The Weir Group PLC : Final Results The Weir Group PLC 27 February 2013 THE WEIR GROUP PLC 2012 FULL YEAR RESULTS DOUBLE DIGIT REVENUE AND PROFIT GROWTH IN TOUGHER END MARKETS The Weir Group PLC, a global engineering solutions provider to the mining, oil & gas and power markets, today reports its results for the 52 week period ended 28 December 2012. Continuing Operations 2012 2011 Growth Order input^1 £2,397m £2,442m -2% Revenue £2,538m £2,292m +11% Operating profit^2 £486m £413m +18% Operating margin^2 19.1% 18.0% +110 bps Profit before tax^2 £443m £396m +12% Cash from operations £399m £303m +32% Earnings per share^2 150.1p 133.6p +12% Dividend per share 38.0p 33.0p +15% Return on Capital Employed^3 29.1% 29.2% - 10bps Net debt £689m £673m -£16m ^1 2011 restated at 2012 average exchange rates. ^2 Adjusted to exclude exceptional items and intangibles amortisation. Reported operating profit, profit before tax and earnings per share were £469m (2011: £408m); £424m (2011: £391m) and 147.1p (2011: 131.8p) respectively, 2011 restated for fair value acquisition accounting. ^3 Continuing operations EBIT (excluding Seaboard and Novatech EBIT and exceptional items) divided by average net assets excluding net debt, pension deficit (net of deferred tax asset) and Seaboard and Novatech net assets. HIGHLIGHTS *Record pre-tax profits up 12% to £443m; *Record Group operating margin, supported by strong performance by Minerals; *Strengthening aftermarket input: 57% of total orders (2011: 52%); *Resilient Oil & Gas performance, supported by positive contributions from acquisitions; *Strategic progress: higher R & D investment; expanded product portfolio and service presence; *Full year dividend increased by 15% to 38.0p with further double digit increase planned in 2013. Keith Cochrane, Chief Executive, commented: "Weir delivered a strong performance for shareholders in 2012 despite challenging pressure pumping markets. We responded rapidly to changing market conditions, realigned capacity, reduced costs in affected areas and continued to maximise operational and cost efficiencies. This allowed us to deliver 2012 results in line with our mid-year expectations. We continued to invest in the Group's capabilities, underpinning our strategy to grow ahead of our end markets. Looking ahead into 2013, despite more challenging markets, the Group will continue to deliver profitable growth through new product introductions and a range of operational initiatives. Assuming a gradual economic and end market improvement, we expect to deliver low single digit revenue growth and broadly stable margins in 2013 with lower first half profits offset by growth in the second half. Alongside substantially higher cash generation, the Group plans the eighth consecutive year of double digit dividend growth." A live webcast of today's presentation commences at 8:30am GMT at www.weir.co.uk. Contact details: The Weir Group PLC Andrew Neilson, Head of Corporate Affairs and (Mobile: 07753 622 357) Strategy Jonathan Milne, Communications Manager (Mobile: 07713 789 536) Maitland - Tom Buchanan Tel. 020 7379 5151 2012 OVERVIEW The strong financial performance was underpinned by a good performance by the Minerals division with robust project activity in most key mining equipment markets which, alongside strong aftermarket growth and procurement, productivity and cost initiatives, delivered record Minerals operating margins, ahead of our expectations. Sales of the Minerals division's broader product portfolio grew, enhanced by the development of our own screens range and new product introductions. Oil & Gas delivered a resilient financial performance, despite the substantial downturn seen in North American pressure pumping markets with full year revenues and margins in line with prior guidance as cost and productivity initiatives supported profitability. Despite a relatively subdued global power sector, strategic momentum in the Power & Industrial Division continued with strong input, output and profit growth. Cash generated from operations increased by 32% with an improved working capital performance in the second half. SEGMENTAL ANALYSIS Continuing Oil & Power & Group Unallocated Total Total Operations £m Minerals Gas Ind. Comp. Expenses Total OE AM Input (constant currency) 2012 1,322 677 361 37 - 2,397 1,024 1,373 2011 1,239 870 306 27 - 2,442 1,180 1,262 Growth: - Constant currency 7% -22% 18% 33% -2% -13% 9% - Like for like^1 7% -41% 13% 33% -9% -23% 4% Revenue 2012 1,334 844 323 37 - 2,538 1,132 1,406 2011 (as reported) 1,216 743 307 26 - 2,292 1,090 1,202 Growth: - As reported 10% 14% 5% 43% 11% 4% 17% - Constant currency 12% 13% 7% 43% 12% 5% 18% - Like for like^1 12% -10% 5% 43% 4% -5% 12% Operating profit 2012 256 211 31 3 -15 486 2011 (as reported) 214 183 27 3 -14 413 Growth: - As reported 20% 15% 17% -17% -7% 18% - Constant currency 21% 14% 20% -17% -7% 18% - Like for like^1 21% -12% 1% -17% -7% 5% Operating margin 2012 19.2% 25.0% 9.7% 6.7% 19.1% 2011 (as reported) 17.6% 24.7% 8.8% 11.2% 18.0% Growth: - As reported 160bps 30bps 90bps -450bps 110bps - Constant currency 150bps 20bps 100bps -450bps 100bps - Like for like^1 140bps -40bps -40bps -450bps 30bps ^1 Like for like excludes the impact of acquisitions and related transaction and integration costs. Weir International was acquired on 1 July 2011, Seaboard was acquired on 14 December 2011 and Novatech was acquired on 22 February 2012. FINANCIAL HIGHLIGHTS Order input at £2,397m on a constant currency basis decreased 2% and was 9% lower on a like for like basis. Original equipment orders were down 13% (down 23% like for like) with the impact of North American pressure pumping market weakness partly offset by growth in most key Minerals markets and very good input growth at Power & Industrial. Aftermarket orders were up 9% (4% like for like) with double digit increases in Minerals and Power & Industrial. Aftermarket orders represented 57% of overall input (2011: 52%). Revenue grew by 12% to £2,538m on a constant currency basis, up 4% like for like. Original equipment represented 45% of revenues with aftermarket revenues accounting for 55%, a 200bps increase over the prior year. Emerging markets revenues increased by 23% with the proportion of total revenues from these markets increasing to 37% (2011: 34%). Together, the acquisitions made in 2011 and 2012 (Weir International, Seaboard and Novatech) contributed £182m of revenue against a 2011 equivalent proforma figure of £172m. Revenues from other Group companies (LGE Process) were £37m in the year (2011: £26m). Operating profit from continuing operations before exceptional items and intangibles amortisation increased by 18% to £486m (2011: £413m) after a net negative currency translation impact of £1m. The increase in underlying performance was driven by strong growth and margin expansion in Minerals, a positive contribution from acquisitions, and reduced one-off costs, offset partly by second half weakness in upstream Oil & Gas operations. One-off costs of £9m were incurred in the period (2011: £17m) of which £4m (2011: £9m) related to acquisition transaction and integration costs. The 2011 and 2012 acquisitions contributed £48m to operating profit against a 2011 equivalent proforma contribution of £41m, excluding transaction and integration costs. EBITDA was £535m (2011: £450m). Operating margin was 19.1%, an increase of 110bps on the prior year (2011: 18.0% and 18.1% on a constant currency basis) reflecting a strong second half improvement in Minerals and continued margin resilience in Oil & Gas. On a like for like basis, the operating margin was 18.8% (2011: 18.5%). Net finance costs were £45.1m in total (2011: £17.1m) due to the increase in net debt following the Seaboard and Novatech acquisitions and related US private placement issue. Profit before tax from continuing operations but before exceptional items and intangibles amortisation increased by 12% to £443m (2011: £396m) and 4% on a like for like basis. Reported profit before tax from continuing operations increased by 8% to £424m (2011 restated: £391m) after intangibles amortisation of £37m (2011 restated: £24m) and the net exceptional credit of £20m (2011: £19m) including the £30m gain on the sale of LGE Process, completed on 28 December 2012. Tax charge for the year of £124m (2011: £114m) on profit before tax from continuing operations before exceptional items and intangibles amortisation of £443m (2011: £396m) represents an underlying effective tax rate of 28.0% (2011: 28.8%), reflecting a reduction in US state taxes as a result of the changing profile of our business within the US and the reduction of the rate of UK corporation tax. Discontinued operations profit of £3.3m (2011: £19.9m) represents the release of unutilised provisions in relation to previous disposals on expiration of the tax warranty periods. Earnings per share from continuing operations before exceptional items and intangibles amortisation increased by 12% to 150.1p (2011: 133.6p). Reported earnings per share including exceptional items, intangibles amortisation and profit from discontinued operations was 148.6p (2011 restated: 141.2p). Cash generated from operations before working capital movements increased by 13% to £516m (2011: £458m). Working capital outflows of £117m (2011: £155m) were driven by higher than expected inventory levels and a subsequent reduction in payables due to lower materials purchases in upstream Oil & Gas, partly offset by an overall improvement in receivables. The initial benefits of a number of supply chain initiatives resulted in second half working capital inflows of £10m. Net cash generated from operations increased by 32% from £303m to £399m representing an EBITDA to cash conversion ratio of 75% (2011: 67%). Net capital expenditure increased from £91m in 2011 to £116m in 2012 principally to add capacity in the Minerals division and investment in expanded flow capacity in SPM. Free cash flow from continuing operations was £62m (2011: £29m). Outflows in respect of acquisitions were £125m with cash generation from disposals of £23m giving a year end net debt of £689m (2011: £673m, £679m constant currency). On a reported basis, the ratio of net debt to EBITDA was 1.3 times and on a proforma basis including the Mathena acquisition was 1.5 times. Return on capital employed of 29.1% for 2012 on a like for like basis (excluding Seaboard and Novatech) was broadly in line with the prior year (2011: 29.2%). Dividend The Board is recommending a 15.2% increase in the full year dividend, the 29th consecutive year of dividend growth, with a final dividend of 30.0p (2011: 25.8p) making a total of 38.0p for the year (2011: 33.0p). If approved at the annual general meeting it will be paid on 31 May 2013 to shareholders on the register on 3 May 2013. The Board also plans a further double digit increase in the full year dividend in 2013. DIVISIONAL HIGHLIGHTS MINERALS Weir Minerals is the global leader in the provision of slurry handling equipment and associated aftermarket support for abrasive high wear applications used in the mining and oil sands markets. £m H1^1 H2 2012 2011^1 Growth Input OE 309 218 527 514 +3% Input aftermarket 411 384 795 725 +10% Input Total 720 602 1,322 1,239 +7% Revenue OE 257 283 540 494 +9% Revenue aftermarket 403 391 794 701 +13% Revenue Total 660 674 1,334 1,195 +12% EBITA 119 137 256 211 +21% Operating margin^2 18.1% 20.3% 19.2% 17.7% +150bps ^12011 and H1 restated at 2012 average exchange rates ^2Adjusted to exclude exceptional items and intangibles amortisation Market drivers Global ore production increased by an estimated 3% in 2012, underpinned by continued demand growth in Chinese and emerging markets for key commodities such as copper. Average ore yields continued to fall, requiring greater levels of processing to maintain the same volume of refined commodity and further supporting aftermarket demand growth. Capital expenditure in the mining sector in 2012 remained ahead of the historically high levels seen in 2011, with over £65bn committed to a number of greenfield developments and brownfield expansions, a 9% increase on 2011 despite new project activity cooling off from the peak seen in the first half of the year. Prices remained above incentive levels for most key commodities during the year. Second half macro-economic concerns over Europe and China resulted in commodity price falls, particularly in iron ore and coal markets, leading to the deferral of some project decisions in Australia and Brasil. Industrial unrest impacted activity in South Africa in the second half of the year. Elsewhere, conditions in key minerals regions were positive. Buoyant activity levels continued in South America and the rest of Africa, driven by copper and gold projects. Weir has benefited from its exposure to these process-intensive commodities. The completion of existing oil sands projects and resulting increases in production levels supported activity in North America, although new project activity levels were low, reflecting the emerging price discount of Canadian heavy oil compared to the WTI benchmark price as a result of transportation constraints. Divisional highlights Targeted capacity addition and product localisation has supported growth in the division's broad range of ancillary products and services. This growth has been supported by expansion of the sales and service footprint, a key source of market differentiation, with 13 new sites opened worldwide. Service capability has also been enhanced through investment in local machining capability and technical skills to support the growing product portfolio. The division enhanced its differentiated technology position during the year with a number of advances in materials technology which will contribute to prolonged wear resistance in customers' critical applications. Minerals research and development efforts have also been at the heart of major product launches in oil and gas markets. Order input increased by 7% to £1,322m (2011: £1,239m). Original equipment orders grew 3% with growth weighted to the first half of the year. Aftermarket orders grew 10%, with the growth rate recovering in the fourth quarter following third quarter destocking in Australia and Brasil. Aftermarket orders represented 60% of total input (2011: 58%). Linked to new project activity, the division continued to experience good levels of demand for slurry pumps. Aftermarket input strengthened across a range of commodities with the benefits of a large and growing installed base reflected in 10% order growth in slurry pump spares and strong input trends across a larger aftermarket portfolio including several multi-million pound orders for cyclones and valves in South America and Canada and a multi-million pound hose contract for a Latin American project. The division also grew its presence in the screen machine and screen media market, benefiting from investment in localised manufacturing. The first major contract awards for Linatex wear resistant lined valves and cyclones were received for one of the world's largest minerals sands projects in East Africa, a highlight of a strong overall 2012 performance in the African market. Emerging markets accounted for 53% of input (2011: 47%) with order growth from South American and African markets rising by 18% and 30% respectively. Revenue increased by 12% to £1,334m (2011: £1,195m). Original equipment sales increased 9% and accounted for 40% of revenues (2011: 41%) with second half sales broadly matching the prior year record. Production-driven aftermarket revenues increased by 13%. Operating profit increased by 21% to £256m (2011: £211m) as the division benefited from strong revenue growth and margin expansion. Operating margin increased to 19.2% (2011: 17.7%) and was ahead of expectations reflecting the strengthening aftermarket revenue mix alongside benefits from procurement initiatives, productivity gains and effective cost control. In the second half of the year margins were also supported by targeted cost and headcount reductions in Brasil and Australia, the markets hardest hit by falling coal and iron ore prices, with total one-off costs of £4m incurred in the year (2011: £1m). Capital expenditure of £50m (2011: £49m) was invested in foundry and wear resistant lining production, as well as expansion of the division's global sales and service footprint. Research and development spend increased by 22% to £13m as the division continued to develop its materials technology positions and supported collaborative innovation efforts across the Group. OIL & GAS Weir Oil & Gas provides superior products and service solutions to upstream, production, transportation, refining and related industries. Upstream products include pressure pumping equipment and services and pressure control products and rental services. Downstream products include API 610 pumps and spare parts. Equipment repairs, upgrades, certification and asset management & field services are delivered globally by Weir Oil & Gas Services. £m H1^1 H2 2012 2011^1 Growth LFL Growth Input OE 157 110 267 479 -44% -66% Input aftermarket 214 196 410 391 +5% -12% Input Total 371 306 677 870 -22% -41% Revenue OE 252 132 384 388 -1% -28% Revenue aftermarket 238 222 460 359 +28% +8% Revenue Total 490 354 844 747 +13% -10% EBITA 123 88 211 185 +14% -12% Operating margin^2 25.0% 24.9% 25.0% 24.8% +20bps -40bps ^12011 and H1 restated at 2012 average exchange rates ^2Adjusted to exclude exceptional items and intangibles amortisation Market drivers In North American pressure pumping markets, the dual effects of US natural gas prices falling below economic incentive levels and relatively high, stable oil prices resulted in a shift of drilling and completion activity from dry gas to oil and liquids-rich shale formations. Over the year, US horizontal gas-directed rig count declined by 43% while horizontal oil and liquids rig count increased by around 28% with total US land rig count falling by 13%. A decline was seen in customer activity over the final quarter of the year as 2012 drilling and completion budgets were exhausted. Advances in technology continue to reduce the time required to drill and complete a well, with the number of wells drilled outstripping the movement in average rig count, supporting demand for pressure control equipment providers. In pressure pumping, analysts estimate that frac equipment utilisation rates had fallen to around 75% by the end of 2012 (PacWest February 2013). Total North American frac demand of around 13 million horsepower at the end of 2012 was at similar levels to H1 2011. Aftermarket activity was also impacted, with overstocking of fluid ends in anticipation of higher activity and lower equipment utilisation and service intensity, leading to pricing pressure in specific product categories. Demand in international pressure pumping markets grew strongly during the year with 38% growth in the frac fleet outside North America to 4.4m (PacWest February 2013) horsepower. Middle East services markets grew strongly, with increased Saudi production and the ongoing rebuilding of Iraqi oilfield infrastructure. In downstream markets, pricing pressure in original equipment markets began to ease with good market opportunities in the FPSO (Floating Production, Storage and Offloading) sector. Divisional highlights As anticipated, the division has maintained overall margins despite fast changing market conditions. In a challenging North American upstream environment, operational capability and capacity was rapidly aligned to market needs. The division grew its market share in certain product segments despite lower overall activity levels and the integrations of the Seaboard and Novatech acquisitions were completed, with plans developed to internationalise both businesses and to enter the frac flowback market. Weir's pressure pumping focused operations (SPM, Mesa and Novatech) responded rapidly to changing market conditions by reducing headcount, in-sourcing machining and implementing lean initiatives and cost reduction programmes with total annualised cost savings of cUS$25m. The expanded aftermarket pressure pumping portfolio has enabled the successful bundling of SPM, Mesa and Novatech products with annual commitments secured from a number of large service companies. Outside North America, like for like upstream international input grew by over a third during the year. Good progress was also made by the Middle East Service operations with the award of a number of significant contracts including a multi-million pound rotating equipment maintenance contract for the refurbishment of the Rumaila oilfield in Iraq. Downstream operations delivered a much improved performance on last year due to the first benefits of the completed restructuring of the operations. Order input at £677m (2011: £870m) was 22% lower and 41% lower like for like due to weakness in pressure pumping markets. Original equipment input fell 44% and 66% like for like as pressure pumping demand fell sharply as a result of frac pump overcapacity. Aftermarket input was up 5% but down 12% like for like with strong growth in Services offset by lower aftermarket pressure pumping orders. Like for like upstream business input (SPM and Mesa) fell 51% to £359m (US$569m), with quarterly order levels broadly flat since the second quarter against the background of a declining rig count. A total of US$139m of 2011 orders were cancelled in the year and reflected as an opening orderbook adjustment. Input from Seaboard was up on the equivalent pre-acquisition period although growth moderated in the second half as market activity levels fell. Strong input growth was achieved at downstream and Service operations, with Middle East Services benefiting from an enhanced operational presence and increased activity levels in Saudi Arabia and Iraq. Improving conditions in downstream markets contributed to higher original equipment orders including a strategic contract in the FPSO market. Revenue increased 13% to £844m (2011: £747m), but was down 10% like for like with equivalent upstream revenues of £511m (US$810m) (2011: US$982m) in line with expectations. Seaboard revenues increased 10% on the pre-acquisition period while Novatech revenues declined, reflecting pressure pumping market conditions. Service and downstream revenues grew by 25%. Operating profit including joint ventures increased by 14% to £211m (2011: £185m) but fell 12% on a like for like basis. Seaboard and Novatech contributed £45m before integration costs of £3m (2011 acquisition and integration costs: £5m), 10% higher than the equivalent pre-acquisition period. Total one off costs of £4m were incurred in the year (2011: £11m). Good profit progression at Service operations and a positive downstream profit performance also contributed. Operating margin of 25.0% (2011: 24.8%) increased year on year, with upstream margins resilient despite challenging pressure pumping markets, an improved performance in downstream and Service businesses, and lower one off costs. On a like for like basis, margins of 25.1% were down 40bps and in line with expectations. The division reacted quickly to the changing pressure pumping market conditions by introducing a range of efficiency and cost reduction measures to preserve profitability. Underlying margins at Seaboard and Novatech were in line with the divisional average, representing a 180bps improvement on the equivalent pre-acquisition period. Capital expenditure of £52m (2011: £32m) was invested in support of growth plans including flow capacity expansion at Weir SPM, integration projects at Seaboard and Novatech and rapid response manufacturing centres in Canada and Dubai as well as new service centres in the US, Iraq and Singapore. In response to the lower demand environment in North America, the previously announced US$75m expansion of Weir SPM was reduced to less than US$60m. Overall spending on research and development increased by 46% to £8m as the division seeks to maintain the strong new product development momentum established in 2012. POWER & INDUSTRIAL Weir Power & Industrial designs and manufactures valves, pumps and turbines as well as providing specialist support services to the global power generation, industrial and oil and gas sectors. Reported £m H1^1 H2 2012 2011^1 Growth LFL Growth Input OE 99 94 193 160 +20% +12% Input aftermarket 96 72 168 146 +15% +14% Input Total 195 166 361 306 +18% +13% Revenue OE 85 85 170 169 +1% -3% Revenue aftermarket 68 85 153 132 +15% +15% Revenue Total 153 170 323 301 +7% +5% EBITA 11 20 31 26 +20% +1% Operating margin^2 7.5% 11.7% 9.7% 8.7% +100bps -40bps ^12011 and H1 restated at 2012 average exchange rates ^2Adjusted to exclude exceptional items and intangibles amortisation Market drivers Nuclear new build activity in the US and Europe remained on hold as post-Fukushima safety reviews concluded, with activity throughout the year centred on Asia-Pacific, Eastern Europe and the Middle East, where Korean EPCs (Engineering, Procurement and Construction) won a number of major projects. Nuclear maintenance and repair markets were positive in the US and the UK which together with increased CCGT (Combined Cycle Gas Turbine) new build activity in North America, provided some mitigation against lower nuclear new build activity. In North America, low economic growth and power prices led to project cancellations and difficult trading conditions in general industrial, power and hydro markets although a number of hydro project opportunities emerged towards the end of the year. While European renewables markets continued to be subdued, the division gained traction towards the end of the year in international projects. Divisional highlights The strategic focus of the division during 2012 has been driving input and order book growth, with restructuring of the valves businesses undertaken in order to develop a strong and unified global platform for the valves portfolio. At the same time, initiatives to enhance operational performance and improve margins have gained momentum, with further leverage of the low cost supply chain and additional supply chain actions underway across the manufacturing operations. Order input increased by 18% to £361m (2011: £306m) with strong growth from valves and service operations. Nuclear input of £72m (2011: £71m) included a multi-million pound project award from a Korean EPC for nuclear service control valves in new build reactors in the Middle East. Overall, control valve orders more than doubled, benefiting from momentum in strategic growth initiatives and a strong first full year performance by Weir International. Low levels of activity in North America affected the US commercial valve business in the second half of the year while Weir American Hydro secured a number of multi-million dollar orders from major North American power companies for rehabilitation, turbine runner replacement and related field service work, including the Nine Mile Dam hydro project towards the end of the period. European input was up year on year despite difficult economic conditions in the eurozone. Aftermarket input of £168m (2011: £146m) benefited from valve and service opportunities. The proportion of orders from power markets was 60% (2011: 57%), with input from the oil and gas market growing by 12% year on year. Input from the Middle East, Africa and Asia increased by over 30%. Revenue increased by 7% to £323m (2011: £301m) with a strong full year contribution from Weir International in South Korea. Like for like revenues were up 5% with revenues from emerging markets increasing by 11% as the division benefits from its increased routes to market. Operating profit increased by 20% to £31m (2011: £26m), 1% like for like, benefiting from strong revenue growth in the valve operations and a first full year contribution from Weir International. Operating margin increased to 9.7% (2011: 8.7%) benefiting from measures to improve cost competitiveness alongside a reduction in one-off costs, which totalled £1m (2011: £5m). Capital expenditure of £19m (2011: £13m) included a new Montreal service centre and the consolidation in July of the US valve production facilities in a single facility at Ipswich, Massachusetts supporting the creation of a unified global valves platform. The opening of a sales office in Seoul, South Korea provides additional traction within the Asia-Pacific region for our control valve, service and speciality pump businesses. Investment in research and development was £2m. STRATEGIC PROGRESS The Group has delivered on its 2012 strategic priorities, strengthening the business through targeted investment in new products and research & development and effective management of the cost base to support continued sustainable profit growth ahead of our end markets. Seaboard and Novatech have been successfully integrated into the Oil & Gas division, with both businesses performing well in challenging market conditions. Seaboard supports the strategy of diversifying the Group's upstream exposure to pressure pumping into the adjacent pressure control market, which will also benefit from the long term growth prospects for unconventional production. Growth opportunities for Seaboard have been validated and the product range is already being taken to international markets. At the end of the calendar year we extended our pressure control presence in the drilling phase of the well lifecycle through an agreement to acquire Mathena, Inc. Flow control production capacity was added at Weir SPM, with the development of a bundled product offering gaining traction in the second half of the year. An initial phase of planned foundry expansion increases our ability to serve global minerals and oil sands markets with capacity additions underway at our European foundry centre in the UK. The innovation framework developed in the last two years continues to bring new products to market. The highlight in 2012 has been the five new products launched for oil and gas customers, increasing our addressable market by some US$500m and leveraging market leading technology from all our divisions into the North American upstream oil and gas sector. This year, good progress has been made on supply chain and procurement initiatives, safety performance and the ongoing development of the people who work for Weir. The strategy is underpinned by four pillars which drive growth - Value Chain ExcelIence, Innovation, Collaboration and Global Capability. In 2013, we will continue to pursue this strategy, enhancing supply chain performance to increase customer responsiveness as we aim to grow ahead of our end markets. We will extend the presence of the Minerals division in the comminution market, capture the North American and international growth opportunities available to Seaboard and Mathena in our enlarged pressure control business and we will continue to drive growth in power markets through an integrated global valves platform. Collaboration across the Group will be supported by developing the IT platform and we will enhance returns through an improved working capital performance. MANAGEMENT AND BOARD CHANGES As previously announced, Keith Ruddock joined the Group as General Counsel and Company Secretary following the retirement of Alan Mitchelson at the Group's AGM in May. Scot Smith resigned and was replaced as Divisional Managing Director, Minerals by Dean Jenkins in August 2012, with Kevin Spencer, previously Regional Managing Director Weir Minerals Europe replacing Dean as Divisional Managing Director, Power & Industrial. On 15 February 2013 the Group announced the appointment of Charles Berry to the Board as a Non-Executive Director, with effect from 1 March 2013 POST- BALANCE SHEET EVENTS On 31 December 2012 Weir Oil & Gas completed the acquisition of Mathena, Inc, a leading provider of pressure control rental equipment and services for onshore oil and gas drilling applications. Consideration was via an initial payment of US$240m (£148m) with a further maximum deferred consideration of US$145m payable over two years, contingent upon meeting profit growth targets. On 20 February 2013 the Group announced the acquisition of R Wales group of companies and the Cheong foundry in Malaysia, with agreement also reached to acquire the Xmeco foundry in South Africa. The combined consideration for the three acquisitions will be £55m. OUTLOOK MINERALS Weir Minerals remains well positioned to benefit from the strong long term market fundamentals in mining and minerals processing, underpinned by urbanisation in emerging markets and their demand for raw materials. This ongoing demand, coupled with declining ore grades, supports continued substantial investment above historic levels by miners over the coming years, although the medium term nature of capital investment may increasingly focus on brownfield and production optimisation projects with absolute industry capital expenditure levels expected to remain above 2010 levels. Global ore production is expected to grow by over 3% per annum through to 2015, supporting aftermarket products and services growth. In 2013 we expect mining capex to decline relative to 2012 but remain at levels supportive of the continued expansion of the installed base. While fewer greenfield projects are expected to reach order point compared to the run rate in the first half of 2012, we expect a number of brownfield expansions as miners focus on maximising returns from existing production assets. With the order mix continuing to shift towards aftermarket products and services, market forecasts of positive ore production volume growth and a continuing focus on increasing our market share of ancillary products and services mean that we anticipate good growth in shorter cycle aftermarket orders. Together with delivery of a strong opening order book, this is expected to result in higher 2013 revenues and operating profits. After a stronger than expected second half 2012 margin performance, operating margins are expected to be at a broadly similar level to 2012 as the business balances the benefits from the growing aftermarket mix alongside sensible cost control and continued investment in its growth plans. OIL & GAS The medium term outlook for global pressure pumping and pressure control markets remains positive, with continued investment in North American shale plays by national and international oil companies. A relatively high and stable oil price should support continuing North American production increases as the US pursues energy independence. Low US gas prices are expected to support increased US gas fired power and industrial demand as US businesses benefit from the competitiveness of lower energy input costs. International shale development is expected to continue to grow, with Russia, China, Argentina, North Africa, Saudi Arabia and Australia becoming larger markets over the next two to three years. Pressure pumping markets are expected to remain competitive in 2013 and our pressure pumping business unit (SPM, Mesa and Novatech) entered the year with a considerably lower orderbook than the prior year period. Minimal levels of original equipment capex are expected throughout 2013 with material overcapacity continuing to affect frac pump demand. With low single digit rig count growth forecast, aftermarket input is expected to progressively increase as customers work through inventory levels. In pressure control, Seaboard is expected to make good progress, as the business seeks to benefit from the organic growth opportunities available in frac rental, frac flowback and international markets. Additional geographic growth opportunities also exist for Mathena's product range through the division's leading service network. At the Middle East Services businesses Iraqi and Saudi Arabian markets are expected to be particularly strong. A continuation of the improved downstream performance is forecast. In total, divisional revenues including Mathena are expected to be slightly lower year on year with underlying operating margins broadly in line with 2012 as exposure to pressure pumping falls to around 50% of divisional revenues (c.15% of Group revenues). POWER & INDUSTRIAL Global macro-economic concerns continue to slow the recovery of general industrial markets with an expected improvement in global power markets leading to increased service and aftermarket demand. Several major Korean nuclear and conventional domestic power plant projects are proceeding in 2013 and Korean EPCs continue to successfully capture global opportunities. Weir is well positioned to benefit through its global presence and its broadened valve range, including good control valve opportunities. As the business continues to expand internationally we see an increasing range of opportunities for the renewables operations. The division also expects to benefit from targeting the aftermarket opportunities of the large valve installed base outside North America. Strategic initiatives are expected to support increased organic growth, particularly in Asia-Pacific and the oil and gas sector. The financial performance in 2013 is expected to benefit from a strong opening orderbook, steadily improving power markets, continuing momentum in strategic initiatives and ongoing operational excellence actions resulting in revenue and profit growth with margins broadly in line with 2012. SUMMARY Over the medium term the Group remains well positioned to benefit from the structural growth expected in each of our end markets. Demand for minerals, oil and gas and power is underpinned by continuing population growth and industrialisation in developing economies. Growing desire for energy security will support the international development of unconventional oil and gas resources and industrialisation, environmental concerns and ageing power plants will accelerate the need for new and refurbished power infrastructure. In 2013, despite more challenging markets, the Group will continue to deliver profitable growth through new product introductions and a range of operational initiatives. Assuming a gradual economic and end market improvement, we expect to deliver low single digit revenue growth and broadly stable margins in 2013 with lower first half profits offset by growth in the second half. Alongside substantially higher cash generation the Group plans the eighth consecutive year of double digit dividend growth. 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 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. AUDITED RESULTS Consolidated Income Statement for the 52 weeks ended 28 December 2012 52 weeks ended 30 December 2011 52 weeks ended 28 December 2012 (Restated note 1) Before Exceptional Before Exceptional exceptional items & exceptional items & items & intangibles items & intangibles intangibles amortisation intangibles amortisation amortisation (note 3) Total amortisation (note 3) Total Notes £m £m £m £m £m £m Continuing operations Revenue 2 2,538.3 - 2,538.3 2,292.0 - 2,292.0 Continuing operations Operating profit before share of results of joint ventures 479.2 (16.5) 462.7 407.9 (4.8) 403.1 Share of results of joint ventures 6.4 - 6.4 4.8 - 4.8 Operating profit 485.6 (16.5) 469.1 412.7 (4.8) 407.9 Finance costs (46.5) (2.6) (49.1) (19.4) (0.7) (20.1) Finance income 5.2 - 5.2 4.3 - 4.3 Other finance costs - retirement benefits (1.2) - (1.2) (1.3) - (1.3) Profit before tax from continuing operations 443.1 (19.1) 424.0 396.3 (5.5) 390.8 Tax expense 4 (124.2) 12.6 (111.6) (114.2) 1.8 (112.4) Profit for the period from continuing operations 318.9 (6.5) 312.4 282.1 (3.7) 278.4 Profit for the period from discontinued operations 5 - 3.3 3.3 - 19.9 19.9 Profit for the period 318.9 (3.2) 315.7 282.1 16.2 298.3 Attributable to Equity holders of the Company 318.6 (3.2) 315.4 282.1 16.2 298.3 Non-controlling interests 0.3 - 0.3 - - - 318.9 (3.2) 315.7 282.1 16.2 298.3 Earnings per share 6 Basic - total operations 148.6p 141.2p Basic - continuing operations 150.1p 147.1p 133.6p 131.8p Diluted - total operations 147.7p 139.8p Diluted - continuing operations 149.2p 146.2p 132.2p 130.5p Consolidated Statement of Comprehensive Income for the 52 weeks ended 28 December 2012 (Restated note 1) 52 weeks 52 weeks ended 28 ended 30 December December 2012 2011 £m £m Profit for the period 315.7 298.3 Other comprehensive income Gains (losses) taken to equity on cash flow hedges 1.4 (1.1) Exchange losses on translation of foreign operations (84.9) (18.9) Exchange gains (losses) on net investment hedges 38.6 (1.4) Actuarial losses on defined benefit plans (14.1) (45.0) Reclassification adjustments taken to the income statement on cash flow hedges 0.8 (1.5) Tax relating to other comprehensive income 3.0 12.2 Net other comprehensive income (55.2) (55.7) Total net comprehensive income for the period 260.5 242.6 Attributable to Equity holders of the Company 260.5 242.6 Non-controlling interests - - 260.5 242.6 Consolidated Balance Sheet at 28 December 2012 (Restated note 1) 30 28 December December 2012 2011 Notes £m £m ASSETS Non-current assets Property, plant & equipment 374.0 318.9 Intangible assets 1,454.1 1,415.1 Investments in joint ventures 12.0 11.4 Deferred tax assets 30.4 38.7 Derivative financial instruments 11 0.8 0.1 Total non-current assets 1,871.3 1,784.2 Current assets Inventories 512.7 463.8 Trade & other receivables 478.2 516.1 Construction contracts 21.7 19.6 Derivative financial instruments 11 3.6 6.4 Income tax receivable 4.1 11.6 Cash & short-term deposits 391.1 113.9 Total current assets 1,411.4 1,131.4 Total assets 3,282.7 2,915.6 LIABILITIES Current liabilities Interest-bearing loans & borrowings 65.4 92.0 Trade & other payables 485.8 569.1 Construction contracts 13.7 26.8 Derivative financial instruments 11 14.7 24.4 Income tax payable 28.6 33.4 Provisions 36.4 55.5 Total current liabilities 644.6 801.2 Non-current liabilities Interest-bearing loans & borrowings 1,014.6 695.1 Other payables 26.3 15.5 Derivative financial instruments 11 0.8 15.2 Provisions 33.2 37.1 Deferred tax liabilities 162.5 149.3 Retirement benefit plan deficits 10 90.4 84.7 Total non-current liabilities 1,327.8 996.9 Total liabilities 1,972.4 1,798.1 NET ASSETS 1,310.3 1,117.5 CAPITAL & RESERVES Share capital 26.7 26.6 Share premium 38.0 38.0 Treasury shares (5.6) (5.6) Capital redemption reserve 0.5 0.5 Foreign currency translation reserve 37.5 83.5 Hedge accounting reserve 0.2 (1.6) Retained earnings 1,209.8 974.0 Shareholders equity 1,307.1 1,115.4 Non-controlling interests 3.2 2.1 TOTAL EQUITY 1,310.3 1,117.5 Consolidated Cash Flow Statement for the 52 weeks ended 28 December 2012 52 weeks 52 weeks ended 28 ended 30 December December 2012 2011 Notes £m £m Continuing operations Cash flows from operating activities 12 Cash generated from operations 398.6 302.6 Additional pension contributions paid (7.5) (6.6) Income tax paid (104.9) (97.3) Net cash generated from operating activities 286.2 198.7 Continuing operations Cash flows from investing activities Acquisitions of subsidiaries 12 (123.3) (386.0) Disposals of subsidiaries 12 22.9 - Purchases of property, plant & equipment & intangible assets 8 (123.6) (95.4) Other proceeds from sale of property, plant & equipment & intangible assets 7.3 4.0 Interest received 5.1 4.3 Dividends received from joint ventures 5.4 4.1 Net cash used in investing activities (206.2) (469.0) Continuing operations Cash flows from financing activities Purchase of shares for equity settled share-based incentives (3.0) (0.4) Proceeds from borrowings 786.9 469.0 Repayments of borrowings (462.5) (50.8) Settlement of external debt of subsidiary on acquisition 12 (1.9) (55.4) Settlement of derivative financial instruments (11.0) (10.9) Interest paid (33.4) (17.7) Proceeds from increase in non-controlling interests 1.0 1.7 Dividends paid to equity holders of the Company (71.7) (59.5) Net cash generated from financing activities 204.4 276.0 Net increase in cash & cash equivalents from continuing operations 284.4 5.7 Net increase in cash & cash equivalents from discontinued operations - investing activities - 24.6 Cash & cash equivalents at the beginning of the period 108.6 79.5 Foreign currency translation differences (8.8) (1.2) Cash & cash equivalents at the end of the period 12 384.2 108.6 Consolidated Statement of Changes in Equity for the 52 weeks ended 28 December 2012 Foreign Attributable Capital currency Hedge to equity Share Share Treasury redemption translation accounting Retained holders of Non-controlling Total capital premium shares reserve reserve reserve earnings the Company interests equity £m £m £m £m £m £m £m £m £m £m At 31 December 2010 26.6 38.0 (6.8) 0.5 103.8 0.4 758.8 921.3 0.4 921.7 Profit for the period - - - - - - 298.3 298.3 - 298.3 Losses taken to equity on cash flow hedges - - - - - (1.1) - (1.1) - (1.1) Exchange losses on translation of foreign operations - - - - (18.9) - - (18.9) - (18.9) Exchange losses on net investment hedges - - - - (1.4) - - (1.4) - (1.4) Actuarial losses on defined benefit plans - - - - - - (45.0) (45.0) - (45.0) Reclassification adjustments taken to the income statement on cash flow hedges - - - - - (1.5) - (1.5) - (1.5) Tax relating to other comprehensive income - - - - - 0.6 11.6 12.2 - 12.2 Total net comprehensive income for the period - - - - (20.3) (2.0) 264.9 242.6 - 242.6 Proceeds from increase in non-controlling interests - - - - - - - - 1.7 1.7 Cost of share-based payments inclusive of tax credits - - - - - - 11.0 11.0 - 11.0 Dividends - - - - - - (59.5) (59.5) - (59.5) Exercise of LTIP awards - - 1.2 - - - (1.2) - - - At 30 December 2011 (restated note 1) 26.6 38.0 (5.6) 0.5 83.5 (1.6) 974.0 1,115.4 2.1 1,117.5 Profit for the period - - - - - - 315.4 315.4 0.3 315.7 Gains taken to equity on cash flow hedges - - - - - 1.4 - 1.4 - 1.4 Exchange losses on translation of foreign operations - - - - (84.6) - - (84.6) (0.3) (84.9) Exchange gains on net investment hedges - - - - 38.6 - - 38.6 - 38.6 Actuarial losses on defined benefit plans - - - - - - (14.1) (14.1) - (14.1) Reclassification adjustments taken to the income statement on cash flow hedges - - - - - 0.8 - 0.8 - 0.8 Tax relating to other comprehensive income - - - - - (0.4) 3.4 3.0 - 3.0 Total net comprehensive income for the period - - - - (46.0) 1.8 304.7 260.5 - 260.5 Proceeds from increase in non-controlling interests - - - - - - - - 1.1 1.1 Cost of share-based payments inclusive of tax charge - - - - - - 4.9 4.9 - 4.9 Dividends - - - - - - (71.7) (71.7) - (71.7) Purchase of shares* - - (2.0) - - - - (2.0) - (2.0) Exercise of LTIP awards 0.1 - 2.0 - - - (2.1) - - - At 28 December 2012 26.7 38.0 (5.6) 0.5 37.5 0.2 1,209.8 1,307.1 3.2 1,310.3 * These shares were purchased on the open market and are held by the Appleby EBT on behalf of the Group for satisfaction of any future vesting of the deferred bonus plan. Notes to the Audited Results 1. Accounting policies Basis of preparation The audited results for the 52 weeks ended 28 December 2012 ("2012") have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and applied in accordance with the provisions of The Companies Act 2006. The financial information set out in the audited results does not constitute the Group's statutory financial statements for the 52 weeks ended 28 December 2012 within the meaning of section 434 of the Companies Act 2006 and has been extracted from the full financial statements for the 52 weeks ended 28 December 2012. Statutory financial statements for the 52 weeks ended 30 December 2011, which received an unqualified audit report, have been delivered to the Registrar of Companies. The reports of the auditors on the financial statements for each of the 52 weeks ended 30 December 2011 and 28 December 2012 were unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006. The financial statements for the 52 weeks ended 28 December 2012 will be delivered to the Registrar of Companies and made available to all shareholders in due course. The accounting policies applied in preparing these audited results are unchanged from those set out in the Group's 2011 annual report except as described below. The following standards and interpretations have been adopted in these financial statements and have not had a material impact on the Group's financial statements in the period of initial application: IFRS 7 Financial Instruments: Disclosure (Amendment) IAS12 Income Taxes (Amendment) - Deferred Taxes: Recovery of Underlying Assets These financial statements are presented in sterling. All values are rounded to the nearest 0.1 million pounds (£m) except where otherwise indicated. In order to provide the users of the financial statements with a more relevant presentation of the Group's underlying performance, profit for each financial year has been analysed between: i)profit before exceptional items and intangibles amortisation; and ii)the effect of exceptional items and intangibles amortisation. a. Exceptional items are items of income and expense which, because of the nature, size and / or infrequency of the events giving rise to them, merit separate presentation to allow a better understanding of the elements of the Group's financial performance for the period and are presented on the face of the income statement to facilitate comparisons with prior periods and assessment of trends in financial performance. Exceptional items may include but are not restricted to: profits or losses arising on disposal of business or on closures of business; the cost of significant business restructuring; significant impairments of intangible or tangible assets; adjustments to the fair value of acquisition related items such as contingent consideration and inventory; other items deemed exceptional due to their significance, size or nature; and the related exceptional taxation. b. Intangibles amortisation, including impairment, has been shown separately to provide increased visibility over the impact of increased acquisition activity on intangible assets. Further analysis of the items included in the column "Exceptional items & intangibles amortisation" is provided in note 3 to the financial statements. During the 52 weeks ended 28 December 2012, the provisional fair values attributed to the 2011 acquisitions of Weir International and Seaboard were finalised. In accordance with IFRS3, the net impact of the adjustments to the provisional fair values has been recognised by means of a decrease to goodwill and the adjustments to the provisional amounts have been recognised as if the accounting for the business combinations had been completed at the relevant acquisition dates. As such, all affected balances and amounts have been restated in the financial statements. To this effect, the Consolidated Balance Sheet and affected notes present restated comparative information as at 30 December 2011. The Consolidated Income Statement for the 52 weeks ended 30 December 2011 has been restated to reflect £0.7m amortisation of customer relationships. Further details of the adjustments made to the provisional fair values can be found in note 9. In addition, the provisional fair values of the acquisition of Novatech in February 2012 were also finalised during the period and details can be found in note 9. 2. Segment information For management purposes, the Group is organised into three operating divisions: Minerals, Oil & Gas and Power & Industrial. These three divisions are organised and managed separately based on the key markets served and each is treated as an operating segment and a reportable segment in accordance with IFRS8. The operating and reportable segments were determined based on the reports reviewed by the Chief Executive which are used to make operational decisions. The Minerals segment is the global leader in the provision of slurry handling equipment and associated aftermarket support for abrasive high wear applications used in the mining and oil sands. The Oil & Gas segment provides products and service solutions to upstream, production, transportation, refining and related industries. The Power & Industrial segment designs and manufactures valves, pumps and turbines as well as providing specialist support services to the global power generation, industrial and oil and gas sectors. All other segments, which are disclosed as Group companies, include the results of LGE Process which supplies equipment to the liquefied petroleum gas marine and onshore markets. This business was sold on 28 December 2012 (note 3). The Chief Executive assesses the performance of the operating segments based on operating profit from continuing operations before exceptional items and intangibles amortisation, including impairment ("segment result"). Finance income and expenditure and associated interest-bearing liabilities and derivative financial instruments are not allocated to segments as all treasury activity is managed centrally by the Group treasury function. The amounts provided to the Chief Executive with respect to assets and liabilities are measured in a manner consistent with that of the financial statements. The assets are allocated based on the operations of the segment and the physical location of the asset. The liabilities are allocated based on the operations of the segment. Transfer prices between business segments are set on an arm's length basis in a manner similar to transactions with third parties. The segment information for the reportable segments for the 52 weeks ended 28 December 2012 and the 52 weeks ended 30 December 2011 is disclosed below. Total continuing Minerals Oil & Gas Power & Industrial operations 2012 2011 2012 2011 2012 2011 2012 2011 £m £m £m £m £m £m £m £m Revenue Sales to external customers 1,333.6 1,216.3 843.6 742.7 323.4 306.7 2,500.6 2,265.7 Inter-segment sales 4.3 5.2 15.3 14.7 4.0 6.6 23.6 26.5 Segment revenue 1,337.9 1,221.5 858.9 757.4 327.4 313.3 2,524.2 2,292.2 Group companies sales to external customers 37.7 26.3 Eliminations (23.6) (26.5) 2,538.3 2,292.0 Sales to external customers - 2011 at 2012 average exchange rates Sales to external customers 1,333.6 1,195.3 843.6 746.8 323.4 301.4 2,500.6 2,243.5 Group companies sales to external customers 37.7 26.3 2,538.3 2,269.8 Result (restated note 1) Segment result before share of results of joint ventures 255.9 213.9 204.2 178.3 31.5 26.8 491.6 419.0 Share of results of joint ventures - - 6.4 4.8 - - 6.4 4.8 Segment result 255.9 213.9 210.6 183.1 31.5 26.8 498.0 423.8 Group companies 2.5 3.0 Unallocated expenses (14.9) (14.1) Operating profit before exceptional items & intangibles amortisation 485.6 412.7 Total exceptional items & intangibles amortisation (19.1) (5.5) Net finance costs before exceptional items (41.3) (15.1) Other finance costs - retirement benefits (1.2) (1.3) Profit before tax from continuing operations 424.0 390.8 Segment result - 2011 at 2012 average exchange rates Segment result before share of results of joint ventures 255.9 211.5 204.2 180.2 31.5 26.0 491.6 417.7 Share of results of joint ventures - - 6.4 4.9 - - 6.4 4.9 Segment result 255.9 211.5 210.6 185.1 31.5 26.0 498.0 422.6 Group companies 2.5 3.0 Unallocated expenses (14.9) (14.1) Operating profit before exceptional items & intangibles amortisation 485.6 411.5 There are no material revenues derived from a single external customer. 3. Exceptional items & intangibles amortisation 2011 Restated 2012 (note 1) £m £m Recognised in arriving at operating profit from continuing operations Intangibles amortisation (36.7) (23.8) Exceptional item - charging of fair value inventory uplift (4.5) - Exceptional item - gain on sale of LGE Process 30.5 - Exceptional item - uplift in respect of contingent consideration liability (5.8) - Exceptional item - past service gain on UK defined benefit scheme - 19.0 (16.5) (4.8) Recognised in finance costs Exceptional item - unwind of discount in respect of contingent consideration liability (2.6) (0.7) Recognised in arriving at profit for the period from discontinued operations Exceptional items (note 5) 3.3 19.9 4. Income tax expense 2011 Restated 2012 (note 1) £m £m Group - UK (5.8) (11.4) Group - overseas (105.8) (101.0) Total income tax expense in the Consolidated Income Statement (111.6) (112.4) The total income tax expense is disclosed in the Consolidated Income Statement as follows. Tax expense - continuing operations before exceptional items & intangibles amortisation (124.2) (114.2) - exceptional items 1.5 (4.8) - intangibles amortisation 11.1 6.6 Total income tax expense in the Consolidated Income Statement (111.6) (112.4) The total income tax expense included in the Group's share of results of joint ventures is as follows. Joint ventures (1.2) (0.6) 5. Discontinued operations There were no disposals of core businesses during the 52 weeks ended 28 December 2012 or the 52 weeks ended 30 December 2011. The profit arising from discontinued operations of £3.3m was as a result of the release of unutilised provisions relating to prior year disposals on expiration of the tax warranty periods. In December 2011, the Group disposed of the former Weir Pumps site at Cathcart to SPX Clyde UK Limited for cash proceeds of £25.0m resulting in a net gain of £19.9m (net of tax of £nil) after taking account of disposal costs and other costs arising from discontinued operations. Since the property was used by the Weir Pumps business, which was sold in 2007, the net gain was shown as a profit from discontinued operations. Earnings per share from discontinued operations were as follows. 2012 2011 pence pence Basic 1.6 9.4 Diluted 1.5 9.3 These earnings per share figures were derived by dividing the net loss attributable to equity holders of the Company from discontinued operations of £3.3m (2011: £19.9m) by the weighted average number of ordinary shares for both basic and diluted amounts shown in note 6. 6. Earnings per share Basic earnings per share amounts are calculated by dividing net profit for the period attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted earnings per share is calculated by dividing the net profit attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during the period (adjusted for the effects of dilutive share awards). The following reflects the profit and share data used in the calculation of earnings per share. 2011 Restated 2012 (note 1) Profit attributable to equity holders of the Company Total operations * (£m) 315.4 298.3 Continuing operations * (£m) 312.1 278.4 Continuing operations before exceptional items & intangibles amortisation * (£m) 318.6 282.1 Weighted average share capital Basic earning per share (number of shares, million) 212.2 211.2 Diluted earnings per share (number of shares, million) 213.5 213.4 The difference between the weighted average share capital for the purposes of the basic and the diluted earnings per share calculations is analysed as follows. 2012 2011 Shares Shares Million Million Weighted average number of ordinary shares for basic earnings per share 212.2 211.2 Effect of dilution: LTIP and deferred bonus awards 1.3 2.2 Adjusted weighted average number of ordinary shares for diluted earnings per share 213.5 213.4 The profit attributable to equity holders of the Company used in the calculation of both basic and diluted earnings per share from continuing operations before exceptional items and intangibles amortisation is calculated as follows. 2011 Restated 2012 (note 1) £m £m Net profit attributable to equity holders from continuing operations * 312.1 278.4 Exceptional items & intangibles amortisation net of tax 6.5 3.7 Net profit attributable to equity holders from continuing operations before exceptional items & intangibles amortisation * 318.6 282.1 2012 2011 pence pence Basic earnings per share: Total operations* 148.6 141.2 Continuing operations* 147.1 131.8 Continuing operations before exceptional items & intangibles amortisation* 150.1 133.6 Diluted earnings per share: Total operations* 147.7 139.8 Continuing operations* 146.2 130.5 Continuing operations before exceptional items & intangibles amortisation* 149.2 132.2 *Adjusted for £0.3m (2011: £nil) in respect of non-controlling interests. There have been no share options (2011: nil) exercised between the reporting date and the date of signing of these financial statements. 7. Dividends paid & proposed 2012 2011 £m £m Declared & paid during the period Equity dividends on ordinary shares Final dividend for 2011: 25.8p (2010: 21.0p) 54.8 44.3 Interim dividend for 2012: 8.0p (2011: 7.2p) 16.9 15.2 71.7 59.5 Proposed for approval by shareholders at the annual general meeting Final dividend for 2012: 30.0p (2011: 25.8p) 63.8 54.5 The proposed dividend is based on the number of shares in issue, excluding treasury shares held, at the date the financial statements were approved and authorised for issue. The final dividend may differ due to increases or decreases in the number of shares in issue between the date of approval of the report and financial statements and the record date for the final dividend. 8. Property, plant & equipment & intangible assets 2012 2011 £m £m Purchases of property, plant & equipment & intangible assets - land & buildings 27.9 18.0 - plant & equipment 87.4 72.1 - intangible assets 8.3 5.3 123.6 95.4 Impairment of plant & equipment - 0.4 In 2011 the impairment charge of £0.4m related to specific assets in one location which were unable to be transferred to that operation's new location. 9. Business combinations On 4 January 2012, the Group completed the acquisition of Gema Industri AB and Gema Industrigummi AB ("Gema") for an initial net cash consideration of £5m. Based in Gallivare, Sweden, Gema's core business is providing maintenance services to mines in northern Sweden. At 28 December 2012, the Group had acquired 100% of the voting shares of Gema Industrigummi AB and 99% of the voting shares of Gema Industri AB and is in the process of acquiring the remaining shares in accordance with Swedish company law which has resulted in a further cash consideration of £0.6m. On 22 February 2012, the Group completed the acquisition of 100% of the voting shares of Novatech LLC ("Novatech") for a cash consideration of US$192m (£121m), net cash consideration of US$176m (£111m). Based in Dallas, Texas, Novatech produces a wide variety of valves for high pressure applications used in unconventional upstream oil and gas operations. The fair values of Novatech are disclosed in the following table. The fair values are final following the completion of the fair value exercise in respect of each class of asset. There are certain intangible assets included in the £52.6m of goodwill recognised that cannot be individually separated and reliably measured due to their nature. These items include anticipated business growth, synergies and an assembled workforce. The fair value and gross amount of the trade receivables amount to £5.2m. None of the trade receivables have been impaired. Weir Novatech 2012 Fair values £m Property, plant & equipment 6.7 Inventories 7.3 Intangible assets - customer relationships 53.4 - brand name 4.5 - order backlog 1.8 - intellectual property 4.7 Trade & other receivables 5.2 Cash & cash equivalents 10.2 Interest-bearing loans & borrowings (1.9) Trade & other payables (1.9) Provisions (0.1) Deferred tax (23.0) Fair value of net assets 66.9 Goodwill arising on acquisition 52.6 Total consideration 119.5 Cash consideration 121.4 Settlement of external debt of subsidiaries on acquisition (1.9) Total consideration 119.5 The total net cash outflow on current year acquisitions was as follows: Weir Novatech - cash & cash equivalents acquired 10.2 - cash paid (121.4) Gema - net cash outflow (5.6) Total cash outflow (116.8) The Group acquired 60% of the voting shares of Weir International on 1 July 2011 and 100% of the voting shares of Seaboard on 14 December 2011. The remaining 40% of the voting shares of Weir International is subject to put and call options exercisable between 2014 and 2019 and based upon an EBITDA multiple of profit in the two years preceding the exercise of the options. The cash consideration paid was £9.8m and the estimated fair value of the contingent consideration is £19.6m. This is based on an assessment of the probability of possible outcomes discounted to net present value. The range of possible outcomes on an undiscounted basis is between zero and £50.0m. In the 2011 annual report and accounts, the fair values on acquisition of Seaboard and Weir International were provisional, due to the timing of the transactions. In the 52 weeks ended 28 December 2012, the fair values of Seaboard and Weir International have been finalised resulting in adjustments to the provisional fair values attributed. The following table summarises the adjustments made to the provisional fair values during the period. Adjustments to provisional fair Provisional fair values values Restated fair values Weir Weir Weir Weir Weir Weir Seaboard International Total Seaboard International Total Seaboard International Total 2011 2011 2011 2011 2011 2011 2011 2011 2011 £m £m £m £m £m £m £m £m £m Property, plant & equipment - land & buildings 0.6 - 0.6 0.3 - 0.3 0.9 - 0.9 - plant & equipment 22.5 0.1 22.6 (3.2) - (3.2) 19.3 0.1 19.4 Intangible assets - brand name - - - 31.6 - 31.6 31.6 - 31.6 - customer relationships - - - 157.6 7.6 165.2 157.6 7.6 165.2 Inventories 29.6 0.7 30.3 (6.0) - (6.0) 23.6 0.7 24.3 Trade & other receivables 42.3 1.1 43.4 (1.1) - (1.1) 41.2 1.1 42.3 Cash & cash equivalents 2.2 0.2 2.4 - - - 2.2 0.2 2.4 Interest-bearing loans & borrowings (55.4) (0.2) (55.6) - - - (55.4) (0.2) (55.6) Trade & other payables (41.5) (1.6) (43.1) (3.6) - (3.6) (45.1) (1.6) (46.7) Provisions - warranty (1.5) - (1.5) (1.8) - (1.8) (3.3) - (3.3) - other - - - (0.5) - (0.5) (0.5) - (0.5) Income tax 6.3 (0.1) 6.2 - - - 6.3 (0.1) 6.2 Deferred tax 1.1 - 1.1 (67.2) - (67.2) (66.1) - (66.1) Fair value of net assets 6.2 0.2 6.4 106.1 7.6 113.7 112.3 7.8 120.1 Goodwill arising on acquisition 379.6 23.6 403.2 (106.1) (7.6) (113.7) 273.5 16.0 289.5 Total consideration 385.8 23.8 409.6 - - - 385.8 23.8 409.6 Cash consideration 432.1 9.8 441.9 - - - 432.1 9.8 441.9 Settlement of external debt on acquisition (55.4) - (55.4) - - - (55.4) - (55.4) Contingent consideration 9.1 14.0 23.1 - - - 9.1 14.0 23.1 Total consideration 385.8 23.8 409.6 - - - 385.8 23.8 409.6 The cash outflow on acquisitions was as follows Cash & cash equivalents acquired 2.2 0.2 2.4 - - - 2.2 0.2 2.4 Cash paid (432.1) (9.8) (441.9) - - - (432.1) (9.8) (441.9) Net cash outflow (429.9) (9.6) (439.5) - - - (429.9) (9.6) (439.5) Together, Seaboard and Novatech contributed £173.3m to revenue and £45.5m to operating profit in the 52 weeks ended 28 December 2012. The contribution of Novatech to revenue and to profit for the period from continuing operations after exceptional items and intangibles amortisation was not material and so has not been separately disclosed. The combined revenue and profit for the period from continuing operations after exceptional items and intangibles' amortisation of the Group, assuming that Novatech had been acquired at the start of 2012, would have been £2,544.9m and £313.9m respectively. The revenue and operating profit of Gema have not been disclosed as they are deemed to be immaterial. Acquisition costs in relation to Novatech of £0.3m have been included within operating profit. 10. Pensions & other post-employment benefit plans 2012 2011 £m £m Plans in deficit 90.4 84.7 The net Group deficit for retirement benefit obligations at the period end was £90.4m (2011: £84.7m) reflecting equity / bond market performance and yield movements. The past service gain for 2011 of £19.0m arose as a result of a decision by the Trustees of The Weir Group Pension and Retirement Saving Scheme that, following the Government's change in legislation, certain elements of pension would increase in line with Consumer Prices Index (CPI) rather than the Retail Prices Index (RPI). This decision was announced to the members of the scheme in July 2011. The past service gain was recognised last year as an exceptional item in the Consolidated Income Statement. 11. Derivative financial instruments Set out in the table below is a summary of the types of derivative financial instruments included within each balance sheet category. 2012 2011 £m £m Included in non-current assets Forward foreign currency contracts designated as cash flow hedges - 0.1 Other forward foreign currency contracts 0.8 - 0.8 0.1 Included in current assets Forward foreign currency contracts designated as cash flow hedges 0.2 0.6 Other forward foreign currency contracts 3.4 5.8 3.6 6.4 Included in current liabilities Forward foreign currency contracts designated as cash flow hedges 0.1 2.1 Forward foreign currency contracts designated as net investment hedges 0.3 0.4 Cross currency swaps designated as net investment hedges - 12.9 Other cross currency swaps 9.1 - Other forward foreign currency contracts 5.2 9.0 14.7 24.4 Included in non-current liabilities Forward foreign currency contracts designated as cash flow hedges - 0.7 Cross currency swaps designated as net investment hedges 0.5 14.3 Other forward foreign currency contracts 0.3 0.2 0.8 15.2 Net derivative financial liabilities 11.1 33.1 12. Additional cash flow information 2011 Restated 2012 (note 1) £m £m Continuing operations Net cash generated from operations Operating profit 469.1 407.9 Non cash exceptional items (20.2) - Share of results of joint ventures (6.4) (4.8) Depreciation of property, plant & equipment 49.4 37.3 Amortisation of intangible assets 36.7 23.8 Impairment of plant & equipment - 0.4 Gains on disposal of property, plant & equipment (0.9) (0.8) Defined benefit plans past service credit - (19.0) Funding of pension & post-retirement costs (1.3) (1.3) Employee share schemes 7.5 4.9 Net foreign exchange including derivative financial instruments 0.3 4.5 (Decrease) increase in provisions (18.7) 5.0 Cash generated from operations before working capital cash flows 515.5 457.9 Increase in inventories (61.6) (137.6) Decrease (increase) in trade & other receivables & construction contracts 24.4 (127.8) (Decrease) increase in trade & other payables & construction contracts (79.7) 110.1 Cash generated from operations 398.6 302.6 Additional pension contributions paid (7.5) (6.6) Income tax paid (104.9) (97.3) Net cash generated from operating activities 286.2 198.7 The settlement of the external debt of Seaboard and Novatech on acquisition has been classified as a financing cash flow in accordance with IAS7 The following tables summarise the cashflows arising on acquisitions: 2012 2011 £m £m Acquisitions of subsidiaries Current period acquisitions (see below) (114.9) (384.1) Previous periods acquisitions contingent consideration paid (8.4) (1.9) (123.3) (386.0) Settlement of external debt of subsidiary on acquisition (1.9) (55.4) Acquisition of subsidiaries - current year acquisitions (114.9) (384.1) Total cash outflow on acquisition of subsidiaries - current year (note 9) (116.8) (439.5) Previous periods acquisitions contingent consideration paid (8.4) (1.9) Total cash outflow relating to acquisitions (125.2) (441.4) Disposals of subsidiaries Current period disposals - proceeds 25.2 - - cash disposed of (1.8) - Prior period disposals (0.5) - 22.9 - Cash and cash equivalents comprise the following Cash & short term deposits 391.1 113.9 Bank overdrafts & short-term borrowings (6.9) (5.3) 384.2 108.6 Reconciliation of net increase in cash & cash equivalents to movement in net debt Net increase in cash & cash equivalents from continuing operations 284.4 5.7 Net increase in cash & cash equivalents from discontinued operations - investing activities (note 5) - 24.6 Net increase in debt (322.6) (362.8) Change in net debt resulting from cash flows (38.2) (332.5) Lease inceptions (0.1) (0.9) Loans acquired (2.3) (55.6) Foreign currency translation differences 24.9 (0.6) Change in net debt during the period (15.7) (389.6) Net debt at the beginning of the period (673.2) (283.6) Net debt at the end of the period (688.9) (673.2) Net debt comprises the following Cash & short-term deposits 391.1 113.9 Current interest-bearing loans & borrowings (65.4) (92.0) Non-current interest-bearing loans & borrowings (1,014.6) (695.1) (688.9) (673.2) Proceeds from sale 25.2 - Cash disposed (1.8) - Net cash inflow from current year disposals 23.4 - Current year disposals had the following effect on the Group's assets and liabilities Trade and other receivables 6.2 - Construction contract assets 0.9 - Net derivative financial instruments (0.6) - Trade and other payables (8.1) - Construction contract liabilities (6.7) - Provisions (2.9) - Net assets disposed (11.2) - 13. Related party disclosures 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. 2012 2011 £m £m Sales of goods to related parties - joint ventures 1.0 0.5 Sales of services to related parties - joint ventures 0.2 0.2 Purchases of goods from related parties - joint ventures 1.7 0.8 Purchases of services from related parties - joint ventures 2.6 1.6 Amounts owed to related parties - group pension plans 1.4 1.5 14. Legal claims The company and certain subsidiaries are, from time to time, parties to legal proceedings and claims which arise in the normal course of business. On 6 February 2013, an Opinion & Order was filed with the United States District Court, Southern District of New York dismissing the claim against the Company (being one of many companies targeted) relating to a civil action for damages arising from the UN Oil for Food programme which was raised in the US. Subsequently the Iraqi Government filed notice of appeal and at the time of writing there has been no ruling by the Court on this appeal. We will continue to defend this action vigorously. To the extent not already provided for, the directors do not anticipate that the outcome of these proceedings and claims, either individually or in aggregate, will have a material adverse effect upon the Group's financial position. 15. Exchange rates The principal exchange rates applied in the preparation of these financial statements were as follows. 2012 2011 Average rate (per £) US dollar 1.58 1.60 Australian dollar 1.53 1.56 Euro 1.23 1.15 Canadian dollar 1.58 1.59 Brazilian real 3.10 2.68 Chilean peso 770.51 774.99 South African rand 13.01 11.64 Closing rate (per £) US dollar 1.62 1.55 Australian dollar 1.56 1.51 Euro 1.22 1.20 Canadian dollar 1.61 1.58 Brazilian real 3.30 2.89 Chilean peso 775.72 805.90 South African rand 13.69 12.53 The Group's operating profit from continuing operations before exceptional items and intangibles amortisation was denominated in the following currencies. 2012 2011 £m £m US dollar 302.5 253.5 Australian dollar 57.4 57.0 Euro 36.4 27.7 Canadian dollar 34.9 29.5 Brazilian real 7.8 11.7 Chilean peso 31.3 24.4 South African rand 8.8 8.4 United Kingdom pound (19.2) (18.8) Other 25.7 19.3 Operating profit from continuing operations before exceptional items & intangibles amortisation 485.6 412.7 16. Events after the balance sheet On 31 December 2012, the Group completed the acquisition of Mathena Inc for an initial cash consideration of US$240m (£148m) with potential additional payments of US$145m payable over two years, contingent upon meeting profit growth targets. On 20 February 2013, the Group announced the acquisition of R Wales and Cheong foundry and the agreement to acquire a heavy bay foundry in South Africa for a total combined consideration of £55m. No further disclosures have been provided under IFRS3 in respect of business combinations after the balance sheet date on the basis that the initial accounting is not yet complete. ------------------------------------------------------------------------------ This announcement is distributed by Thomson Reuters on behalf of Thomson Reuters clients. The owner of this announcement warrants that: (i) the releases contained herein are protected by copyright and other applicable laws; and (ii) they are solely responsible for the content, accuracy and originality of the information contained therein. Source: The Weir Group PLC via Thomson Reuters ONE HUG#1681279
The Weir Group PLC : Final Results
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