Final Results - Year Ended 31 December 1999
Weir Group PLC
22 March 2000
THE WEIR GROUP PLC PRELIMINARY RESULTS FOR 1999
RESULTS FOR THE 52 WEEKS TO 31ST DECEMBER 1999
HIGHLIGHTS 1999 1998 %
- Turnover £754.9m £724.9m +4.1
- Operating Profit
(pre-exceptional and goodwill amortisation) £56.9m £61.6m -7.6
- Pre-Tax Profit
(pre-exceptional and goodwill amortisation) £53.3m £64.0m -16.7
- Earnings per share
(pre-exceptional and goodwill amortisation) 19.6p 23.2p -15.5
- Dividend 10.4p 9.9p +5.1
- Order Intake (1999 exchange rates) £691m £633m +9.2
The Chairman of The Weir Group PLC, Sir Ron Garrick, commented:
'In 1999 the Group made further progress in a year of difficult market
conditions. Our performance compared well with our major international
competitors and by the end of the year the Group was in a good position to
take advantage of improving markets.
'During the year we took a significant strategic step in the acquisition of
Warman International, the Australian based specialist pump group. The
acquisition makes us the market leader in the supply of heavy duty slurry
pumps to the minerals processing industry.
'2000 should be a year of substantial growth for the Group. With our capacity
for further acquisitions and a likelihood of continuing consolidation in our
core product areas, we look forward to a year of significant opportunities to
enhance shareholder value.'
Enquiries
The Weir Group PLC - available through Warburg Dillon Read
Sir Ron Garrick, Chairman Tel: 0171 567 8000 (switchboard)
Duncan Whyte, Chief Executive or The Weir Group PLC
Emrys Inker, Public Relations Manager Tel: 0141 637 7111
The Maitland Consultancy
Angus Maitland
Charlotte Hamilton - Tel: 0171 379 5151
THE WEIR GROUP RESULTS
Summary of results
In 1999 the Group made further progress in a year of difficult market
conditions. Our performance compared well with our major international
competitors and by the end of the year the Group was in a good position to
take advantage of improving markets.
During the year we took a significant strategic step in the acquisition of
Warman International, the Australian based specialist pump group. The
acquisition makes us the market leader in the supply of heavy duty slurry
pumps to the minerals processing industry.
Although operating profits were lower than those achieved in 1998 due to short
lead time business being depressed, order input was well ahead of invoiced
sales, as a result of winning some significant long term contracts.
Profit before interest, exceptionals and goodwill amortisation amounted to
£56.9 million (1998 : £61.6m). This figure includes a contribution of £3.5m
from Warman, which was acquired on 1st September 1999.
We announced in December that there would be an exceptional charge in the 1999
accounts to cover the costs of integrating Warman into the Group's
operations. This charge amounts to £8.3m and with interest costs of £3.6m and
goodwill amortisation of £3.3m, mainly arising from the Warman acquisition,
the pre-tax profit for 1999 was £41.6m (1998 : £71.6m).
Total turnover, including Warman, was £754.9m (1998 : £724.9m). Excluding our
share of Joint Venture and Associates, turnover was £637.5m (1998 : £624.4m)
and order input booked in 1999, on the same basis, amounted to £691.5m (1998 :
£633m). Orders on hand at the year end were at record levels.
The effective tax rate was 26.6% on profit before exceptionals and goodwill
amortisation (1998 : 26.8%) and earnings per share on the same basis were
19.6p (1998 : 23.2p).
A final dividend of 7.5p is proposed (1998 : 7.15p). An interim dividend of
2.9p has already been paid and the total distribution for the year will,
therefore, be 10.4p (1998 : 9.9p), an increase of 5.1 per cent.
At year-end, we had net debt of £146.5m, giving a gearing ratio of 57%.
Interest cover remains comfortable, even after the acquisition of Warman, and
our balance sheet remains strong allowing us to consider further corporate
development opportunities.
Review of results
A decline in short term orders, particularly in the second half of the year,
meant that most of our companies had difficulty in reaching last year's record
levels of operating profit. The weak oil price in 1998 and the first half of
1999 led to a lack of spending by the oil industry and had a major impact on
our results.
As a result of reduced activity in the oil sector, combined with a deferral of
projects in the Indo Pacific region, our Engineering Products business
narrowly failed to meet 1999 operating profit levels and showed a decrease of
1.3% to £39.0m (1998 : £39.5m) including a £3.5m contribution from Warman.
Turnover increased to £496.7m from £476.9m in 1998.
Significant steps were taken to cut costs and increase efficiency. These
included closure of foundries, a restructuring into market led business units
and increased international sourcing of components and materials.
Turnover in Engineering Services reduced by 5% to £140.9m (1998 : £148.7m)
again largely due to the oil industry slowdown. Overall margins increased
slightly to 8.2% (1998 : 8.1%) with profits at £11.6m (1998 : £12m). Our main
UK operation, Weir Engineering Services, recorded turnover similar to that of
1998. Prospects, particularly in the outsourcing of maintenance by utilities,
are better than ever before and we intend to build on our succesful experience
to date.
Earnings from our Joint Venture and Associates were disappointing with a
reduced profit of £7.7m (1998 : £10.3m) despite our share of turnover
increasing to £117.4m (1998 : £100.5m). These results were caused by the
downturn in the oil industry and the early renegotiation and introduction of
new extended maintenance contracts with Railtrack.
Corporate activity
The acquisition of Warman was a major step in implementing the Group's
strategy to focus on core products where we can establish a leading global
market position, offering greater growth potential. Combined with our
EnviroTech business, this acquisition makes the Group the world leader in
heavy duty slurry pumps. With commodity prices showing signs of improvement,
there should be rising demand for our enhanced pump range.
The integration plan to secure synergies from the combined business is well on
course with savings identified in excess of £8m a year by 2001. Some £4m of
savings are expected to be achieved, mainly in the second half of 2000.
In addition to Warman, we acquired five small businesses at a net cost of
£8.3m and these have been integrated into existing operations in the UK and
South America.
Strategy
As expected, global consolidation in our core product areas is showing
increased momentum, giving us excellent opportunities to advance the Group's
strategy. This has proven to be the case with the acquisition of Warman. We
will continue to play an active role in this process.
Following Duncan Whyte's appointment as Chief Executive of the Group on 1st
June 1999 a review of strategy was conducted. We are convinced that our
future success will come from focusing even more on our strengths and
concentrating our resources on those areas of the business where we can
establish significant market positions which will lead to greater growth.
Inevitably those businesses for which we cannot achieve such positions are
likely to be worth more to an outside party and will be considered for
divestment. These divestments, together with our strong balance sheet, will
ensure that the Group maintains its ability to continue to make value
enhancing acquisitions. This is extremely important at this time as there is
clearly a disconnect between the present valuation being placed on the company
in the London Stock Exchange and the prospects we see for the business.
We must ensure that we are a globally competitive organisation and we see the
need continuously to drive costs out of our operations. Efforts in this
direction have been given new impetus in all of our subsidiaries as we seek to
achieve higher levels of performance.
e-commerce
We are also aware of the challenges and opportunities afforded by the use of
the internet and electronic commerce. We have always had strong and direct
links with our major customers. We believe that such links will continue to
be important to the Group as business practices adjust to this technology. A
Group executive director, Kevin Gamble, has been given responsibility for
leading the Group's development of new systems to ensure that all of our
subsidiaries gain competitive advantage from the use of the Web and
e-commerce. Most of our businesses procure significant quantities of raw
materials and finished products and this is an area where early benefits can
be obtained.
Prospects
Predicting prospects is never easy but having come through difficult market
conditions we are seeing higher levels of activity in many subsidiaries.
Although oil and gas was our most difficult market in 1999 the continuing
strength of the oil price gives us confidence that the worst has passed and we
expect to see improvement and new project activity in 2000.
The most disappointing geographical territory was the Indo Pacific region,
where many projects and orders, particularly for power generation business,
were deferred. Again, the current situation in this territory suggests that
prospects are improving.
In addition, we shall have the impact of a full year of Warman in our 2000
results and we shall begin to see some of the synergy benefits impact on our
results later in the year. Our current projections indicate that most of the
growth will take place in the second half of the year.
Hence, 2000 should be a year of substantial growth for the Group. With our
capacity for further acquisitions and a likelihood of continuing consolidation
in our core product areas, we look forward to a year of further opportunities
to enhance shareholder value.
AUDITED RESULTS
---------------
The Consolidated Profit and Loss Account for the 52 weeks ended 31st December
1999 is as follows:
52 weeks to 53 weeks to
31st December 1999 1st January 1999
£'000 £'000
TURNOVER
Group - Ongoing operations 600,021 624,418
- Warman acquisition 37,501 -
------- -------
637,522 624,418
Share of - Joint Venture 3,754 4,621
- Associates 113,631 95,897
------- -------
754,907 724,936
------- -------
OPERATING PROFIT
Group - Ongoing operations 45,659 51,257
- Warman acquisition 3,487 -
- Goodwill amortisation (3,330) (415)
------- -------
45,816 50,842
Share of - Joint Venture 711 1,992
- Associates 7,034 8,334
------- -------
53,561 61,168
EXCEPTIONAL ITEMS
Reorganisation costs arising from
Warman acquisition (8,329) -
Profit on disposal of discontinued operation - 7,935
INTEREST AND OTHER INCOME (3,635) 2,461
------- -------
PROFIT ON ORDINARY ACTIVITIES BEFORE TAX 41,597 71,564
Tax on profit on ordinary activities 12,410 18,640
------- -------
PROFIT ON ORDINARY ACTIVITIES AFTER TAX 29,187 52,924
Minority interest 43 94
------- -------
PROFIT ATTRIBUTABLE TO THE WEIR GROUP PLC 29,144 52,830
Dividends 20,789 19,790
------- -------
Transfer to reserves 8,355 33,040
------- -------
------- -------
EARNINGS PER SHARE 14.6p 26.1p
---- ----
EARNINGS PER SHARE EXCLUDING GOODWILL
AMORTISATION AND EXCEPTIONAL ITEM 19.6p 23.2p
---- ----
DILUTED EARNINGS PER SHARE 14.5p 26.0p
---- ----
DIVIDENDS
---------
52 weeks to 53 weeks to
31st December 1999 1st January 1999
£'000 £'000
Ordinary Shares
Interim 2.9p per 12.5p share (1998: 2.75p) 5,792 5,541
Final 7.5p per 12.5p share (1998: 7.15p) 14,997 14,249
------ ------
20,789 19,790
------ ------
The directors recommend payment of a final dividend of 7.5p per ordinary share
for 1999 (1998: 7.15p) which with the interim dividend of 2.9p per ordinary
share (1998: 2.75p) will make a total distribution for the year of 10.4p per
ordinary share (1998: 9.9p). Subject to the approval of shareholders at the
annual general meeting, payment will be made on 9th June 2000 to ordinary
shareholders on the register at close of business on 7th April 2000.
TAX
52 weeks to 53 weeks to
31st December 1999 1st January 1999
£'000 £'000
Group - United Kingdom 7,865 9,923
Group - Overseas 4,190 4,247
Joint Venture 175 599
Associates 1,933 2,370
Overseas tax on exceptional item (1,092) 1,501
UK tax on exceptional item (661) -
------ ------
Profit and Loss Account tax charge 12,410 18,640
------ ------
BASIS OF PREPARATION
The preliminary results for the 52 weeks ended 31st December 1999 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 1998 Annual Report and Accounts, except as
noted below, and were approved by the board of directors on 22nd March 2000.
Full accounts with an unqualified audit report will be lodged with the
Registrar in due course. Financial statements for the 53 weeks to 1st January
1999 are abridged statements; full accounts with an unqualified audit report
have been lodged with the Registrar.
ACCOUNTING STANDARDS
FRS 12 'Provisions, Contingent Liabilities and Contingent Assets' has been
adopted in the preliminary results for the 52 weeks to 31st December 1999.
The adoption of FRS 12 has no significant impact on the results of either the
current period or the comparative periods. There is a presentational impact
on the Balance Sheet and the Cash Flow Statement and comparative figures for
1998 have been re-presented to comply with FRS 12.
Divisional contributions were:
1999 1998 1999 1998
Turnover Turnover Profit Profit
£'000 £'000 £'000 £'000
Engineering Products:
Group - ongoing 459,157 476,879 35,494 39,510
Warman acquisition 37,501 - 3,487 -
------- ------- ------ ------
496,658 476,879 38,981 39,510
Share of Associates 295 546 14 23
------- ------- ------ ------
496,953 477,425 38,995 39,533
------- ------- ------ ------
Engineering Services:
Group 140,864 148,695 11,555 12,032
Share of Joint Venture 3,754 4,621 711 1,992
Share of Associates 113,336 95,351 7,020 8,311
------- ------- ------ ------
257,954 248,667 19,286 22,335
------- ------- ------ ------
Segmental totals
Group 637,522 625,574 50,536 51,542
Joint Venture and Associates 117,385 100,518 7,745 10,326
Goodwill amortisation
- Engineering Products - - (3,330) (415)
Unallocated costs - - (1,390) (814)
*Exchange adjustment - Group - (1,156) - 529
------- ------- ------ ------
754,907 724,936 53,561 61,168
Exceptional item
- Engineering Products - - (8,329) 7,935
Interest and other income - - (3,635) 2,461
------- ------- ------ ------
754,907 724,936 41,597 71,564
------- ------- ------ ------
*For comparative purposes 1998 figures have been restated at the 1999 closing
exchange rates.
The Consolidated Balance Sheet as at 31st December 1999 is as follows:-
1999 1998
£'000 £'000
FIXED ASSETS
Intangible assets - goodwill 146,010 19,931
Tangible assets 138,316 104,076
Investments
Joint Venture - share of gross assets 6,460 7,510
- share of gross liabilities 1,704 2,864
------- -------
4,756 4,646
Associates 16,989 14,870
Other 388 218
------- -------
22,133 19,734
------- -------
TOTAL FIXED ASSETS 306,459 143,741
------- -------
CURRENT ASSETS
Stocks 126,281 96,094
Debtors 208,364 181,446
Cash at bank and in hand 24,696 58,201
------- -------
359,341 335,741
------- -------
CREDITORS falling due within one year:
Borrowings 22,726 14,485
Other creditors 197,600 179,267
------- -------
220,326 193,752
------- -------
NET CURRENT ASSETS 139,015 141,989
------- -------
TOTAL ASSETS LESS CURRENT LIABILITIES 445,474 285,730
Less
CREDITORS falling due after more than one year:
Loan capital 147,489 13,415
Obligations under finance leases 696 910
PROVISIONS FOR LIABILITIES AND CHARGES 37,641 20,255
DEFERRED INCOME
Grants not yet credited to profit 506 611
MINORITY INTEREST 374 395
------- -------
258,768 250,144
------- -------
CAPITAL AND RESERVES
Called up share capital 24,995 24,908
Share premium account 10,147 8,449
Capital redemption reserve 531 531
Special reserves - 1,882
Profit and loss account 223,095 214,374
------- -------
258,768 250,144
------- -------
The Consolidated Cash Flow Statement for the 52 weeks ended 31st December 1999
is as follows:
1999 1998
£'000 £'000 £'000 £'000
Cash inflow from operating activities
- funds generated by operations 63,162 65,259
- (increase) decrease in working capital (3,344) 2,727
- cash spent on reorganisation costs (1,030) -
------ ------
58,788 67,986
Dividend received from Joint Venture 400 550
Dividends received from Associates 3,236 3,625
Returns on investments and servicing
of finance (2,633) 1,858
Taxation (8,268) (11,722)
Capital expenditure and financial investment (12,433) (15,850)
Acquisitions and disposals
- acquisition - Warman (186,982) -
- acquisition - others (5,819) (20,847)
- disposal - 11,141
------- ------
(192,801) (9,706)
Equity dividends paid (20,041) (18,680)
------- ------
Cash (outflow) inflow before liquid
resources and financing (173,752) 18,061
Management of liquid resources 28,162 (6,876)
Financing - issue of shares 1,610 495
purchase of shares - (7,633)
new loans 202,668 -
debt repaid (58,677) (7,525)
foreign exchange hedging - 200
------- ------
145,601 (14,463)
------- ------
Increase (decrease) in cash 11 (3,278)
------- ------
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET (DEBT) FUNDS
1999 1998
£'000 £'000 £'000 £'000
Increase (decrease) in cash 11 (3,278)
Cash flow from debt repaid 58,677 7,525
Cash flow from new loans (202,668) -
Cash flow from management
of liquid resources (28,162) 6,876
------- -----
CHANGE IN NET (DEBT) FUNDS
RESULTING FROM CASH FLOWS (172,142) 11,123
Short term debt - acquired - (1,896)
Leases - inceptions (57) (413)
- acquired - (961)
Exchange (2,669) 1,437
------- ------
MOVEMENT IN NET (DEBT) FUNDS
DURING THE YEAR (174,868) 9,290
Net funds at 2nd January 1999 28,407 19,117
------- ------
NET (DEBT) FUNDS AT 31st December 1999 (146,461) 28,407
------- ------
Additional Statements for the 52 weeks ended 31st December 1999 are as
follows:
RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
1999 1998
£'000 £'000
Operating Profit 45,816 50,842
Depreciation, goodwill amortisation
and grant credits 20,923 15,694
Surplus on disposal of tangible assets
and investments (543) (675)
Pension prepayments (2,608) (2,388)
Provision movements (426) 1,786
------ ------
Funds generated by operations 63,162 65,259
------ ------
Decrease in stocks 80 4,459
(Increase) decrease in debtors (1,679) 16,194
Decrease in creditors (1,745) (17,926)
------ ------
(Increase) decrease in working capital (3,344) 2,727
------ ------
Exceptional reorganisation costs (8,329) -
Accelerated depreciation 350 -
Provision movements 6,803 -
Increase in creditors 146 -
----- ------
Cash spent on reorganisation costs (1,030) -
----- ------
NET CASH INFLOW FROM OPERATING ACTIVITIES 58,788 67,986
------ ------
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
1999 1998
£'000 £'000
Profit excluding share of profits of
Joint Venture and Associates 23,764 45,653
Share of Joint Venture profit 510 1,414
Share of Associates' profit 4,870 5,763
------ ------
Profit attributable to The Weir Group PLC 29,144 52,830
Exchange differences on foreign currency
net investments (813) (1,579)
Tax thereon (581) 304
------ ------
TOTAL RECOGNISED GAINS 27,750 51,555
------ ------
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
1999 1998
£'000 £'000
Total recognised gains 27,750 51,555
Dividends (20,789) (19,790)
Other movements
New share capital subscribed 1,785 537
Cost of issuing shares (122) (29)
Share purchase - (7,633)
------ ------
Net addition to shareholders' funds 8,624 24,640
Opening shareholders' funds 250,144 225,504
------- -------
CLOSING SHAREHOLDERS' FUNDS 258,768 250,144
------- -------
Shareholders' funds are entirely attributable
to equity interests
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