Views
3 years ago

The-Weir-Group-PLC-Annual-Report-2013

The-Weir-Group-PLC-Annual-Report-2013

Strategic

Strategic Report: Financial Review FINANCIAL REVIEW CONTINUED Operating profit from continuing operations before exceptional items and intangibles amortisation decreased by 4% to £467m (2012 restated: £485m). Although year on year there was a minimal currency translation impact, movements in the average exchange rates from the first to second half had an adverse effect on operating profit of £11m in H2, relative to H1 average rates. The main driver of this was the US dollar which moved from an average of $1.54:£1 in H1 to $1.58:£1 in H2, ending the year at $1.64:£1. Subdued demand for Pressure Pumping original equipment was only partly offset by a first contribution from acquisitions and good growth in aftermarket revenue. One-off costs of £8.0m were incurred in the period (2012: £9.3m) of which £2.7m (2012: £4.0m) related to acquisition transaction and integration costs. Acquisitions contributed profit of £33.7m. There were no profits from other Group companies (2012: £2.5m). Unallocated costs were £14.0m (2012: £15.4m), reflecting targeted cost management initiatives and reduced discretionary spend. Operating margin from continuing operations before exceptional items and intangibles amortisation was 19.2%, an increase of 10 basis points on the prior period (2012: 19.1%; 19.2% on a constant currency basis). On a like for like basis, the operating margin was 18.5% (2012: 19.5%). Sequential margin improvement was seen in the second half in each division. With regard to Minerals the operating margin was 20.6% (2012: 19.4% constant currency) for the full year, reflecting the strengthening aftermarket revenue mix alongside benefits from procurement initiatives, productivity gains and effective cost control. The Oil & Gas full year operating margin was 22.7% (2012: 25.0% constant currency) reflecting lower Pressure Pumping activity and higher one-off costs, only partially offset by the positive impact of acquisitions and a good performance in Downstream and Service businesses. As expected, H2 margins at 23.5% were higher than the first half of 21.8%. The operating margin in Power & Industrial was 9.5% (2012: 9.8% constant currency) with the impact of improved operational performance and higher activity levels leading to second half margins 380 basis points higher than the H1. Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA) Depreciation of property, plant and equipment in the period was £59.1m (2012: £49.4m) resulting in EBITDA of £525.6m (2012 restated: £534.5m). Exceptional items and intangibles amortisation An exceptional gain of £70.5m (2012: £20.2m) combined with an intangibles amortisation charge of £46.7m (2012: £36.7m) resulted in total Group operating profit for the year of £490.3m (2012 restated: £468.6m). The increase in amortisation year on year is a direct result of the 2013 acquisitions. The exceptional gain in the current year relates to two items: (i) the release of the contingent consideration liability for Weir Mathena of £67.8m; and (ii) the curtailment gain of £2.7m recorded following the decision to close one of our main pension plans to future accrual with effect from 30 June 2015. The Mathena contingent consideration liability has been reduced to nil following the continuation of the depressed natural gas price which led to certain customers reducing their gas drilling activity in the second half of the year, resulting in the short term forecasts for the business no longer supporting payment of the contingent consideration. The exceptional credit in the prior year comprises the net of three items, the largest of which was the gain on sale of LGE Process of £30.5m which was completed on 28 December 2012. Offsetting this are: (i) a charge of £4.5m representing the uplift of inventory to net realisable value on acquisition being charged against profits as the inventory is sold; and (ii) an uplift of £5.8m to the net present value of contingent consideration payable in respect of the acquisition of Weir International. Net finance costs Total net finance costs, including exceptional items, were £59.1m (2012 restated: £47.9m). There are four components of this net charge, the most significant being the interest cost of £47.9m (2012: £46.5m) on the Group’s borrowings (including amounts in relation to derivative financial instruments). The other elements are finance income of £3.0m (2012: £5.2m), a charge of £3.5m (2012 restated: £4.0m) in relation to the Group’s defined benefit pension plans and an exceptional cost of £10.7m (2012: £2.6m) being the unwind of the discount on the contingent consideration liability. 44 The Weir Group PLC Annual Report and Financial Statements 2013

Overview Strategic Review Operational Review Corporate Governance Financial Statements Operating margins 1 (%) 19.2% +10bps 20% Profit before tax 2 (£m) £418m -5% £500m 19% 19.1 19.2 £400m 396 440 418 18% 18.0 £300m 2011 2012 2013 2011 2012 2013 1. Continuing operations excluding exceptional items and intangibles amortisation. 2. 2012 restated to reflect the impact of IAS 19 on pension costs The unwind of the discount on the contingent consideration liability is higher than the prior year due to an amount being recorded in relation to Mathena, prior to this liability being released in the second half. The total contingent consideration liability recorded on the balance sheet in respect of all acquisitions is £27.7m (2012: £24.5m). Net finance costs (excluding retirement benefit related amounts and exceptional items) were covered 10.4 times by operating profit from continuing operations, before exceptional items and intangibles amortisation (2012: 11.7 times). Profit before tax from continuing operations but before exceptional items and intangibles amortisation decreased by 5% to £418.1m (2012 restated: £439.8m). Reported profit before tax from continuing operations increased by 2% to £431.2m (2012 restated: £420.7m) after intangibles amortisation of £46.7m (2012: £36.7m) and a net exceptional credit of £59.8m (2012: £17.6m), primarily in relation to the release of the Mathena contingent consideration liability. The tax charge for the year of £107.5m (2012 restated: £123.3m) on profit before tax from continuing operations before exceptional items and intangibles amortisation of £418.1m (2012 restated: £439.8m) represents an underlying effective tax rate of 25.7% (2012: 28.0%), primarily reflecting a lower proportion of US profits. The Group’s policy with regard to tax matters is discussed later in this report. Discontinued operations In 2012, the Group reported income from discontinued operations of £3.3m representing the release of unutilised provisions in relation to previous disposals on expiration of the tax warranty periods. Earnings per share Earnings per share from continuing operations before exceptional items and intangibles amortisation decreased by 2% to 145.4p (2012 restated: 149.0p). Reported earnings per share including exceptional items, intangibles amortisation and profit from discontinued operations was 157.2p (2012 restated: 147.5p). The weighted average number of shares in issue increased to 213.0m (2012: 212.2m). Cash flows Cash generated from operations before working capital movements was in line with the prior year at £514.8m (2012: £515.5m). Working capital cash outflows of £40.9m (2012: £116.9m) showed a significant improvement on the prior period with a second half working capital cash inflow of £21.9m. This second half performance was the result of improved supply chain performance and strong cash collection from receivables. Cash generated from operations increased by 19% from £398.6m in 2012 to £473.9m in 2013 representing an EBITDA to cash conversion ratio of 90% (2012: 75%). Net capital expenditure decreased from £116.3m in 2012 to £97.3m in 2013 with investment to add capacity in Minerals and the addition of rental and service capacity in Oil & Gas. The settlement of financing derivatives resulted in a net cash outflow of £5.0m (2012: £11.0m). Additional pension contributions of £12.1m (2012: £7.5m) were paid in the year in respect of agreed special contributions to the UK schemes. This will fall to £9.6m in 2014. Free cash flow from continuing operations was £168.4m (2012: £62.3m). Outflows in respect of the acquisition of subsidiaries of £202.5m and investments in joint ventures of £14.0m resulted in a closing net debt of £747.0m (2012: £688.9m, £691.5m constant currency). On a reported basis, the ratio of net debt to EBITDA was 1.4 times. Return on capital employed (ROCE) The Group’s ROCE of 19.3% for 2013 (on a like for like basis, excluding Mathena and R Wales) was down on the prior year (2012: 22.2%) primarily reflecting lower Oil & Gas profits and additional investment to support future growth. Dividends The Board is recommending an 11% increase in the full year dividend, the 30th consecutive year of dividend growth, with a final dividend of 33.2p (2012: 30.0p) making a total of 42.0p for the year (2012: 38.0p). Dividend cover (being the ratio of earnings per share from continuing operations before exceptional items and intangibles amortisation to dividend per share) is 3.5 times (2012 restated: 3.9 times). If approved at the Annual General Meeting, the final dividend will be paid on 30 May 2014 to shareholders on the register on 2 May 2014. The Weir Group PLC Annual Report and Financial Statements 2013 45

The Weir Group PLC Excellent Annual Report 2006 Engineering ...
The Weir Group PLC Annual Report and Financial Statements 2012 ...
The Weir Group PLC Excellent Annual Report 2007 Engineering ...
The Weir Group PLC Excellent Annual Report 2008 Engineering ...
MITIE Group PLC Annual Report and Accounts 2013
NoTiCe of ANNuAL GeNerAL MeeTiNG 2013 - The Weir Group
IMI plc annual report 2012
IMI plc - Annual Report 2007
Chemring Group PLC |Annual Report and Accounts 2012
Annual Report & Accounts 2013 - Intermediate Capital Group PLC
Keller Group plc Annual Report and Accounts 2010
MITIE Group PLC Annual Report and Accounts 2008
Annual Report and Accounts 2012 - Petards Group plc
Annual Report 2011 - TalkTalk Telecom Group PLC
2009 Annual Report - Wolfson Microelectronics plc
Spirent plc Annual Report 2004 - Spirent Communications
Oxford Catalysts Group PLC Annual Report and Accounts 2010
SABMiller plc Annual Report 2013 - PrecisionIR
Kier Group plc Annual Report and Accounts 2012
Tesco PLC Annual Report and Financial Statements 2013 - The Group
Healthcare without boundaries - EMIS Group plc Annual report and ...
foresight solar vct plc annual report and accounts - Foresight Group
Full year annual report 2005 - Intermediate Capital Group PLC
2009 Annual Report & Accounts - First Property Group plc
Kesa Electricals plc Annual report 2010/11 - Darty group