The Weir Group PLC : Half Yearly Report The Weir Group PLC 30 July 2013 FIRST HALF PERFORMANCE IN LINE WITH EXPECTATIONS IN CHALLENGING END MARKETS: FULL YEAR OUTLOOK UNCHANGED The Weir Group PLC, a global engineering solutions provider to the energy and natural resources industries, today reports its 2013 interim results Results for 26 weeks ended Continuing Operations 28 June 2013 29 June 2012 Growth Order input^1 £1,258m £1,328m -5% Revenue £1,198m £1,325m -10% Operating profit^2 £217m £247m -12% Operating margin^2 18.1% 18.7% -60bps Profit before tax^2 £193m £225m -14% Cash from operations £183m £141m +29% Earnings per share^2 66.4p 75.9p -13% Dividend per share 8.8p 8.0p +10% Return on Capital Employed^3 25.2% 30.5% -530bps Net debt £950m £689m^4 -£261m HIGHLIGHTS *13% sequential order growth compared to second half of 2012; *Growing aftermarket sales in all three divisions, increasing to 63% of total revenues; *Book to bill of 1.05 and above 1.0 in each division; *Value chain excellence agenda underway: over £15m of procurement savings achieved; *Good first contribution from Mathena acquisition, integration progressing smoothly; *Comminution platform established in Minerals, extending addressable market. Keith Cochrane, Chief Executive, commented: "Weir has delivered a first half performance in line with our expectations, despite challenging market conditions. The Group has continued to focus on operational improvements and investment in its growth platform, positioning Weir to take full advantage of the range of opportunities we see across our end markets in the second half of the year. We anticipate good sequential revenue and profit growth in the second half, assuming a continued recovery in upstream Oil & Gas and no further deterioration, or project delays, in our mining end markets. As a result, we remain on track to meet our full year expectations and continue to expect to deliver low single digit revenue growth and broadly stable margins on 2012." Enquiries: The Weir Group PLC: +44 (0) 7753622357 Andrew Neilson, Head of Corporate Affairs and +44 (0) 7713789536 Strategy +44 (0) 20 7404 5959 Jonathan Milne, Group Communications Brunswick Patrick Handley/Nina Coad A live webcast of the management presentation to the investment community will begin at 8:30am (BST) on 30 July 2013. Access details for the webcast, copies of this release and the slide presentation are available at www.weir.co.uk. Notes: 1. 2012 restated at 2013 average exchange rates. 2. Adjusted to exclude exceptional items and intangibles amortisation. Reported operating profit and profit before tax were £195m (2012: £225m) and £165m (2012: £201m) respectively. Reported earnings per share were 56.6p (2012: 67.9p). 2012 restated to reflect adjustment for pension costs. 3. Continuing operations EBIT before exceptional items (excluding Seaboard, Novatech, Mathena and Wales) divided by average net assets (excluding Seaboard, Novatech, Mathena and Wales) excluding net debt and pension deficit (net of deferred tax asset). 4. 28 December 2012 net debt. FIRST HALF OVERVIEW Overall Group first half results were in line with expectations, with the mix of revenues and profits in the half demonstrating the value of portfolio diversity. The Minerals division first half orders were slightly lower year on year but materially higher than the second half of 2012. Original equipment orders were up sequentially quarter on quarter with good brownfield and plant optimisation project activity somewhat offsetting the expected slowdown in new greenfield projects. Orders and sales of the broader product portfolio grew, alongside continuing productivity and procurement initiatives which supported a divisional margin ahead of prior expectations and demonstrated good year on year growth. Despite a decline in North American rig count during the period, the Oil & Gas division delivered a performance in line with expectations. Lower original equipment pressure pumping sales were partially offset by a positive first contribution from Mathena and a second quarter of progressive improvement in aftermarket activity. Strategic momentum in the Power & Industrial division continued with good underlying valves growth in emerging markets. Overall input was down against a prior year period containing substantial one-off contracts. The division continued to invest in capacity and operational initiatives to support the expected higher second half activity levels. Value chain excellence initiatives supported profitability across the Group, including over £15m of savings in the first half from procurement initiatives. SEGMENTAL ANALYSIS Continuing Minerals Oil & Power & Group Unallocated Total Total Total Operations Gas Industrial Ops Expenses OE AM £m Input (constant currency) 2013 700 384 174 - - 1,258 459 799 2012 731 382 199 16 - 1,328 593 734 Growth: - Constant -4% 1% -13% n/a - -5% -23% 9% currency - Like for -6% -6% -13% n/a - -7% -21% 4% like^1 Revenue 2013 659 381 158 - - 1,198 440 758 2012 (as 665 492 155 13 - 1,325 612 713 reported) Growth: - As -1% -23% 2% n/a - -10% -28% +6% reported - Constant -1% -24% 1% n/a - -11% -29% +5% currency - Like for -3% -29% 1% n/a - -12% -27% +0% like^1 Operating profit 2013 130 83 12 - (8) 217 2012 (as 120 123 12 1 (9) 247 reported) Growth: - As +9% -32% 1% n/a -5% -12% reported - Constant +7% -34% -1% n/a -5% -14% currency - Like for +5% -46% -1% n/a -5% -20% like^1 Operating margin 2013 19.8% 21.8% 7.5% n/a - 18.1% 2012 (as 18.0% 25.0% 7.6% 9.8% - 18.7% reported) Growth: - As 180bps -320bps -10bps n/a - -60bps reported - Constant 160bps -320bps -10bps n/a - -70bps currency - Like for 150bps -590bps -10bps n/a - -170bps like^1 ^1 Like for like excludes the impact of acquisitions, disposals and related transaction and integration costs. FINANCIAL HIGHLIGHTS Order input at £1,258m decreased 5% in constant currency terms and was 7% lower on a like for like basis. Original equipment orders were down 23% (down 21% like for like) impacted by project delays in Minerals and excess frac pump capacity in Oil & Gas. Aftermarket orders were up 9% (4% like for like), with a strong double digit increase in Oil & Gas, and represented 64% of overall input (2012: 55%). Revenue declined by 11% to £1,198m on a constant currency basis, down 12% like for like. Original equipment represented 37% of revenues with aftermarket revenues accounting for 63% (2012: 46% and 54% respectively). Emerging markets revenues were broadly flat on the prior year with the proportion of total Group revenues from these markets increasing to 37% (2012: 33%). Operating profit from continuing operations before exceptional items and intangibles amortisation decreased by 12% to £217m (2012 restated to reflect pension costs: £247m) after a net positive currency translation impact of £5m. This performance was driven by reduced profit in Oil & Gas which was partially offset by a 9% year on year increase in Minerals and a broadly flat profit performance in Power & Industrial. One-off costs of £6m were incurred in the period (2012: £3m) of which £2m (2012: £3m) related to acquisition transaction and integration costs. In 2013, the remaining £4m one-off costs related to the closure of two small manufacturing facilities in Oil & Gas. EBITDA was £246m (2012 restated: £271m). Operating margin was 18.1%, a reduction of 60bps on the prior year (2012: 18.7% and 18.8% on a constant currency basis) with lower margins in Oil & Gas partially offset by stronger than expected margins in Minerals. On a like for like basis, the operating margin was 17.4% (2012: 19.1%), down 170bps, again primarily due to lower margins and a smaller contribution from Oil & Gas. Net finance costs before exceptional items were £24m in total (2012 restated: £22m) with the increase due to higher net debt following the acquisitions made during the period. Profit before tax from continuing operations but before exceptional items and intangibles amortisation decreased by 14% to £193m (2012 restated: £225m). Reported profit before tax from continuing operations decreased by 18% to £165m (2012 restated: £201m) after intangibles amortisation of £22m (2012: £18m), with exceptional items in the period of £6m (2012: £6m). Tax charge for the period of £51m (2012: £65m) on profit before tax from continuing operations before exceptional items and intangibles amortisation of £193m (2012: £225m) represents an underlying effective tax rate of 26.6% (2012: 28.8%), primarily reflecting a lower proportion of US profits. Earnings per share from continuing operations before exceptional items and intangibles amortisation decreased by 13% to 66.4p (2012: 75.9p). Reported earnings per share including exceptional items, intangibles amortisation and profit from discontinued operations was 56.6p (2012 restated: 69.4p). Cash generated from operations decreased by 8% before working capital movements to £246m (2012: £268m). Working capital outflows of £63m (2012: £127m) reflected early gains from working capital reduction initiatives offset by shifts in timing of OE projects in Minerals and resultant changes to the profile of advance payment receipts. Cash generated from operations increased by 29% from £141m to £183m representing an EBITDA to cash conversion ratio of 74% (2012: 52%). Net capital expenditure was down 24% year on year at £40m (2012: £53m) with investment in further capacity in the Minerals division and expenditure in Oil & Gas to enable the closure of two small manufacturing facilities and the consolidation of operations into Fort Worth. Free cash flow from continuing operations was an inflow of £8m (2012: outflow of £40m). Outflows in respect of acquisitions were £214m giving a net debt of £950m (December 2012: £689m). On a reported and pro-forma basis, the ratio of net debt to EBITDA was 1.8 times. Return on Capital employed of 25.2% on a like for like basis was down on the prior year (2012: 30.5%) due to lower profits and an increase in capital employed. Dividend The Board is recommending an interim dividend of 8.8p (2012: 8.0p) a 10% increase on the prior year, which is in line with previous guidance. The dividend will be paid on 1 November to shareholders on the register on 4 October 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 2013 H1 2012^1 Growth LFL Growth H2 2012^1 Input OE 266 314 -15% -15% 221 Input aftermarket 434 417 +4% +2% 388 Input Total 700 731 -4% -6% 609 Revenue OE 245 261 -6% -6% 287 Revenue aftermarket 414 407 +1% +0% 396 Revenue Total 659 668 -1% -3% 683 EBITA^2 130 121 +7% +5% 140 Operating margin^2 19.8% 18.2% +160bps +150bps 20.4% ^12012 restated at 2013 average exchange rates. ^2Adjusted to exclude exceptional items and intangibles amortisation. Market drivers Robust ore production activity continued during the half year with the commissioning of a small number of large greenfield projects supporting volume growth. Sharp second quarter commodity price falls, with copper, gold and iron ore prices falling by around 20%, had a minimal impact on production activity. However, the original equipment market was more challenging. Mining industry capital expenditure fell as activity continues to move from large new greenfield developments to smaller and shorter cycle brownfield and plant optimisation projects. Projects are progressing at a slower rate than prior years with customers taking a more measured approach to investment, leading to project commissioning delays into the second half of 2013 and beyond. Project activity in Africa, outside of South Africa, was supportive of ongoing greenfield development. In contrast, South America was impacted by materially lower new greenfield activity, although brownfield remained strong. In Australia project activity remained generally subdued due to difficult conditions in iron ore and coal markets. North American hard rock mining markets were resilient, while stronger Eastern European markets offset subdued conditions in Western Europe. Outside of mining, brownfield activity supported oil sands markets in the absence of new greenfield projects. Power and water market conditions were supportive with a number of projects progressing to the procurement phase during the half year. Strategic progress The Minerals division has continued to add capacity to meet growing aftermarket demand for a number of greenfield projects which have still to be commissioned, with the purchase of foundries in South Africa and Malaysia supporting best cost sourcing while the acquisition of R Wales in Canada extends the footprint of wear resistant rubber applications and products. A series of agreements enhanced the platform for growth in the comminution segment of minerals processing, a c.£3bn market for crushing, grinding and screening equipment and services. The division's technology position was further extended with successful trials of new alloys and the launch of new screens technology. Targeted capacity addition and product localisation has supported growth in the division's broad range of ancillary products and services, with investment in additional sales resources. Tight cost control and procurement savings improved operational performance in the period. Order input decreased by 4% to £700m (2012: £731m), 6% lower on a like for like basis. Input increased sequentially quarter on quarter through the period, with second quarter orders broadly flat year on year. Original equipment orders declined 15%, with second quarter orders showing good sequential growth, as brownfield and non-mining contract wins partially offset further project delays. Aftermarket orders grew 4%, including a good first contribution from R Wales, and were up 2% like for like. Good underlying aftermarket growth, benefiting from the growing installed base, was offset in the second quarter by certain project commissioning dates slipping into the second half and some temporary destocking in South American markets. Aftermarket input represented 62% of the total, compared to 57% in the prior year. The division continued to gain traction across the broader original equipment product portfolio, further reducing its reliance on the core slurry pump product range. Orders for dewatering pumps and screens were both up over 30%. Notable contracts during the period included a material contract for a Canadian oil sands brownfield expansion, a large pump order in Peru and a landmark dewatering contract for a Queensland, Australia coal bed methane project. Aftermarket input strengthened across a range of commodities with the benefits of a large and growing installed base reflected in 3% order growth in slurry pump spares. Emerging markets accounted for 47% of input (2012: 50%) with orders from Africa rising by 10%. Revenue fell by 1% to £659m (2012: £668m) and was 3% lower like for like. Original equipment sales were 6% lower and accounted for 37% of revenues (2012: 39%). Production-driven aftermarket revenues increased by 1%, flat on a like for like basis, slightly lower than expectations due to destocking and delays in commissioning certain projects. Operating profit increased by 7% to £130m (2012: £121m), 5% like for like, as the division benefited from strengthening aftermarket mix and operational improvements. Operating margin increased 160bps to 19.8% (2012: 18.2%), ahead of expectations, reflecting the strengthening aftermarket revenue mix alongside benefits from continuing business improvement and cost initiatives. Capital expenditure totalled £23m (2012: £22m) and included investment in service and machining capacity in China and Africa alongside foundry capacity expansion in Europe. Overall spending on research and development of £6m was broadly flat year on year. 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 2013 H1 2012^1 Growth LFL Growth H2 2012^1 Input OE 106 162 -35% -35% 113 Input aftermarket 278 220 +27% +15% 202 Input Total 384 382 +1% -6% 315 Revenue OE 111 259 -57% -57% 136 Revenue aftermarket 270 244 +10% +0% 228 Revenue Total 381 503 -24% -29% 364 EBITA^2 83 126 -34% -46% 91 Operating margin^2 21.8% 25.0% -320bps -590bps 25.0% ^12012 restated at 2013 average exchange rates. ^2Adjusted to exclude exceptional items and intangibles amortisation. Market drivers Oil prices in excess of $90/barrel remained supportive of ongoing activity levels while a recovery in the US natural gas price towards $4mbtu had no obvious impact on North American upstream markets. In contrast to our earlier expectations of low single digit growth, average US rig count was down more than 10% year on year, and trended progressively lower during the period. The number of wells drilled in the US is estimated to have fallen by around 5% year on year, with continued drilling efficiency gains partially offsetting the fall in rig count. Demand for both pressure pumping and pressure control equipment is primarily related to the number of wells drilled and completed. Oil activity remained broadly flat while gas rigs were down over 40%, reaching 15-year lows. Canadian markets were adversely impacted in the second quarter by widespread flooding, prolonging the spring break well beyond seasonal norms. Pressure pumping aftermarket activity continued to recover from the impact of 2012 overstocking with customer inventory levels continuing to normalise and frac fleet utilisation increasing towards 80% by the end of the period. Pressure Control markets were down year on year, reflecting the reduction in wells drilled. International interest in shale technologies continued to grow, with increasing activity in China, Russia, the Middle East and Australia. Increased Saudi Arabian production levels and the continuing refurbishment of Iraqi oilfield infrastructure supported strong services activity in the Middle East. Downstream continued to see good market opportunities in the midstream and FPSO (Floating Production, Storage and Offloading) sectors, although the core refining market remains subdued. Strategic progress The integration of Mathena is progressing according to plan, with the business adding customers, increasing market share, launching new patent pending products and successfully growing its position in the main North American liquid shale plays. Seaboard has launched flowback and zipper manifold product lines in the pressure control markets, with rapid market acceptance of the new offering, and expanded its international wellhead presence. In Pressure Pumping, the differentiated Duralast fluid end was successfully launched with the technology also made available in a stainless steel version, giving the broadest range of long life fluid ends on the market. Lean initiatives enabled the consolidation of Pressure Pumping manufacturing in Fort Worth, with the associated benefits enhancing efficiencies and supporting second half margins. The Middle East Services business has expanded across the region, winning strategic O & M contracts in Iraq and rotating equipment upgrades and repairs in Saudi Arabia. Order input at £384m (2012: £382m) was 1% higher and 6% lower like for like due to continued overcapacity in pressure pumping markets. Original equipment input fell 35% against a prior year period including two months of strong demand for frac pumps and other pressure pumping equipment. Aftermarket input was up 27% and 15% like for like, with good sequential growth through the period in pressure pumping, and a strong Services performance. Pressure Pumping (SPM, Novatech and Mesa) input fell 9% year on year but sequentially was up 25% compared to the second half of 2012. Materially lower original equipment orders were partially offset by good growth in aftermarket orders, with input strengthening through the period as customer inventory levels began to normalise. A notable pick up was seen in orders for Novatech and SPM expendables, benefiting from the comprehensive branch network, dedicated aftermarket sales team and ongoing success of the bundling strategy. Improved lead times following investment and operational improvement has supported the continued growth of the flow control portfolio. Outside North America, international pressure pumping input grew by over 20%. Pressure Control (Seaboard and Mathena) input increased due to a strong first contribution from Mathena. Seaboard input was lower year on year, due to lower end market activity levels and the slight delays in rolling out new product initiatives. Middle East Services benefited from regional expansion of the core business whilst supportive aftermarket trends and traction in the midstream and FPSO market benefited the Downstream business. Revenue was 24% lower at £381m (2012: £503m), down 29% on a like for like basis, reflecting the lower opening order book and upstream market conditions. Sequentially like for like revenues were flat with Pressure Pumping sales slightly ahead of expectations but 5% down on a second half of 2012 which was supported by delivery of the residual 2011 order backlog. Original equipment revenues were down by 57%, primarily due to materially lower frac pump sales. Aftermarket revenues were up 10% and flat like for like. Services recorded strong revenue growth in the period. Operating profit including joint ventures was 34% lower at £83m (2012: £126m) and 46% lower on a like for like basis, reflecting lower revenues and margins. Total one-off costs of $7m (£5m) were incurred in the period (2012 one-off acquisition costs: £3m), primarily due to the closure of two small manufacturing facilities, with production transferred to the main Fort Worth campus. Good profit progression at Service operations and a positive Downstream profit performance also contributed. Operating margin declined 320bps to 21.8% (2012: 25.0%), down 590bps on a like for like basis and reflecting lower activity levels, higher one-off costs and pricing pressure on legacy fluid ends and OE frac pump orders. Margins across all other Pressure Pumping product lines were in line with expectations. Capital expenditure of £18m (2012: £23m), including £5m investment to establish a frac flow back and zipper manifold rental fleet at Seaboard. Further investment was made to extend and strengthen the capability of the service network. Research and development investment of £3m was lower than the prior year period, which included test and launch costs for five new products. 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. £m H1 2013 H1 2012^1 Growth H2 2012^1 Input OE 87 101 -14% 97 Input aftermarket 87 98 -11% 72 Input Total 174 199 -13% 169 Revenue OE 84 88 -4% 87 Revenue aftermarket 74 69 +8% 86 Revenue Total 158 157 +1% 173 EBITA^2 12 12 -1% 20 Operating margin^2 7.5% 7.6% -10bps 11.8% ^12012 restated at 2013 average exchange rates. ^2Adjusted to exclude exceptional items and intangibles amortisation. Market drivers US and UK nuclear maintenance and repair markets were positive with increased CCGT (Combined Cycle Gas Turbine) new build activity in North America, benefiting from the lower input costs of natural gas. Low economic growth and power prices have led to difficult trading conditions in North American coal, hydro and general industrial markets. Nuclear new build activity remains slow. Oil and gas markets have been supportive of control and safety valve activity. Strategic progress Valves aftermarket initiatives gained traction in the period, with the growing control valves installed base providing attractive opportunities. Entry to the FPSO control valve market was secured with a number of contract wins. The global valves platform is now well established, with senior leadership appointed at each plant to drive strategic delivery and operational performance to support higher activity levels. Product transfer to Weir International South Korea continues, broadening the emerging market offering. Additional repair facilities have been established in Southeast Asia, further internationalising the power service offering. Order input was 13% lower at £174m (2012: £199m) against a prior year period containing major one-off contracts for nuclear valves and hydro refurbishment. Original equipment orders were 14% lower as a number of projects were delayed until the second half of the year. Excluding the large H1 2012 nuclear valve contract, underlying valves input was broadly in line with the prior year. Aftermarket input of £87m (2012: £98m) was 11% lower, impacted by the reduction in hydro refurbishment orders. The proportion of orders from power markets was 55% (2012: 59%). Emerging market input increased to 35% of input. Revenue was only 1% higher at £158m (2012: £157m) due to project delivery delays. Revenues from emerging markets increased by 24%, with strong growth from Weir International South Korea a highlight of a good performance across the valves portfolio, as the division benefits from its increased routes to market. Operating profit was 1% lower at £12m (2012: £12m) as revenues were affected by project delays and first half investment in operational capability to support second half revenue growth, offset by insurance proceeds on settlement of a prior claim. Operating margin of 7.5% (2012: 7.6%) was broadly in line with the prior year period. Capital expenditure of £6m (2012: £11m) included investment in new manufacturing technology in Hydro operations. Research and development expenditure totalled £2m (2012: £1m). POST BALANCE SHEET EVENTS In July 2013 the Group completed the negotiation of a USD 800m 5-year Revolving Credit Facility with a syndicate of 12 banks. This replaces an existing facility of USD 800m maturing in September 2014. RISKS & UNCERTAINTIES The principal risks and uncertainties affecting the business activities of the Group remain those detailed on pages 44 and 45 of the Annual Report 2012, a copy of which is available on the Group website at www.weir.co.uk. The Board considers that these remain a current reflection of the risks and uncertainties facing the business for the remaining 26 weeks of the financial year. OUTLOOK MINERALS Supported by the opening order book we expect sequential growth in both aftermarket and original equipment revenue in the second half, assuming no further project and commissioning slippages. Divisional revenue growth is expected to be slightly lower than our previous expectations, reflecting revised project delivery and commissioning schedules. Following the strong first half performance, second half margins are expected to be in line with the first half and ahead of our prior expectations, such that full year profit expectations remain unchanged. OIL & GAS Full year divisional revenues are anticipated to be slightly better than previous expectations, supported by higher pressure pumping sales, although still down on 2012. Operating margins are expected to be slightly lower year on year, below prior expectations, with second half margin improvement supported by the benefits of first half restructuring actions and increased sales of new higher margin products, offset by the impact of additional sales of lower margin product lines. Divisional profit expectations remain unchanged. POWER & INDUSTRIAL Full year divisional revenue, profit and operating margin expectations remain unchanged, with strong sequential second half revenue and margin growth supported by the strong opening order book, and first half investment in operational capabilities. SUMMARY We expect the Group to continue to benefit from its global presence and diverse exposure, despite challenging market conditions. The Group is well positioned to take full advantage of the range of opportunities across its end markets in the second half of the year. We anticipate good sequential revenue and profit growth in the second half, assuming a continued recovery in upstream Oil & Gas and no further deterioration, or project delays, in our mining end markets. As a result we remain on track to meet our full year expectations and continue to expect to deliver low single digit revenue growth and broadly stable margins on 2012. 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. Consolidated Income Statement for the 26 weeks ended 28 June 2013 26 weeks ended 29 June 2012 26 weeks ended 28 June 2013 Restated (note 1) 52 weeks ended 28 Dec Before Exceptional Before Exceptional 2012 exceptional items & exceptional items & Total items & intangibles items & intangibles Restated intangibles amortisation intangibles amortisation (note 1) amortisation (note 3) Total amortisation (note 3) Total £m Notes £m £m £m £m £m £m Continuing operations 2,538.3 Revenue 2 1,198.1 - 1,198.1 1,324.7 - 1,324.7 Continuing operations Operating profit before share of results of 462.2 joint ventures 213.4 (22.0) 191.4 244.3 (22.5) 221.8 Share of results of 6.4 joint ventures 3.7 - 3.7 2.9 - 2.9 Operating 468.6 profit 2 217.1 (22.0) 195.1 247.2 (22.5) 224.7 (49.1) Finance costs (25.9) (5.8) (31.7) (21.5) (0.7) (22.2) 5.2 Finance income 3.7 - 3.7 0.9 - 0.9 Other finance costs - retirement (4.0) benefits (1.8) - (1.8) (2.0) - (2.0) Profit before tax from continuing 420.7 operations 193.1 (27.8) 165.3 224.6 (23.2) 201.4 (110.7) Tax expense 4 (51.4) 7.0 (44.4) (64.6) 6.2 (58.4) Profit for the period from continuing 310.0 operations 141.7 (20.8) 120.9 160.0 (17.0) 143.0 Profit for the period from discontinued 3.3 operations - - - - 3.3 3.3 Profit for the 313.3 period 141.7 (20.8) 120.9 160.0 (13.7) 146.3 Attributable to Equity holders 313.0 of the Company 141.2 (20.8) 120.4 160.9 (13.7) 147.2 Non-controlling 0.3 interests 0.5 - 0.5 (0.9) - (0.9) 313.3 141.7 (20.8) 120.9 160.0 (13.7) 146.3 Earnings per share 5 Basic - total 147.5p operations 56.6p 69.4p Basic - continuing 145.9p operations 66.4p 56.6p 75.9p 67.9p Diluted - total 146.6p operations 56.3p 69.2p Diluted - continuing 145.1p operations 66.0p 56.3p 75.7p 67.7p Consolidated Statement of Comprehensive Income for the 26 weeks ended 28 June 2013 26 weeks 52 weeks ended ended 28 Dec 2012 29 June 2012 Restated (note 26 weeks ended Restated 1) 28 June 2013 (note 1) £m Note £m £m 313.3 Profit for the period 120.9 146.3 Other comprehensive income (expense) Other comprehensive income (expense) to be reclassified to profit or loss in subsequent periods: (Losses) gains taken to 1.4 equity on cash flow hedges (0.8) (0.1) Reclassification adjustments 0.8 on cash flow hedges (0.5) (0.3) Exchange gains (losses) on translation of foreign (84.9) operations 97.6 (18.6) Exchange (losses) gains on 38.6 net investment hedges (68.6) (2.5) Tax effect to be reclassified to profit or (0.4) loss in subsequent periods 0.5 0.1 Net other comprehensive income (expense) to be reclassified to profit or (44.5) loss in subsequent periods 28.2 (21.4) Income (expense) not to be reclassified to profit or loss in subsequent periods: Remeasurements on defined (10.8) benefit plans 10 21.3 (18.0) Tax relating to other comprehensive income (expense) not to be reclassified in subsequent 2.5 periods (4.3) 4.0 Losses taken to equity on - cash flow hedges (0.9) - Reclassification adjustments - on cash flow hedges 0.2 - Net other comprehensive income (expense) not to be reclassified to profit or (8.3) loss in subsequent periods 16.3 (14.0) Total net comprehensive 260.5 income for the period 165.4 110.9 Attributable to Equity holders of the 260.5 Company 164.5 112.4 - Non-controlling interests 0.9 (1.5) 260.5 165.4 110.9 Consolidated Balance Sheet at 28 June 2013 29 June 2012 Restated 28 Dec 2012 28 June 2013 (note 1) £m Notes £m £m ASSETS Non-current assets 374.0 Property, plant & equipment 416.1 348.0 1,454.1 Intangible assets 1,745.7 1,514.4 12.0 Investments in joint ventures 28.6 13.5 30.4 Deferred tax assets 30.7 37.0 Derivative financial 0.8 instruments 11 0.6 0.4 1,871.3 Total non-current assets 2,221.7 1,913.3 Current assets 512.7 Inventories 532.1 514.6 478.2 Trade & other receivables 520.3 508.6 21.7 Construction contracts 31.0 25.5 Derivative financial 3.6 instruments 11 12.4 17.3 4.1 Income tax receivable 2.2 7.0 391.1 Cash & short-term deposits 78.5 120.8 1,411.4 Total current assets 1,176.5 1,193.8 3,282.7 Total assets 3,398.2 3,107.1 LIABILITIES Current liabilities Interest-bearing loans & 65.4 borrowings 115.0 67.2 485.8 Trade & other payables 522.3 503.7 13.7 Construction contracts 11.5 18.9 Derivative financial 14.7 instruments 11 17.4 43.9 28.6 Income tax payable 31.3 22.9 36.4 Provisions 36.3 47.2 644.6 Total current liabilities 733.8 703.8 Non-current liabilities Interest-bearing loans & 1,014.6 borrowings 913.5 897.6 26.3 Other payables 46.6 18.3 Derivative financial 0.8 instruments 11 5.1 5.1 33.2 Provisions 30.5 34.1 162.5 Deferred tax liabilities 182.0 169.5 Retirement benefit plan 90.4 deficits 10 68.7 104.3 1,327.8 Total non-current liabilities 1,246.4 1,228.9 1,972.4 Total liabilities 1,980.2 1,932.7 1,310.3 NET ASSETS 1,418.0 1,174.4 CAPITAL & RESERVES 26.7 Share capital 26.7 26.7 38.0 Share premium 38.0 38.0 (5.6) Treasury shares (5.8) (3.6) 0.5 Capital redemption reserve 0.5 0.5 Foreign currency translation 37.5 reserve 66.1 63.0 0.2 Hedge accounting reserve (1.3) (1.9) 1,209.8 Retained earnings 1,289.2 1,051.1 1,307.1 Shareholders equity 1,413.4 1,173.8 3.2 Non-controlling interests 4.6 0.6 1,310.3 TOTAL EQUITY 1,418.0 1,174.4 Consolidated Cash Flow Statement for the 26 weeks ended 28 June 2013 52 weeks 26 weeks 26 weeks ended ended ended 28 Dec 2012 28 June 2013 29 June 2012 £m Notes £m £m Continuing operations Cash flows from operating activities 12 398.6 Cash generated from operations 183.0 141.5 Additional pension contributions (7.5) paid (2.5) - (104.9) Income tax paid (37.8) (65.8) Net cash generated from 286.2 operating activities 142.7 75.7 Continuing operations Cash flows from investing activities (123.3) Acquisitions of subsidiaries 12 (199.0) (118.6) 22.9 Disposals of subsidiaries 12 (0.2) (0.4) Purchases of property, plant & (123.6) equipment & intangible assets (43.8) (55.6) Other proceeds from sale of property, plant & equipment & 7.3 intangible assets 3.4 2.3 5.1 Interest received 0.8 1.9 - Investment in joint ventures (14.0) - Dividends received from joint 5.4 ventures 2.1 0.9 Net cash used in investing (206.2) activities (250.7) (169.5) Continuing operations Cash flows from financing activities Purchase of shares for equity (3.0) settled share-based incentives (2.2) - 786.9 Proceeds from borrowings 72.3 635.7 (462.5) Repayments of borrowings (183.6) (463.7) Settlement of external debt of (1.9) subsidiary on acquisition (1.3) (1.9) Settlement of derivative (11.0) financial instruments (10.2) - (33.4) Interest paid (21.5) (10.2) Proceeds from increase in 1.0 non-controlling interests 0.5 - Dividends paid to equity holders (71.7) of the Company 6 (63.8) (54.8) Net cash generated (used in) 204.4 financing activities (209.8) 105.1 Net (decrease) increase in cash & cash equivalents from 284.4 continuing operations (317.8) 11.3 Cash & cash equivalents at the 108.6 beginning of the period 384.2 108.6 Foreign currency translation (8.8) differences 1.1 (4.0) Cash & cash equivalents at the 384.2 end of the period 12 67.5 115.9 Consolidated Statement of Changes in Equity for the 26 weeks ended 28 June 2013 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 30 December 2011 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 (restated note 1) - - - - - - 147.2 147.2 (0.9) 146.3 Losses taken to equity on cash flow hedges - - - - - (0.1) - (0.1) - (0.1) Exchange losses on translation of foreign operations - - - - (18.0) - - (18.0) (0.6) (18.6) Exchange losses on net investment hedges - - - - (2.5) - - (2.5) - (2.5) Remeasurements on defined benefit plans (restated note 1) - - - - - - (18.0) (18.0) - (18.0) Reclassification adjustments taken to the income statement on cash flow hedges - - - - - (0.3) - (0.3) - (0.3) Tax relating to other comprehensive income - - - - - 0.1 4.0 4.1 - 4.1 Total net comprehensive income for the period - - - - (20.5) (0.3) 133.2 112.4 (1.5) 110.9 Cost of share-based payments inclusive of tax credits - - - - - - 0.8 0.8 - 0.8 Dividends - - - - - - (54.8) (54.8) - (54.8) Exercise of LTIP awards 0.1 - 2.0 - - - (2.1) - - - At 29 June 2012 26.7 38.0 (3.6) 0.5 63.0 (1.9) 1,051.1 1,173.8 0.6 1,174.4 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 Profit for the period - - - - - - 120.4 120.4 0.5 120.9 Losses taken to equity on cash flow hedges - - - - - (1.7) - (1.7) - (1.7) Exchange gains on translation of foreign operations - - - - 97.2 - - 97.2 0.4 97.6 Exchange losses on net investment hedges - - - - (68.6) - - (68.6) - (68.6) Remeasurements on defined benefit plans - - - - - - 21.3 21.3 - 21.3 Reclassification adjustments taken to the income statement on cash flow hedges - - - - - (0.3) - (0.3) - (0.3) Tax relating to other comprehensive income - - - - - 0.5 (4.3) (3.8) - (3.8) Total net comprehensive income for the period - - - - 28.6 (1.5) 137.4 164.5 0.9 165.4 Proceeds from increase in non-controlling interests - - - - - - - - 0.5 0.5 Cost of share-based payments inclusive of tax charge - - - - - - 7.0 7.0 - 7.0 Dividends - - - - - - (63.8) (63.8) - (63.8) Purchase of shares* - - (1.4) - - - - (1.4) - (1.4) Exercise of LTIP awards - - 1.2 - - - (1.2) - - - At 28 June 2013 26.7 38.0 (5.8) 0.5 66.1 (1.3) 1,289.2 1,413.4 4.6 1,418.0 At 30 December 2011 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 (restated note 1) - - - - - - 313.0 313.0 0.3 313.3 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 Remeasurements on defined benefit plans (restated note 1) - - - - - - (10.8) (10.8) - (10.8) 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) 2.5 2.1 - 2.1 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 credits - - - - - - 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 Financial Statements 1. Basis of preparation These interim condensed financial statements are for the 26 week period ended 28 June 2013 and have been prepared on the basis of the accounting policies set out in the Group's 2012 Annual Report, except for the adoption of new standards and interpretations effective from 1 January 2013 as noted below and in accordance with IAS34 "Interim Financial Reporting (revised)" as adopted by the European Union and the Disclosure and Transparency Rules of the Financial Services Authority. These interim condensed financial statements have been prepared on the going concern basis as the directors, having considered available relevant information, have a reasonable expectation that the Group has adequate resources to continue to operate for the foreseeable future. The Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Changes in Equity and affected notes have been restated for the 26 weeks ended 29 June 2012 and the 52 weeks ended 28 December 2012, to reflect changes in the calculation of pension costs in accordance with IAS19 "Employee Benefits (Revised)". The net charge to the Income Statement for the 52 weeks ended 28 December 2012 increased by £3.3m, on a pre tax basis, with a tax impact of £0.9m. Operating profit reduced £0.5m due to the recognition of administrative costs, while other finance costs increased £2.8m following the introduction of the concept of recognising net interest on the net defined benefit obligation in place of the interest on the defined benefit obligation and the expected return on plan assets recognised under the original standard. The corresponding impact for the 26 weeks ended 29 June 2012 was an increased charge of £1.4m pre tax, with a tax impact of £0.4m. The restatements were reflected in the Consolidated Statement of Comprehensive Income and there was no impact on the disclosed defined benefit obligation at either period end. The amendments to IAS 1 introduce a grouping of items presented in other comprehensive income (OCI). Items that could be reclassified (or recycled) to profit or loss at a future point in time now have to be presented separately from items that will never be reclassified. The amendment affected presentation only and had no impact on the Group's financial position or performance. IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted. The application of IFRS 13 has not materially impacted the fair value measurements carried out by the Group. IFRS 13 also requires specific disclosures on fair values, some of which replace existing disclosure requirements in other standards, including IFRS 7 Financial Instruments: Disclosures. Some of these disclosures are specifically required for financial instruments by IAS 34 and thereby affect the interim condensed consolidated financial statements period. The relevant disclosures are reflected in note 11. During the 52 weeks ended 28 December 2012, the provisional fair values attributed to the 2011 acquisitions of Weir International and Seaboard, and the 2012 acquisition of Novatech, were finalised. In accordance with IFRS3, the net impact of the adjustments to the provisional fair values has been recognised by means of an increase 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 29 June 2012. There was no impact on the Consolidated Income Statement or Consolidated Statement of Comprehensive Income as a result of the finalisation of the provisional values. Further details of the restatements can be found in note 8. These interim condensed financial statements are unaudited but have been formally reviewed by the auditors and their report to the Company is set out on page 26. The information shown for the 52 weeks ended 28 December 2012 does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006 and has been extracted, with the exception of the restatement noted above, from the Group's 2012 Annual Report which has been filed with the Registrar of Companies. The report of the auditors on the financial statements contained within the Group's 2012 Annual Report was unqualified and did not contain a statement under either Section 498(2) or Section 498(3) of the Companies Act 2006. These interim condensed financial statements were approved by the Board of Directors on 30 July 2013. 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 under 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 markets. 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. In 2012, the other segments, which were disclosed as Group companies, included the results of LGE Process which was sold on 28 December 2012. 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 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 26 weeks ended 28 June 2013, the 26 weeks ended 29 June 2012 and the 52 weeks ended 28 December 2012 is disclosed below. Power & Total continuing Minerals Oil & Gas Industrial operations June June June June June June 2013 2012 2013 2012 2013 2012 June 2013 June 2012 £m £m £m £m £m £m £m £m Revenue Sales to external customers 658.5 664.9 381.6 492.3 158.0 154.5 1,198.1 1,311.7 Inter-segment sales 4.9 2.3 7.0 7.8 2.7 2.1 14.6 12.2 Segment revenue 663.4 667.2 388.6 500.1 160.7 156.6 1,212.7 1,323.9 Group companies sales to external customers - 13.0 Elimination of inter-segment sales (14.6) (12.2) 1,198.1 1,324.7 Sales to external customers - 2012 at 2013 average exchange rates Sales to external customers 658.5 668.5 381.6 503.4 158.0 156.5 1,198.1 1,328.4 Group companies sales to external customers - 13.0 1,198.1 1,341.4 Result (restated note 1) Segment result before share of results of joint ventures 130.1 119.9 79.4 120.1 11.8 11.7 221.3 251.7 Share of results of joint ventures - - 3.7 2.9 - - 3.7 2.9 Segment result 130.1 119.9 83.1 123.0 11.8 11.7 225.0 254.6 Group companies - 1.3 Unallocated expenses (7.9) (8.7) Operating profit before exceptional items & intangibles amortisation 217.1 247.2 Exceptional items & intangibles amortisation (27.8) (23.2) Net finance costs before exceptional items (22.2) (20.6) Other finance costs - retirement benefits (1.8) (2.0) Profit before tax from continuing operations 165.3 201.4 Segment result - 2012 at 2013 average exchange rates Segment result before share of results of joint ventures 130.1 121.6 79.4 122.9 11.8 11.9 221.3 256.4 Share of results of joint ventures - - 3.7 2.9 - - 3.7 2.9 Segment result 130.1 121.6 83.1 125.8 11.8 11.9 225.0 259.3 Group companies - 1.3 Unallocated expenses (7.9) (8.4) Operating profit before exceptional items & intangibles amortisation 217.1 252.2 Total assets (restated note 1) Intangible assets 430.2 378.6 1,202.3 1,023.9 110.6 110.9 1,743.1 1,513.4 Property, plant & equipment 204.2 190.8 155.2 105.8 55.1 50.8 414.5 347.4 Working capital assets 507.4 498.4 397.4 398.0 180.0 152.0 1,084.8 1,048.4 1,141.8 1,067.8 1,754.9 1,527.7 345.7 313.7 3,242.4 2,909.2 Investments in joint ventures - - 28.6 13.5 - - 28.6 13.5 Segment assets 1,141.8 1,067.8 1,783.5 1,541.2 345.7 313.7 3,271.0 2,922.7 Group companies assets - 2.2 Unallocated assets 127.2 182.2 Total assets 3,398.2 3,107.1 Working capital liabilities 259.9 255.3 105.9 136.0 64.6 79.1 430.4 470.4 Group companies liabilities 3.3 14.2 Unallocated liabilities 1,546.5 1,448.1 Total liabilities 1,980.2 1,932.7 2. Segment information (continued) Total Oil & Power & continuing 52 weeks ended 28 December 2012 Minerals Gas Industrial operations £m £m £m £m Revenue Sales to external customers 1,333.6 843.6 323.4 2,500.6 Inter-segment sales 4.3 15.3 4.0 23.6 Segment revenue 1,337.9 858.9 327.4 2,524.2 Group companies sales to external customers 37.7 Elimination of inter-segment sales (23.6) 2,538.3 Sales to external customers - 2012 at 2013 average exchange rates Sales to external customers 1,351.5 867.0 329.7 2,548.2 Group companies sales to external customers 37.7 2,585.9 Result (restated note 1) Segment result before share of results of joint ventures 255.9 204.2 31.5 491.6 Share of results of joint ventures - 6.4 - 6.4 Segment result 255.9 210.6 31.5 498.0 Group companies 2.5 Unallocated expenses (15.4) Operating profit before exceptional items & intangibles amortisation 485.1 Exceptional items & intangibles amortisation (19.1) Net finance costs before exceptional items (41.3) Other finance costs - retirement benefits (4.0) Profit before tax from continuing operations 420.7 Segment result - 2012 at 2013 average exchange rates Segment result before share of results of joint ventures 261.3 210.2 32.4 503.9 Share of results of joint ventures - 6.6 - 6.6 Segment result 261.3 216.8 32.4 510.5 Group companies 2.5 Unallocated expenses (15.4) Operating profit before exceptional items & intangibles amortisation 497.6 Total assets Intangible assets 368.4 974.4 109.8 1,452.6 Property, plant & equipment 199.1 121.6 52.2 372.9 Working capital assets 485.9 365.8 167.0 1,018.7 1,053.4 1,461.8 329.0 2,844.2 Investments in joint ventures - 12.0 - 12.0 Segment assets 1,053.4 1,473.8 329.0 2,856.2 Unallocated assets 426.5 Total assets 3,282.7 Working capital liabilities 263.7 128.0 88.0 479.7 Group companies liabilities 3.4 Unallocated liabilities 1,489.3 Total liabilities 1,972.4 3. Exceptional items & intangibles amortisation 52 weeks ended 26 weeks ended 26 weeks ended 28 Dec 2012 28 June 2013 29 June 2012 £m £m £m Recognised in arriving at operating profit from continuing operations (36.7) Intangibles amortisation (22.0) (18.0) Exceptional item - charging of fair value (4.5) inventory uplift - (4.5) Exceptional item - gain on 30.5 sale of LGE Process - - Exceptional item - uplift in respect of contingent (5.8) consideration liability - - (16.5) (22.0) (22.5) Recognised in finance costs Exceptional item - unwind of discount in respect of contingent consideration (2.6) liability (5.8) (0.7) Recognised in arriving at profit for the period from discontinued operations Exceptional items (net of 3.3 tax of £nil) - 3.3 4. Tax expense 52 weeks ended 26 weeks ended 28 Dec 2012 26 weeks ended 29 June 2012 Restated (note Restated (note 1) 28 June 2013 1) £m £m £m (4.9) Group - UK (3.4) (1.4) (105.8) Group - overseas (41.0) (57.0) Total income tax expense in the Consolidated Income (110.7) Statement (44.4) (58.4) The total income tax expense is disclosed in the Consolidated Income Statement as follows: - continuing operations before exceptional items & (123.3) intangibles amortisation (51.4) (64.6) 1.5 - exceptional items - 1.4 - intangibles 11.1 amortisation 7.0 4.8 Total income tax expense in the Consolidated Income (110.7) Statement (44.4) (58.4) Total income tax expense included in the Group's share of results of joint (1.2) ventures (0.7) (0.6) 5. 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 amounts are 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. 26 weeks ended 52 weeks ended 29 June 2012 28 Dec 2012 26 weeks ended Restated (note Restated (note 1) 28 June 2013 1) Profit attributable to equity holders of the Company 313.0 Total operations * (£m) 120.4 147.2 Continuing operations * 309.7 (£m) 120.4 143.9 Continuing operations before exceptional items & intangibles amortisation * 316.2 (£m) 141.2 160.9 Weighted average share capital Basic earnings per share (number of shares, 212.2 million) 212.8 212.0 Diluted earnings per share (number of shares, 213.5 million) 213.8 212.6 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. 52 weeks ended 26 weeks ended 26 weeks ended 28 Dec 2012 28 June 2013 29 June 2012 Shares Shares Shares Million Million Million Weighted average number of ordinary shares for basic 212.2 earnings per share 212.8 212.0 Effect of dilution: LTIP 1.3 awards 1.0 0.6 Adjusted weighted average number of ordinary shares for diluted earnings per 213.5 share 213.8 212.6 The profit attributable to equity holders of the Company used in the calculation of both basic and diluted earnings per share on continuing operations before exceptional items and intangibles amortisation is calculated as follows. 26 weeks ended 52 weeks ended 29 June 2012 28 Dec 2012 26 weeks ended Restated (note Restated (note 1) 28 June 2012 1) £m £m £m Net profit attributable to equity holders from 309.7 continuing operations * 120.4 143.9 Exceptional items & intangibles amortisation 6.5 net of tax 20.8 17.0 Net profit attributable to equity holders from continuing operations before exceptional items & 316.2 intangibles amortisation * 141.2 160.9 26 weeks ended 52 weeks ended 29 June 2012 28 Dec 2012 26 weeks ended Restated (note Restated (note 1) 28 June 2013 1) pence pence pence Basic earnings per share: 147.5 Total operations* 56.6 69.4 145.9 Continuing operations* 56.6 67.9 Continuing operations before exceptional items & 149.0 intangibles amortisation* 66.4 75.9 Diluted earnings per share: 146.6 Total operations* 56.3 69.2 145.1 Continuing operations* 56.3 67.7 Continuing operations before exceptional items & 148.1 intangibles amortisation* 66.0 75.7 *Adjusted for £0.5m (2012: (£0.9m)) in respect of non-controlling interests. There have been no share options (2012: nil) exercised between the reporting date and the date of signing of these financial statements. 6. Dividends paid & proposed 52 weeks ended 26 weeks ended 26 weeks ended 28 Dec 2012 28 June 2013 29 June 2012 £m £m £m Declared & paid during the period Equity dividends on ordinary shares Final dividend for 2012: 54.8 30.0p (2011: 25.8p) 63.8 54.8 Interim dividend: see 16.9 below (2012: 8.0p) - - 71.7 63.8 54.8 Final dividend for 2012 proposed for approval by shareholders at the AGM: 63.8 30.0p - - Interim dividend for 2013 declared by the Board: - 8.8p (2012: 8.0p) 18.8 17.0 The proposed final dividend and the declared interim dividend are 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 actual dividend paid may differ due to increases or decreases in the number of shares in issue between the date of approval of the financial statements and the record date for the dividend. 7. Property, plant & equipment & intangible assets 52 weeks ended 26 weeks ended 26 weeks ended 28 Dec 2012 28 June 2013 29 June 2012 £m £m £m Additions of property, plant & equipment & intangible assets 27.9 Land & buildings 5.6 6.6 87.4 Plant & equipment 33.1 46.3 8.3 Intangible assets 9.0 2.7 123.6 47.7 55.6 8. Business combinations On 31 December 2012, the Group completed the acquisition of 100% of the voting shares of Mathena, Inc ('Weir Mathena') for a cash consideration of $247m (£153m) with a maximum future payment of $145m payable over two years. Of this future payable, $120m is contingent consideration and $25m is an employee benefit expense which will be recognised as and when it is paid, based on the ongoing employment of the individuals. The full amount is contingent upon meeting profit growth targets and based on vendor forecasts at the date of acquisition we currently expect that the full amount will be payable. We have discounted the element of contingent consideration over the period in which it is expected to fall due, resulting in a deferred liability of £60m at the acquisition date. Based in El Reno, Oklahoma Weir Mathena is a leading provider of pressure control rental equipment and services for onshore oil and gas drilling applications. The fair values of Weir Mathena are disclosed in the following table. The fair values are provisional pending the completion of the fair value exercise in respect of each class of asset and will be finalised during the second half of the financial year. There will be certain intangible assets included in the £61m of goodwill recognised that cannot be individually separated and reliably measured due to their nature. These items include anticipated business growth, intellectual property, synergies and an assembled workforce. During the period the Group also acquired 100% of the voting shares of the R Wales group of companies ('Weir Wales'), 100% of the voting shares of Aspir Pty Limited in Australia, the business and assets of the Cheong foundry in Malaysia, and a heavy bay foundry in South Africa. The combined consideration for these acquisitions was £54m, with an expected contingent consideration of £2m. The fair values of these acquisitions are disclosed in the table below and are provisional pending the finalisation of the complete fair value exercise in respect of each class of asset for each acquisition. The fair values will be finalised during the second half of the financial year. There will be certain intangible assets included in the £31m 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. Provisional Provisional fair values fair values Mathena Others 2013 2013 £m £m Property, plant & equipment 23.0 4.9 Inventories 0.7 2.2 Intangible assets - customer relationships 108.6 20.6 - trade name 7.4 2.3 - intellectual property - 0.2 Trade & other receivables 11.5 3.6 Cash & cash equivalents 3.3 3.2 Interest-bearing loans & borrowings (1.3) (0.2) Trade & other payables (1.5) (5.5) Provisions (0.5) (0.4) Deferred tax - (6.2) Fair values of net assets 151.2 24.7 Goodwill arising on acquisition 60.6 30.7 Total consideration 211.8 55.4 Cash consideration 153.0 53.8 Contingent consideration 60.1 1.6 Settlement of external debt on acquisition (1.3) - Total consideration 211.8 55.4 The total net cash outflow on current year acquisitions was as follows - Cash paid (153.0) (53.8) - Cash & cash equivalents acquired 3.3 3.2 Total cash outflow (149.7) (50.6) Together, Weir Mathena and the other acquisitions contributed £34.7m to revenue and £4.9m to operating profit (including exceptional items and intangibles amortisation) in the 26 weeks ended 28 June 2013. The contribution of the individual acquisitions to revenue and profit for the period from continuing operations after exceptional items and intangibles amortisation of the Group was not material and so has not been separately disclosed. If the acquisitions had occurred at the start of 2013 the combined revenue and profit for the period from acquired operations after exceptional items and intangibles amortisation, would not have been materially different from the results disclosed in the Consolidated Income Statement. The fair values for Weir Novatech, Weir Seaboard and Weir International were finalised in the financial statements for the 52 weeks ending 28 December 2012. As a result the provisional fair values disclosed at 29 June 2012 have been restated. 9. Interest-bearing loans and borrowings As at 28 June 2013, £63m (2012: £nil) was drawn under the revolving credit facility and £102.3m (2012: £162.6m) outstanding under the amortising term loan. Total unamortised issue costs at 28 June 2013 were £4.9m (2012 : £7.3m). On the 5 July 2013, the Group repaid the outstanding unamortised portion of the US$300m amortising term loan, replacing the existing borrowings under this agreement with an equivalent draw down under the U$800m revolving credit facility which was entered into in 2010. The Group has recently completed the negotiation of a USD 800m 5 year Revolving Credit Facility with a syndicate of 12 banks. This replaces an existing facility of USD 800m maturing in September 2014. 10. Pensions & other post-employment benefit plans 28 Dec 2012 28 June 2013 29 June 2012 £m £m £m 90.4 Plans in deficit 68.7 104.3 The decrease in deficit of £21.7m in the 26 weeks ended 28 June 2013 was primarily due to actuarial gains of £21.3m, driven by an increase in gilt yields over the period, being recognised in the Consolidated Statement of Comprehensive Income. The impact of IAS19 (Revised) on the financial statements for the 52 weeks ended 28 December 2012 and the 26 weeks ended 29 June 2012 is an increased charge to the Consolidated Income Statement of £3.3m and £1.4m respectively, on a pre tax basis. There was no impact on the disclosed defined benefit obligation at either period end. 11. Financial instruments 28 Dec 2012 28 June 2013 29 June 2012 £m £m £m Included in non-current assets Forward foreign currency contracts designated as cash flow - hedges 0.3 - Other forward foreign currency 0.8 contracts 0.3 0.4 0.8 0.6 0.4 Included in current assets Forward foreign currency contracts designated as cash flow 0.2 hedges 0.3 0.6 Forward foreign currency contracts designated as net - investment hedges - 0.9 Other forward foreign currency 3.4 contracts 12.1 15.8 3.6 12.4 17.3 Included in current liabilities Forward foreign currency contracts designated as cash flow 0.1 hedges 1.2 2.7 Forward foreign currency contracts designated as net 0.3 investment hedges 5.9 1.1 Cross currency swaps designated - as net investment hedges - 24.5 9.1 Other cross currency swaps - - Other forward foreign currency 5.2 contracts 10.3 15.6 14.7 17.4 43.9 Included in non-current liabilities Forward foreign currency contracts designated as cash flow - hedges 0.8 0.1 Cross currency swaps designated 0.5 as net investment hedges 4.1 3.5 Other forward foreign currency 0.3 contracts 0.2 1.5 0.8 5.1 5.1 Net derivative financial 11.1 liabilities 9.5 31.3 Carrying amounts & fair values Set out below is a comparison of carrying amounts and fair values of all of the Group's financial instruments that are reported in the financial instruments. Carrying amount Fair value 28 June 2013 29 June 2012 £m £m Financial assets Derivative financial instruments recognised at fair value through profit or loss 12.4 12.4 Derivative financial instruments in designated hedge accounting relationships 0.6 0.6 Trade & other receivables excluding statutory assets & prepayments 490.3 490.3 Cash & short term deposits 78.5 78.5 581.8 581.8 Financial liabilities Derivative financial instruments recognised at fair value through profit or loss (10.5) (10.5) Derivative financial instruments in designated hedge accounting relationships (12.1) (12.1) Contingent consideration (95.6) (95.6) Amortised cost Bank overdrafts & short-term borrowings (11.0) (11.0) Trade & other payables excluding statutory liabilities & deferred income (384.5) (384.5) Obligations under finance leases (0.7) (0.7) Floating rate borrowings (202.4) (202.4) Fixed rate borrowings (814.4) (796.6) (1,531.2) (1,513.4) The Group enters into derivative financial instruments with various counterparties, principally financial institutions with investment grade credit ratings. The derivative financial instruments are valued using valuation techniques with market observable inputs including spot and forward foreign exchange rates, interest rate curves, counterparty and own credit risk. The fair value of cross currency swaps is calculated as the present value of the estimated future cash flows based on spot foreign exchange rates. The fair value of forward foreign currency contracts is calculated as the present value of the estimated future cash flows based on spot and forward foreign exchange rates. The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities; Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly; Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data. For financial instruments that are recognised at fair value on a recurring basis, the Group determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. At 28 December 2012 and 29 June 2012, the Group held all financial instruments at level 2 fair value measurement. From 29 June 2013 we have now assessed contingent consideration as level 3. 11. Financial instruments (continued) The opening fair value of the contingent consideration balances classified as level 3 was £24.8m at 29 December 2012, with a closing fair value of £95.6m at 28 June 2013. The movement in the period is represented by additional contingent consideration on acquisitions of £61.7m, outlined in note 8, plus the unwind of the discount of £5.8m detailed in note 3 and losses on retranslation of £3.3m. During the 26 weeks ended 28 June 2013 and the 52 weeks ended 28 December 2012, there were no transfers between level 1 and level 2 fair value measurements and no transfers into or out of level 3 fair value measurements. The fair value of borrowings, contingent consideration and obligations under finance leases is estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities. The fair value of cash and short-term deposits, trade and other receivables and trade and other payables approximates their carrying amount due to the short-term maturities of these instruments. 12. Additional cash flow information 26 weeks ended 52 weeks ended 29 June 2012 28 Dec 2012 26 weeks ended Restated (note Restated (note 1) 28 June 2012 1) £m £m £m Continuing operations Cash generated from operations 468.6 Operating profit 195.1 224.7 (20.2) Non cash exceptional items - 4.5 Share of results of joint (6.4) ventures (3.7) (2.9) Depreciation of property, 49.4 plant & equipment 29.1 24.1 Amortisation of intangible 36.7 assets 22.0 18.0 Gains on disposal of property, plant & (0.9) equipment (0.4) (0.4) Funding of pension & (0.8) post-retirement costs (0.5) (0.4) 7.5 Employee share schemes 4.7 3.8 Net foreign exchange including derivative 0.3 financial instruments 4.0 3.7 (Decrease) increase in (18.7) provisions (4.5) (7.0) Cash generated from operations before working 515.5 capital cashflows 245.8 268.1 (61.6) Increase in inventories (3.9) (52.7) (Increase) decrease in trade & other receivables 24.4 & construction contracts (18.1) 7.5 (Decrease) increase in trade & other payables & (79.7) construction contracts (40.8) (81.4) Cash generated from 398.6 operations 183.0 141.5 Additional pension (7.5) contributions paid (2.5) - (104.9) Income tax paid (37.8) (65.8) Net cash generated from 286.2 operating activities 142.7 75.7 The following tables summarise the cashflows arising on acquisitions: Acquisitions of subsidiaries Current period (114.9) acquisitions (199.0) (114.7) Previous periods acquisitions deferred (8.4) consideration paid - (3.9) (123.3) (199.0) (118.6) Settlement of external debt of subsidiary on (1.9) acquisition (1.3) (1.9) Acquisition of subsidiaries - current (114.9) year acquisitions (199.0) (114.7) Total cash outflow on acquisition of subsidiaries - current (116.8) year (200.3) (116.6) Previous periods acquisitions deferred (8.4) consideration paid - (3.9) Total cash outflow (125.2) relating to acquisitions (200.3) (120.5) Disposals of subsidiaries Previous periods disposals 24.7 - proceeds (0.2) (0.4) Previous periods disposals (1.8) - cash disposed of - - Cash & cash equivalents comprise the following 391.1 Cash & short-term deposits 78.5 120.8 Bank overdrafts & (6.9) short-term borrowings (11.0) (4.9) 384.2 67.5 115.9 Reconciliation of net increase (decrease) in cash & cash equivalents to movement in net debt Net increase (decrease) in cash & cash equivalents 284.4 from continuing operations (317.8) 11.3 Net (increase) decrease in (322.6) debt 112.6 (170.1) Change in net debt (38.2) resulting from cash flows (205.2) (158.8) (0.1) Lease inceptions - - (2.3) Loans acquired (1.5) (2.3) Foreign currency translation differences& amortisation of issue 24.9 costs (54.4) (9.7) Change in net debt during (15.7) the period (261.1) (170.8) Net debt at the beginning (673.2) of the period (688.9) (673.2) Net debt at the end of the (688.9) period (950.0) (844.0) Net debt comprises the following 391.1 Cash & short-term deposits 78.5 120.8 Current interest-bearing (65.4) loans & borrowings (115.0) (67.2) Non-current interest-bearing loans & (1,014.6) borrowings (913.5) (897.6) (688.9) (950.0) (844.0) 13. Related party disclosure The following table provides the total amount of significant transactions which have been entered into with related parties for the relevant financial period and outstanding balances at the period end. 52 weeks ended 26 weeks ended 26 weeks ended 28 Dec 2012 28 June 2013 29 June 2012 £m £m £m 1.0 Sales of goods to related 1.6 0.1 parties - joint ventures 0.2 Sales of services to - - related parties - joint ventures 1.7 Purchases of goods from - 1.0 related parties - joint ventures 2.6 Purchases of services from 1.2 0.1 related parties - joint ventures 1.4 Amounts owed to related 1.2 1.1 parties - group pension plans 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 interim condensed financial statements were as follows. 52 weeks ended 26 weeks ended 26 weeks ended 28 Dec 2012 28 June 2013 29 June 2012 Average rate (per £) 1.58 US dollar 1.54 1.58 1.53 Australian dollar 1.51 1.53 1.23 Euro 1.18 1.22 1.58 Canadian dollar 1.57 1.59 3.10 Brazilian real 3.13 2.94 770.51 Chilean peso 736.46 776.98 13.01 South African rand 14.17 12.53 Closing rate (per £) 1.62 US dollar 1.52 1.55 1.56 Australian dollar 1.64 1.55 1.22 Euro 1.17 1.25 1.61 Canadian dollar 1.60 1.60 3.30 Brazilian real 3.33 3.24 775.72 Chilean peso 768.21 789.68 13.69 South African rand 15.20 13.06 Directors Statement of Responsibilities The directors confirm that this condensed set of financial statements has been prepared in accordance with IAS34 "Interim Financial Reporting" as adopted by the European Union, and that the interim management report herein includes a fair review of the information required by the Disclosure and Transparency Rules of the Financial Services Authority, paragraphs DTR 4.2.7 and DTR 4.2.8. The directors of The Weir Group PLC are listed in the Group's 2012 Annual Report, with the exception of Charles Berry who joined the Board on 1 March 2013 and was appointed Deputy Chairman on 1 May 2013. A list of current directors is maintained on The Weir Group PLC website which can be found at www.weir.co.uk. On behalf of the Board Jon Stanton Finance Director 30 July 2013 Independent Review Report to The Weir Group PLC Introduction We have been engaged by the Company to review the condensed set of financial statements in the interim report for the 26 weeks ended 28 June 2013 which comprises the Consolidated Income Statement, Consolidated Statement of Comprehensive Income, Consolidated Balance Sheet, Consolidated Cash Flow Statement, Consolidated Statement of Changes in Equity and the related notes 1 to 15. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. This report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed. Directors Responsibilities The Interim report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the Interim report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority. As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this Interim report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union. Our Responsibility Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the Interim report based on our review. Scope of Review We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the Interim report for the twenty six weeks ended 28 June 2013 is not prepared, in all material respects, in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority. Ernst & Young LLP Glasgow 30 July 2013 Shareholder Information The Board have declared an interim dividend of 8.8p (2012: 8.0p). The dividend will be paid on 1 November 2013 to shareholders on the register on 4 October 2013. Shareholders may have their dividends reinvested in Weir Group shares by participating in its Dividend Reinvestment Plan (DRIP). If you wish to participate in the DRIP, please apply online at www.investorcentre.co.uk or alternatively, you can complete a DRIP mandate form obtainable from the Company's registrar, Computershare Investor Services. The final date for receipt of DRIP elections is 11 October 2013. Financial Calendar Ex-dividend date for interim dividend 2 October 2013 Record date for interim dividend 4 October 2013 Shareholders on the register at this date will receive the dividend Final day for receipt of DRIP elections 11 October 2013 Interim dividend paid 1 November 2013 The Interim Report can be downloaded from The Weir Group PLC website at: www.weir.co.uk ------------------------------------------------------------------------------ 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#1719562
The Weir Group PLC : Half Yearly Report
Press spacebar to pause and continue. Press esc to stop.