2005 - The Weir Group

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Notes to the Financial Statements (Continued) 28. Commitments & contingencies (continued) Capital commitments Outstanding capital commitments contracted but not provided for: 2005 2004 £'000 £'000 Property, plant & equipment 1,155 4,266 Intangible assets 26 - The Group's share of the capital commitments of its joint ventures amounted to £54,000 (2004: £nil). 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. 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. Guarantees Guarantees and indemnities have been given in respect of the performance of Devonport Royal Dockyard Limited. 29. Related party disclosures The following table provides the total amount of significant transactions which have been entered into with related parties for the relevant financial year and outstanding balances at the year end: Income tax Management Sales to Sales to Amounts owed Amounts owed consortium relief charge to related parties related parties by related to related from related parties related parties - goods - services parties parties £'000 £'000 £'000 £'000 £'000 £'000 Joint ventures 2005 - - 528 1,557 - - 2004 - - 1,046 1,548 - - Associates 2005 2,705 740 845 391 1,598 260 2004 1,582 542 37 556 1,348 407 Group pension schemes 2005 - - - - - 546 2004 - - - - - 818 Contributions to the Group pension schemes are disclosed in notes 4 and 17. Terms & conditions of transactions with related parties Sales to and from related parties are made at normal market prices. Outstanding balances at the year end are unsecured and settlement occurs in cash. There have been no guarantees provided or received for any related party balances. For the 52 weeks ended 30 December 2005, the Group has not raised any provision for doubtful debts relating to amounts owed by related parties as the payment history has been excellent (2004: £nil). This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates. Compensation of key management personnel Key management comprises the Board of directors. Further details of their remuneration can be found in the Remuneration Committee Report on page 31. 2005 2004 £ £ Short-term employee benefits 2,174,809 1,542,766 Post-employment benefits 46,000 77,000 Share-based payments 256,000 97,000 2,476,809 1,716,766 80 The Weir Group PLC Annual Report 2005
30. Financial risk management objectives & policies The Group's principal financial instruments, other than derivatives, comprise bank overdrafts, short-term debt, loans, cash and short-term deposits. The main purpose of these financial instruments is to manage the Group's funding and liquidity requirements. The Group has other financial instruments such as trade receivables and trade payables which arise directly from its operations. The principal financial risks to which the Group is exposed are those relating to foreign currency, commodity price, credit, liquidity and interest rate. These risks are managed in accordance with Board approved policies. Foreign currency risk The Group has invested in operations outside the United Kingdom and also buys and sells goods and services in currencies other than in the functional currency of its subsidiary operations. As a result, the Group's non sterling revenues, profits, assets, liabilities and cash flows can be affected by movements in exchange rates. The Group seeks to minimise its transaction exposure by maintaining a policy that all operating units hedge using forward foreign currency contracts to eliminate exposures on committed transactions over the currency equivalent of £100,000. In addition, it is Group policy that the three companies where the most significant concentration of foreign currency risk has been identified also apply hedge accounting. It is Group policy not to engage in any speculative transaction of any kind. Commodity price risk The Group's exposure to raw material price risk is generally diminished by restricting bid validity to periods within those quoted by suppliers and by material price escalation clauses. Credit risk The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit ratings assigned by international credit rating agencies. The Group's credit risk is primarily attributable to its trade receivables and amounts due under construction contracts. The Group is exposed to risk over a large number of countries and customers and there is no significant concentration of risk. Where appropriate, the Group endeavours to minimise risk by the use of trade finance instruments such as letters of credit and insurance. Credit worthiness checks are also undertaken before entering into contracts with new customers and credit limits are set as appropriate. The amounts presented in the balance sheet are net of allowance for doubtful receivables. An allowance for impairment is made where there is an identifiable loss event which, based on previous experience, is evidence of a reduction in the recoverability of cash flows. Liquidity risk The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, bank loans and finance leases. Interest rate risk The majority of the Group's borrowings are at variable rates of interest. Interest rate risk is regularly monitored to ensure that the mix of variable and fixed rate borrowing is appropriate for the Group in the short to medium term. Based on current levels of net debt, interest rate risk is not considered to be material. The associated cash flow risk, which can have a positive impact on the Group if interest rates decrease as well as a negative impact if interest rates increase, is also not considered to be material. The Weir Group PLC Annual Report 2005 81
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The Weir Group PLC Annual Report 20
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2005 Highlights The Group made sign
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Chairman’s Statement Strategy & s
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Chief Executive’s Review Our Mine
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Operational Review Mining On a comm
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Case Study Ravensthorpe Nickel Proj
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Case Study Weir Gabbioneta: integra
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Case Study Zaporozhye nuclear power
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Case Study Colonial Pipeline, USA C
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Operational Review Defence Despite
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Financial Review Profits from conti
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Board of Directors Operations Execu
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Corporate Governance Statement The
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As part of these procedures, each G
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Nomination Committee Report During
Page 31 and 32: on normal retirement date, currentl
Page 33 and 34: Salary Benefits Total Total & Fees
Page 35 and 36: Shares Shares subject to subject to
Page 37 and 38: Lost time accidents 2001 - 2005 350
Page 39 and 40: Manufacturing industry and engineer
Page 41 and 42: The Weir Group PLC Financial Statem
Page 43 and 44: Independent Auditors Report Indepen
Page 45 and 46: Consolidated Balance Sheet at 30 De
Page 47 and 48: Consolidated Statement of Recognise
Page 49 and 50: On consolidation, the results of fo
Page 51 and 52: Cash & cash equivalents Cash and ca
Page 53 and 54: Treasury shares The Weir Group PLC
Page 55 and 56: 3. Segment information (continued)
Page 57 and 58: 4. Revenues & expenses The followin
Page 59 and 60: 6. Net finance costs (a) Finance co
Page 61 and 62: 8. Discontinued operations On 8 Jul
Page 63 and 64: 9. Earnings per share (continued) 2
Page 65 and 66: 12. Intangible assets Customer Purc
Page 67 and 68: 14. Investments in joint ventures &
Page 69 and 70: 16. Equity settled share-based paym
Page 71 and 72: 16. Equity settled share-based paym
Page 73 and 74: 17. Pensions & other post-employmen
Page 75 and 76: 17. Pensions & other post-employmen
Page 77 and 78: 23. Interest-bearing loans & borrow
Page 79 and 80: 26. Share capital & reserves 2005 2
Page 81: 27. Additional cash flow informatio
Page 85 and 86: 31. Financial instruments (continue
Page 87 and 88: 32. Transition to International Fin
Page 93 and 94: Directors Statement of Responsibili
Page 95 and 96: Company Balance Sheet 30 December 2
Page 97 and 98: Derecognition of financial assets &
Page 99 and 100: 5. Debtors 2005 2004 £’000 £’
Page 101 and 102: 9. Retirement benefits (continued)
Page 103 and 104: 11. Reserves Capital Share Treasury
Page 105 and 106: Principal Companies of the Group Th
Page 107: Financial Calendar Ex-dividend date
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2005 - The Weir Group

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