17th Aug 2006 07:01
Weir Group PLC17 August 2006 The Weir Group PLC 17 August 2006 THE WEIR GROUP PLC INTERIM RESULTS 2006 Results for 26 weeks ended 30 June 2006 HIGHLIGHTS "Primed to Perform" • Order input(*1) up 36% to £606.4m (2005: £445.0m) • Revenue up 24% to £438.2m (2005: £354.1m) • Operating profit(*2) up 44% to £38.0m (2005: £26.4m) • Earnings per share(*3) up 45% to 13.9p (2005: 9.60p) • Cash generated by operations £51.5m, up £37.4m (2005: £14.1m) • Dividend increase of 6% to 3.75p (2005: 3.55p) • Restructuring on target and delivering benefits 2006 2005 Change ------ ------ -------- Continuing OperationsOrder Input (*1) £606.4m £445.0m +36%Revenue £438.2m £354.1m +24%Operating Profit (*2) £38.0m £26.4m +44%Profit before tax (*3) £37.2m £24.8m +50%Earnings per share (*3) 13.90p 9.60p +45%Dividend 3.75p 3.55p +6%Total OperationsEarnings per share 13.30p (0.80)p *1 Excludes Joint Ventures and Associates*2 Profit from continuing operations before restructuring costs, net financecosts and tax*3 Adjusted to exclude restructuring costs The Chairman of The Weir Group, Sir Robert Smith, commented: "In the first halfof 2006, the Group's continuing operations delivered significantly improvedorder input, revenue, profit and earnings per share when compared to the sameperiod in 2005. This improved performance, together with the ongoing strength of the order bookand restructured portfolio of businesses, increases our confidence in theoutlook for 2006. In consideration of the excellent first half results and our confidence in thesecond half of the year the Board has declared a 6% increase in the dividend to3.75p per share." Contact details: The Weir Group PLC Available through UBSMark Selway, Chief Executive Tel. 020 7567 8000 (switchboard)Helen Walker, Public Relations Manager (Mobile: 07789 032296)Maitland Tel. 020 7379 5151Suzanne Bartch (Mobile: 07769 710 335)Michelle Jeffery (Mobile: 07989 977 837) FINANCIAL HIGHLIGHTS 2006 first half order input at £606.4m was 36% higher than the same period in2005. Engineering Products order input grew 36% to £365.0m (2005: £267.7m) withgood progress from Minerals, Clear Liquid and Valves coupled to a first timecontribution of £31.7m from Gabbioneta. Services order input at £137.9m was 39%above the same period in 2005 while Defence, Nuclear & Gas benefited from largecontract awards helping to produce a first half order input of £103.5m against£77.9m in the first half of 2005. Revenue from Group continuing operations increased 24% to £438.2m (2005:£354.1m). Engineering Products grew 22% to £283.0m (2005: £231.2m) withexcellent performances from Minerals and Clear Liquid offsetting a plannedreduction resulting from the restructuring of Valves. Engineering Servicesrevenue in the first half increased 16% to £106.9m (2005: £91.9m) with goodprogress in Canada, the USA and Australia. The Defence, Nuclear & Gas Divisiongrew their revenue 56% to £48.3m (2005: £31.0m) as a result of new gas contractsat LGE. First half operating profit(*2) at £38.0m (2005: £26.4m) was 44% above the sameperiod in 2005. Engineering Products operating profit(*2) increased 66% to£26.7m (2005: £16.1m) with the combination of strong end markets, restructuringbenefits and the acquisition of Gabbioneta all contributing to excellentprogress in the first half of the year. Services operating profit(*2) increased2% to £6.2m (2005: £6.0m) while Defence, Nuclear & Gas achieved a 29% increaseto £4.1m (2005: £3.2m). Joint Ventures and Associates contributed £4.8m against £3.9m in the same periodlast year. Good progress was made from our Joint Venture in Abu Dhabi and fromthe first time contribution of our latest business in Saudi Arabia. Profit before tax(*3) at £37.2m (2005: £24.8m) was 50% above the same period in2005. Net finance costs of £3.2m were largely offset by other finance income of£2.4m arising from the improved performance of the Group's pension schemes. Further restructuring costs of £1.8m were incurred in the first half in respectof the previously announced UK restructuring. A tax charge of £8.0m (2005: £5.0m) gives an effective tax rate of 26%. Earningsper share(*3) for continuing operations were 13.9p (2005: 9.6p). Basic earningsper share for total operations rose to 13.3p from a loss of 0.8p in thecomparable period last year. The Group's net debt at the half year was £64.8m reducing from £76.4m at thestart of the year. The first half inflow is after payment of £20.0m for thefinal 2005 dividend and a £5.1m cash outflow related to previously announcedrestructuring activities. Good progress was made in managing the Group's workingcapital with a £7.9m increase in advance payments and improvements in inventoryand debtor ratios all contributing to the results. DIVIDEND An interim dividend of 3.75p (2005: 3.55p) is declared and will be paid on 10November 2006 to shareholders on the register at the close of business on 13October 2006. REVIEW OF RESULTS To assist in meaningful comparisons, the following review of results restatescomparative 2005 figures at 2006 average exchange rates. The addition of firsttime earnings from the acquisitions of Gabbioneta and the shareholding in theJoint Venture in Saudi Arabia are included in the reviews of the respectiveEngineering Products and Joint Ventures and Associates segmental results. Engineering Products The Engineering Products Division includes the operations of our Minerals, ClearLiquid and Valves businesses. First half order input grew 32% to £365.0m (2005:£276.2m) with good progress in each of Minerals, Clear Liquid and Valves.Revenue from continuing businesses increased 19% to £283.0m (2005: £238.5m)while operating profit(*2) increased 57% to £26.7m (2005: £17.1m). At the operating profit(*2) level, the margin was 9.5% compared with 7.2% in2005. This margin increase was underpinned by a continued strong performancefrom Minerals, the first time contribution from Gabbioneta and strongeroperating performances from Valves and Clear Liquid as a result of restructuringactivities. Minerals had an excellent first half growing its order input, revenue andoperating profit(*2) through the combination of buoyant commodity markets, newproduct offerings and improvements in operational efficiency. The 20% growth inorder input was driven in part by the strong investment climate and build-up ofmining spares evident in the Americas, Australia and Europe. North Americabenefited from continued success in the Canadian oil sands, where it has gainedearly entry into this newly developing market, and from a significant £9.1m neworder from Canadian Natural Resources Limited secured in the first half. In the FSU large projects were awarded from the Russian iron ore and coppermarkets and in Europe there was a continued strong demand for mine upgrades andspares from our more traditional markets. Clear Liquid performed well in the first half growing its order input, revenueand operating profit(*2) when compared to the same period in 2005. The benefitsfrom restructuring at Weir Pumps were ahead of expectations while bothGabbioneta and the speciality businesses continue to experience strong endmarkets. First half input at £118.4 m (2005: £75.1m) was 58% above the first half of2005. Gabbioneta provided a first time addition of £31.7m, Weir Pumps benefitedfrom the move into new markets securing a number of large-scale power projectsin China, upstream work in Russia and an oil platform project in Thailand. Thespeciality businesses continued to make good progress collectively growing theirinput 9% against the same period last year. The UK restructuring programme made good progress delivering profit and cashbenefits ahead of schedule. Plans to move from the existing Cathcart site to amodern, purpose built facility in late 2008 or 2009, are expected to incurprogressively a cash cost of approximately £30m which we expect to be largelyrecovered from the sale of the existing property. The acquisition of Gabbioneta contributed £12.3m of revenue in the first half of2006. The integration within Clear Liquid operations is progressing very well.Its order book is at a historic high with significant new oil orders secured inthe first half of the year. Plans are in place to fast track the Weir ProductionSystem into Gabbioneta's operations to free up capacity to accommodate furthergrowth. In the longer term (2008-9) we anticipate investing in a new site tomeet increased demands on capacity. Valves performed well in the first half of 2006 increasing order input by 37% to£39.5m (2005: £28.9m) and improving profitability when compared to the sameperiod in 2005. The US business strengthened its position in its domestic marketwinning contracts to upgrade nuclear and coal fired plants in western USA. Thenew Chinese operation, a modern facility located west of Shanghai acquired inFebruary, made a small anticipated loss in the first half of the year. The French operations benefited from nuclear orders from the Ukraine and Chinaand delivered improved revenue and profitability when compared to the sameperiod last year. The UK restructuring programme is in the final stages of completion with the newplant, designed around Weir production methodology, becoming operational at theend of March 2006. The outsourcing of non-core manufacturing activities, wascompleted without disruption and, while slower than anticipated, the new supplychain is making solid progress in its endeavours to support the growing orderbook. In the first half the UK business secured new orders for a gastransmission project and an upgrade project in Iran. Engineering Services Engineering Services first half order input increased 31% to £137.9m (2005:£105.4m) with good progress being made in the Middle East, Canada, USA and theUK. The UK business secured nearly £5m of new hydro business from Scottish Powerand Scottish & Southern Energy and made further progress in the North Sea. TheCanadian market remains strong and the US Service Centres grew their input to£4.6m, an increase of 41% when compared to the same period in 2005. Revenue increased 9% to £106.9m (2005: £97.6m) with good progress in Canada,Australia and the USA. UK revenue was 15% lower at £27.7m reflecting the lastperiod where the Yorkshire Water contract affects comparisons. First halfoperating profit(*2) at £6.2m (2005: £6.5m) was 6% below the same period in2005. Improved profit from the Canadian and Australian operations helped in partto offset declines in the Middle East, the UK and USA. In the Middle East, as expected we continued to experience lower sales due toongoing security issues in the higher margin markets. A plan has been put intoaction to realign the business to opportunities elsewhere in the Middle East andbring overheads in line with future market needs. The addition of our new JointVenture in Saudi Arabia has opened up opportunities in that region and largeproject awards were placed in Dubai. In the UK we are consolidating the numberof sites to improve plant utilisation and achieve a better geographic spread,which will reduce costs. These actions are expected to incur additional costs of£1.7m in the second half in addition to the £0.9m charge which was incurred torealign overheads in the USA and Canada in the first half of the year. We continue to see encouraging prospects for growth of our Services Division.The investments in geographic expansion and productivity enhancements both inthe UK and Middle East provide a solid foundation for the future growth andmargin progress of the division. Defence, Nuclear & Gas The Defence, Nuclear & Gas businesses are involved in the design and manufactureof specialist engineering equipment for the naval and energy markets. First half revenue from the division increased 56% to £48.3m (2005: £31.0m)producing operating profit(*2) of £4.1m against a prior year profit of £3.2m. Inthe first half of 2006, order input increased by 33% to £103.5m against £77.9min the previous year. The defence and nuclear business, Weir Strachan & Henshaw, delivered marginallylower revenue and operating profit(*2) when compared to the first half of 2005reflecting the favourable profit taking position on major projects last year.Order input at £58.8m was £44.1m above the same period in 2005 and included therecently announced £37m contract to engineer weapons handling systems for theSpanish Navy. The liquid gas storage business, Weir LGE, achieved a significant increase inrevenue and operating profit(*2) when compared to the first half of 2005. Recentorders from Norwegian shipbuilders and a continuation of strong demand fromKorea delivered first half order input of £44.7m compared with £63.2m in whatwas an exceptional input period last year. Future market demand and astrengthened order book continue to underpin Weir LGE's revenue and profitgrowth in 2006 and beyond. Joint Ventures and Associates Weir's share of revenue from Joint Ventures and Associates in the first half at£59.5m was marginally above the same period in 2005 (2005: £58.9m). Our share ofprofit after tax from Joint Ventures and Associates at £4.8m (2005: £3.9m)reflects the good performances from Services Joint Ventures in Saudi Arabia andAbu Dhabi. STRATEGY The Group remains focused on a programme underpinned by the core principles ofoperational excellence and continued expansion in higher margin, higher growthmarkets. In 2005, our corporate activities reflected the continuation of thisstrategy selling off the lower margin, higher risk water treatment businesses,acquiring Pompe Gabbioneta and restructuring the underperforming UK operations.These activities all contributed to the Group's improved financial performancein the first half of 2006. The key focus in the first half has been delivering the benefits from therestructuring at our two UK operations within Engineering Products. Goodprogress has been made and we remain confident that these reorganisations willcontinue to contribute to the improved performance of the Group. The Group continues to invest in organic development and extending ourgeographic presence in high growth markets. Our growing infrastructure in Chinaand extension of our Engineering Products operations in the region complementour ongoing investments by Minerals, Valves and Services in India. Our continuedinvestments in the global parts business, investment in organic growth andongoing search for high quality aligned acquisitions underpin our near termplans for future top line growth. Our strong balance sheet and good level of cash generation support our intentionto pursue the full range of options for future growth. THE BOARD In March, the Group announced the appointment of Keith Cochrane to the positionof Group Finance Director, taking over from Chris Rickard on 3 July 2006. Previously Group Director of Finance at Scottish Power, Keith brings to Weir thenecessary skill and expertise to make a major contribution to the futuredevelopment of the Group. OUTLOOK In the second half of 2006, the Engineering Products Division is expected todeliver growth in revenue and profits when compared to the same period in 2005. Minerals anticipates another good year, supported by continuing strong commoditymarkets and the large-project work which is likely to feature in our Netherlandsand US businesses. Continued strength in the new equipment end of the market,together with projected £0.5m start-up costs in China, are expected to restrainsecond half margins, although profit is anticipated to grow in absolute termsrelative to the same period last year. The outlook for Clear is also encouraging. Expected growth in second half salesdue to an additional quarter of contribution from Gabbioneta, and increasedprofitability from Weir Pumps in the UK, will deliver improved second halfresults when compared to 2005. Valves is also expected to demonstrate better performance in the second half of2006, bolstered by strong order books in all of our core territories andbenefits from the restructuring of the UK operation. A second half charge ofapproximately £0.4m is planned to be incurred in the development of the newChinese business. The Engineering Services Division is forecast to deliver margin and profitgrowth after one time charges in the second half of the year. The inclusion lastyear of mine refurbishment work in Canada and the Ravensthorpe uranium projectin Australia will influence revenue comparisons, although absolute profits areexpected to improve. The Defence, Nuclear & Gas Division is well-positioned to show further revenueand profit progress in the second half. Joint Ventures and Associates will alsocontinue their good contribution, with the new Saudi Joint Venture expected topartially offset a shortfall against last year's exceptional second half at DML. The relative performance in the first half of 2006, when compared to the sameperiod last year, should translate to a more balanced second half result andclearly demonstrates the generally improving condition of the Group. Thesustained strength of the order book and restructured portfolio of businessesincreases our confidence in the outlook for 2006. We now expect profit beforetax(*3) to be ahead of the top end of recent market estimates(*4). *4 The range of market estimates for profit before tax and restructuring costsfor 2006, based on Reuters estimates, is £70.0m to £76.9m. CONSOLIDATED INCOME STATEMENT----------------------------- 52 weeks 26 weeks 26 weeksended 30 ended 30 ended 1Dec 2005 June 2006 July 2005 £m Notes £m £m-------------------------------------------------------------------------------- Continuing operations 789.4 Revenue 2 438.2 354.1 (570.7) Cost of sales (310.2) (254.6)-------------------------------------------------------------------------------- 218.7 Gross profit 128.0 99.5 1.5 Other operating income 0.7 0.3 (106.6) Selling & distribution costs (58.4) (50.7) (56.5) Administrative expenses (37.1) (26.6) 1.7 Share of results of - joint ventures 1.3 0.6 7.5 - associates 3.5 3.3-------------------------------------------------------------------------------- Profit from continuing operations before 66.3 restructuring costs, net finance costs & tax 38.0 26.4 (24.7) Restructuring costs 3 (1.8) (18.0)-------------------------------------------------------------------------------- Profit from continuing operations before 41.6 net finance costs & tax 2 36.2 8.4 (6.6) Finance costs (5.9) (2.9) 2.0 Finance income 2.7 1.0 0.5 Other finance income - retirement benefits 2.4 0.3-------------------------------------------------------------------------------- 37.5 Profit from continuing operations before tax 35.4 6.8 (13.8) Income tax expense 4 (8.0) (5.0)-------------------------------------------------------------------------------- 23.7 Profit from continuing operations 27.4 1.8 2.3 Profit (loss) from discontinued operations 5 - (3.5)-------------------------------------------------------------------------------- 26.0 Profit (loss) for the period 27.4 (1.7)-------------------------------------------------------------------------------- Attributable to: 25.9 Equity holders of the Company 27.4 (1.7) 0.1 Minority interests - --------------------------------------------------------------------------------- 26.0 27.4 (1.7)-------------------------------------------------------------------------------- Earnings per share 6 12.6p Basic 13.3p (0.8)p 1.1p Basic - discontinued - (1.7)p 11.5p Basic - continuing 13.3p 0.9p 23.5p Basic - continuing (pre restructuring costs) 13.9p 9.6p 12.5p Diluted 13.1p (0.8)p 1.1p Diluted - discontinued - (1.7)p 11.4p Diluted - continuing 13.1p 0.9p 23.4p Diluted - continuing (pre restructuring costs) 13.7p 9.5p CONSOLIDATED BALANCE SHEET-------------------------- 30 Dec 2005 30 June 2006 1 July 2005 £m £m £m-------------------------------------------------------------------------------- ASSETS Non-current assets 119.2 Property, plant & equipment 114.4 108.3 187.5 Intangible assets 184.5 113.4 20.9 Investments in joint ventures & associates 25.5 9.6 17.4 Deferred tax assets 9.8 25.3 0.4 Forward foreign currency contracts 2.5 1.1-------------------------------------------------------------------------------- 345.4 Total non-current assets 336.7 257.7-------------------------------------------------------------------------------- Current assets 122.8 Inventories 128.2 106.6 207.3 Trade & other receivables 194.4 175.5 28.2 Construction contracts 31.9 32.5 2.3 Forward foreign currency contracts 4.1 4.2 0.6 Income tax receivable 1.2 1.6 - Assets classified as held for sale 1.9 31.6 109.6 Cash & short term deposits 118.1 63.1-------------------------------------------------------------------------------- 470.8 Total current assets 479.8 415.1-------------------------------------------------------------------------------- 816.2 Total assets 816.5 672.8-------------------------------------------------------------------------------- LIABILITIES Current liabilities 10.9 Interest-bearing loans & borrowings 12.6 17.2 178.8 Trade & other payables 184.4 140.5 39.2 Construction contracts 44.4 31.3 4.6 Forward foreign currency contracts 2.8 4.4 7.3 Income tax payable 9.6 5.1 26.1 Provisions for liabilities & charges 22.0 18.5 Liabilities directly associated with assets - classified as held for sale - 22.9-------------------------------------------------------------------------------- 266.9 Total current liabilities 275.8 239.9-------------------------------------------------------------------------------- Non-current liabilities 175.1 Interest-bearing loans & borrowings 170.3 85.5 3.1 Forward foreign currency contracts 1.5 2.5 61.6 Retirement benefit obligations 43.7 93.9 14.6 Provisions for liabilities & charges 14.7 6.4 3.9 Deferred tax liabilities 4.5 0.7-------------------------------------------------------------------------------- 258.3 Total non-current liabilities 234.7 189.0-------------------------------------------------------------------------------- 525.2 Total liabilities 510.5 428.9-------------------------------------------------------------------------------- 291.0 NET ASSETS 306.0 243.9-------------------------------------------------------------------------------- CAPITAL & RESERVES 26.2 Share capital 26.3 26.0 32.5 Share premium 33.6 28.7 (10.7) Treasury shares (10.7) (9.2) 0.5 Capital redemption reserve 0.5 0.5 9.9 Foreign currency translation reserve 0.7 5.2 (3.7) Hedge accounting reserve 0.9 (1.8) 235.9 Retained earnings 254.3 194.2-------------------------------------------------------------------------------- 290.6 Shareholders equity 305.6 243.6 0.4 Minority interest 0.4 0.3-------------------------------------------------------------------------------- 291.0 TOTAL EQUITY 306.0 243.9-------------------------------------------------------------------------------- CONSOLIDATED CASH FLOW STATEMENT-------------------------------- 52 weeks 26 weeks 26 weeksended 30 ended 30 ended 1Dec 2005 June 2006 July 2005 £m Note £m £m-------------------------------------------------------------------------------- Cash flows from operating activities 71.3 Cash generated by operations 7 51.5 14.1 (10.0) Exceptional pension contributions paid - (2.0) (16.6) Fundamental restructuring costs paid (5.1) (8.2) (7.9) Income tax paid (4.6) (4.5)-------------------------------------------------------------------------------- Net cash generated from (absorbed by) 36.8 operating activities 41.8 (0.6)-------------------------------------------------------------------------------- Cash flows from investing activities (75.6) Acquisitions of subsidiaries & joint ventures (2.6) (1.0) 14.2 Disposals of subsidiaries & joint ventures - 1.9 Purchases of property, plant & equipment (25.7) & intangible assets (10.6) (10.3) Proceeds from sale of property, plant 0.4 & equipment & intangible assets 0.4 - 0.2 Proceeds from sale of other investments - 0.1 1.9 Interest received 2.6 1.1 4.0 Dividends received - --------------------------------------------------------------------------------- (80.6) Net cash used in investing activities (10.2) (8.2)-------------------------------------------------------------------------------- Cash flows from financing activities 6.3 Proceeds from issuance of ordinary shares 1.2 2.3 (10.7) Purchase of treasury shares - (9.2) 170.0 Proceeds from borrowings 88.6 25.9 (84.5) Repayments of borrowings (93.4) (10.3) (8.3) Interest paid (3.8) (2.9) Dividends paid to equity holders of the (26.6) Company (20.0) (19.3)-------------------------------------------------------------------------------- 46.2 Net cash used in financing activities (27.4) (13.5)-------------------------------------------------------------------------------- Net increase (decrease) in cash & 2.4 cash equivalents 4.2 (22.3) Cash & cash equivalents at beginning 95.6 of period 104.0 95.6 6.0 Foreign currency translation differences (2.4) 2.8-------------------------------------------------------------------------------- 104.0 Cash & cash equivalents at end of period 105.8 76.1-------------------------------------------------------------------------------- Cash & cash equivalents comprises the following: 109.6 Cash & short-term deposits 118.1 63.1 Cash & short-term deposits included in - assets classified as held for sale - 13.3 (5.6) Bank overdrafts (12.3) (0.3)-------------------------------------------------------------------------------- 104.0 105.8 76.1-------------------------------------------------------------------------------- Reconciliation of net increase (decrease) in cash & cash equivalents to movement in net (debt) funds Net increase (decrease) in cash & cash 2.4 equivalents 4.2 (22.3) (85.5) Net decrease (increase) in debt 4.8 (15.6)-------------------------------------------------------------------------------- Change in net (debt) funds resulting from (83.1) cash flows 9.0 (37.9) (0.2) Lease acquired - - (0.1) Lease inception - - (5.6) Foreign currency translation differences 2.6 (1.0)-------------------------------------------------------------------------------- (89.0) Change in net (debt) funds during the period 11.6 (38.9) 12.6 Net (debt) funds at beginning of period (76.4) 12.6-------------------------------------------------------------------------------- (76.4) Net debt at end of period (64.8) (26.3)-------------------------------------------------------------------------------- CONSOLIDATED STATEMENT OF RECOGNISED INCOME & EXPENSE----------------------------------------------------- 52 weeks 26 weeks 26 weeksended 30 ended 30 ended 1Dec 2005 June 2006 July 2005 £m £m £m-------------------------------------------------------------------------------- Income & expense recognised directly in equity Gains (losses) taken to equity on cash (10.7) flow hedges 6.5 (6.1) Exchange differences on translation of 13.9 foreign operations (9.2) 9.2 22.1 Actuarial gain on defined benefit plans 14.7 - Share of associate's actuarial gain on 4.8 defined benefit plans - - Transfers to the income statement 0.3 On cash flow hedges 0.1 (1.6) Tax on items taken directly to or (2.9) transferred from equity (6.4) 2.3-------------------------------------------------------------------------------- 27.5 Net income recognised directly in equity 5.7 3.8 26.0 Profit (loss) for the period 27.4 (1.7)-------------------------------------------------------------------------------- Total recognised income & expense for 53.5 the period 33.1 2.1-------------------------------------------------------------------------------- Attributable to: 53.4 Equity holders of the Company 33.1 2.1 0.1 Minority interests - --------------------------------------------------------------------------------- 53.5 33.1 2.1-------------------------------------------------------------------------------- Effect of changes in accounting policy: Net gain on cash flow hedges on first 2.5 time application of IAS39 - 2.5-------------------------------------------------------------------------------- Notes to the Financial Statements 1. Basis of preparationThese interim financial statements have been prepared on the basis of the accounting policies set out in the Group's 2005 Annual Report and were approved by the Board of Directors on 17 August 2006. The Group has not applied IAS34 "Interim financial reporting", which is not mandatory for UK groups, in thepreparation of these interim financial statements. The interim financial statements are unaudited but have been formally reviewed by the auditors and their report to the Company is set out on page 16. The information shown for the52 weeks ended 30 December 2005 does not constitute statutory accounts asdefined in Section 240 of the Companies Act 1985 and has been extracted from theGroup's 2005 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 2005 Annual Report was unqualified and did not contain a statement under either Section 237(2) or Section 237(3) of the Companies Act 1985. Notes to the Financial Statements 2. Segment information - Continuing OperationsThe following tables present revenue and profit information regarding the Group's business segments for the 26 weeks ended 30 June 2006, 26 weeks ended 1 July 2005 and the 52 weeks ended 30 December 2005. For comparative purposes, sales to external customers and segment result before restructuring costs for the 26 weeks ended 1 July 2005 and for the 52 weeks ended 30 December 2005 havebeen restated to 2006 average exchange rates. Inter-segment sales are not material in relation to total Group revenue. Continuing Engineering Engineering Defence, Nuclear Operations Products Services & Gas Total June June June June June June June June 2006 2005 2006 2005 2006 2005 2006 2005 £m £m £m £m £m £m £m £m-------------------------------------------------------------------------------- Sales toexternalcustomers 283.0 231.2 106.9 91.9 48.3 31.0 438.2 354.1-------------------------------------------------------------------------------- Sales toexternalcustomers at2006 averageexchange rates 283.0 238.5 106.9 97.6 48.3 31.0 438.2 367.1--------------------------------------------------------------------------------Segment resultbeforerestructuringcosts 26.7 16.1 6.2 6.0 4.1 3.2 37.0 25.3Restructuringcosts (1.8) (18.0) - - - - (1.8) (18.0)--------------------------------------------------------------------------------Segment result 24.9 (1.9) 6.2 6.0 4.1 3.2 35.2 7.3----------------------------------------------------------------Share of results of: - joint ventures 1.3 0.6 - associates 3.5 3.3Unallocatedexpenses (3.8) (2.8)--------------------------------------------------------------------------------Profit beforenet financecosts & tax 36.2 8.4-------------------------------------------------------------------------------- Segment resultbeforerestructuringcosts at 2006averageexchange rates 26.7 17.1 6.2 6.5 4.1 3.2 37.0 26.8-------------------------------------------------------------------------------- Defence, Continuing Engineering Engineering Nuclear Operations Products Services & Gas Total Dec 2005 Dec 2005 Dec 2005 Dec 2005 £m £m £m £m-------------------------------------------------------------------------------- Sales to external customers 505.6 215.4 68.4 789.4-------------------------------------------------------------------------------- Sales to external customers at2006 average exchange rates 511.3 223.1 68.3 802.7-------------------------------------------------------------------------------- Segment result beforerestructuring costs 42.3 13.1 6.8 62.2Restructuring costs (24.7) - - (24.7)--------------------------------------------------------------------------------Segment result 17.6 13.1 6.8 37.5-------------------------------------------------------------------Share of results of: - joint ventures 1.7 - associates 7.5Unallocated expenses (5.1)--------------------------------------------------------------------------------Profit before net financecosts & tax 41.6-------------------------------------------------------------------------------- Segment result beforerestructuring costs at 2006average exchange rates 43.0 13.9 6.7 63.6-------------------------------------------------------------------------------- Notes to the Financial Statements 3. Restructuring costsDuring 2005 the Group incurred costs of £21.4m and impairment losses of £3.3m in connection with the previously announced fundamental restructuring activitiesin the UK Engineering Products businesses. Further costs of £1.8m have been incurred in 2006. These costs arose from activities that are not considered to be operating in nature and accordingly have been disclosed separately as to include them in operating activities would impair the comparability of the financial statements. Other non fundamental restructuring activities throughout the Group are included in operating activities. 4. Income tax expense 52 weeks 26 weeks 26 weeksended 30 ended 30 ended 1Dec 2005 June 2006 July 2005 £m £m £m-------------------------------------------------------------------------------- (0.9) Group - United Kingdom (2.0) - (13.0) Group - overseas (6.0) (5.1)-------------------------------------------------------------------------------- Total income tax expense included (13.9) in the consolidated income statement (8.0) (5.1) Less: income tax expense on discontinued (0.1) operations - (0.1)-------------------------------------------------------------------------------- (13.8) Income tax expense on continuing operations (8.0) (5.0)-------------------------------------------------------------------------------- The total income tax expense included in the Group's share of results of joint ventures & associates is as follows: (0.2) Joint ventures (0.2) - (3.0) Associates (1.4) (1.3)-------------------------------------------------------------------------------- 5. Discontinued operationsThe loss from discontinued operations for the 26 weeks ended 1 July 2005 related principally to the trading results of the water treatment businesses of the Group's Techna division (Weir Westgarth, Weir Entropie and Weir Envig) which were disposed of on 8 July 2005 and the loss on disposal of Weir Flowguard whichtook place on 1 June 2005. The assets and liabilities of Weir Westgarth, Weir Entropie and Weir Envig are shown in the consolidated balance sheet as at 1 July2005 as "assets classified as held for sale" or "liabilities directly associated with assets classified as held for sale" respectively. The profit from discontinued operations for the 52 weeks ended 30 December 2005 included the gain on disposal of these companies. 6. Earnings per shareBasic earnings per share amounts are calculated by dividing net profit for the period attributable to ordinary 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 ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the period (adjusted for the effects of dilutive options and L-TIP awards). The following reflects the incomeand share data used in the calculation of basic and diluted earnings per share: 52 weeks 26 weeks 26 weeksended 30 ended 30 ended 1Dec 2005 June 2006 July 2005 £m £m £m-------------------------------------------------------------------------------- 23.7 Profit from continuing operations 27.4 1.8 (0.1) Minority interests - --------------------------------------------------------------------------------- Net profit attributable to ordinary 23.6 shareholders from continuing operations 27.4 1.8 Profit (loss) attributable to ordinary 2.3 shareholders from discontinued operations - (3.5)-------------------------------------------------------------------------------- 25.9 Net profit attributable to ordinary shareholders 27.4 (1.7)-------------------------------------------------------------------------------- No. of No. of No. of shares shares shares million million million-------------------------------------------------------------------------------- Weighted average number of ordinary shares 206.1 for basic earnings per share 206.7 206.5 1.4 Effect of dilution: share options 1.2 1.5 0.2 L-TIP awards 1.2 0.3-------------------------------------------------------------------------------- Adjusted weighted average number of ordinary 207.7 shares for diluted earnings per share 209.1 208.3-------------------------------------------------------------------------------- To calculate earnings per share pre restructuring costs, the weighted average number of ordinary shares for both basic and diluted is as per the table above. The following table provides the profit figure used as the numerator: 52 weeks 26 weeks 26 weeks ended 30 ended 30 ended 1Dec 2005 June 2006 July 2005 £m £m £m-------------------------------------------------------------------------------- Net profit attributable to ordinary 23.6 shareholders from continuing operations 27.4 1.8 Restructuring costs net of tax 24.7 (2005: no tax benefit was recognised) 1.3 18.0-------------------------------------------------------------------------------- Net profit attributable to ordinary shareholders from continuing operations 48.3 before restructuring costs 28.7 19.8-------------------------------------------------------------------------------- 7. Cash generated by operations 52 weeks 26 weeks 26 weeksended 30 ended 30 ended 1Dec 2005 June 2006 July 2005 £m £m £m-------------------------------------------------------------------------------- Profit from continuing operations before 66.3 restructuring costs, net finance costs & tax 38.0 26.4 Loss from discontinued Group operations (0.7) before net finance costs & tax - (0.8) (9.2) Share of results of joint ventures & associates (4.8) (3.9) 17.0 Depreciation & amortisation 9.9 8.2 (Gain) loss on disposal of property, plant 0.3 & equipment & investments (0.1) 0.1 (0.8) Funding of pension & post-retirement costs (0.2) 0.1 0.4 Exchange - - 1.0 Employee share scheme 0.7 0.4 2.4 (Decrease) increase in provisions (0.3) 1.2 (18.9) Increase in inventories (9.8) (13.3) Decrease (increase) in trade & other (12.3) receivables & construction contracts 4.5 1.3 Increase (decrease) in trade & other 25.8 payables & construction contracts 13.6 (5.6)-------------------------------------------------------------------------------- 71.3 Cash generated by operations 51.5 14.1-------------------------------------------------------------------------------- 8. Dividends paid & proposed 52 weeks 26 weeks 26 weeksended 30 ended 30 ended 1Dec 2005 June 2006 July 2005 £m £m £m-------------------------------------------------------------------------------- Equity dividends declared & paid during the period on ordinary shares: Final dividend for 2005: 9.65p 19.3 (2004: 9.35p) 20.0 19.3 Interim dividend for 2006: 7.3 see below (2005: 3.55p) - --------------------------------------------------------------------------------- 26.6 20.0 19.3-------------------------------------------------------------------------------- Final dividend for 2005 proposed for approval 19.9 by shareholders at the AGM: 9.65p - - Interim dividend for 2006 declared - by the Board: 3.75p (2005: 3.55p) 7.8 7.3-------------------------------------------------------------------------------- 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 dividendpaid 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 forthe dividend. 9. Reconciliation of movements in equity 52 weeks 26 weeks 26 weeksended 30 ended 30 ended 1Dec 2005 June 2006 July 2005 £m £m £m-------------------------------------------------------------------------------- Total recognised income & expense for 53.5 the period 33.1 2.1 1.0 Cost of share-based payment 0.7 0.4 (26.6) Equity dividends (20.0) (19.3) 6.3 Exercise of options 1.2 2.3 (10.7) Cost of purchase of treasury shares - (9.2) (0.3) Acquisition of minority interest - (0.2)-------------------------------------------------------------------------------- 23.2 Net movement in equity 15.0 (23.9) 265.3 Opening equity 291.0 265.3 Adjustments relating to adoption of IAS32 2.5 and IAS39 from 1 January 2005 - 2.5-------------------------------------------------------------------------------- 291.0 Closing equity 306.0 243.9-------------------------------------------------------------------------------- 10. Exchange ratesThe principal exchange rates applied in the preparation of these interim financial statements were as follows: 52 weeks 26 weeks 26 weeksended 30 ended 30 ended 1Dec 2005 June 2006 July 2005-------------------------------------------------------------------------------- Average rate 1.81 US dollar (per £) 1.80 1.86 2.39 Australian dollar (per £) 2.42 2.42 1.47 Euro (per £) 1.45 1.47 2.19 Canadian dollar (per £) 2.03 2.30-------------------------------------------------------------------------------- Closing rate 1.72 US dollar (per £) 1.83 1.79 2.35 Australian dollar (per £) 2.48 2.35 1.46 Euro (per £) 1.44 1.48 2.01 Canadian dollar (per £) 2.03 2.19-------------------------------------------------------------------------------- INTERIM RESULTS--------------- The interim results will be sent to shareholders and copies will be availablefrom The Weir Group PLC, Clydesdale Bank Exchange, 20 Waterloo Street, GlasgowG2 6DB. Interim Dividend Payable: 10 November 2006 Interim dividend will be paid to shareholders on the register at close ofbusiness on 13 October 2006. Details contained in the interim report can be downloaded from The Weir Groupwebsite at: www.weir.co.uk INDEPENDENT REVIEW REPORT TO THE WEIR GROUP PLC Introduction We have been instructed by the Company to review the financial information forthe 26 weeks ended 30 June 2006 which comprises the Consolidated IncomeStatement, Consolidated Balance Sheet, Consolidated Cash Flow Statement,Consolidated Statement of Recognised Income & Expenditure and the related notes1 to 10. We have read the other information contained in the interim report andconsidered whether it contains any apparent misstatements or materialinconsistencies with the financial information. This report is made solely to the Company in accordance with guidance containedin Bulletin 1999/4 'Review of interim financial information' issued by theAuditing Practices Board. To the fullest extent permitted by law, we do notaccept 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, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures should be consistentwith those applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4'Review of interim financial information' issued by the Auditing Practices Boardfor use in the United Kingdom. A review consists principally of making enquiriesof Group management and applying analytical procedures to the financialinformation and underlying financial data, and based thereon, assessing whetherthe accounting policies and presentation have been consistently applied, unlessotherwise disclosed. A review excludes audit procedures such as tests ofcontrols and verification of assets, liabilities and transactions. It issubstantially less in scope than an audit performed in accordance withInternational Standards on Auditing (UK and Ireland) and therefore provides alower level of assurance than an audit. Accordingly we do not express an auditopinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the 26 weeks ended30 June 2006. Ernst & Young LLP Glasgow 17 August 2006 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Weir Group