2005 - The Weir Group

The Weir Group PLC Annual Report 2005
Chief Executive’s Review: 2005 again demonstrated
the successful execution of the Weir Group strategy,
exiting activities which were non-core, restructuring
those that had historically under-performed, increasing
our exposure to higher growth markets and delivering
improvements to underpin future growth. We remain
on course to realise significant further improvements
in 2006.
In the Annual Report published in 2002, we first defined our ambition
to achieve sector-best performance by targeting those markets which
offered the most attractive prospects and where we had a realistic ability
to lead. 2005 proved to be a critical point on our journey: we restructured
our under-performers, exiting a number of low margin activities and
acquired Gabbioneta which competes in the higher margin, high growth
oil sector.
The benefits of these strategies were evident in our second half results,
delivering higher order input, continuing operational improvements and
strong growth in our core areas of business. The year also demonstrated
the Group’s capabilities to integrate new business activities with the
seamless entry of Gabbioneta into the Clear Liquid group.
“Our operational plans are well developed
and the realignment of the Group portfolio
will improve both margins and the
robustness of future earnings.”
Our Journey to Excellence
Engineering Products Division
Engineering Products includes the combined activities of our Minerals,
Clear Liquid and Valves & Controls businesses which all supply pumps
and valves to the flow control industry. The Division collectively grew its
input, revenue and profits when compared to the same period last year.
Input grew 11.5% to £559.7m with excellent results from the Minerals
activities offsetting the planned reductions in our UK Clear Liquid and
Valves & Controls operations. Revenue grew 13.2% to £505.6m against
£446.5m in 2004.
Before restructuring costs, the results from the operations of Engineering
Products grew 31.5% to £42.3m with an underlying margin of 8.4%
against 7.2% last year.
The collective businesses work closely together and share many facets
of their operations across geographic and product boundaries. The
businesses combine their activities in the emerging markets where
individually they would be unable to fund the necessary cost. In China,
our purchasing, logistics and quality infrastructure manages the low
cost sourcing of components for the Engineering Products Division.
Chinese demand for oil, power and mining products makes it essential
for Weir to have a presence in China. Our approach is to combine our
collective needs: Minerals investing in a foundry, Valves & Controls in
an assembly and test facility and all activities sharing sales offices in
the key industrial centres.
The restructuring activities at both Weir Pumps and the UK Valves &
Controls business were critical to the performance of the Engineering
Products Division. I am pleased with the achievements made during
the year using common practices and dedicated teams to ensure that
a consistent approach was taken as they moved through the various
stages towards completion.
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