Annual Financial Report

The Weir Group PLC

2015 Annual Report and 2016 Annual General Meeting

The following documents have today been posted or otherwise made available to shareholders:

1. Annual Report and Financial Statements for the 52 weeks ended 1 January 2016 (the "2015 Annual Report");
2. Notice of 2016 Annual General Meeting;
3. Form of Proxy for the 2016 Annual General Meeting;
4. Scrip Dividend Scheme Circular; and
5. Scrip Dividend Scheme Mandate.

In accordance with Listing Rule 9.6.1, a copy of each of these documents has been uploaded to the National Storage Mechanism and will be available for viewing shortly at http://www.morningstar.co.uk/uk/NSM.

The documents are also available on the Company's website at www.global.weir and in hard copy to shareholders upon request to Investor Relations, The Weir Group PLC, 1 West Regent Street, Glasgow, G2 1RW.

The Company's 2016 Annual General Meeting will be held at the Company's Head Office, 1 West Regent Street, Glasgow, G2 1RW, on Thursday 28 April 2016 at 2.30pm.

The Company's full year results announcement of 24 February 2016 contained a management report as well as the audited financial statements which were prepared in accordance with the applicable accounting standards. The 2015 Annual Report submitted to the National Storage Mechanism today also contains information regarding the Company's principal risks and uncertainties, related party transactions and a responsibility statement relating to the content of the 2015 Annual Report; an extract of this information is provided below as required under paragraph 6.3.5 of the DTR, however this material should be read in conjunction with and is not a substitute for reading the full 2015 Annual Report. Page numbers and cross-references in the following appendices refer to page numbers and cross-references in the 2015 Annual Report.

APPENDICES

Appendix A: Principal risks and uncertainties
A description of the principal risks and uncertainties that the Company faces is extracted in full and unedited form from pages 24 to 29 of the 2015 Annual Report.

As in any business, there are risks and uncertainties which could impact the Group's ability to achieve its objectives in the future. However, we believe the Group's risk management and assurance framework makes this less likely. The Board has conducted a robust assessment of the principal risks, alongside the risk appetite statement set out on page 21, meeting the Board's responsibilities in connection with Risk Management and Internal Control detailed in the 2014 UK Corporate Governance Code. Each of the principal risks is assigned an owner from amongst the Board or Group senior management team and is either a standing agenda item at each Board meeting or subject to formal periodic review by the Board.  A summary of principal risks and the Group's mitigating controls is presented at every Board meeting.

The Directors reviewed the Group's risk register, reassessed the validity of the principal risks identified  in the prior year and considered whether any new principal risks have emerged or a risk is no longer considered a principal risk. The identified principal risks were subjected to a detailed assessment based on the following considerations:

• severity of each risk;
• existence and effectiveness of actions and internal controls which serve to mitigate the risk;
• the overall effectiveness of the Group's control environment, including assurance and any identified control weaknesses or failings; and
• the extent to which each of the principal risks could impact upon the Group's viability, in financial or operational terms, due to their potential effects on the business plan, solvency or liquidity.

The principal risks set out below are those which we believe to have the greatest potential to impact  our ability to achieve the Group's strategic objectives or which have the greatest potential impact on  the Group's solvency or liquidity.

Risk	Why we think this is important	How we are mitigating the risk	Changes during 2015
Global economic conditions (Risk increasing; Considered as part of Viability Statement assessment)
Changes in key markets, including commodity prices affecting mining and oil and gas, have an adverse impact on customers' expenditure plans. This may include delaying existing expenditure commitments.	We need to remain sufficiently flexible to allow us to anticipate downturns, to allow us to adjust our operations accordingly, and equally to meet growth in demand when our customers' markets are buoyant and therefore capital investment is high. Otherwise, we are at risk of incurring unnecessary costs during downturns, and not maximising our potential for growth in buoyant markets.   In challenging market conditions, our supply chain risks are increased. These are described in more detail on page 26.	We maintain regular engagement with our customers to understand their needs and challenges, and ensure our business is appropriately aligned. Our strategic planning utilises extensive market intelligence to assist in forecasting opportunities and dips in markets. We maintain contingency plans for downturns.	Market conditions have remained challenging during 2015, with commodity prices in oil and gas joining those in minerals markets at recent historical lows. Necessary adjustments have been made to our operations to accommodate our customers' responses to these market conditions.
Technology and innovation (Risk increasing; Considered as part of Viability Statement assessment)
We fail to drive innovation or to react to emerging technology developments, and therefore fail to ensure that the business continues to deliver sustainable and attractive solutions for our customers.	The strength of our business is built upon a history of delivering innovative and sustainable solutions for our customers.  If we fail to keep abreast of market needs or to innovate solutions, we are at risk of losing market share to our competitors and lowering margins as demand will reduce.	Continual investment in research and development, including the Weir Advanced Research Centre (WARC) in conjunction with the University of Strathclyde. We have a dedicated governance team (Engineering Excellence Committee) focused on the delivery of our strategic objectives for technological advances and innovation to meet the needs of our customers. Weir Technology Advisory Board established  comprising highly regarded experts to ensure Weir continues to be at the leading edge of technology development in our chosen industries.	The pace of technological innovation continues to increase as we and our competitors seek to provide customers with solutions that improve the efficiency of their operations. To ensure we continue to retain competitive advantage in this area, our existing research and development initiatives within the business, at WARC, and at certain universities around the world, have been enhanced through our partnership with Imperial College London. This partnership will help the Group develop game-changing solutions to our customers' challenges. We are also devoting additional resources to reviewing and responding to developing technologies and have signed an agreement with Microsoft Corporation to develop Internet of Things (IoT) technology. Further information on progress made in this area is set out in the Products and Technology section of the Sustainability Review on pages 58 and 59.
Political and social risk (Risk unchanged; Considered as part of Viability Statement assessment)
Adverse political action, or political and social instability, in territories in which we operate may result in strategic, financial or personnel loss to the Group.	We operate across the globe and therefore have to work within a wide range of political and social conditions. Adverse events may occur in the territories in which we operate that may require us to act swiftly to protect our people, our property and to maintain our competitiveness, and we need to be flexible and able to anticipate such issues. Expansions into new territories are only undertaken after rigorous assessment of the risks, including the social and political situation within the territory.	Regular review of market attractiveness. Monitoring travel by Weir employees to higher risk locations. External expert risk assessments and regular monitoring in higher risk locations. Contingency plans and exit strategy planning. Our strategic planning assists in forecasting potential political and social instability in regions.	In response to increased security risks, arising from changes in the political environment in certain countries where the Group has operations, enhancements have been made to the Group's access to expert risk assessments and plans to respond to adverse events in higher risk locations. During the course of 2015, the environment in which a number of the Group's businesses operate continued to be challenging and uncertain, especially from a security perspective. During the year we appointed a Group Head of Security to a newly created role designed to improve the ways in which these concerns are addressed and mitigated.
Supply chain management (Risk unchanged)
Failure to achieve supply chain management improvements and the associated reduction in costs and enhanced flexibility.	If we fail to improve our supply chain management, we risk: losing the opportunity to invest capital into alternative value creating opportunities; damaging our reputation and as a consequence losing customers and market share; incurring penalties as a result of late delivery contractual clauses; reducing margins by incurring unnecessary additional costs associated with late remedial actions taken to avoid missing delivery targets; and holding excess inventory in the event of a market downturn.	Regular KPI monitoring of the supply chain throughout the organisation. The Group's operations are currently implementing Value Chain Excellence initiatives amongst other business improvement objectives. Established Centres of Excellence drive cost savings, efficiencies and enhance delivery standards whilst maintaining quality. The Group's forward purchase commitments are being closely monitored to manage inventories at levels appropriate to market conditions. Our credit risk management procedures are under continuous appraisal and their application is subject to specific internal audit review.	Supply chain remains an area of strategic focus for the Group. Supply chain improvements continue to be recognised year on year as the Group realises benefits from its focused approach to these matters. In 2015, we have seen underlying improvements in working capital, including circa £65m in our Oil & Gas division, and substantial progress in improving on-time-delivery for all divisions with a 21% and 20% improvement in Oil & Gas and Power & Industrial respectively.  A programme of Value Chain Excellence initiatives has been launched throughout the Group to drive supply chain improvements.
Environment, health and safety (EHS) (Risk unchanged; Considered as part of Viability Statement assessment)
Failure to adequately protect our people and other stakeholders from harm associated with a breach in EHS standards.	We operate in hazardous environments, and therefore have a fundamental duty to protect our people and other stakeholders from harm whilst conducting our business. As well as the personal impact on our people resulting from a failure to meet this obligation, we would also be at risk of: reputational damage leading to a loss of customers; legal action from regulators, including fines and penalties; and exclusion from markets important for our future growth.	The Weir Behavioural Safety system is in place to reduce the risk of safety incidents. In addition, there are initiatives to prevent the most common accident types. The Weir global EHS standards are continually reviewed. The EHS Excellence Committee is responsible for monitoring performance and compliance with Group objectives, policies and standards relating to EHS. There is a formal EHS assurance programme with issues escalated as required through the reporting structures.	The Group is never complacent in relation to EHS matters. Committed to achieving the highest of standards, the Group continues to set higher benchmarks for EHS compliance and roll out cohesive programmes to address EHS risks and drive safe and sustainable working practices. Improvements have been made throughout the year to our EHS Board reporting and assurance activities and our key performance indicators in place to measure our success in mitigating EHS risks continue to show improvement.
Contract risk (Risk decreasing; Considered as part of Viability Statement assessment)
We fail to adequately manage contract risk and as a result commit to obligations which the Group is unable to meet without incurring significant unplanned costs.   In addition, failure to follow Group policies and procedures may lead to commitments without the desired level of contractual protections.	We operate in an increasingly complex and competitive environment where customers are not only highly focused on price and service but are also more challenging in contract negotiations.   As we offer a broader range of products and services to our customers, including those that are more technologically advanced, we risk exposing the Group to reputational and financial loss should our contract acceptance, negotiation and approval processes fail to protect the Group accordingly.	The Group has policies and procedures for contract acceptance and approval. These are under continuous review and improvement to ensure they are adequate for current and future circumstances. The tools and training available to employees responsible for contract management are similarly under continuous review.	Contract management has become an area of increased  focus for the Group, given the competitive environment. Amongst other initiatives, certain of the Group's policies and procedures have been reviewed and refreshed to provide employees with improved tools to assist them in their contract management activities.
IT security and continuity (Risk unchanged)
Failure to maintain business systems or technical infrastructure that serves the business needs.   Failure to successfully execute changes to these business systems or technical infrastructure; together with failure to minimise disruption and maintain business as usual activity during technical infrastructure or business system changes.   Failure to adequately protect the business operations from cybercrime.	Up-to-date data allows us to make informed decisions about our business. Therefore, we require reliable and efficient IT systems and infrastructure to provide our data requirements. Breaches of our IT security could have serious consequences for our business, including: interruption to business operations; and loss of intellectual property and other sensitive data.   The Group is investing in a significant IT transformation programme. If this is not managed effectively, the consequences could include interruption to business operations if data is unavailable due to unsuccessful execution of change, impacting our ability to compete and our reputation in the market.   At present, the Group's principal exposures to cybercrime relate to the misappropriation of cash and data. Our revenue streams are largely protected as our products are not currently electronic in nature and we do not, as a rule, transact over the internet.	We continually review the effectiveness of our key IT security controls in consultation with external experts. There is regular reporting of unplanned outages and potential security breaches, with lessons learned across the Group. We have an IT Governance Framework with a focus on structured change management techniques, including setting project governance levels in line with risk. External assurance being obtained on the Tier 1 IT transformation projects. The security arrangements around all of the Group's information assets will be revised following the transition to the Weir Cloud infrastructure. Policies, procedures and baseline standards in relation to cyber risk and IT security more generally are continuously updated and rolled out to operations. A programme of user training in relation to cyber risk is being rolled out.	IT security and continuity continues to be a matter of strategic priority for the Group. Progress to strengthen the Group's defences in this respect is being made, including developing the Weir Cloud programme which aims to rationalise our IT infrastructure and service.
Cost competitiveness (Risk unchanged)
Failure to deliver cost competitive products and services, or failure to deliver sufficiently differentiated products and services which justify a price premium through lowest total cost of ownership value propositions.	Customers are increasingly focused on the price competitiveness of products and services as they seek to lower operating costs. If the Group fails to demonstrate the value of our products and services, it risks losing market position.	There is continual focus on maximising the efficiency of our products to ensure the solutions provided to customers deliver the best overall value, allowing our customers to meet their cost reduction strategies through lower energy costs and improved productivity. The key component Centres of Excellence are driving cost efficiencies, whilst maintaining quality. Expansion of production in best-cost locations, including foundry expansions in Malaysia and South Africa. We regularly monitor market activity to ensure we remain competitive.	Cost competitiveness remains a strategic priority for the Group. Initiatives to expand production in best-cost locations are developing in South Africa and Malaysia and the procurement function continues to drive cost and quality improvements through the Group's supply chain.
Ethics and governance (Risk unchanged)
Interactions with our people, customers, suppliers and other stakeholders are not conducted with the highest standards of integrity which devalues our reputation.	We are unwilling to accept dishonest or corrupt behaviour from our people, or external parties acting on our behalf, whilst conducting our business. If we fail to act with integrity, we are at risk of: reputational damage leading to a loss of customers; increased scrutiny from regulators; legal action from regulators including fines, penalties and imprisonment; and exclusion from markets important for our future growth.	The Code of Conduct, supplemented with Group policies on related topics, provides a clear benchmark for how we expect our business will be conducted. Regular training is provided using a range of mechanisms including Town Hall style sessions, online and induction training. The financial control framework is continually monitored for effectiveness. Internal Audit's remit includes regular review of the anti-bribery and corruption and financial controls across the Group. The Group Legal team is responsible for monitoring compliance with the Code of Conduct.	The governance and legislative environment in which the Group operates continues to evolve and become more complex. The Group has further developed and grown its operations in geographies where ethical standards may not be as well established as in other countries. The Group has reinforced its commitment to high standards of ethics and governance through the Code of Conduct and completed a programme of training for key individuals. In addition, the Group has developed and issued a Group Competition Law Manual, which again is being accompanied by related training for those in relevant roles.
Staff recruitment, development and retention (Risk increased (new))
Failure to recruit, develop or retain key management and staff may lead to disruption to the Group's operations, functions and processes.	Our people represent our biggest asset and failure to attract, develop and retain key management and staff would have a detrimental impact on the Group's ability to deliver our key strategic objectives.	Promotion of the Weir Group Values & Behaviours, Code of Conduct and HR Policies sets the standards and expectations for all our staff, reinforcing our stated commitment to attracting and retaining the very best people. High performer assessments are undertaken to identify and develop our very best talent. Succession plans are in place and periodically reviewed for all of our key management. Personal Development Plans are set and reviewed for the effective development of all of our staff. Continue to offer competitive compensation and benefits packages. Personal development programmes including Weir University and the Weir Leadership Programme are open to participation by high potential staff members and these continue to attract high calibre individuals.	Recognising the ever increasing need to recruit, develop and retain the very best staff, this was included within our Principal Risk assessment during the year. We continue to focus on these key areas including obtaining feedback through staff surveys and measuring the success of our Leadership and Development Programmes. Recognising the importance of effective ongoing staff communication we continue to provide information and updates through our Global Intranet, Town Hall meetings and team briefings.

Appendix B: Directors' statement of responsibilities
The following statement is repeated here solely for the purpose of complying with DTR 6.3.5.  This statement relates to and is extracted from page 121 of the 2015 Annual Report and is signed on behalf of the Board of Directors by Charles Berry, Chairman and Keith Cochrane, Chief Executive.  Responsibility is for the full 2015 Annual Report and not the extracted information presented in this announcement or the full year results announcement.

The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have prepared the Group financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and the Company financial statements in accordance with UK Accounting Standards and applicable law.

In preparing those financial statements, the Directors are required to:

• Select suitable accounting policies and then apply them consistently.
• Make judgements and estimates that are reasonable and prudent.
• State that the Group financial statements have complied with IFRS as adopted by the European Union, subject to any material departures being disclosed and explained.
• State for the Company financial statements whether the applicable UK Accounting Standards have been followed, subject to any material departures being disclosed and explained.

The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that the Group financial statements comply with the 2006 Act and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of accounts may differ from legislation in other jurisdictions.

The Directors confirm that they have complied with the above requirements in preparing the financial statements.

The Directors consider that the Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Group's performance, business model and strategy.

Each of the Directors, as at the date of this report, confirms to the best of their knowledge that:

• The financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit of the Group.
• The Strategic Report and the Directors' Report include a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.

Appendix C: Related Party Transactions
The following statements regarding related party transactions are set out on page 173 of the 2015 Annual Report.  The following is extracted in full and unedited form from the 2015 Annual Report.

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

		Sales to related parties - goods	Sales to related parties - services	Purchases from related parties - goods	Purchases from related parties - services	Amounts owed to related parties
Related party		£m	£m	£m	£m	£m
Joint ventures	2015	18.4	0.4	1.4	0.8	-
	2014	26.7	0.5	8.2	0.5	-
Group pension plans	2015	-	-	-	-	2.1
	2014	-	-	-	-	1.8

Contributions to the Group pension plans are disclosed in note 24.

Terms & conditions of transactions with related parties
Sales to and from related parties are made at normal market prices. Outstanding balances at the period end are unsecured and settlement occurs in cash. There have been no guarantees provided or received for any related party balances. For 2015, the Group has not raised any provision for doubtful debts relating to amounts owed by related parties as the payment history has been excellent (2014: £nil). This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.

Compensation of key management personnel	2015	2014
	£m	£m
Short-term employee benefits	4.9	6.3
Share-based payments	0.5	4.0
Post-employment benefits	0.3	0.2
	5.7	10.5

Emoluments paid to the Directors of The Weir Group PLC	2015	2014
	£m	£m
Remuneration	2.4	2.9
Gains made on the exercise of Long Term Incentive Plan awards	0.4	1.9
	2.8	4.8

Key management comprises the Board and the Group Executive. Further details of the Directors' remuneration are disclosed in the Directors' Remuneration Report on pages 95 to 117.

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's ("the Company") financial position, business strategy, plans (including development plans and objectives relating to the Company'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 Company 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 Company's present and future business strategies and the environment in which the Company will operate in the future. These forward-looking statements speak only as at the date of this document. The Company 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 Company'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.

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Source: The Weir Group PLC via Globenewswire

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