Interim Results

Weir Group PLC 16 August 2000 THE WEIR GROUP PLC INTERIM RESULTS 2000 RESULTS FOR 26 WEEKS ENDED 30TH JUNE 2000(Unaudited) Highlights 2000 1999 - Turnover £420.1m £357.0m - Operating profit (pre interest and goodwill amortisation) £31.5m £28.2m - Pre tax profit (pre goodwill amortisation) £25.5m £28.3m - Earnings per share (pre goodwill amortisation) 9.6p 10.4p - Dividend 3.0p 2.9p - Order input (excluding Joint Ventures and Associates) £348.1m £347.8m The Executive Chairman, Sir Ron Garrick, commented as follows: 'Turnover and operating profits increased in the first half of 2000 due to excellent results from the newly-formed Weir Slurry Group and a good performance from other operations outside the UK. However, turnover and earnings from UK companies were down due to difficult market conditions. A higher interest cost resulted in a lower pre tax profit for the Group than that achieved in 1999. 'With our cost base and operational efficiency improved, the Warman integration producing synergy benefits and signs of increased activity in the market for oil, power and water projects, prospects are beginning to improve. We continue to expect a strong second half and progress for the year as a whole from our existing operations.' Enquiries The Weir Group PLC Available through UBS Warburg Sir Ron Garrick, Executive Chairman Presentation Suite, Ground Floor David Dunbar, Chief Operating Officer Tel: 020 7567 8000 (switchboard) Emrys Inker, Public Relations Manager Tel: 020 7568 0566/0554 (direct) (These numbers apply to Wednesday, 16th August only; tel. 0141 637 7111 thereafter) The Maitland Consultancy Suzanne Bartch Tel: 020 7379 5151 Note to Editors: Print quality images are available to download at http://www.newscast.co.uk General Overview Results from the Group's subsidiaries in the first half of 2000 were mixed. In general our operations outside the UK performed well and results from the Weir Slurry Group were excellent. This newly-formed grouping, incorporating the slurry pump operations of Warman and EnviroTech, is the world market leader in the supply of pumps to the minerals processing industry. The good overseas performance was offset to a large extent by the performance of our UK based companies which have been experiencing sluggish order input since the second half of 1999 for both products and services. There has been a lack of investment by our customers in the oil, power and water sectors but those markets are showing signs of recovery. Total Group turnover rose to £420.1m (1999 : £357m). Turnover from our Group subsidiaries grew by 19% to £358.4m (1999 : £301.3m), and joint ventures and associates accounted for £61.7m (1999 : £55.7m). The growth came from the enlarged Weir Slurry Group and overseas businesses, reduced by lower turnover in the UK. As we have combined our slurry pump operations throughout the world, it is no longer possible to separate the impact of Warman on the year on year comparisons. Order input for Group subsidiaries for the period amounted to £348.1m and includes an initial contribution from Warman. The 1999 figure, which was very similar at £347.8m, included an exceptionally large order for a defence contract valued at £57m. Summary of Results Operating profit, i.e. before interest and goodwill amortisation, for the period amounted to £31.5m (1999 : £28.2m), an 11.7% increase over the previous year. After charging interest of £5.96m (1999 : £0.1m credit), the pre-tax profit before goodwill amortisation amounted to £25.5m (1999 : £28.3m), a 9.9% decrease over the same period last year. The interim tax charge is based on the estimated effective tax rate for the full year of 25% (1999 :27%) and as a result earnings per share amounted to 9.6p (1999 : 10.4p). An interim dividend of 3.0p (1999 : 2.9p) is declared. At the end of June the Group had net debt of £168m (end 1999 : £146m) due mainly to an increase in working capital. It was decided to increase stocks of slurry pump parts early in the year to ensure that the delivery performance to the minerals processing industry would be maintained during the formation of the new Weir Slurry Group. This will unwind in the months ahead. Also, on some major contracts there was a build up in work in progress as advance payments were not available and invoicing will take place when the equipment is delivered to site later this year. Engineering Products Turnover in the first half was £286.8m (1999 : £231.3m). Profit amounted to £23.6m (1999 : £19.2m) producing a margin of 8.2% compared with 8.3% in 1999. Pumps accounted for just over 60% of this turnover. Despite the first six months being a difficult period for our UK pump operations, overall margins for this core activity improved due to the excellent performance from the slurry group and pump companies outside the UK. The integration plan to create the new Weir Slurry Group has been completed to programme and budget. This will generate savings from synergies of around £8m pa and those benefits will become increasingly evident in the months ahead. The valve businesses improved earnings as the significant restructuring which took place in 1999 at Hopkinsons, our principal UK company, began to take effect. Other UK companies involved in material handling, gas handling plant, thermal insulation and automotive tooling found it difficult to meet their previous year's performance mainly as a result of market conditions. Engineering Services Turnover in Engineering Services was £71.6m (1999 : £71.5m). Profit was disappointing at £4.8m (margin 6.7%) compared with the 1999 level of £6.2m (8.7%). Whilst we experienced improvements in our Canadian service operation, we faced difficult market conditions in the UK with a reduction in demand for oil drilling tools and where the spend in many industries was constrained for much of the period. Results were also affected by a higher than normal impact from export service contracts, where margins tend to be lower, but this is not expected to recur in the second half. Longer term outsourcing contracts have allowed us to maintain turnover in services and we have had additional successes this year in Canada, where we have won a contract for the management of a naval test facility worth around £17m over the next five years. We have recently won a further contract in the UK to provide specialist engineering services, through a framework agreement, for much of Severn Trent Water's centrifugal pumping plant. Joint Ventures and Associates Profitability from joint ventures and associates amounted to £3.95m, compared to £4m in 1999. This included an initial contribution from a 49% investment in a joint venture service centre in Abu Dhabi. Hence, on a like for like comparison, profits were somewhat lower than in 1999 due to depressed conditions for oil drilling tools and tighter margins in the railway infrastructure maintenance industry. The Board It was announced on 11th July that Duncan Whyte had resigned as Chief Executive. Organisational changes have subsequently been put in place to maximise returns from existing operations and to accelerate the strategic development of the Group. Sir Ron Garrick has become Executive Chairman and David Dunbar has been appointed Chief Operating Officer. The Board is progressing the search for a new Chief Executive. Strategy and Prospects The Board is determined to pursue strategies which will increase shareholder value. We intend to concentrate on the development of those activities in the Group where we can establish significant market positions which will lead to greater growth. The acquisition of Warman and its successful integration has demonstrated the merits of this strategy. We are actively involved in negotiating disposals and the proceeds will be used to expand our core activities. We believe there is considerable scope in our mainstream activities for further consolidation and we aim to play a leading role in this process. In the last twelve months, we have improved our cost base and operational efficiency and the Warman integration is yielding synergy benefits. We are seeing increased project activity in many countries in the oil, power and water markets. Consequently, we believe that our prospects are improving and we continue to expect a strong second half and progress for the year as a whole from our existing operations. Those expectations take no account of disposals or any impact from a triennial valuation of our UK pension fund, the results of which will be available later in the year and will require to be incorporated in our full year accounts. CONSOLIDATED PROFIT AND LOSS ACCOUNT 26 weeks to 26 weeks to 52 weeks to 30 June 2000 2 July 1999 31 December 1999 £'000 £'000 £'000 TURNOVER Group 358,376 301,286 637,522 Share of - Joint Ventures 3,383 2,393 3,754 - Associates 58,350 53,338 113,631 ------- ------- ------- 420,109 357,017 754,907 ======= ======= ======= OPERATING PROFIT Group - Before Goodwill Amortisation 27,540 24,210 49,146 - Goodwill Amortisation (3,760) (577) (3,330) Share of - Joint Ventures 466 447 711 - Associates 3,483 3,555 7,034 ------- ------- ------- 27,729 27,635 53,561 EXCEPTIONAL ITEM Reorganisation costs arising from Warman acquisition - - (8,329) INTEREST AND OTHER INCOME Group (5,676) 241 (3,378) Joint Ventures (7) (17) (26) Associates (278) (87) (231) ------- ------- ------- (5,961) 137 (3,635) ------- ------- ------- PROFIT ON ORDINARY ACTIVITIES BEFORE TAX 21,768 27,772 41,597 ESTIMATED TAX ON PROFIT ON ORDINARY ACTIVITIES 6,382 7,498 12,410 ------- ------- ------- PROFIT ON ORDINARY ACTIVITIES AFTER TAX 15,386 20,274 29,187 Minority Interest 20 31 43 ------- ------- ------- PROFIT ATTRIBUTABLE TO THE WEIR GROUP PLC 15,366 20,243 29,144 ======= ======= ======= EARNINGS PER SHARE 7.7p 10.2p 14.6p EARNINGS PER SHARE EXCLUDING GOODWILL AMORTISATION AND EXCEPTIONAL ITEM 9.6p 10.4p 19.6p DILUTED EARNINGS PER SHARE 7.7p 10.1p 14.5p DIVIDENDS 26 weeks to 26 weeks to 52 weeks to 30 June 2000 2 July 1999 31 December 1999 Ordinary Shares pence per share 3.0 2.9 10.4 costing - £'000 5,999 5,784 20,789 An interim dividend of 3.0p (net) per ordinary share (1999: 2.9p per ordinary share) will be paid on 10th November 2000 to shareholders on the register at close of business on 15th September 2000. TAX 26 weeks to 26 weeks to 52 weeks to 30 June 2000 2 July 1999 31 December 1999 £'000 £'000 £'000 Group - United Kingdom 1,072 4,234 7,865 Group - Overseas 4,207 2,061 4,190 Joint Ventures 63 145 175 Associates 1,040 1,058 1,933 Overseas tax on exceptional item - - (1,092) UK tax on exceptional item - - (661) ------- ------- ------- Tax on Profit on Ordinary Activities 6,382 7,498 12,410 ------- ------- ------- BASIS OF PREPARATION The interim financial statements are unaudited and do not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. These statements have been prepared on the basis of the accounting policies set out in the Group's 1999 Annual Report and Accounts, and were approved by the Board of directors on 16th August 2000. Financial statements for the 52 weeks to 31st December 1999 are abridged statements; full accounts with an unqualified audit report have been lodged with the Registrar. INTERIM RESULTS The Interim Results will be sent to shareholders and copies will be available from The Weir Group PLC, 149 Newlands Road, Cathcart, Glasgow G44 4EX SEGMENTAL ANALYSIS Turnover and profit on ordinary activities before tax were contributed as follows: 26 wks to 26 wks to 52 wks to 26 wks to 26 wks to 52 wks to 30 Jun'00 2 Jul'99 31 Dec'99 30 Jun'00 2 Jul'99 31 Dec'99 Turnover Turnover Turnover Profit Profit Profit £'000 £'000 £'000 £'000 £'000 £'000 ENGINEERING PRODUCTS Group 286,842 231,335 504,852 23,598 19,234 40,037 Share of Associates - 147 295 - 3 14 ------- ------- ------- ------ ------ ------ 286,842 231,482 505,147 23,598 19,237 40,051 ------- ------- ------- ------ ------ ------ ENGINEERING SERVICES Group 71,534 71,519 143,570 4,775 6,173 11,671 Share of Joint Ventures 3,383 2,393 3,754 466 447 711 Share of Associates 58,350 53,191 113,336 3,483 3,552 7,020 ------- ------- ------- ------ ------ ------ 133,267 127,103 260,660 8,724 10,172 19,402 ------- ------- ------- ------ ------ ------ SEGMENTAL TOTALS Group 358,376 302,854 648,422 28,373 25,407 51,708 Joint Ventures & Associates 61,733 55,731 117,385 3,949 4,002 7,745 Goodwill amortisation Engineering Products - - - (3,760) (577) (3,330) Unallocated costs - - - (833) (995) (1,387) Exchange adjustment Group - (1,568) (10,900) - (202) (1,175) ------- ------- ------- ------ ------ ------ 420,109 357,017 754,907 27,729 27,635 53,561 Exceptional item Engineering Products - - - - - (8,329) Interest and other income - - - (5,961) 137 (3,635) ------- ------- ------- ------ ------ ------ 420,109 357,017 754,907 21,768 27,772 41,597 ------- ------- ------- ------ ------ ------ For comparative purposes 1999 figures have been restated at the 30th June 2000 closing exchange rates. CONSOLIDATED BALANCE SHEET 30 June 2000 2 July 1999 31 December 1999 £'000 £'000 £'000 FIXED ASSETS Goodwill 136,470 22,745 146,010 Tangible assets 137,714 106,419 138,316 Investments Joint Ventures - share of gross assets 8,138 7,017 6,460 - share of gross liabilities 2,131 2,070 1,704 ------- ------- ------- 6,007 4,947 4,756 Associates 18,968 17,255 16,989 Other 359 225 388 ------- ------- ------- 25,334 22,427 22,133 ------- ------- ------- TOTAL FIXED ASSETS 299,518 151,591 306,459 CURRENT ASSETS Stocks 137,600 100,453 126,281 Debtors 221,401 194,159 208,364 Cash at bank and in hand 34,302 36,633 24,696 ------- ------- ------- 393,303 331,245 359,341 ------- ------- ------- CREDITORS FALLING DUE WITHIN ONE YEAR: Bank overdrafts and short term debt 15,260 7,362 17,376 Other borrowings 5,999 5,322 5,350 Other creditors 177,729 169,335 197,600 ------- ------- ------- 198,988 182,019 220,326 ------- ------- ------- NET CURRENT ASSETS 194,315 149,226 139,015 ------- ------- ------- TOTAL ASSETS LESS CURRENT LIABILITIES 493,833 300,817 445,474 Less: CREDITORS FALLING DUE AFTER MORE THAN ONE YEAR: Loan capital 180,663 11,300 147,489 Obligations under finance leases 567 766 696 PROVISIONS FOR LIABILITIES AND CHARGES 40,352 22,288 37,641 DEFERRED INCOME Grants not yet credited to profit 453 558 506 MINORITY INTEREST 411 412 374 ------- ------- ------- 271,387 265,493 258,768 ------- ------- ------- CAPITAL AND RESERVES Called up share capital 24,997 24,916 24,995 Reserves 246,390 240,577 233,773 ------- ------- ------- 271,387 265,493 258,768 ------- ------- ------- CONSOLIDATED CASH FLOW STATEMENT 26 weeks to 26 weeks to 52 weeks to 30 June 2000 2 July 1999 31 December 1999 £'000 £'000 £'000 Cash inflow from operating activities Funds generated by operations 35,468 30,951 63,162 Increase in working capital (22,984) (18,363) (3,344) Cash spent on reorganisation costs (2,031) - (1,030) ------- ------- ------- 10,453 12,588 58,788 Dividends received from joint ventures - - 400 Dividends received from associates 5 4 3,236 Returns on investments and servicing of finance (4,461) 297 (2,633) Taxation (2,139) (2,981) (8,268) Capital expenditure and financial investment (8,117) (5,620) (12,433) Acquisitions (4,884) (5,558) (192,801) Disposals 3,842 - - Equity dividends paid (14,997) (14,249) (20,041) ------- ------- ------- Cash outflow before liquid resources and financing (20,298) (15,519) (173,752) Management of liquid resources 3,944 24,227 28,162 Financing - issue of shares 34 161 1,610 - new loans 32,540 - 202,668 - debt repaid (10,383) (3,194) (58,677) - foreign exchange hedging - (57) - ------- ------- ------- 22,191 (3,090) 145,601 ------- ------- ------- Increase in Cash 5,837 5,618 11 ------- ------- ------- RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT £'000 £'000 £'000 Increase in cash 5,837 5,618 11 Cash flow from debt repaid 10,383 3,194 58,677 Cash flow from new loans (32,540) - (202,668) Cash flow from management of liquid resources (3,944) (24,227) (28,162) ------- ------- ------- CHANGE IN NET DEBT RESULTING FROM CASH FLOWS (20,264) (15,415) (172,142) Loans - disposal 108 - - Loans - amortisation of issue costs (145) - - Leases - inceptions - - (57) Exchange (1,723) (1,484) (2,669) ------- ------- ------- MOVEMENT IN NET DEBT DURING THE PERIOD (22,024) (16,899) (174,868) Net debt at 1st January 2000 (146,461) 28,407 28,407 ------- ------- ------- NET DEBT AT 30TH JUNE 2000 (168,485) 11,508 (146,461) RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES 26 weeks to 26 weeks to 52 weeks to 30 June 2000 2 July 1999 31 December 1999 £'000 £'000 £'000 Operating Profit 23,780 23,633 45,816 Depreciation, goodwill amortisation and grant credits 15,014 8,987 20,923 Surplus on disposal of tangible assets and investments (841) (282) (543) Pension prepayments (1,187) (1,350) (2,608) Provision movements (1,298) (37) (426) ------- ------- ------- Funds generated by operations 35,468 30,951 63,162 ------- ------- ------- (Increase)decrease in stocks (8,761) (2,723) 80 Increase in debtors (6,401) (7,724) (1,679) Decrease in creditors (7,822) (7,916) (1,745) ------- ------- ------- Increase in working capital (22,984) (18,363) (3,344) ------- ------- ------- Exceptional reorganisation costs - - (8,329) Accelerated depreciation - - 350 Provision movements (2,031) - 6,803 Increase in creditors - - 146 ------- ------- ------- Cash spent on reorganisation costs (2,031) - (1,030) ------- ------- ------- NET CASH INFLOW FROM OPERATING ACTIVITIES 10,453 12,588 58,788 ------- ------- ------- STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES £'000 £'000 £'000 Profit excluding share of profits of Joint Ventures and Associates 12,805 17,548 23,764 Share of Joint Ventures' profit 396 285 510 Share of Associates' profit 2,165 2,410 4,870 ------- ------- ------- Profit attributable to The Weir Group PLC 15,366 20,243 29,144 Exchange differences on foreign currency net investments 3,880 1,703 (813) Tax thereon (1,357) (951) (581) ------- ------- ------- TOTAL RECOGNISED GAINS 17,889 20,995 27,750 ------- ------- ------- RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS £'000 £'000 £'000 Total recognised gains 17,889 20,995 27,750 Dividends (5,999) (5,784) (20,789) Goodwill released 695 - - Other movements New share capital subscribed 34 161 1,785 Cost of issuing shares - (23) (122) ------- ------- ------- Net addition to shareholders' funds 12,619 15,349 8,624 Opening shareholders' funds 258,768 250,144 250,144 ------- ------- ------- CLOSING SHAREHOLDERS' FUNDS 271,387 265,493 258,768 ------- ------- ------- Shareholders' funds are entirely attributable to equity interests.

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