBP14m. This combined with an adverse translational foreign
exchange movement of GBP66m and a net decrease in IFRS 16: Leases
of GBP5m, resulted in a reported increase in net debt of GBP10m to
GBP1,167m (December 2019: GBP1,157m). This includes GBP189m 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
GBP200m 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.GBP650m of immediately available
committed facilities and cash balances at the end of June and
access to GBP300m as part of the UK Government's CCFF programme,
which remains unutilised, with a further GBP50m in uncommitted
facilities available.
Pensions
The net pension liability increased to GBP185m from GBP139m 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 GBP98m partially offset by gains
on assets of GBP50m and GBP9m 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 growth(1) Like-for-like(1,2) growth
Division Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
-------------------- ----- ------ ------ ----- ------- ------ ------- ------
72 -9 72 -9
Original Equipment % 20 % -13% % % 20 % -13% %
-5 -6 -5 -6
Aftermarket % 8 % -1 % % % 8 % -1 % %
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%
-------------------- ----- ------ ------ ----- ------- ------ ------- ------
-26 -26
Original Equipment % 7 % -41% -71% % 7 % -41% -71%
-34 -34
Aftermarket % -43% -31% -67% % -43% -31% -67%
Oil & Gas -32% -35% -34% -68% -32% -35% -34% -68%
-------------------- ----- ------ ------ ----- ------- ------ ------- ------
41 40
Original Equipment % 18 % -22% -25% % 17 % -22% -25%
-7 -13 -10 -25 -15
Aftermarket % % % % % -11% -10% -25%
Continuing Ops(1) 4% -6% -13% -25% - -3% -13% -25%
-------------------- ----- ------ ------ ----- ------- ------ ------- ------
1. 1.
Book-to-bill 08 0. 97 1. 08 1.04 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 2019 HY Percentage
average average of FY 2019
FX rates FX rates 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 Before Exceptional
exceptional items & exceptional items &
items & intangibles items & intangibles
intangibles amortisation intangibles amortisation
Total amortisation (note 4) Total amortisation (note 4) Total
GBPm Notes GBPm GBPm GBPm GBPm GBPm GBPm
-------------- --------------- ----- ------------- ------------- ------- ------------- ------------- -------
Continuing
operations
2,661.9 Revenue 2, 3 1,094.8 - 1,094.8 1,329.4 - 1,329.4
-------------- --------------- ----- ------------- ------------- ------- ------------- ------------- -------
Continuing
operations
Operating
profit (loss)
before share of
results of
(328.4) joint ventures 129.9 (45.6) 84.3 169.1 (41.5) 127.6
Share of
results of
6.2 joint ventures 3.0 - 3.0 3.1 - 3.1
-------------- --------------- ----- ------------- ------------- ------- ------------- ------------- -------
Operating
(322.2) 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
Profit (loss)
before tax from
continuing
(371.8) operations 108.1 (45.6) 62.5 147.2 (41.5) 105.7
Tax (expense)
18.4 credit 5 (26.2) 9.5 (16.7) (37.3) 9.4 (27.9)
-------------- --------------- ----- ------------- ------------- ------- ------------- ------------- -------
Profit (loss)
for the period
from continuing
(353.4) operations 81.9 (36.1) 45.8 109.9 (32.1) 77.8
Loss for the
period from
discontinued
(26.0) operations 6 - - - (4.0) (20.7) (24.7)
-------------- --------------- ----- ------------- ------------- ------- ------------- ------------- -------
Profit (loss)
(379.4) for the period 81.9 (36.1) 45.8 105.9 (52.8) 53.1
-------------- --------------- ----- ------------- ------------- ------- ------------- ------------- -------
Attributable
to:
Equity holders
(379.9) of the Company 81.8 (36.1) 45.7 105.6 (52.8) 52.8
Non-controlling
0.5 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
Basic - total
(146.4p) operations 17.6p 20.3p
Basic -
continuing
(136.4p) operations 31.5p 17.6p 42.2p 29.8p
Diluted - total
(146.4p) operations 17.5p 20.2p
Diluted -
continuing
(136.4p) 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
GBPm Notes GBPm GBPm
---------------- --------------------------------------------------------------- ----- ------------ ------------
(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
Reclassification of foreign currency translation reserve on
(20.5) 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
Tax relating to other comprehensive expense to be reclassified
(0.2) in subsequent periods - (0.2)
---------------- --------------------------------------------------------------- ----- ------------ ------------
Items that are or may be reclassified to profit or loss in
(129.0) 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 - -
Tax relating to other comprehensive income not to be
0.8 reclassified in subsequent periods 9.3 1.3
---------------- --------------------------------------------------------------- ----- ------------ ------------
Items that will not be reclassified to profit or loss in
(4.5) 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
GBPm Notes GBPm GBPm
---------------- ------------------------------------ ----- ------------ ------------
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
GBPm Notes GBPm GBPm
---------------- ---------------------------------------------------------- ----- ------------ -----------------
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)
Other proceeds from sale of property, plant & equipment
12.3 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
Foreign Attributable
Capital currency Hedge to equity
Share Share Merger Treasury redemption translation accounting Retained holders of Non-controlling Total
capital premium reserve shares reserve reserve reserve earnings the Company interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------- ------- ------- ------- -------- ---------- ----------- ---------- -------- ------------ --------------- -------
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 GBP546.2m 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 GBP52m. A reduction in the terminal growth
rate by 100bps would lead to an impairment of GBP40m. 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
GBP0.2m.
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 GBP23.8m
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
GBPm GBPm GBPm
---------------- ---------------------------------------------------------------------- ------------ ------------
407.6 Cash generated from operations (note 14) 191.6 53.9
(90.2) Income tax paid (26.4) (38.4)
Net capital expenditure from purchase & disposal of property, plant &
(104.3) 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 GBP88.4m and
GBP10.5m 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
GBPm GBPm GBPm
---------------- ----------------------------------------------------------------- ------------ ------------
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 GBP23.3m
(2019: GBP20.3m), 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.
Total continuing
Minerals ESCO Oil & Gas operations
Restated Restated Restated
30 June 30 June 30 June 30 June 30 June 30 June 30 June 30 June
2020 2019 2020 2019 2020 2019 2020 2019
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
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 30 June 30 June 30 June 30 June 30 June 30 June 2020 30 June 2019
2020 2019 2020 2019 2020 2019
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------ ----------- ----------- ----------- ----------- ----------- ----------- ------------ ------------
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 Middle East &
June 2020 UK US Canada Europe & FSU Asia Pacific Australia South America Africa Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- ---- ----- ------ ------------ ------------ --------- ------------- ---------------- -------
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 Middle East &
June 2019 UK US Canada Europe & FSU Asia Pacific Australia South America Africa Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- ---- ----- ------ ------------ ------------ --------- ------------- ---------------- -------
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 Middle East &
December 2019 UK US Canada Europe & FSU Asia Pacific Australia South America Africa Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- ---- ----- ------ ------------ ------------ --------- ------------- ---------------- -------
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
---------------- ---- ----- ------ ------------ ------------ --------- ------------- ---------------- -------
Total
continuing
Year ended 31 December 2019 Minerals ESCO Oil & Gas operations
GBPm GBPm GBPm GBPm
--------------------------------------------------------------------- -------- ----- --------- -----------
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)
Total
Year ended 31 December 2019 Minerals ESCO Oil & Gas Group
GBPm GBPm GBPm GBPm
------------------------------ -------- ------- --------- -------
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
GBPm GBPm GBPm
---------------- ------------------------------------------------- ------------ ------------
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
---------------- ------------------------------------------------- ------------ ------------
Total continuing
Minerals ESCO Oil & Gas operations
Restated Restated Restated
30 June 30 June 30 June 30 June 30 June 30 June 30 June 30 June 2019
2020 2019 2020 2019 2020 2019 2020
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ------------
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
GBPm GBPm GBPm
---------------- -------------------------------------------------------------- ------------ ------------
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
GBPm GBPm GBPm
---------------- ---------------------------------------------------------------------- ------------ ------------
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) -
Exceptional item - Oil & Gas North America impairment - intangibles
(472.9) and goodwill - -
Exceptional item - Oil & Gas North America impairment - tangible
(73.3) 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 GBP1.7m 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 GBP6.7m
recognised to date, GBP5.5m relates to severance costs across the
Minerals and ESCO divisions, GBP5.0m and GBP0.5m respectively, due
to a reduction in headcount. The remaining GBP1.2m 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 GBP0.7m in Minerals, GBP0.1m ESCO and GBP0.4m 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
GBP5.0m costs across the Oil & Gas division (GBP3.4m) and Head
Office (GBP1.6m), 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
GBP5.4m 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
GBP4.4m includes GBP3.6m non-cash IFRS 2 charge representing the
fair value of the remaining 60% shareholding with GBP0.8m 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 GBP0.4m 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
GBPm GBPm GBPm
---------------- ---------------------------------------------------------------------- ------------ ------------
Continuing operations
(0.9) Group - UK (1.2) (1.2)
19.3 Group - overseas (15.5) (26.7)
---------------- ---------------------------------------------------------------------- ------------ ------------
Continuing operations total income tax (expense) credit in the
18.4 Consolidated Income Statement (16.7) (27.9)
---------------- ---------------------------------------------------------------------- ------------ ------------
The total income tax (expense) credit is disclosed in the Consolidated
Income Statement as
follows:
- continuing operations before exceptional items & intangibles
(73.8) amortisation (26.2) (37.3)
- discontinued operations before exceptional items and
(0.5) 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)
---------------- ---------------------------------------------------------------------- ------------ ------------
Total income tax expense included in the Group's share of results of
(1.3) 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 GBP19m.
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 GBP275.0m and a net consideration of
GBP263.4m, after customary working capital and debt-like
adjustments. In January 2020 the Group paid GBP4.5m to First
Reserve and wrote off GBP0.2m receivable from First Reserve to
settle the final element of the total consideration of GBP258.7m
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
31 December 2019
Before exceptional items & Exceptional items &
Total intangibles amortisation intangibles amortisation Total
GBPm GBPm GBPm GBPm
---------------- ---------------------------- ----------------------------- ----------------------------- ------
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)
---------------- ---------------------------- ----------------------------- ----------------------------- ------
Loss before tax from
(3.8) discontinued operations (3.4) (0.4) (3.8)
(0.5) Tax expense (0.6) - (0.6)
---------------- ---------------------------- ----------------------------- ----------------------------- ------
Loss after tax from
(4.3) discontinued operations (4.0) (0.4) (4.4)
Loss on sale of the
subsidiaries after income
(21.7) tax (see below) - (20.3) (20.3)
---------------- ---------------------------- ----------------------------- ----------------------------- ------
Loss for the period from
(26.0) discontinued operations (4.0) (20.7) (24.7)
---------------- ---------------------------- ----------------------------- ----------------------------- ------
Reclassification of foreign
(20.5) currency translation reserve (20.5) - (20.5)
Other comprehensive expense
(0.2) from discontinued operations - - -
---------------- ---------------------------- ----------------------------- ----------------------------- ------
Net other comprehensive
expense from discontinued
(20.7) operations (20.5) - (20.5)
---------------- ---------------------------- ----------------------------- ----------------------------- ------
Year ended Period ended
30 June
31 December 2019 2019
GBPm GBPm
---------------- ---------------------------------------------------------------------- ------------
(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
GBPm
-------------------------------------------------------------------------------------------- ----------------
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.
GBPm
--------------------------------------------------------- -------
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
30 June
31 December 2019 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* (GBPm) 45.7 52.8
(353.9) Continuing operations* (GBPm) 45.7 77.5
Continuing operations before exceptional items & intangibles
228.2 amortisation* (GBPm) 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
----------------- -------------------------------------------------------------------- ------------ ------------
Weighted average number of ordinary shares for basic earnings
259.5 (loss) per share 259.5 259.7
1.7 Effect of dilution: employee share awards 2.2 1.8
------------------ ------------------------------------------------------------------- ------------ ------------
Adjusted weighted average number of ordinary shares for diluted
261.2 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
GBPm GBPm GBPm
Net profit (loss) attributable to equity holders from continuing
(353.9) operations* 45.7 77.5
582.1 Exceptional items & intangibles amortisation net of tax 36.1 32.1
------------------ ------------------------------------------------------------------- ------------ ------------
Net profit (loss) attributable to equity holders from continuing
operations before exceptional
228.2 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
Continuing operations before exceptional items & intangibles
87.9 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
Continuing operations before exceptional items & intangibles
87.4 amortisation* 31.3 41.9
---------------- ---------------------------------------------------------------------- ------------ ------------
*Adjusted for GBP0.1m (2019: GBP0.3m) 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
GBPm GBPm GBPm
---------------- ---------------------------------------------------------------------- ------------ ------------
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
---------------- ---------------------------------------------------------------------- ------------ ------------
Final dividend for 2019 proposed for approval by shareholders at the
79.1 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
GBPm GBPm GBPm
---------------- ---------------------------------------------------------------------- ------------ ------------
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 Exceptional
sales contracts Asbestos-related Employee-related rationalisation Other Total
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------- --------------------- ---------------- ---------------- ---------------------- ----- ------
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 GBP47.1m
(December 2019: GBP44.4m) 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 GBP3.2m (December 2019:
GBP3.2m).
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 GBP14.2m and include GBP6.7m
related to Covid-19 restructuring and other costs, GBP5.0m for
restructuring in relation to Oil & Gas, GBP0.8m in relation to
Broad-based Black Economic Empowerment costs and GBP1.7m in
relation to ESCO integration costs. Of the current year exceptional
costs, GBP7.8m has been cash settled with the remaining balance
primarily relating to outstanding severance costs.
Of the opening provision of GBP12.8m, GBP6.3m is still
outstanding with GBP2.2m in Minerals and GBP3.7m 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 GBP300m term loan facility was also
replaced, previously maturing in December 2020 and refinanced as a
GBP200m 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 GBP300m
of which GBPnil was drawn as at 30 June 2020 (2019: GBPnil) and is
due to mature in May 2021.
At 30 June 2020, the Group had GBP638.2m (2019: GBP622.3m) of
private placement debt in issue, GBP389.7m (2019: GBP402.4m) drawn
under the revolving credit facility, GBP200.0m (2019: GBP300.0m)
drawn on the term loan facility, GBP87.2m (2019: GBP264.9m) of debt
issued under the commercial paper programme and GBP27.3m (2019:
GBP28.1m) drawn on uncommitted facilities. Total unamortised issue
costs at 30 June 2020 were GBP8.0m (2019: GBP1.3m).
12. Pensions & other post-employment benefit plans
31 December 2019 30 June 2020 30 June 2019
GBPm GBPm GBPm
---------------- --------------------------------- ------------ ------------
- 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 GBP47.9m 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 GBP0.2m in deficit at
December 2019. A charge of GBP47.4m (2019: GBP5.8m) has been
recognised in the Consolidated Statement of Comprehensive
Income.
13. Financial instruments
31 December 2019 30 June 2020 30 June 2019
GBPm GBPm GBPm
---------------- ---------------------------------------------------------------------- ------------ ------------
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
GBPm GBPm GBPm GBPm GBPm GBPm
---------------- ---------------- ------------------ --------------- ------------ --------------- ------------
Financial assets
Derivative
financial
instruments
recognised at fair
value through
15.0 15.0 profit or loss 15.8 15.8 25.4 25.4
5.9 5.9 Derivative 5.9 5.9 4.2 4.2
financial
instruments in
designated hedge
accounting
relationships
552.9 552.9 Trade & other 501.0 501.0 653.9 653.9
receivables
excluding
statutory assets,
prepayments &
construction
contract
assets
Cash & short-term
273.8 273.8 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 16.7 16.7 15.7 15.7
financial
instruments
recognised at fair
value through
profit or loss
10.9 10.9 Derivative 0.3 0.3 4.0 4.0
financial
instruments in
designated hedge
accounting
relationships
Amortised cost:
Fixed rate
595.2 640.3 borrowings 637.8 696.3 621.8 675.5
Floating rate
648.4 648.4 borrowings 696.6 696.6 994.6 994.6
185.0 185.0 Leases 188.8 188.8 197.7 197.7
Bank overdrafts &
short-term
1.7 1.7 borrowings 0.2 0.2 1.0 1.0
Trade & other
payables excluding
statutory
liabilities &
contract
511.0 511.0 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
GBPm GBPm GBPm
---------------- ---------------------------------------------------------------- ------------ -----------------
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
GBPm GBPm GBPm
---------------- ---------------------------------------------------------------------- ------------ ------------
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
Prior period disposals - settlement of final costs and final
0.1 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
GBPm GBPm GBPm
---------------- ----------------------------------------------- ------------ ------------
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 Closing balance at
31 December 2019 Cash movements Additions FX Non-cash movements 30 June 2020
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------- ------------------- -------------- --------- ------ ------------------ --------------------
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 Closing balance at
30 June 2019 Cash movements Additions FX Non-cash movements 31 December 2019
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------- -------------------- -------------- --------- ------ ------------------ -------------------
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
GBPm GBPm GBPm
----------------- ------------------------------------------------------------ ------------ ------------
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 Period ended
31 December 2019 30 June 2020 30 June 2019
---------------- --------------------------- ------------ ------------
Average rate (per GBP)
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 GBP)
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.
END
IR RPMFTMTJTBLM
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July 29, 2020 02:00 ET (06:00 GMT)
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