Adoption of IFRS

Weir Group PLC 01 July 2005 1 July 2005 - Embargoed until 7am THE WEIR GROUP PLC Adoption of International Financial Reporting Standards ('IFRS') Restatement of 2004 financial information. The Weir Group PLC today announces the impact of the transition to International Financial Reporting Standards (IFRS) on its 2004 results previously prepared in accordance with generally accepted accounting principles in the UK (UK GAAP). The impact on the audited 2004 key financial data is summarised as follows: UK GAAP IFRS % Comments on principal IFRS changes Â£ Million Â£ Million change Turnover 847.6 738.7 -12.8 Share of joint ventures and associates excluded. Profit from continuing 61.3 58.2 -5.1 Share of joint ventures and associates operations before tax and finance costs and tax included. finance costs (1) Profit before tax (1) 58.3 55.4 -5.0 Share of joint ventures and associates tax included. Profit after tax (1) 44.3 44.1 -0.5 Earnings per share (1) 21.5p 21.4p -0.5 Total equity 245.5 265.3 +8.1 Goodwill, dividends, associates and deferred tax. Net funds 12.3 12.6 +2.4 Short term highly liquid investments. Notes: (1) The UK GAAP profit and earnings per share figures exclude amortisation of goodwill. (2) The Weir Group PLC will adopt IAS32 and IAS39 prospectively with effect from 1 January 2005 and the effect of doing so is considered in Part I of the following document. Analysts' Teleconference: 10.30 am, Friday 1 July, 2005: Dial In: 020 7162 0092 - Quote: Weir Contact Details: The Weir Group PLC Chris Rickard, Finance Director Tel. 0141 637 7111 Helen Walker, Public Relations Manager (Mobile: 07789 032296) Maitland Tel. 020 7379 5151 Peter Spring The Weir Group PLC Restatement of Financial Information Under International Financial Reporting Standards 1st July 2005 CONTENTS Executive Summary PART I Transition from UK GAAP to IFRS Introduction Basis of preparation Relevant differences between UK GAAP and IFRS Presentational changes Prospective adoption of IAS32 and IAS39 PART II Restated audited preliminary comparative IFRS financial information - Consolidated income statement for the 53 weeks ended 31 December 2004 - Consolidated cash flow statement for the 53 weeks ended 31 December 2004 - Consolidated balance sheet as at 31 December 2004 - Consolidated statement of recognised income and expense for the 53 weeks ended 31 December 2004 - Consolidated summary of changes in shareholders' equity for the 53 weeks ended 31 December 2004 - Consolidated adjustment to opening shareholders' equity for the 53 weeks ended 31 December 2004 Notes to the restated financial information, including significant accounting policies under IFRS Independent auditors' report to the Directors of The Weir Group PLC on the preliminary comparative IFRS financial information PART III Presentation of financial information prepared in accordance with UK GAAP in IFRS format - Consolidated income statement for the 53 weeks ended 31st December 2004 - Consolidated cash flow statement for the 53 weeks ended 31st December 2004 - Consolidated balance sheet as at 31st December 2004 EXECUTIVE SUMMARY Adoption of International Financial Reporting Standards ('IFRS') Restatement of 2004 financial information. The Weir Group PLC today announces the impact of the transition to International Financial Reporting Standards (IFRS) on its 2004 results previously prepared in accordance with generally accepted accounting principles in the UK (UK GAAP). The impact on the audited 2004 key financial data is summarised as follows: UK GAAP IFRS % Comments on principal IFRS Â£ Million Â£ Million change changes Turnover 847.6 738.7 -12.8 Share of joint ventures and associates excluded. Profit from continuing 61.3 58.2 -5.1 Share of joint ventures and operations before tax and associates finance costs and tax finance costs (1) included. Profit before tax (1) 58.3 55.4 -5.0 Share of joint ventures and associates tax included. Profit after tax (1) 44.3 44.1 -0.5 Earnings per share (1) 21.5p 21.4p -0.5 Total equity 245.5 265.3 +8.1 Goodwill, dividends, associates and deferred tax. Net funds 12.3 12.6 +2.4 Short term highly liquid investments. NOTES: (1) The UK GAAP profit and earnings per share figures exclude amortisation of goodwill. (2) The Weir Group PLC will adopt IAS32 and IAS39 prospectively with effect from 1 January 2005 and the effect of doing so is considered in Part 1. PART I TRANSITION FROM UK GAAP TO IFRS Transition from UK GAAP to IFRS INTRODUCTION With effect from 1 January 2005, The Weir Group PLC ('The Weir Group') is required to prepare its consolidated financial statements in accordance with International Financial Reporting Standards (IFRS). As the Group's consolidated financial statements for the 52 weeks ending 30 December 2005 will include comparative information for the 53 weeks ended 31 December 2004 ('2004'), the Group's date of transition to IFRS is regarded as 27 December 2003. Comparative information for 2004 originally presented in accordance with UK GAAP, must be restated in accordance with IFRS. The first results to be prepared on an IFRS basis will be contained in the Group's results announcement for the 26 weeks ended 1 July 2005. The purpose of this document is to: a. explain the basis on which The Weir Group has effected the transition to IFRS; b. identify the significant differences between IFRS and UK GAAP relevant to The Weir Group; c. set out the Group's significant accounting policies under IFRS; and d. show the impact of restatement in accordance with IFRS on the Group's previously reported results and financial position under UK GAAP. Part II of this document includes the Group's consolidated income statement, consolidated cash flow statement, consolidated balance sheet as at 31 December 2004, consolidated statement of recognised income and expense and consolidated summary of changes in shareholders' equity for the 53 weeks ended 31 December 2004 restated in accordance with IFRS. Part III includes schedules reclassifying the UK GAAP profit and loss account and cash flow statement for the 53 weeks ended 31 December 2004 and the balance sheet at that date, into IFRS format. The financial information in Parts II and III has been audited by Ernst & Young LLP and their audit report to the Directors of the Weir Group PLC is set out in Part II. BASIS OF PREPARATION European law requires that the Group's financial statements for the 52 weeks ending 30 December 2005 are prepared on the basis of IFRS as endorsed for use in the European Union. IFRS are subject to amendment or interpretation by the IASB and there is an ongoing process of review and endorsement by the European Commission. The financial information contained in this document has been prepared on the basis of IFRS that the Directors expect to be applicable as at 30 December 2005. For the reasons outlined above, it is possible that the restated information for 2004 presented in this document may be subject to change before its inclusion in the Group's 2005 Report and Accounts, which will contain the Group's first complete financial statements prepared in accordance with IFRS. As a general rule, the Group is required to apply IFRS applicable as at 30 December 2005 retrospectively to determine its restated financial position as at 27 December 2003 ('the transition date'). However, under IFRS1 'First time adoption of IFRS' there are certain exemptions to this general principle that the Group has adopted as follows: Business combinations The Weir Group has elected not to apply IFRS3 'Business Combinations' to business combinations that took place before 27 December 2003. As a result: a. goodwill recognised as an asset under UK GAAP as at 27 December 2003 has not been revised retrospectively to identify and extract intangible assets to be recognised separate from goodwill. The carrying amount of goodwill brought forward in the opening IFRS balance sheet is that recorded under UK GAAP; and b. goodwill written-off directly to reserves under UK GAAP will not be taken into account in determining any gain or loss on the disposal of acquired businesses on or after 27 December 2003. Share-based payments The Weir Group has applied IFRS2 'Share-based Payment' retrospectively only to equity-settled awards that had not vested as at 1 January 2005 and were granted on or after 7 November 2002. Financial instruments The Weir Group has elected to apply IAS32 'Financial Instruments: Disclosure and Presentation' and IAS39 'Financial Instruments: Recognition and Measurement' prospectively from 1 January 2005. Consequently, the relevant comparative information for 2004 does not reflect the impact of these standards and is accounted for on a UK GAAP basis. The impact of adopting IAS32 and IAS39 from 1 January 2005 is considered further on page 8. Cumulative foreign currency translation differences The Weir Group has elected to deem the cumulative differences on the retranslation into sterling of the Group's net investment in foreign operations to be Â£nil as at 27 December 2003. As a result, in the event of the subsequent disposal of a foreign operation, any gain or loss on disposal will only include cumulative translation differences arising on or after 27 December 2003. Post employment benefits All cumulative actuarial gains and losses on group defined benefit pension schemes have been recognised in reserves as at the transition date. On an ongoing basis all actuarial gains and losses will be recognised directly in reserves via the statement of recognised income and expense in the period in which they occur in a similar way to FRS 17. Property, plant and equipment The Weir Group has elected to use previous GAAP revaluations of property, plant and equipment prior to 27 December 2003 as deemed cost at the date of the revaluation. RELEVANT DIFFERENCES BETWEEN UK GAAP AND IFRS a. Goodwill As a consequence of the Group's election not to apply IFRS3 'Business Combinations' retrospectively, the basis of accounting under UK GAAP for business combinations recognised before 27 December 2003 has not been revisited under IFRS and the carrying amount of goodwill recognised as an asset under UK GAAP has been brought forward unadjusted, as the cost of goodwill recognised under IFRS as at 27 December 2003. Under UK GAAP, goodwill was amortised over its useful economic life, tested for impairment and provided against as necessary. Under IFRS, goodwill is no longer amortised but must be tested for impairment as at 27 December 2003 (the transition date) and at least annually thereafter. The impairment tests carried out by the Group as at 27 December 2003 and 31 December 2004 revealed no impairment loss. Goodwill amortisation, excluding share of associates, charged under UK GAAP during 2004 was Â£7.2 million and this amount is credited back to the income statement under IFRS. b. Computer software Under UK GAAP, all capitalised computer software was included within tangible fixed assets. Under IAS38 'Intangible Assets', capitalised computer software must be presented as an intangible asset unless it is integral to an item of property, plant and equipment. Under IFRS, non-integral computer software with a carrying value of Â£3.7 million has been reclassified from property, plant and equipment to intangible assets at 31 December 2004 (Â£3.0 million at 27 December 2003). c. Development costs Under UK GAAP, research and development costs were written off in the period in which they were incurred. Under IAS38 'Intangible Assets', all research costs and most development costs will be written off in the period in which they are incurred. However, development costs associated with new products must be capitalised from the time at which the development project satisfies the conditions specified within IAS38 'Intangible Assets'. Due to the nature of our businesses, much of the Group's development expenditure is directed towards the incremental improvements of existing products and does not qualify for capitalisation. Under the Group's IFRS accounting policies, development expenditure on new products will be capitalised only if it is incurred after the technical feasibility and commercial viability of the product has been proven. During 2004, the Group incurred no development expenditure which satisfies these conditions. Development expenditure incurred before 27 December 2003 has not been capitalised retrospectively because the conditions specified within IAS 38 were not met. d. Share-based payments Under UK GAAP, the cost of awards made under the Group's employee share schemes was based on the intrinsic value of the awards, with the exception of SAYE schemes for which no cost was recognised. Under IFRS2 'Share-based Payment', the cost of employee share schemes, including SAYE schemes, is based on the fair value of the awards that must be assessed using an option-pricing model. Generally, the fair value of the award is expensed on a straight-line basis over the vesting period. Adjustments are made to reflect expected and actual forfeitures during the vesting period due to failure to satisfy either service conditions or non-market performance conditions, such as EPS growth targets. As a result of these changes, the cost of employee share schemes recognised during 2004 has decreased by Â£0.2 million. e. Post employment benefits Under UK GAAP, post employment benefits were accounted for under FRS 17 ' Retirement Benefits', whereby operating costs of providing retirement benefits are recognised in the periods the benefits are earned by employees and finance costs are recognised in the periods they arise. Under FRS17, actuarial gains and losses are reflected in the statement of total recognised gains and losses in the period in which they arise. Under IAS19 'Employee Benefits', the fair value of assets is required to be based on a bid market price whereas under FRS17 the mid market price was used. The value of defined benefit pension scheme assets have therefore been reduced by Â£1.0 million and Â£1.2 million as at 27 December 2003 and 31 December 2004 respectively and the net finance income recognised during 2004 has decreased by Â£0.1 million. Under IAS19, a number of options for the recognition of actuarial gains and losses are permitted. The Group's policy is to recognise immediately any variations in full, as opposed to applying the 'corridor' approach, in a statement of recognised income and expense, as permitted in the IASB's amendment to IAS19 entitled Actuarial Gains and Losses, Group Plans and Disclosures. The European Union has not yet endorsed this amendment and the above policy is subject to change, depending on the outcome of the endorsement process. Under UK GAAP, deferred tax is netted off against the related pension liability but under IFRS deferred tax on the pension liability is included within the deferred tax balance. As at 31 December 2004 the reclassification amounts to Â£29 million (Â£32.7 million as at 27 December 2003). f. Employee benefits - holiday pay IAS19 explicitly requires appropriate accrual to be made for the cost of all holiday entitlements not taken at the balance sheet date. This is more prescriptive than was the case under UK GAAP and holiday pay accruals amounting to Â£0.4 million are incorporated as at 31 December 2004 (Â£0.5 million as at 27 December 2003). As a result of this change, the cost of providing employee benefits recognised during 2004 has decreased by Â£0.1 million. g. Proposed dividends Under UK GAAP, proposed dividends were recognised as a liability in the period to which they related. Under IFRS, dividends are recognised as a liability in the period in which they are declared. Net assets at 31 December 2004 increase by Â£19.4 million, representing the reversal of the accrual for the final ordinary dividend proposed in respect of 2004, (Â£18.5 million as at 27 December 2003). h. Deferred tax Under UK GAAP, deferred tax was provided on timing differences between the accounting and taxable profit (an income statement approach). Under IAS12 ' Income Taxes', deferred tax is provided on temporary differences between the book carrying value and tax base of assets and liabilities (a balance sheet approach). Under IFRS the difference in approach means that deferred tax provisions of Â£9.3 million relating to goodwill set off against reserves under UK GAAP and not reinstated under IFRS are written back as at 31 December 2004. A deferred tax asset has not been recognised because it does not meet the IAS12 recognition criteria. i. Foreign currency translation differences Under UK GAAP, cumulative foreign currency translation differences arising on the retranslation into sterling of the Group's net investment in foreign operations were recognised within reserves. Under IAS21 'The Effects of Changes in Foreign Exchange Rates', cumulative foreign currency translation differences must be recognised as a separate component of equity and should be taken into account in calculating the gain or loss on the disposal of a foreign operation. As permitted under IFRS 1, The Weir Group has elected to deem cumulative translation differences to be Â£nil on 27 December 2003. Under UK GAAP, exchange differences that arise on translating a monetary item which forms part of the reporting entity's net investment in a foreign operation and which is denominated in a currency other than the functional currency of either the reporting entity or the foreign operation are recorded as movements on reserves. Under IFRS, such exchange differences require to be reported in the income statement. As a result of this change an exchange gain of Â£0.2 million reported as a movement in reserves is now recognised in the income statement for the period ending 31 December 2004. j. Joint Ventures and Associates Under UK GAAP, joint ventures and associates are accounted for using the equity method. Under IAS31 'Interests in Joint Ventures' interests in joint ventures that are jointly controlled entities may be recognised using either the proportionate consolidation method or the equity method. The Group's policy under IFRS is to account for such joint ventures using the equity method. Under IAS 28 'Investments in Associates', the application of the equity method requires that the investees financial statements be prepared using accounting policies which conform to those of the investor. The adoption of IFRS by The Weir Group results in a net Â£15.3 million reduction in the investments in associates as at 31 December 2004 (Â£10.4 million at 27 December 2003) due to adjustments in respect of goodwill, intangibles, pensions and tax. This alignment to IFRS also results in a reduction of Â£0.4 million to the Weir share of associates profits after tax for 2004. k. Construction Contracts IAS11 'Construction Contracts' requires balance sheet classifications which differ from UK GAAP. This has no impact on the profit or net assets previously reported. PRESENTATIONAL CHANGES The primary financial statements contained in this document have been presented in accordance with IAS1 'Presentation of Financial Statements', IAS7 'Cash Flow Statements' and IFRS5 'Non-Current Assets Held for Sale and Discontinued Operations'. There are a number of presentational changes compared with UK GAAP, including the following, that affect the Group's reported profit from operations: â€¢ the results (after interest and tax) of joint ventures and associates are shown as single line items respectively in arriving at profit from operations. Associates results for 2004 were presented under UK GAAP as Â£9.1 million profit, Â£0.2 million interest charge and Â£2.6 million tax charge. Under IFRS the contribution from associates to the Group's profit from operations is presented as Â£6.3 million profit prior to any adjustment for the changes referred to in (j) above. The restatement impact on joint ventures is not significant. It is possible that the format and presentation of the primary financial statements will change in the event that further guidance is issued by the IASB and as practice develops. The effect of presentational changes on the income statement, cash flow statement and the balance sheet are shown in Part III. PROSPECTIVE ADOPTION OF IAS32 'FINANCIAL INSTRUMENTS: DISCLOSURE AND PRESENTATION' AND IAS39 'FINANCIAL INSTRUMENTS: RECOGNITION AND MEASUREMENT' As permitted under IFRS1, The Weir Group has elected to apply IAS32 and IAS39 prospectively from 1 January 2005. As a result, the relevant comparative information for 2004 does not reflect the impact of these standards and is accounted for on a UK GAAP basis. The principal impact of applying IAS32 and IAS39 is detailed below. a. Derivatives and hedge accounting The Weir Group uses derivative contracts to manage economic exposure to movements in currency exchange rates. Under UK GAAP, such derivative contracts are not recognised as assets and liabilities on the balance sheet and gains or losses arising on them are not recognised until the hedged item has itself been recognised in the financial statements. Under IFRS, such derivative contracts must be recognised as assets and liabilities on the balance sheet measured at their fair values. Changes in their fair values must be recognised in the income statement and this is likely to cause volatility, although under certain conditions specified within IAS39, hedge accounting may be used to mitigate income statement volatility. The Weir Group plans to continue using derivative instruments to manage economic exposure to movements in non functional currency exchange rates. The Groups accounting policy will be to apply hedge accounting to hedging relationships where it is both permissible under IAS39 and practical to do so. b. Pro-forma effect of adopting IAS32 and IAS39 For illustrative purposes, the following table shows the Group's equity, net funds, tax and other assets/liabilities as at 1 January 2005 on a pro-forma basis, prepared on the assumption that IAS32 and IAS39 is adopted as at 1 January 2005: 1 January 2005 Other assets/ liabilities Tax Net Funds Equity Â£m Â£m Â£m Â£m Restated under IFRS 232.1 20.6 12.6 (265.3) Fair value adjustments 3.7 (1.0) (0.3) (2.4) Pro-forma under IAS32 and IAS39 235.8 19.6 12.3 (267.7) PART II Restated audited preliminary comparative IFRS financial information for the 53 weeks ended 31 December 2004 THE WEIR GROUP PLC RESTATEMENT OF CONSOLIDATED INCOME STATEMENT (PREPARED IN ACCORDANCE WITH IFRS) for the 53 weeks ended 31 December 2004 UK GAAP Penalties on Exchange Share Mid to bid Holiday Restated IFRS construction Goodwill on intra based pensions pay under IFRS Format contracts amortisation group payments valuation Associ- accruals Tax loans ates Â£000's Â£000's Â£000's Â£000's Â£000's Â£000's Â£000's Â£000's Â£000's Â£000's Continuing operations Revenue 739,350 (688) 738,662 Cost of sales (542,285) 688 56 (541,541) Gross profit 197,065 - - - - - - 56 - 197,121 Other revenue and 2,019 203 2,222 income Selling and (95,850) (95,850) distribution costs Administrative (51,965) 244 (51,721) expenses Goodwill amortisation (7,163) 7,163 - Share of results of - joint ventures 541 541 - associates 6,302 (408) 5,894 Profit from continuing operations before tax and finance costs 50,949 - 7,163 203 244 - (408) 56 - 58,207 Finance costs (6,395) (6,395) Finance income 2,693 2,693 Employee benefits interest income 955 (68) 887 Profit before tax 48,202 - 7,163 203 244 (68) (408) 56 - 55,392 Income tax expense 11,280 51 48 (20) 17 (40) 11,336 Profit for the year from continuing operations 36,922 - 7,163 152 196 (48) (408) 39 40 44,056 Attributable to: Equity holders of the parent 36,881 - 7,163 152 196 (48) (408) 39 40 44,015 Minority interests 41 41 36,922 - 7,163 152 196 (48) (408) 39 40 44,056 Earnings per share Basic - continuing operations 17.9p 21.4p Diluted - continuing operations 17.8p 21.3p THE WEIR GROUP PLC CONSOLIDATED CASH FLOW STATEMENT PREPARED IN ACCORDANCE WITH IFRS for the 53 weeks ended 31 December 2004 Restated Restated under IFRS under IFRS Â£000's Â£000's Cash flows from operating activities Cash generated from operations 67,010 Exceptional pension contributions (12,096) Income tax paid (8,815) Net cash generated from operating activities 46,099 Cash flows from investing activities Acquisitions (897) Disposals 4,602 Purchases of property, plant & equipment & intangible assets (24,250) Proceeds from sale of property, plant & equipment & intangible assets 489 Purchases of other investments (550) Proceeds from sale of other investments 782 Dividends received 5,298 Interest paid (4,765) Interest received 2,675 Net cash used in investing activities (16,616) Cash flows from financing activities Proceeds from issuance of ordinary shares 5,488 Proceeds from borrowings 80,842 Repayments of borrowings (113,140) Foreign exchange hedging 2,478 Dividends paid to equity holders of the parent (25,688) Dividends paid to minority interests (29) Net cash used in financing activities (50,049) Net decrease in cash and cash equivalents (20,566) Cash and cash equivalents at 27 December 2003 117,725 Exchange losses on cash and cash equivalents (1,548) Cash and cash equivalents at 31 December 2004 95,611 Cash and cash equivalents at 31 December 2004 comprised: Cash & short term deposits 97,622 Bank overdrafts (2,011) 95,611 Reconciliation of net increase in cash to movement in net debt Decrease in cash and cash equivalents (20,566) Decrease in debt 32,298 Change in net debt resulting from cash flows 11,732 Lease inception (216) Foreign currency translation differences 580 Change in net funds during the year 12,096 Net funds at 27 December 2003 504 Net funds at 31 December 2004 12,600 THE WEIR GROUP PLC NOTE TO CONSOLIDATED CASH FLOW STATEMENT PREPARED IN ACCORDANCE WITH IFRS for the 53 weeks ended 31 December 2004 As Goodwill Exchange Share Holiday Exceptional Construction Restated reported amortisation on intra based pay items contracts under under UK group payments accruals IFRS GAAP * loans Â£000's Â£000's Â£000's Â£000's Â£000's Â£000's Â£000's Â£000's Operating profit 44,106 7,163 203 244 56 51,772 Profit from continuing operations excluding joint ventures and associates Depreciation, goodwill amortisation & grant credits 22,371 (7,163) 15,208 Depreciation & grant credits Gain on disposal of tangible assets & investments (173) (173) Gain on disposal of property, plant & equipment & investments Funding of pension & post retirement costs (733) (733) Funding of pension & post retirement costs Increase in provisions 2,507 (628) 16 1,895 Increase in provisions Employee share scheme 600 (244) 356 Employee share scheme - (203) (203) Exchange gain on intra group loans Increase in stocks (633) 865 232 Decrease in inventories Increase in debtors (40,808) (2,570) (43,378) Increase in trade & other receivables & construction contracts Increase in creditors 40,401 (56) 1,689 42,034 Increase in trade & other payables & construction contracts Funds generated by operations 67,638 - - - - (628) - 67,010 Cash generated by operations Exceptional pension contributions (12,096) - (12,096) Exceptional pension contributions Cash spent on exceptional environmental provision (284) 284 - Cash spent on exceptional closure costs (344) 344 - Cash spent on exceptional items (628) - - - - 628 - - Taxation (8,815) (8,815) Income tax paid 46,099 - - - - - - 46,099 Net cash generated from operating activities * The order and description of items presented 'As reported under UK GAAP' has been adjusted to ease the direct comparison with IFRS presentation. THE WEIR GROUP PLC RESTATEMENT OF CONSOLIDATED BALANCE SHEET (PREPARED IN ACCORDANCE WITH IFRS) as at 31 December 2004 UK GAAP Mid to bid Exchange Share Holiday IFRS Computer Goodwill Proposed pensions on intra base pay Restated Format Software amortisation dividend valuation Associate group pay- accruals Tax under loans ments IFRS Â£000's Â£000's Â£000's Â£000's Â£000's Â£000's Â£000's Â£000's Â£000's Â£000's Â£000's ASSETS Non-current assets Property, plant & equipment 109,750 (3,700) 106,050 Intangible assets 103,916 3,700 7,091 114,707 Investments in joint ventures & associates 21,020 (15,295) 5,725 Deferred tax receivable 31,813 366 123 (7,598) 24,704 Total non-current assets 266,499 - 7,091 - 366 (15,295) - - 123 (7,598) 251,186 Current assets Inventories 93,170 93,170 Trade & other receivables 177,652 177,652 Construction contracts 45,905 45,905 Income tax receivable 1,589 1,589 Investments 213 213 Cash & short term deposits 97,622 97,622 Total current assets 416,151 - - - - - - - - - 416,151 Total assets 682,650 - 7,091 - 366 (15,295) - - 123 (7,598) 667,337 EQUITY AND LIABILITIES Share capital 25,882 25,882 Share premium 26,451 26,451 Other reserves 531 531 Foreign currency translation reserve (2,805) (72) (152) (982) (4,011) Retained earnings 195,425 7,163 19,362 (855) (15,295) 152 (48) (287) 10,264 215,881 Shareholders' equity 245,484 - 7,091 19,362 (855) (15,295) - (48) (287) 9,282 264,734 Minority interest 573 573 Total equity 246,057 - 7,091 19,362 (855) (15,295) - (48) (287) 9,282 265,307 Non-current liabilities Interest-bearing loans and borrowings 81,994 81,994 Retirement benefit 94,113 1,221 95,334 obligations Provisions for liabilities & charges 6,958 6,958 Deferred tax payable 17,418 48 (16,791) 675 Total non -current 200,483 - - - 1,221 - - 48 - (16,791) 184,961 liabilities Current liabilities Interest- bearing loans and borrowings 3,028 3,028 Trade and other payables 186,705 (19,362) 410 167,753 Construction contracts 29,836 29,836 Income tax payable 5,123 (89) 5,034 Provisions for liabilities & charges 11,418 11,418 Total current liabili- ties 236,110 - - (19,362) - - - - 410 (89) 217,069 Total liabili- ties 436,593 - - (19,362) 1,221 - - 48 410 (16,880) 402,030 Total equity and liabili- ties 682,650 - 7,091 - 366 (15,295) - - 123 (7,598) 667,337 THE WEIR GROUP PLC CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE PREPARED IN ACCORDANCE WITH IFRS for the 53 weeks ended 31 December 2004 UK GAAP IFRS IFRS adjustments Restated under Format IFRS Â£000's Â£000's Â£000's Actuarial losses (3,258) (179) (3,437) Tax on actuarial losses 918 54 972 Share of associate's actuarial losses - (4,459) (4,459) Exchange differences arising on translation of (2,754) (1,257) (4,011) overseas operations Tax on exchange differences arising on translation of (51) 51 - overseas operations Net expense recognised directly in equity (5,145) (5,790) (10,935) Profit for the period 36,922 7,134 44,056 Total recognised income and expense for the period 31,777 1,344 33,121 Attributable to: Equity shareholders 31,736 1,344 33,080 Minority interests 41 - 41 31,777 1,344 33,121 CONSOLIDATED SUMMARY OF CHANGES IN SHAREHOLDERS' EQUITY for the 53 weeks ended 31 December 2004 UK GAAP IFRS IFRS adjustments Restated under Format IFRS Â£000's Â£000's Â£000's Total recognised gains and losses attributable to 31,736 1,344 33,080 equity shareholders Dividends on ordinary shares (26,525) 837 (25,688) New share issues (net of costs) 5,488 - 5,488 Employee share scheme 600 (244) 356 Net addition to shareholders' equity 11,299 1,937 13,236 Shareholders' equity at the beginning of the year 234,185 17,313 251,498 Shareholders' equity at the end of the year 245,484 19,250 264,734 CONSOLIDATED ADJUSTMENT TO OPENING SHAREHOLDERS' EQUITY for the 53 weeks ended 31 December 2004 IFRS adjustments Â£000's Proposed dividend 18,525 Mid to bid pensions valuation (682) Associates (10,428) Holiday pay accruals (326) Tax 10,224 Net addition to opening shareholders' equity 17,313 THE WEIR GROUP PLC NOTES TO THE FINANCIAL INFORMATION PREPARED IN ACCORDANCE WITH IFRS 1 SIGNIFICANT ACCOUNTING POLICIES UNDER IFRS Basis of preparation The consolidated financial information has been prepared on the basis of International Financial Reporting Standards ('IFRS') expected to be applicable for the 52 weeks ended 30 December 2005. European law requires that the Group's financial statements for the 52 weeks ending 30 December 2005 are prepared on the basis of IFRS as endorsed for use in the European Union. IFRS are subject to amendment or interpretation by the IASB and there is an ongoing process of review and endorsement by the European Commission. The financial information contained in this document has been prepared on the basis of IFRS that the Directors expect to be applicable as at 30 December 2005. For the reasons outlined above, it is possible that the restated information for 2004 presented in this document may be subject to change before its inclusion in the Group's 2005 Report and Accounts, which will contain the Group's first complete financial statements prepared in accordance with IFRS. The Weir Group PLC adopted IFRS with a transition date of 27 December 2003. Comparative figures for the 53 weeks ended 31 December 2004 that were previously reported in accordance with accounting principles generally accepted in the United Kingdom ('UK GAAP') have been restated in order to comply with IFRS, with the exception of IAS32 'Financial Instruments: Disclosure and Presentation' and IAS39 'Financial Instruments: Recognition and Measurement'. These will be applied prospectively from 1 January 2005. IFRS1 'First-time Adoption of IFRS' allows certain exemptions from the retrospective application of IFRS prior to 27 December 2003. Where these exemptions have been used, they are explained under the relevant headings below. The consolidated financial information has been prepared under the historical cost convention except as described under the heading 'Financial Instruments'. Basis of consolidation The consolidated financial information includes the results, cash flows and assets and liabilities of The Weir Group PLC ('the Company') and its subsidiaries (together, 'the Group'), and the Group's share of its joint ventures and associates results. The financial statements of subsidiaries, joint ventures and associates are prepared for the same reporting period as the company, using consistent accounting policies. A subsidiary is an entity controlled, either directly or indirectly, by the Company, where control is the power to govern the financial and operating policies of the entity so as to obtain benefit from its activities. The results of a subsidiary acquired during the period are included in the Group's results from the effective date on which control is transferred to the Group. The results of a subsidiary sold during the period are included in the Group's results up to the effective date on which control is transferred out of the Group. All intragroup transactions, balances, income and expenses are eliminated on consolidation. Joint Ventures and Associates A joint venture is an entity in which the Group holds an interest on a long term basis and which is jointly controlled by the Group and one or more other venturers under a contractual arrangement. Joint ventures are accounted for using the equity method. An associate is an entity over which the Company, either directly or indirectly, is in a position to exercise significant influence by participating in, but not controlling or jointly controlling, the financial and operating policies of the entity. Associates are accounted for using the equity method. These investments are carried in the balance sheet at cost plus post-acquisition changes in the Group's share of net assets less any impairment in value. The income statement reflects the share of results of operations of these investments. Where there has been a change recognised directly in the investee's equity, the Group recognises its share of any changes and discloses this when applicable in the statement of recognised income and expense. Foreign currency translation The financial statements for each of the Group's subsidiaries, joint ventures and associates are prepared using their functional currency. The functional currency is the currency of the primary economic environment in which an entity operates. The presentation currency of the Group and functional currency of the Weir Group PLC is Sterling. At entity level, transactions denominated in foreign currencies are translated into the entity's functional currency at the exchange rate ruling on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the exchange rate ruling on the balance sheet date. Currency translation differences are recognised in the income statement. On consolidation, the results of foreign operations are translated into sterling at the average exchange rate for the period and their assets and liabilities are translated into sterling at the exchange rate ruling on the balance sheet date. Currency translation differences, including those on monetary items that form part of a net investment in a foreign operation, are recognised in the currency translation reserve. Differences on foreign currency borrowings that provide a hedge against a net investment in a foreign entity are taken directly to equity until the disposal of the net investment, at which time they are recognised in the consolidated income statement. In the event that a foreign operation is sold, the gain or loss on disposal recognised in the income statement is determined after taking into account the cumulative currency translation differences that are attributable to the operation. As permitted by IFRS1, The Weir Group PLC elected to deem cumulative currency translation differences to be Â£nil as at 27 December 2003. Accordingly, the gain or loss on disposal of a foreign operation does not include currency translation differences arising before 27 December 2003. In the cash flow statement, the cash flows of foreign operations are translated into sterling at the average exchange rate for the period. Revenue Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue from sales of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and can be reliably measured. Revenue from the sales of services and revenue from construction contracts is recognised by reference to the stage of completion. A construction contract is defined as a contract that is specifically negotiated for the construction of an asset or a combination of assets that are closely interrelated or interdependent in terms of their design, technology and function or their ultimate purpose or use. Where the time taken to complete such contracts extends over different accounting periods, revenue is recognised by reference to the stage of completion of the contract activity at the balance sheet date where the outcome can be estimated reliably, otherwise it is recognised to the extent costs are incurred. Losses on contracts are recognised in the period when such losses become probable. The stage of completion of a contract is determined either by reference to the proportion that contract costs incurred for work performed to date bear to the estimated total contract costs, or by reference to the completion of a physical proportion of the contract work, dependent upon the nature of the underlying contract. Goodwill Business combinations are accounted for using the purchase method. Goodwill arises on the acquisition of subsidiaries, joint ventures and associates and represents any excess of the cost of the acquired entity over the Group's interest in the fair value of the entity's identifiable assets, liabilities and contingent liabilities determined at the date of acquisition. Goodwill in respect of an acquired subsidiary is recognised as an intangible asset. Goodwill in respect of an acquired joint venture or associate is included within investments in joint ventures and associates. Goodwill is tested at least annually for impairment and carried at cost less any recognised impairment losses. Where the fair value of the interest acquired in an entity's assets, liabilities and contingent liabilities exceeds the consideration paid, the excess is recognised immediately as a gain in the income statement. As permitted by IFRS1, The Weir Group PLC elected not to apply IFRS3 'Business Combinations' to business combinations that were recognised before 27 December 2003. As a result: â€¢ goodwill recognised as an asset under UK GAAP as at 27 December 2003 has not been revised retrospectively to identify and extract intangible assets to be recognised separate from goodwill. The carrying amount of goodwill brought forward in the opening IFRS balance sheet is that recorded under UK GAAP; and â€¢ goodwill that was written-off directly to reserves under UK GAAP is not taken into account in determining the gain or loss on disposal of acquired businesses on or after 27 December 2003. Other intangible assets Other intangible assets are stated at cost less accumulated amortisation and any recognised impairment losses. a. Acquired intangible assets An intangible resource acquired in a business combination is recognised as an intangible asset if it is separable from the acquired business or arises from contractual or legal rights, is expected to generate future economic benefits and its fair value can be measured reliably. An acquired intangible asset with a finite life is amortised on a straight-line basis so as to charge its cost, which represents its fair value at the acquisition date, to the income statement over its expected useful life. b. Research and development costs All research expenditure is charged to the income statement in the period in which it is incurred. Development expenditure is charged to the income statement in the period in which it is incurred unless it relates to the development of a new product and it is incurred after the technical feasibility and commercial viability of the product has been proven. Capitalised development expenditure is amortised on a straight-line basis such that it is charged to the income statement over the expected life of the resulting product, not exceeding eight years. Development expenditure incurred before 27 December 2003 was not capitalised retrospectively because the conditions specified within IAS38 'Intangible Assets ' were not met. c. Computer software Computer software that is not integral to an item of property, plant and equipment is recognised separately as an intangible asset. Amortisation is provided on a straight- line basis so as to charge the cost of the software to the income statement over its expected useful life, not exceeding eight years. Property, plant and equipment Property, plant and equipment is stated at cost less accumulated depreciation and any recognised impairment losses. Freehold land and assets under construction are not depreciated. Depreciation of property, plant and equipment, other than freehold land and assets under construction, is provided on a straight-line basis so as to charge the depreciable amount to the income statement over the expected useful life of the asset concerned, which is in the following ranges: Freehold buildings, long leasehold land and buildings - 10 - 40 years Short leasehold land and buildings - Duration of lease Plant and equipment - 3 - 20 years Borrowing costs attributable to assets under construction are charged to the income statement in the period in which they are incurred. Leases Leases which transfer to the Group substantially all the risks and rewards of ownership of the leased asset are classified as finance leases. All other leases are classified as operating leases. Assets held under finance leases are included within property, plant and equipment, initially measured at their fair value or, if lower, the present value of the minimum lease payments, and a corresponding liability is recognised within obligations under finance leases. Subsequently, the assets are depreciated on a basis consistent with similar owned assets or the lease term if shorter. At the inception of the lease, the lease rentals are apportioned between an interest element and a capital element so as to produce a constant periodic rate of interest on the outstanding liability. Subsequently, the interest element is recognised as a charge to the income statement while the capital element is applied to reduce the outstanding liability. Operating lease rentals, and any incentives receivable, are recognised in the income statement on a straight-line basis over the term of the lease. Impairment of non-current assets All non-current assets are tested for impairment whenever events or circumstances indicate that their carrying values might be impaired. Additionally, goodwill and capitalised development expenditure relating to a product that is not yet in full production are subject to an annual impairment test. An impairment loss is recognised to the extent that an asset's carrying value exceeds its recoverable amount, which represents the higher of the asset's fair value less costs to sell and its value in use. An asset's value in use represents the present value of the future cash flows expected to be derived from the asset. Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is conducted for the cash-generating unit to which it belongs. Similarly, the recoverable amount of goodwill is determined by reference to the discounted future cash flows of the cash-generating units to which it is allocated. Impairment losses are recognised in the income statement. Impairment losses recognised in previous periods for an asset other than goodwill are reversed if there has been a change in the estimates used to determine the asset's recoverable amount. The carrying amount of an asset shall not be increased above the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior periods. Impairment losses recognised in respect of goodwill are not reversed. Inventories Inventories are valued at the lower of cost and net realisable value, with due allowance for any obsolete or slow moving items. Cost represents the expenditure incurred in bringing inventories to their existing location and condition and comprises the cost of raw materials, direct labour costs, other direct costs and related production overheads. Raw material cost is generally determined on a first in, first out basis. Net realisable value is the estimated selling price less costs to complete and sell. Trade and other receivables Trade receivables, which generally are of a short dated nature, are recognised and carried at original invoice amount less an allowance for estimated irrecoverable amounts. Grants Grants are recognised at their fair value where there is reasonable assurance that the grant will be received and the Group will comply with all the attached conditions. Grants relating to capitalised costs are deferred and recognised in the income statement over the period to match with the costs they are intended to compensate. Grants relating to the purchase of tangible and intangible assets are deducted in arriving at the balance sheet carrying amount of the related asset. Other grants received are recognised as income on a systematic basis so as to match them with the costs they are intended to compensate or, if those costs have already been recognised, the grants are recognised as income in the period in which they are received. Cash and cash equivalents Cash and cash equivalents comprise cash in hand, deposits available on demand and other short-term highly liquid investments with a maturity on acquisition of three months or less, and bank overdrafts. Bank overdrafts are presented as current liabilities to the extent that there is no right of offset with cash balances. Interest-bearing loans and borrowings All loans and borrowings are initially recognised at cost, being the fair value of the proceeds received net of issue costs associated with the borrowing. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Amortised cost is calculated by taking into account any issue costs and any discount or premium on settlement. Provisions A provision is recognised in the balance sheet when the group has a legal or constructive obligation as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Financial instruments a. Prospective adoption of IAS32 and IAS39 As permitted by IFRS1, The Weir Group PLC has elected to apply IAS32 'Financial Instruments: Disclosure and Presentation' and IAS39 'Financial Instruments: Recognition and Measurement' prospectively from 1 January 2005. As a result, the relevant comparative information for the 53 weeks ended 31 December 2004 and as at 31 December 2004 does not reflect the impact of these standards and is accounted for in accordance with UK GAAP. b. Investments Under UK GAAP, investments in UK gilts and United States treasury bonds are stated at cost. From 1 January 2005 onwards, these investments will be classified as held to maturity assets or cash equivalents as appropriate and will be measured at amortised cost. c. Derivative financial instruments The Weir Group PLC uses derivative financial instruments, principally forward foreign currency contracts, to reduce its exposure to exchange rate movements. The Weir Group PLC does not hold or issue derivatives for speculative or trading purposes. Under UK GAAP, such derivative contracts are not recognised as assets and liabilities on the balance sheet and gains or losses arising on them are not recognised until the hedged item is itself recognised in the financial statements. From 1 January 2005 onwards, derivative financial instruments will be recognised as assets and liabilities measured at their fair values at the balance sheet date. The fair value of forward exchange contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profile. Changes in their fair values will be recognised in the income statement, except where hedge accounting is used provided the conditions specified by IAS39 are met. Hedge accounting is applied in respect of hedge relationships where it is both permissible under IAS39 and practical to do so. When hedge accounting is used, the relevant hedging relationships will be classified as fair value hedges, cash flow hedges or net investment hedges. Where the hedging relationship is classified as a fair value hedge, the carrying amount of the hedged asset or liability will be adjusted by the increase or decrease in its fair value attributable to the hedged risk and the resulting gain or loss will be recognised in the income statement where, to the extent that the hedge is effective, it will be offset by the change in the fair value of the hedging instrument. Where the hedging relationship is classified as a cash flow hedge or as a net investment hedge, to the extent the hedge is effective, changes in the fair value of the hedging instrument will be recognised directly in equity rather than in the income statement. When the hedged item is recognised in the financial statements, the accumulated gains and losses recognised in equity will be either recycled to the income statement or, if the hedged item results in a non-financial asset, will be recognised as adjustments to its initial carrying amount. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer qualifies for hedge accounting. At that point in time, any cumulative gain or loss on the hedging instrument recognised in equity is kept in equity until the forecasted transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is transferred to net profit or loss for the period. d. Embedded derivatives Under UK GAAP, embedded derivatives are not recognised in the financial statements. From 1 January 2005 onwards, derivatives embedded in non-derivative host contracts will be recognised separately as derivative financial instruments when their risks and characteristics are not closely related to those of the host contract and the host contract is not stated at its fair value with changes in its fair value recognised in the income statement. Post employment benefits Post employment benefits comprise pension benefits provided to employees throughout the world and other benefits, mainly post retirement healthcare, provided to certain employees in the United States. For defined benefit plans, the cost is calculated using the projected unit credit method and is recognised over the average expected remaining service lives of participating employees, in accordance with the advice of qualified actuaries. Past service costs resulting from enhanced benefits are recognised on a straight-line basis over the vesting period, or immediately if the benefits have vested. Actuarial gains and losses, which represent differences between the expected and actual returns on the plan assets and the effect of changes in actuarial assumptions, are recognised in full in the statement of recognised income and expense in the period in which they occur. The defined benefit liability or asset recognised in the balance sheet comprises the net total for each plan of the present value of the benefit obligation, using a discount rate based on appropriate high quality corporate bonds, at the balance sheet date, minus any past service costs not yet recognised, minus the fair value of the plan assets, if any, at the balance sheet date. Where a plan is in surplus, the asset recognised is limited to the amount of any unrecognised past service costs and the present value of any amount which the Group expects to recover by way of refunds or a reduction in future contributions. For defined contribution plans, the cost represents the Group's contributions to the plans and this is charged to the income statement in the period in which they fall due. Share-based payments Equity settled share-based incentives are provided to employees under the Group's executive share option scheme, the savings-related share option scheme and the long-term incentive plan. The Group recognises a compensation cost in respect of these schemes that is based on the fair value of the awards. For equity-settled schemes, the fair value is determined at the date of grant and is not subsequently re-measured unless the conditions on which the award was granted are modified. The fair value at the date of the grant is calculated using appropriate option pricing models and the cost is recognised on a straight-line basis over the vesting period. Adjustments are made to reflect expected and actual forfeitures during the vesting period due to failure to satisfy service conditions or non-market performance conditions. As permitted by IFRS 1, The Weir Group PLC has applied IFRS2 'Share-based Payment' retrospectively only to equity-settled awards that had not vested as at 1 January 2005 and were granted on or after 7 November 2002. Taxation Current tax is the amount of tax payable or recoverable in respect of the taxable profit or loss for the period. Deferred tax is provided in full, using the liability method, on temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base. Deferred tax arising from the initial recognition of an asset or liability in a transaction, other than a business combination, that at the time of the transaction affects neither accounting nor taxable profit or loss, is not recognised. Deferred tax liabilities represent tax payable in future periods in respect of taxable temporary differences. Deferred tax assets represent tax recoverable in future periods in respect of deductible temporary differences, the carry forward of unused tax losses and the carry forward of unused tax credits. Deferred tax is determined using the tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date and are expected to apply when the deferred tax asset is realised or the deferred tax liability is settled. Deferred tax is provided on temporary differences arising on investments in subsidiaries, joint ventures and associates, except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Current and deferred tax is recognised in the income statement except if it relates to an item recognised directly in equity, in which case it is recognised directly in equity. INDEPENDENT AUDITORS' REPORT TO THE DIRECTORS OF THE WEIR GROUP PLC ON THE PRELIMINARY COMPARATIVE IFRS FINANCIAL INFORMATION FOR THE 53 WEEKS ENDED 31 DECEMBER 2004 We have audited the accompanying preliminary comparative International Financial Reporting Standards ('IFRS') financial information of the Company for the 53 weeks ended 31 December 2004 which comprise the Consolidated Income Statement, the Consolidated Statement of Income and Expense and the Consolidated Cash Flow Statement for the 53 weeks ended 31 December 2004 and the Consolidated Balance Sheet as at 31 December 2004, together with the related notes set out in Part II and the Presentation of financial information prepared in accordance with UK GAAP in IFRS format set out in Part III. This report is made solely to the Directors in accordance with our engagement letter dated 17 May 2005. Our audit work has been undertaken so that we might state to the Directors those matters we are required to state to them in an auditors' report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility or liability to anyone other than the Directors for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors This preliminary comparative IFRS financial information is the responsibility of the Company's directors and have been prepared as part of the Company's conversion to IFRS. It has been prepared in accordance with the basis set out in Note 1, which describes how IFRS have been applied under IFRS 1, including the assumptions management has made about the standards and interpretations expected to be effective, and the policies expected to be adopted, when management prepares its first complete set of IFRS financial statements as at 30 December 2005. Our responsibility is to express an independent opinion on the preliminary comparative IFRS financial information based on our audit. We read the other information accompanying the preliminary comparative IFRS financial information and consider whether it is consistent with the preliminary comparative IFRS financial information. This other information comprises the information set out in Part I. Our responsibilities do not extend to any other information. Basis of audit opinion We conducted our audit in accordance with United Kingdom Auditing Standards issued by the Auditing Practices Board. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the preliminary comparative IFRS financial information is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the preliminary comparative IFRS financial information. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the preliminary comparative IFRS financial information. We believe that our audit provides a reasonable basis for our opinion. Emphasis of matter Without qualifying our opinion, we draw attention to the fact that Note I explains why there is a possibility that the preliminary comparative IFRS financial information may require adjustment before constituting the final comparative IFRS financial information. Moreover, we draw attention to the fact that, under IFRS, only a complete set of financial statements with comparative financial information and explanatory notes can provide a fair presentation of the Group's financial position, results of operations and cash flows in accordance with IFRS. Opinion In our opinion, the preliminary comparative IFRS financial information for the 53 weeks ended 31 December 2004 has been prepared, in all material respects, in accordance with the basis set out in Note 1, which describes how IFRS have been applied under IFRS 1, including the assumptions management has made about the standards and interpretations expected to be effective, and the policies expected to be adopted, when management prepares its first complete set of IFRS financial statements as at 30 December 2005. Ernst & Young LLP Glasgow 1 July 2005 PART III Presentation of financial information prepared in accordance with UK GAAP in IFRS Format THE WEIR GROUP PLC REFORMAT OF UK GAAP CONSOLIDATED INCOME STATEMENT for the 53 weeks ended 31 December 2004 As Share of Share of Share of Gross up IFRS reported JVs & JVs & JVs & interest Format under UK associates associates associates GAAP * revenue interest tax UK GAAP amounts in UK GAAP format Â£000's Â£000's Â£000's Â£000's Â£000's Â£000's UK GAAP amounts in IFRS format Turnover Continuing operations Group - continuing operations 739,350 739,350 Revenue Share of turnover of - joint ventures 8,435 (8,435) - - associates 99,790 (99,790) - 847,575 (108,225) - - - 739,350 Turnover 739,350 739,350 Revenue Cost of sales (542,285) (542,285) Cost of sales Gross profit 197,065 - - - - 197,065 Gross profit Other operating income 2,019 2,019 Other revenue and income Distribution costs (95,850) (95,850) Selling and distribution costs Administrative expenses (51,965) (51,965) Administrative expenses Goodwill amortisation (7,163) (7,163) Goodwill amortisation Share of operating profit of - joint 536 26 (21) 541 Share of results of ventures - joint ventures - associates 9,157 (219) (2,636) 6,302 - associates Operating profit 53,799 - (193) (2,657) - 50,949 Profit from continuing operations before tax and finance costs Interest & other income Net interest & other income (3,895) 193 (2,693) (6,395) Finance costs 2,693 2,693 Finance income Other finance income 955 955 Employee benefits interest income Profit on ordinary activities before 50,859 - - (2,657) - 48,202 Profit before tax tax Tax on profit on ordinary activities 13,937 (2,657) 11,280 Income tax expense before tax Profit on ordinary activities after 36,922 - - - - 36,922 Profit for the year tax from continuing operations Attributable to: Attributable to: Equity holders of the parent 36,881 36,881 Equity holders of the parent Minority interests 41 41 Minority interests 36,922 - - - - 36,922 * The order and description of items presented 'As reported under UK GAAP' has been adjusted to ease the direct comparison with IFRS presentation. THE WEIR GROUP PLC REFORMAT OF CONSOLIDATED CASH FLOW STATEMENT for the 53 weeks ended 31 December 2004 UK GAAP amounts in UK GAAP Format As Cash Operating Investing Financing IFRS UK GAAP amounts in IFRS reported equivalents activities activities activities Format format under UK GAAP * Â£000's Â£000's Â£000's Â£000's Â£000's Â£000's Cash inflow from operating Cash flows from operating activities activities Funds generated by operations 67,638 (628) 67,010 Cash generated from operations Exceptional pension contributions (12,096) (12,096) Exceptional pension contributions Cash spent on exceptional items (628) 628 - (8,815) (8,815) Income tax paid 54,914 46,099 Net cash generated from operating activities Taxation (8,815) 8,815 - Acquisitions & disposals Cash flows from investing activities - acquisitions (282) (615) (897) Acquisitions - acquisitions of joint ventures (615) 615 - - disposals of businesses 57 4,545 4,602 Disposals - disposal of joint venture 4,545 (4,545) - Capital expenditure & financial investment - purchase of tangible fixed (24,250) (24,250) Purchases of property, plant assets & equipment & intangible assets - sale of tangible fixed assets 489 489 Proceeds from sale of property, plant & equipment & intangible assets - purchase of investments (1,338) 788 (550) Purchases of other investments - sale of investments 1,215 (433) 782 Proceeds from sale of other investments 5,298 5,298 Dividends received Returns on investments & servicing of finance - interest & finance charges paid (4,681) (84) (4,765) Interest paid - interest element of finance (113) 113 - lease rentals - interest received 2,675 2,675 Interest received (16,616) Net cash used in investing activities Management of liquid resources 40,827 (40,827) - Financing Cash flows from financing activities - issue of shares 5,488 5,488 Proceeds from issuance of ordinary shares - new loans 80,842 80,842 Proceeds from borrowings - debt repaid (113,140) (113,140) Repayments of borrowings - foreign exchange hedging 2,478 2,478 Foreign exchange hedging Dividends received from joint ventures & associates - joint ventures 2,312 (2,312) - - associates 2,986 (2,986) - Equity dividends paid (25,688) (25,688) Dividends paid to equity holders of the parent (29) (29) Dividends paid to minority interests (50,049) Net cash used in financing activities Increase in cash 19,906 (40,472) - - - (20,566) Net decrease in cash and cash equivalents Cash at 27 December 2003 63,792 53,933 117,725 Cash and cash equivalents at 27 December 2003 Exchange losses on cash (505) (1,043) (1,548) Exchange losses on cash and cash equivalents Cash at 31 December 2004 83,193 12,418 - - - 95,611 Cash and cash equivalents at 31 December 2004 * The order and description of items presented 'As reported under UK GAAP' has been adjusted to ease the direct comparison with IFRS presentation. THE WEIR GROUP PLC REFORMAT OF UK GAAP CONSOLIDATED BALANCE SHEET as at 31 December 2004 As Reclass. of Construction Tax assets and Finance lease reported investments, contracts liabilities obligations under UK JVs and GAAP * associates UK GAAP Â£000's Â£000's Â£000's Â£000's Â£000's UK GAAP balances balances in UK in IFRS format GAAP format ASSETS Fixed assets Non-current assets Tangible 109,767 Property, plant & assets equipment Intangible 103,916 Intangible assets assets - goodwill Investments Joint ventures - share of 2,795 (2,795) gross assets - share of 1,430 (1,430) gross liabilities _____________________________________________________________________________________________________________________ 1,365 (1,365) - - - Associates 19,655 (19,655) Other 548 (548) investments 21,020 Investments in joint ventures & associates 2,775 Deferred tax receivable _____________________________________________________________________________________________________________________ Total fixed 235,251 (548) - 2,775 - Total non-current assets assets _____________________________________________________________________________________________________________________ Current assets Current assets Stocks 98,330 (5,160) Inventories Debtors 218,058 (36,042) (4,364) Trade & other receivables 45,905 Construction contracts 1,589 Income tax receivable 213 Investments Cash at bank & 97,287 335 Cash & short term in hand deposits _____________________________________________________________________________________________________________________ 413,675 548 4,703 (2,775) - Total current assets _____________________________________________________________________________________________________________________ 648,926 - 4,703 - - Total assets _____________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________ Capital & EQUITY AND reserves LIABILITIES Called up 25,882 Share capital share capital Share premium 26,451 Share premium account Capital 531 Other reserves redemption reserve - Foreign currency translation reserve Profit & loss 192,620 Retained earnings account _____________________________________________________________________________________________________________________ 245,484 - - - - Shareholders' equity - Minority interest _____________________________________________________________________________________________________________________ 245,484 - - - - Total equity _____________________________________________________________________________________________________________________ Creditors Non-current falling due liabilities after more than one year Loans 81,063 931 Interest-bearing loans and borrowings Obligations 931 (931) under finance leases Retirement 65,075 Retirement benefits - benefit liability obligations Provisions for 36,007 (213) (17,418) Provisions for liabilities & liabilities & charges charges 17,418 Deferred tax payable Deferred income Grants not yet 17 credited to profit Minority 573 interest _____________________________________________________________________________________________________________________ 183,666 - (213) - - Total non-current liabilities _____________________________________________________________________________________________________________________ Creditors Current falling due liabilities within one year Borrowings 2,553 475 Interest-bearing loans and borrowings Other 217,223 (24,920) (5,123) (475) Trade and other creditors payables 29,836 Construction contracts 5,123 Income tax payable Provisions for liabilities & charges _____________________________________________________________________________________________________________________ 219,776 - 4,916 - - Total current liabilities _____________________________________________________________________________________________________________________ 403,442 - 4,703 - - Total liabilities _____________________________________________________________________________________________________________________ 648,926 - 4,703 - - Total equity and liabilities _____________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________ Government Deferred tax Reclass. of Reclass. of IFRS Format grants on retirement provisions equity benefits liability UK GAAP balances Â£000's Â£000's Â£000's Â£000's Â£000's UK GAAP balances in in UK GAAP IFRS format format ASSETS Fixed assets Non-current assets Tangible assets (17) 109,750 Property, plant & equipment Intangible 103,916 Intangible assets assets - goodwill Investments Joint ventures - - share of gross assets - share of gross - liabilities _____________________________________________________________________________________________________________________ - - - - Associates - Other - investments 21,020 Investments in joint ventures & associates 29,038 31,813 Deferred tax receivable _____________________________________________________________________________________________________________________ Total fixed (17) 29,038 - - 266,499 Total non-current assets assets _____________________________________________________________________________________________________________________ Current assets Current assets Stocks 93,170 Inventories Debtors 177,652 Trade & other receivables 45,905 Construction contracts 1,589 Income tax receivable 213 Investments Cash at bank & 97,622 Cash & short term in hand deposits _____________________________________________________________________________________________________________________ - - - - 416,151 Total current assets _____________________________________________________________________________________________________________________ (17) 29,038 - - 682,650 Total assets _____________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________ Capital & EQUITY AND reserves LIABILITIES Called up share 25,882 Share capital capital Share premium 26,451 Share premium account Capital 531 Other reserves redemption reserve (2,805) (2,805) Foreign currency translation reserve Profit & loss 2,805 195,425 Retained earnings account _____________________________________________________________________________________________________________________ - - - - 245,484 Shareholders' equity 573 573 Minority interest _____________________________________________________________________________________________________________________ - - - 573 246,057 Total equity _____________________________________________________________________________________________________________________ Creditors Non-current falling due liabilities after more than one year Loans 81,994 Interest-bearing loans and borrowings Obligations - under finance leases Retirement 29,038 94,113 Retirement benefit benefits - obligations liability Provisions for (11,418) 6,958 Provisions for liabilities & liabilities & charges charges 17,418 Deferred tax payable Deferred income Grants not yet (17) - credited to profit Minority (573) - interest _____________________________________________________________________________________________________________________ (17) 29,038 (11,418) (573) 200,483 Total non-current liabilities _____________________________________________________________________________________________________________________ Creditors Current liabilities falling due within one year Borrowings 3,028 Interest-bearing loans and borrowings Other creditors 186,705 Trade and other payables 29,836 Construction contracts 5,123 Income tax payable 11,418 11,418 Provisions for liabilities & charges _____________________________________________________________________________________________________________________ - - 11,418 - 236,110 Total current liabilities _____________________________________________________________________________________________________________________ (17) 29,038 - (573) 436,593 Total liabilities _____________________________________________________________________________________________________________________ (17) 29,038 - - 682,650 Total equity and liabilities _____________________________________________________________________________________________________________________ _____________________________________________________________________________________________________________________ * The order and description of items presented 'As reported under UK GAAP' has been adjusted to ease the direct comparison with IFRS presentation. Paste the following link into your web browser to download the PDF document related to this announcement: http://www.rns-pdf.londonstockexchange.com/rns/2858o_-2005-6-30.pdf This information is provided by RNS The company news service from the London Stock Exchange

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