Company Announcements

Record orders, strong execution and good strategic progress

Record demand for Weir spares and equipment

•     FY AM orders¹ +17%; capitalising on installed base growth and mining production trends

•     FY OE orders¹ +3%; delivering Weir's sustainable and brownfield solutions

•     Q4 mining markets positive, orders¹ +8% against a very strong comparative

Strong execution: Medium-term targets on track

•     FY revenues¹ +21%; outperforming our markets

•     FY adjusted operating profit^1,2,3 of £395m, +25%

•     Operating margin^2,3 of 16%; +70bps

•     Free operating cash conversion of 87%

•     Cumulative 17% reduction in absolute scope 1&2 emissions vs. 2019 baseline^2,6

Increasing balance sheet strength and returns

•     Lowered net debt to EBITDA to 1.5x; new £300m debt facility agreed in January 2023

•     Return on capital employed² of 15.2%, +320bps

•     Full year dividend of 32.8p; +38%

Expecting another year of growth in 2023

•     Record opening order book and positive mining markets

•     Growth in constant currency revenue, profit and operating margins

•     On track to deliver target of 17% operating margin in 2023

•     Free operating cash conversion of 80% to 90%

	2022	2021	As reported +/-	Constant currency1 +/-
Continuing Operations2
Orders1	£2,644m	£2,323m	n/a	+14%
Revenue	£2,472m	£1,934m	+28%	+21%
Adjusted operating profit3	£395m	£296m	+33%	+25%
Adjusted operating margin3	16.0%	15.3%	+70bps	+60bps
Adjusted profit before tax3	£348m	£249m	+40%	n/a
Statutory profit before tax	£260m	£209m	+24%	n/a
Adjusted earnings per share3	98.4p	71.3p	+38%	n/a
Return on capital employed	15.2%	12.0%	+320bps	n/a
Total Group
Statutory profit after tax	£214m	£259m	-17%	n/a
Statutory earnings per share	82.5p	99.7p	-17%	n/a
Free operating cash conversion	87%	63%	n/a	n/a
Dividend per share	32.8p	23.8p	+38%	n/a
Net debt4	£797m	£773m	-£24m	n/a

^{See footnotes on page 5}

Jon Stanton, Chief Executive Officer said:

"The value creation opportunity for Weir is compelling. The mining industry is playing a crucial role in meeting the twin demands for decarbonisation and economic growth, resulting in multi-decade demand growth for critical metals. Weir is the focused mining technology leader that is well placed to capitalise. Deeply embedded in our customer operations and offering unique engineering expertise and innovation, our solutions are delivering excellent outcomes for all stakeholders.

This is reflected in the proven performance of our mining businesses through the cycle, and was further evidenced in 2022. We are making mining smarter, more efficient and sustainable. We are growing faster than our markets, strengthening margins and cash and reducing our CO₂ footprint. We are underpinning our continued progress through our commitment to our future technology roadmap with increased investment in R&D, and a sharper focus on execution through Performance Excellence.

So our future is exciting. Reflecting high levels of confidence in this strategy to deliver long-term sustainable profitable growth, the Board has approved a final dividend of 19.3p, an increase of 57% on 2021."

A webcast of the management presentation will begin at 08:00 (GMT) on 1 March 2023 at www.investors.weir. A recording of the webcast will also be available at www.investors.weir.

 

CHIEF EXECUTIVE OFFICER'S REVIEW

Introduction

2022 was a landmark year for Weir. We demonstrated the benefits of focus: winning share in favourable markets, executing strongly and taking significant steps towards achieving our medium-term targets. We outgrew our markets and delivered significant year-on-year growth in revenue, profit and cash generation.

We also made excellent strategic progress. Highlights included the launch of our redefined mill circuit, our production partnership model in ESCO and the next generation of our proprietary digital platform, Synertrex^®. Our safety performance improved with a 13% like-for-like reduction in the rate of total incidents⁵ (TIR), while in July, we announced our Performance Excellence programme, which will drive further operational efficiency across the Group. Our recent acquisitions, Motion Metrics and Carriere Industrial Supply (CIS), both performed very well and ahead of initial expectations.

Our strong performance across all metrics reflects the outstanding work of Weir colleagues across the globe, and I would like to take this opportunity to thank them. Collectively, they dealt with the consequences of the horrific Russian invasion of Ukraine, widespread disruption to global supply chains, inflation at the highest level in a generation and the lingering effects of both the Covid-19 pandemic and 2021 cyber incident. To have delivered so strongly in 2022 with all of this going on is a testament to their commitment, passion and resilience. I am extremely proud of the team.

Looking ahead, I am hugely excited about the future of Weir and our commitment to deliver excellent outcomes for all stakeholders. In 2022 we set out a refreshed equity case centred on our leading position in highly attractive markets and our unique capabilities to make mining smart, efficient and sustainable. This overall positioning and focus gives us confidence that we can outgrow our markets, expand our margins and convert our earnings to cash, while remaining resilient and doing the right thing for our people and the planet, all of which was demonstrated in 2022.

Growth: Ore production trends drive strong demand for Weir solutions

Throughout the year, conditions in mining markets were highly favourable. Across most key commodities, market prices were significantly above miners' cost to produce and end market demand was high. This was particularly the case for energy transition metals, such as copper, as physical inventory levels tightened through the year.

With large greenfield expansion projects slow to convert, miners met demand by accelerating production from existing assets and by developing harder and more complex ore deposits. This, coupled with a growing installed base and the effects of declining ore grades, drove record demand for our aftermarket spares and expendables. In OE, we won market share as miners ordered Weir solutions to debottleneck and improve the efficiency of existing assets. In particular, we saw strong demand for our industry-leading Warman^® mill circuit pumps that have significant productivity and sustainability benefits relative to competitor solutions.

Demand was strong in all regions, with North America supported by particularly high levels of activity in the Canadian oil sands and Asia Pacific seeing a strong recovery in Australia. Our growing geographical footprint allowed us to capitalise on new demand in ASEAN countries as miners made strategic investments in the region, such as in nickel expansion projects in Indonesia. Our new service centre in Kazakhstan enabled us to support growing demand from customers in Central Asia, including a series of recently developed copper projects.

In infrastructure markets, demand was stable at high levels in the first half of the year. Demand was lower in Europe during the second half as activity levels in end markets fell. Demand also softened, to a lesser extent, in the US during the fourth quarter.

On a constant currency basis, the Group delivered strong year-on-year order growth of 14%.

Demand for AM was particularly strong and constant currency orders grew 17% year-on-year, reaching record levels.

In OE, constant currency orders were up 3% year-on-year. Orders in the prior year included the £36m Ferrexpo HPGR and £32m Indonesia electric pumps orders, and excluding these large orders from the prior year comparator, constant currency orders were up 16%.

Revenue was 21% higher on a constant currency basis as we converted our order book.

Margins and resilience: Strong execution delivers operating margin³ expansion

In 2022 we were successful in managing a complex operating environment, where rising levels of inflation were a mainstay and bottlenecks in global logistics channels were present for much of the year. Our market leading positions enabled us to increase prices and pass through all input cost inflation, while our vertically integrated regional manufacturing model gave us protection from supply chain challenges, and ensured our customers had continued access to our equipment and spares to keep mines running.

Adjusted operating profit^2,3 was 25% higher than in the prior year on a constant currency basis and operating margins^2,3 were 16.0%, up 70bps on an as reported basis. This expansion reflects movement in Minerals revenue mix towards AM, underlying operational efficiency and the mitigation of inflationary pressures, and represents good progress towards our 2023 target of 17% operating margin.

In July 2022, we launched our Performance Excellence programme outlining our ambition to grow margins above 17% beyond 2023. The programme will drive further operational efficiency across the Group and deliver £30m of annualised run-rate savings in 2025, with an expected one-off cost of up to £45m phased across the three years. Plans to deliver the programme remain on track, and as expected, we will see the early benefits in 2023.

Returns: Free operating cash conversion target achieved

Early in 2022 we introduced a new free operating cash conversion metric, which measures free operating cash flow relative to operating profit³. Our target for 2022 was to achieve between 80% and 90%.

Our focus on execution and working capital efficiency delivered significant cash generation, particularly during the final quarter of the year, resulting in full year free operating cash conversion of 87%.

Our strong cash conversion meant net debt to EBITDA fell to within our target range, being 1.5x at the end of December (2021: 1.9x). While, year-on-year, return on capital employed improved by 320bps to 15.2%.

In January 2023 we put in place a new £300m medium-term loan which, combined with our US$800m sustainability linked bond and US$800m multi-currency revolving credit facility, ensures the Group retains substantial levels of liquidity at highly favourable interest rates. This was followed, in February 2023, by the repayment of the final US$200m tranche of the Group's US Private Placement debt.

Reflecting high levels of confidence in our strategy and future prospects, the Board has today announced a final dividend of 19.3 pence per share. This equates to a total full year dividend of 32.8 pence per share, which is 33% of adjusted EPS for the period, in line with our capital allocation policy.

Safety and sustainability: SBTi aligned absolute carbon reduction targets

Sustainability is core to Weir's purpose and is a critical priority for the mining industry. In 2022, we committed to more ambitious SBTi aligned carbon reduction targets. These included an update to absolute, rather than intensity linked, reduction targets for scope 1&2 emissions, and also the introduction of a scope 3 emissions reduction target. Our scope 3 emissions include our customers' scope 1&2 emissions, and Weir solutions and technology are playing a key role in helping our customers reduce their emissions and deliver against their own carbon reduction targets. Indeed, our top ten customers have all set targets to reduce scope 1&2 emissions by between 30% and 50% by 2030.

During the year, we delivered a 3% absolute year-on-year reduction in our scope 1&2 emissions, in the context of revenue growth of over 20%. We also increased the amount of electricity we source from renewables to 22% as we installed new solar panel arrays at our sites in Chile, Malaysia and South Africa. This means we have now delivered a cumulative 17% reduction in our absolute scope 1&2 emissions, relative to our 2019 baseline.

We also started work to quantify scope 4, avoided emissions, for key products in our portfolio. Over time, we anticipate using the outputs of this work to enhance our overall customer value proposition, while creating the potential for Weir to recognise green revenue.

With respect to safety, our TIR⁵ for the year was 0.41, representing a 9% improvement on the prior year of 0.45. Excluding the impact from acquired businesses, 2022 TIR⁵ reduced by 13% to 0.39. During the year we also enhanced our strategy on safety with the launch of our new Zero Harm Behaviours framework, which will drive further improvements as we seek to eliminate harm in our operations.

Compelling value creation opportunity for all stakeholders

The long-term value creation opportunity for the Group is compelling. Mining has a critical role to play in decarbonisation as, over the coming decades, the world needs significantly more metals to transition to Net Zero, and meet increasing demands driven by continued GDP growth. However, to unlock the supply needed, the mining industry must adopt new technologies and become more sustainable.

Weir's unique world class engineering expertise, coupled with our clear strategic framework focused on People, Customer, Technology and Performance means we are well placed to capitalise on this opportunity.

Critical to this is our technology roadmap and R&D framework. In 2022, we reiterated our commitment to increase our investment in R&D to 2% of revenue, while also increasing the amount of spend allocated to addressing our customers' biggest sustainability challenges. These can be summarised in the five key themes of: Move less rock; Use less energy; Use water wisely; Create less waste; and Boost with digital.

Our technology roadmap aligns to these themes, and in 2022, we launched several new solutions. This included our redefined mill circuit, which is underpinned by our new technology partnerships with STM for stirred mills and Eriez for coarse particle flotation. These technologies, when packaged into an integrated solution with our energy saving High Pressure Grinding Rolls (HPGRs) and our industry leading cyclones and pumps, significantly reduce ore reprocessing, improving mine productivity while reducing energy and water consumption.

We successfully rolled out Motion Metrics^TM products through the ESCO sales network and integrated the technology with ESCO hardware to create a packaged productivity solution. This underpins our production partnership model, and has enabled us to explore new ways of working with our customers where our revenue is linked to the productivity benefits we deliver.

Going forward, our ambition is to capitalise on our footprint in both the mining pit and processing plant by connecting and integrating our solutions across the full value chain to deliver compounding benefits.

Specifically, in our mine of the future, Motion Metrics^TM vision technology will ensure only the right rock is moved from the pit to the plant to be processed, and data captured on critical rock characteristics will enable processing to be optimised. Our processing technologies will reduce energy consumption and ensure that water is used wisely, and by having only the right ore entering the process, efforts will be expended on processing higher grade material, rather than waste. For the waste that is produced, our Terraflowing^™ solutions will balance water recovery with tailings stability and energy consumption. Furthermore, our proprietary digital systems will capture data across the whole value chain, enabling pre-emption of potential issues and operating conditions to be optimised.

This will further strengthen our position as a critical supplier to the mining industry as it pursues its sustainability ambitions. The combination of this market opportunity, coupled with our unique capabilities, underpins our commitment to deliver excellent outcomes for all our stakeholders.

Outlook

We begin 2023 with a record order book and positive conditions in mining markets, where high levels of activity, coupled with miners' focus on sustainable operations, are driving demand for our AM spares and brownfield OE solutions.

In 2023, we therefore expect to deliver growth in constant currency revenue, profit and operating margin. We are on track to deliver our target of 17% operating margin in 2023, supported by operational efficiencies and early benefits from Performance Excellence, and expect free operating cash conversion of between 80% and 90%.

Further out, the long-term fundamentals for mining and our business are highly attractive, underpinned by decarbonisation, GDP growth and the transition to sustainable mining. We have a clear strategy to grow ahead of our markets, with specific growth initiatives underpinning our ambition to deliver through-cycle mid-to-high single digit percentage revenue growth. Beyond 2023, Performance Excellence will support margin expansion above 17% and we expect free operating cash conversion to increase to between 90% and 100%.

Board changes

After completing her full nine-year term, Mary Jo Jacobi will be stepping down from the Board at the AGM and Ebbie Haan has decided not to seek re-election.

We are Weir strategic framework: 2022 performance

Each year the Group sets strategic and ESG measures aligned to the 'We are Weir' framework of People, Customer, Technology and Performance. The table below summarises our 2022 performance and rating against each of these measures, with full details outlined in our 2022 Annual Report.

	Strategic initiatives	2022 Measures	2022 Performance and rating
People	Deliver on Zero Harm for our people and the environment   Accelerate our purpose-driven culture and lead in inclusion, diversity and equity   Create talent and capabilities for the future	•   Retain our talent	•   Voluntary attrition < 11%	G
		•   Build our digital capability	•   Growth in core digital team   •   Senior Leaders trained on Weir Digital Vision	G   G
		•   Maintain top quartile engagement scores	•   Engagement score of 8.5; top quartile of benchmark	G
		•   Improve our Safety Total Incident Rate (TIR)*	•   On a like-for-like basis, TIR of 0.39 (2021: 0.45)	G
		•   Improve our gender diversity*	•   % of female employees improved by 0.7%	G
Customer	Outgrow our markets through voice-of-customer led initiatives   Solve our customers' biggest smart, efficient and sustainable challenges   Show leadership in our industries' pathway to Net Zero	•   Execute our top 3 strategic growth initiatives in each division	•   Minerals executed its strategy on Integrated Solutions, spares and OE market share gains   •   ESCO executed its strategy on mining G.E.T., infrastructure G.E.T. and mining buckets	G       G
		•   Establish new strategic alliances	•   CIS acquisition; and new STM & Eriez partnerships	G
		•   Develop our scope 4 value proposition*	•   Phase 1 product evaluations completed	G
Technology	Invest in innovating transformational solutions   Digitally enable everything we do   Create new business and business models from data and insights	•   Secure market acceptance of our top 3 horizon 1 innovations in each division	•   Innovations launched; market acceptance ongoing	G
		•   Digitise our current business model	•   Minerals: Grew Synertrex installed base   •   ESCO: CA$26m sales from Motion Metrics	G     G
		•   Create and deploy Future Back Strategy	•   Minimum viable proposition for priority opportunities developed and mobilised	G
		•   Build pipeline and commercialise sustainability focused technologies and solutions*	•   Priority projects underway or completed	G
		•   Progress our priority acceleration R&D projects*	•   Ore characterisation: equipment on customer site for commencement of trial   •   Additive manufacturing: technologies successfully integrated	G       G
Performance	Drive clear, lean and agile operations and supply chain   Deliver high quality, efficient back-office functions   Expand margins and deliver strong cash conversion	•   Improve our lean scores	•   Improved Level 2 & 3 scores	G
		•   Grow the percentage of Group revenue covered by Finance shared services	•   >80% Group revenue covered by Finance shared services	G
		•   Reduce scope 1&2 CO2e vs 2019 base aligned with SBTi*	•   17% absolute CO2e reduction achieved and verified	G
		•   Evaluate SBTi scope 3 targets*	•   Scope target in process of being validated by SBTi and embedded in CO2e strategy	G

*ESG measures

Notes:

The Group Financial Highlights and Divisional Financial Reviews include a mixture of GAAP measures and those which have been derived from our reported results in order to provide a useful basis for measuring our operational performance. Adjusted results are for continuing operations before adjusting items as presented in the Consolidated Income Statement. Details of other alternative performance measures are provided in note 2 of the Audited Results contained in this press release.

1.     2021 restated at 2022 average exchange rates.

2.     Continuing operations excludes the Oil & Gas Division, which was sold to Caterpillar Inc. in February 2021 and the Saudi-Arabian joint venture, which was sold to Olayan Financing Company in June 2021.

3.     Profit figures before adjusting items. Continuing operations statutory operating profit was £308m (2021: £257m). Total operations operating cash flow (cash generated from operations) excludes additional pension contributions, exceptional and other adjusting cash items, and income tax paid. Total operations net cash generated from operating activities was £321m (2021: £156m).

4.     2021 has been restated to reflect the finalisation of the Motion Metrics opening balance sheet. Details of the restatement are provided in note 1 of the Audited Results contained in this press release.

5.     Total incident rate is an industry standard indicator that measures lost time and medical treatment injuries per 200,000 hours worked.

6.     Market-based absolute CO₂ emissions. 2019 is the baseline year for our SBTi-aligned Scope 1&2 target of 30% reduction in absolute emissions by 2030.

 

DIVISIONAL REVIEW

Minerals

Minerals is a global leader in products and integrated solutions for smart, efficient and sustainable processing in mining and infrastructure markets.

2022 Summary

•     FY: AM orders¹ +18%; demand driven by mining production trends and growth in installed base

•     FY: OE orders¹ +2%; demand driven by sustainable and brownfield solutions

•     Strong execution: revenue¹ +20%; operating profit^1,2 +24%

2022 Operating Review

The Division benefited from high levels of mining activity and growth in its installed base, which drove strong demand for spares across all product categories, culminating in record annual AM orders. In OE, customers ordered solutions to debottleneck and improve the efficiency of existing assets, and in particular, we saw strong demand for our industry-leading Warman^® slurry pumps.

Our focus on execution delivered record levels of divisional revenue and operating profit. Operating momentum built through the year, resulting in strong revenue growth and operating margin expansion in the second half of the year as we converted our growing order book.

People

Safety performance remained a priority for the Division, and this is reflected in a 25% year-on-year reduction in total incident rate (TIR) to 0.27 (2021: 0.36). This performance positions the Division as one of the safest organisations in its sector, and is particularly pleasing in the context of strong revenue growth and increased levels of activity in our facilities.

People development was also in focus, with over 200 customer facing colleagues completing our proprietary 'Mill Circuit University' training programme, while in total around 10,000 learning and development courses were completed by Minerals colleagues during 2022.

Customers

During the year, the Division made good progress in its geographical expansion initiative, particularly in Central and South East Asia. Notable progress included expansion of our installed base across multiple projects in high-grade nickel applications in Indonesia, with £33m of OE orders received through the year for packages of GEHO positive displacement pumps.

Across our core product lines customers continued to recognise the benefits of our leading technology and global service network. This manifested in market share gains across the mill circuit, as the Division converted over 75% of its trials against competitor equipment. Furthermore, good progress was made in delivering our comminution strategy, including our first sale of a pebble crushing plant to a large Tier 1 copper mine in South America.

Technology

Technology highlights in the year included new partnership agreements with Eriez, for course particle flotation technology, and STM, for tower mills. These technologies, combined with Weir's sustainable solutions, form part of our redefined mill circuit that has significant energy and efficiency benefits relative to traditional technologies.

In Q4, the Division also launched the next generation of its proprietary Synertrex^® platform. The system provides data-driven insights on equipment performance, enabling early identification of issues and optimised maintenance planning, thereby improving efficiency and mine productivity.

Performance

The Division continued to drive operational efficiency, supported by investments in both systems and capacity. Significant facility investments included the opening of a new facility in Bangalore, which will drive efficiencies across our operations in India, and also a new rubber mixing facility in Malaysia.

The roll-out of SAP also progressed well, with operations in India successfully migrating in Q3, meaning around 85% of the Division now operates the system. The final stages of the roll-out are scheduled for 2023, with the migration of our Middle East and Africa businesses scheduled for the first half of the year.

2022 Financial Review

Constant currency £m	H11	H2	2022	20211	Growth1
Orders OE	265	296	561	547	2%
Orders AM	687	689	1,376	1,170	18%
Orders Total	952	985	1,937	1,717	13%
Revenue OE	200	258	458	425	8%
Revenue AM	597	725	1,322	1,057	25%
Revenue Total	797	983	1,780	1,482	20%
Adjusted operating profit2	138	186	324	261	24%
Adjusted operating margin2	17.3%	18.9%	18.2%	17.6%	60bps
Operating cash flow2	106	280	386	227	70%
Book-to-bill	1.19	1.00	1.09	1.16

1. 2021 and 2022 H1 restated at 2022 average exchange rates except for operating cash flow.

2. Profit figures before adjusting items. Operating cash flow (cash generated from operations) excludes additional pension contributions, exceptional and other adjusting cash items, and income tax paid. Refer to note 2 of the Audited Results contained in this press release for further details of alternative performance measures.

Orders increased by 13% on a constant currency basis to £1,937m (2021: £1,717m) with a book-to-bill of 1.09 reflecting strong order growth and a focus on execution. OE orders increased 2% year-on-year, with demand predominantly driven by brownfield solutions to debottleneck and improve the efficiency of existing assets, as miners accelerated ore production and large projects remained slow to convert. Through the year, we saw benefits from our geographical expansion strategy, with our increased presence in Central and South East Asia driving strong growth as we supplied equipment to copper and nickel mines in the region. AM orders were up 18% year-on-year as prices of most key commodities remained well above cost of production, incentivising miners to increase activity levels and develop more complex and lower grade ore bodies. Growth also reflects year-on-year price increases. AM orders represented 71% of total orders (2021: 68%). In total, mining end markets accounted for 75% of total orders (2021: 77%).

Revenue was 20% higher on a constant currency basis at £1,780m (2021: £1,482m) as order activity remained strong and the Division's focus on execution converted orders to revenue. Revenue grew through the period, with H2 revenue 23% higher on a sequential basis. Product mix moved slightly towards AM, which accounted for 74% of full year revenue (2021: 71%).

Adjusted operating profit increased 24% on a constant currency basis to £324m (2021: £261m) as the Division benefited from increased volumes, favourable mix and strong operational execution. Costs in the year included an adverse transactional FX impact of £9m, while discretionary spend, such as travel, returned to normal levels following lower spend during the Covid-19 pandemic. Prior year costs also included under-recoveries due to the cyber incident in Q3 and a one-off gain from the sale of a property in China.

Adjusted operating margin on a constant currency basis was 18.2% (2021: 17.6%), with the +60bps improvement driven by favourable mix, operating efficiency and the non-repeat of under-recoveries from the cyber incident in the prior year. Benefits are partially offset by the impact of adverse transactional FX and the normalisation of discretionary spend.

Operating cash flow² increased by 70% to £386m (2021: £227m) reflecting growth in operating profit and a reduced working capital outflow of £18m (2021: outflow of £89m). Working capital movements comprised inventory build to support the growing order book and a reduction in receivables as revenue in H2 was more evenly loaded relative to the prior year.

 

ESCO

ESCO is a global leader in Ground Engaging Tools (G.E.T.), attachments, and artificial intelligence and machine vision technologies that optimise productivity for customers in global mining and infrastructure markets.

2022 Summary

•     FY: Orders¹ +17%; demand for expendables driven by high levels of mining activity

•     Strong execution: revenue¹ +22%; operating profit^1,2 +18%

2022 Operating Review

The Division benefited from high levels of activity in mining markets, which drove strong demand for expendables. Growth was also supported by a contribution from acquired businesses, with both Motion Metrics and Carriere Industrial Supply (CIS) performing ahead of expectations. The Division's focus on execution delivered strong year-on-year growth in revenue and operating profit.

People

In terms of safety, excluding the impact from acquired businesses, TIR was 0.90 (2021: 0.85). While an increase on the prior year, the Division achieved a reduction in incident severity and a decrease in TIR in its North American foundries, both of which were focus areas for the year.

Key learning and development initiatives included training programmes for the next generation of operational leaders and the roll-out of the Division's foundry process control training. Other highlights included technical training for ESCO sales teams on Motion Metrics^TM solutions.

Customers

Across our core mining G.E.T. portfolio, the Division gained market share with positive net conversions in the year. We saw particularly strong conversion rates in Indonesia and Australia, and in due course, expect to see a corresponding increase in demand for expendables in these regions. In addition, customer interest in our mining attachments proposition continued to gain traction, with orders up significantly year-on-year, including the first sale of cable shovel buckets to longstanding G.E.T. customers in Chile and Canada.

The Division also made good progress on its geographical expansion initiative and strategy to have direct channels to market in all major mining regions. This included the acquisition of CIS and the establishment of a direct channel to market, in partnership with Minerals, in Central Asia.

Technology

The performance of Motion Metrics was a technology highlight for the Division. In addition to core range expansions and new module releases, the technology was successfully integrated with ESCO's hardware to create a packaged productivity solution that underpins ESCO's production partnership model. During the year, the first reference site for this new model was established, whereby our revenue is directly linked to the productivity benefits we deliver. Incremental productivity benefits will be achieved through the Division's proprietary ore characterisation technology, and initial field trials of this commenced in the fourth quarter.

The Division also made progress on a number of new digital tools to support operations. This included the launch of a new digital supply chain tool, and the development of a digital configurator, which customers will use when ordering mining attachments. Both systems will improve customers' buying experience, while also driving operational efficiency.

Performance

Improving operational efficiency of foundry operations is a key priority for the Division. Good progress was made in the year with the roll-out of digital process optimisation tools, and the commencement of the construction of the Division's new foundry in Xuzhou, China, which will deliver significant efficiency and capacity benefits. Other footprint investments in the period included a new facility in Edmonton, Canada, which will improve the efficiency of the Division's operations in the region.

2022 Financial Review

Constant currency £m	H11	H2	2022	20211	Growth1
Orders OE	25	19	44	39	14%
Orders AM	341	322	663	567	17%
Orders Total	366	341	707	606	17%
Revenue OE	17	26	43	37	18%
Revenue AM	312	337	649	532	22%
Revenue Total	329	363	692	569	22%
Adjusted operating profit2	53	57	110	93	18%
Adjusted operating margin2	16.1%	15.7%	15.9%	16.3%	-40bps
Operating cash flow2	25	68	93	86	8%
Book-to-bill	1.11	0.94	1.02	1.07

1. 2021 and 2022 H1 restated at 2022 average exchange rates except for operating cash flow.

2. Profit figures before adjusting items. Operating cash flow (cash generated from operations) excludes additional pension contributions, exceptional and other adjusting cash items, and income tax paid. Refer to note 2 of the Audited Results contained in this press release for further details of alternative performance measures.

Orders increased 17% on a constant currency basis to £707m (2021: £606m). This includes a £52m contribution from the acquisitions of Motion Metrics and CIS. Organic order growth of 8% was driven by strong demand for mining expendables, particularly from customers in South America, and year-on-year price increases. In infrastructure markets, demand was stable at high levels in the first half of the year before moving lower in Europe during the second half and also softening, to a lesser extent, in the US during the fourth quarter. The Division's book-to-bill for the year was 1.02 as a result of a combination of growing orders and strong execution. AM represented 94% of orders (2021: 94%) reflecting ESCO's business model as a provider of highly engineered expendables to mining and infrastructure markets.

Revenue increased 22% on a constant currency basis to £692m (2021: £569m). Mining represented 60% of revenues (2021: 56%) and infrastructure was 28% (2021: 31%).

Adjusted operating profit increased 18% on a constant currency basis to £110m (2021: £93m) as the Division benefited from increased volumes. In the prior year, the Division benefited from the favourable phasing of price increases relative to raw material purchase contract renewals, and from temporary cost savings as discretionary spend, such as travel, was at lower levels during the Covid-19 pandemic.

Adjusted operating margin of 15.9% was 40bps lower on a constant currency basis (2021: 16.3%). Offsetting operational efficiencies was the reversal of non-recurring benefits in the prior year and the dilutive effect of Motion Metrics as it delivered significant year-on-year revenue growth and was break even at an operating profit level. This was in line with expectation as the business scaled rapidly while also investing significantly in R&D. In line with the acquisition plan, we expect Motion Metrics to be accretive to ESCO operating margins in 2023.

Operating cash flow² increased by 8% to £93m (2021: £86m), reflecting growth in operating profit offset by a higher working capital outflow of £33m (2021: outflow of £13m). Growth in working capital was driven by inventory build and an increase in receivables, reflecting order book and revenue growth respectively.

 

GROUP FINANCIAL REVIEW

		Constant currency1		As reported
Continuing Operations £m	2022	2021	Growth	2021	Growth
Orders OE	605	586	3%	n/a	n/a
Orders AM	2,039	1,737	17%	n/a	n/a
Orders Total	2,644	2,323	14%	n/a	n/a
Revenue OE	501	462	9%	446	12%
Revenue AM	1,971	1,589	24%	1,488	32%
Revenue Total	2,472	2,051	21%	1,934	28%
Adjusted operating profit2	395	316	25%	296	33%
Adjusted operating margin2	16.0%	15.4%	60bps	15.3%	70bps
Book-to-bill	1.07	1.13	n/a	1.14	n/a
Total Group £m
Operating cash flow2	448	n/a	n/a	266	68%
Free operating cash conversion	87%	n/a	n/a	63%	n/a
Net debt	797	n/a	n/a	773	-24

1. 2021 restated at 2022 average exchange rates.

2. Profit figures before adjusting items. Operating cash flow (cash generated from operations) excludes additional pension contributions, exceptional and other adjusting cash items, and income tax paid. Refer to note 2 of the Audited Results contained in this press release for further details of alternative performance measures.

Continuing operations orders at £2,644m increased 14% on a constant currency basis with growth in both Divisions. Minerals orders were up 13% with AM up 18% as prices of most key commodities remained well above cost of production, incentivising miners to increase activity levels and develop more complex and lower grade ore bodies. ESCO orders increased 17% including a £52m contribution from the acquisitions of Motion Metrics and CIS, while organic order growth was driven by strong demand for mining expendables, particularly from customers in South America, and year-on-year price increases. 77% of orders related to aftermarket compared to 75% in the prior year.

Continuing operations revenue of £2,472m increased 21% on a constant currency basis. Minerals revenue grew 20% on a constant currency basis at £1,780m (2021: £1,482m) ESCO revenue increased 22% on a constant currency basis to £692m (2021: £569m). Aftermarket accounted for 80% of revenues, up from 78% in the prior year. Reported revenues increased 28% (2021: £1,934m), impacted by a foreign exchange translation tailwind of £117m. Overall book-to-bill at 1.07 reflects strong order growth and focus on execution, meaning that we enter 2023 with a record order book.

Continuing operations adjusted operating profit increased by £99m (33%) to £395m on a reported basis (2021: £296m). Excluding a £20m foreign currency translation tailwind, the constant currency increase was £79m (25%). As explained further in the Divisional reviews, Minerals adjusted operating profit increased on a constant currency basis to £324m (2021: £261m) and ESCO increased by 18% on a constant currency basis to £110m (2021: £93m). Unallocated costs are £1m higher than the prior year at £39m.

Continuing operations adjusted operating margin of 16.0% is up 60bps versus last year on a constant currency basis and up 70bps as reported. The main drivers of the margin improvement are increased volumes, favourable mix and strong operational execution. These are partially offset by an adverse transactional foreign exchange impact and re-investment in our medium-term strategic priorities, including R&D increasing to 1.9% of sales, and the anticipated year one dilutive effect of Motion Metrics. As expected, we saw a return of discretionary spend, such as travel, to normal levels following lower spend during the Covid-19 pandemic and this was broadly offset by the non-repeat of the prior year cyber under-recoveries.

Continuing operations statutory operating profit of £308m was £51m favourable to the prior year, with the increase in adjusted operating profit of £99m being offset by an increase in adjusting items.

Continuing operations adjusting items increased by £47m to £87m (2021: £40m). Intangibles amortisation increased by £1m to £36m (2021: £35m). Exceptional items increased by £49m to £49m (2021: net nil), primarily due to the wind down of our Russian operations, which totalled £44m. This reflects the loss on disposal of our ESCO Russia business in September 2022, as well as the write down of our Minerals Russia business and associated assets as trading is wound down. Continuing operations included Russia revenue of £52m and adjusted operating profit of £8m which was slightly ahead of the prior year. Other exceptional items included acquisition and integration costs relating to Motion Metrics and Carriere Industrial Supply of £2m and initial costs relating to our Performance Excellence programme of £3m. Other adjusting items relating to the Group's legacy US asbestos-related provision reduced to £3m (2021: £4m).

Continuing operations net finance costs were £47m (2021: £47m) with a reduction in finance costs of £2m being offset by lower interest income. Finance costs decreased following the settlement of private placement debt in February 2022, which resulted in an improved interest rate mix. This was partially offset by a foreign currency translation headwind of £4m on USD denominated debt.

Continuing operations adjusted profit before tax was £348m (2021: £249m), after a foreign currency translation tailwind of £16m. The statutory profit before tax from continuing operations of £260m compares to £209m in 2021, the increase is primarily due to the increase in adjusted operating profit offset by the increase in adjusting items.

Continuing operations adjusted tax charge for the year of £93m (2021: £64m) on profit before tax from continuing operations (before adjusting items) of £348m (2021: £249m) represents an adjusted effective tax rate (ETR) of 26.6% (2021: 25.6%). Our ETR is principally driven by the geographical mix of profits arising in our business and, to a lesser extent, by the impact of Group financing and transfer pricing arrangements. A tax credit of £45m has been recognised in relation to continuing operations adjusting items (2021: £9m). This includes an exceptional tax credit of £32m following the recognition of US tax attributes that were previously held off balance sheet.

Continuing operations profit after tax before adjusting items is £255m (2021: £185m). The statutory profit after tax for the year from continuing operations is £213m (2021: £155m).

Discontinued operations statutory profit after tax for the year from discontinued operations was £1m (2021: £104m) reflecting a tax credit related to the Oil & Gas Division which was disposed in the prior year.

Statutory profit for the year after tax from total operations of £214m (2021: £259m) reflects the increase in profit from continuing operations of £58m offset by the reduction in discontinued operations of £103m.

Adjusted earnings per share from continuing operations increased by 38% to 98.4p (2021: 71.3p) reflecting the increased profit offset by higher effective tax rate in the year. Statutory reported earnings per share from total operations is 82.5p (2021: 99.7p). The weighted average number of shares in issue was 258.7m (2021: 259.3m).

Acquisition of Carriere Industrial Supply

The Group completed the acquisition of Carriere Industrial Supply Limited on 8 April 2022 for an enterprise value of CAD$33m (£20m) less customary debt and working capital adjustments, which resulted in initial cash consideration of £16m and deferred consideration of £3m, of which £1m has now been paid. CIS contributed £27m to revenue and adjusted operating profit of £6m in the period from acquisition. These values are inclusive of revenue and margin which would have been earned pre-acquisition on sales from ESCO to CIS under the former distributor model.

Cash flow and net debt

Cash generated from total operations² increased by £182m to £448m (2021: £266m) in the year, with the prior year including an outflow of £14m from discontinued operations. The cash generated from continuing operations² increased by £168m primarily driven by the increase in adjusted operating profit, coupled with an improvement in working capital of £54m (2022: outflow of £49m vs 2021: £103m). The outflow in working capital in the year reflects our continued investment in growth, with inventory increasing as operations prepare to execute a record closing order book. This was partially offset by a decrease in debtors as we seek to improve our cash cycle, and despite 15% year-on-year revenue growth in the last quarter. As a result, working capital as a percentage of sales decreased to 24% from 28% in the prior year. Continuing operations utilised non-recourse invoice discounting facilities, primarily customers supply chain financing facilities, of £45m (2021: £19m) and suppliers chose to utilise supply chain financing facilities of £54m (2021: £33m). Net cash generated from operations is £321m (2021: £156m).

Net capital expenditure increased by £19m to £58m (2021: £39m), in part due to the prior year including £12m net proceeds from the sale of a property in China. Lease payments of £31m increased from £28m last year mainly due to the acquisitions of Motion Metrics and Carriere Industrial Supply.

Free operating cash flow increased by £157m to £342m (2021: £185m) resulting in operating cash conversion (refer to note 2 of the Audited Results) of 87% (2021: 63%). This was a result of the above noted improvement in cash generation, partially offset by the increase in capital expenditure in the year. Over the medium-term, we continue to target operating cash conversion of 90% to 100% driven by working capital efficiency and maintaining capex and lease costs close to one times depreciation. Capex is likely to be elevated above this level for the next year as we construct our new ESCO foundry in China and complete our roll-out of SAP and other digital initiatives, resulting in cash conversion between 80% and 90% over 2023.

Free cash flow from total operations was an inflow of £193m (2021: £62m). In addition to the movements noted above, this was primarily impacted by an increase in tax payments of £11m and an £11m decrease in proceeds on settlement of derivative financial instruments.

Net debt increased by £24m to £797m (2021 restated: £773m) and includes £115m (2021: £105m) in respect of IFRS 16 'Leases'. The movement reflects free cash inflow of £193m, offset by foreign exchange retranslation of £101m, dividends of £67m, acquisition of Carriere Industrial Supply of £15m, exceptional cash flows of £26m and other movements of £8m. Net debt to EBITDA on a lender covenant basis was 1.5 times (2021: 1.9 times) compared to a covenant level of 3.5 times.

In April 2022, the Group completed the refinancing of its US$950m Revolving Credit Facility (RCF), which was due to expire in June 2023. This was replaced with a US$800m RCF, which will mature in April 2027, with the option to extend for up to a further two years. The RCF includes a link to the Group's sustainability goals and the covenant terms are unchanged. In January 2023, the Group added a further £300m loan facility, which will expire in January 2024, subject to a one-year extension option. These refinancing actions result in the Group having more than £800m of immediately available committed facilities and cash balances following the maturity of US$200m of US Private placement debt in February 2023.

Pensions

The net IAS 19 funding position improved from a deficit of £57m at December 2021 to a net surplus of £15m at December 2022. This is primarily due to changes in financial assumptions, which resulted in a gain of £303m (2021: £54m), mainly due to the rise in discount rates over the period, partially offset by losses on plan assets of £224m (2021: gain £8m). These movements contributed to a credit of £65m (2021: £96m) being recognised in the Consolidated Statement of Comprehensive Income.

 

Appendix 1 - 2022 continuing operations¹ quarterly order trends

	Reported growth
Division	2021 Q1	2021 Q2	2021 Q3	2021 Q4	2021 FY	2022 Q1	2022 Q2	2022 Q3	2022 Q4	2022 FY
Original Equipment	66%	50%	71%	9%	45%	-18%	-3%	13%	19%	2%
Aftermarket	-1%	9%	16%	29%	13%	23%	18%	25%	6%	18%
Minerals	15%	20%	30%	23%	22%	9%	11%	21%	10%	13%
Original Equipment	76%	17%	65%	-9%	36%	-17%	98%	-6%	14%	14%
Aftermarket	-2%	31%	34%	40%	24%	37%	19%	14%	1%	17%
ESCO	2%	30%	36%	37%	25%	32%	23%	13%	2%	17%
Original Equipment	67%	48%	71%	8%	45%	-17%	2%	12%	19%	3%
Aftermarket	-2%	14%	21%	32%	16%	28%	18%	21%	5%	17%
Continuing Ops	11%	22%	31%	26%	22%	15%	14%	19%	8%	14%
Book-to-bill	1.22	1.20	1.14	1.01	1.14	1.22	1.13	1.02	0.95	1.07

 

	Like-for-like growth2
Division	2021 Q4	2022 Q1	2022 Q2	2022 Q3	2022 Q4	2022 FY
Original Equipment	9%	-18%	-3%	13%	19%	2%
Aftermarket	29%	23%	18%	25%	6%	18%
Minerals	23%	9%	11%	21%	10%	13%
Original Equipment	-9%	-17%	98%	-6%	14%	14%
Aftermarket	39%	31%	9%	5%	-10%	8%
ESCO	36%	27%	13%	4%	-9%	8%
Original Equipment	8%	-17%	2%	12%	19%	3%
Aftermarket	32%	26%	15%	18%	1%	14%
Continuing Ops	26%	14%	12%	17%	5%	12%
Book-to-bill	1.01	1.21	1.14	1.02	0.94	1.07

 

	Quarterly orders3 £m
Division	2021 Q1	2021 Q2	2021 Q3	2021 Q4	2021 FY	2022 Q1	2022 Q2	2022 Q3	2022 Q4	2022 FY
Original Equipment	136	156	132	123	547	113	152	149	147	561
Aftermarket	261	309	274	326	1,170	322	365	342	347	1,376
Minerals	397	465	406	449	1,717	435	517	491	494	1,937
Original Equipment	12	8	11	8	39	10	15	11	8	44
Aftermarket	131	137	142	157	567	178	163	162	160	663
ESCO	143	145	153	165	606	188	178	173	168	707
Original Equipment	148	164	143	131	586	123	167	160	155	605
Aftermarket	392	446	416	483	1,737	500	528	504	507	2,039
Continuing Ops	540	610	559	614	2,323	623	695	664	662	2,644

 

	Like-for-like orders2,3 £m
Division	2021 Q4	2022 Q1	2022 Q2	2022 Q3	2022 Q4	2022 FY
Original Equipment	123	113	152	149	147	561
Aftermarket	326	322	365	342	347	1,376
Minerals	449	435	517	491	494	1,937
Original Equipment	8	10	15	11	8	44
Aftermarket	157	172	149	149	141	611
ESCO	165	182	164	160	149	655
Original Equipment	131	123	167	160	155	605
Aftermarket	483	494	514	491	488	1,987
Continuing Ops	614	617	681	651	643	2,592

 

 

Appendix 2 - Foreign exchange (FX) rates and continuing operations¹ profit exposure

	2022 average FX rates	2021 average FX rates	Percentage of FY 2022 operating profits4
US Dollar	1.24	1.38	49%
Australian Dollar	1.78	1.83	14%
Euro	1.17	1.16	6%
Canadian Dollar	1.61	1.73	16%
Chilean Peso	1,078.02	1,043.54	14%
South African Rand	20.19	20.34	3%
Brazilian Real	6.39	7.42	3%
Chinese Yuan	8.30	8.88	3%
Indian Rupee	97.06	101.70	2%

1. Continuing operations excludes the Oil & Gas Division, which was sold to Caterpillar Inc. in February 2021 and the Saudi-Arabian joint venture, which was sold to Olayan Financing Company in June 2021.

2. Like-for-like excludes the impact of Motion Metrics acquired on 30 November 2021 and Carriere Industrial Supply Limited acquired on 8 April 2022.

3. 2021 restated at 2022 average exchange rates.

4. Profit figures before adjusting items. Refer to note 2 of the Audited Results contained in this press release for further details of alternative performance measures.

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 PLC's ("the Group") financial position, business strategy, plans (including development plans and objectives relating to the Group'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 Group 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 Group's present and future business strategies and the environment in which the Group will operate in the future. These forward-looking statements speak only as at the date of this document. The Group 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 Group'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.

 

AUDITED RESULTS

 

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2022

		Year ended 31 December 2022			Year ended 31 December 2021
		Adjusted results	Adjusting items (note 5)	Statutory results	Adjusted results	Adjusting items (note 5)	Statutory results
	Notes	£m	£m	£m	£m	£m	£m
Continuing operations
Revenue	3	2,472.1	-	2,472.1	1,933.6	-	1,933.6
Continuing operations
Operating profit before share of results of joint ventures		392.3	(87.3)	305.0	294.5	(39.6)	254.9
Share of results of joint ventures		2.5	-	2.5	1.7	-	1.7
Operating profit		394.8	(87.3)	307.5	296.2	(39.6)	256.6
Finance costs		(51.0)	-	(51.0)	(52.7)	-	(52.7)
Finance income		3.7	-	3.7	5.6	-	5.6
Profit before tax from continuing operations		347.5	(87.3)	260.2	249.1	(39.6)	209.5
Tax (expense) credit	6	(92.5)	44.9	(47.6)	(63.8)	9.4	(54.4)
Profit for the year from continuing operations		255.0	(42.4)	212.6	185.3	(30.2)	155.1
Profit (loss) for the year from discontinued operations	7	1.2	-	1.2	(2.2)	106.1	103.9
Profit (loss) for the year		256.2	(42.4)	213.8	183.1	75.9	259.0
Attributable to:
Equity holders of the Company		255.8	(42.4)	213.4	182.6	75.9	258.5
Non-controlling interests		0.4	-	0.4	0.5	-	0.5
		256.2	(42.4)	213.8	183.1	75.9	259.0
Earnings per share	8
Basic - total operations				82.5p			99.7p
Basic - continuing operations		98.4p		82.0p	71.3p		59.6p
Diluted - total operations				82.0p			99.0p
Diluted - continuing operations		97.8p		81.5p	70.8p		59.2p

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2022

		Year ended	Year ended
		31 December 2022	31 December 2021
		£m	£m
Profit for the year		213.8	259.0
Other comprehensive income (expense)
Losses taken to equity on cash flow hedges		-	(0.2)
Exchange gains (losses) on translation of foreign operations		223.1	(29.9)
Reclassification of foreign currency translation reserve on disposal of operations		0.1	(103.4)
Exchange losses on net investment hedges		(124.9)	(18.2)
Reclassification adjustments on cash flow hedges		0.5	0.1
Tax relating to other comprehensive expense to be reclassified in subsequent periods		(0.1)	-
Items that are or may be reclassified to profit or loss in subsequent periods		98.7	(151.6)
Other comprehensive income (expense) not to be reclassified to profit or loss in subsequent periods:
Remeasurements on defined benefit plans		65.3	96.3
Tax relating to other comprehensive income not to be reclassified in subsequent periods		(16.3)	(21.1)
Items that will not be reclassified to profit or loss in subsequent periods		49.0	75.2
Net other comprehensive income (expense)		147.7	(76.4)
Total net comprehensive income for the year		361.5	182.6
Attributable to:
Equity holders of the Company		360.8	182.5
Non-controlling interests		0.7	0.1
		361.5	182.6
Total net comprehensive income (expense) for the year attributable to equity holders of the Company
Continuing operations		359.6	183.3
Discontinued operations		1.2	(0.8)
		360.8	182.5

 

 

CONSOLIDATED BALANCE SHEET

AT 31 DECEMBER 2022

			Restated (note 1)
		31 December 2022	31 December 2021
	Notes	£m	£m
ASSETS
Non-current assets
Property, plant & equipment		462.2	415.9
Intangible assets		1,409.9	1,308.4
Investments in joint ventures		15.1	12.3
Deferred tax assets		92.5	57.0
Other receivables		76.8	76.5
Retirement benefit plan assets	14	50.0	-
Total non-current assets		2,106.5	1,870.1
Current assets
Inventories		679.1	516.5
Trade & other receivables		528.9	505.7
Derivative financial instruments	15	8.9	7.1
Income tax receivable		41.3	33.0
Cash & short-term deposits		691.2	564.4
Total current assets		1,949.4	1,626.7
Total assets		4,055.9	3,496.8
LIABILITIES
Current liabilities
Interest-bearing loans & borrowings		406.3	524.1
Trade & other payables		623.5	491.1
Derivative financial instruments	15	13.2	3.8
Income tax payable		7.4	7.6
Provisions	12	35.3	36.3
Total current liabilities		1,085.7	1,062.9
Non-current liabilities
Interest-bearing loans & borrowings		1,082.1	812.8
Other payables		1.0	-
Derivative financial instruments	15	-	0.1
Provisions	12	62.9	69.0
Deferred tax liabilities		51.4	40.8
Retirement benefit plan deficits	14	34.9	56.7
Total non-current liabilities		1,232.3	979.4
Total liabilities		2,318.0	2,042.3
NET ASSETS		1,737.9	1,454.5
CAPITAL & RESERVES
Share capital		32.5	32.5
Share premium		582.3	582.3
Merger reserve		332.6	332.6
Treasury shares		(14.3)	(5.3)
Capital redemption reserve		0.5	0.5
Foreign currency translation reserve		(108.5)	(206.5)
Hedge accounting reserve		1.9	1.5
Retained earnings		899.5	705.9
Shareholders' equity		1,726.5	1,443.5
Non-controlling interests		11.4	11.0
TOTAL EQUITY		1,737.9	1,454.5

The financial statements were approved by the Board of Directors and authorised for issue on 1 March 2023.

 

 

JON STANTON	JOHN HEASLEY
Director	Director

 

 

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2022

		Year ended	Year ended
		31 December 2022	31 December 2021
	Notes	£m	£m
Total operations
Cash flows from operating activities	16
Cash generated from operations		447.8	266.0
Additional pension contributions paid		(9.7)	(7.8)
Exceptional and other adjusting cash items		(14.2)	(8.6)
Exceptional cash items - acquired vendor liabilities		(9.7)	(11.1)
Income tax paid		(93.4)	(82.4)
Net cash generated from operating activities		320.8	156.1
Cash flows from investing activities
Acquisitions of subsidiaries, net of cash acquired	16	(15.2)	(67.9)
Purchases of property, plant & equipment		(56.1)	(44.4)
Purchases of intangible assets		(6.6)	(8.4)
Exceptional cash item - proceeds from sale of property		-	15.8
Other proceeds from sale of property, plant & equipment and intangible assets		4.4	14.3
Disposals of discontinued operations, net of cash disposed and disposal costs	7,16	(0.1)	258.5
Exceptional cash item - disposal of ESCO Russia	16	(2.0)	-
Disposals of joint ventures	16	-	24.0
Interest received		4.6	2.6
Dividends received from joint ventures		2.7	0.7
Net cash (used in) generated from investing activities		(68.3)	195.2
Cash flows from financing activities
Proceeds from borrowings		822.8	794.1
Repayments of borrowings		(958.9)	(903.4)
Lease payments		(30.5)	(27.8)
Settlement of derivative financial instruments		(0.3)	10.6
Interest paid		(49.9)	(45.6)
Dividends paid to equity holders of the Company	9	(66.7)	(29.8)
Dividends paid to non-controlling interests		(0.3)	(0.4)
Purchase of shares for employee share plans		(20.0)	(15.0)
Net cash used in financing activities		(303.8)	(217.3)
Net (decrease) increase in cash & cash equivalents		(51.3)	134.0
Cash & cash equivalents at the beginning of the year		500.0	374.1
Foreign currency translation differences		28.8	(8.1)
Cash & cash equivalents at the end of the year	16	477.5	500.0

 

The cash flows from discontinued operations included above are disclosed separately in note 7.

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2022

 

	Share capital	Share premium	Merger reserve	Treasury shares	Capital redemption reserve	Foreign currency translation reserve	Hedge accounting reserve	Retained earnings	Attributable to equity holders of the Company	Non- controlling interests	Total equity
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
At 31 December 2020	32.5	582.3	332.6	(6.8)	0.5	(55.4)	1.6	408.3	1,295.6	11.3	1,306.9
Profit for the year	-	-	-	-	-	-	-	258.5	258.5	0.5	259.0
Losses taken to equity on cash flow hedges	-	-	-	-	-	-	(0.2)	-	(0.2)	-	(0.2)
Exchange losses on translation of foreign operations	-	-	-	-	-	(29.5)	-	-	(29.5)	(0.4)	(29.9)
Reclassification of exchange gains on discontinued operations	-	-	-	-	-	(103.4)	-	-	(103.4)	-	(103.4)
Exchange losses on net investment hedges	-	-	-	-	-	(18.2)	-	-	(18.2)	-	(18.2)
Reclassification adjustments on cash flow hedges	-	-	-	-	-	-	0.1	-	0.1	-	0.1
Remeasurements on defined benefit plans	-	-	-	-	-	-	-	96.3	96.3	-	96.3
Tax relating to other comprehensive income	-	-	-	-	-	-	-	(21.1)	(21.1)	-	(21.1)
Total net comprehensive (expense) income for the year	-	-	-	-	-	(151.1)	(0.1)	333.7	182.5	0.1	182.6
Cost of share-based payments inclusive of tax charge	-	-	-	-	-	-	-	10.2	10.2	-	10.2
Dividends	-	-	-	-	-	-	-	(29.8)	(29.8)	-	(29.8)
Purchase of shares for employee share plans	-	-	-	(15.0)	-	-	-	-	(15.0)	-	(15.0)
Dividends paid to non-controlling interests	-	-	-	-	-	-	-	-	-	(0.4)	(0.4)
Exercise of share-based payments	-	-	-	16.5	-	-	-	(16.5)	-	-	-
At 31 December 2021	32.5	582.3	332.6	(5.3)	0.5	(206.5)	1.5	705.9	1,443.5	11.0	1,454.5

 

	Share capital	Share premium	Merger reserve	Treasury shares	Capital redemption reserve	Foreign currency translation reserve	Hedge accounting reserve	Retained earnings	Attributable to equity holders of the Company	Non- controlling interests	Total equity
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
At 31 December 2021	32.5	582.3	332.6	(5.3)	0.5	(206.5)	1.5	705.9	1,443.5	11.0	1,454.5
Profit for the year	-	-	-	-	-	-	-	213.4	213.4	0.4	213.8
Exchange gains on translation of foreign operations	-	-	-	-	-	222.8	-	-	222.8	0.3	223.1
Reclassification of foreign currency translation reserve on disposal of operations	-	-	-	-	-	0.1	-	-	0.1	-	0.1
Exchange losses on net investment hedges	-	-	-	-	-	(124.9)	-	-	(124.9)	-	(124.9)
Reclassification adjustments on cash flow hedges	-	-	-	-	-	-	0.5	-	0.5	-	0.5
Remeasurements on defined benefit plans	-	-	-	-	-	-	-	65.3	65.3	-	65.3
Tax relating to other comprehensive income	-	-	-	-	-	-	(0.1)	(16.3)	(16.4)	-	(16.4)
Total net comprehensive income for the year	-	-	-	-	-	98.0	0.4	262.4	360.8	0.7	361.5
Cost of share-based payments inclusive of tax credit	-	-	-	-	-	-	-	8.9	8.9	-	8.9
Dividends	-	-	-	-	-	-	-	(66.7)	(66.7)	-	(66.7)
Purchase of shares for employee share plans	-	-	-	(20.0)	-	-	-	-	(20.0)	-	(20.0)
Dividends to non-controlling interests	-	-	-	-	-	-	-	-	-	(0.3)	(0.3)
Exercise of share-based payments	-	-	-	11.0	-	-	-	(11.0)	-	-	-
At 31 December 2022	32.5	582.3	332.6	(14.3)	0.5	(108.5)	1.9	899.5	1,726.5	11.4	1,737.9

 

 

1. Accounting policies

 

A. Basis of preparation

The audited results for the year ended 31 December 2022 ("2022") have been prepared in accordance with UK-adopted International Accounting Standards and with the requirements of the Companies Act 2006 as applicable to those companies reporting under those standards.

 

The financial information set out in the audited results does not constitute the Group's statutory financial statements for the year ended 31 December 2022 within the meaning of section 434 of the Companies Act 2006 and has been extracted from the full financial statements for the year ended 31 December 2022.

 

Statutory financial statements for the year ended 31 December 2021 ("2021"), which received an unqualified audit report, have been delivered to the Registrar of Companies. The reports of the auditors on the financial statements for the year ended 31 December 2021 and for the year ended 31 December 2022 were unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006. The financial statements for the period ended 31 December 2022 will be delivered to the Registrar of Companies and made available to all Shareholders in due course.

 

These financial statements are presented in Sterling. All values are rounded to the nearest 0.1 million pounds (£m) except where otherwise indicated.

 

The financial statements are also prepared on a historic cost basis except where measured at fair value as outlined in the accounting policies.

 

Going concern

The Directors have a reasonable expectation that the Group has adequate resources to continue to operate for a period of at least 12 months from the date of approval of the financial statements. For this reason, they continue to adopt the going concern basis of preparing the financial statements. In forming this view the Directors have reviewed the Group's budget and sensitivity analysis.

 

Basis of consolidation

The Consolidated Financial Statements include the results, cash flows and assets and liabilities of The Weir Group PLC and its subsidiaries, and the Group's share of results of its joint venture. For consolidation purposes, subsidiaries and joint ventures prepare financial information for the same reporting period as the Company using consistent accounting policies.

 

A subsidiary is an entity controlled, either directly or indirectly, by the Company, where control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The results of a subsidiary acquired during the period are included in the Group's results from the effective date on which control is transferred to the Group. The results of a subsidiary sold during the period are included in the Group's results up to the effective date on which control is transferred out of the Group. All intragroup transactions, balances, income and expenses are eliminated on consolidation.

 

Non-controlling interests represent the portion of profit or loss and net assets in subsidiaries that are not held by the Group and are presented within equity in the Consolidated Balance Sheet, separately from the Company Shareholders' equity.

 

New accounting standards, amendments and interpretations

The accounting policies that follow are consistent with those of the previous period, with the exception of the following standards, amendments and interpretations which are effective for the year ended 31 December 2022:

 

i)              Property, plant and equipment: Proceeds before intended use - Amendments to IAS 16;

ii)             Annual improvements to IFRS standards 2018-2020;

iii)            Onerous contracts - Cost of fulfilling a contract - Amendments to IAS 37; and

iv)            Reference to conceptual framework amendments to IFRS 3.

 

The amendments listed above are not considered to have a material impact on the Consolidated Financial Statements of the Group.

 

The following new accounting standards and interpretations have been published but are not mandatory for 31 December 2022:

 

i) Amendments to IAS 1 - Classification of liabilities as current or non-current;

ii) Narrow scope amendments to IAS 1, Practice statement 2 and IAS 8;

iii) Amendment to IFRS 16 - Leases on sale and leaseback;

iv) Amendment to IAS 12 - Deferred tax related to assets and liabilities arising from a single transaction; and

v) IFRS 17 'Insurance contracts' as amended in December 2021.

 

These amendments have not been early adopted by the Group. The impact assessment is ongoing, however, from initial review these standards are not expected to have a material impact on the Group in the current or future reporting periods or on foreseeable future transactions.

 

Climate change

Climate change is considered to be a key element of our overall sustainability roadmap. As well as considering the impact of climate change across our business model, the Directors have considered the impact on the financial statements in accordance with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations. Climate change is not considered to have a material impact on the financial reporting judgements and estimates arising from our considerations. Overall, sustainability is recognised in the market as a growth driver for Weir and a key part of our investment case. This is consistent with our assessment that climate change is not expected to have a detrimental impact on the viability of the Group in the medium-term. Specifically we note the following:

•       The impact of climate change has been included in the modelling to assess the viability and going concern status of the Group, both in terms of the preparation of our Strategic Plan, which underpins our viability statement modelling, and the modelling of our severe, but plausible downside scenarios;

•       Our assessment of the carrying value of goodwill and intangible assets included consideration of scenario analysis of potential climate change on our end markets and this did not introduce a set of circumstances that were considered could reasonably lead to an impairment;

•       The impact on the carrying value and useful lives of tangible assets has been considered and while we continue to invest in projects to reduce our carbon impact, there is not considered to be a material impact on our existing asset base; and

•       In May 2021, the Group successfully completed the issuance of five-year US$800m Sustainability-Linked Notes. The cost of meeting our linked targets in 2024 has been considered within the above modelling and the impact is not material.

Further detail on our science-based targets and performance against them is included in the Emissions Strategy in the Strategic Report section of the Annual Report.

 

B. Prior year restatement

Following the acquisition of Motion Metrics during the year ended 31 December 2021, the Group has completed the review of the opening balance sheet (OBS) position acquired. As part of this process, the Group has identified the adjustments below that are required to the opening balance sheet, which was reported in the 2021 Annual Report.

 

Restated Consolidated Balance Sheet (extract)
at 31 December 2021
	As previously reported	Adjustment to OBS	Restated
	£m	£m	£m
Non-current assets
Property, plant & equipment	415.3	0.6	415.9
Intangible assets	1,308.3	0.1	1,308.4
Current assets
Inventories	517.1	(0.6)	516.5
Income tax receivable	32.0	1.0	33.0
Current liabilities
Interest-bearing loans & borrowings	523.9	0.2	524.1
Trade & other payables	490.6	0.5	491.1
Provisions	36.5	(0.2)	36.3
Non-current liabilities
Interest-bearing loans & borrowings	812.3	0.5	812.8
Deferred tax liabilities	40.7	0.1	40.8
NET ASSETS	1,454.5	-	1,454.5

 

C. Use of estimates and judgements

The Group's significant accounting policies are set out below. The preparation of the Consolidated Financial Statements, in conformity with IFRS, requires management to make judgements that affect the application of accounting policies and estimates that impact the reported amounts of assets, liabilities, income and expense.

 

Management bases these judgements on a combination of past experience, professional expert advice and other evidence that is relevant to each individual circumstance. Actual results may differ from these judgements and the resulting estimates, which are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the year in which the estimate is revised.

 

Areas requiring significant judgement in the current year and on a recurring basis are presented to the Audit Committee.

 

Critical judgments and estimates

The areas where management considers critical judgements and estimates to be required, which are areas more likely to be materially adjusted within the next 12 months due to inherent uncertainty regarding estimates and assumptions, are those in respect of the following:

 

i)              Retirement benefits (estimate)

The assumptions underlying the valuation of retirement benefit assets and liabilities include discount rates, inflation rates and mortality assumptions, which are based on actuarial advice. Changes in these assumptions could have a material impact on the measurement of the Group's retirement benefit obligations.

 

ii)             Provisions (judgement/estimate)

Management judgement is used to determine when a provision is recognised, taking into account the commercial drivers that gave rise to it, the Group's previous experience of similar obligations and the progress of any associated legal proceedings. The calculation of provisions typically involves management estimates of associated cash flows and discount rates. The key provision, which currently requires a greater degree of management judgement and estimate is the US asbestos provision and associated insurance asset, details of which are included in note 12.

 

iii)             Deferred taxation (estimate)

The level of current and deferred tax recognised in the financial statements is dependent on subjective judgements as to the interpretation of complex international tax regulations and, in some cases, the outcome of decisions by tax authorities in various jurisdictions around the world, together with the ability of the Group to utilise tax attributes within the time limits imposed by the relevant tax legislation. The value of the recognised US deferred tax asset in relation to US tax attributes is based on expected future US taxable profits with reference to the Group's ten-year forecast period and assumptions over the intended use of these tax attributes during this period. The application of this model and its underlying assumptions may result in future changes to the deferred tax asset recognised. In particular, the recognition of US deferred tax assets relating to deferred intra-group interest deductions is based upon the current policy and modelling demonstrating full utilisation of that attribute over the ten-year forecast period. If the current policy were to change then the utilisation of this tax attribute, as demonstrated by the model, may reduce resulting in a reduction in US deferred tax asset recognised of a maximum of £41.2m. 

 

Other estimates

iii)             Taxation (estimate)

The Group faces a variety of tax risks, which result from operating in a complex global environment, including the ongoing reform of both international and domestic tax rules in some of the Group's larger markets and the challenge to fulfil ongoing tax compliance filing and transfer pricing obligations given the scale and diversity of the Group's global operations.

 

The Group makes provision for open tax issues where it is probable that an exposure will arise including, in a number of jurisdictions, ongoing tax audits and uncertain tax positions including transfer pricing which are by nature complex and can take a number of years to resolve. In all cases, provisions are based on management's interpretation of tax law in each country, as supported where appropriate by discussion and analysis undertaken by the Group's external advisers, and reflect the single best estimate of the likely outcome or the expected value for each liability. Provisions for uncertain tax positions are included in current tax liabilities and total £7.1m at 31 December 2022.

 

The Group believes it has made adequate provision for such matters although it is possible that amounts ultimately paid will be different from the amounts provided, but not materially within the next 12 months.

 

Tax disclosures are provided in note 6.

 

D. Accounting policies

Adjusting items

 

In order to provide the users of the Consolidated Financial Statements with a more relevant presentation of the Group's performance, statutory results for each year have been analysed between:

i)              adjusted results; and

ii)             the effect of adjusting items.

The principal adjusting items are summarised below. These specific items are presented on the face of the Consolidated Income Statement, along with the related adjusting items' taxation, to provide greater clarity and a better understanding of the impact of these items on the Group's financial performance. In doing so, it also facilitates greater comparison of the Group's underlying results with prior years and assessment of trends in financial performance. This split is consistent with how business performance is measured internally.

 

i)              Intangibles amortisation

Intangibles amortisation is expensed in line with the other intangible assets policy, with separate disclosure provided to allow visibility of the impact of both:

a)             intangible assets recognised via acquisition, which primarily relate to items that would not normally be capitalised unless identified as part of an acquisition opening balance sheet. The ongoing costs associated with these assets are expensed; and

b)             ongoing multi-year investment activities, which currently include our IT transformation strategy and digitalisation strategy.

During the year, amortisation of £5.7m (2021: £5.3m) is included within adjusted operating profit in relation to assets which are no longer part of ongoing multi-year investment activities.

 

ii)             Exceptional items

Exceptional items are items of income and expense which, because of the nature, size and/or infrequency of the events giving rise to them, merit separate presentation. Exceptional items may include, but are not restricted to: profits or losses arising on disposal or closure of businesses; the cost of significant business restructuring; significant impairments of intangible or tangible assets; adjustments to the fair value of acquisition-related items such as contingent consideration and inventory; acquisitions and other items deemed exceptional due to their significance, size or nature.

 

iii)             Other adjusting items

Other adjusting items are those that do not relate to the Group's current ongoing trading and, due to their nature, are treated as adjusting items. For example these may include, but are not restricted to, movements in the provision for asbestos-related claims or the associated insurance assets, which relate to the Flow Control Division that was sold in 2019, but the provision remains with the Group and is in run-off, or past service costs related to pension liabilities.

Further analysis of the items included in the column 'Adjusting items' in the Consolidated Income Statement is provided in note 5.