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Weir Group PLC (WEIR)

  Print      Mail a friend       Annual reports

Wednesday 22 August, 2001

Weir Group PLC

Interim Results

Weir Group PLC
22 August 2001


THE WEIR GROUP PLC INTERIM RESULTS 2001

Results for 26 weeks ended 29th June 2001 (unaudited)

Highlights
                                     Group Results        Ongoing Operations 3
                                          2001                    2001

Turnover                            £462m            +10%        £451m     +17%
Operating Profit 1                 £29.5m             -6%       £32.5m      +6%
Pre-Tax Profit 1                   £25.6m       no change
Earnings per share 1                 9.6p       no change
Dividend                            3.15p             +5%
Order Intake2                       £390m            +12%        £379m     +21%
(2001 exchange rates)

1: Excludes goodwill amortisation and exceptionals.

2: Excludes Joint Ventures and Associates.

3: Excludes discontinued and discontinuing businesses.

The Chairman, Sir Ron Garrick, commented as follows.


'During the first half of 2001 the value of orders booked by Group
subsidiaries reached record levels despite the current uncertain economic
conditions in global markets.

'Operating profits from ongoing operations are improving and we expect to make
further progress during the remainder of the year.'


Enquiries:

The Weir Group PLC                         Available through UBS Warburg
Sir Ron Garrick, Chairman                  Tel. 020 7567 0800 (switchboard);
Mark Selway, Chief Executive               Tel 020 7568 0566/0554 (direct)
Helen Walker, Public Relations Manager     (Mobile: 07802 431 385)

The Maitland Consultancy                   Tel. 020 7379 5151
Angus Maitland
Suzanne Bartch                             (Mobile: 07769 710 335)


General Overview

During 2001 we have continued to implement our strategy to build shareholder
value by focussing on those areas of our business where significant market
positions can be established and stronger growth achieved.

In early July 2001 we announced the sale of Weir Systems Limited and our
intention to withdraw from Tooling Products, G. Perry and the Manchester
operation of Strachan & Henshaw (formerly known as Bridgetest Holdings). At
that time we indicated that the results for 2001 would include an exceptional
charge of £15m, of which approximately half related to asset impairment and
goodwill which had previously been written off to reserves. Approximately £6m
has been included in the interim results. The initial cash outflow will be
fully recovered, in time, from the release of working capital and the sale of
fixed assets.

Prior to exceptionals and goodwill amortisation the pre tax profit for the
Group as a whole in 2001 was similar to last year. However for ongoing
operations an improving trend was evident.

Order input for Group subsidiaries in the first half of 2001 at £390m was a
record level for any six month period as was the order input from ongoing
operations at £379m. In the current uncertain economic conditions in global
markets, this was a particularly pleasing result. The increased business came
mainly from the oil and gas, minerals processing, power generation and naval &
marine markets.

Summary of Results

Total Group turnover rose to £462m (2000 : £420m) with £371m (2000 : £358m)
being generated from Group subsidiaries and £91m (2000 : £62m) from Joint
Ventures and Associates.

Operating profit for ongoing operations at £32.5m (2000 : £30.7m) is up by
about 6% from 2000. Whilst it is not practical to produce a pro forma pre tax
profit for ongoing operations for last year, the removal of the non core
businesses will make a significant improvement in performance at the pre tax
level.

Pre tax profit before goodwill amortisation and exceptionals was broadly
similar to the previous year at £25.6m, (2000 : £25.5m) and is in line with
the statements made in the 2000 Annual Report and at the AGM in May 2001.

The interim tax charge is based on the estimated effective tax rate for the
full year of 25%, the same as last year, and as a result earnings per share
are unchanged at 9.6p.

An interim dividend of 3.15p (2000 : 3.0p) is declared, an increase of 5%.

The Group's net debt at the half year was £105m substantially down on the June
2000 level of £168m but slightly up on the end 2000 level of £95m. The first
half of the year normally produces an outflow of funds due to payment of the
final dividend in June.

Engineering Products

Excluding discontinued and discontinuing businesses, turnover from Engineering
Products was £285m (2000 : £260m) resulting in an operating profit of £22.8m
(2000 : £22.5m).

Pumps and valves accounted for over 75% of the ongoing operations turnover.

At the operating profit level, the margin was 8.0% compared with 8.7% in 2000.
The main reasons for the reduction were a lack of volume in some operations,
mix changes in others and competitive pricing in all of our markets.

With an expectation of higher volumes margins should be stronger in the second
half of 2001.

Engineering Services

Turnover from ongoing service operations was £75m (2000 : £65m) and operating
profits were £5.6m (2000 : £5.1m). This resulted in an operating margin of
7.4% compared with 7.8% in 2000. A good performance from our service
operations in the UK, Middle East and Canada was offset to some extent by a
reduction in drilling activity in the UK sector of the North Sea. Steps have
been taken to transfer equipment from the UK to other parts of the world and
some recovery is therefore expected during the remainder of the year.

Joint Ventures and Associates

The main turnover from Joint Ventures and Associates came from Engineering
Services businesses and at £90m for the half year, there was substantial
growth over the £62m achieved in 2000. Operating profit at £5.1m (2000 : £3.9m)
produced an operating margin of 5.6% (2000 : 6.4%).

Most of the increased turnover came from Devonport Dockyard where a current
contract has generated high billings but profit determination awaits
completion.

Other Joint Ventures and Associate companies performed well with both
increased turnover and margins.

The Board

Mark Selway became Chief Executive of the Group on 5 June. He has extensive
manufacturing and commercial experience of engineering businesses in the
automotive sector and he has run companies in the UK, USA, Australia, Europe
and the Far East. By the middle of September he will have visited most of the
Group's global operations and become familiarised with our activities. At that
time it is my intention to revert to a part time Chairman's role but of course
I shall be available to Mark Selway as required to ensure a smooth transfer of
responsibilities.

David Dunbar, the Chief Operating Officer of the Group reaches his normal
retirement date at the end of August and will leave the Board at that time.
David has made a significant contribution to the success of the Group in
recent years and I am delighted that he has agreed to continue to represent
the company on the Boards of our associate companies namely DML and First
Engineering Limited. He has also agreed to be available to Mark Selway in an
advisory capacity and on a part time basis until March 2002.

Strategy and Prospects

The strategy being followed by the Group is to concentrate our financial
resources on those areas of our business where we can establish significant
market positions which will lead to stronger growth. In the year to date we
have taken action to dispose or withdraw from four businesses and we continue
to seek suitable acquisitions to strengthen core activities. Current economic
conditions are likely to provide greater opportunities to grow by acquisition.

On prospects, it is evident from the Group's results that as we implement our
strategy to concentrate on core activities, operating profits from ongoing
operations are improving and we expect to make further progress during the
remainder of the year.


CONSOLIDATED PROFIT AND LOSS ACCOUNT

                 26 weeks to 29  26 weeks to 29        26 weeks 52 weeks to 29
                      June 2001       June 2001              to       Dec 2000
                                                        30 June
                                                           2000
                     Continuing    Discontinued  Total
                          £'000           £'000  £'000    £'000          £'000
TURNOVER
Group
- Ongoing               360,513               - 360,513  324,057        680,313
- Discontinuing           7,619               -   7,619   11,338         19,458
- Discontinued                -           3,303   3,303   22,981         46,165
                   ------------    ------------ ---------- ------------- -------
                        368,132           3,303 371,435  358,376        745,936
Share of
- Joint                   5,090               -   5,090    3,383          8,044
Ventures
- Associates             85,503               -  85,503   58,350        128,872
                        -------       --------- --------- ---------    ---------
                        458,725           3,303 462,028  420,109        882,852
                       ========          ====== ======  =======        =======
                  
OPERATING
PROFIT

Group
- Ongoing                27,484               - 27,484   26,793         61,419
- Discontinuing         (2,576)               - (2,576)    (589)          (305)
- Discontinued                -           (420)   (420)   1,336          3,247
- Goodwill              (3,324)               - (3,324)  (3,760)        (6,705)
amortisation
                     ----------        -------- ---------- ----------     ------
                        21,584            (420) 21,164   23,780         57,656
Share of
- Joint                   1,112               -  1,112      466          1,123
Ventures
- Associates              3,923               -  3,923    3,483          7,391
                      ---------        -------- -------- ---------     ---------
                        26,619           (420) 26,199    27,729         66,170
                     ----------       ---------
EXCEPTIONAL                                    (6,082)        -          2,317
ITEMS

INTEREST AND OTHER INCOME

Group                                          (3,909)   (5,676)       (11,459)
Joint Ventures                                     (5)       (7)           (10)
Associates                                         33      (278)          (192)
                                               -------  --------     ---------
                                               (3,881)   (5,961)       (11,661)
                                            ---------   --------     ---------
PROFIT ON ORDINARY
ACTIVITIES BEFORE TAX                          16,236    21,768         56,826
ESTIMATED TAX ON PROFIT
ON ORDINARY ACTIVITIES                          5,868     6,382         15,276
                                             --------   --------      --------
PROFIT ON ORDINARY
ACTIVITIES AFTER TAX                           10,368    15,386         41,550
Minority Interest                                  23        20             74
                                              -------    ------       ---------
PROFIT ATTRIBUT-ABLE TO
THE WEIR GROUP PLC                             10,345    15,366         41,476
                                               ======    ======          ======
EARNINGS PER SHARE                               5.1p      7.7p          20.7p
EARNINGS PER SHARE EXCLUDING
GOODWILL AMORTISA- TION AND
EXCEPTIONAL ITEMS                                9.6p      9.6p          22.9p
DILUTED EARNINGS PER SHARE                       5.1p      7.7p          20.7p

DIVIDENDS                                 26 weeks to 26 weeks to   52 weeks to
                                              29 June     30 June   29 December
                                                 2001        2000          2000

Ordinary Shares
pence per share                                 3.15p         3.0          11.0
costing - £'000                                 6,364       5,999        22,079

An interim dividend of 3.15p (net) per ordinary share (2000: 3.0p per ordinary
share) will be paid on 9 November 2001 to shareholders on the register at
close of business on 12 September 2001.

EXCEPTIONAL ITEMS                            26 weeks    26 weeks  52 weeks to  
                                                  to          to           29
                                              29 June     30 June     December  
                                                 2001        2000         2000
                                                £'000       £'000        £'000
(Loss) profit on disposal of
discontinued operations
Pre-goodwill                                      400           -       11,961
Goodwill                                      (1,520)           -      (9,644)
                                              ---------- --------   ----------
                                              (1,120)           -        2,317
                                              ---------- --------   ----------
Impairment of fixed assets of
discontinuing operations
Tangible assets                               (2,506)           -            -
Goodwill                                      (2,456)           -            -
                                              ---------- --------   ----------
                                              (4,962)           -            -
                                              ---------- --------   ----------
Total exceptional items                       (6,082)           -        2,317
                                              ---------- --------    ---------



The loss on disposal of discontinued operations relates to the disposal of
Weir Systems Ltd which was completed on 29 June 2001. The results of Weir
Systems Ltd for the six months to date of disposal have been shown in the
profit and loss account as 'discontinued' and prior year figures have been
restated accordingly. The comparative figures for the 52 weeks to 29 December
2000 reflect the profit on disposal of Darchem Engineering Ltd . The results
of Darchem Engineering Ltd for prior years to date of disposal on 22 December
2000 are shown in the profit and loss account as 'discontinued'.


Businesses in the process of disposal or closure which were referred to in the
announcement of 5 July 2001 are categorised as 'discontinuing operations' and
in accordance with FRS11 fixed asset impairment is recognised in the period to
29 June 2001. The businesses concerned are Tooling Products Ltd, G Perry &
Sons Ltd and the Manchester operation of Strachan & Henshaw Ltd. The results
of these operations are separately identified under the heading of
'continuing' activities in the profit and loss account.

TAX                                          26 weeks   26 weeks    52 weeks to
                                                   to         to
                                              29 June    30 June    29 December
                                                 2001       2000           2000
                                                £'000      £'000          £'000

Group - United Kingdom                          1,103      1,072          3,922
Group - Overseas                                3,999      4,207          8,789
Joint Ventures                                    112         63            148
Associates                                      1,196      1,040          2,417
UK tax on exceptional item                      (542)          -              -
                                           ----------  ---------      ---------
Tax on Profit on Ordinary                       5,868      6,382         15,276
Activities
                                             --------   --------      ---------

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 2000 Annual Report and Accounts, and were approved by the Board of
Directors on 22 August 2001. Financial statements for the 52 weeks to 29
December 2000 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 weeks to 29 June '01    26 weeks to 30   52 weeks to 29
                                    Turnover          June '00          Dec '00

                                                      Turnover         Turnover
                                       £'000             £'000            £'000
ENGINEERING PRODUCTS
Group
Ongoing                              285,485           259,902          548,471
Discontinuing                          7,619            11,338           19,458
Discontinued                               -            14,565           30,763
                                ------------      ------------     ------------
                                     293,104           285,805          598,692
Share of Joint                           600                 -              815
Venture
Share of Associates                        -                 -              507
                                    --------        ----------       ----------
                                     293,704           285,805          600,014
                               -------------       -----------     ------------
ENGINEERING SERVICES
Group
Ongoing                               75,028            64,756          137,863
Discontinued                           3,303             8,416           15,402
                                   ---------         ---------       ----------
                                      78,331            73,172          153,265
Share of Joint                         4,490             3,383            7,229
Ventures
Share of Associates                   85,503            58,350          128,365
                              --------------      ------------     ------------
                                     168,324           134,905          288,859
                                 -----------       -----------     ------------
SEGMENTAL TOTALS
Group
Ongoing                              360,513           324,658          686,334
Discontinuing                          7,619            11,338           19,458
Discontinued                           3,303            22,981           46,165
Joint Ventures &                      90,593            61,733          136,916
Associates
Goodwill
amortisation
Engineering Products                       -                 -                -
Unallocated costs                          -                 -                -
Exchange adjustment
Group                                      -             (601)          (6,021)
                                ------------       -----------     ------------
                                     462,028           420,109          882,852
Exceptional items
Engineering Products                       -                 -                -
Engineering Services                       -                 -                -
Interest and other                         -                 -                -
income
                                  ----------         ---------     ------------
                                     462,028           420,109          882,852
                                ------------       -----------     ------------


                           26 weeks to 29     26 weeks to 30 52 weeks to 29 Dec
                                 June '01           June '00                '00

                                   Profit             Profit             Profit
                                    £'000              £'000              £'000
ENGINEERING PRODUCTS
Group
Ongoing                            22,865             22,516             52,223
Discontinuing                     (2,576)              (589)              (305)
Discontinued                            -              1,538              3,511
                            -------------      -------------      -------------
                                   20,289             23,465             55,429
Share of Joint Venture               (48)                  -                 10
Share of Associates                     -                  -                 37
                                ---------          ---------         ----------
                                   20,241             23,465             55,476
                               ----------        -----------         ----------
ENGINEERING SERVICES
Group
Ongoing                             5,565              5,055             11,874
Discontinued                        (420)              (202)              (264)
                                ---------           --------           --------
                                    5,145              4,853             11,610
Share of Joint                      1,160                466              1,113
Ventures
Share of Associates                 3,923              3,483              7,354
                              -----------          ---------          ---------
                                   10,228              8,802             20,077
                             ------------         ----------          ---------
SEGMENTAL TOTALS
Group
Ongoing                            28,430             27,571             64,097
Discontinuing                     (2,576)              (589)              (305)
Discontinued                        (420)              1,336              3,247
Joint Ventures &                    5,035              3,949              8,514
Associates
Goodwill amortisation
Engineering Products              (3,324)            (3,760)            (6,705)
Unallocated costs                   (946)              (833)            (2,256)
Exchange adjustment
Group                                   -                 55              (422)
                             ------------       ------------        -----------
                                   26,199             27,729             66,170
Exceptional items
Engineering Products              (4,962)                  -              2,317
Engineering Services              (1,120)                  -                  -
Interest and other                (3,881)       (5,961)                (11,661)
income
                              -----------        -----------       ------------
                                   16,236             21,768             56,826
                              -----------       ------------       ------------



For comparative purposes 2000 figures have been restated at the 29 June 2001
closing exchange rates.


CONSOLIDATED BALANCE SHEET
                             29 June 2001    30 June 2000      29 December 2000
                                    £'000           £'000                 £'000
Fixed assets
Goodwill                          117,092         136,470               124,988
Tangible assets                   121,990         137,714               127,250
Investments
Joint ventures
- share of gross assets             9,453           8,138                 8,727
- share of gross liabilities        3,080           2,131                 3,060
                                ---------     -----------           -----------
                                    6,373           6,007                 5,667
Associates                         20,976          18,968                18,303
Other                                 431             359                   428
                             ------------     -----------           -----------
                                   27,780          25,334                24,398
                              -----------     -----------          ------------
Total fixed assets                266,862         299,518               276,636
Current assets
Stocks                            125,286         137,600               113,048
Debtors                           234,240         221,401               244,400
Cash at bank and in hand           76,983          34,302                96,244
                              -----------     -----------           -----------
                                  436,509         393,303               453,692
                              -----------     -----------          ------------
Creditors falling due within one
year:
Bank overdrafts and short
 term debt                          8,472          15,260                 7,991
Other borrowings                   16,207           5,999                15,562
Other creditors                   182,319         177,729               209,326
                               ----------   -------------         -------------
                                  206,998         198,988               232,879
                               ----------   -------------         -------------
Net current assets                229,511         194,315               220,813
                               ----------    ------------          ------------
Total assets less current 
liabilities                       496,373         493,833               497,449
Less:
Creditors falling due after
 more than one year:
Loan capital                      155,433         180,663               165,826
Obligations under finance leases    1,323             567                 1,564
Provisions for liabilities
 and charges                       44,775          40,352                42,314
Deferred income
Grants not yet credited to profit     308             453                   494
Minority interest                     428             411                   447
                               ----------     -----------              --------
                                  294,106         271,387               286,804
                               ----------     -----------           -----------
Capital and reserves
Called up share capital            25,230          24,997                25,078
Reserves                          268,876         246,390               261,726
                               ----------    ------------           -----------
                                  294,106         271,387               286,804
                               ----------     -----------          ------------


CONSOLIDATED CASH FLOW STATEMENT
                                 26 weeks  26 weeks to 30           52 weeks to
                                       to       June 2000           29 December
                                  29 June                                  2000
                                     2001
                                    £'000           £'000                 £'000
Cash inflow from operating
activities
Funds generated by operations      33,109          35,468               81,217
Increase in working capital       (14,490)        (22,984)             (10,377)
Cash spent on Warman                 (661)         (2,031)              (5,132)
reorganisation costs
                                 ---------     ------------      -------------
                                   17,958          10,453               65,708
Dividends received from joint           -               -                  911
ventures
Dividends received from               248               5                3,948
associates
Returns on investments and         (5,240)         (4,461)             (10,540)
servicing of finance
Taxation                           (2,678)         (2,139)              (5,997)
Capital expenditure and financial  (6,668)         (8,117)             (13,565)
investment
Acquisitions                            -          (4,884)                (988)
Disposals                             146           3,842               30,278
Equity dividends paid             (16,083)        (14,997)             (21,007)
                                  ---------    -------------      -------------
Cash outflow before liquid        (12,317)        (20,298)              48,748
resources and financing
Management of liquid resources     12,763           3,944              (59,666)
Financing     - issue of shares
- issues of shares                  2,680              34                1,246
- new loans                             -          32,540               74,000
- debt repaid                      (8,166)        (10,383)             (55,648)
- foreign exchange hedging         (1,625)              -                    -
                                  ---------     ------------       -----------
                                   (7,111)         22,191               19,598
                                  ---------     ------------       ------------
(Decrease) increase in Cash        (6,665)          5,837                8,680
                                  ---------      -----------       ------------



RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT

                                                £'000         £'000       £'000

(Decrease) increase in cash                   (6,665)         5,837       8,680
Cash flow from debt repaid                      8,166        10,383      55,648
Cash flow from new loans                            -      (32,540)    (74,000)
Cash flow from management of liquid          (12,763)       (3,944)      59,666
resources
                                         ------------  ------------ ------------
Change in net debt resulting from cash       (11,262)      (20,264)      49,994
flows
Loans - disposal                                    -           108         111
Leases - inceptions                                 -             -     (1,180)
Exchange                                        1,489       (1,868)       2,518
                                          -----------   ----------- ------------
Movement in net debt during the period        (9,773)      (22,024)      51,443
Net debt at 30th December 2000               (95,018)     (146,461)   (146,461)
                                         ------------ -------------- -----------
Net debt at 29th June 2001                  (104,791)     (168,485)    (95,018)
                                        --------------- --------------- --------
RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
                                     26 weeks to 29  26 weeks to 30   52 weeks
                                          June 2001       June 2000         to

                                                                            29
                                                                      December
                                                                          2000
                                              £'000           £'000      £'000
Operating Profit                             21,164          23,780     57,656
Depreciation, goodwill amortisation          13,424          15,014     28,603
and grant credits
Surplus on disposal of tangible               (451)           (841)    (1,655)
assets and investments
Pension prepayments                           (743)         (1,187)    (2,894)
Provision movements                           (285)         (1,298)      (493)
                                         ----------     ----------- -----------
Funds generated by operations                33,109          35,468     81,217
                                        -----------     ----------- ----------
(Increase) decrease in stocks              (11,479)         (8,761)      9,417
Decrease (increase) in debtors                8,887         (6,401)   (37,021)
(Decrease) increase in creditors           (11,898)         (7,822)     17,227
                                       ------------    ------------ ------------
Increase in working capital                (14,490)        (22,984)   (10,377)
                                      -------------   ------------- ------------
Exceptional Warman reorganisation
costs:
Accelerated depreciation                          -               -        295
Provision movements                           (661)         (2,031)    (5,427)
Cash spent on Warman reorganisation           (661)         (2,031)    (5,132)
costs
                                          ---------    ------------ ------------
NET CASH INFLOW FROM OPERATING               17,958          10,453     65,708
ACTIVITIES
                                        -----------     ----------- ------------



STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
                                                    £'000       £'000     £'000
Profit excluding share of profits of
Joint Ventures and Associates                       6,590      12,805    35,729
Share of Joint Ventures' profit                       995         396       965
Share of Associates' profit                         2,760       2,165     4,782
                                                --------- ----------- ---------
Profit attributable to The Weir Group PLC          10,345      15,366    41,476
Exchange differences on foreign currency net          467       3,880        66
investments
Tax thereon                                       (1,346)     (1,357)   (1,512)
                                                ----------- ----------- --------
TOTAL RECOGNISED GAINS                              9,466      17,889    40,030
                                                ----------- ----------- --------
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
                                             £'000          £'000         £'000

Total recognised gains                       9,466         17,889        40,030
Dividends                                  (6,364)        (5,999)      (22,079)
Goodwill released                            1,520            695         8,839
Other movements
New share capital subscribed                 3,121             34         1,368
Cost of issuing shares                       (441)              -         (122)
Net addition to shareholders' funds          7,302         12,619        28,036
Opening shareholders' funds                286,804        258,768       258,768
                                      ------------   ------------  ------------
CLOSING SHAREHOLDERS' FUNDS                294,106        271,387       286,804
                                      ------------    ----------- -------------


Shareholders' funds are entirely attributable to equity interests