WEIR Weir Group Plc

 

 

 

 

The Weir Group PLC interim results for the six months ended 30 June 2024

 

AM strength continuing and project outlook improving

FY operating profit and cash conversion guidance reiterated

 

Resilient demand for aftermarket spares and expendables

•     High levels of activity in hard rock mining driving group AM orders¹ +2%

•     Strength of copper and gold markets more than offsetting mine specific headwinds

•     £31m AM order split between Q2 and Q4 on retention of multi-year contract; all booked in Q2 in PY

Strong execution and delivery of Performance Excellence benefits

•     Group adjusted operating margin^1,3 17.8%, +180bps

•     Cumulative Performance Excellence savings of £13m to date, on track to deliver full year benefit

•     Free operating cash conversion 68%, +17pp

FY outlook: Growing H2 order pipeline with operating profit and cash guidance reiterated

•     £53m greenfield contract awarded in July for an HPGR-led project

•     Revenue toward the lower end of the current range of analysts' expectations*

•     Operating margin³ expected to be c.18%, ahead of prior guidance

•     Free operating cash conversion of 90% to 100%

	H1 2024	H1 2023	As reported +/-	Constant currency1 +/-
Continuing Operations2
Orders1	£1,253m	£1,275m	n/a	-2%
Revenue	£1,207m	£1,300m	-7%	-3%
Adjusted operating profit3	£215m	£212m	+2%	+8%
Adjusted operating margin3	17.8%	16.3%	+150bps	+180bps
Adjusted profit before tax3	£193m	£188m	+3%	n/a
Statutory profit before tax	£165m	£170m	-3%	n/a
Adjusted earnings per share3	53.6p	53.4p	0%	n/a
Return on capital employed	17.9%	16.3%	+160bps	n/a
Total Group
Statutory profit after tax	£117m	£126m	-7%	n/a
Statutory earnings per share	45.3p	48.8p	-7%	n/a
Free operating cash conversion	68%	51%	+17pp	n/a
Dividend per share	17.9p	17.8p	+1%	n/a
Net debt5	£738m	£690m**	-£48m	n/a

^{*Company compiled consensus from 12 July 2024, Group revenue range of £2,596m to £2,758m.}

^{**As of 31 December 2023. For all other footnotes see page 4.}

Jon Stanton, Chief Executive Officer said:

"Our performance in the first half of the year is another proof point along the journey to deliver market leading through-cycle growth at sustainably higher margins. The resilience of our aftermarket biased business model and strong delivery of Performance Excellence benefits demonstrate the significant upside potential in our equity case.

 

Looking toward the full year, industry acceptance of our Redefined Mill Circuit is building momentum, and

our pipeline of greenfield expansion projects is encouraging. Taken together with continued execution of our Performance Excellence programme, we remain on track to deliver our full year guidance for operating profit and cash conversion."

 

A webcast of the management presentation will begin at 08:00 (BST) on 30 July 2024 at ^{www.investors.weir}.  A recording of the webcast will also be available at ^{www.investors.weir}

 

CHIEF EXECUTIVE OFFICER'S REVIEW

Introduction

Our performance in the first half of the year was resilient in the context of current macro-economic uncertainty and geopolitical tension. We delivered strong short-term progress while investing in longer-term strategic growth opportunities, and once again met or exceeded our commitments to stakeholders as a high quality mining focused group.

Overall we saw high levels of activity across the global mining sector, with our resilient aftermarket biased business model delivering well against elevated levels of mine specific challenges. More recent developments in the conversion of our greenfield expansion pipeline illustrates the technology shift now underway in mining. We executed strongly on our Performance Excellence programme, delivering significant year-on-year growth in profit margin, cash conversion and return on capital employed. We have line of sight and remain on track to deliver our target of £60m of absolute savings in 2026.

We made progress against our strategic people initiatives. In an assessment of the UK's 100 largest companies, CCLA Investment Management named Weir as the 'top improver' in its corporate mental health benchmark, and in July we received accreditation as a Global Living Wage Employer from the Fair Wage Network.

On technology, ESCO launched the next generation mining GET solution, Nexsys^TM, providing a step change in productivity for our customers. We will be showcasing Nexsys^TM alongside our other market leading equipment at MINExpo later this year. Minerals continues to make excellent progress with the Redefined Mill Circuit solution and its digital offerings. Both Synertrex^® and Motion Metrics^TM saw an encouraging level of new installations in the period.

Overall, our performance across all metrics reflects the hard work and dedication of Weir colleagues across the globe, and I'd like to thank them for their commitment and contribution to our success.

Looking ahead, the opportunity to deliver compounding growth and margin expansion is compelling. We anticipate our aftermarket focused business model and strategic growth initiatives will drive revenue growth, while the Performance Excellence transformation programme will establish a leaner, more efficient operating model to drive value creation and returns. Together, these factors give me great confidence that we will continue to deliver on our ambition to outgrow our markets, expand our operating margins, convert our earnings cleanly to cash, while remaining resilient and doing the right thing for our people and the planet.

OE growth: Increased conversion potential of larger projects in our pipeline

Through the first half, the majority of our customers remained focused on maximising production from existing assets. This included running equipment harder, developing more complex and lower grade ore bodies and debottlenecking and driving efficiency in existing processes.

As a result, Minerals activity in the first half of the year continued to be dominated by small brownfield debottlenecking and sustainability related projects, with only 3 orders received over £5m, and a large number of smaller orders in line with our expected run rate.

The ESCO pipeline of capital attachments remains encouraging and we are continuing to see strong demand for our technology-led solutions, although customer approvals are slightly lagging last year at this stage.

As a result, OE constant currency orders declined by 13% year-on-year.

More encouragingly we see an improvement in the conversion potential of larger greenfield projects in our pipeline, principally in Asia and Africa. We have been awarded a £53m greenfield contract already in July for a high pressure grinding rolls (HPGR) led project, while others are close to approval and expected to be booked in the second half of this year. Notably, the Enduron^® large format HPGR is prominent in many of these greenfield projects reflecting the growing reputation from its performance at recently commissioned reference sites.

AM growth: Good levels of activity despite site specific challenges

Overall we saw good levels of activity across the global mining sector. Gold and copper producers were very active, iron and oil sands stable, while nickel and lithium producers remain under pressure from lower commodity prices.

Geographically, demand in most regions was ahead of the prior year with the exception of Central and West Africa where activity levels were weak. Both Minerals and ESCO saw an elevated level of mine specific headwinds, such as the shutdowns in nickel and lithium operators in Australia, and in Panama and Türkiye.

In infrastructure, demand was stable overall with solid activity in North America and strong growth in dredge orders offsetting continued subdued demand in Europe.

Against this backdrop, our aftermarket biased business model once again demonstrated its highly resilient nature with orders up 2% in constant currency terms as customer challenges in certain markets were more than offset by strong growth elsewhere.

As previously indicated, the large annual recurring order usually received in Minerals during the second quarter has been split this year between the second and fourth quarter due to the timing of the contract renewal - the net effect being c.£14m of aftermarket orders have shifted to the second half. In 2025, the full annual order of around £31m is expected to be received in the second quarter once again.

Revenue and margins: Strong execution across the business

Despite strong execution in the second quarter, revenue in the first half declined 3% on a constant currency basis due to phasing of OE shipments, the normalisation of demand from the Canadian oil sands market and the absence of revenue from Russia following our exit. The Group's book-to-bill increased to 1.04.

Input costs through the first half were stable, with only minor headwinds from raw material prices and freight availability. Wage inflation continues, however at lower levels than our prior year comparator. Our market leading positions and brands enabled us to capture annualised increases in price to maintain or expand gross margins, though we expect the benefit of these to normalise in the second half.

We made good progress in our Performance Excellence programme. Our Weir Business Services are now deployed across the majority of our regions and we completed a number of capacity optimisation projects, including the official opening of our new ESCO foundry in Xuzhou and relocation of our rubber process streams within the APAC region. Further to our plans to optimise our APAC supply chain, we recently announced our intent to relocate our rubber spool manufacturing from Australia to our existing operations in India.

On a constant currency basis adjusted operating profit grew by 8% and adjusted operating margins were 17.8%, up 180bps on a constant currency basis. This improvement reflects strong operational efficiency, a movement in Minerals revenue mix towards AM, and incremental Performance Excellence benefits.

Returns: Continued growth in return on capital employed

Free operating cash conversion increased to 68% as a result of a strong performance in working capital and a decrease in capital expenditures. Our performance represents a significant 17 percentage point improvement on the prior year. We remain firmly on track to deliver our full year guidance of 90% to 100% free operating cash conversion.

As a result, we expect to further de-lever the balance sheet, leaving net debt to EBITDA in the lower half of our guidance range of 0.5 to 1.5 times EBITDA by the end of the year.

Return on capital employed (ROCE) for the 12 months to the end of June was 17.9%, an increase of 160bps relative to the same measurement point in the prior year.

The Board has approved an interim dividend of 17.9 pence per share (2023: 17.8p). This is in line with our policy of distributing one third of adjusted EPS and represents a 1% increase on the prior year. The interim dividend will be paid on 1 November 2024 to Shareholders on the register on 4 October 2024.

Safety and sustainability: Focus on zero harm

On safety, while lost time injuries reduced by close to 50% overall, I am very sad to report that one of our colleagues suffered a fatal incident earlier this year. Our north star is, and will always be, the pursuit of zero harm - returning every Weir employee home safely at the end of the working day is our paramount focus. This accident was a stark reminder of the need to maintain a relentless concentration on this objective. Overall the Group's total incident rate⁴ (TIR) increased slightly year-on-year to 0.35.

For the second year running, we achieved a place on the global environmental non-profit Carbon Disclosure Project's (CDP) prestigious 'A List' for leadership in corporate transparency and performance on climate change. Retaining our 'A' rating reflects our commitment to making mining smart, efficient and sustainable and our continued progress in executing our sustainability strategy. We are continuing our work to build our avoided emissions reporting beyond the Redefined Mill Circuit and are on track to exceed our 2023 baseline.

 

Outlook: Full year operating profit and cash conversion guidance on track

Activity levels in our mining markets are positive. Customers are focused on maximising ore production and on improving the efficiency and sustainability of existing operations, which will continue to drive demand for our AM spares and expendables and brownfield OE solutions.

In aftermarket we are expecting to see a step up in growth rates for orders in the second half driven by the commissioning of new installed base, the re-phasing of the Q2 multi-period order, and normalised comparatives for oil sands.

We now see OE demand being supplemented by conversions in greenfield expansion projects in the second half with a £53m contract award already received in July and others potentially to follow. These orders will convert to revenue in 2025 and beyond and underpin our through-cycle growth ambitions.

Overall we are reiterating our full year guidance for constant currency growth in operating profit. Revenue is now expected to be at the lower end of the range of current analyst estimates. Operating margins are expected to be c.18%, ahead of our previous guidance and supported by further progress on Performance Excellence, with some of the mix and pricing benefits seen in the first half expected to moderate.

We expect free operating cash conversion of between 90% and 100%, in line with previous guidance with capex moving more in line with depreciation and further improvements in working capital.

Further out, the fundamentals for our business are highly attractive. The world is looking to our customers to provide the natural resources needed to support the transition to a net zero economy. This in turn presents us an opportunity to deliver innovative mining technology solutions necessary to meet this challenge, underpinning our ambition to deliver through-cycle mid to high single digit percentage revenue growth. Our commitment to continuous improvement, embodied by the Performance Excellence programme, is well on track to deliver compounding benefits and support margin expansion to 20% in 2026 and beyond. Our strong cash generation and balance sheet give us future optionality to allocate capital to prioritise growth in total shareholder returns.

 

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 Interim Financial Statements contained in this press release.

1.     2023 restated at 2024 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 £188m (2023: £194m). 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 £123m (2023: £109m).

4.     As measured by Total Incident Rate (TIR) which represents the rate of any incident that causes an employee, visitor, contractor, or anyone working on behalf of Weir to require off-site medical treatment per 200,000 hours worked.

5.     Refer to note 2 of the Interim Financial Statements contained in this press release for further details of alternative performance measures.

 

DIVISIONAL REVIEW - MINERALS

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

2024 First half summary

•     AM orders¹ +1%; ore production trends and installed base growth, offset by split of large Q2 order

•     AM revenue¹ stable; growth in underlying demand against strong prior year comparator

•     Operating profit margin^1,2 +160 bps; mix, efficiency and Performance Excellence benefits

•     Book-to-bill of 1.04

2024 First half strategic review

Minerals made strong strategic progress in the first half, further growing its leadership position in the mill circuit, booking further orders for its Redefined Mill Circuit technologies and making progress on key Performance Excellence workstreams. Progress across all 4 pillars of the 'We are Weir' strategic framework is outlined below.

People

Tragically one of our colleagues suffered a fatal incident earlier this year, which was shocking to the team, and we are working harder than ever to achieve zero harm and learn lessons to prevent this ever happening again. Minerals TIR for the period was 0.24 (2023: 0.21).

Inclusion, diversity and equity remain a key focus, with improved gender diversity across the Division.

Customer

The Division executed well on key strategic growth initiatives and during the first half gained market share in our core mill circuit product categories. We converted 100% of our competitive field trials for large mill circuit pumps against a range of competitor solutions.

We also opened our new state-of-the-art service centre in Port Hedland, located in the Pilbara region of Western Australia. The facility services Enduron^® HPGR, and our broader suite of products and services, along with critical parts storage for our customers in the region. Its location is strategically positioned to support customers and their operations across this important iron ore region. Further activity in Australia included a first order for our large format HPGR technology in a gold application, which will also be supported from Port Hedland.

We saw strong levels of demand from mining customers across our product range, including for our GEHO^® positive displacement pumps where we received a large order from a North American copper miner during the first half of the year.

Technology

We are seeing very encouraging interest from customers for our Redefined Mill Circuit, including Coarse Particle Flotation and Vertical Stirred Mill technologies, which we access through our partnerships with Eriez and STM respectively.

We developed our digital penetration by growing the number of sites digitally enabled with our Synertrex® 2.0 platform, now being installed in c.80 sites and made good progress in our integration of the Sentian AI platform, with live trials now underway.

Research and development activity across our technology offerings included new materials and polymers to support our core technology offerings, as well as other advancements such as real-time stud wear detection for our HPGR technology.

Performance

The Division's Performance Excellence work streams continue to progress at pace, with key milestones being the roll out of our lean manufacturing programme, Weir Integrating Network System (WINS), at a site level with this driving improved manufacturing quality, as well as making further progress on our capacity optimisation programme with site consolidations and relocations.

 

2024 First half financial review

Constant currency £m	H1 2024	H1 20231	Growth1	H2 20231
Orders OE	225	255	-12%	244
Orders AM	682	674	1%	652
Orders Total	907	929	-2%	896
Revenue OE	218	251	-13%	283
Revenue AM	651	650	0%	685
Revenue Total	869	901	-4%	968
Adjusted operating profit2	170	162	5%	195
Adjusted operating margin2	19.6%	18.0%	+160bps	20.2%
Operating cash flow2	151	131	15%	287
Book-to-bill	1.04	1.03		0.93

1. 2023 restated at 2024 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 Interim Financial Statements contained in this press release further details of alternative performance measures.

Orders decreased by 2% on a constant currency basis to £907m (2023: £929m), with book-to-bill of 1.04. OE orders decreased 12%, reflecting order phasing with miners continuing to maximise production from existing assets with orders for small brownfield expansions and debottlenecking projects. AM orders grew 1% reflecting volume growth in hard rock mining and a minor contribution from pricing, partially offset, as expected, by the timing of multi-period orders historically received in Q2. In the first half, AM orders represented 75% of total orders (2023: 73%). In total, mining end markets accounted for 73% of total orders (2023: 76%).

Revenue was 4% lower on a constant currency basis at £869m (2023: £901m) due to phasing of the OE order book, a reduction in revenue from customers in the Canadian oil sands and the absence of revenue from Russia, partially offset by strong underlying mining markets and the annualised benefit of price increases. Revenue growth was particularly strong in Australasia reflecting the benefits of installed base growth. Product mix moved towards AM, which represented 75% of revenue, up from 72% in the prior period.

Adjusted operating profit² increased 5% on a constant currency basis to £170m (2023: £162m) as the Division grew its gross margins, with benefit from incremental Performance Excellence savings and operational efficiencies.

Adjusted operating margin² on a constant currency basis was 19.6% (2023: 18.0%). The year-on-year improvement of 160bps reflects Performance Excellence savings, the benefit of movement in revenue mix towards AM and strong underlying efficiency gains.

Operating cash flow² increased by 15% to £151m (2023: £131m) reflecting growth in operating profit, partially offset by a modest decrease in working capital outflow to £55m (2023: £75m). Working capital movements reflect an increase in inventory and debtors being offset by an increase in payables.

 

DIVISIONAL REVIEW - ESCO

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

2024 First half summary

•     Orders¹ stable; robust demand from mining customers driving 2% AM growth

•     Revenue¹ stable; strong execution driving 14% operating profit^1,2 growth

•     Operating profit margin^1,2 +260bps; pricing, mix, and strong operational efficiencies

•     Book-to-bill of 1.02

2024 First half strategic review

ESCO made good strategic progress in the first half, achieving key technology milestones and gaining market share in mining GET. Progress across all 4 pillars of the 'We are Weir' strategic framework is outlined below.

People

On safety, ESCO's TIR for the period was 0.82 (2023: 0.65). The division continues to focus on safety and remains on a positive long-term trajectory towards its ambition of zero harm.

We continued to make significant strides with respect to diversity, with improvement in gender diversity at senior levels in the Division.

Customer

During the period ESCO made further progress across its strategic growth initiatives. The number of mines using Motion Metrics^TM AI-enabled vision technology increased and the Division made excellent progress in growing market share in core mining GET winning net 28 competitive major digger conversions, highlighting the strength of ESCO's core GET products.

ESCO grew orders year-on-year in both Africa and the Middle East reflecting demand for dredging products and our continued focus and momentum in these regions.

Technology

The next generation of core GET, Nexsys™, was launched after several thousand trial hours providing improved overall productivity for our customers, allowing for longer bucket campaign cycles and improved GET wear life.

We saw further progress with our proprietary ore characterisation technology, with the latest phase of trials undertaken in the first half of the year. Other technology investments include ongoing development of new series of mining and construction attachments, supported by our latest materials and composite developments.

Performance

The Division's new foundry in Xuzhou, China, opened in March with phased ramp-up in production on plan with full production on site expected before the end of the year.

The Division made good progress on its North American foundry optimisation programme with strong performance across all sites driving manufacturing efficiencies.

 

2024 First half financial review

Constant currency £m	H1 2024	H1 20231	Growth1	H2 20231
Orders OE	28	34	-20%	26
Orders AM	318	312	2%	305
Orders Total	346	346	0%	331
Revenue OE	26	27	-4%	30
Revenue AM	312	314	-1%	316
Revenue Total	338	341	-1%	346
Adjusted operating profit2	65	57	14%	63
Adjusted operating margin2	19.3%	16.7%	+260bps	18.2%
Operating cash flow2	70	53	32%	84
Book-to-bill	1.02	1.02		0.96

1. 2023 restated at 2024 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 Interim Financial Statements contained in this press release for further details of alternative performance measures.

Orders were stable on a constant currency basis at £346m (2023: £346m). This was driven by robust underlying demand from customers in mining driving aftermarket growth, with infrastructure demand remaining at stable levels. At 92%, AM continues to account for the vast majority of the Division's orders (2023: 90%). The Division's book-to-bill remained at 1.02. In total, mining end markets accounted for 60% of total orders (2023: 61%).

Revenue was stable on a constant currency basis at £338m (2023: £341m). This reflects strong execution and further price realisation with stable infrastructure revenue.

Adjusted operating profit² increased by 14% on a constant currency basis to £65m (2023: £57m) as the Division expanded its gross margins, benefiting from annualised price realisation and further operating leverage.

Adjusted operating margin² on a constant currency basis was 19.3%, +260 bps (2023: 16.7%), with the year-on-year improvement reflecting pricing benefits, favourable product mix and strong operational efficiencies.

Operating cash flow² increased by 32% to £70m (2023: £53m), reflecting growth in operating profit and a reduction in working capital outflow to £6m (2023: £15m). Working capital movements reflect a modest increase in inventory and modest reduction in receivables and payables.

 

GROUP FINANCIAL REVIEW

		Constant currency1		As reported
Continuing Operations £m	H1 2024	H1 20231	Growth	H1 2023	Growth
Orders OE	253	289	-13%	n/a	n/a
Orders AM	1,000	986	2%	n/a	n/a
Orders Total	1,253	1,275	-2%	n/a	n/a
Revenue OE	244	278	-12%	290	-15%
Revenue AM	963	964	0%	1,010	-5%
Revenue Total	1,207	1,242	-3%	1,300	-7%
Adjusted operating profit2	215	199	8%	212	2%
Adjusted operating margin2	17.8%	16.0%	+180bps	16.3%	+150bps
Book-to-bill	1.04	1.03	n/a	n/a	n/a
Total Group £m
Operating cash flow2	198	n/a	n/a	173	14%
Free operating cash conversion	68%	n/a	n/a	51%	+17pp
Net debt	738	n/a	n/a	6903	-£48m

1. 2023 restated at 2024 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 Interim Financial Statements contained in this press release for further details of alternative performance measures.

3. Net Debt at 31 December 2023.

Continuing operations order input at £1,253m decreased 2% on a constant currency basis. Minerals orders were down 2%, with AM growth up 1% reflecting growth in demand from customers in hard rock mining and a minor contribution from pricing partially offset by the timing of multi-period orders historically received in Q2. OE orders decreased, reflecting order phasing with miners continuing to maximise production from existing assets. ESCO orders were stable, with robust underlying demand in mining driving aftermarket growth and increased demand for dredging products. 80% of orders from continuing operations related to aftermarket compared to 77% in the prior year.

Continuing operations revenue of £1,207m decreased 3% on a constant currency basis, with a strong prior year comparator which was boosted by higher OE deliveries, the last revenue from Russia and a strong oil sands performance. In Minerals revenue was 4% lower on a constant currency basis at £869m (2023: £901m). ESCO revenue was stable on a constant currency basis at £338m (2023: £341m). Aftermarket accounted for 80% of revenues from continuing operations, up from 78% in the prior year. Reported revenues decreased 7%, largely driven by a foreign exchange translation headwind of £58m. Overall book-to-bill at 1.04 reflects the continued strength in orders as we executed on our strong opening order book.

Continuing operations adjusted operating profit increased by £3m, 2%, to £215m on a reported basis (2023: £212m). Excluding a £13m foreign currency translation headwind, the constant currency increase was £16m, 8%.

As explained further in the Divisional reviews, Minerals adjusted operating profit increased by 5% on a constant currency basis to £170m (2023: £162m) and ESCO's adjusted operating profit increased by 14% on a constant currency basis to £65m (2023: £57m). Corporate costs of £20m (2023: £20m) are in line with prior year.

Continuing operations adjusted operating margin of 17.8% is up 180bps versus last year on a constant currency basis and up 150bps as reported. This increase is driven by further Performance Excellence savings, strong operating efficiencies as well as product mix moving slightly towards AM (78% to 80%) for continuing operations. R&D as a percentage of sales was 2.1%, up from 1.8% at June 2023, meeting our target of 2% of revenue as we continue to invest in our technology strategy.

Continuing operations statutory operating profit for the period of £188m was £6m adverse to the prior year, driven by the increase in adjusting items of £10m, a result of progress towards our Performance Excellence initiatives.

Continuing operations net finance costs were £22m (2023: £24m) with the decrease mainly due to the non-repeat of term loan costs, and lower RCF usage and facility.

Continuing operations adjusted profit before tax was £193m (2023: £188m), after a translational foreign exchange headwind of £13m. The statutory profit before tax from continuing operations of £165m compares to £170m in 2023, the decrease being due to higher adjusting items.

Continuing operations adjusted tax charge for the year of £54m (2023: £50m) on profit before tax from continuing operations (before adjusting items) of £193m (2023: £188m) represents an adjusted effective tax rate (ETR) of 28.2% (2023: 26.3%). The increase in ETR mainly reflects the geographic mix of profits.

A tax credit of £7m has been recognised in relation to continuing operations adjusting items (2023: £6m).

Continuing operations adjusting items increased to £28m (2023: £18m). Intangibles amortisation decreased by £1m to £12m (2023: £13m). Exceptional items totalled £15m (2023: £1m), with costs relating to our Performance Excellence programme of £14m and the remainder being legacy legal claims and integration costs partially offset by a small credit for the reversal of provisions in respect of the wind down of operations in Russia as working capital recoveries continue. Other adjusting items which relate solely to the Group's legacy asbestos-related provisions in the period were £1m (2023: £4m), with the reduction primarily due to the change in discount rates year on year.

Statutory profit for the period after tax from total operations of £117m (2023: £126m) reflects a £9m decrease in profit from continuing operations.

Adjusted earnings per share from continuing operations increased to 53.6p (2023: 53.4p). Statutory reported earnings per share from total operations is 45.3p (2023: 48.8p).

Cash flow and net debt

Cash generated from operations increased by £25m to £198m (2023: £173m) in the period due to a combination of higher operating profits and a reduced outflow from working capital in the period of £71m (2023: £88m). Working capital as a percentage of sales at 24% was in line with the prior year, slightly up on the December 2023 result of 21%. Continuing operations utilised non-recourse invoice discounting facilities of £27m (2023: £40m) compared to £33m at December 2023. This is largely utilising facilities provided by our customers to receive payment on reasonable terms in certain geographies where custom dictates extended payment terms. Suppliers chose to utilise supply chain financing facilities of £39m (2023: £41m) versus £32m at December 2023.

Net capital expenditure reduced by £6m to £30m (2023: £36m), with the decrease due to the completion of our new ESCO foundry in China, which opened in March 2024. Lease payments reduced to £15m (2023: £16m), while the purchase of shares for employee share plans decreased by £8m to £7m (2023: £15m) with the H2 amount expected to be in line with the prior year.

Free operating cash conversion (refer to note 2 of the Interim Financial Statements) was 68% (2023: 51%) as a result of the increased cash generated from operations and a reduced working capital outflow, including the impact of timing of share purchases for employee awards which is split between H1 and H2 in 2024.

Free cash flow (refer to note 2 of the Interim Financial Statements) from total operations was an inflow of £53m (2023: £24m).

Net debt increased by £48m to £738m (December 2023: £690m) and includes £133m (December 2023: £117m) in respect of IFRS 16 'Leases'. Drivers of the increase in net debt include payment of the final 2023 dividend of £54m, lease movement of £16m, exceptional items of £16m which include Performance Excellence costs, plus adverse translational foreign exchange and non-cash movements of £12m. These are partially offset by the free cash inflow of £53m. Net debt to EBITDA on a lender covenant basis was 1.2x (December 2023: 1.1x) compared to a covenant level of 3.5x.

As a result of strong cash generation in 2023, the Group reduced its multi-currency revolving credit facility (RCF) by US$200m to US$600m in February 2024. In March 2024, the Group exercised the option to extend its RCF by one year which will now mature in April 2029. The RCF includes a link to the Group's sustainability goals and the covenant terms are unchanged. Overall these actions extended the average tenor of the Group's debt financing and there remains in place more than £750m of immediately available liquidity.

Pensions

The IAS 19 funding position across the Group's legacy UK and North American schemes increased from a net surplus of £2m at 31 December 2023 to a net surplus of £10m at 30 June 2024. This is primarily due to a c.£4m increase in the surplus in the UK Main plan where gains driven by higher UK discount rates and changes in demographic assumptions were partly offset by net losses in UK assets and experience losses resulting from UK inflation, coupled with a reduction in the deficit on our main US schemes of c.£3m mainly from higher US discount rates. In total, a credit of £7m (2023: charge of £17m) has been recognised in the Consolidated Statement of Comprehensive Income.

The strength of the funding position of the UK main scheme has resulted in additional pension cash contributions reducing to £nil in 2024 (2023: £6m). Additional pension contributions of c.£3m are expected in relation to other schemes during H2.

 

Principal Risks and Uncertainties

The Board considers the Principal Risks and Uncertainties affecting the business activities of the Group are:

Principal Risk		Risk Trend from 2023 Annual Report
1.	Political and Social	No change
2.	Technology	No change
3.	Value Chain Excellence	No change
4.	Safety, Health and Wellbeing	No change
5.	People	No change
6.	Climate	Increased
7.	Market	No change
8.	Digital	No change
9.	Ethics and Governance	No change
10.	Information Security and Cyber	No change
11.	Competition	No change

 

Further details of the Group's policies on Principal Risks and Uncertainties are contained within the Group's 2023 Annual Report, a copy of which is available at www.annualreport.weir.

 

Enquiries:
Investors: Philip Carlisle	+44 (0)141 308 3617
Media: Sally Jones	+44 (0)141 308 3666
Citigate Dewe Rogerson: Kevin Smith	+44 (0) 207 638 9571 Weir@citigatedewerogerson.com