The Weir Group Annual Report 2006

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FY2006 Annual Report · The Weir Group

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The Weir Group PLC
Clydesdale Bank Exchange
20 Waterloo Street
Glasgow G2 6DB, Scotland

Telephone: +44 (0)141 637 7111
Facsimile: +44 (0)141 221 9789

Email: investor-relations@weir.co.uk
Website: www.weir.co.uk

The Weir Group PLC
Annual Report 2006

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Financial Highlights 2006

Group results - continuing operations

Revenue

£940.9m

Up 19%

Operating profit (2)

£87.7m

Up 32%

Pre-tax profit (2)

£87.1m

Up 40%

Order input (1)

£1,099.5m

Up 23%

Earnings per share (2)

32.4p

Up 38%

Dividend

14.5p

Up 10%

Net debt

£7.1m

Down 91%

2005
23.5p

2006
32.4p

2005
13.2p

2006
14.5p

(1) Excludes Joint Ventures & Associates; calculated at constant 2006

exchange rates

(2) Adjusted to exclude exceptional items

Contents:

The Reports

2006 Highlights

Chairman’s Statement

Chief Executive’s Review

7 Operational Review

17 Financial Review

20 Board of Directors

22 Directors Report

26 Corporate Governance Statement

29 Audit Committee Report

30 Nomination Committee Report

31 Remuneration Committee Report

37 Corporate Social Responsibility Report

Group Financial Statements

42 Directors Statement of Responsibilities

43 Independent Auditors Report

44 Consolidated Income Statement

45 Consolidated Balance Sheet

46 Consolidated Cash Flow Statement

47 Consolidated Statement of Recognised

Income & Expense

48 Notes to the Group Financial Statements

Company Financial Statements

86 Directors Statement of Responsibilities

87 Independent Auditors Report

88 Company Balance Sheet

89 Notes to the Company Financial

Statements

97 Principal Companies of the Group

98 Shareholder Information

100 On-line Share management

Inside back cover - Financial Calendar

Financial Calendar

Ex-dividend date for final dividend

2 May 2007

Record date for final dividend*

4 May 2007

Annual General Meeting

9 May 2007

Final dividend paid

1 June 2007

*shareholders on the register at this date will receive the dividend

Registered office & company number

Clydesdale Bank Exchange
20 Waterloo Street
Glasgow G2 6DB, Scotland
Registered in Scotland
Company Number 2934

The Weir Group PLC Annual Report 2006 | Highlights

The benefits of restructuring, the addition of Gabbioneta
and our ongoing operational improvements all
contributed to the Group’s excellent results in 2006.
We enter 2007 with a robust portfolio of businesses
operating in buoyant end markets which provides an
excellent platform for further improvement in the year
ahead. The Group’s healthy balance sheet and cash
generation provide the necessary flexibility to pursue
new capital investments and aligned acquisitions.

2006 Highlights (continuing operations):
• Order input(1) up 23% to £1099.5m

• Revenue up 19% to £940.9m

• Operating profit(2) up 32% to £87.7m

• Earnings per share(2) up 38% to 32.4p

• Dividend increase of 10% to 14.5p

• Strong cash generation reduces net debt to £7.1m

(1) Excludes joint ventures & associates; calculated at constant 2006 exchange rates

(2) Adjusted to exclude exceptional items

The Weir Group Worldwide

The Weir Group has a strong reputation for
engineering excellence in the manufacture
of specialist equipment and the delivery of
through-life engineering solutions. The best
manufacturing facilities in the Group deliver
industry leading performance and every
business has well defined plans to maximise
operational performance.

Weir employs over 8,000 people worldwide,
focused on our key markets. These range
from mining and minerals processing to the
defence and nuclear industry, from oil and
gas exploration to power generation. In all
these areas, we provide solutions that meet
the engineering and operational challenges
facing our customers.

For further information
about The Weir Group PLC,
visit www.weir.co.uk

The Weir Group PLC Annual Report 2006

Chairman’s Statement: It is particularly rewarding
to report the successful execution of the Group’s
five year programme to transform the operational
and financial performance of the Group. In 2006,
we saw double digit growth in revenue and profits
and delivered our best operating year ever.

Financial highlights

Group revenue from continuing operations increased 19% to £940.9m
(2005: £789.4m). Continued strong growth from our Engineering
Products Division reflects the strength of the oil, power and mining
markets and the first full year of contribution from Weir Gabbioneta which
was acquired in the final quarter of 2005. The Defence, Nuclear & Gas
Division also benefited from buoyant conditions in the shipbuilding and
naval sectors where Weir maintains significant market positions.

Operating profit before exceptional items from continuing operations at
£87.7m (2005: £66.3m) was 32% above 2005, with Group subsidiaries
at £77.2m (2005: £57.1m) and our joint ventures and associates
contributing £10.5m against £9.2m in 2005. Operating margins,
excluding attributable profits from our joint ventures and associates,
as a percentage of revenue increased to 8.2% of sales against 7.2% last
year. The benefits of the UK restructuring programmes and acquisition
of Weir Gabbioneta in Engineering Products, together with a stronger
performance from Defence, Nuclear & Gas offset lower margins
from our Engineering Services Division.

Group pre-tax profits before exceptional items from continuing operations
were up 40% to £87.1m (2005: £62.2m). Net exceptional gains of 15.7m
resulted in a reported profit before tax from continuing operations of
£102.8m. We recognised a £6.8m gain on the sale of the former Weir
Valves & Controls site in Huddersfield and a once off gain of £10.7m
on the agreement from the pension trustees to implement defined
benefit changes to our main UK pension plan.

With an effective tax rate of 26% on attributable profits before exceptional
items, earnings per share on the same basis amounted to 32.4p (2005:
23.5p). Reported earnings per share, taking account of exceptional
items and discontinued operations, was 39.4p, an increase of 213%.

Cash generation from operations improved significantly to £134.5m
(2005: £71.3m) reflecting the success of management’s focus on
improving working capital. The year ended with net debt of £7.1m
against £76.4m last year. The continued strong cash generation
capabilities of Group operations are clearly evident in these results.

The Board is recommending a final dividend of 10.75p per share making
a total distribution for the year of 14.5p (2005: 13.2p), a 10% increase
on 2005.

“While the Group’s organic opportunities provide
good development prospects, our strong cash
generation and largely ungeared balance sheet
provide the full range of options to create
further growth.”

Chairman’s Statement

Strategy & structure

The Board

It is particularly rewarding to celebrate the successful execution of our five
year programme to transform the operational performance and financial
returns of the Group. The achievements have been substantial; a realigned
portfolio of businesses, a change in culture and a clearly defined roadmap
for operational excellence. In the year, we saw double digit growth in
revenue and profits and delivered our best operating year ever.

The Engineering Products Division delivered dramatically improved results
in 2006 and benefited from its portfolio realignment to the higher growth
oil, power and mining markets which represented more than 80% of
revenue in the year. The benefits from restructuring the underperforming
UK businesses were clearly evident in this year’s results with the two
businesses contributing significantly to the division’s 2006 performance.

In the Defence, Nuclear & Gas Division, the improvement has been
impressive. In Defence, our geographic expansion into Canada, Spain
and Australia underpins the substantial progress in the year. Our growing
participation in the UK nuclear sector provides a further avenue for
substantial growth. At the same time the liquid gas business benefited
from buoyant demand in gas ship orders while extending its market
and customer base in the European and onshore storage sectors.

The Engineering Services Division has grown considerably in recent years
by expanding its position in Australia and North America and adding
strategically important joint ventures in the Middle East. With the major
restructuring of our Engineering Products Division largely behind us, our
attention in 2006 turned to improving the performance of our Services
activities in our more traditional markets. Restructuring activities in the
United States, the Middle East and the UK were undertaken in the year
and the division is now positioned for growth in margins and operational
performance in 2007 and beyond.

At the outset of the Group’s transformation programme, we recognised
the need to respond to the changing demographics of our most important
markets. We laid down plans to expand our footprint in the higher growth
emerging markets of the Former Soviet Union, Asia, South America and
the Middle East. Today these markets represent in excess of 30% of Group
turnover and in 2007, we will make additional investments in new foundry
operations in Brasil and the start-up of Minerals’ wholly-owned greenfield
operation in Suzhou, China.

The key management focus for 2007 is to accelerate the execution of the
Weir Production System throughout the Group and reap additional benefits
from concentrating on Lean processes. The collective operations of the
Group made excellent progress during 2006 and the benefits are evident
in this year’s results. Improved working capital, reduced inventories and
improved customer relationships were all delivered through a focused
approach to achieving best practice.

As previously reported, Keith Cochrane joined as Group Finance Director
on 3 July 2006 and has made a significant contribution since joining.

Corporate governance

I remain confident that at the Weir Group we have the culture and required
processes to protect effectively the interests of all of our stakeholders.

The Board’s operational framework is underpinned by clearly defined
strategies, vision and values which combine to create shareholder value
through the effective use of our resources.

In 2006, the Group internal audit function was extended to complement
our already robust external and peer group audits and self-certification
programmes. The increased rigour in our processes and active benchmarking
of financial best practice is already delivering benefits to the Group.

Prospects

The Group finished 2006 in excellent financial condition, with a strong order
book and continued buoyant outlook for our most important markets. The
positive market conditions experienced in 2006 are expected to continue
in 2007 and we expect the improving performance from the Engineering
Services Division and operational developments elsewhere to deliver a
good level of progress in 2007.

People

We have over 8,000 employees working for Weir in 35 countries. I recognise
that it is our people who drive our success and define the culture of
excellence at Weir. I am grateful for the contribution of employees at all
levels of our organisation and thank them for their tremendous enthusiasm
and commitment throughout 2006. They have all worked hard to improve
our processes and productivity and have achieved real progress in the year.

Finally, I would like to thank our shareholders who have believed in the
Group’s potential. I remain confident in the Group’s ability to make further
progress in the year ahead.

In 2006, the Group’s track record of acquisitions has been further enhanced
with the successful integration of Weir Gabbioneta and our newest joint
venture in Saudi Arabia both making considerable contributions
during the year.

Sir Robert Smith
Chairman
21 March 2007

While the Group’s organic opportunities provide good development
prospects, our strong cash generation and largely ungeared balance
sheet provide the full range of options to create further growth.

The Weir Group PLC Annual Report 2006

Chief Executive’s Review: 2006 demonstrated the
success of the Weir Group strategy, exiting non core
activities, restructuring those which underperform,
increasing exposure to higher growth markets
and delivering improvements to underpin future
growth. We remain on course to realise further
improvements in 2007.

In 2002, we first defined our ambition to achieve sector-best performance,
by targeting those markets which offered the most attractive prospects and
where we had a realistic ability to lead. The portfolio of Group businesses
has changed dramatically since this time. We have largely restructured
our underperformers, exited lower margin activities and acquired growth
businesses in the higher margin, high growth oil sector.

At the same time we outlined our philosophy to meet and exceed customer
expectations, which we passionately believed would play a direct role in
the Group’s earnings growth. We engaged the entire organisation in the
implementation of the Weir Production System, a structured process geared
to delivering a leaner and more disciplined organisation. Today, our best
manufacturing facilities deliver industry leading performance and every
business in the Group has well defined plans to maximise operational
performance. We remain absolutely convinced that these developments
will continue to unlock our full potential for increased customer satisfaction
and improving financial returns.

The benefits of these strategies are clearly evident in our 2006 results.
Group revenue increased 19% to £940.9m with over 80% of the £1.1bn
input in the year tied to the mining, oil and gas, power generation and
naval and marine markets.

Operating margins also improved substantially, particularly in our Engineering
Products Division which reported 10.3% in 2006 against 7.4% back in 2002.

The significant reduction in the Group’s debt is a direct reflection of
the benefits of our Lean initiatives with improved working capital, lower
inventories and improved on-time delivery all featuring prominently in
the excellent cash generation achieved in the year.

Our Journey to Excellence

Engineering Products Division

Engineering Products posted new records in 2006 growing input 23%,
revenue 21% and profits 49% when compared to 2005. The division includes
the combined activities of our Minerals, Clear Liquid and Valves & Controls
businesses which supply pumps, valves and ancillary equipment to the oil
and gas, power generation, mining and general industrial markets.

A key component of the division’s success in the year has been the strong
portfolio of businesses with solid positions in growing and attractive markets.
Input grew 23% to £683.8m with almost 80% being attributable to the
mining, oil and gas and power generation markets. We achieved excellent
results from Minerals (up 19%) and Clear Liquid (up 32%) which combined
with 20% growth from Valves & Controls to achieve the Group’s highest ever
level of order input.

“A key component of our success in the year
has been the strong portfolio of businesses
with solid positions in growing and
attractive markets.”

Chief Executive’s Review

In 2006, the division’s revenue grew 21% to £608.5m against £501.4m last
year with a largely balanced workload of new project and aftermarket activity.
The realigned portfolio of businesses specialise in safety critical, high wear
applications where new project sales provide the foundations for medium
to long-term spares and service sales streams.

Operating profits at £62.6m were 49% above 2005, validating our
confidence in the strategy outlined back in 2002. Profitability improved
in every area in the year and the full benefits of the previous year’s UK
restructuring, the acquisition of Gabbioneta and continued contribution
from our operational excellence initiatives all featured in underlying margin
growth to 10.3% against 8.4% last year.

Our Engineering Products segment includes a strong portfolio of businesses
in the mining, oil and gas and power generation markets where the
fundamentals point to sustained future progress. Global population is
expected to expand dramatically in the next 25 years and this, combined
with increasing infrastructure needs in China and India, is expected to
underpin ongoing sector growth in the medium term.

The Engineering Products businesses reaped additional benefits from focusing
on Lean processes and continued to accelerate their execution of the Weir
Production System. As a whole, the initiative provides all our businesses with
a common set of world class practices which provide the fuel to achieve
improving results and prepare us for the challenges of the future.

Our Minerals businesses posted another year of solid progress with significant
gains in input, revenue and profit when compared to 2005. The principal
market for our Minerals business is global mining which accounts for more
than 70% of the collective turnover in the year.

Minerals input grew 19% to £390.5m reflecting the ongoing strength of
global mining markets, the benefits of management’s emerging market
strategy and our entry into the specialised areas of the power generation and
oil sectors. The combination of the ongoing spares stream from the existing
installed base and the potential business derived from new orders secured in
the year provides a solid platform for future progress.

The Minerals business recognised at the outset of their strategic review in
2002 that they needed to respond to the changing demographics of the
global mining market and implemented plans to establish and grow market
positions in South America, Asia and the Former Soviet Union. Today the
Group is the best geographically positioned of any supplier to the market
with emerging countries representing 30% of 2006 input.

Power-related input totalled £47m in the year and reflects the increased
global requirements for flue gas desulphurisation used to improve emissions
in coal fired power stations. The Minerals team has built progressively a
leading position in this high growth area of the market and during the year
secured new contracts in China, Spain, Italy, Poland, Czech Republic and
North America.

Minerals secured £26m of oil related orders, due in part to the success of their
strategy to develop pump products for the Canadian oil sands market dating
back to 2004. The highly abrasive application and growing investment
rationale for the development of the world’s significant deposits of oil sands
provide the basis for a considerable growth driver for the future.

During the year, Minerals added significantly to its installed foundry capacity
with new facilities coming on stream in South Africa and China and an
expansion to the Chilean operations. All of these investments were launched
successfully and added much needed capacity to respond to market
opportunities. In 2007, further investments will be made to add foundry
capabilities in Brasil and the Chinese business will enter full operational status.

Going forward the Minerals business will benefit from the favourable
economic climate while continuing to make progress in the key pillars
of its future strategy.

The Valves & Controls businesses made good progress in 2006 and
contributed to the revenue and profit growth in the Engineering Products
Division during the year. The principal markets for our Valves businesses are
power and oil which represented more than 80% of input in 2006.

The Valves & Controls business continued to build on its achievements in
the Chinese power market and was successful in its integration of our newly
acquired wholly-owned subsidiary located at Suzhou. The increased activity
in the domestic United States power market helped deliver growth in
turnover in the United States operation.

Weir Valves & Controls France benefited from its ongoing success in
Eastern European nuclear markets where upgrade work is being funded
by the European Union and also work in the Middle East oil and gas markets.
Growth in sales and profits from this business was evident in the 2006 results.

The restructuring of the Weir Valves & Controls UK operation is now complete
and the move to a modern, appropriately sized facility was executed on time
and under budget. The second half performance of the UK business provides
increased confidence in the delivery of anticipated improvements and
positions us well for further progress in 2007.

We remain encouraged by the prospects for the Valves & Controls businesses.
The United States operation will move to larger premises to capitalise on
the growing power opportunities in their domestic market and our recent
acquisition in China, coupled to further progress from our UK and French
operations, are expected to deliver further improvements in 2007.

Our Clear Liquid businesses contributed significantly to the excellent results
of Engineering Products in 2006. Strong end markets, the benefits of prior
year restructuring and the addition of Gabbioneta were all significant
contributors to the Clear Liquid businesses improved results.

Clear Liquid includes a portfolio of pump businesses with solid positions in
growing and attractive markets. In 2006, input increased 32% to £222.7m
reflecting the continued strength of the oil, power and general industrial
markets which represented more than three quarters of total orders booked
in the year.

The results for Clear Liquid include the full year benefits from the prior year
restructuring of Weir Pumps. This included an extensive analysis of their
business portfolio and a strategy to deploy resources to the oil and power
sectors from where the most value could be derived. The current strength of
these sectors has contributed greatly to the improvement and we continue
to develop our strategy to sustain this success in a cyclical downturn.

The 2006 results include a full year contribution from Gabbioneta which was
acquired in the final quarter of 2005. Gabbioneta grew its input substantially
to £50.2m due, principally, to the continued buoyant project activity in the
downstream oil market which represents the vast majority of the company’s
target market. The business is now fully integrated and has an active
programme to implement the Weir Production System to accelerate
operational and financial progress in the future.

The Clear Liquid speciality businesses continued to perform well with
excellent progress at our operations in Missouri and California which
benefited both from stronger domestic demand and the increased
geographic reach of the Group. Weir Lewis Pumps, which specialises
in highly aggressive acid pumps, continued to benefit from phosphate
processing investments in the Former Soviet Union and Middle East and
Weir Floway, our specialist vertical turbine business, achieved significant
share gains in the critical application fire pump market.

The medium term outlook for the oil, power and related general industrial
markets remains positive and this, coupled to our ambitious plans for
operational improvement, provide a solid platform for further progress
in 2007.

Operating profits at £9.8m were 46% above 2005 with both the liquid gas
and defence activities making progress during the year. Operating margin at
9.1% was slightly below the 9.8% achieved in 2005 and reflects the balance
of new project work which remains at early completion stages when
compared to the work stream last year.

The liquid gas operation, Weir LGE, is the market leader in the design, project
management and commissioning of facilities for the shipbuilding and
onshore storage of liquid gas. During the year, input grew 23% to £98.8m
with the absence of significant onshore work being more than offset by
increased orders booked in the marine market.

Turnover and profits from the liquid gas business also grew significantly when
compared to 2005, as revenue and profit taking milestones were achieved
on orders booked in prior periods. The marine market cannot realistically be
expected to sustain the new build work evidenced in 2005 and 2006 and
therefore order intake is expected to decline significantly in 2007. Revenue
and profits can, however, be expected to be maintained for the medium
term as new projects now extend into 2009.

The defence and nuclear businesses performed well, improving both revenue
and profits in 2006. Order input was £80.3m against £31.8m last year and
our increased presence in Australia and Canada contributed significantly
to the results. Recent investments in these territories, and the award of
the previously announced Spanish submarine contract, provide a strong
defence order book going into 2007.

2007 Outlook

The Group remains in good financial condition with a much improved order
book and a continuing level of confidence in our most important markets.

By remaining on course, capitalising on our strong portfolio of businesses and
striving for continued operational improvement, we will deliver a good level
of progress in 2007.

Mark Selway
Chief Executive
21 March 2007

The Weir Group PLC Annual Report 2006 | Chief Executive’s Review
The Weir Group PLC Report and Accounts 2005

Engineering Services Division

Input from Engineering Services increased 5% to £236.6m (2005: £225.5m).
Revenue increased 3% to £225.2m (2005: £218.8m) producing an operating
profit of £12.4m against £13.6m in 2005, primarily due to once off costs
of £4.4m related to restructuring initiatives in the UK, United States and
Middle East.

In the UK, input grew 6% to £60.0m (2005: £56.7m) with new hydro orders
contributing to solid growth in our power generation activities. Rationalisation
of the number of UK Service Centres was largely completed during the year
and 2007 results are expected to reflect the improving returns.

At our Middle East business, input grew 62% to £26.9m (2005: £16.6m) with
significant new orders booked in oil services. Once off costs were taken in the
year to realign overheads and refocus the operation on the oil sector. Good
second half improvements are now expected to underpin further progress.

The Canadian operation had another successful year benefiting from
continued buoyant market conditions and Weir’s growing position in the
Oil Sands sector. In the United States, we took the decision to close our
loss making service centres which, while disappointing, will result in the
remaining United States businesses contributing positively to Services results
in the coming year.

The Australian operations performed well in the year, growing revenue
and profits when compared to 2005 and our investment in larger facilities
in Western Australia, which will come on-line in the first half of the year,
is expected to provide further growth in 2007.

The restructuring work undertaken in 2006 was necessary to reposition the
Engineering Services Division in those sectors and geographies which are
critical to the future of the Group. The rationalisation of our UK infrastructure,
closure of smaller less profitable United States Service Centres and refocus
towards the oil services sector in the Middle East leave the division better
equipped to improve margins and take advantage of the significant
opportunities available for accelerated growth.

We remain optimistic of the prospects within our Services Division. The
restructuring investments made in 2006 together with the excellent
progress from our joint ventures in Saudi Arabia and Abu Dhabi provide
the foundations for significant improvement in 2007.

Defence, Nuclear & Gas Division

The Defence, Nuclear & Gas Division delivered a further year of solid
progress with significant gains in input, revenue and profit when compared
to the results of 2005. The division includes the combined activities of our UK
based gas storage and nuclear businesses and our global activities in defence.

Input grew 60% to £179.1m with over 90% attributable to the naval
and marine markets. We achieved excellent results from Weir LGE which
benefited from the continued strength of the new build ship market, while
Weir Strachan & Henshaw, our defence and nuclear business, reported
significant new project work in the year.

In 2006, the division’s revenue grew 57% to £107.2m against £68.3m last
year. The majority of growth in the year was due to the liquid gas operations
achieving predetermined milestones on new ship contracts which grew their
revenue to £58.1m in 2006 against £22.1m last year.

Engineering Products: includes the combined
activities of our Minerals, Clear Liquid and Valves &
Controls operations which collectively grew their
input, revenue and profits when compared to last year.

Operational Review

Operating profit

£62.6m

Up 49%

Revenue

£608.5m

Up 21%

Order Input

£683.8m

Up 23%

Operating
profit (£m)

2005

2006

Operational review

Input grew 23% to £683.8m with almost 80% being attributable to the
oil and gas, mining and power generation markets. We achieved excellent
results from Minerals (up 19%) and Clear Liquid (up 32%) which combined
with 20% growth from Valves & Controls to achieve the Group’s highest
ever level of order input.

Operating margins before exceptional items as a percentage of revenue
increased to 10.3% against 8.4% in 2005. Increased revenue in the
Minerals business, improved performances at the restructured Valves and
Clear Liquid operations and the inclusion of Weir Gabbioneta’s higher
margin product sales for the full year, all contributed to the improved result.

Our Engineering Products segment includes a strong portfolio of businesses
in the mining, oil and gas and power generation markets where the
fundamentals point to sustained future progress.

A key component of the division’s success in the year has been the strong
portfolio of businesses with solid positions in growing and attractive markets.

The Engineering Products businesses reaped additional benefits from
focusing on Lean processes and continued to accelerate their execution
of the Weir Production Systems. As a whole, the initiative provides all our
businesses with a common set of world class practices which provide the fuel
to achieve improving results and prepare us for the challenges of the future.

Key achievements

• Engineering Products delivered the highest ever level of order input.

• Principal market of global mining accounted for more than 70% of

Minerals revenue.

• Valves and Controls built on achievements in Chinese, United States

and Eastern European power markets.

• Clear Liquid’s 32% input increase reflected good levels of growth by the

speciality pump businesses in respective markets.

• Strong portfolio of business in mining, power generation and oil and

gas markets point to sustained future progress.

Mining

On a commodity basis coal, alumina, copper,
iron ore, platinum and gold prices held at or
near historically high levels over the year,
prompting increased levels of both new plant
construction and upgrading, particularly in the
traditional mining markets of South America
and Australia.

Power

Power generation is a strong and growing
market for Weir Engineering Products
businesses. The traditional power markets of
Western Europe and North America continue
to demand life-extension, plant refurbishment
and enhancement solutions. China remained
the focus of new-build activity for both
conventional and nuclear power stations,
with good opportunities also in India.
Weir’s track record in safety and delivery
has given us a strong position in the nuclear
upgrade market in the Former Soviet Union.

Oil & Gas

Oil prices continued to be high in 2006,
which meant that both the upstream and
downstream oil markets were buoyant,
growing globally at over 15% and at much
higher levels in some markets where we are
strong. With high oil prices increasing the cost
of pipeline downtime, the reliability of Weir
products and our ability to deliver local
engineering support have proved important
factors in winning new work.

The Weir Group PLC Annual Report 2006

Minerals: Specialist businesses delivering and
supporting slurry equipment solutions for global
mining and mineral processing, the power sector
and general industry.

Scot Smith
Divisional Managing Director

400

300

200

100

Order input

£390.5m

Up 19%

Product brands
WARMAN
GEHO
CAVEX
ISOGATE
VULCO

2005

2006

Operational review

Key achievements

• Record sales of flue gas desulphurisation pumps into China, supplying

20 separate power plants.

• Record slurry pump sales into the Australian and South East Asian

mining industries.

• Significant growth in India, with output 35% higher than 2005 and

profit more than doubled.

• Weir Minerals China foundry comes online, with first pour achieved

on schedule in November.

• Launch of new foundry in South Africa, using existing space made

available through implementation of Lean initiatives.

• Continuing success of Geho product lines – sold 1,000th Geho

industrial pipeline pump.

• European order input increases by 33%.

• North American operation wins Top 25 Factory Award.

• Focus on operational excellence saw Lean scores across the Minerals

businesses improve by 22%.

2006 was a strong year for Weir Minerals. We invested additional resources
to improve operational excellence in all of our factories, furthered our
geographical expansion and improved our product portfolio.

We have continued to push through the implementation of the Weir
Production System and now have a rigorous and proven system of Lean
assessment and audit to ensure that all our operations attain world-class
standards. This is key to meeting growth in demand.

2006 also saw a great turnaround and very satisfying improvement in
the level of operational delivery to our customers. At the start of 2006,
the combination of massive and rapid market demand and insufficient
capacity resulted in a considerable delivery backlog. This has now been
rectified and we are consistently achieving on-time delivery to customers
to the required quality standards.

New foundries were successfully established in South Africa and China,
with the first pours for both taking place on schedule in November.
We expect both foundries to be in full production by mid-2007.

Rubber Engineering finished its first full year as part of Weir Minerals. It
now supports our North American facilities and will also help us to exploit
additional elastomer opportunities that we identify in the market.

Our geographical expansion plans continue. We are bringing together
our Russian activities under one managing director. This will provide better
continuity in customer support and ensure successful future growth. Our
Indian company experienced strong growth, and increased its top line by
35%. It remains focused on growing our installed base and the spares
market and strengthening our routes to market in all areas of the country.

We continue to expand and improve our product portfolio. The new
WS series slurry valve was launched successfully and all regions are now
marketing, manufacturing and selling it. The first Warman SLR pump field
tests are also in progress.

Around the world, our end customers continue to look to us to improve
their production processes. Our divisional and local strategies, strong
management teams and expanding global coverage ensure that we
can support them regardless of their location.

“The minerals industry is still being driven by a buoyant market and our strategy
of aligning our capacity with customer needs in 2006 has paid off. Continuing
our Lean programme and expanding geographically in line with our customers
should see us make further progress in 2007.”
Scot Smith, Divisional Managing Director

Case Study

Engineering excellence
at Weir Minerals Australia

Harder ore at Xstrata’s Ernest Henry Mine in
Queensland, Australia, led to a 30% reduction
in the wear life of the Warman type AH pump
operating in the mill circuit. This adversely
affected production and increased maintenance
costs. Our local marketing and engineering
departments moved into action.

When design changes to the components
of the metal lined pump did not create the
desired product life, a more radical approach
was considered. The new, rubber lined
Warman MCR pump designed in Madison
for the South American market was showing
good results in similar applications, which had
previously been the domain of metal pumps.

The first trial of the MCR pump at Ernest
Henry Mine yielded promising results and
after further design improvements, the pump
reached the target wear life. In addition to
increasing the wear life by 63%, pump
throughput also increased by 8%.

Ernest Henry has now replaced all its mill
circuit pumps with rubber lined Warman
MCR pumps.

Checking the wear rate on the rubber liners
in a Warman MCR Mill Circuit pump.

Operational Review

Weir Minerals best-in-class products are
designed and built to reduce downtime
and minimise disruption in heavy duty,
abrasive or corrosive processes. A robust
global supply operation is backed by
excellent local engineering support.

Primary input breakdown
Minerals
Power
General industrial
Oil
Water & Wastewater

Geographic breakdown
Americas
Europe & FSU
Australia
Indo Pacific
Middle East & Africa
UK

68.0%
12.1%
11.6%
6.7%
1.6%

45.4%
16.0%
13.9%
13.7%
8.6%
2.4%

Market review

Businesses within Weir Minerals supply slurry equipment solutions to
mining, mineral processing, sand and aggregate, power and oil sands
markets around the world.

All of our markets remained buoyant in 2006 and we anticipate another
year of growth in 2007. As customers continue to consolidate, we are
increasingly moving towards setting up global account management,
using inter- and intra-divisional collaboration to capitalise on available
opportunities across the Group.

We are also focusing on expanding our service offerings. In South America,
customers have fully embraced the ‘full service model’, which sees Minerals
service centres and teams embedded with customers. To replicate this
development across all regions, we have established a global working group
to help instill a more consistent approach in all our centres, based on Lean
processes. This is coordinated by the Hazleton Service Centre, a showcase
facility, which sets the benchmark for the Minerals businesses.

The Weir Minerals design centre is involved in redesigning our older
products and developing solutions to take us into new areas of our
customers business. This supports our strategy of ringfencing customers,
so that they don’t need to go anywhere else for any part of their process.
Our strategy also includes building collaborative frameworks with other
players within the market to offer a combined product portfolio that
benefits everyone.

In terms of geographic significance, North America, South America
and Australia remain the three key drivers for Minerals. However, future
growth opportunities in Russia, China and India present strong prospects
for the future.

Our operations in India and China continue to experience very rapid
growth. India won significant contracts within the local power generation
market during the year and now includes a 50-strong design team, which
provides engineering design and modelling services to the whole Group.
The opening of our first dedicated foundry in China now provides a
low cost source enabling us to attack the indigenous Chinese market
more aggressively.

The Weir Group PLC Annual Report 2006

Clear Liquid: World-class businesses providing
end-to-end pumping solutions for major oil and
gas, power generation, water and hydrocarbon
processing projects.

250

200

150

100

Order input

£222.7m

Up 32%

2005

2006

Our brands
Weir
Lewis
Floway
Gabbioneta
Roto-Jet®
Wemco®
Girdlestone
Begemann
Zeron 100

Stephen Bird
Divisional Managing Director

Operational review

2006 was a year of significant achievement, with all businesses benefiting
from our strategy of focusing on higher technology, higher margin and
speciality activities while exiting lower margin markets.

The acquisition of Italian pump manufacturer Weir Gabbioneta has been
an excellent strategic fit and the integration of this business has been
highly successful. The Group is investing in strengthening the organisation
and improving the core processes of the company and Weir Gabbioneta is
now well placed to benefit from continued growth in the downstream oil
and gas markets.

Weir Pumps delivered a significant improvement in 2006 results due to
the restructuring undertaken in 2005 and by refocusing the business on
its most profitable activities. These initiatives delivered full year profits
following significant losses in previous years.

We experienced further growth in our existing higher margin, niche
businesses of Weir Lewis, Weir Specialty Pumps and Weir Floway.

The improvement in Weir Floway was particularly pleasing as it stems from
the successful implementation of a number of operational and growth
initiatives, as well as the appointment of a new managing director. The
company produced an input increase of 27%, with much of the growth
driven by international expansion. Targeting fire protection pumps for
offshore oil exploration platforms has proved highly successful. Weir
Floway has developed supply partners whose technology uniquely
supports this niche market and the team has established itself as a
leader in the design and manufacturing of this product line.

Weir Lewis recorded another excellent year, on top of a very strong 2005 and
saw input increase by 29%, with significant new orders from Northern Africa.

Our Manchester foundry played an important role in supporting both the
Clear Liquid businesses and other Weir Group companies in 2006. The
demand for castings during the year was very strong and resulted in an
extension of lead times throughout the industry. However, the Manchester
foundry was able to maintain short lead times and give Weir companies a
competitive advantage on many projects. This vertical integration and control
of a critical component of our products has been important in meeting our
customers needs. Indeed, much of Weir Gabbioneta’s casting work was
moved to the Manchester foundry to help Gabbioneta deliver key projects
on time. This was a prime example of how Weir companies work together
to maximise the Group’s competitive advantage.

With our most important markets continuing to remain buoyant, our
investment in Lean manufacturing and excellent project management
principles has enabled us to meet increased demand from our customers.
Lean principles are being driven across all of our businesses, including
Weir Gabbioneta and we remain well placed to sustain ongoing
continuous improvement.

Following a year of consolidation and controlled expansion, Weir Clear
Liquid Division is looking forward to continued growth in 2007 and beyond.

Key achievements

• Gabbioneta integration completed successfully and order input increased

by 30%.

• Restructuring of Weir Pumps delivered significant improvement.

• Weir Lewis order intake up 29%, with significant progress in North Africa.

• Weir Floway order input up 27%, with growing position in the international

fire pump market.

• Weir Pumps experienced continued success in the Chinese nuclear market.

• Manchester foundry gave other Weir companies significant competitive
advantage when high demand led to increased industry lead times.

• Materials business in Manchester increased input by 32% and won major

projects for supply to Chile, Spain and the Middle East.

• Continued investment in implementing Lean principles resulted in

improvements in quality, on time delivery and working capital across
the Clear Liquid businesses.

“2006 saw Weir Clear Liquid deliver a strong performance as a result of executing
our strategy to focus on higher margin, specialist markets, successfully integrating
Gabbioneta and restructuring Weir Pumps in Scotland. Weir Clear Liquid is well placed
to grow in 2007.”
Stephen Bird, Divisional Managing Director

Case Study

Weir Floway Targets Offshore
Oil Exploration Market

Weir Floway enjoyed a highly successful 2006
with input up 27%. Much of this growth was
driven by international expansion.

Weir Floway’s strategy for international growth
includes the active pursuit of the highly
engineered international fire pump market.
Targeting fire protection pumps for offshore
oil exploration platforms has been highly
successful. Floway has developed supply
partners whose technology uniquely supports
this niche market and the team has established
itself as a leader in design and manufacturing
of this product line.

Continuing efforts to maximise penetration in
this market include the addition of dedicated
engineering resources to design modular fire
pump skid packages for quicker delivery and
common specifications from platform builders.
This new design will enable Floway to meet
the market demands for documentation while
driving down manufacturing costs. Floway
anticipates that the worldwide demand for
new oil resources will continue to drive sales
in the export fire pump market sector. The
development of new fabrication capabilities
at Floway is underway and expected to
increase the profits for fire pumps by bringing
work in-house for better plant utilisation.

Weir Floway’s 2006 export fire pump order
input has grown significantly and this growth
complements Floway’s already strong presence
in mining and other speciality vertical turbine
pump applications internationally.

Weir Floway’s highly engineered fire pump
achieving international growth in the
offshore oil exploration market.

Operational Review

Weir Clear Liquid is continuously
enhancing and developing its product
range to solve the technical and
operational challenges facing its
customers, enabling them to
improve performance and
compete effectively worldwide.

Primary input breakdown:
Oil
General industrial
Power
Water & Wastewater
Minerals
Naval & Marine

Geographic breakdown:
Americas
Middle East & Africa
Indo Pacific
Europe & FSU
UK
Australia

43.8%
17.3%
15.4%
14.3%
8.1%
1.1%

29.2%
26.9%
17.8%
15.8%
9.9%
0.4%

Market review

The primary markets for Weir Clear Liquid are oil and gas, power
generation, specialist water and wastewater and speciality products
for general industrial markets. The strategy is to strengthen participation
in higher margin activities and focus our resources on those markets
where we believe we can lead and bring added value to our customers.

Oil prices remained high in 2006, which meant that both the upstream
and downstream oil markets continued to be buoyant and growing
globally. This resulted in significant business opportunities for Weir Pumps
and Weir Gabbioneta, in particular.

We experienced strong growth in the Chinese power generation market
in 2006 and expect this will continue due to Chinese plans for significant
long-term investment in their future. Our increased regional sales
presence and an international reputation for both technical expertise
and excellent quality resulted in significant orders for Weir Pumps in
this market – with particular demand for concrete volute units and our
unique integral turbine pumps.

We remain selective about our activities in the water and wastewater
markets and will continue to focus on more technical, higher margin
products. We currently operate successfully in the UK clean water market
and in the United States, where we have leading positions in our selected
municipal water and wastewater markets.

The minerals and mining sector continues to be a growth market,
particularly with regard to our Weir Floway vertical turbine pumps.
By working closely with Weir Minerals, we have been able to grow our
market share considerably, particularly in South America.

The niche Weir Lewis and Weir Specialty Pumps businesses enjoyed
considerable success, outpacing market growth rates, and we
anticipate equally impressive results in 2007.

Our 2006 performance in the general industrial market was also strong.
The sector continues to grow at 3-4% and the Clear Liquid businesses
are well placed to grow ahead of this market.

The Weir Group PLC Annual Report 2006

Valves & Controls: Specialising in high integrity
valves for critical service, process protection and
plant safety applications in the power generation
and oil & gas sectors.

Phil Clifton
Divisional Managing Director

Order input

£70.6m

Up 20%

2005

2006

Our brands
Atwood & Morrill
Batley Valve
Blakeborough Controls
Hopkinsons
MAC Valves
Sarasin – RSBD
Sebim
Tricentric

Operational review

During 2006, all the Valves & Controls businesses delivered significant
improvements in their financial performance compared with the previous
year, showing the benefit of the recent transformational changes.

The restructuring of our UK operation was completed on time and
under budget in the first quarter of 2006. As expected in such a major
transformation, we have had to work hard to develop the new supply
chain and we are now in a stronger position going forward.

The capabilities, quality and reliability of the supply chain remain crucial
to Weir Valves & Controls, due to the demands of our highly technical
nuclear valves at the higher quality end of the market. As a consequence,
Weir is investing in its own foundries, including the Clear Liquid facilities
in Manchester and Minerals foundries worldwide, with benefits for
all businesses.

Our French operation enjoyed considerable success, turning the business
around over the last two years and recording strong growth and excellent
profit performance in 2006. Delivery of the first Ukrainian nuclear contracts
to programme and budget led to further nuclear valve work being won in
the Ukraine, in addition to significant orders from China and a major three-
year nuclear service contract for EDF in France. The commercial safety
valve business achieved more output from the consolidated facility than
the previous two factories combined, with the implementation of Weir
Production Systems and Lean thinking reducing bottlenecks and
smoothing flow through the facility.

The acquisition of our new factory in Suzhou, China, was completed to
plan and this operation was integrated utilising the now proven Weir 100
day integration plan. We now have a modern facility operating to world-
class quality and safety standards, based on the Weir Production System
and Lean thinking.

In the United Arab Emirates, we restructured our operation and commenced
production of valves using a local supply chain. In this region, we collaborate
closely with Weir Services to provide both valve assembly and testing
locally, which has proven to be very successful.

In the year, product development was focused on modifying existing
products to meet new customer needs, including our French nuclear
valve range for the United States market. We are also re-working products
for use in the next generation of conventionally fuelled power stations,
which operate at much higher pressure.

Key achievements

• Restructuring and relocation of the UK business and the implementation
of a new business model based on a higher proportion of outsourcing.

• Transformation of our French operation, resulting in strong growth and

excellent profit performance.

• Acquisition and integration of a new wholly owned subsidiary in Suzhou,
China, including the successful introduction of Weir Production Systems.

• Significant order wins for the Middle East oil and gas market.

• Increased output and profitability from our commercial valve operation
in North Carolina following the implementation of Lean principles.

• Creation of a Weir Group nuclear forum to maximise opportunities

in the power generation market across all Group businesses.

• All the Valves & Controls businesses significantly improved their

Weir Production System scores, resulting in delivery and lead time
improvements in all plants over the year.

“The transformation of the Valves & Controls businesses in France and the UK was
substantially completed during 2006 and has shown significant improvement in
profitability. Together with improvements in the United States operations and the new
plant in China, this gives a strong platform for further profitable growth in the future.
The oil and gas market continues to be strong, but most pleasing is the growth we are
now seeing in the power generation market, both conventional and nuclear, where
we have good products, strong references and excellent engineering skills.”

Phil Clifton, Divisional Managing Director

Case Study

Cryogenic valves for
China’s first LNG plant

China, the hungriest and thirstiest energy
market in the world, is likely to require the
import of 19 million tonnes of Liquefied
Natural Gas (LNG) by 2010. Construction
of China’s first LNG terminal and associated
high-pressure pipelines is currently underway
in Guangdong Province. Weir Valves &
Controls was contracted to supply a
range of control valves for the project.

The valves we supplied included butterfly
valves, globe control valves and cryogenic
globe valves. Based on our standard BV500
and BV990 ranges and manufactured in
stainless steel, the valves were fitted with
specially constructed cryogenic valve
bonnets to ensure maximum heat
dispersion and packing protection
at cryogenic temperatures.

The cryogenic valves were required to
undergo a rigorous round of cryogenic
tests in a bath of liquid nitrogen to prove
the integrity of the valve body and seals.
They were then slowly returned to ambient
temperatures and re-tested to ensure
continuing seal integrity.

All of our valves passed this extensive testing
and were successfully supplied in 2006.

Assembly of Blakeborough control valves for
cryogenic use in China.

Operational Review

Weir Valves & Controls products reflect
our state-of-the-art product development
and manufacturing focus. Our global sales
operation and engineering capability
enable us to offer the whole-project,
whole-process solutions our
customers require.

Primary input breakdown
Power
Oil & Gas
General industrial
Minerals
Naval & Marine
Water & Wastewater

Geographic breakdown
Europe & FSU
Americas
Middle East & Africa
UK
Indo Pacific
Australia

56.0%
25.5%
17.5%
0.6%
0.3%
0.1%

29.5%
27.0%
16.1%
14.7%
12.6%
0.1%

Market review

The two key sectors in which Weir Valves & Controls businesses operate
are power generation and oil and gas.

The power generation market showed strong growth during 2006 –
and not just in China. We are now seeing coal and nuclear plants in the
advanced stages of planning in both Europe and North America. We have
taken the decision to relocate our nuclear valve operation to a new site in
Massachusetts and have high expectations for this facility.

A Weir Group nuclear forum was established to capitalise on the
opportunities in this important market across the Group businesses.
Weir is particularly well placed in the nuclear market on account of
its technically advanced products, strong installed base (over 75%
of the world’s reactors use Weir equipment) and excellent
engineering capabilities.

We are also optimistic about opportunities in the conventional power
generation market. The latest conventionally fuelled power stations
operate at higher pressure. In 2006, we adapted our products to meet
the requirements of this new operating environment.

The oil and gas markets are robust and growing. Businesses operating
in this sector continued to perform strongly in 2006 and we won
significant orders, including several for the Middle East.

We are continuing to invest in local people and training in key emerging
markets around the world and introduced new sales and operational
offices in Dubai, Beijing and South Africa.

In 2006, we focused on after-market activities with several of the businesses
improving their processes to become responsive to changing and ever
more demanding customer requirements. The growth achieved in this
area is very encouraging and we see further opportunities for 2007.

The Weir Group PLC Annual Report 2006
The Weir Group PLC Annual Report 2006

Engineering Services: Weir’s reputation for engineering excellence extends to the
technical support of both our own installed base and other manufacturers equipment.
Engineering Services works across all Weir markets, supporting both the Engineering
Products businesses and the Defence, Nuclear & Gas operations. Weir Services also
provides equipment maintenance, engineered solutions, process support and asset
management across major industrial sectors. A global programme of state-of-the-art
analysis, design and production technology for spare parts is delivered through local
and on-site engineering service centres.

Operating profit (£m)

Operating profit

Steve Simone
Divisional Managing Director

£12.4m

Down 9%

Revenue

£225.2m

2005

2006

Up 3%

Order input

£236.6m

Up 5%

Operational review

2006 was a year of transition and consolidation for much of the Weir
Services Division. All of the businesses continue to strengthen our offerings
in niche markets, using our expertise and experience to improve customer
service, enhance equipment performance and accelerate delivery. We
continued to exit non-core products and activities that are not aligned
to our strategy of offering higher margin integrated engineering solutions.

In North America, we enjoyed significant success in the Oil Sands markets
of western Canada. During the year, we won a very high percentage of the
bids that were tendered for the specialised equipment we supply, and also
saw significant improvements in our distribution products business, for
which we sell other Weir products throughout the region.

After careful evaluation, the decision was made to close our unprofitable
United States service centres. While we were disappointed with the need
to take this action, neither the competitive environment nor the margins
provided by these businesses were sufficient to provide ongoing
opportunities and satisfactory returns.

In the Middle East, our major facility in Dubai turned performance around
and showed significant improvements in the second half of the year.
Switching focus onto more localised opportunities in the oil sector resulted
in considerable success, with input substantially up on the previous year.

2006 was a year of major restructuring in the UK as we consolidated
facilities and resources to focus on the most profitable activities and
markets. We also won significant contracts and received notable health
and safety and outstanding customer service accolades from Scottish &
Southern Energy and Sandon Dock. Our field service group performed
well, with increased profits and safety improvements that saw them
complete the entire year with no Lost Time Accidents.

The Weir Production System was successfully implemented during
2006. Its introduction was well supported throughout the division
and across all geographic regions.

In 2007, we will continue to focus on value added services and
integrated engineering solutions, working together with other Weir
divisions to share technical resources and facilities that will enable
profitable growth for all.

Key achievements

• Success in the Oil Sands markets of western Canada.

• Adoption of Weir Production System produced operational benefits

across North America and the UK.

Dubai also became the first location in the Group to achieve OHSAS 18001
accreditation following the successful audit of its Health & Safety Management
System by independent certification bodies.

• Weir-Amco joint venture in Saudi Arabia grew 50%.

• Aramco recognised our Saudi facility for outstanding

We enjoyed considerable success through our new joint venture with
Amco in Saudi Arabia, which made significant progress during the year.
We have great expectations for the business going forward.

Our Australian operations had an excellent year, exceeding targets
following a two-year investment strategy.

customer support.

• Market refocus produced significant improvements in Dubai’s

performance in the second half.

• Opened new facility in Bangalore, India.

• Australia met all of its targets, reflecting growth over previous years.

• Alloa business in the UK won three large Hydro projects.

• Secured five year Canadian Natural Resources asset management

contract in North Sea oil and gas industry.

“Weir Services continues to be a strong customer focused organisation and prides itself
in solving customer problems. We continue to listen to our customers, developing the
organisation to reflect the demands of the marketplace. In 2006, we invested
significantly in facility realignments to have more capable facilities with stronger
technical and project management skills to enhance our position in our core markets.”
Steve Simone, Divisional Managing Director

Case Study

Weir-Amco:
joint venture success

Weir-Amco, our newest joint venture company,
is the licensed authorised repair facility for
Hydril Blow-out Preventors in one of the
largest oil related markets in Saudi Arabia.

In April 2005, prior to the joint venture, Amco
was placed on provisional status by Hydril and
was under threat of losing its preferred status.
The new Weir management team and Weir-
Amco employees have not only managed to
attain fully approved status again, but have
also received accolades from both customers
and Hydril management.

At the start of the joint venture operations,
investigations revealed that the lack of
specific threading capability was causing
major delays in the delivery of blow-out
preventors to customers.

The use of the Weir Production System has
successfully reduced turnaround of threading
parts from three weeks to 3-4 days. Weir-Amco
now has full in-house capability to turnaround
Hydril Blow-out Preventors and the number of
Blow-out Preventors received from customers
has almost doubled in 2006 from 2005.

During 2006, the estimated value of Hydril
work also doubled, including winning back
major customers, which were lost prior to
Weir’s involvement.

Blow-out Preventors for the oil industry go
through the service facility.

Photograph: Muskeg River Mine in the Canadian Oil Sands, courtesy of Shell Canada Limited

Operational Review

The specialist technical expertise of Weir
service engineers and project managers
enables customers to improve their
operations by reducing downtime,
enhancing the performance and
extending the working life of
process-critical equipment.

Primary input breakdown
Oil
General industrial
Power
Minerals
Water & Wastewater
Naval & Marine

Geographic breakdown
Americas
UK
Middle East & Africa
Australia
Europe & FSU
Indo Pacific

35.6%
22.5%
18.0%
10.4%
7.5%
6.0%

48.1%
25.4%
11.8%
11.0%
2.4%
1.3%

Market review

The oil and gas industries around the world remain busy, driven by growing
demand and buoyant prices and this continues to be a key sector for Weir
Services. Billions of dollars are being committed to projects in the energy rich
regions of the world, such as western Canada, Middle Eastern countries,
Western Australia and the Caspian region. Weir Services is involved in
projects ranging from small productivity enhancement programmes to
major greenfield operations for the Oil Sands in Western Canada and
increasing drilling capacity by 50% in Saudi Arabia.

The Oil Sands business in western Canada has increased significantly in
recent years and the division experienced continued success in this area in
2006. The industry has committed to $10bn of investment in this region
over a 10 year period, so it is likely that we will continue to stay focused
on this market for the foreseeable future.

The power industry is also experiencing significant growth and we are
seeing a commitment to increase capacity through a combination of new
facilities, the investigation of renewable energy options and equipment
life extensions driven by ageing plants. New plants are prominent in
China and India, while upgraded plants are planned for North America
and Europe.

Around the world, commodities markets remain strong and the mining
industry is being driven by demand in China, as well as Australia and Canada.
The importance of safety and equipment specification within the industry
means that it is essential to offer an integrated engineering solution rather
than a simple repair service. We are generating successful business in this
area and have enjoyed upturned market conditions in 2006.

Weir Services is well positioned to take advantage of buoyant market
conditions globally through our existing service network around the
world. Our ability to marshal technical resources to the sometimes difficult
locations of our customers sets us apart from the general competition.
We also enjoy an excellent reputation for solving ongoing performance
or equipment problems, providing the technical expertise and experience
that customers need to help to create optimal solutions for the long haul.

As a consequence of limited supply, customers are increasingly looking
to work more closely with our Services Division, which offers a stable
supply of qualified field labour and capable re-manufacturing locations.
To maximise the opportunities this situation presents, we will continue
to promote the division as an integrated solutions provider, rather than
simply a repair and maintenance supplier. This puts us in an ideal position
to benefit from the move by customers towards long-term asset
management contracts and their requirement for more partnership-
style relationships.

The Weir Group PLC Annual Report 2006 | Operational Review

Defence, Nuclear & Gas: Specialist engineering
design businesses, responsible for the design and
management of complex engineering projects.

Operating profit (£m)

Operating profit

7.5

2.5

£9.8m

Up 46%

Revenue

£107.2m

Up 57%

Order input

£179.1m

Up 60%

2005

2006

Phil Clifton
Divisional Managing Director

Operational review

The nuclear and defence businesses delivered another strong performance
in 2006, successfully building on our reputation for engineering excellence
by working with customers to solve very specific problems in the defence
and nuclear sectors.

In these buoyant markets our strengths lie in the ability to design and
produce control systems and mechanical handling solutions, which meet
very specific, safety critical and challenging requirements, such as the
mechanical handling of weapons or nuclear waste.

We experienced significant growth overseas, successfully implementing our
strategy for opening up new markets outside of the traditional UK market,
with contract wins for the Spanish, Canadian, Dutch, Korean and Australian
navies. The long-awaited confirmation of our Spanish submarine contract
was particularly welcome.

Within the nuclear industry, we remain focused on the UK market, where there
is considerable opportunity in nuclear decommissioning waste management
and clean up operations, once funding commitment is secured.

Weir LGE, our liquid gas shipping and onshore storage business, had
another exceptionally strong year in 2006 making a significant contribution
to divisional profits and winning virtually every new order possible during
the year.

The market for marine LPG gas carriers grew at record levels for the third
successive year, with limited availability of building slots forcing owners to
order now for deliveries into 2009. However, following the recent boom in
orders, we are expecting demand for large and medium sized LPG carriers
to decline significantly in 2007 and throughout 2008.

We are continuing to develop our onshore LPG storage facility expertise
and forecast a healthy and steady growth of opportunities for the future.

Key achievements

• Major contract awarded to design and manufacture the Weapons Discharge

and Handling System for new Spanish conventional submarines.

• Successful installation of an Intermediate Level Waste handling system at

Hunterston ‘A’ nuclear facility.

• Five year Through-Life Support contract signed in Australia, enhancing our

already close relationship with the Australian Navy and Defence Department.

• Record year saw Weir LGE build on its leading position in LPG carrier market.

• Successfully extended Weir customer base to include Norwegian ship owners.

• Continued successful delivery of major equipment for the Royal Navy Astute

submarine programme.

• Continued growth in support of the Canadian Navy submarine programme.

• Continued growth with British Energy to maintain and improve fuelling

systems on its ACR nuclear power stations.

Defence

Growth in defence spending remains positive
worldwide. Many major maritime and land
system projects are predicted to start in the
near future in the United States, Europe,
Australia, Canada and the Far East.

Nuclear

The potential for nuclear power revitalisation
and demand for decommissioning solutions
have brought new confidence to the nuclear
markets. We forecast an increasing demand
for competent systems providers with
strong technological skills and detailed
regulatory knowledge.

Gas

The LPG transportation and onshore storage
market remains robust with increasing long-
term new storage requirements particularly
in the Middle East.

Primary input breakdown
Naval & Marine
Power
General Industrial

91.7%
5.5%
2.8%

Geographic breakdown
Indo Pacific
Europe & FSU
UK
Australia
Americas

54.8%
21.7%
15.4%
5.5%
2.6%

“The Defence, Nuclear & Gas Division successfully
opened up new markets for our defence business
and is well positioned to take advantage of
activity in the nuclear power market. In the
burgeoning gas market, Weir LGE significantly
exceeded its growth expectations.”
Phil Clifton, Divisional Managing Director

Financial Review: These financial results demonstrate
the effectiveness of the operational improvements
we have made and the strong underlying cash
generation of the Group.

Financial Review

“The Group includes a strong portfolio of businesses

in the oil and gas, power generation and
mining markets where fundamentals point
to sustained future progress.”

Operating Structure

The trading activities of The Weir Group PLC comprise the manufacture
of pumps and valves and ancillary equipment for the oil and gas,
power generation, mining and general industrial markets (the Group’s
Engineering Products Division); the provision of equipment maintenance,
process support and asset management services (which constitutes the
Engineering Services Division) and the specialist design of turnkey
engineering projects, (the Group’s Defence, Nuclear & Gas Division).
The Group also has a number of investments under joint ventures and
associates, the most significant of which is the shareholding in Devonport
Management Ltd (DML), the owner and operator of the Devonport
Royal Dockyard, which services, maintains and repairs the UK’s nuclear
submarine fleet. The results of these joint ventures and associates are
reported separately.

Results overview

These financial results demonstrate the operational improvements we have
made and the strong underlying cash generation of the Group. The Group
includes a strong portfolio of businesses in the oil and gas, power generation
and mining markets where fundamentals point to sustained future progress.

Reported revenue increased by 19% in 2006, from £789.4m to £940.9m
with all three divisions achieving growth over 2005. Buoyant conditions in
the mining, oil and gas, power generation and marine markets, together
with a full year contribution from Weir Gabbioneta, contributed to the
year’s results. Favourable exchange benefits from the translation effects
of overseas subsidiaries contributed £0.9m to the revenue growth.

Operating profits before exceptional items rose 32% to £87.7m for 2006.
Excluding attributable profits from our joint ventures and associates, the
operating margin was 8.2% of revenues against 7.2% last year. Increased
operational leverage, the UK restructuring programmes and the full year
effect of the Weir Gabbioneta acquisition benefited Engineering Products.
Together with a stronger performance from Defence, Nuclear and Gas,
this offset lower margins in the Engineering Services Division caused by
once off restructuring costs which are expected to deliver improved
performance in 2007. Attributable profits, reported on an after tax basis,
from our joint ventures and associates contributed £10.5m against £9.2m
in 2005.

Net exceptional profits of £15.7m were recognised in the year. These
represent a gain on sale of £6.8m on the former Weir Valves & Controls
site in Huddersfield, costs of £1.8m in respect of the previously announced
UK restructuring and a one-off gain of £10.7m arising on the implementation
of agreed changes to the defined benefits arrangements in our main UK
pension scheme.

1717

The Weir Group PLC Annual Report 2006

Net interest costs of £5.5m were £0.9m higher than 2005 as a consequence
of higher average net debt levels following the Gabbioneta acquisition in
2005. The net interest costs were covered 16 times by operating profit
from continuing operations before exceptional items. In addition, there
was a £4.4m improvement in the net income earned from the Group’s
pension schemes reflecting the improved expected return on plan assets.

Profit before tax before exceptional items increased 40% on the previous
year at £87.1m (2005: £62.2m). Reported profit before tax increased
174% to £102.8m (2005: £37.5m), reflecting the impact of exceptional
items in both years.

Details of the trading highlights of each of these segments are set
out below.

Engineering Products

Input grew 23% to £683.8m with almost 80% being attributable
to the oil and gas, mining and power generation markets. We achieved
excellent results from Minerals (up 19%) and Clear Liquid (up 32%)
which combined with 20% growth from Valves & Controls to achieve
the Group’s highest ever level of order input.

Revenue on a constant currency basis increased 21% to £608.5m in
2006 (2005: £501.4m) due to continued strong demand from our core
mining, oil and power markets and good levels of organic growth across
the division’s pumps and valves products. Underlying revenue growth,
excluding the part year impact of the Weir Gabbioneta acquisition on
the 2005 comparatives, was 17%. The impact of foreign currency
movements was minimal.

Operating margins before exceptional items as a percentage of revenue
increased to 10.3% against 8.4% in 2005. Increased revenue in the Minerals
business, improved performances at the restructured Valves & Controls
and Clear Liquid operations and the inclusion of Weir Gabbioneta’s higher
margin product sales for the full year, all contributed to the improved result.

The two UK restructuring programmes are now complete following a
further charge of £1.8m in 2006 in addition to the £24.7m booked in the
prior year. The total cost of £26.5m was £4.5m below the anticipated cost
of £31.0m advised at the time of our 2005 restructuring announcement.
In addition, a gain of £6.8m was recognised on the sale of the
Huddersfield site.

Operating profits before exceptional items increased 49% to £62.6m
(2005: £41.9m) due to continued strong performances from the Minerals
activities, the benefits of restructuring in both Clear Liquid and Valves and
the full year impact of Weir Gabbioneta on the 2006 results.

Engineering Services

Input from Engineering Services increased 5% to £236.6m (2005: £225.5m)
with strong growth across the power and oil sectors. On a constant
currency basis revenue increased 3% to £225.2m (2005: £218.8m)
reflecting both the impact of a number of large one off contracts in 2005
and a conscious focus on the most profitable activities and markets.
Operating profits were £12.4m compared to £13.6m in 2005. This
reflected an improvement in the underlying trading performance of
the division offset by one off costs of £4.4m arising from restructuring
activities in the UK, United States and Middle East.

Good progress was made by the Canadian and Australian operations
during the year. In the UK, the rationalisation of the UK Service Centre
network was largely completed and, in the United States, the decision was
taken to close the remaining loss making Service Centres. In the Middle
East, one off costs were taken in the year to realign overheads and refocus
the operation on the oil sector.

We are encouraged by the prospects for growth within our Services Division.
Our joint ventures in Saudi Arabia and Abu Dhabi made good progress and
the restructuring investments made in the United States, UK and Middle East
provide a solid foundation for margin progress in the year ahead.

Defence, Nuclear & Gas

This division comprises those businesses in the Group where revenue
is derived from the specialist design of turnkey engineering projects for
the defence, nuclear and gas markets. The division’s revenue in 2006
increased 57% to £107.2m (2005: £68.3m), with gains in the marine
market as revenue milestones were achieved on a number of major
contracts. Operating profit grew 46% to £9.8m against £6.7m in 2005.

Joint Ventures & Associates

The Group’s share of profit from its joint ventures and associates
increased 14% to £10.5m. The increased profits from DML reflect the
benefits of the improved performance of its pension scheme, which offset
the impact of favourable profit taking on a number of key contracts in the
prior year. The full year contribution from the Group’s 49% share of its
joint venture in Saudi Arabia also contributed to the improved result
when compared to 2005.

Taxation

The tax charge for the year of £19.9m (2005: £13.8m) on attributable
profits of £76.6m, before exceptional items and excluding joint ventures
and associates, represents an underlying effective rate of 26% (2005:
26%). This differs from a theoretical expected rate of 31.3% (2005: 31.3%)
principally as a consequence of the tax efficient use of capital and the
recognition of historic losses and temporary differences in the United
States. The underlying tax rate is expected to rise in 2007 as these
historic losses are utilised.

The reported tax charge on profits before tax was £22.6m (2005: £13.8m)
reflecting the additional tax due on exceptional items. There is no tax
payable on the gain on sale of the Huddersfield site as a consequence
of capital losses available for offset.

In accordance with IFRS, earnings from joint ventures and associates are
reported on an after tax basis, with a tax charge of £3.7m reflected within
these net earnings.

Earnings and Dividends

Earnings per share before exceptional items was 32.4p, an increase of
38% compared to 2005. Reported earnings per share, taking account of
exceptional items and discontinued operations, was 39.4p, an increase of
213%. The weighted average number of ordinary shares in issue increased
to 207.1m as a result of the issue of 1.3m shares during the year to fulfil
option exercises.

Subject to shareholder approval, the total dividend for the year is 14.5p,
an increase of 10% over last year’s total of 13.2p. This represents dividend
cover (being the ratio of earnings per share before exceptional items to
dividend per share) of 2.2 times compared to 1.8 times in 2005. Going
forward, the Group will look to sustain a progressive dividend policy and
cover of at least 2 times.

Cash flows

The Group has delivered strong growth in cashflows, with cash generated
from operations of £134.5m substantially ahead of 2005 (£71.3m) as a
consequence of increased profitability and a £34.9m improvement in net
working capital, despite increased trading volumes. This improvement
arose from relative reductions in receivables and inventory levels and
increased advanced receipts of £10.9m which are expected to unwind
in 2007. A £7m special contribution was made during the year to reduce
further the deficit in the Group’s UK defined benefit pension plans.

Net capital expenditure was £26.6m (2005: £25.3m) reflecting continued
investment across the business. This represents 1.5 times depreciation,
and we expect to spend around 2 times in 2007. In addition, proceeds
from the sale of the Huddersfield site of £8.3m were offset by exceptional
cash restructuring costs of £5.8m.

The reduction in net debt resulting from positive cashflows was £56.9m
which, taken together with a £12.4m positive currency translation effect
on overseas borrowings, resulted in a year end net debt position of £7.1m,
down from £76.4m in 2005.

Liquidity and Funding

Our general policy is to finance the Group through a mixture of debt and
equity. The Group’s capital structure is managed centrally with the objective
of optimising the returns to shareholders over time, whilst safeguarding
the Group’s ability to continue as a going concern.

The Group has a £300m multi-currency revolving credit facility and Canadian
dollar credit facilities of $180m, all maturing in 2009. These have standard
covenant and variable rate interest structures and all covenants were met
in 2006. Foreign currency denominated borrowings of £145m equivalent
were outstanding under these facilities as at 29 December 2006.

The maturity profile of committed banking facilities is regularly reviewed
and well in advance of their expiry such facilities are extended or replaced
as required.

The Group held net cash balances of £139m as at 29 December 2006,
of which £98m was held in the UK and the remainder held as operating
funds by Group companies worldwide.

In addition, the Group has several committed and uncommitted bank
facilities under which advance payment and performance guarantees
are issued to support normal contract terms.

Treasury Management & Policies

The Group’s treasury policies seek to reduce financial risk and to ensure
adequate controls over treasury activities group-wide. Treasury activities
are largely delegated to the Group’s operating companies and are carried
out within this policy framework. Under treasury policy, all material foreign
exchange exposures are hedged, typically by means of forward contracts
matching the underlying contract cash flows, to provide certainty of future
revenues and costs. No speculative transactions are undertaken. Group
Treasury monitors exposures group-wide and reports regularly to support
Group financial risk management processes. Although all companies with
risk exposures undertake hedging transactions, only three companies
apply hedge accounting for such transactions for IFRS purposes.
The Group does not hedge foreign exchange translation exposure.

Further information on financial risk management objectives and policies
can be found in note 31 on page 85.

Exchange Rates

The Group operates in a number of foreign currencies. The results of
overseas operations are translated into sterling at average exchange rates
for the year. Net assets are translated at year end rates. Whilst there was
no material net year on year impact on the income statement in respect
of revenues and profits, the general strengthening of sterling against
major currencies towards the year end resulted in a negative net asset
translation effect of £12.8m.

Details of principal exchange rates used are contained in Note 32 on
page 85.

Financial Review

Retirement Benefits

The Group has 16 pension plans around the world of which six are defined
benefit plans, the most significant being the UK and Canadian plans.
All defined benefit plans are closed to new members. The net retirement
benefits obligation deficit reported at 29 December 2006 was £3.9m
(2005: £61.6m). During the year, the pension plans have benefited from
rising equity markets and bond yields, contributing to gains of £33m,
and a further £7m special contribution was made by the Company
into the UK plans. In addition, the trustees of the main UK plan agreed
to the implemented defined benefit changes which further reduced the
plan deficit by £10.7m. Against the background of this improved position,
the Group and trustees are undertaking a review of investment strategy
with a view to reducing future volatility risk.

Net Assets

Net assets at 29 December 2006 were £371.9m (2005: £291.0m), with
the increase due to the improved profitability of the business and gains
from pension fund performance considerably offsetting an adverse foreign
exchange translation effect.

Litigation

There are 52 asbestos related actions outstanding against Group
companies in the United States. All such actions are robustly defended.

Critical Accounting Policies

The financial statements have been prepared in accordance with IFRS and
the material accounting policies are set out on pages 48 to 53 of this report.
There have been no changes to the accounting policies adopted in 2005.

Applying accounting policies requires the use of certain judgements,
assumptions and estimates. The most important of these are set out
below. Further judgements, assumptions and estimates are set out in
the financial statements.

Long term contracts
Approximately 14% of revenue was derived from long term contracts.
The timing of revenue and profits recognition in long term contractual
arrangements is important and is usually measured by reference to the
stage of completion of contract activity at the balance sheet date. This
assessment necessarily requires a high degree of judgement. For other
aspects of revenue recognition, our accounting policies allow revenue to
be recognised only when the risks and rewards of ownership have passed
to the customer.

Impairment
IFRS requires companies to carry out impairment testing on any assets
that show indications of impairment and annually on goodwill and
intangibles that are not subject to amortisation. This testing involves
exercising management judgement about future cashflows and other
events which are, by their nature, uncertain.

Retirement benefits
The assumptions underlying the calculation of retirement benefits are
important and based on independent advice. Changes in these assumptions
could have a material impact on the measurement of the Group’s retirement
benefit obligations.

Keith Cochrane
Finance Director
21 March 2007

The Weir Group PLC Annual Report 2006

Board of Directors: The Board's operational
framework is underpinned by clearly defined
strategies, vision and values which combine to
create shareholder value through the effective
use of our resources.

Mark Selway
Executive Director

Alan Mitchelson
Executive Director

Keith Cochrane
Executive Director

Aged 47, was appointed chief executive in June
2001. Before his appointment, he was a director
of Britax International plc and managing director
of its automotive components division. Following
the purchase of that division by Schefenacker
International AG in 2000, he became a director
of that company and executive director of
Schefenacker Vision Systems.

Aged 57, is a solicitor and joined the Group in
March 2000 as group company secretary. He
was appointed a director in December 2001.
Before joining the Company, he was legal
director and company secretary of Highland
Distillers plc, following a number of years as
a legal advisor with Trafalgar House plc.

Aged 42, is a chartered accountant and was
appointed group finance director in July 2006.
He was formerly group director of finance at
ScottishPower plc. Before that he was with
Stagecoach Group plc where he was group
finance director before becoming group
chief executive in 2000.

Audit Committee

Stephen King (Chairman)
Christopher Clarke
Michael Dearden

Remuneration Committee

Michael Dearden (Chairman)
Christopher Clarke
Professor Ian Percy

Nomination Committee

Sir Robert Smith (Chairman)
Michael Dearden
Professor Ian Percy
Lord Robertson
Mark Selway

Group Operations
Executive Committee
From left to right

Keith Cochrane
Finance Director

Mark Selway
Chief Executive

Alan Mitchelson
Corporate Services Director and
Company Secretary

Phil Clifton
Valves & Controls and Defence,
Nuclear & Gas Divisional MD

Steve Simone
Services Divisional MD

Scot Smith
Minerals Divisional MD

Stephen Bird
Clear Liquid Divisional MD

Board of Directors

Sir Robert Smith
Chairman

Stephen King
Non-Executive Director

Michael Dearden
Non-Executive Director

Aged 62, was appointed chairman in July 2002.
He is chairman of Scottish and Southern Energy
plc and a non-executive director of 3i Group plc,
Standard Bank Group Limited and Aegon UK plc.
He was formerly chief executive of Morgan
Grenfell Asset Management, a member of the
Financial Services Authority and of the Financial
Reporting Council and chairman of Stakis plc.

Aged 46, was appointed a non-executive
director in February 2005. He has been group
finance director of De La Rue plc since January
2003. He was formerly group finance director of
Midlands Electricity plc and held senior financial
roles with Seeboard plc and Lucas Industries plc.
He was also a director of Camelot Group plc
until May 2006.

Aged 64, was appointed a non-executive
director in February 2003. A graduate of Oxford
University, he was formerly with Burmah Castrol
plc, where he was CEO of Castrol International.
He is a non-executive director of Johnson
Matthey plc and Travis Perkins plc. He was
chairman of Minova International Ltd until
December 2006.

Christopher Clarke
Non-Executive Director

Aged 61, was appointed a non-executive
director in 1999. A graduate of Cambridge
University and of the London Business School,
he was formerly a director of Samuel Montagu
& Co. Limited and HSBC Investment Banking.
He is a Deputy Chairman of the Competition
Commission and a non-executive director of
Omega Insurance Holdings Ltd.

Professor Ian Percy CBE
Deputy Chairman & Senior Non-
Executive Director

Aged 65, was appointed a non-executive
director in 1996. He was formerly senior partner
of accountants Grant Thornton, president of the
Institute of Chartered Accountants of Scotland
and chairman of The Accounts Commission for
Scotland. He served as a member of the Treasury
and DTI Co-ordinating Committee on Audit
and Accounting in 2003 and was chairman of
Companies House until December 2006. He is
senior non-executive director of Cala Group
Limited, non-executive deputy chairman of
Ricardo plc and chairman of Queen Margaret
University, Edinburgh.

Lord Robertson of Port Ellen (George)
KT, GCMG, HonFRSE, PC
Non-Executive Director

Aged 60, was appointed a non-executive director
in February 2004. He was Secretary General of
NATO (1999-2003) and before that Secretary
of State for Defence (1997-99). Lord Robertson
is chairman of Cable and Wireless International
Operating Board. He is a non-executive director
of Western Ferries (Clyde) Ltd. He is also an
advisor to the Royal Bank of Canada, Europe,
on the Advisory Board of Englefield Capital,
senior counsellor with The Cohen Group
(USA), President of Chatham House and
deputy chairman of TNK-BP.

Directors Report

The directors are pleased to present their 113th annual report,
together with the audited financial statements, for the 52 weeks
ended 29 December 2006.

Cautionary statement
This annual report and financial statements have been prepared
for the shareholders of the Company, as a body, and no other persons.
The various reports contain forward looking statements that are subject
to risk factors because of the nature of the sector and markets in which
the Group operates and reflect the knowledge and information
available at the date of the preparation of these financial statements.

Statements in the Chief Executive’s Review, the Operational
Review and the Financial Review on divisional performance are
made on a continuing business basis, excluding discontinued
operations and exceptional items.

Except as otherwise stated in the Chief Executive’s Review,
the Operational Review and the Financial Review, growth rates
and other comparative data in respect of divisional revenue and
operating profits are given on a constant exchange rate basis.
Underlying growth using constant exchange rates is defined as a
non-GAAP measure because, unlike actual growth, it cannot be
derived directly from the information in the financial statements.
This measure removes the effects of currency movements, which
allows us to focus on the changes in sales and expenses driven
by volume, prices and cost levels relative to the prior period.

Underlying constant exchange rate growth is calculated by
re-translating the prior year’s performance at current exchange
rates and adjusting for other exchange effects, including hedging.

Results
The Group profit attributable to members for the 52 weeks,
after taxation, amounted to £81.6m.

Dividends
The directors recommend a final ordinary dividend of 10.75p
per share to be paid on 1 June 2007 to ordinary shareholders
whose names are on the Company’s register at close of business
on 4 May 2007. Together with the interim ordinary dividend
of 3.75p per share paid on 10 November 2006, this makes
the total dividend for the year 14.5p.

Principal activities and business review
A review of the Group’s operations, principal activities, future
developments, together with a description of the principal risks
and uncertainties affecting the business and key performance
indicators can be found in the Chairman’s Statement on pages
2 to 3, the Chief Executive’s Review on pages 4 to 6, the
Operational Review on pages 7 to 16, the Financial Review
on pages 17 to 19 and the Corporate Social Responsibility
Report on pages 37 to 40, which are incorporated into this
report by reference, as well as within this report.

Other reports
The annual report includes a separate Corporate Governance
Statement, which is on pages 26 to 28, Audit Committee Report
on page 29, Nomination Committee Report on page 30 and
Remuneration Committee Report on pages 31 to 36.

Directors
Details of the current directors of the Company are set out on
pages 20 and 21. Chris Rickard resigned from the Board on 30
June 2006. Keith Cochrane was appointed to the Board on 3 July
2006. The directors who retire this year by rotation are Sir Robert

The Weir Group PLC Annual Report 2006

Smith and Alan Mitchelson. In addition, as he has been a non-
executive director for more than nine years, Professor Ian Percy is
subject to annual re-election. In accordance with article 97 of the
articles of association of the Company, Keith Cochrane also retires
at the forthcoming annual general meeting and, being eligible,
offers himself for election. Sir Robert Smith, Alan Mitchelson and
Professor Percy offer themselves for re-election.

Director’s indemnities
The Company has granted indemnities to each of its directors in
respect of all losses arising out of, or in connection with, the execution
of their powers, duties and responsibilities as directors to the extent
permitted by the Companies Act and the Company's articles of
association. In addition, directors and officers of the Company and
its subsidiaries are covered by Directors & Officers liability insurance.

Share capital
During the year, options were exercised by participants in the
Company’s share option schemes as a consequence of which
1,328,633 ordinary shares of 12.5p each were allotted and issued.
No awards under the Group Long-Term Incentive Plan vested
during the year. Details of the options and awards outstanding
under each of the Company’s share schemes at the end of the
year are set out in note 28 to the Group financial statements.

At the 2006 annual general meeting, shareholders renewed the
Company’s authority to make market purchases of up to 20.64m
ordinary shares (representing 10% of the issued share capital). No
shares were purchased under this authority during the 52 weeks
to 29 December 2006 and at the forthcoming annual general
meeting the Board will again seek shareholder approval to renew
the annual authority for the Company to make market purchases.

Substantial shareholders
The Company has been notified of the following interests
representing 3% or more of the issued ordinary share capital of
the Company as at 21 March 2007 (excluding treasury shares):

Number Percentage
Holding
of shares

Threadneedle Asset Management Holdings Limited 18,745,148
12,230,775
M&G Investment Management Limited
10,785,213
Fidelity International Limited and FMR Corp
10,469,815
AXA Investment Managers UK Limited
8,382,291
Legal & General Investment Management Limited

9.02%
5.88%
5.19%
5.04%
4.03%

Annual general meeting
The annual general meeting will be held on 9 May 2007.
A separate letter is being sent to all shareholders containing
the Notice of Meeting and the resolutions to be proposed.

Going concern
After making enquiries, the directors have a reasonable expectation
that the Group has adequate resources to continue in operational
existence for the foreseeable future. For this reason, they continue to
adopt the going concern basis in preparing the financial statements.

Charitable contributions
During the year, Group companies made the following contributions:

• charitable (being specifically health, heritage, educational and

community) purposes £169,218 (2005: £101,757).

• the Group made no political contributions during the period

(2005: nil).

Audit and auditors
So far as each of the directors is aware, there is no relevant audit
information (as defined by section 234ZA of the Companies Act
1985) of which the Company’s auditors are unaware.

Each of the directors has taken all of the steps that he ought to
have taken as a director to make himself aware of any relevant
audit information (as defined) and to establish that the
Company’s auditors are aware of that information.

A resolution to re-appoint Ernst & Young LLP as the Company’s
auditors will be put to the forthcoming annual general meeting.

Principal risks
Risk is inherent in our business activities and as a consequence
of operating a sound risk management process the Group has
identified the following principal risks and uncertainties, which
it believes could have a materially adverse effect on its business,
turnover, profit, assets, liquidity, resources and reputation.

The nature of risk is such that no list can be comprehensive and
it is possible that other risks may arise, or that risks not currently
considered material may become so in the future. Any forward-
looking statements in the annual report or otherwise made by
the Group should be considered in light of these risk factors.

The Group operates controls as described in the Corporate
Governance report to mitigate against these risks.

Economic, political and natural catastrophe risks
The Group operates in 35 countries around the world including
several within Africa, Middle East, Asia and South America. While
benefiting from the opportunities and growth in these regions,
the Group is exposed to the economic, political and business risks
associated with international operations, such as sudden changes
in regulation, expropriation of assets, imposition of trade barriers
and wage controls, limits on the export of currency and volatility
of prices, taxes and currencies. The Group’s diversified geographic
footprint mitigates against any exposure within any one country
in which it operates.

The Group’s operations are exposed to varying degrees of natural
catastrophe risk, such as earthquake and flood, as well as security
risk, in the various manufacturing locations in which it operates.
Where cost effective, such risks are mitigated through physical
measures designed to counter the impact of a catastrophe. The
value of assets and associated profits are also protected by insurance.

Market cycles
Over 70% of the Group’s revenues are generated from the power
generation, oil and gas and mining sectors and its performance
may be impacted by market trends across these sectors. The
provision of both original equipment and aftermarket sales and
services spreads this risk together with the broad geographical
diversification of the Group.

Legislative risks
Revision of environmental legislation in various countries takes
time and the Group monitors this in order to anticipate the effect
on its business and that of its customers. Unforeseen legislative
changes may have an adverse impact on operations and tighter
environmental legislation may increase manufacturing costs.
However, it can also provide opportunities to offer customers new
solutions to meet the more stringent environmental standards.

Intellectual property
The Group operates in a competitive market and constantly has
to take steps to prevent misappropriation of its intellectual
property rights. The Group relies on a combination of patent
rights, licensing arrangements and contractual arrangements
to establish and protect those rights, as well as occasionally
bringing law suits against third parties.

Industry competition
The markets for many of the Group’s products are fragmented and
highly competitive. The Group competes against large and well
established global companies, as well as local companies, and low
cost replicators of spare parts, on the basis of price, technical
expertise, timeliness of delivery, previous installation history and
reputation for quality and reliability. To remain competitive, the
Group invests continuously in its manufacturing, marketing, customer
service support and distribution networks. The diversity of operations
reduces the possible effect of action by a single competitor and
combined with the application of Lean manufacturing ensures
the Group’s competitive advantage is sustained.

Product liability claims
The Group faces an inherent business risk of exposure to product
liability and warranty claims in the event that a failure of a
product results in, or is alleged to result in, bodily injury, property
damage and consequential loss. The Group maintains insurance
coverage for product liability claims where possible. For warranty
claims not covered by insurance, warranty costs may be incurred
which the Group may not be able to recover.

Foreign exchange risk
The Group sells its products in over 100 countries and has
manufacturing operations in over 15 countries with the result
that two forms of currency risk - transaction and translational
exposures, arise:

• Transactional currency exposure arises when operating

subsidiaries enter into transactions denominated in currencies
other than their functional currency. Foreign exchange
transaction exposures are identified and managed directly
by the Group's operating subsidiaries within the policies and
guidelines established by Group Treasury. Group Treasury
enter into foreign exchange hedging transactions on behalf
of subsidiaries in accordance with the Group's policies and
procedures.

• Translational risk arises due to exchange rate fluctuations in the
translation of the results of overseas subsidiaries into sterling
and trading transactions in foreign currencies.

The Group makes limited use of derivative financial instruments
to hedge balance sheet translation exposures. On significant
acquisitions of overseas companies, borrowings are raised in the
local currency to minimise the translation risk. It remains the
Group's policy not to hedge profit and loss account
translation exposures.

Transaction exposures are hedged where deemed appropriate
and where they can be reliably forecast with the use of forward
exchange rate contracts.

The Weir Group PLC Annual Report 2006

Directors Report (Continued)

Tax
The effective rate of tax paid by the Group may be influenced
by a number of factors including changes in law and accounting
standards and the Group’s overall approach to such matters, the
results of which could increase or decrease that rate. The Group
seeks to manage its financial structure efficiently to minimise
the overall tax burden on the business where practicable. The
continued ability of the Group to manage its businesses in this
way cannot be guaranteed and so could affect the Group’s
financial performance.

Employee issues
Group performance depends on the skills and efforts of its
employees and management team across all of its businesses.
In striving to be an employer of choice, the Group recognises
that failing to attract new talent and retain existing expertise,
knowledge and skills in operations, products and infrastructure
areas such as information technology could have a negative
impact on its business. In addition, the success of Group
acquisitions will depend on the Group’s ability to retain
management personnel of acquired companies.

Pensions
Estimates of the amount and timing of future funding obligations
for the Group’s pension plans are based on various assumptions
including, among other things, the actual and projected market
performance of the pension plan assets, future long-term corporate
bond yields, increased longevity of members and statutory
requirements. In the last year, the relative improvement in equity
markets together with increased bond yields has reduced the deficit.
The Group continually reviews this risk and takes action to mitigate
where possible. In addition, while the Group is consulted by the
trustees on the investment strategies of its pension plans, the
Group has no direct control over these matters as the trustees
are directly responsible for the strategy.

Acquisitions
The Group has made a number of acquisitions in recent years
as part of its growth strategy and may make acquisitions in the
future. While the Group identifies expected synergies, cost savings
and growth opportunities prior to completing any acquisition,
these benefits may not always be achieved within the anticipated
timescale or may not achieve all of the anticipated benefits.

To mitigate against this, the Group implements a vigorous due
diligence process and ensures clear financial targets are in place
together with ensuring any acquisition is put through a formal
approval process. The Group also has its internal 100 day plan to
ensure that the integration process runs as smoothly as possible.

Delivery performance
The Group’s ability to meet customer delivery schedules is dependent
on a number of factors including sufficient manufacturing capacity,
access to raw materials, inventory control, sufficient trained and
equipped employees, engineering expertise and the appropriate
planning and scheduling of the manufacturing process. Many of
the contracts it enters into require long lead times and therefore
contain clauses on on-time delivery. Failure to deliver in accordance
with customer expectation could subject the Group to financial
penalties, may result in damage to customer relationships and
could impact on the Group’s financial performance.

Managing joint venture relationships
The Group must ensure that the selection of new joint venture
partners and the relationship with its partners in its existing joint
ventures is managed effectively to ensure the full potential for the
joint venture is achieved. Failure to achieve alignment of objectives
and manage relationships effectively may negatively impact the
Group's financial performance.

The Weir Group PLC Annual Report 2006

Health & safety
The Group operates in a number of demanding environments.
Safe working practices are extremely important to protect everyone
on the Group's sites. The Group has developed quality and safety
processes within each of its businesses which are regularly audited
by professional bodies and customers. The Group operates long
established working practices and controls to minimise damage
and injury. If the Group cannot maintain a safe place for all its
employees to work this could result in a number of negative
outcomes to the Group including:

• fines and penalties;

• loss of key customers;

• exclusion from certain market sectors deemed important for

future development of the business; and

• damage to reputation.

Group performance
In 2006, the Group’s strategy was underpinned by focusing on a
number of key performance measures. The following measures are
the ones that the Board feel communicate the performance and
strength of the Group as a whole. However, management use
further performance measures to run and assess the performance
of their individual divisions, rather than the Group as a whole.

Input - continuing operations (1)

Order input is a key measure used to evaluate market trends,
establish forward sales and enable the efficient management of
production schedules. Order input is defined as the expected
revenues to be generated from contractually committed
orders received.

(1) Excludes joint ventures and associates; calculated at constant 2006 exchange rates.
(2) Calculated at constant 2006 exchange rates.
(3) Group weighted average.
(4) Adjusted to exclude exceptional items.

020052006Input(£m)20040060080010001200892.51099.5Up23% Operating margins - continuing operations (2)

One of the Group’s key objectives has been to improve business
operating margins. These are monitored on an ongoing basis.
Operating margins are defined as operating profits expressed
as a percentage of revenues. These are calculated before taking
account of any exceptional items to focus on underlying
trading performance.

Earnings per share - continuing operations (4)

The Group seeks to deliver long-term shareholder value as
evidenced in part through the growth in underlying earnings
per share. Growth in underlying earnings per share is a key
measure in determining the vesting of shares under the
Group's incentive schemes.

Underlying earnings per share is represented by profit for the
period from continuing operations, before exceptional items,
divided by the weighted average number of shares in issue.

Dividend and dividend cover - continuing operations

Shareholder value is also generated through the payment of annual
dividends to shareholders. Our ability to sustain such payments is
measured against the dividend cover ratio with our current policy
being to sustain dividend cover of at least two times. Dividend
cover is defined as basic earnings per share from continuing
operations, before exceptional items, divided by the annual
dividend per share.

Weir Production System implementation
The Group’s goal is consistently to meet customer demand on
time with the least cost method, through implementation of the
Weir Production System, adapted from the Toyota Production
System. By eliminating waste, quality is improved and production
time and costs are reduced. The key objective is to embed the
appropriate practices across all business processes to produce just
what is needed, when it is needed, in the most efficient way.

The Group has adopted the Lean Management philosophy
focusing on reduction of the Seven Wastes to improve overall
customer value. These are:

• transportation

• motion

• overproduction

• scrap

• inventory

• waiting time

• the processing itself.

Due to the importance of ownership in the process, the measurement
of performance is by an evaluation across all Group companies
comparing their current plant practice against world-class practice
and performance.

The evaluation involves an audit of each manufacturing site
which results in the site being awarded a Lean Score. Audits are
performed annually by internal peer groups. The Lean Score for
each site is then totalled and expressed as a Group Lean Score.
The results for 2005 and 2006 are as follows:

2005

2006

104

%age Change

37% increase

The Group Lean Scores are interpreted as follows:

• 0-60 score means the site needs significant improvement,

action is required;

• 61-99 score means relatively good practice, but regular follow

up and further improvements are required;

• 100-150 is world-class practice where process has taken root

and needs to be maintained and further improved.

The scores awarded to individual businesses are used to identify
improvement actions and set future targets.

Glasgow
21 March 2007

By order of the Board
Alan Mitchelson
Secretary

The Weir Group PLC Annual Report 2006

024681012Margins(%)EngineeringProductsEngineeringServicesDefence,Nuclear&GasGroup (3)200520068.310.36.25.59.89.17.99.005101520253035Earningspershare(pence)2005200623.532.4Up38% 03691215Dividend(pence)Dividendcover(times)20052.520062.01.51.00.50.013.214.5DividendUp10% Corporate Governance Statement

The Combined Code
The Company remains committed to the highest standards of
corporate governance and manages its affairs in accordance with
the Combined Code on Corporate Governance (the “Combined
Code”) issued by the Financial Services Authority in July 2003.
During the 52 weeks ended 29 December 2006, the Company
complied with the Combined Code provisions. This statement
describes how the Company has applied the Combined Code.

The Board
The Board comprises the chairman, chief executive, group finance
director, corporate services director and five non-executive directors,
all of whom are independent. The Board meets regularly throughout
the year with ad hoc meetings as necessary. In the year to 29
December 2006, the Board met seven times. Meetings are held at
the head office in Glasgow, London at the time of the Company’s
annual and interim announcements and at operating locations.
The following table identifies the number of board and committee
meetings held during the past year and the attendance record of
individual directors.

Board
Meetings

Audit Remuneration

Nomination

Committee Meetings

No. of meetings in year

Sir Robert Smith
Christopher Clarke
Keith Cochrane(1)
Michael Dearden
Stephen King
Alan Mitchelson
Professor Ian Percy
Chris Rickard(2)
Lord Robertson
Mark Selway

7
7
4
7
7
7
7
3
6
7

(1) Appointed to the Board on 3 July 2006
(2) Resigned from the Board on 30 June 2006

3
3

2
3

Directors appointed to the Board other than at an annual general
meeting of the Company are required to retire at the following
annual general meeting when they may offer themselves for election.
One third of the remaining members of the Board (or, where that
number is not a whole number, the nearest lower whole number)
are required to retire by rotation, subject to all directors submitting
themselves for re-election at least once every three years. In line
with best practice under the Combined Code, any director who
has held office for more than nine years is required to submit
himself for re-election.

On joining the Board, directors are provided with documentation
on the Company and its activities. New directors are provided
with an appropriate induction programme and, where appropriate,
site visits are arranged to major business units. Ongoing training
is provided as necessary.

A formal process for evaluating the performance of the Board is
undertaken annually. This process is conducted internally based
on a detailed questionnaire completed by each director and
individual and collective discussions. The senior non-executive
director, as part of this appraisal process, also meets with the other
directors as a group to consider the effectiveness of the Board.

The evaluation examines the balance of skills of the directors,
the operation of the Board in practice including its corporate
governance and the operation and content of board meetings.
The findings are used to assist the Board in its consideration of
the opportunities for improvement in the performance of the
Board and its directors.

During 2006, the Board also conducted an internal review of
the effectiveness of the Audit, Nomination and Remuneration
Committees incorporating a questionnaire covering such matters
as the role and organisation of each committee, meeting
arrangements, information provision and effectiveness. Following
completion of these questionnaires by the members of each
committee, the chairman met with the respective chairmen of the
Audit and Remuneration Committees to discuss the feedback. The
results of this evaluation were reported to the Board and, where
areas for improvement had been identified, actions were agreed.

Additionally, a one-to-one appraisal of all board members is
undertaken annually, including the chairman, whose appraisal
is carried out by the senior non-executive director.

There is an agreed procedure for directors, where appropriate,
to take independent professional advice on any matter at the
Company’s expense. The company secretary is responsible for
ensuring that board procedures are followed and all directors have
direct access to the advice and services of the company secretary.
The company secretary is also responsible for facilitating the
induction and professional development of the board members
and information flows within the Board, its committees and
between the non-executive directors and senior management.

There is an agreed list of matters which requires to be authorised
by the Board, such as the approval of the Group strategic plan,
Group budget and risk management strategy. Major acquisitions
and disposals, as well as major capital spend, are authorised by
the Board and are subsequently monitored by the Board after
execution. The Board also approves the issue of full year and
interim reports.

All directors bring their own independent judgement to all major
matters affecting the Group. Each of the non-executive directors is
considered by the Company to be independent. Notwithstanding
his presence on the Board for a period of more than nine years,
the Board considers Professor Percy, who continues to be a
member of the Board and the Remuneration and Nomination
Committees, to be independent in character and judgement.
He brings a wealth of experience to the Board’s deliberations and
is considered to be free from any business or other relationship
that could materially interfere with his independent judgement.

The Weir Group PLC Annual Report 2006

The views of executive directors are not limited to those operational
or functional areas for which directors have prime responsibility.
Board and committee papers are sent to directors in sufficient time
before meetings and any further back-up papers and information
are readily available to all directors on request to the company
secretary. The chairman ensures that non-executive directors
are properly briefed on any issue arising at board meetings and
non-executive directors have access to the chairman at any time.

The roles of chairman and chief executive are separate. The
chairman’s primary role is to ensure that the Board is effective in
its task of setting and implementing the Company’s direction. The
chief executive is responsible for management of the business and
developing the appropriate organisational structure for a global
organisation. The chief executive chairs the Group Operations
Executive Committee.

The non-executive directors are independent of management.
None of the non-executive directors has any material business or
other relationship with the Company. Each member of the Board
has considerable experience at senior level in other companies,
which allows for well informed and broadly based debate. The
Board structure ensures that no individual or group dominates
the decision-making process. Professor Ian Percy has been
designated the senior non-executive director to whom any
concerns can be conveyed.

The executive directors have contracts of service with one
year’s notice, whilst non-executive directors are appointed
on a rotational basis for periods of up to three years.

Board committees
Where appropriate, matters are delegated to board committees,
all of which have written terms of reference, which are available
on the Company’s website. The company secretary acts as
secretary to all these committees.

The principal board committees are the Audit Committee,
the Nomination Committee and the Remuneration Committee
(details of which are contained on pages 29 to 36).

Group Operations Executive Committee
The Group Operations Executive Committee is responsible for
ensuring that each of the Group’s businesses is managed effectively
and that the operational objectives of the Group, as approved by
the Board, are achieved. Its role includes the preparation of the
Group budget for approval by the Board, management of business
performance to achieve the Group budget, establishing and
maintaining reporting systems providing clear and consistent
information on all aspects of business performance, managing
and minimising corporate risk and ensuring that the necessary
mechanisms are in place to achieve effective inter-divisional
co-ordination in areas such as purchasing, branding and career
development planning. It also approves major items of capital
expenditure within limits authorised by the Board. The Group
Operations Executive Committee meets each month. Its
membership comprises the chief executive, group finance
director, corporate services director and the four divisional
managing directors. In the year to 29 December 2006,
the Group Operations Executive Committee met 12 times.

General Administration Committee
The principal duties of the General Administration Committee are
to allot shares under the various share option schemes and other
matters of a routine nature. This Committee comprises executive
members of the Board and meets as required.

Principles of business conduct
As an international company, the Group’s approach to maintaining
high ethical standards is critical to its business success. The Group’s
Operating Policies, which provide guidance in this area, have been
communicated throughout the Group through its intranet. A copy
is available from the Group secretariat. These policies are reviewed
on a regular basis.

Shareholders
The Company maintains regular dialogue with its shareholders.
The investor relations programme includes formal presentations
of full year and interim results. Feedback from these presentations
is reported to the Board, which gives investors an opportunity to
comment on the quality of the communications they receive in
their contact with the chief executive and group finance director.
Attendees at the results presentations include the chairman, the
executive directors and the senior non-executive director. The
Company also encourages communication with private shareholders
throughout the year and welcomes their participation at shareholder
meetings. In addition to the chairman’s statement at the annual
general meeting, a trading update to shareholders is given and
details of the Company’s trading activities are on display. The
directors attend the annual general meeting when the chairmen
of the Audit, Remuneration and Nomination Committees are
available to answer questions.

Notice of the annual general meeting is sent to shareholders
at least 20 working days before the meeting. The Company
conducts the vote at the annual general meeting by electronic
poll and the result of the votes (including proxies) is published
on the Company’s website after the annual general meeting.

Communications
The Board considers that the annual report and financial statements
and interim statements present a balanced and understandable
assessment of the Group’s performance and prospects. In addition
to information which any company is under a legal or regulatory
requirement to publish, the Group frequently publicises other
business developments through the national or specialised press or
in its own newspapers and bulletins which have wide circulation.

The Company’s website at www.weir.co.uk provides additional
company information, is regularly updated and includes the
presentations to shareholders given at the announcements of the
full year and interim results. The website also contains an online
version of the notice of the annual general meeting, the annual
report and financial statements and the interim report.

The Weir Group PLC Annual Report 2006

Corporate Governance Statement (Continued)

Internal control
In accordance with the Turnbull Guidance on internal control,
the Board ensures that there is an ongoing process for identifying,
evaluating and managing the significant risks faced by Group
companies. This process has been in place throughout 2006
and up until the date of this report, except that it did not apply
to the Group’s material joint ventures and associates. As part
of the integration programme, Weir Gabbioneta only became
fully integrated into the Risk and Control Framework and
the Group system of internal control in February 2006.

The directors have overall responsibility for the Group’s system
of internal control and for reviewing its effectiveness. The Board
delegates to executive management the responsibility for designing,
operating and monitoring both the system and the maintenance
of effective internal control in each of the businesses which comprise
the Group. In addition, each operating company is responsible
for the operation of key internal controls and to formally assess
the effectiveness of the internal control environment through
the submission, twice yearly, of the financial scorecard.

An internal audit function is in place to review and challenge
the effectiveness of key internal controls and to suggest relevant
actions to address potential weaknesses. The internal audit review
programme is based on a ‘risk based approach’ that helps to
prioritise resource upon the areas of perceived greatest risk to the
Group. This process is supplemented by a number of peer reviews
that seek to further monitor and evaluate the process of internal
control and share best practice around the Group.

Internal audit and peer review reports are provided to the
Group Operations Executive Committee as well as to the Audit
Committee which considers and determines relevant action in
respect of any control issues raised.

As part of the control framework, each Group operating company
and business prepares a Risk and Control Framework for their
respective business. As part of this process, the operating companies
prepare a report identifying the relative probability and severity of
the risks identified, the process for managing and mitigating these
risks and the means by which management might be assured that
the processes are effective. These frameworks are considered and
approved by the chief executive, group finance director and the
Group Operations Executive Committee. In addition, a Group
Risk and Control Framework is prepared, taking account of the
significant risks identified by the individual units together with
other group-wide risks. The Group Risk and Control Framework
is considered and adopted by the Board which is responsible for
the risk management strategy. The system of internal control is
designed to manage, rather than eliminate, the risk of failure to
achieve business objectives and can only provide reasonable, but
not absolute, assurance against material misstatement or loss.

The Board has monitored the effectiveness of the Group’s system
of internal control during the year. This is refined as necessary to
meet changes in the Group’s business and associated risks. Regular
performance reports are provided to the Group Operations
Executive Committee and/or the Audit Committee or the Board.
Where weaknesses are identified, plans and timetables for
addressing them are also reported.

In addition to the Group Risk and Control Framework, other
procedures which are fundamental to the Group’s system of
internal control are as follows:

Control environment
There is a clearly defined organisational structure within
which individual responsibilities are identified and monitored.
Businesses follow well understood procedures and are required
to comply with them.

Main control procedures
The Group has identified a number of key areas which are
subject to regular reporting to the Board. These controls include
procedures for seeking and obtaining approval for major
investments and transactions.

Group-wide standards
There are, for application throughout the Group, operating
policies and a standards manual which set out policies and
procedures with which all Group companies are required to
comply. The manual is communicated to all Group operating
companies through the Group intranet.

The managing directors are responsible for ensuring that each
company observes and implements the policies and procedures
set out in the manual which was reviewed in 2006.

Information systems
There is a comprehensive budgeting system in place with an
annual budget approved by the Board. Management information
systems provide directors with relevant and timely reports that
identify significant deviations from approved plans and include
regular re-forecasts for the year.

The Group’s internal control procedures described in this
section have not been extended to cover its interests in joint
ventures and associates. The Group has board representation
on each of its joint venture and associate companies where
separate systems of internal control have been adopted.

The Weir Group PLC Annual Report 2006

Audit Committee Report

The Audit Committee is charged with responsibility to the Board
for satisfying itself, on behalf of the Board as a whole, that the
financial affairs of the Group are conducted with openness,
integrity and accountability and in accordance with such existing
statutory and regulatory provisions and codes as are applicable
to the Group and to report on these matters to the Board.

e) the scope of the function and the findings of internal audit
reviews undertaken by PriceWaterhouseCoopers and the
Internal Auditor;

f) Corporate Governance Reporting;

g) the fees for Ernst & Young for 2006;

Its duties are to:

h) the audit strategy for year end 2006 audit; and

• consider the appointment, resignation or dismissal of the

i) the fraud and error guidelines contained in IAS240.

auditors and the level of audit fee;

• discuss with the auditors the nature and scope of the audit;

• review the draft interim and annual financial statements before

submission to the Board for approval;

• discuss any problems and reservations arising from the annual

audit and any matters the auditors may wish to raise;

• discuss with the auditors the Group’s system of internal financial
controls and any auditors recommendations for improvement;

• consider the findings of internal investigations and

management’s response;

• oversee the implementation of systems for financial control

and risk management;

• pre-approve non-audit services provided by the auditor;

• review the internal audit programme and its implementation;

• receive and review internal audit reports;

• review treasury policy.

The chairman of the Committee is Stephen King. The other
members of the Committee are Christopher Clarke and Michael
Dearden. The secretary to the Committee is Alan Mitchelson.
In addition the chief executive, group finance director and the
internal and external auditors also attend each meeting. The
Board is satisfied that Stephen King has recent and relevant
financial experience.

The Committee has the ability to call on the Group’s staff to
assist in their work and also has access to independent advice.
The chairman of the Committee receives additional remuneration
for his duties, details of which are set out on page 34. The
Committee meets each January, March and August and at other
times as appropriate. During the March meeting the Committee
undertakes a full review of the audit with the Group’s auditors.

There were three meetings in 2006. In the course of 2006,
the Committee discussed the following matters:

a) operational issues identified by the auditors in both their

audit and interim review;

b) the Internal Audit Charter and Strategy;

c) the Group Risk and Control Framework;

d) the Group accounting policies;

Both the Group internal auditor and PriceWaterhouseCoopers
undertake their activities in conjunction with the Group’s usual
peer group review process.

The Committee maintains a policy on the appointment and role
of the auditors. This includes guidelines on their appointment
which is subject to review at least every five years and on their
ongoing work to ensure that the independence of the Group’s
auditors is not threatened, particularly by the provision of non-
audit services. Prior approval of the Committee is required where
the expected cost of non-audit services provided by the appointed
external auditors is in excess of £75,000.

The day-to-day implementation of the Committee’s policy is
delegated to the group finance director who in turn monitors
the business units to ensure that all engagements fall within the
Committee’s guidelines. Fees payable to Ernst & Young in respect
of taxation advice of £nil (2005: £0.5m) and audit and assurance
services of £1.0m (2005: £1.0m) in respect of 2006 were
approved by the Committee.

The Group maintains a ‘whistle blowing’ policy in line with the
Public Interest Disclosure Act 1998 to enable employees, on a
confidential basis, to raise concerns internally in cases where they
believe they have discovered malpractice or impropriety. This is
reviewed on an ongoing basis. Complaints can be made either
to line managers or directly to the company secretary who will
appoint an investigating officer. Action will be taken in cases
where the complaint is shown to be justified and at all times the
complainant is informed of progress and outcomes. In addition,
the auditors Ernst & Young can be brought in to review procedures
if appropriate. The ‘whistle blowing’ policy is published on the
Group intranet.

The Committee’s terms of reference are available from the
company secretary on request and can also be found on the
Company’s website.

Stephen King
Chairman of the Audit Committee
Signed and approved for and on behalf of the Board
21 March 2007

The Weir Group PLC Annual Report 2006

Nomination Committee Report

During 2006, the members of the Nomination Committee were
Sir Robert Smith (chairman), Michael Dearden, Professor Ian Percy,
Lord Robertson and Mark Selway. Alan Mitchelson acts as secretary
to the Committee. The Committee meets at least twice a year
and at other times when necessary. The Committee uses external
search consultants to assist it in its work.

The Committee primarily monitors the composition and balance
of the Board and its committees and identifies and recommends
to the Board the appointment of new directors. The Committee’s
terms of reference establish a framework through which it can
operate to ensure the selection process of board candidates is
conducted in a formal, disciplined and objective manner. When
considering candidates, the Committee evaluates the balance of
skills, knowledge and experience of the Board and prepares a
description of the role and capabilities required for the particular
appointment. The Committee also reviews the succession
planning and leadership needs of the organisation and ensures
that, on appointment, all directors receive a formal contract or
letter of appointment as appropriate. The Committee’s terms
of reference are available from the company secretary and can
also be found on the Company’s website.

Appointments to the Board are approved by the Board as
a whole. However, it is the role of the Committee to make
recommendations to the Board in respect of the appointment
of new executive or non-executive directors. The process by
which the Committee brings candidates to the Board has been
agreed by the Board. In the case of executive directors, the
Committee has recommendations presented to it by the chief
executive and thereafter nominates candidates for consideration
by the Board. The procedure for non-executive directors is
that the Committee identifies and nominates candidates for
consideration by the Board to fill vacancies as and when
they arise.

During the year the Committee reviewed:

a) the Group’s current committee structure and procedures

including the composition and membership of each of the
board committees;

b) the induction programme for new directors;

c) the training for directors;

d) the appointment of Keith Cochrane as group finance director;

e) the board evaluation process; and

f) the board recruitment process.

Sir Robert Smith
Chairman of the Nomination Committee
Signed and approved for and on behalf of the Board
21 March 2007

The Weir Group PLC Annual Report 2006

Remuneration Committee Report

Committee membership
The chairman of the Remuneration Committee is Michael
Dearden. The other members of the Committee are Christopher
Clarke and Professor Ian Percy. The secretary to the Committee
is Alan Mitchelson. The Committee consists exclusively of non-
executive directors who are independent of management and free
from any business or other relationship which could materially
interfere with the exercise of their independent judgement. No
member of the Committee has any personal financial interest,
other than as a shareholder, in the matters decided by the
Committee. New Bridge Street Consultants LLP (“NBSC”) continued
to provide external advice in formulating remuneration policy
and its implementation during 2006. NBSC’s appointment was
renewed by the Committee in 2007. NBSC do not undertake
any other work for the Group other than remuneration work.
In carrying out its business, the Committee consults with the
chairman and the chief executive as appropriate.

Committee responsibilities
The responsibilities of the Committee are as follows:

• to determine the policy on the remuneration and performance

of executive directors of the Company;

• to determine the conditions of employment, including levels

of salary, pension arrangements, bonuses, incentives and share
options of executive directors of the Company;

• to determine targets for any performance-related pay

schemes; and

• to recommend to the Board the remuneration of the chairman

of the Board.

The Committee met four times in 2006. The Committee is
constituted, and operated throughout the year, in accordance
with the relevant provisions of the Combined Code. This report
complies with the Directors Remuneration Report Regulations
2002. The Committee’s terms of reference are available from
the company secretary on request and can also be found on the
Company’s website. NBSC’s terms of appointment are available
on request from the company secretary.

Executive directors remuneration policy
The Committee has adopted the following policy for the
remuneration of executive directors throughout 2006. It is
intended that this policy will apply in 2007 and future years.

The objective of the Company’s remuneration policy is to attract,
motivate and retain executive directors with the necessary abilities
to manage and develop the Group’s activities successfully for the
benefit of shareholders.

Accordingly, the Committee sets remuneration packages for the
executive directors to reflect both the size and complexity of the
business and individual responsibilities. It also takes into consideration
the remuneration practices adopted by other companies of similar
size and international spread of operations. For all senior executives,
the Group policy is to provide a significant part of their total
potential reward through performance based incentive plans
(annual bonus and long-term incentives) as described below.

To ensure the interests of management remain aligned with those
of shareholders, executive directors are encouraged to build up a
meaningful shareholding in the Company by both the purchase of
shares and/or the retention of a proportion of their share awards.
In addition, executive directors are obliged to convert part of their
bonus into shares under the Group incentive plan so that over a
five year period they build up a meaningful shareholding.

Executive directors remuneration comprises the following:

a) a basic salary, which is set by the Committee for each executive
director by reference to companies of a similar size and industry
practice. With effect from 1 April 2007, the salaries of Keith
Cochrane, Alan Mitchelson and Mark Selway will be increased
by 3.5%;

b) an annual performance-related bonus. Bonus payments are

intended to reflect the achievement of agreed business objectives
and positive contribution to stretching the performance of the
Group. The Committee reviews the bonuses payable on an
annual basis and sets the targets at the beginning of the financial
year. The targets used are based primarily on normalised pre-tax
profits but can also on occasion include other performance
measures. In 2006, the maximum potential bonus receivable
by the chief executive was 85% of salary and for the other
executive directors 75% of salary. In 2007, the maximum
bonus potential for the chief executive has been increased
to 125% of salary and for the other executive directors
100% of salary to bring them into line with current industry
benchmarks. The performance criteria has remained unchanged.
As a member of the Long-Term Incentive Plan (“L-TIP”), the
chief executive is required to contribute 25% of his bonus
in exchange for which he receives a conditional award of
investment shares. The other executive directors are required
to contribute 20% of their bonuses in the same manner.
Investment share awards are subject to forfeiture if the
director leaves the Group within three years. Bonuses
are non-contractual and non-pensionable;

c) participation in the L-TIP, details of which are set out on the

following pages;

d) participation in the Company’s pension plan by Alan
Mitchelson, details of which are set out below; and

e) other benefits-in-kind, which are the provision of a car allowance,
participation in a Group health care scheme, travel allowance
and death in service insurance. The Committee believes that
the level and provision of benefits-in-kind is consistent with
that provided by other comparable companies.

Pensions
Alan Mitchelson is a member of the Company’s 1972 pension and
life assurance plan. The plan is a defined benefit contributory plan
with the active members contributing 8% of salary, the balance of
the cost of the plan is met by the Company having taken account
of the Trustee’s opinion arrived at by considering the funding
recommendations of the plan’s independent actuary.

The Weir Group PLC Annual Report 2006

Remuneration Committee Report (Continued)

The plan targets a pension of two thirds of final salary payable at
normal retirement date, providing a member then has at least 24
years pensionable service. Where a member has less than 24 years
pensionable service to normal retirement date their pension
currently accrues at 1/36th of final salary per annum.

For members, whose pensionable service starts after June 1989,
salary (both for contributions and for plan benefits) is subject to
a plan specific earnings cap. This is currently £108,600.

The plan provides for a surviving spouse’s pension of one half
of the member’s pension and, in certain circumstances, for a
dependent child’s pension until the child attains the age of 18
years (or 25 years if in full time further education). Pensions in
payment and deferred pensions increase by an amount equal
to retail price inflation up to 5% per annum.

Life assurance cover of five times salary is provided separately
for each of the executive directors.

Mark Selway and Keith Cochrane are responsible for their own
pension arrangements.

Long-Term Incentive Plan (L-TIP)
During 2006, the Weir Group operated an incentive whereby
awards of Performance Shares, Matching Shares and Investment
Shares were made:

i) Performance Shares – Performance shares are conditional

awards to acquire free shares subject to company performance
(see below). In 2006, conditional awards of performance shares
were made worth 70% of salary to the chief executive, 100%
of salary to the new group finance director and 45% to the
corporate services director. It is the Committee’s intention
in 2007 to make an award worth 70% of salary to the chief
executive, 80% of salary to the corporate services director and
45% of salary to the group finance director. However, in the
case of recruitment this may be up to 150%.

ii) Matching and Investment Shares - Matching shares are

conditional awards to acquire free shares, subject to Group
performance (see below) granted in connection with an
individual’s investment from their annual bonus. Under the
L-TIP, executive directors are required to compulsorily defer
an element of any Group bonus earned (currently 25% for
the chief executive and 20% for the other executive directors)
in exchange for which they are awarded investment shares.
In addition, executive directors are also allowed to voluntarily
invest a further portion of their Group bonus (subject to any
cap imposed by the Committee, currently 10%) to be further
eligible for an award of matching shares. In return, the executive
directors are eligible to receive a conditional award of matching
shares worth a maximum of 2.5 times the pre-tax value of
the bonus “invested” under the L-TIP. It is intended that the
voluntary element will be increased to 20% for the 2007 awards.

The awards are based on the Group's share price, using the average
published closing price for the three dealing days immediately
preceding the date of award.

The conditional awards of performance and matching shares are
only receivable if a highly demanding performance condition is
achieved. For the performance share awards granted in 2006,
the performance condition will be based on the growth in the
Group’s Total Shareholder Return (“TSR”) over a single three-year
performance period (three consecutive financial years, beginning
with the year in which the award is made) relative to the growth
in the TSR of a comparator group ("the Comparator Group").
The Comparator Group comprises the following 18 companies:
AGA Foodservice Group, Bodycote International, Cookson Group,
Enodis, FKI, Halma, IMI, Meggitt, Mitie Group, Morgan Crucible
Company, Rolls-Royce, Rotork, Senior, Smiths Group, Spirax-Sarco
Engineering, Tomkins, Wood Group and WS Atkins. For awards
granted in 2007, the Comparator Group will comprise the same
companies. Only if the Company’s TSR ranks in the upper quintile
of this group will the full awards be receivable. This reduces
on a sliding scale so that for median performance, 25% of the
awards will be receivable. For below median performance,
none of the awards will be receivable.

TSR has been selected as the appropriate performance criteria
by the Committee as it is felt that such a measure clearly aligns
the interests of the senior executives with those of shareholders.
The TSR calculation will be performed independently for the
Committee, at the time of vesting.

In addition to TSR performance, for any of the performance and
matching shares to vest, the growth in the Company’s earnings
per share over the performance period must be equal to or
greater than the growth in the UK Retail Prices Index over
the same period.

Share option schemes
The Company operated a discretionary executive share option
scheme (“the Executive Scheme”) on a global basis. The Executive
Scheme, which was approved in 1994, expired in May 2004.
Under the rules of the Executive Scheme, share options were
granted up to a maximum value of four times a participant’s
earnings. Options were granted at the mid market price of a share
at the date of grant. The right to exercise an option under the
Executive Scheme is subject to performance conditions as
determined by the Committee at the date of grant.

The performance criteria applicable in 2004 were for the growth
in the Company’s normalised earnings per share over a three year
period to either exceed by nine per cent the growth in the retail
price index of the UK over that three year period or exceed the
weighted average growth during that three year period of the
normalised earnings per share of those companies in the FTSE
All Share Industrial Engineering Sector. Under the terms of the
Scheme, this is re-tested every year from the third anniversary
of the grant of the option to the date the option lapses.

In addition, the Company operated a Savings-related Share
Option Scheme in the UK, which the executive directors were
eligible to participate in on the same terms as all other employees
and which was not subject to performance criteria. This scheme
was closed in 2004.

The Weir Group PLC Annual Report 2006

Performance graph
The graph below compares the Company’s total shareholder
return performance over a five year period against the L-TIP
Comparator Group and the FTSE All Share Industrial Engineering
Sector Index. The Board believes that both the FTSE Index and the
Comparator Group represent an appropriate and fair benchmark
upon which to measure the Group’s performance for this purpose.

Company. In the event that the Company terminated an executive
director’s service contract other than in accordance with its terms,
the Committee, when determining what compensation, if any,
should properly be paid by the Company to the departing director,
will give full consideration to the obligation of that director to
mitigate any loss which he may suffer as a result of the termination
of his contract.

This chart shows the value, at the end of the 2006 financial year, of £100 invested in
The Weir Group PLC over the last five financial years compared with the value of £100 invested
in the average of the L-TIP Comparator Group and the FTSE All Share Industrial Engineering
Sector Index. The other points plotted are values at intervening financial year ends.

Directors contracts/terms of appointment
The details of the service contracts in relation to the executive
directors and letters of appointment in relation to the non-
executive directors who served during the year are:

Contract
commencement date

Unexpired
term/next re-election

Notice period
by company

Director

Sir Robert Smith
Christopher Clarke
Michael Dearden
Stephen King
Professor Ian Percy
Lord Robertson
Keith Cochrane
Alan Mitchelson
Chris Rickard
Mark Selway

9 May 2007

6 February 2002
14 December 1999 May 2008
17 February 2003 May 2009
May 2008
3 February 2005
9 May 2007
11 October 1996
1 February 2004
May 2009
12 months
3 July 2006
12 December 2001 12 months
19 January 2004
5 June 2001

6 months
6 months
6 months
6 months
6 months
6 months
12 months
12 months

resigned on 30 June 2006
12 months

12 months

Executive directors service contracts
To recruit the best executives, the Committee has in the past and
may in the future, agree contractual notice periods which initially
exceed 12 months particularly as it is often necessary for executives
to relocate their families. All the directors who served during the year
(including Chris Rickard up to his date of resignation) have service
contracts with the Company that provide for a minimum period
of notice of six months by the individual and 12 months by the

Executive directors external appointments
The executive directors are permitted, with Board agreement,
to take up one non-executive appointment provided that there is
no conflict of interest and that the time spent would not impinge
on their work for the Group. None of the executive directors has
at the date of this report any such non-executive appointment.
Remuneration from any external appointments will be passed
to the Company.

Letters of appointment
The chairman and each of the non-executive directors have
letters of appointment. The letters of appointment do not contain
any contractual entitlement to a termination payment and the
directors can be removed in accordance with the Company’s
articles of association. The chairman and all non-executive
directors are subject to re-election by shareholders at least
every three years, with the exception of any director whose
appointment exceeds nine years, in which case there is a
requirement for annual re-election.

Remuneration of the chairman & non-executive directors
The remuneration of the chairman is agreed by the Board on the
recommendation of the Committee. Fees of the non-executive
directors are determined by the Board. In determining the fee
levels, account is taken of the time commitment, scale of roles,
market norms and comparison with companies of equivalent
size based on information provided by NBSC. Neither the chairman
nor any of the non-executive directors participate in any of the
Company’s incentive plans or receive pension or other benefits,
except that the chairman is entitled to participate in the Group
health care scheme and an additional allowance is made available
to non-executive directors to reflect the additional time commitment
in attending intercontinental board meetings and operational
visits. The chairman and the non-executive directors are not
involved in any discussions or decisions about their
own remuneration.

The non-executive directors fees and chairman's remuneration
are reviewed annually by the Board. With effect from 1 April 2007,
the chairman’s remuneration will be increased to £175,000 and the
basic fee for each of the non-executive directors will be increased
to £40,000. In addition, each of the chairmen of the Audit and
Remuneration Committees is paid an additional fee which from
1 April 2007 is to increase to £7,500. There is to be no change
to the fee for the combined role of deputy chairman and senior
non-executive director of £10,000.

The Weir Group PLC Annual Report 2006

The Weir Group PLCFTSE Industrial Engineering0255075100125150175200225250275200120022003200420052006L-TIP Peer GroupRemuneration Committee Report (Continued)

Directors’ remuneration #

Chairman and non-executive directors:
Sir Robert Smith
Christopher Clarke
Michael Dearden
Stephen King
Professor Ian Percy
Lord Robertson
2005 Retiree

Executive directors:
Keith Cochrane
Alan Mitchelson
Mark Selway
Chris Rickard

Previous year comparatives

# Audited

Salary
& Fees
£

Bonus
£
(note iv)

Notes

i
ii
iii

146,250
35,000
40,000
40,000
45,000
35,000
-
341,250

179,075
283,350
531,940
136,383

-
-
-
-
-
-
-
-

129,375
200,250
448,800
107,625

Benefits
£
(note v)

418
9,623
-
-
11,967
-
-
22,008

12,600
14,615
18,997
994

Total
2006
£

Total
2005
£

146,668
44,623
40,000
40,000
56,967
35,000
-
363,258

321,050
498,215
999,737
245,002

135,354
32,000
35,201
30,583
42,000
32,000
18,500
325,638

-
437,598
905,472
506,101

1,471,998

886,050

69,214 2,427,262 2,174,809

1,367,630

788,800

18,379

(i) The fees for Michael Dearden include £5,000 for services as chairman of the Remuneration Committee (2005: £3,201).

(ii) The fees for Stephen King include £5,000 for services as chairman of the Audit Committee (2005: £1,250).

(iii) The fees for Professor Ian Percy include £10,000 for services as deputy chairman and for his role as senior non-executive

director (2005: £10,000).

(iv) The bonus figures for Keith Cochrane, Alan Mitchelson and Mark Selway include £25,875 (2005: £nil), £40,050 (2005: £26,100) and
£112,200 (2005: £60,945) respectively, which will be compulsory deducted from their bonus in exchange for which they will be awarded
investment shares which, subject to remaining employed with the Group, will be receivable on the third anniversary of the 2007 award.

(v) Benefits include, as appropriate, in the case of the executive directors participation in the Group health care scheme, travel allowance
and death in service insurance and in the case of the non-executive directors the additional allowance made available to reflect the
time commitment in attending the intercontinental board meeting and site visits held in October in Australia.

Directors’ interests in performance and other share plans #

Plan or
Scheme

Keith Cochrane

L-TIP 2006

Alan Mitchelson

Mark Selway

Chris Rickard

# Audited

L-TIP 2004
L-TIP 2005
L-TIP 2006

SRSOS
L-TIP 2004
L-TIP 2005
L-TIP 2006

ESOS
ESOS
L-TIP 2004
L-TIP 2005

As at
30 Dec
2005

-
-

47,166
32,925
-
80,091

3,497
142,801
105,524
-
251,822

164,835
15,165
40,132
39,453
259,585

Notes

iii
Total

iii
iii
iii
Total

iv
iii
iii
iii
Total

v
v
iii, v
iii, v
Total

The Weir Group PLC Annual Report 2006

Granted
during
year

Exercised
during
year

Lapsed
during
year

As at
29 Dec
2006

Date from
Exercise which ordinarily
exercisable

Price

Normal
expiry
date

76,695
76,695

-
-
54,062
54,062

-
-
-
144,764
144,764

-
-
-
-
-

-
-

-
-
-
-

(3,497)
-
-
-
(3,497)

-
-

-
-
-
-

-
-
-
-
-

76,695
76,695

47,166
32,925
54,062
134,153

-
142,801
105,524
144,764
393,089

nil

24.08.09 24.11.09

nil
nil
nil

11.06.07 11.09.07
01.04.08 01.07.09
04.04.09 04.07.09

201p
nil
nil
nil

01.07.06 01.01.07
11.06.07 11.09.07
01.04.08 01.07.08
04.04.09 04.07.09

-
-
-
-
-

-
-
40,132
39,453
79,585

164,835

273p
15,165 295.75p
nil
nil

-
-
180,000

01.04.07 01.04.14
22.04.07 22.04.14
11.06.07 11.09.07
01.04.08 01.07.08

(i) The closing market price of the shares at 29 December 2006 was 534p and the range for the year was 376.75p to 551.25p.

(ii) Since 2000, the exercise of options granted under the Executive Share Option Scheme (“ESOS”) is subject to the growth of the
Company’s normalised earnings per share over a three year period, either exceeding by nine per cent the growth in the retail
price index of the UK over that three year period, or exceeding the weighted average growth during that three year period
of the normalised earnings per share of those companies in the FTSE All Share Industrial Engineering sector. Between 1994
and 1999, the growth in the retail price index was required to be exceeded by six per cent.

(iii) The number of awards shown under the L-TIP is subject to achieving the performance conditions referred to on page 32 under

both the Performance and Matching Plan. These figures shown are maximum entitlements and the actual number of shares (if any)
will depend on these performance conditions being achieved. Awards take the form of nil cost options and have no performance
retesting facility. The market price on 4 April 2006 and 24 August 2006 was 445p. No shares have vested as at 29 December 2006.

(iv) On 18 July 2006, Mark Selway exercised options over 3,497 shares at a price of 201p under the Savings-related Share Option
Scheme (“SRSOS”). The market price on the date of exercise was 384p. The gain in respect of this exercise was £6,399.
The aggregate gains made on all option exercises by directors during the year totalled £6,399 (2005: £676,136).

(v) Chris Rickard’s options under the Executive Share Option Scheme can be exercised by him until 1 October 2007 and 22 October

2007. All of Chris Rickard’s L-TIP awards have lapsed.

Long-term Incentive Plan

Keith Cochrane

Alan Mitchelson

Mark Selway

Performance Share Awards Compulsory Investment Awards
(Notes i&ii)

(Note iii)

Matching Share Awards
(Notes ii&iii)

2006 Award
Total

2004 Award
2005 Award
2006 Award
Total

76,695
76,695

33,443
32,925
27,338
93,706

107,283
105,524
84,096
296,903

-
-

n/a
-
5,939
5,939

n/a
-
17,334
17,334

-
-

13,723
-
20,785
34,508

35,518
-
43,334
78,852

Total

76,695
76,695

47,166
32,925
54,062
134,153

142,801
105,524
144,764
393,089

(i) Compulsory investment awards are not subject to performance conditions.

(ii) No matching or compulsory investment awards were awarded in 2005 to Alan Mitchelson and Mark Selway as no bonus

was awarded.

(iii) The figures shown above are maximum entitlements and the actual number of shares which vest will depend on the performance

conditions being achieved as set out on page 32.

The Weir Group PLC Annual Report 2006

Remuneration Committee Report (Continued)

Directors pension benefits #

Alan Mitchelson was a member of a defined benefit scheme provided by the Group during the year. Mark Selway and Keith Cochrane are
responsible for their own pension provision. Up until his departure, Chris Rickard was responsible for his own pension provision. Pension
entitlement and the corresponding transfer values were as follows during the year:

Disclosures under Directors Remuneration Report Regulations 2002

Listing Rules

Accrued pension

Transfer value of accrued pension

Notes

At year
start

Increase
during
the year

At year
end

£
(note 1)

Change during
the year net
of directors
ordinary
contributions

£
(note 3)

At year
start

Directors
ordinary
contributions

At year
end

Increase

in accrued Transfer value
of Increase
(net of
inflation)

pension during
the year (net
of inflation)

(note 2)

4, 5, 6 18,627

3,546

22,173

328,166

79,497

8,508

416,171

2,959

50,228

Name of
Director

Contributing member:
Alan Mitchelson

# Audited

1. The pension entitlement shown is that which would be paid

annually on normal retirement, prior to any cash commutation,
based on pensionable service to the end of the year.

2. The transfer value of the increase in accrued pension has been
calculated on the basis of actuarial advice in accordance with
Actuarial Guidance Note GN11 and includes an allowance for
the risk cost of death in service benefits less the director’s
ordinary contributions over the year.

3. The change in the amount of the transfer value over the year is

made up of the following elements:
a) transfer value of the increase in accrued pension (net of inflation);
b) transfer value of the increase in accrued pension (due to inflation);
c) increase in the transfer value of accrued pension at year start

due to ageing;

d) impact of any change in the economic or mortality
assumptions underlying the transfer value basis; and

e) less the director’s ordinary contributions.

The change in the amount of the transfer value over the year
includes the effect of fluctuations in the transfer value due to
factors beyond the control of the Group and directors, such
as stockmarket movements which will be reflected within
d) above.

4. Directors have the option to pay voluntary contributions.
Neither the contributions nor the resulting benefits are
included in the above table.

5. The figures allow for the impact of the plan specific earnings
cap. Alan Mitchelson does not have an entitlement to an
excepted (formerly known as unapproved) pension from
the Group.

6. Payment of actual transfer values (from the defined benefit
scheme) are currently reduced below 100% of their value.
The figures above do not reflect this reduction.

Directors interests
The interests of the directors in the ordinary shares of the Company as at 29 December 2006 and at the end of the preceding financial
year were as follows:–

As at 29 December 2006

As at 30 December 2005 iii

shares under option

L-TIP awards

shares under option

L-TIP awards

Sir Robert Smith
Christopher Clarke
Keith Cochrane
Michael Dearden
Stephen King
Alan Mitchelson
Professor Ian Percy
Lord Robertson
Mark Selway

50,000
10,000
3,500
10,000
1,050
67,767
-
2,637
126,426

-
-
-
-
-
-
-
-
-

-
-
76,695
-
-
134,153
-
-
393,089

50,000
10,000
3,500
10,000
-
66,385
-
2,637
122,929

-
-
-
-
-
-
-
-
3,497

-
-
-
-
-
80,091
-
-
248,325

(i) At the date of this report the interests of the directors in the shares of the Company remain as stated above.

(ii) No director had, during or at the end of the year, any material interest in any contract of any significance in relation to the

Company’s business, in any debenture stocks of the Company, or in the share capital or debenture or loan stocks of any subsidiary.

(iii) In the case of Keith Cochrane, the comparative figure is as at his date of appointment to the Board.

Michael Dearden
Chairman of the Remuneration Committee
Signed and approved for and on behalf of the Board
21 March 2007

The Weir Group PLC Annual Report 2006

Corporate Social Responsibility Report

Our approach
The Weir Group is a global organisation, working in sectors and
industries that have a significant impact on human and natural
resources. As an organisation, our core values include integrity,
self-determination and valuing people. These values ensure we
remain focused on meeting our responsibilities to our customers,
suppliers, employees and shareholders, as well as to the
communities where we work.

By ensuring that corporate social responsibility is an inherent part of
leadership that crosses all boundaries in our organisation, we seek to
combine business success with support for people, communities and
the environment. We recognise that corporate social responsibility
requires us first and foremost to listen to our external and internal
customers in everything we do and to respond to their needs through
the enduring excellence of our actions, policies and processes.

We involve and inform our employees as much as possible within
regulatory constraints. Given the diverse nature and geographical
spread of our operations, it would be inappropriate and impractical
to apply uniform procedures group-wide and each company
is therefore responsible for achieving and maintaining appropriate
consultation and communication with its employees. We
communicate generally with employees through the production
and distribution on a regular basis of printed and electronic
newspapers and bulletins for employees to promote awareness
of current progress and developments within the Group.

The Group gives full and fair consideration to employment
applications from disabled persons. Where an employee becomes
disabled, arrangements are made wherever practicable to continue
employment by identifying an available job suited to that person’s
capabilities and providing any necessary retraining. The Group’s
career development programme encourages disabled employees
to reach their full potential.

Throughout 2006, the Group Operations Executive Committee
reviewed the safety, quality and environmental performance against
the objectives set for 2006. The primary concerns are to reduce
accidents in the workplace and maintain high standards of
environmental management in all of our activities.

In line with this philosophy, we pursue excellence through our global
Health, Safety and Environmental Forums whose goal is to eliminate
work-related injuries, prevent pollution, conserve resources, comply
with regulatory requirements and improve performance. These
forums annually review our performance in these areas, collect data,
share best practice and plan for the coming year. In turn, these plans
are disseminated and included within individual business plans
throughout our operations. This ensures consistency in performance
measurement and improvement activities. Forum members also
perform cross company safety audits to identify practices that are
working well and areas for improvement. Concern reports are
used to track completion of corrective actions.

During 2006, the European HSE Group Forum has been working
toward all our major European operations achieving OHSAS
18001 accreditation and most companies anticipate completing
their gap analysis by the end of 2007 with a view to all sites
achieving accreditation by the end of 2008. OHSAS 18001
(Occupational Health Safety Assessment Series) was developed by
the British Standards Institute as a health and safety management

framework allowing organisations to ensure that they are
consistently and accurately identifying hazards and risks within
their organisation. Providing a platform for eliminating and
managing these identified risks, the system supports the
organisation to continually improve its products, people and
process by fulfilling the overhanging safety policy that indicates
the company’s commitment and objectives. OHSAS 18001
offers a proactive approach to reducing accidents, near misses,
and other incidents year on year.

Employees
The root cause of 95% of accidents is as a result of behaviours.
Conventional approaches to accident reduction will go some
way to help achieve the business goal of reducing injuries in
the workplace. However, to further reduce accident rates, a
behavioural approach to safety must be adopted. There are
a variety of programmes that have been developed to meet
this need but many have been found to be cumbersome,
over complicated for much of the workforce and ultimately
impractical if covering a wide variety of workplace hazards.

The Weir Group has adopted a behavioural system known as
Safe Start. The programme is designed to supplement current
Health and Safety and Engineered Management controls and is
not designed to replace tailor made training for a multitude of
workplace hazards. The whole principle behind its concept is
to heighten awareness to those hazards and maintain them
in the mind whilst at work, in the home and when travelling.
The success of the programme lies in its ability to allow
employees to understand its message and allow the "self triggers"
to bring safety to the fore. The key to its success is involvement
and understanding at all levels of the organisation.

The concept of Safe Start revolves around four states of mind
contributing to critical errors:

The Four States of Mind

Cause or Contribute to One of More of

• Rushing

• Frustration

• Fatigue

• Eyes not on task

• Mind not on task

• Line of fire

• Complacency

• Loss of balance, traction or grip

The training is given in five weekly one hour units and examines
the critical errors, whilst also teaching techniques that will reduce
the risk of injury. The training is rolled out in the same manner to all
employees, including the managing director and the office cleaner.
The strength of the programme lies in its simplicity and takes the
approach of making "Common Sense Common Practice".

The Weir Group is committed to an accident free health and
safety environment based on the belief that all accidents are
preventable. The Group Operations Executive Committee drives
this commitment through operations globally. The businesses
record all near misses and injuries within their operations and
these are analysed on a continuous basis to reduce the number
of lost time accidents through improvement of the
working environment.

The Weir Group PLC Annual Report 2006

Corporate Social Responsibility Report (Continued)

The Group’s policy on health and safety requires that all our
companies take a proactive responsible attitude to the protection of
their employees health and safety. All companies carefully evaluate
risks to personnel wherever they are working and take appropriate
steps to minimise such risks. These include ensuring that project
design engineers consider design factors that minimise or eliminate
the risk of accidents to personnel during site installation and
commissioning. All Group companies are required to comply with
the legislation governing health and safety at work and to conduct
regular formal health and safety reviews at plant and site level.
These reviews are undertaken by nominated managers and
employees to ensure that risks are properly evaluated, events
leading to accidents are examined and appropriate remedial or
avoidance action initiated and subsequently monitored. Formal
reporting procedures have been implemented so that the safety
performance of individual companies is monitored and peer-to-peer
audits are conducted in order to provide a critical assessment of
each company’s performance.

The increased focus in this important issue includes full
investigations of all accidents being carried out and reported
at the Group Operations Executive Committee meetings.

The key measure of safety performance is the number of lost time
accidents (“LTAs”). The Weir Group adopts a more stringent lost
time measurement criterion than the industry norm of 3 days.
The recorded LTAs use the Group definition of ‘incidents resulting
in lost time of more than 4 hours’.

Lost Time Accidents

Note: The 2005 totals have been restated to include Weir Gabbioneta
in the Clear Liquid figures and Saudi Arabia in the Services figure.

The companies who have the highest numbers of accidents are
audited by our insurers to ensure that the proper systems and
processes are in place. The reduction can also be attributed to
improvements in education and training and adoption of Lean
manufacturing principles. In 2006, we started to focus not only
on accidents, but on near misses to further improve the safety
culture that is being engendered across the Group.

The Weir Group PLC Annual Report 2006

Environment
• The Weir Group is committed to the protection of the

environment in which all its companies operate.

• Each Weir company will comply with the relevant regulatory

requirements applicable to its business.

• Each Weir company will ensure that it is seen to be a good
citizen in the community in which it operates and adopt
practices aimed at minimising the environmental impact
of its operations.

Maintenance of the Group’s environmental policy is the
responsibility of the Group Operations Executive Committee,
while its implementation is the responsibility of divisional
managing directors. Each Weir division is required to report
on environmental performance and maintain environmental
management practices.

The Group policy is that all its operations will be ISO 14001
accredited. ISO 14001 is an internationally recognised specification
for an effective structured environmental management system
which helps organisations achieve environmental and economic
goals as well as assisting in the implementation of environmental
policy. An ISO 14001 accredited environmental management
system provides our customers, employees and shareholders with
the assurance that our environmental performance meets and will
continue to meet our legal and environmental policy requirements.
Through the Group Health, Safety and Environmental Forums,
all new businesses are brought into line with best practice and
assisted where the skills are not available in the implementation
of ISO 14001. In addition the Forums are a useful arena to allow
local and international environmental legislative developments to
be monitored before they become law. This proactive approach
allows us to conform with future environmental legislation before
laws are passed by voluntarily taking action on specific issues.

As part of our integrated commitment to our ISO 14001
accreditation, we have a rolling programme as part of our 100
day integration plan which we put in place in relation to any new
business unit. In 2006, the integration plans at Weir Gabbioneta,
Weir China, Weir Services in Saudi Arabia, Abu Dhabi, India and
Malaysia, plus service centres in Grand Prairie, Saskatchewan and
Woolongong and the Minerals Rustenberg Service Centre all
included action plans to gain compliance within a prescribed
timescale. Full compliance is targeted for early to mid 2007.

Environmental Performance
The Group policy is to minimise its environmental impact and any
environmental incidents are reported to the Group Operations
Executive Committee on a monthly basis. The definition of a
reportable incident:

“Any incident which involves the accidental release, emission
or discharge of contaminants to air, water or land and requires
outside resources to control or is required to be reported to
a regulatory agency”.

01020304050LostTimeAccidents(n)MineralsClearLiquidDefence,Nuclear&GasValvesServices352639247446267320052006In both 2005 and 2006, the Group recorded one environmental
incident. The environmental incident which took place in 2006
occurred in Saudi Arabia when effluent was discovered leaking from
drains at the rear of the main site. A contractor was brought in to
repair and clean up, laying new drains to the septic tanks. A new
drainage system and relocation of the septic tanks have now been
included in the site improvement plan.

Community
During the year, Group companies were involved in numerous
community, social and cultural initiatives. Causes, events and
charities are often nominated and driven by our employees,
reflecting their own interests and social engagement. We also
participate in a range of educational and training initiatives,
including:

As all our businesses have an objective of continuous improvement,
our environmental initiatives focus on minimising waste generation,
preventing pollution and reducing energy consumption.

Initiatives during 2006 include:

Weir Strachan & Henshaw are launching a Cycle to Work Scheme
in 2007, which will offer employees a long-term loan of a cycle
and related cycle equipment tax-free under a salary sacrifice
scheme. The scheme has been established with support from
cyclescheme.co.uk. The employee should use the cycle for at least
50% of their trips to work. They are also allowed to use it for
leisure and holidays. The aim of the scheme is to encourage
employees to cycle to work instead of using their car, thereby
promoting a healthy lifestyle and reducing pollution.

The Weir Minerals Australia foundry is a large consumer of
electricity and its Artarmon site undertook an energy consumption
study to identify mitigation methods of electricity consumption.
The study was conducted in 2006 and an energy efficiency and
reduction plan was approved. The main opportunities identified
for energy reduction or improved efficiency per ton of product
produced, include the updating of furnaces and air compressors.
During 2007, it is planned to replace this equipment and continue
with a rigorous preventative maintenance aimed to identify and
correct air leaks. Other energy efficiency and reduction opportunities
currently underway are related to reduction in the consumption of
LPG by implementing the Weir Production System waste elimination
principles in terms of reduction in the amount of fork-lift traffic.
Specifically, the project of relocating the pump assembly
shop near the warehouse will significantly reduce internal
transport needs.

Weir Services Australia, although a global company, are
recycling at a local level. With two endangered species living
in their local area, the Red Crowned Toadlet and the Somersby
Mintbush, Weir Services feel that they have more cause to recycle
than most. They have reviewed the waste that each department
creates and effectively found a way for reusing or recycling. In
their workshops they recycle and reuse rubber, plastic sheeting,
broken pallets, mild steel, stainless steel, brass, white metal and
packaging materials. In the office they reuse both sides of the
paper before recycling it along with printer cartridges and at the
request of staff they are now recycling all plastic and glass bottles,
cardboard, steel and aluminium cans.

Recently about 80 employees at
Weir Vulco Chile participated in
the construction of four houses for
four underprivileged families located
120 miles west of Santiago.

Weir Minerals Australia has been involved for many years in
sponsoring and participating in a Design and Construct Competition
for 2nd year Engineering Students throughout Australia and New
Zealand. This is organised in conjunction with the Australian
Institution of Engineers and is open to all universities in Australia
and New Zealand. Each university conducts its own competition,
with the winners gathered together for the national final in Sydney
which is sponsored by the company (2006: A$32,000). In addition
the company arranges:

• a tour of the company’s Artarmon factory by all 60 or so

competing students and officials;

• participation by staff as judges in the final event; and

• presentation of the awards at the function dinner.

The 2006 Warman Student Design-
and-Build Competition National Final,
was won by the team from the
University of Auckland, sending the
Warman Trophy and $1000 prize
money to New Zealand for the third
year in a row. The University of Adelaide team was given the
Judges Award for innovation. This year’s specification, code named
“Project ABC – Autonomously Beautify Countryside”, asked the
students to design a device, in response to a fictional requirement
for the planet Gondwana. The objective was to design, build and
prove a prototype device in a laboratory environment that served
to accurately and rapidly distribute wild flower seeds along the
planet’s highways. Along the way, students not only learned
about engineering design but also project management,
sustainability principles and team work and the results ranged
from sophisticated mechatronic systems to devices crafted from
such things as Lego, old farming machinery, skateboard wheels,
car parts and rubber bands.

The Weir Group PLC Annual Report 2006

Corporate Social Responsibility Report (Continued)

The Social Responsibility Committee at Weir Minerals Africa
was involved in various company and community projects to
uplift previously disadvantaged communities. Project acceptance
is based on the contribution to the improvement of quality of life.

predominantly employed at the site, into the local community
and was supported by the staff. In addition the company provided
match sponsorship for a friendly international Poland v England
football match held in the town.

For the year ahead, it is planned that the site will be the principal
location for a local two day event titled “Made in Todmorden”
which will involve community outreach to show the local
community the activities carried out on site, the products and
people, to aid a demystification of the business and promote a
closer affinity between the larger local community and the site.

Marketplace
We recognise that our corporate social responsibility also reflects
the way we behave towards our suppliers. The Group does
not operate a standard policy in respect of payments to suppliers
and each operating company is responsible for agreeing the terms
and conditions under which business transactions are conducted,
including the terms of payment. It is Group policy that payments
to suppliers are made in accordance with the agreed terms. At 29
December 2006, the Group had an average of 61 days purchases
outstanding in trade creditors.

Many Weir companies are collaborating closely with suppliers
to address environmental considerations throughout the supply
chain, particularly in areas such as raw materials, packaging and
recycling, to our mutual benefit.

Research & development
Research and development has a vital role to play in meeting our
corporate social responsibilities. The development of new products
that are more environmentally benign in both manufacture and
operation and the substitution of harmful materials, offer competitive
advantage to ourselves and to our customers.

We recognise that many of our products are themselves contributors
to environmental protection in critical areas such as power
generation, nuclear handling and subsea oil and gas exploration.
We are therefore investing in research and development to
continuously improve their performance.

2007 will see ongoing investment in design, research and
development, in which our corporate social responsibility and
business objectives are closely aligned.

In 2006, the company assisted with the following donations
and sponsorships:

• Purchased its cleaning materials from Tembisa Self Help

Association for the Disabled, who make such items on their
premises, thus providing employment to some disabled residents.

• A donation of R25,000 to Tembisa Child and Family Welfare

for use in providing for the children in their care. An additional
R25,000 was also donated towards the cost of a replacement bus.

• A donation of R25,000 to Tembisa Self Help Association for the
Disabled as well as providing financial support to their Casual
Day sticker campaign.

• Financial assistance was given to employees’ children to
cover some of the costs of schooling and tertiary studies.

• Subscribing to the East Rand Industrialists Network who
are involved in the upliftment and maintenance of the
industrial area facilities.

• R5,000 was donated to the University of the North West to
sponsor some orphaned children to attend a sports camp.

Weir Minerals Europe’s strategy is to work towards becoming
a neighbour of choice. This increasing pro-active approach is
reflected through the company’s approach to both environmental
impact minimisation and social stewardship. In 2006, the
Todmorden site set aggressive targets to reduce the volume of
waste to landfill and to improve recycling with sand and slag
waste to landfill being reduced by 31%. Plans for 2007 include
the installation of a chromite separation plant, which should
enable the company to improve its reuse of chromite sand by
20%. General waste to landfill was reduced by 24% through
improvements in internal waste streaming. The site also
demonstrated substantial improvements in recycling, increasing
wood and cardboard recycled by 73%. This was achieved
primarily through the combining of wood and cardboard waste,
to simplify the waste streams and reduce inclusion in general
waste to landfill. Metal scrap recycled improved by 20% despite
the outsourcing of metal fabrications in mid 2006, although this
should be viewed against volume increases through the machine
shop during 2006 generating increased levels of swarf waste.

The business also actively supports local events and charities,
which during 2006 included charitable donations (totalling
£2,000) specifically targeted at the local community through
a diverse range of organisations including schools, the arts, the
fire brigade and young peoples’ clubs. Financial sponsorship was
also provided for the organisation of a Polish cultural event aimed
at encouraging understanding and integration of Polish workers,

The Weir Group PLC Annual Report 2006

The Weir Group PLC
Financial Statements
for the 52 weeks ended 29 December 2006

Group Financial Statements

42 Directors Statement of Responsibilities

43 Independent Auditors Report

44 Consolidated Income Statement

45 Consolidated Balance Sheet

46 Consolidated Cash Flow Statement

47 Consolidated Statement of Recognised Income & Expense

48 Notes to the Group Financial Statements

Company Financial Statements

86 Directors Statement of Responsibilities

87 Independent Auditors Report

88 Company Balance Sheet

89 Notes to the Company Financial Statements

97 Principal Companies of the Group

98 Shareholder Information

Inside back cover - Financial Calendar

The Weir Group PLC Annual Report 2006 41

Directors Statement of Responsibilities

The directors are responsible for preparing the annual report
and the Group ﬁnancial statements in accordance with applicable
United Kingdom law and those International Financial Reporting
Standards (“IFRSs”) as adopted by the European Union.

The directors are required to prepare Group ﬁnancial statements
for each ﬁnancial year which present fairly the ﬁnancial position
of the Group and the ﬁnancial performance and cash ﬂows of
the Group for that period. In preparing those Group ﬁnancial
statements the directors are required to

• select suitable accounting policies in accordance with IAS 8:
‘Accounting Policies, Changes in Accounting Estimates and
Errors’ and then apply them consistently;

• present information, including accounting policies, in a manner
that provides relevant, reliable, comparable and understandable
information;

• provide additional disclosures when compliance with the speciﬁc
requirements in IFRSs is insufﬁcient to enable users to understand
the impact of particular transactions, other events and conditions
on the Group’s ﬁnancial position and ﬁnancial performance; and

• state that the Group has complied with IFRSs, subject to any
material departures disclosed and explained in the ﬁnancial
statements.

The directors are responsible for keeping proper accounting
records which disclose with reasonable accuracy at any time the
ﬁnancial position of the Group and enable them to ensure that
the Group ﬁnancial statements comply with the Companies Act
1985 and Article 4 of the IAS Regulation. They are also responsible
for safeguarding the assets of the Group and hence for taking
reasonable steps for the prevention and detection of fraud and
other irregularities.

The Weir Group PLC Annual Report 2006

Independent Auditors Report

Independent auditors report to the members
of The Weir Group PLC
We have audited the Group ﬁnancial statements of The Weir
Group PLC for the 52 weeks ended 29 December 2006 which
comprise the Consolidated Income Statement, the Consolidated
Balance Sheet, the Consolidated Cash Flow Statement, the
Consolidated Statement of Recognised Income and Expense and
the related notes 1 to 32. These Group ﬁnancial statements have
been prepared under the accounting policies set out therein.

We have reported separately on the Company ﬁnancial statements
of The Weir Group PLC for the 52 weeks ended 29 December
2006 and on the information in the Remuneration Committee
Report that is described as having been audited.

This report is made solely to the Company's members, as a body,
in accordance with Section 235 of the Companies Act 1985.
Our audit work has been undertaken so that we might state to
the Company's members those matters we are required to state
to them in an auditors report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the
Company's members as a body, for our audit work, for this
report, or for the opinions we have formed.

Respective responsibilities of directors and auditors
The directors responsibilities for preparing the annual report and
the Group ﬁnancial statements in accordance with applicable United
Kingdom law and International Financial Reporting Standards
(“IFRSs”) as adopted by the European Union are set out in the
Directors Statement of Responsibilities.

Our responsibility is to audit the Group ﬁnancial statements in
accordance with relevant legal and regulatory requirements and
International Standards on Auditing (UK and Ireland).

We report to you our opinion as to whether the Group ﬁnancial
statements give a true and fair view and whether the Group
ﬁnancial statements have been properly prepared in accordance
with the Companies Act 1985 and Article 4 of the IAS Regulation.
We also report to you whether in our opinion the information
given in the Directors Report is consistent with the ﬁnancial
statements. The information given in the Directors Report
includes speciﬁc information that is contained in the Chief
Executive’s Report, the Operational Review, the Financial Review
and the Corporate Social Responsibility Report that is cross
referred from the Directors Report.

In addition we report to you if, in our opinion, we have not
received all the information and explanations we require for
our audit, or if information speciﬁed by law regarding directors
remuneration and other transactions is not disclosed.

We review whether the Corporate Governance Statement reﬂects
the Company’s compliance with the nine provisions of the 2003
Combined Code speciﬁed for our review by the Listing Rules of
the Financial Services Authority and we report if it does not. We
are not required to consider whether the Board’s statements on
internal control cover all risks and controls, or form an opinion on
the effectiveness of the Group’s corporate governance procedures
or its risk and control procedures.

We read other information contained in the annual report and
consider whether it is consistent with the audited Group ﬁnancial
statements. The other information comprises only the Financial
Highlights 2006, 2006 Highlights, the Chairman’s Statement,
the Chief Executive’s Report, the Operational Review, the Financial
Review, the Board of Directors, the Directors Report, the Corporate
Governance Statement, the Audit Committee Report, the
Nomination Committee Report, the unaudited part of the
Remuneration Committee Report and the Corporate Social
Responsibility Report. We consider the implications for our report
if we become aware of any apparent misstatements or material
inconsistencies with the Group ﬁnancial statements. Our
responsibilities do not extend to any other information.

Basis of audit opinion
We conducted our audit in accordance with International
Standards on Auditing (UK and Ireland) issued by the Auditing
Practices Board. An audit includes examination, on a test basis,
of evidence relevant to the amounts and disclosures in the
Group ﬁnancial statements. It also includes an assessment of
the signiﬁcant estimates and judgments made by the directors
in the preparation of the Group ﬁnancial statements and of
whether the accounting policies are appropriate to the Group’s
circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the
information and explanations which we considered necessary in
order to provide us with sufﬁcient evidence to give reasonable
assurance that the Group ﬁnancial statements are free from
material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated
the overall adequacy of the presentation of information in the
Group ﬁnancial statements.

Opinion
In our opinion

• the Group ﬁnancial statements give a true and fair view, in
accordance with IFRSs as adopted by the European Union,
of the state of the Group’s affairs as at 29 December 2006
and of its proﬁt for the 52 weeks then ended;

• the Group ﬁnancial statements have been properly prepared
in accordance with the Companies Act 1985 and Article 4 of
the IAS Regulation; and

• the information given in the Directors Report is consistent

with the Group ﬁnancial statements.

Ernst & Young LLP
Registered Auditor
Glasgow
21 March 2007

The Weir Group PLC Annual Report 2006 43

Consolidated Income Statement

for the 52 weeks ended 29 December 2006

Continuing operations
Revenue
Cost of sales

Gross proﬁt
Other operating income
Selling & distribution costs
Administrative expenses
Restructuring costs
Share of results of - joint ventures

- associates

Operating proﬁt
Finance costs
Finance income
Other ﬁnance income - retirement beneﬁts

Proﬁt before tax from continuing operations
Tax expense

Proﬁt for the period from continuing operations
Proﬁt for the period from discontinued operations
Proﬁt for the period

Attributable to
Equity holders of the Company
Minority interests

Earnings per share
Basic - total operations
Basic - continuing operations

Diluted - total operations
Diluted - continuing operations

52 weeks ended 29 December 2006

52 weeks ended 30 December 2005

Notes

15
15

6
6
24

Before
exceptional
items
£m

Exceptional
items
(note 5)
£m

-
-

-
6.8
-
10.7
(1.8)
-
-

15.7
-
-
-

15.7
(2.7)

13.0
-
13.0

940.9
(679.5)

261.4
2.1
(119.3)
(67.0)
-
2.4
8.1

87.7
(10.8)
5.3
4.9

87.1
(19.9)

67.2
1.4
68.6

68.6
-
68.6

32.4p

32.0p

Total
£m

940.9
(679.5)

261.4
8.9
(119.3)
(56.3)
(1.8)
2.4
8.1

103.4
(10.8)
5.3
4.9

102.8
(22.6)

80.2
1.4
81.6

81.6
-
81.6

39.4p
38.7p

38.8p
38.2p

Before
exceptional
items
£m

Exceptional
items
(note 5)
£m

-
-

-
-
-
-
(24.7)
-
-

(24.7)
-
-
-

(24.7)
-

(24.7)
-
(24.7)

789.4
(570.7)

218.7
1.5
(106.6)
(56.5)
-
1.7
7.5

66.3
(6.6)
2.0
0.5

62.2
(13.8)

48.4
2.3
50.7

50.6
0.1
50.7

23.5p

23.4p

Total
£m

789.4
(570.7)

218.7
1.5
(106.6)
(56.5)
(24.7)
1.7
7.5

41.6
(6.6)
2.0
0.5

37.5
(13.8)

23.7
2.3
26.0

25.9
0.1
26.0

12.6p
11.5p

12.5p
11.4p

The Weir Group PLC Annual Report 2006

Consolidated Balance Sheet

at 29 December 2006

ASSETS
Non-current assets
Property, plant & equipment
Intangible assets
Investments in joint ventures & associates
Deferred tax assets
Retirement beneﬁt plan surpluses
Forward foreign currency contracts
Total non-current assets

Current assets
Inventories
Trade & other receivables
Construction contracts
Forward foreign currency contracts
Income tax receivable
Cash & short term deposits
Total current assets
Total assets

LIABILITIES
Current liabilities
Interest-bearing loans & borrowings
Trade & other payables
Construction contracts
Forward foreign currency contracts
Income tax payable
Provisions
Total current liabilities

Non-current liabilities
Interest-bearing loans & borrowings
Forward foreign currency contracts
Provisions
Deferred tax liabilities
Retirement beneﬁt plan deﬁcits
Total non-current liabilities
Total liabilities
NET ASSETS

CAPITAL & RESERVES
Share capital
Share premium
Treasury shares
Capital redemption reserve
Foreign currency translation reserve
Hedge accounting reserve
Retained earnings

Shareholders equity
Minority interest
TOTAL EQUITY

Approved by the Board of Directors on 21 March 2007

Mark Selway Director

Keith Cochrane Director

29 December
2006
£m

30 December
2005
£m

Notes

11
12
15
23
24
30

16
17
18
30

20
21
18
30

20
30
22
23
24

25
25
25
25
25
25
25

116.6
180.1
33.5
19.3
7.8
4.9
362.2

120.9
203.8
34.9
6.5
0.1
146.3
512.5
874.7

7.5
212.4
46.3
3.0
19.4
27.3
315.9

145.9
1.8
13.6
13.9
11.7
186.9
502.8
371.9

26.4
35.4
(10.7)
0.5
(2.9)
3.5
319.3

371.5
0.4
371.9

119.2
187.5
20.9
17.4
-
0.4
345.4

122.8
207.3
28.2
2.3
0.6
109.6
470.8
816.2

10.9
178.8
39.2
4.6
7.3
26.1
266.9

175.1
3.1
14.6
3.9
61.6
258.3
525.2
291.0

26.2
32.5
(10.7)
0.5
9.9
(3.7)
235.9

290.6
0.4
291.0

The Weir Group PLC Annual Report 2006 45

Consolidated Cash Flow Statement

for the 52 weeks ended 29 December 2006

Cash ﬂows from operating activities
Cash generated from operations
Additional pension contributions paid
Fundamental restructuring costs paid
Income tax paid
Net cash generated from operating activities

Cash ﬂows from investing activities
Acquisitions of subsidiaries & joint ventures
Disposals of subsidiaries & joint ventures
Purchases of property, plant & equipment & intangible assets
Exceptional proceeds on sale of property
Other proceeds from sale of property, plant & equipment & intangible assets
Proceeds from sale of other investments
Interest received
Dividends received
Net cash used in investing activities

Cash ﬂows from ﬁnancing activities
Proceeds from issue of ordinary shares
Purchase of treasury shares
Proceeds from borrowings
Repayments of borrowings
Interest paid
Dividends paid to equity holders of the Company
Net cash (used in) generated from ﬁnancing activities

Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Foreign currency translation differences
Cash and cash equivalents at end of period

52 weeks
ended 29
December
2006
£m

52 weeks
ended 30
December
2005
£m

134.5
(7.0)
(5.8)
(14.6)
107.1

(2.1)
(1.8)
(27.6)
8.3
1.0
-
5.3
1.5
(15.4)

3.1
-
90.7
(110.2)
(10.2)
(27.7)
(54.3)

37.4
104.0
(2.3)
139.1

71.3
(10.0)
(16.6)
(7.9)
36.8

(75.6)
14.2
(25.7)
-
0.4
0.2
1.9
4.0
(80.6)

6.3
(10.7)
170.0
(84.5)
(8.3)
(26.6)
46.2

2.4
95.6
6.0
104.0

Notes

26
26

The Weir Group PLC Annual Report 2006

Consolidated Statement of Recognised
Income & Expense

for the 52 weeks ended 29 December 2006

Income & expense recognised directly in equity
Gains (losses) taken to equity on cash ﬂow hedges
Exchange differences on translation of foreign operations
Actuarial gains on deﬁned beneﬁt plans
Share of associate's actuarial gain on deﬁned beneﬁt plans
Transfers to the income statement
On cash ﬂow hedges
Tax on items taken directly to or transferred from equity

Net income recognised directly in equity
Proﬁt for the period
Total recognised income & expense for the period

Attributable to
Equity holders of the Company
Minority interests

Effect of changes in accounting policy
Net gain on cash ﬂow hedges on ﬁrst time application of IAS39

Note

52 weeks
ended 29
December
2006
£m

52 weeks
ended 30
December
2005
£m

11.5
(12.8)
33.0
4.4

(1.1)
(12.5)

22.5
81.6
104.1

104.1
-
104.1

(10.7)
13.9
22.1
4.8

0.3
(2.9)

27.5
26.0
53.5

53.4
0.1
53.5

2.4

The Weir Group PLC Annual Report 2006 47

Notes to the Group Financial Statements

1. Authorisation of ﬁnancial statements & statement of compliance

The consolidated ﬁnancial statements of The Weir Group PLC for the 52 weeks ended 29 December 2006 were approved and authorised for issue in
accordance with a resolution of the directors on 21 March 2007. The comparative information is presented for the 52 weeks ended 30 December 2005.
For practical reasons, the Group prepares its ﬁnancial statements to the week ending closest to the Company reference date of 31 December. The results
on this basis are unlikely to be materially different from those that would be presented for a period of one year. The Weir Group PLC is a limited company
incorporated in Scotland and is listed on the London Stock Exchange.

The consolidated ﬁnancial statements of The Weir Group PLC have been prepared in accordance with International Financial Reporting Standards (IFRS)
as adopted by the European Union and applied in accordance with the provisions of The Companies Act 1985.

The principal activities of the Group are described in note 3.

2. Accounting policies

Basis of preparation

The accounting policies which follow set out those policies which have been applied consistently to all periods presented in these ﬁnancial statements.

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

The format of the consolidated income statement presented in these consolidated ﬁnancial statements differs from that used in the Group’s consolidated
ﬁnancial statements for the 52 weeks ended 30 December 2005 and the Group’s 2006 Interim Report. The format of the consolidated income statement
included within these consolidated ﬁnancial statements, which presents exceptional items in separate columns, has been adopted as it presents information
in a format that is more relevant to users of the ﬁnancial statements. The comparative information has been reclassiﬁed accordingly.

Use of estimates and judgements

The preparation of the consolidated ﬁnancial statements requires management to make judgements, estimates and assumptions that affect the application
of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the
estimate is revised and in any future periods affected.

Details of the signiﬁcant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most signiﬁcant effect on
the amounts recognised in the ﬁnancial statements are described on page 19.

Basis of consolidation

The consolidated ﬁnancial statements include the results, cash ﬂows and assets and liabilities of The Weir Group PLC (“the Company”) and its subsidiaries
(together, “the Group”), and the Group’s share of its joint ventures and associates results. The ﬁnancial statements of subsidiaries, joint ventures and
associates are prepared 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 the power to govern the ﬁnancial and operating policies
of the entity so as to obtain beneﬁt from its activities. 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.

Minority interests represent the portion of proﬁt or loss and net assets in subsidiaries that is not held by the Group and is presented within equity in the
consolidated balance sheet, separately from the Company shareholders equity.

Joint ventures & associates

The Group has a number of long-term contractual arrangements with other parties which represent joint ventures. These all take the form of agreements to
share control over other entities (“jointly controlled entities”). The Group’s interests in the results and assets and liabilities of its jointly controlled entities are
accounted for using the equity method. An associate is an entity over which the Company, either directly or indirectly, is in a position to exercise signiﬁcant
inﬂuence by participating in, but not controlling or jointly controlling, the ﬁnancial and operating policies of the entity. Associates are accounted for using
the equity method.

These investments are carried in the balance sheet at cost plus post-acquisition changes in the Group’s share of net assets less any impairment in value.
The income statement reﬂects the share of results of operations of these investments after tax. Where there has been a change recognised directly in the
investee’s equity, the Group recognises its share of any changes and discloses this when applicable in the statement of recognised income and expense.

Any goodwill arising on the acquisition of a joint venture or associate, representing the excess of the cost of the investment compared to the Group’s share
of the net fair value of the joint venture or associate’s identiﬁable assets, liabilities and contingent liabilities, is included in the carrying amount of the joint
venture or associate and is not amortised. To the extent that the net fair value of the joint venture or associate’s identiﬁable assets, liabilities and contingent
liabilities is greater than the cost of the investment, a gain is recognised and added to the Group’s share of the joint venture or associate’s proﬁt or loss in
the period in which the investment is acquired.

The Weir Group PLC Annual Report 2006

Foreign currency translation

The ﬁnancial statements for each of the Group’s subsidiaries, joint ventures and associates are prepared using their functional currency. The functional
currency is the currency of the primary economic environment in which an entity operates.

At entity level, transactions denominated in foreign currencies are translated into the entity’s functional currency at the exchange rate ruling on the date
of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the exchange rate ruling on the balance sheet date.
Currency translation differences are recognised in the income statement except when hedge accounting is applied.

On consolidation, the results of foreign operations are translated into sterling at the average exchange rate for the period and their assets and liabilities
are translated into sterling at the exchange rate ruling on the balance sheet date. Currency translation differences, including those on monetary items
that form part of a net investment in a foreign operation, are recognised in the foreign currency translation reserve.

In the event that a foreign operation is sold, the gain or loss on disposal recognised in the income statement is determined after taking into account the
cumulative currency translation differences that are attributable to the operation. As permitted by IFRS1, the Group elected to deem cumulative currency
translation differences to be £nil as at 27 December 2003. Accordingly, the gain or loss on disposal of a foreign operation does not include currency
translation differences arising before 27 December 2003.

In the cash ﬂow statement, the cash ﬂows of foreign operations are translated into sterling at the average exchange rate for the period.

Revenue recognition

Revenue is recognised to the extent that it is probable that the economic beneﬁts will ﬂow to the Group and the revenue can be reliably measured.
Revenue from sales of goods is recognised when the signiﬁcant risks and rewards of ownership of the goods have passed to the buyer, usually on dispatch
of the goods, and can be reliably measured. Revenue from the sales of services and revenue from construction contracts is recognised by reference to
the stage of completion. The stage of completion of a contract is determined either by reference to the proportion that contract costs incurred for work
performed to date bear to the estimated total contract costs, or by reference to the completion of a physical proportion of the contract work. The basis
used is dependent upon the nature of the underlying contract, and takes into account the degree to which the physical proportion of the work is subject
to formal customer acceptance procedures.

A construction contract is deﬁned as a contract that is speciﬁcally negotiated for the construction of an asset or a combination of assets that are closely
interrelated or interdependent in terms of their design, technology and function or their ultimate purpose or use. Where the time taken to complete such
contracts extends over different accounting periods, revenue is recognised by reference to the stage of completion of the contract activity at the balance
sheet date where the outcome can be estimated reliably, otherwise it is recognised to the extent costs are incurred. Losses on contracts are recognised in
the period when such losses become probable.

Exceptional items

Material items of income and expense which, because of the nature and infrequency of the events giving rise to them, merit separate presentation to allow
a better understanding of the elements of the Group’s ﬁnancial performance for the period, are presented as exceptional items on the face of the income
statement to facilitate comparisons with prior periods and assessment of trends in ﬁnancial performance.

Goodwill

Business combinations on or after 27 December 2003 are accounted for under IFRS3 using the purchase method.

Goodwill arises on the acquisition of subsidiaries and represents any excess of the cost of the acquired entity over the Group’s interest in the fair value
of the entity’s identiﬁable assets, liabilities and contingent liabilities determined at the date of acquisition. Goodwill in respect of an acquired subsidiary
is recognised as an intangible asset. Goodwill is tested at least annually for impairment and carried at cost less any recognised impairment losses.

Where the fair value of the interest acquired in an entity’s assets, liabilities and contingent liabilities exceeds the consideration paid, the excess is recognised
immediately as a gain in the income statement.

Goodwill recognised as an asset as at 27 December 2003 is recorded at its carrying amount at that date and is not amortised. The carrying amount of
goodwill allocated to a cash-generating unit is taken into account when determining the gain or loss on disposal of the unit. Goodwill that was written-off
directly to reserves under UK GAAP is not taken into account in determining the gain or loss on disposal of acquired businesses on or after 27 December 2003.

Other intangible assets

Other intangible assets are stated at cost less accumulated amortisation and any recognised impairment losses.

(a) Acquired intangible assets

An intangible resource acquired in a business combination is recognised as an intangible asset if it is separable from the acquired business or arises from
contractual or legal rights, is expected to generate future economic beneﬁts and its fair value can be measured reliably. An acquired intangible asset with
a ﬁnite life is amortised on a straight-line basis so as to charge its cost, which represents its fair value at the acquisition date, to the income statement over
its expected useful life. An acquired intangible asset with an indeﬁnite life is not amortised but is tested at least annually for impairment and carried at cost
less any recognised impairment losses.

The Weir Group PLC Annual Report 2006 49

Notes to the Group Financial Statements (Continued)

The expected useful lives of the acquired intangible assets are as follows

Brand name

Customer relationships

Favourable lease

(b) Research & development costs

indeﬁnite life

25 years

6 years

All research expenditure is charged to the income statement in the period in which it is incurred.

Development expenditure is charged to the income statement in the period in which it is incurred unless it relates to the development of a new product
and it is incurred after the technical feasibility and commercial viability of the product has been proven, the development costs can be measured reliably,
future economic beneﬁts are probable and the Group intends to and has sufﬁcient resources to complete the development and to use or sell the asset.
Any such capitalised development expenditure will be amortised on a straight-line basis so that it is charged to the income statement over the expected
life of the resulting product.

Computer software that is not integral to an item of property, plant and equipment is recognised separately as an intangible asset. Amortisation is provided
on a straight-line basis so as to charge the cost of the software to the income statement over its expected useful life, not exceeding eight years.

Property, plant & equipment

The Group elected to use previous UK GAAP revaluations of land and buildings, amounting to £10.5m, prior to 27 December 2003 as deemed cost at
the date of the revaluation.

Property, plant and equipment is stated at cost less accumulated depreciation and any recognised impairment losses. Freehold land and assets under
construction are not depreciated.

Depreciation of property, plant and equipment, other than freehold land and assets under construction, is provided on a straight-line basis so as to
charge the cost less residual value, based on prices prevailing at the balance sheet date, to the income statement over the expected useful life of the
asset concerned, which is in the following ranges

Freehold buildings, long leasehold land & buildings

Short leasehold land & buildings

Plant & equipment

10 - 40 years

duration of lease

3 - 20 years

Borrowing costs attributable to assets under construction are charged to the income statement in the period in which they are incurred.

Leases

Leases which transfer to the Group substantially all the risks and rewards of ownership of the leased asset are classiﬁed as ﬁnance leases. All other leases
are classiﬁed as operating leases.

Assets held under ﬁnance leases are included within property, plant and equipment, initially measured at their fair value or, if lower, the present value of
the minimum lease payments and a corresponding liability is recognised within obligations under ﬁnance leases. Subsequently, the assets are depreciated
on a basis consistent with similar owned assets or the lease term if shorter. At the inception of the lease, the lease rentals are apportioned between
an interest element and a capital element so as to produce a constant periodic rate of interest on the outstanding liability. Subsequently, the interest
element is recognised as a charge to the income statement while the capital element is applied to reduce the outstanding liability.

Operating lease rentals and any incentives receivable are recognised in the income statement on a straight-line basis over the term of the lease.

Impairment of non-current assets

All non-current assets are tested for impairment whenever events or circumstances indicate that their carrying values might be impaired. Additionally,
goodwill, intangible assets with an indeﬁnite life and any capitalised development expenditure are subject to an annual impairment test.

An impairment loss is recognised to the extent that an asset’s carrying value exceeds its recoverable amount, which represents the higher of the asset’s
fair value less costs to sell and its value in use. An asset’s value in use represents the present value of the future cash ﬂows expected to be derived from the
asset. Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is conducted for the cash-generating unit to
which it belongs. Similarly, the recoverable amount of goodwill is determined by reference to the discounted future cash ﬂows of the cash-generating units
to which it is allocated.

Impairment losses are recognised in the income statement. Impairment losses recognised in previous periods for an asset other than goodwill are reversed
if there has been a change in the estimates used to determine the asset’s recoverable amount. The carrying amount of an asset shall not be increased
above the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior periods. Impairment losses
recognised in respect of goodwill are not reversed.

The Weir Group PLC Annual Report 2006

Inventories

Inventories are valued at the lower of cost and net realisable value, with due allowance for any obsolete or slow moving items. Cost represents the
expenditure incurred in bringing inventories to their existing location and condition and comprises the cost of raw materials, direct labour costs, other
direct costs and related production overheads. Raw material cost is generally determined on a ﬁrst in, ﬁrst out basis. Net realisable value is the estimated
selling price less costs to complete and sell.

Trade & other receivables

Trade receivables, which generally are of a short dated nature, are recognised and carried at original invoice amount less an allowance for estimated
irrecoverable amounts. Provision is made when there is objective evidence that the Group will not be able to recover balances in full. Balances are
written off when the probability of recovery is assessed as being remote.

Cash & cash equivalents

Cash and cash equivalents comprise cash in hand, deposits available on demand and other short-term highly liquid investments with a maturity on
acquisition of three months or less and bank overdrafts. Bank overdrafts are presented as current liabilities to the extent that there is no right of offset
with cash balances.

Interest-bearing loans & borrowings

Obligations for loans and borrowings are recognised when the Group becomes party to the related contracts and are measured initially at fair value less
directly attributable transaction costs. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using
the effective interest method. Amortised cost is calculated by taking into account any issue costs and any discount or premium on settlement.

Provisions

A provision is recognised in the balance sheet when the Group has a legal or constructive obligation as a result of a past event, the obligation can be
estimated reliably and it is probable that an outﬂow of economic beneﬁts will be required to settle the obligation. If the effect is material, provisions are
determined by discounting the expected future cash ﬂows at a pre-tax rate that reﬂects current market assessments of the time value of money and,
where appropriate, the risks speciﬁc to the liability.

Derecognition of ﬁnancial assets & liabilities

The Group's principal ﬁnancial assets and liabilities, other than derivatives, comprise bank overdrafts, short term debt, loans, cash and short term deposits.
The Group also has other ﬁnancial assets and liabilities such as trade receivables and trade payables which arise directly from its operations.

A ﬁnancial asset or liability is generally derecognised when the contract that gives rise to it is settled, sold, cancelled or expires.

A ﬁnancial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. Where an existing ﬁnancial liability
is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modiﬁed, such an
exchange or modiﬁcation is treated as a derecognition of the original liability and the recognition of a new liability, such that the difference in the
respective carrying amounts together with any costs or fees incurred are recognised in proﬁt or loss.

Financial instruments

(a) Derivative ﬁnancial instruments

The Group uses derivative ﬁnancial instruments, principally forward foreign currency contracts, to reduce its exposure to exchange rate movements.
The Group does not hold or issue derivatives for speculative or trading purposes.

Derivative ﬁnancial instruments are recognised as assets and liabilities measured at their fair values at the balance sheet date. The fair value of forward
exchange contracts is calculated by reference to current forward exchange rates for contracts with similar maturity proﬁles. Changes in their fair values
have been recognised in the income statement, except where hedge accounting is used, provided the conditions speciﬁed by IAS39 are met. Hedge
accounting is applied in respect of hedge relationships where it is both permissible under IAS39 and practical to do so. When hedge accounting is
used, the relevant hedging relationships will be classiﬁed as fair value hedges, cash ﬂow hedges or net investment hedges.

Where the hedging relationship is classiﬁed as a fair value hedge, the carrying amount of the hedged asset or liability will be adjusted by the increase or
decrease in its fair value attributable to the hedged risk and the resulting gain or loss will be recognised in the income statement where, to the extent that
the hedge is effective, it will be offset by the change in the fair value of the hedging instrument.

Where the hedging relationship is classiﬁed as a cash ﬂow hedge or as a net investment hedge, to the extent the hedge is effective changes in the fair value
of the hedging instrument will be recognised directly in equity rather than in the income statement. When the hedged item is recognised in the ﬁnancial
statements, the accumulated gains and losses recognised in equity will be either recycled to the income statement or, if the hedged item results
in a non-ﬁnancial asset, will be recognised as adjustments to its initial carrying amount.

The Weir Group PLC Annual Report 2006 51

Notes to the Group Financial Statements (Continued)

Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer qualiﬁes for hedge accounting.
At that point in time, any cumulative gain or loss on the hedging instrument recognised in equity is kept in equity until the forecasted transaction occurs.
If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is transferred to net proﬁt or loss for the period.

(b) Embedded derivatives

Derivatives embedded in non-derivative host contracts are recognised separately as derivative ﬁnancial instruments when their risks and characteristics
are not closely related to those of the host contract and the host contract is not stated at its fair value with changes in its fair value recognised in the
income statement.

Post-employment beneﬁts

Post employment beneﬁts comprise pension beneﬁts provided to employees throughout the world and other beneﬁts, primarily post retirement healthcare,
provided to certain employees in the United States.

For deﬁned beneﬁt plans, the cost is calculated using the projected unit credit method and is recognised over the average expected remaining service lives
of participating employees, in accordance with the advice of qualiﬁed actuaries. Past service costs resulting from enhanced beneﬁts are recognised on a
straight-line basis over the vesting period, or immediately if the beneﬁts have vested. Actuarial gains and losses, which represent differences between the
expected and actual returns on the plan assets and the effect of changes in actuarial assumptions, are recognised in full in the statement of recognised
income and expense in the period in which they occur. The deﬁned beneﬁt liability or asset recognised in the balance sheet comprises the net total for
each plan of the present value of the beneﬁt obligation, using a discount rate based on appropriate high quality corporate bonds, at the balance sheet
date, minus any past service costs not yet recognised, minus the fair value of the plan assets, if any, at the balance sheet date. Where a plan is in surplus,
the asset recognised is limited to the amount of any unrecognised past service costs and the present value of any amount which the Group expects to
recover by way of refunds or a reduction in future contributions.

For deﬁned contribution plans, the cost represents the Group’s contributions to the plans and this is charged to the income statement in the period in
which they fall due.

Share-based payments

Equity settled share-based incentives are provided to employees under the Group’s executive share option scheme, the savings-related share option scheme
and the long-term incentive plan. The Group recognises a compensation cost in respect of these schemes that is based on the fair value of the awards. For
equity settled schemes, the fair value is determined at the date of grant and is not subsequently re-measured unless the conditions on which the award was
granted are modiﬁed. The fair value at the date of the grant is calculated using appropriate option pricing models and the cost is recognised on a straight-
line basis over the vesting period. Adjustments are made to reﬂect expected and actual forfeitures during the vesting period due to failure to satisfy service
conditions or non-market performance conditions.

As permitted by IFRS1, The Group has applied IFRS2 “Share-based Payment” retrospectively only to equity settled awards that were granted on or after 7
November 2002 and had not vested as at 1 January 2005.

Taxation

Current tax is the amount of tax payable or recoverable in respect of the taxable proﬁt or loss for the period.

Deferred tax is recognised, on temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base with the
following exceptions

(a) Deferred tax arising from the initial recognition of goodwill, or of an asset or liability in a transaction that is not a business combination, that, at the

time of the transaction, affects neither accounting nor taxable proﬁt or loss, is not recognised.

(b) Deferred tax is provided on temporary differences arising on investments in subsidiaries, joint ventures and associates, except where the timing of

the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

(c) A deferred tax asset is recognised only to the extent that it is probable that future taxable proﬁts will be available against which the asset can

be utilised.

Deferred tax liabilities represent tax payable in future periods in respect of taxable temporary differences. Deferred tax assets represent tax recoverable
in future periods in respect of deductible temporary differences, the carry forward of unutilised tax losses and the carry forward of unused tax credits.
Deferred tax is measured on an undiscounted basis using the tax rates and tax laws that have been enacted or substantively enacted at the balance
sheet date and are expected to apply when the deferred tax asset is realised or the deferred tax liability is settled.

Current and deferred tax is recognised in the income statement except if it relates to an item recognised directly in equity, in which case it is recognised
directly in equity.

The Weir Group PLC Annual Report 2006

Treasury shares

The Weir Group PLC shares held by the Company and the Group are classiﬁed in shareholders equity as ‘treasury shares’ and are recognised at cost.
Consideration received for the sale of such shares is also recognised in equity, with any difference between the proceeds from sale and the original
cost being taken directly to revenue reserves. No gain or loss is recognised in the performance statements on the purchase, sale, issue or cancellation
of equity shares.

New standards & interpretations

The IASB and IFRIC have issued the following standards and interpretations with an effective date after the date of these ﬁnancial statements

International Accounting Standards (IAS/IFRS)

Effective date for periods commencing

IFRS7

IFRS8

IAS1

Financial Instruments: Disclosures

Operating Segments*

Amendment to IAS1: Capital Disclosures

International Financial Reporting Interpretations Committee (IFRIC)

IFRIC7

Applying the Restatement Approach under IAS29 Financial Reporting
In Hyperinﬂationary Economies

IFRIC8

Scope of IFRS2: Share-based payments

IFRIC9

Reassessment of Embedded Derivatives

IFRIC10

Interim Financial Reporting and Impairment*

IFRIC11

IFRS 2 – Group and Treasury Share Transactions*

IFRIC 12

Service Concession Arrangements*

* not yet adopted for use in the European Union

1 January 2007

1 January 2009

1 January 2007

1 March 2006

1 May 2006

1 June 2006

1 November 2006

1 March 2007

1 January 2008

The above standards and interpretations will be adopted in accordance with their effective dates and have not been adopted in these ﬁnancial statements.
The directors do not anticipate that the adoption of these standards and interpretations will have a material impact on the Group’s ﬁnancial statements in
the period of initial application.

Upon adoption of IFRS7, the Group will have to disclose additional information about its ﬁnancial instruments, their signiﬁcance and the nature and extent
of risks that they give rise to. More speciﬁcally, the Group will need to disclose the fair value of its ﬁnancial instruments and its risk exposure in greater
detail. There will be no effect on reported income or net assets.

3. Segment information

The Group's primary reporting format is business segments, as the Group's risks and rates of return are affected predominantly by differences in the
products and services provided. The Group's secondary format is geographical segments. The operating businesses are organised and managed separately
according to the nature of the products and services provided, with each segment representing a strategic business unit that offers different products and
serves different markets.

The Engineering Products segment comprises the manufacture of pumps and valves for ﬂow control applications. The Engineering Services segment
provides equipment maintenance, process support and asset management services. The Defence, Nuclear & Gas segment comprises the defence and
liquid gas handling businesses which provide specialist design and project management of complex engineering contracts.

Transfer prices between business segments are set on an arm's length basis in a manner similar to transactions with third parties.

The Group's geographical segments are determined by the location of the Group's assets and operations.

The Weir Group PLC Annual Report 2006 53

Notes to the Group Financial Statements (Continued)

3. Segment information (continued)

Business segments

The following tables present revenue and proﬁt information and certain asset and liability information on the Group's continuing operations for the 52
weeks ended 29 December 2006 and the 52 weeks ended 30 December 2005 analysed by business segment.

Revenue
Sales to external customers
Inter-segment sales
Segment revenue

Sales to external customers at 2006
average exchange rates

Result
Segment result before exceptional items
Exceptional income (costs) (net)
Segment result after exceptional items
Share of results of - joint ventures

- associates

Unallocated expenses
Unallocated exceptional income
Operating proﬁt

Segment result before exceptional items at 2006
average exchange rates

Assets & liabilities
Segment assets
Investment in joint ventures & associates

Unallocated assets
Total assets

Segment liabilities
Unallocated liabilities
Total liabilities

Other segment information
Segment capital expenditure
Unallocated capital expenditure
Total capital expenditure

Segment depreciation & amortisation
Unallocated depreciation & amortisation
Total depreciation and amortisation

Engineering
Products

Engineering
Services

Defence,
Nuclear & Gas

Total continuing
operations

2006
£m

2005
£m

2006
£m

2005
£m

2006
£m

2005
£m

2006
£m

2005
£m

608.5
20.9
629.4

505.6
19.0
524.6

225.2
1.6
226.8

215.4
1.3
216.7

107.2
-
107.2

68.4
-
68.4

940.9
22.5
963.4

789.4
20.3
809.7

608.5

501.4

225.2

218.8

107.2

68.3

940.9

788.5

62.6
5.0
67.6
-
-
67.6

42.3
(24.7)
17.6
-
-
17.6

12.4
-
12.4
2.4
8.1
22.9

13.1
-
13.1
1.7
7.5
22.3

9.8
-
9.8
-
-
9.8

6.8
-
6.8
-
-
6.8

84.8
5.0
89.8
2.4
8.1
100.3
(7.6)
10.7
103.4

62.2
(24.7)
37.5
1.7
7.5
46.7
(5.1)
-
41.6

62.6

41.9

12.4

13.6

9.8

6.7

84.8

62.2

523.6
-
523.6

522.3
-
522.3

111.4
33.5
144.9

132.1
20.9
153.0

29.6
-
29.6

15.6
-
15.6

189.1

167.0

44.0

40.6

52.6

39.9

20.4

17.8

5.7

6.7

1.2

0.7

14.7

12.3

4.2

3.6

0.9

664.6
33.5
698.1
176.6
874.7

285.7
217.1
502.8

27.3
1.1
28.4

19.8
0.3
20.1

-
-
6.8

670.0
20.9
690.9
125.3
816.2

247.5
277.7
525.2

25.2
0.5
25.7

16.8
0.1
16.9

1.4
1.9
8.3

Impairment - property, plant & equipment
Impairment - inventory
Warranty expense (net)

-
-
6.5

1.4
1.9
7.9

-
-
0.3

-
-
0.4

-
-
-

Details of the Group's discontinued operations can be found in note 8.

The Weir Group PLC Annual Report 2006

3. Segment information (continued)

Geographical segments

The following tables present revenue, certain asset and capital expenditure information regarding the Group's geographical segments for the 52 weeks
ended 29 December 2006 and the 52 weeks ended 30 December 2005.

52 weeks ended 29 December 2006

North
America
£m

UK
£m

Far East
& Asia
£m

Australasia
£m

South
America
£m

Middle
East
£m

Other
EU
£m

Total
Others Operations
£m

£m

Revenue
Sales to external customers
less sales attributable to discontinued operations
Revenue from continuing operations

241.8
-
241.8

131.0
-
131.0

117.3
-
117.3

111.2
-
111.2

Other segment information
Segment assets
Investment in joint ventures & associates
Unallocated assets
Total assets

131.3
-

180.0
26.0

3.3
-

119.6
-

98.7
-
98.7

41.3
-

87.4
-
87.4

74.5
-
74.5

79.0
-
79.0

14.0
7.5

168.5
-

14.9
-

940.9
-
940.9

672.9
33.5
168.3
874.7

Total capital expenditure

7.5

7.3

2.6

2.8

0.2

3.5

1.7

28.4

North
America
£m

226.6
-
226.6

52 weeks ended 30 December 2005

Revenue
Sales to external customers
less sales attributable to discontinued operations
Revenue from continuing operations

Other segment information
Segment assets
Investment in joint ventures & associates
Unallocated assets
Total assets

UK
£m

Far East
& Asia
£m

Australasia
£m

South
America
£m

Middle
East
£m

Other
EU
£m

Others
£m

Total
Operations
£m

137.2
(5.3)
131.9

95.7
(0.5)
95.2

94.7
-
94.7

139.0
-

188.0
13.5

1.9
0.1

126.3
-

89.7
(4.8)
84.9

44.2
-

53.7
(9.2)
44.5

63.9
(0.9)
63.0

62.2
(13.6)
48.6

823.7
(34.3)
789.4

13.2
7.3

150.4
-

13.8
-

676.8
20.9
118.5
816.2

Total capital expenditure

6.1

11.3

0.3

2.5

0.2

2.2

0.6

25.7

Unallocated assets primarily comprise cash & short term deposits, income tax receivable, deferred tax assets and retirement beneﬁt plan surpluses as well
as those assets which are used for general head ofﬁce purposes. Unallocated liabilities primarily comprise interest bearing loans & borrowings, income tax
payable, deferred tax liabilities and retirement beneﬁt plan deﬁcits as well as liabilities relating to general head ofﬁce activities. The difference between
unallocated assets in the business and geographical segments arises as a result of different inter segment eliminations.

The Weir Group PLC Annual Report 2006 55

Notes to the Group Financial Statements (Continued)

4. Revenues & expenses

The following disclosures are given in relation to continuing operations

An analysis of the Group's revenue is as follows
Sales of goods
Rendering of services
Revenue from construction contracts
Revenue
Finance income
Total revenue

No revenue was derived from exchanges of goods or services (2005: £nil).

Operating proﬁt is stated after charging (crediting)
Costs of inventories recognised as an expense
Depreciation
Amortisation (note 12)
Foreign exchange gains (net)
Impairment of trade receivables (included within administrative expenses)

Included in restructuring costs (note 5)
Impairment of property, plant & equipment
Impairment of inventories

The following disclosures are given in relation to total operations

Auditors remuneration
The total fees payable by the Group to Ernst & Young LLP and their associates for work performed in respect of the audit and
other services provided to the Group and its subsidiary companies during the period are disclosed below

Fees payable to the Company's auditor for the audit of the Company's annual accounts

Fees payable to the Company's auditor and its associates for other services

- The audit of the Company's subsidiaries pursuant to legislation
- Other services pursuant to legislation
- Tax services

Fees payable in respect of the Group's pension plans

- Audit

The Weir Group PLC Annual Report 2006

2006
£m

626.4
183.5
131.0
940.9
5.3
946.2

2006
£m

679.5
17.6
2.5
-
0.6

-
-

2005
£m

521.9
173.1
94.4
789.4
2.0
791.4

2005
£m

570.7
15.5
1.4
(0.6)
1.4

1.4
1.9

2006
£m

2005
£m

0.3

0.6
0.1
-

0.1

0.3

0.6
0.1
0.5

0.1

4. Revenues & expenses (continued)

Research & development costs

Research & development costs consist of £6.1m (2005: £5.2m) charged directly to cost of sales in the income statement.

Operating leases

Minimum lease payments under operating leases recognised as an expense in the year were £9.7m (2005: £8.5m).

Employee beneﬁts expense
Wages & salaries
Social security costs
Pension (income) costs - deﬁned beneﬁt plans
Pension costs - deﬁned contribution plans
Post-retirement healthcare costs
Share-based payments - equity settled transactions

2006
£m

223.0
28.5
(4.9)
7.0
-
1.4
255.0

2005
£m

208.5
25.9
4.6
6.2
(0.2)
1.0
246.0

The net pension income of £4.9m in 2006 in respect of deﬁned beneﬁt plans includes the £10.7m pension plan gain referred to in note 5.

The average monthly number of persons employed by the Company and its subsidiaries is as follows
Engineering Products
Engineering Services
Defence, Nuclear & Gas
Techna

5. Exceptional items

Recognised in arriving at operating proﬁt from continuing operations
Proﬁt on sale of property
Pension plan gain
Restructuring costs

2006
Number

2005
Number

5,473
1,980
522
-
7,975

2006
£m

6.8
10.7
(1.8)
15.7

5,231
1,987
479
120
7,817

2005
£m

-
-
(24.7)
(24.7)

Proﬁt on sale of property

A proﬁt of £6.8m (2005: £nil) was made on the sale of the Group's former premises at Huddersﬁeld which were vacated as part of the restructuring of the
UK Engineering Products businesses.

Pension plan gain

The pension plan gain of £10.7m (2005: £nil), which represents a reduction in past service costs, arose on the implementation of amendments to the
deﬁned beneﬁt arrangements of the Group's main UK deﬁned beneﬁt pension plan made with effect from November 2006 (see note 24).

Restructuring costs

During 2005 the Group incurred costs of £21.4m and impairment losses of £3.3m in connection with the previously announced fundamental restructuring
activities in the UK Engineering Products businesses. Further costs of £1.8m have been incurred in 2006 in connection with this restructuring.

The restructuring costs arose from activities that are not considered to fall within the normal function based classiﬁcations adopted by the Group when
analysing results and, accordingly, they have been disclosed on a separate line on the income statement.

The Weir Group PLC Annual Report 2006 57

Notes to the Group Financial Statements (Continued)

6. Net ﬁnance costs

(a) Finance costs

Interest payable on bank loans & overdrafts
Finance charges payable under ﬁnance leases
Finance charges related to committed loan facilities

(b) Finance income

Interest receivable on cash at bank

7. Tax expense

(a) Income tax expense

Consolidated income statement
Current income tax
UK corporation tax - continuing operations

- discontinued operations
Adjustments in respect of current income tax of previous years

UK corporation tax
Foreign tax
Adjustments in respect of current income tax of previous years
Total current income tax

Deferred income tax
Origination and reversal of temporary differences
Adjustment to estimated recoverable deferred tax assets
Total deferred tax *
Total income tax expense in the consolidated income statement

* Includes £2.3m of deferred tax credit relating to foreign tax (2005: a credit of £0.2m)

The total income tax expense is disclosed in the consolidated income statement as follows

Tax expense - continuing operations before exceptional items

- exceptional items
- within proﬁt from discontinued operations

2006
£m

(9.8)
(0.1)
(0.9)
(10.8)

2006
£m

5.3

2005
£m

(6.0)
(0.1)
(0.5)
(6.6)

2005
£m

2.0

2006
£m

2005
£m

(4.2)
-
(0.5)

(4.7)
(23.5)
0.2
(28.0)

(7.7)
13.1
5.4
(22.6)

2.0
0.1
0.1

2.2
(12.8)
(0.4)
(11.0)

(3.1)
0.2
(2.9)
(13.9)

(19.9)
(2.7)
-

(13.8)
-
(0.1)

"UK corporation tax" includes a £0.5m tax credit (2005: £nil) in respect of the exceptional restructuring costs of £1.8m (2005: £24.7m) and deferred
tax "origination and reversal of temporary differences" includes a £3.2m tax charge (2005: £nil) in respect of the exceptional pension plan gain of
£10.7m (2005: £nil).

Current tax for 2006 has been reduced by £1.9m (2005: £nil) due to the utilisation of deferred tax assets previously not recognised.

The Weir Group PLC Annual Report 2006

7. Tax expense (continued)

The total deferred tax included in the income tax expense is as follows

Post employment beneﬁts
Accelerated depreciation for tax purposes
Tax losses
Other
Deferred income tax credit (charge)

2006
£m

(6.9)
(0.1)
2.1
10.3
5.4

2005
£m

(3.3)
(0.5)
0.3
0.6
(2.9)

“Other” includes a £9.9m credit in respect of an adjustment to the estimated recoverable deferred tax assets of the US operations. These deferred tax assets relate
to temporarily disallowed inventory/debtor provisions and accruals/provisions for liabilities where the tax allowance is deferred until the cash expense is incurred.

(b) Tax relating to items charged or credited to equity

Tax credit (charge) on actuarial loss (gain) on retirement beneﬁts
Current tax on contributions in excess of costs through the income statement
Deferred tax on contributions in excess of costs through the income statement
Deferred tax - origination and reversal of temporary differences

Deferred tax on hedge gains / losses
Deferred tax on share-based payments
Current tax on share-based payments
Current tax on exchange differences
Tax charge in the statement of recognised income and expense

2006
£m

0.1
-
(10.2)
(10.1)
(3.2)
0.3
0.5
-
(12.5)

2005
£m

0.7
(0.5)
(6.7)
(6.5)
3.1
0.7
-
(0.2)
(2.9)

The tax expense in the consolidated income statement for the year is less than the weighted average of standard rates of corporation tax across the Group
of 31.0% (2005: 31.2%). The differences are reconciled below.

Proﬁt from continuing operations before taxation
Proﬁt from discontinued operations before taxation
Accounting proﬁt before income tax

At the weighted average of standard rates of corporation tax across the Group of 31.0% (2005: 31.2%)
Adjustments in respect of previous years - current tax

- deferred tax

Joint ventures and associates
Unrecognised deferred tax assets
Overseas tax on unremitted earnings
Permanent differences
Gains exempt from tax
At effective tax rate of 21.7% (2005: 34.9%)

2006
£m

102.8
1.4
104.2

32.3
0.3
(1.4)
(3.2)
(13.1)
7.6
1.1
(1.0)
22.6

2005
£m

37.5
2.4
39.9

12.5
0.3
(0.4)
(2.3)
6.8
-
(1.7)
(1.3)
13.9

The Weir Group PLC Annual Report 2006 59

Notes to the Group Financial Statements (Continued)

8. Discontinued operations

On 8 July 2005, the Group disposed of the desalination and water treatment businesses of its Techna division (Weir Westgarth, Weir Entropie and Weir
Envig) for a total cash consideration of £27.7m and on 1 June 2005 the Group disposed of Weir Flowguard for a total cash consideration of £2.9m.
Provisions amounting to £6.1m were made for potential warranty and indemnity claims and allowance was made for disposal costs amounting to £1.9m.
The results of these companies are included in the consolidated income statement as discontinued operations. Losses recognised in 2005 in respect of
prior years’ disposals related to warranty and indemnity claims where the likelihood of payment had become probable based on events which occurred
during that year.

The revenue, results, cash ﬂows, segment and earnings per share information relating to discontinued operations is as follows

Sale of goods
Rendering of services
Revenue from construction contracts

Revenue
Cost of sales
Other operating income
Selling & distribution costs
Administrative expenses
Share of results of joint venture

Loss before net ﬁnance costs and tax
Finance costs

Loss before tax
Income tax

Loss after tax
Net gain on current year disposals
Proﬁts (losses) recognised in respect of prior years' disposals
Proﬁt for the period from discontinued operations

The £1.4m proﬁt in 2006 arises from the negotiated settlement of a claim in connection with a prior year disposal (see note 22).

Loss before net ﬁnance costs and tax is stated after charging (crediting)

Costs of inventories recognised as an expense
Depreciation and amortisation

The income tax is analysed as follows
On loss before tax

Cash inﬂow (outﬂow) from - operating activities
- investing activities
- ﬁnancing activities

Inter-segment sales
Capital expenditure

Earnings per share from discontinued operations

Basic
Diluted

2006
£m

-
-
-

-
-
-
-
-
-

-
-

-
-
1.4
1.4

-
-

-
(1.8)
-

-
-

2006
pence

0.7p
0.7p

2005
£m

1.7
0.5
32.1

34.3
(31.4)
0.3
(1.4)
(2.5)
(0.7)

(1.4)
(0.1)

(1.5)
(0.1)

(1.6)
9.2
(5.3)
2.3

31.4
0.2

(0.1)

(3.8)
14.3
(2.5)

1.5
0.2

2005
pence

1.1p
1.1p

These earnings per share ﬁgures were derived by dividing the net proﬁt attributable to equity holders of the Company from discontinued operations of
£1.4m (2005: £2.3m) by the weighted average number of ordinary shares for both basic and diluted amounts shown in note 9.

The Weir Group PLC Annual Report 2006

8. Discontinued operations (continued)

The major classes of assets and liabilities disposed of were

Property, plant & equipment
Goodwill
Other intangible assets
Inventories
Trade & other receivables
Construction contract assets
Cash & cash equivalents
Trade & other payables
Construction contract liabilities
Provisions
Income tax payable

9. Earnings per share

2006
£m

-
-
-
-
-
-
-
-
-
-
-
-

2005
£m

0.7
5.2
0.3
0.7
9.1
5.0
14.1
(12.3)
(9.0)
(0.6)
(0.1)
13.1

Basic earnings per share amounts are calculated by dividing net proﬁt for the year attributable to ordinary equity holders of the Company by the weighted
average number of ordinary shares outstanding during the year.

Diluted earnings per share amounts are calculated by dividing the net proﬁt attributable to ordinary equity holders of the Company by the weighted
average number of ordinary shares outstanding during the year (adjusted for the effects of dilutive options and L-TIP awards).

The following reﬂects the proﬁt and share data used in the calculation of earnings per share

Basic earnings per share
Proﬁt attributable to equity holders of the Company

- Total operations
- Continuing *
- Continuing (pre-exceptional items) *

2006
£m

81.6
80.2
67.2

2005
£m

25.9
23.6
48.3

Weighted average share capital (number of shares, million)

207.1

206.1

Diluted earnings per share
Proﬁt attributable to equity holders of the Company

- Total operations
- Continuing *
- Continuing (pre-exceptional items) *

Weighted average share capital (number of shares, million)

* adjusted for £nil (2005: £0.1m) attributable to minority interests.

81.6
80.2
67.2

25.9
23.6
48.3

210.1

207.7

The Weir Group PLC Annual Report 2006 61

Notes to the Group Financial Statements (Continued)

9. Earnings per share (continued)

The difference between the weighted average share capital for the purposes of the basic and the diluted earnings per share calculations is analysed as follows

Weighted average number of ordinary shares for basic earnings per share
Effect of dilution: share options
L-TIP awards

Adjusted weighted average number of ordinary shares for diluted earnings per share

2006
Shares
Million

207.1
1.0
2.0
210.1

2005
Shares
Million

206.1
1.4
0.2
207.7

The proﬁt attributable to equity holders of the Company used in the calculation of both basic and diluted earnings per share on continuing operations
pre-exceptional items is calculated as follows

Net proﬁt attributable to ordinary shareholders from continuing operations
Exceptional items net of tax (2005: no tax beneﬁt was recognised)
Net proﬁt attributable to ordinary shareholders from continuing operations before exceptional items

2006
£m

80.2
(13.0)
67.2

There have been 80,367 (2005: 320,230) share options exercised between the reporting date and the date of signing of these ﬁnancial statements.

10. Dividends paid and proposed

Declared & paid during the period
Equity dividends on ordinary shares
Final dividend for 2005: 9.65p (2004: 9.35p)
Interim dividend for 2006: 3.75p (2005: 3.55p)

Proposed for approval by shareholders at the AGM
Final dividend for 2006: 10.75p (2005: 9.65p)

2006
£m

19.9
7.8
27.7

22.3

2005
£m

23.6
24.7
48.3

2005
£m

19.3
7.3
26.6

19.9

The proposed dividend is based on the number of shares in issue, excluding treasury shares held, at the date the ﬁnancial statements were approved and
authorised for issue. The ﬁnal dividend may differ due to increases or decreases in the number of shares in issue between the date of approval of the report
and ﬁnancial statements and the record date for the ﬁnal dividend.

The Weir Group PLC Annual Report 2006

11. Property, plant & equipment

Cost
At 31 December 2004
Additions
Acquisition of subsidiary
Disposals
Discontinued operations
Exchange adjustment

At 30 December 2005
Additions
Disposals
Exchange adjustment
At 29 December 2006

Accumulated depreciation & impairment
At 31 December 2004
Depreciation charge for the period
Impairment
Disposals
Discontinued operations
Exchange adjustment

At 30 December 2005
Depreciation charge for the period
Disposals
Exchange adjustment
At 29 December 2006
Net book value at 31 December 2004
Net book value at 30 December 2005
Net book value at 29 December 2006

Land & buildings
£m

Plant & equipment
£m

63.4
1.2
0.6
(0.9)
-
3.1

67.4
3.6
(2.4)
(4.0)
64.6

20.9
1.8
-
(0.3)
-
1.1

23.5
1.6
(0.4)
(1.5)
23.2
42.5
43.9
41.4

158.0
20.0
3.5
(2.7)
(2.5)
12.3

188.6
22.4
(16.3)
(12.8)
181.9

94.4
13.9
1.4
(2.2)
(1.8)
7.6

113.3
16.0
(15.2)
(7.4)
106.7
63.6
75.3
75.2

Total
£m

221.4
21.2
4.1
(3.6)
(2.5)
15.4

256.0
26.0
(18.7)
(16.8)
246.5

115.3
15.7
1.4
(2.5)
(1.8)
8.7

136.8
17.6
(15.6)
(8.9)
129.9
106.1
119.2
116.6

The carrying value of buildings held under ﬁnance leases is £1.6m (2005: £1.7m). The carrying value of plant and equipment held under ﬁnance leases
is £nil (2005: £0.2m). Leased assets are pledged as security for the related ﬁnance lease liabilities. The carrying amount of assets under construction
included in plant & equipment is £1.5m (2005: £2.2m). The amount of compensation received from third parties for items of property, plant and
equipment that were impaired or lost included in the income statement is £2.1m (2005: £1.0m).

The Weir Group PLC Annual Report 2006 63

Notes to the Group Financial Statements (Continued)

12. Intangible assets

Cost
At 31 December 2004
Additions
Acquisition of subsidiary
Discontinued operations
Exchange adjustment

At 30 December 2005
Additions
Disposals
Exchange adjustment
At 29 December 2006

Accumulated amortisation & impairment
At 31 December 2004
Amortisation charge for the period
Discontinued operations
Exchange adjustment

At 30 December 2005
Amortisation charge for the period
Disposals
Exchange adjustment
At 29 December 2006
Net book value at 31 December 2004
Net book value at 30 December 2005
Net book value at 29 December 2006

Goodwill
£m

Brand name
£m

Customer
relationships
£m

Purchased
software
£m

Favourable
lease
£m

111.0
-
49.1
(5.2)
5.3

160.2
0.8
-
(7.1)
153.9

-
-
-
-

-
-
-
-
-
111.0
160.2
153.9

-
-
4.7
-
-

4.7
-
-
(0.1)
4.6

-
-
-
-

-
-
-
-
-
-
4.7
4.6

-
-
15.1
-
0.1

15.2
-
-
(0.4)
14.8

-
0.2
-
-

0.2
0.6
-
-
0.8
-
15.0
14.0

9.3
4.7
0.1
(0.5)
0.6

14.2
1.6
(0.1)
(0.2)
15.5

5.6
1.2
(0.2)
0.6

7.2
1.8
(0.1)
(0.5)
8.4
3.7
7.0
7.1

-
-
0.6
-
-

0.6
-
-
-
0.6

-
-
-
-

-
0.1
-
-
0.1
-
0.6
0.5

Total
£m

120.3
4.7
69.6
(5.7)
6.0

194.9
2.4
(0.1)
(7.8)
189.4

5.6
1.4
(0.2)
0.6

7.4
2.5
(0.1)
(0.5)
9.3
114.7
187.5
180.1

The brand name, Gabbioneta, has been in existence since 1897 when the company was founded. Given the longevity of the name and its strength
in the oil and gas markets, it has been assigned an indeﬁnite useful life, and as such is not amortised. The carrying value was tested for impairment at
29 December 2006. The customer relationships were acquired as part of the Company's acquisition of Pompe Gabbioneta SpA in 2005 (see note 13).
The remaining amortisation period of these assets as at 29 December 2006 is 24 years. The carrying value of purchased software held under ﬁnance
leases is £0.4m (2005: £0.3m). The amortisation charge for the period is included in the income statement as follows

Cost of sales
Selling & distribution costs
Administrative expenses

2006
£m

0.4
0.1
2.0
2.5

2005
£m

0.3
0.1
1.0
1.4

The Weir Group PLC Annual Report 2006

13. Business combinations

On 16 February 2006, the Group acquired the business and certain trading assets of Loftyman Engineering Limited, a company registered in Hong Kong.
The amount payable for the goodwill associated with the business was £0.8m and a total of £0.4m was payable for the trading assets.

On 30 September 2005, the Company acquired 100% of the share capital of Pompe Gabbioneta SpA, an unlisted company based in Milan, Italy
specialising in the manufacture and sale of petrochemical pumps. The total cash consideration was £69.2m. The acquisition was accounted for on a
provisional basis in last year's accounts as the ﬁnal determination of fair values had still to be completed. The provisional fair values of the identiﬁable
assets and liabilities at the date of acquisition, which were not changed following their ﬁnal determination in 2006, were

Property, plant & equipment
Intangible assets
Inventories
Trade & other receivables
Cash & cash equivalents
Interest-bearing loans & borrowings
Trade & other payables
Forward foreign currency contracts
Provisions
Income tax
Deferred tax
Fair value of net assets
Goodwill arising on acquisition
Total consideration

Consideration
Costs associated with the acquisition
Total consideration

The cash outﬂow on acquisition was as follows
Cash & cash equivalents acquired
Cash paid
Net cash outﬂow

2005
Recognised
on acquisition
£m

2005
Carrying
values
£m

4.1
0.1
5.8
7.8
(0.3)
(0.3)
(7.9)
(0.2)
(5.4)
(0.4)
4.0
7.3

4.1
20.5
5.8
7.8
(0.3)
(0.3)
(7.9)
(0.2)
(5.4)
(0.4)
(3.6)
20.1
49.1
69.2

68.1
1.1
69.2

0.3
68.8
69.1

From the date of the acquisition, Pompe Gabbioneta - now called Weir Gabbioneta contributed £400,000 to the 2005 proﬁt from continuing operations
of the Group. The directors consider that it is impractical to disclose the combined revenue and proﬁt of the Group, assuming that Weir Gabbioneta had
been acquired at the start of 2005, due to the fact that their ﬁnancial statements were previously prepared under local GAAP accounting policies.

The Weir Group PLC Annual Report 2006 65

Notes to the Group Financial Statements (Continued)

14. Impairment testing of goodwill and intangible assets with indeﬁnite lives

Goodwill acquired through business combinations and intangible assets with indeﬁnite lives have been allocated at acquisition to the cash generating
units (CGUs) that are expected to beneﬁt from that business combination. The carrying amount of goodwill has been allocated as per the table below.
The amount allocated to "Other" is not considered signiﬁcant in comparison to the total carrying amount of goodwill.

Warman companies
Weir Gabbioneta
Other

2006
£m

88.5
48.2
17.2
153.9

2005
£m

93.9
49.5
16.8
160.2

The Warman companies were acquired in 1999 and form part of the Group's Engineering Products Business Segment. Weir Gabbioneta, which also forms
part of the Group's Engineering Products Business Segment, relates to the acquisition of Pompe Gabbioneta SpA in 2005.

The carrying amount of intangible assets with indeﬁnite lives has been allocated as follows

Weir Gabbioneta - brand name

The reduction of £0.1m in the carrying value of the brand name results from exchange movements.

2006
£m

4.6

2005
£m

4.7

The Group tests goodwill and intangible assets with indeﬁnite lives annually for impairment, or more frequently if there are indications that these might
be impaired.

The recoverable amounts of the CGUs are determined from value in use calculations using cash ﬂow forecasts based on the latest strategic ﬁve year plan
projections approved by the Board. These projections are based on historical performance and the most recent ﬁnancial forecasts available. The main
assumptions used in the value in use calculations relate to selling price, sales volume and cost increases. The strategic ﬁve year plans of each CGU
incorporate third-party demand projections for the speciﬁc market segments which they serve. These market demand projections contain both volume
and pricing assumptions but generally the pricing assumption assumes growth in line with inﬂation. Beyond sales volume effects, operating cost increases
are projected in line with long-run inﬂation expectations for the relevant territory that the CGU operates in.

Cash ﬂows beyond the period of the projections are extrapolated based on expected growth rates for the geographical area. The growth rates do not
exceed the average long-term growth rates for these areas. A weighted average growth rate of 2.9% (2005: 2.9%) was used for the Warman companies,
2.0% (2005: 2.0%) for Weir Gabbioneta and 2.6% (2005: 2.6%) for other. The discount rates applied to the cash ﬂow forecasts are based on the weighted
average, nominal, risk adjusted pre-tax cost of capital in the various geographical regions. The weighted average discount rates used were 14.8% (2005:
14.3%) for the Warman companies, 13.6% (2005: 14.0%) for Weir Gabbioneta and 13.5% (2005: 13.8%) for other.

In assessing the value in use of the CGUs, management have considered the potential impact of reasonably possible changes in the main assumptions
used and believe that there are no such changes that would cause the carrying value of the units to exceed their recoverable amounts.

The Weir Group PLC Annual Report 2006

15. Investments in joint ventures & associates

At 31 December 2004
Additions
Share of results
Share of dividends
Share of actuarial gain on deﬁned beneﬁt plans

At 30 December 2005
Share of results
Share of dividends
Share of actuarial gain on deﬁned beneﬁt plans
Exchange adjustment
At 29 December 2006

Details of the Group’s share of the balance sheets, revenue and proﬁts of its joint ventures and associates are given below

Share of joint ventures' balance sheets
Goodwill
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets

Share of joint ventures' revenue and proﬁt
Revenue
Cost of sales
Selling & distribution costs
Administrative expenses
Income tax expense
Proﬁt after tax

Carrying value of investments in joint ventures

Share of associate’s balance sheet
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets

Share of associate’s revenue and proﬁt
Revenue
Proﬁt after tax

Carrying value of investments in associates

Total carrying value of investments in joint ventures & associates

The Group’s signiﬁcant investments in joint ventures and associates are listed on page 97.

Joint
ventures
£m

Associates
£m

1.4
5.2
1.7
(0.9)
-

7.4
2.4
(1.5)
-
(0.8)
7.5

Total
£m

5.7
5.2
9.2
(4.0)
4.8

20.9
10.5
(1.5)
4.4
(0.8)
33.5

2005
£m

3.1
6.3
1.7
(3.3)
(0.4)
7.4

8.6
(6.3)
(0.2)
(0.2)
(0.2)
1.7

7.4

22.9
44.3
(27.7)
(26.0)
13.5

115.2
7.5

13.5

20.9

4.3
-
7.5
(3.1)
4.8

13.5
8.1
-
4.4
-
26.0

2006
£m

2.7
7.0
1.4
(3.2)
(0.4)
7.5

12.1
(8.4)
(0.5)
(0.4)
(0.4)
2.4

7.5

30.2
42.8
(40.3)
(6.7)
26.0

111.1
8.1

26.0

33.5

The Weir Group PLC Annual Report 2006 67

Notes to the Group Financial Statements (Continued)

16. Inventories

Raw materials
Work in progress
Finished goods

2006
£m

30.3
41.6
49.0
120.9

2005
£m

27.0
42.7
53.1
122.8

The carrying amount of inventory at fair value less costs to sell is £36.6m (2005: £29.3m). Write downs of inventory occur regularly in the general course
of business and the amounts are considered to be insigniﬁcant. These are included in cost of sales in the income statement.

17. Trade & other receivables

Trade receivables
Other debtors
Sales tax receivable
Accrued income
Amounts owed by joint ventures & associates
Prepayments

18. Construction contracts

Gross amount due from customers for contract work (included in current assets)
Gross amount due to customers for contract work (included in current liabilities)

2006
£m

168.9
17.9
5.7
4.2
0.2
6.9
203.8

2006
£m

34.9
46.3

For contracts in progress at the balance sheet date, the amount of contract costs incurred plus recognised proﬁts less recognised losses to date was
£238.6m (2005: £174.5m). The amount of retentions held by customers for contract work amounted to £0.1m (2005: £0.2m) and the amount of
advances received from customers for contract work amounted to £44.3m (2005: £30.6m).

19. Cash & short-term deposits

Cash at bank & in hand
Short-term deposits

For the purposes of the consolidated cash ﬂow statement, cash and cash equivalents comprises the following

Cash & short-term deposits
Bank overdrafts (note 20)

2006
£m

43.6
102.7
146.3

146.3
(7.2)
139.1

2005
£m

188.3
8.7
3.0
0.6
1.6
5.1
207.3

2005
£m

28.2
39.2

2005
£m

44.1
65.5
109.6

109.6
(5.6)
104.0

Cash at bank & in hand earns interest at ﬂoating rates based on daily bank deposit rates. Short-term deposits are made for varying periods of between
one day and three months depending on the immediate cash requirements of the Group and earn interest at the respective short-term deposit rates.

The Weir Group PLC Annual Report 2006

20. Interest-bearing loans & borrowings

Current
Bank overdrafts
Short term debt
Bank loans
Obligations under ﬁnance leases (note 27)

Non-current
Bank loans
Obligations under ﬁnance leases (note 27)

Bank loans comprise the following
C$180.0m variable rate loan 2009
C$45.0m variable rate loans 2009
A$138.8m variable rate loan 2009
A$31.2m variable rate loan 2009
Euro 5.4% ﬁxed rate loan 2009

Less: current instalments due on bank loans

2006
£m

7.2
-
0.1
0.2
7.5

145.3
0.6
145.9

-
76.7
55.9
12.5
0.3
145.4
(0.1)
145.3

2005
£m

5.6
4.8
0.1
0.4
10.9

174.3
0.8
175.1

89.7
-
68.9
15.5
0.3
174.4
(0.1)
174.3

The A$ variable rate loans are borrowings under the Group's £300.0m ﬁve year syndicated multi-currency revolving credit facility which was entered into
in July 2004. The A$138.8m loan bears interest at rates based on the bank bill swap rate (BBSY) plus a margin of 0.45%. The A$31.2m loan bears interest
at rates based on Australian dollar LIBOR plus a margin of 0.45%. The C$180.0m loan, which was also part of the £300.0m facility, was repaid during the
year and was replaced by four C$45.0m loans all of which are held under separate credit facilities. These loans bear interest at rates based on the Canadian
dollar LIBOR plus margins of 0.45% or 0.5%.

As at 29 December 2006, the undrawn committed facilities amounted to £231.6m (2005: £125.3m) on the £300.0m ﬁve-year multi-currency revolving
credit facility and C$5.0m (2005: C$nil) on the Canadian dollar credit facilities.

The Euro loan is ﬁxed at 5.4% and is repayable in quarterly instalments. The loan is secured over certain of the Group's local assets.

Fair values

Set out below is a comparison by category of carrying amounts and fair values of all of the Group's ﬁnancial instruments that are carried in the
ﬁnancial statements.

Financial assets
Cash and short term deposits
Forward currency contracts

Financial liabilities
Bank overdrafts & short term debt
Interest-bearing loans & borrowings
Obligations under ﬁnance leases
Floating rate borrowings
Fixed rate borrowings

Forward currency contracts

Carrying
amount
2006
£m

Fair
value
2006
£m

Carrying
amount
2005
£m

Fair
value
2005
£m

146.3
11.4

109.6
2.7

(7.2)

(10.4)

(0.8)
(145.1)
(0.3)
(4.8)

(1.2)
(174.1)
(0.3)
(7.7)

The fair value of forward currency contracts is calculated by reference to current forward exchange rates for contracts with similar maturity proﬁles. The
fair value of all other items has been calculated by discounting the expected future cash ﬂows at prevailing interest rates. The carrying amount of the other
ﬁnancial instruments of the Group, ie. short term trade receivables and payables that are not included in the above table, is a reasonable approximation
of fair value. The carrying amount recorded in the balance sheet of each ﬁnancial asset, including derivative ﬁnancial instruments, represents the Group's
maximum exposure to credit risk.

The Weir Group PLC Annual Report 2006 69

Notes to the Group Financial Statements (Continued)

20. Interest-bearing loans & borrowings (continued)

Interest rate risk

The following tables set out the carrying amount, by maturity, of the Group's ﬁnancial instruments that are exposed to interest rate risk.

52 weeks ended 29 December 2006

Fixed rate
Obligations under ﬁnance leases
Bank loans

Floating rate
Cash & short term deposits
Bank overdrafts & short term debt
Bank loans

52 weeks ended 30 December 2005

Fixed rate
Obligations under ﬁnance leases
Bank loans

Floating rate
Cash & short term deposits
Bank overdrafts & short term debt
Bank loans

146.3
(7.2)
-

Within
1 year
£m

1-2 years
£m

2-3 years
£m

3-4 years
£m

4-5 years
£m

More than
5 years
£m

Total
£m

(0.2)
(0.1)

(0.2)
(0.2)

(0.1)
-

(0.8)
(0.3)

-
-
-

-
-
(145.1)

-
-
-

146.3
(7.2)
(145.1)

1-2 years
£m

2-3 years
£m

3-4 years
£m

4-5 years
£m

More than
5 years
£m

(0.4)
(0.1)

(0.3)
(0.1)

(0.2)
(0.1)

(0.1)
-

Total
£m

(1.2)
(0.3)

109.6
(10.4)
-

-
-
-

-
-
(174.1)

-
-
-

109.6
(10.4)
(174.1)

Interest on ﬁnancial instruments classiﬁed as ﬁxed rate is ﬁxed until the maturity of the instrument. Interest on ﬁnancial instruments classiﬁed as ﬂoating
rate is repriced at intervals of less than one year. The other ﬁnancial instruments of the Group that are not included in the above tables are non-interest
bearing and are therefore not subject to interest rate risk.

2006
£m

128.4
8.5
11.3
48.0
-
16.2
212.4

2005
£m

105.5
8.4
10.4
47.8
0.3
6.4
178.8

21. Trade & other payables

Trade payables
Other creditors
Other taxes & social security costs
Accruals
Amounts owed to joint ventures & associates
Deferred income

The Weir Group PLC Annual Report 2006

22. Provisions

At 30 December 2005
Additions
Utilised
Unused
Exchange adjustment
At 29 December 2006

Current 2006
Non-current 2006

Current 2005
Non-current 2005

Warranties

Warranties
£m

Onerous sales
contracts
£m

Discontinued
operations
warranty and

indemnity Rationalisation
£m

£m

Deferred
consideration
£m

12.4
8.0
(4.0)
(1.2)
(0.4)
14.8

11.0
3.8
14.8

8.4
4.0
12.4

2.3
1.4
(1.9)
(0.4)
(0.1)
1.3

1.3
-
1.3

2.3
-
2.3

9.7
3.8
(2.1)
-
-
11.4

7.3
4.1
11.4

6.4
3.3
9.7

5.8
3.9
(5.8)
(0.4)
(0.1)
3.4

2.8
0.6
3.4

4.5
1.3
5.8

0.9
-
(0.9)
-
-
-

-
-
-

0.9
-
0.9

Other
£m

9.6
2.6
(1.7)
-
(0.5)
10.0

4.9
5.1
10.0

3.6
6.0
9.6

Total
£m

40.7
19.7
(16.4)
(2.0)
(1.1)
40.9

27.3
13.6
40.9

26.1
14.6
40.7

Provision has been made in respect of actual warranty and contract penalty claims on goods sold and services provided and allowance has been made
for potential warranty claims based on past experience for goods and services sold with a warranty guarantee. It is expected that all costs related to such
claims will have been incurred within ﬁve years of the balance sheet date.

Onerous sales contracts

Provision has been made in respect of sales contracts entered into for the sale of goods in the normal course of business where the unavoidable costs of
meeting the obligations under the contracts exceeds the economic beneﬁts expected to be received from the contracts. Provision is made immediately
when it becomes apparent that expected costs will exceed the expected beneﬁts of the contract. It is expected that the costs will be incurred within
one year of the balance sheet date.

Discontinued operations warranty and indemnity

During 2005, the Company provided in full for residual liabilities of discontinued operations for which the Company retains responsibility. £2.1m of these
provisions were utilised during 2006.

Following the completion of the negotiation of a claim settlement, provisions have been increased by £3.8m. A recently agreed associated insurance recovery
of £5.2m has been included within other debtors. The overall effect of the negotiations has been the recognition of a £1.4m credit in the income statement.

The provision as at 29 December 2006 is based on management's current best estimate of the remaining liabilities. The actual outcome may differ, and in
some cases, this will be dependent on the outcome of legal proceedings. It is expected that the majority of these costs will be incurred within one year of
the balance sheet date with the remaining costs expected to be incurred within ﬁve years of the balance sheet date.

Rationalisation

Rationalisation provisions relate primarily to costs associated with the closure of United States Services Centres and the restructuring activities of the UK
Engineering Services businesses. It is expected that the majority of the provision will be utilised in 2007 with remaining lease obligations costs being
incurred in the period up to 2010.

Other

Other provisions relate principally to an environmental clean up programme in the United States, for a company acquired in 1992, and employment
related provisions in the UK, Australia, South America and Europe. The environmental provision is based on management's current best estimate of the
expected costs under the programme. It is expected that these costs will be incurred in the period up to 2019. The employment related provisions arise
from legal obligations in various countries where full provision is made based on the number of employees in the companies.

The Weir Group PLC Annual Report 2006 71

Notes to the Group Financial Statements (Continued)

23. Deferred tax

Consolidated balance sheet
Deferred income tax assets
Post employment beneﬁts
Decelerated depreciation for tax purposes
Tax losses
US deferred interest deductions
US untaxed reserves
Other untaxed reserves
Offset against liabilities
Gross deferred income tax assets

Deferred income tax liabilities
Post employment beneﬁts
Accelerated depreciation for tax purposes
Overseas tax on unremitted earnings
Other temporary differences
Offset against assets
Gross deferred income tax liabilities

Net deferred income tax asset

2006
£m

3.5
0.3
2.6
3.2
6.8
7.7
(4.8)
19.3

(1.7)
(2.7)
(7.6)
(6.7)
4.8
(13.9)

5.4

2005
£m

19.3
0.2
0.6
-
-
1.5
(4.2)
17.4

-
(1.7)
-
(6.4)
4.2
(3.9)

13.5

“Untaxed reserves” primarily relate to temporarily disallowed inventory/debtor provisions and accruals/provisions for liabilities where the tax allowance
is deferred until the cash expense is incurred.

Based on the Group's proﬁt projections, it is now probable that future taxable proﬁts in the US operations will allow the US deferred tax assets to be
recovered. These deferred tax assets, previously unrecognised, are now included in the balance sheet as at 29 December 2006 at a value of £10.8m which
relates to £2.3m of tax losses, £3.2m of deferred interest deductions, £6.8m of untaxed reserves and an offsetting £1.5m of accelerated depreciation for
tax purposes. The improvement in the trading results of the French operations together with improved proﬁt projections for future periods results in an
increase of £1.2m to the estimated recoverable amounts of previously unrecognised tax losses, of which £0.8m has been utilised to reduce 2006 current
tax. The realisation of a capital gain on the sale of the premises at Huddersﬁeld results in the recognition of £1.1m of previously unrecognised deferred
tax asset balances in respect of capital losses, of which £1.1m has been utilised to reduce 2006 current tax.

Deferred tax asset balances for unused tax losses of £9.5m (2005: £9.8m) and deductible temporary differences of £2.4m (2005: £14.2m) have not been
recognised on the grounds that there is insufﬁcient evidence that these assets will be recoverable. These assets will be recovered when future tax charges
are sufﬁcient to absorb these tax beneﬁts. Deferred tax asset balances for capital losses in the UK amounting to £17.6m (2005: £18.9m) have not been
recognised but would be available in the event of future capital gains being incurred by the Group.

Temporary differences associated with Group investments

The Group has determined that the unremitted earnings of certain subsidiaries will be distributed in the foreseeable future and accordingly, a deferred tax
liability of £7.6m has been recognised in respect of taxes arising from such a distribution. As at 29 December 2006, this is the only recognised deferred
tax liability in respect of taxes on unremitted earnings as the Group does not foresee a distribution of unremitted earnings from other subsidiaries, joint
ventures or associates which would result in a reversal of deferred tax.

The temporary differences associated with investments in subsidiaries, joint ventures and associates, for which a deferred tax liability has not been
recognised aggregate to £211.3m (2005: £214.2m).

There are no income tax consequences attaching to the payment of dividends by the Group to its shareholders.

The Weir Group PLC Annual Report 2006

24. Pensions and other post-employment beneﬁt plans

The Group has six deﬁned beneﬁt pension plans in the UK and North America, all of which, with the exception of the main UK plan, are ﬁnal salary
pension plans. With effect from 23 November 2006, contribution salary in respect of the Group’s main UK plan will increase in line with RPI up to a maximum
of 5% per annum. The most signiﬁcant of the deﬁned beneﬁt plans are the two UK plans and the Canadian plan. All deﬁned beneﬁt plans are closed to
new members. For these closed plans, the current service cost is expected to increase under the projected unit method as the members of the plan approach
retirement. The Group also provides certain additional post-retirement healthcare beneﬁts to senior employees in the United States. These beneﬁts are unfunded.

The assets and liabilities of the plans are

52 weeks ended 29 December 2006

Plans in surplus at 29 December 2006
Plans in deﬁcit at 29 December 2006

Plan assets at fair value
Equities
Bonds
Other

Fair value of plan assets
Present value of plan liabilities
Net pension asset (liability)

52 weeks ended 30 December 2005

Plans in surplus at 30 December 2005
Plans in deﬁcit at 30 December 2005

Plan assets at fair value
Equities
Bonds
Other
Fair value of plan assets
Present value of plan liabilities
Net pension liability

UK
pensions
£m

5.9
(3.4)
2.5

396.7
188.0
-

584.7
(582.2)
2.5

UK
pensions
£m

-
(48.5)
(48.5)

381.7
166.3
-
548.0
(596.5)
(48.5)

North
American
pensions
£m

Post
retirement
healthcare
£m

1.9
(3.4)
(1.5)

26.0
21.6
0.9

48.5
(50.0)
(1.5)

-
(4.9)
(4.9)

-
-
-

-
(4.9)
(4.9)

North
American
pensions
£m

Post
retirement
healthcare
£m

-
(7.0)
(7.0)

26.1
23.1
0.9
50.1
(57.1)
(7.0)

-
(6.1)
(6.1)

-
-
-
-
(6.1)
(6.1)

Total
£m

7.8
(11.7)
(3.9)

422.7
209.6
0.9

633.2
(637.1)
(3.9)

Total
£m

-
(61.6)
(61.6)

407.8
189.4
0.9
598.1
(659.7)
(61.6)

The pension plans have not invested in any of the Group's own ﬁnancial instruments nor in properties or other assets used by the Group.

The Weir Group PLC Annual Report 2006 73

Notes to the Group Financial Statements (Continued)

24. Pensions and other post-employment beneﬁt plans (continued)

The amounts recognised in the Group income statement and in the Group statement of recognised income & expense for the year are analysed as follows

52 weeks ended 29 December 2006

Recognised in the income statement
Current service cost
Negative past service cost

Expected return on plan assets
Interest cost on plan liabilities
Other ﬁnance (income) cost

UK
pensions
£m

North
American
pensions
£m

Post
retirement
healthcare
£m

4.5
(10.7)
(6.2)

(33.2)
28.2
(5.0)

1.3
-
1.3

(3.0)
2.8
(0.2)

-
-
-

-
0.3
0.3

Curtailment gains of £nil (2005: £0.9m) and £nil (2005: £0.7m) were included in the income statement as part of exceptional items and proﬁt from
discontinued operations respectively.

Taken to the statement of recognised income & expense
Actual return on plan assets
Less: expected return on plan assets

Other actuarial gains
Actuarial gains recognised in the statement of recognised income & expense

52 weeks ended 30 December 2005

Recognised in the income statement
Current service cost
Past service cost
Curtailment gains and losses

Expected return on plan assets
Interest cost on plan liabilities
Other ﬁnance (income) cost

Taken to the statement of recognised income & expense
Actual return on plan assets
Less: expected return on plan assets

Other actuarial gains and (losses)
Actuarial gains and (losses) recognised in the statement of recognised income & expense

45.3
(33.2)
12.1
16.9
29.0

4.9
(3.0)
1.9
1.8
3.7

-
-
-
0.3
0.3

UK
pensions
£m

North
American
pensions
£m

Post
retirement
healthcare
£m

5.2
1.8
(3.4)
3.6

(29.6)
28.6
(1.0)

89.8
(29.6)
60.2
(36.0)
24.2

1.0
-
-
1.0

(2.5)
2.7
0.2

5.4
(2.5)
2.9
(5.2)
(2.3)

-
(0.2)
-
(0.2)

-
0.3
0.3

-
-
-
0.2
0.2

Total
£m

5.8
(10.7)
(4.9)

(36.2)
31.3
(4.9)

50.2
(36.2)
14.0
19.0
33.0

Total
£m

6.2
1.6
(3.4)
4.4

(32.1)
31.6
(0.5)

95.2
(32.1)
63.1
(41.0)
22.1

The Weir Group PLC Annual Report 2006

24. Pensions and other post-employment beneﬁt plans (continued)

Pension contributions are determined with the advice of independent qualiﬁed actuaries on the basis of annual valuations using the projected unit method.
Plan assets are stated at their market values at the respective balance sheet dates and overall expected rates of return are established by applying published
brokers forecasts to each category of plan assets and allowing for plan expenses.

UK pensions

2006
%

2005
%

North America pensions
2005
%

2006
%

Post retirement healthcare
2005
%

2006
%

Main assumptions
Rate of salary increase
Rate of increase in pensions in payment

Pre 6 April 2006
Post 6 April 2006

Discount rate
Expected rates of return on plan assets

Equities
Bonds
Other

Inﬂation assumption
Rate of increase in healthcare costs

3.1

2.8
2.5
5.2

7.7
4.5
n/a
3.1
n/a

* 9.5% per annum decreasing to 5% per annum and remaining static at that level from 2010 onwards.

Post-retirement mortality

Current pensioners at 65 - male
Current pensioners at 65 - female
Future pensioners at 65 - male
Future pensioners at 65 - female

2006
Years

18.1
20.9
19.6
22.3

3.9

2.8
2.8
4.8

7.1
3.9
n/a
2.8
n/a

2005
Years

18.1
20.9
19.6
22.3

3.1

n/a
n/a
5.4

7.4
4.2
3.0
2.3
n/a

2006
Years

17.5
21.3
23.8
27.7

3.2

n/a
n/a
5.1

7.8
4.6
3.4
2.3
n/a

2005
Years

17.5
21.3
17.8
21.7

n/a

n/a
n/a
5.8

n/a
n/a
n/a
2.5
*

2006
Years

18.1
20.5
18.1
20.5

n/a

n/a
n/a
5.5

n/a
n/a
n/a
2.5
*

2005
Years

18.1
20.5
18.1
20.5

The post-retirement mortality assumptions allow for expected increases in longevity. The "current" disclosures above relate to assumptions based on
longevity (in years) following retirement at the balance sheet date, with "future" being that relating to an employee retiring in 2035.

A one percentage point change in the assumed rate of increase in healthcare costs would have the following effects

Increase
2006
£m

Decrease
2006
£m

Increase
2005
£m

Decrease
2005
£m

Effect on deﬁned beneﬁt obligation

0.4

(0.3)

0.6

(0.5)

The Weir Group PLC Annual Report 2006 75

Notes to the Group Financial Statements (Continued)

24. Pensions and other post-employment beneﬁt plans (continued)

Changes in the present value of the deﬁned beneﬁt obligations are analysed as follows

As at 31 December 2004
Current service cost
Past service cost
Interest cost
Beneﬁts paid
Contributions by employees
Curtailment gains and losses
Actuarial gains and losses
Exchange adjustment

As at 30 December 2005
Current service cost
Negative past service cost
Interest cost
Beneﬁts paid
Contributions by employees
Actuarial gains and losses
Exchange adjustment
As at 29 December 2006

UK
pensions
£m

North
American
pensions
£m

Post
retirement
healthcare
£m

548.2
5.2
1.8
28.6
(22.6)
2.7
(3.4)
36.0
-

596.5
4.5
(10.7)
28.2
(21.9)
2.5
(16.9)
-
582.2

43.2
1.0
-
2.7
(2.3)
0.5
-
5.2
6.8

57.1
1.3
-
2.8
(3.2)
0.6
(1.8)
(6.8)
50.0

5.9
-
(0.2)
0.3
(0.3)
-
-
(0.2)
0.6

6.1
-
-
0.3
(0.4)
-
(0.3)
(0.8)
4.9

Total
£m

597.3
6.2
1.6
31.6
(25.2)
3.2
(3.4)
41.0
7.4

659.7
5.8
(10.7)
31.3
(25.5)
3.1
(19.0)
(7.6)
637.1

The deﬁned beneﬁt obligation comprises £5.9m (2005: £7.2m) arising from unfunded plans and £631.2m (2005: £652.5m) from plans that are wholly or
partially funded.

Changes in the fair value of plan assets are analysed as follows

As at 31 December 2004
Expected return on plan assets
Employer contributions
Contributions by employees
Beneﬁts paid
Actuarial gains and losses
Exchange adjustment

As at 30 December 2005
Expected return on plan assets
Employer contributions
Contributions by employees
Beneﬁts paid
Actuarial gains and losses
Exchange adjustment
As at 29 December 2006

UK
pensions
£m

North
American
pensions
£m

Post
retirement
healthcare
£m

463.5
29.6
14.6
2.7
(22.6)
60.2
-

548.0
33.2
10.8
2.5
(21.9)
12.1
-
584.7

38.5
2.5
2.0
0.5
(2.3)
2.9
6.0

50.1
3.0
2.5
0.6
(3.2)
1.9
(6.4)
48.5

-
-
0.3
-
(0.3)
-
-

-
-
0.4
-
(0.4)
-
-
-

Total
£m

502.0
32.1
16.9
3.2
(25.2)
63.1
6.0

598.1
36.2
13.7
3.1
(25.5)
14.0
(6.4)
633.2

The Group made contributions of £7.0m in 2006 (2005: £10.0m) in addition to the employers’ regular contributions.

The Weir Group PLC Annual Report 2006

24. Pensions and other post-employment beneﬁt plans (continued)

History of experience gains and losses

UK pensions
Fair value of plan assets
Present value of deﬁned beneﬁt obligations
Surplus (deﬁcit) in the plans
Experience adjustments arising on plan liabilities
Changes in ﬁnancial assumptions underlying plan liabilities
Experience adjustments arising on plan assets

North America pensions
Fair value of plan assets
Present value of deﬁned beneﬁt obligations
Deﬁcit in the plans
Experience adjustments arising on plan liabilities
Changes in ﬁnancial assumptions underlying plan liabilities
Experience adjustments arising on plan assets

Post retirement healthcare
Present value of deﬁned beneﬁt obligations
Experience adjustments arising on plan liabilities
Changes in ﬁnancial assumptions underlying plan liabilities

2006
£m

2005
£m

2004
£m

2003
£m

584.7
(582.2)
2.5
(0.4)
17.3
12.1

48.5
(50.0)
(1.5)
(0.1)
1.9
1.9

(4.9)
-
0.3

548.0
(596.5)
(48.5)
1.1
(37.1)
60.2

50.1
(57.1)
(7.0)
(0.4)
(4.8)
2.9

(6.1)
0.1
0.1

463.5
(548.2)
(84.7)
0.5
(19.9)
14.6

38.5
(43.2)
(4.7)
0.5
(2.1)
2.3

(5.9)
(0.9)
1.7

419.8
(511.3)
(91.5)

32.5
(40.4)
(7.9)

(7.0)

The cumulative amount of actuarial gains and losses recognised in the Group statement of recognised income and expense since 28 December 2003 is a
gain of £51.7m (2005: a gain of £18.7m).

The directors are unable to determine how much of the pension plan deﬁcits are attributable to actuarial gains and losses since inception of those pension
plans. Consequently, the directors are unable to determine the amount of actuarial gains and losses that would have been recognised on an IFRS basis in
the Group statements of recognised income and expense before 27 December 2003.

25. Share capital & reserves

Shares allotted

Authorised share capital
Ordinary shares of 12.5p each

The Company has one class of ordinary share which carries no rights to ﬁxed income.

Issued & fully paid share capital
At beginning of period
Issued during the year for cash on exercise of share options
At end of period

Shares allotted

Aggregate nominal value of share options exercised
Share premium
Consideration received on exercise of share options

Treasury shares
At beginning of period
Purchased during the year
At end of period

2006
Number
Million

2005
Number
Million

288.0

209.7
1.3
211.0

2006
£m

0.2
2.9
3.1

3.3
-
3.3

207.1
2.6
209.7

2005
£m

0.3
6.0
6.3

-
3.3
3.3

The Weir Group PLC Annual Report 2006 77

Notes to the Group Financial Statements (Continued)

25. Share capital & reserves (continued)

Reconciliation of movements in equity

Attributable to equity holders of the Company

Share
capital
£m

Share
premium
£m

Treasury
shares
£m

Reserves
£m

Total
£m

At 31 December 2004
Adjustments relating to adoption of
IAS 32 and IAS 39 from 1 January 2005

At 1 January 2005
Total recognised income & expense for the period
Cost of share-based payments
Dividends
Exercise of options
Purchase of treasury shares
Transaction costs
Acquisition of minority interest

At 30 December 2005
Total recognised income & expense for the period
Cost of share-based payments
Dividends
Exercise of options
At 29 December 2006

25.9

26.5

25.9
-
-
-
0.3
-
-
-

26.2
-
-
-
0.2
26.4

26.5
-
-
-
6.0
-
-
-

32.5
-
-
-
2.9
35.4

-
-
-
-
-
(10.6)
(0.1)
-

(10.7)
-
-
-
-
(10.7)

212.4

264.8

2.4

214.8
53.4
1.0
(26.6)
-
-
-
-

242.6
104.1
1.4
(27.7)
-
320.4

267.2
53.4
1.0
(26.6)
6.3
(10.6)
(0.1)
-

290.6
104.1
1.4
(27.7)
3.1
371.5

Minority
interest

Total
equity

£m

0.6

0.6
0.1
-
-
-
-
-
(0.3)

0.4
-
-
-
-
0.4

£m

265.4

2.4

267.8
53.5
1.0
(26.6)
6.3
(10.6)
(0.1)
(0.3)

291.0
104.1
1.4
(27.7)
3.1
371.9

At 31 December 2004
Adjustments relating to adoption of IAS 32 and IAS 39 from 1 January 2005

At 1 January 2005
Total recognised income & expense for the period
Cost of share-based payments
Dividends

At 30 December 2005
Total recognised income & expense for the period
Cost of share-based payments
Dividends
At 29 December 2006

Capital
redemption
reserve
£m

Foreign
currency
translation
reserve
£m

Hedge
accounting
reserve
£m

Retained
earnings
£m

Total
reserves
£m

0.5
-

0.5
-
-
-

0.5
-
-
-
0.5

(4.0)
-

(4.0)
13.9
-
-

9.9
(12.8)
-
-
(2.9)

-
3.5

3.5
(7.2)
-
-

(3.7)
7.2
-
-
3.5

215.9
(1.1)

214.8
46.7
1.0
(26.6)

235.9
109.7
1.4
(27.7)
319.3

212.4
2.4

214.8
53.4
1.0
(26.6)

242.6
104.1
1.4
(27.7)
320.4

As permitted by IFRS 1, the Group elected to apply IAS32 "Financial Instruments - Disclosure and Presentation" and IAS 39 "Financial Instruments -
Recognition and Measurement" prospectively from 1 January 2005.

Capital redemption reserve

The capital redemption reserve was created by a repurchase and cancellation of own shares during the 53 weeks ended 1 January 1999.

Foreign currency translation reserve

The foreign currency translation reserve is used to record exchange differences arising from the translation of the ﬁnancial statements of foreign operations.

Hedge accounting reserve

This reserve records the portion of the gains or losses on hedging instruments used as cash ﬂow hedges that are determined to be effective.

The Weir Group PLC Annual Report 2006

26. Additional cash ﬂow information

Net cash generated from operations
Operating proﬁt before exceptional items
Loss from discontinued operations before net ﬁnance costs and tax
Share of results of joint ventures & associates
Depreciation & amortisation
Loss on disposal of property, plant & equipment & investments
Funding of pension & post retirement costs
Exchange
Employee share schemes
Increase in provisions
Increase in inventories
Increase in trade & other receivables, construction contracts and forward foreign currency contracts
Increase in trade & other payables, construction contracts and forward foreign currency contracts

Cash generated from operations
Additional pension contributions paid
Fundamental restructuring costs paid
Income tax paid
Net cash generated from operating activities

Acquisitions of subsidiaries & joint ventures
Current year acquisitions (note 13)
Previous year acquisitions deferred consideration paid
Cost of investments in joint ventures

Disposals of subsidiaries & joint ventures
Previous year disposals
- discontinued operations
- other

Reconciliation of net increase in cash and cash equivalents to movement in net debt
Net increase in cash and cash equivalents
Net decrease (increase) in debt

Change in net (debt) funds resulting from cash ﬂows
Lease acquired
Lease inception
Foreign currency translation differences

Change in net (debt) funds during the period
Net (debt) funds at beginning of period
Net debt at end of period

Net debt comprises the following
Cash & short term deposits (note 19)
Current interest-bearing loans & borrowings (note 20)
Non current interest-bearing loans & borrowings (note 20)

2006
£m

87.7
-
(10.5)
20.1
0.1
(0.9)
(1.1)
1.4
2.8
(7.0)
(6.8)
48.7

134.5
(7.0)
(5.8)
(14.6)
107.1

(0.8)
(1.3)
-
(2.1)

(1.8)
-
(1.8)

37.4
19.5

56.9
-
-
12.4

69.3
(76.4)
(7.1)

2005
£m

66.3
(0.7)
(9.2)
17.1
0.3
(0.8)
0.3
1.0
2.4
(18.9)
(12.3)
25.8

71.3
(10.0)
(16.6)
(7.9)
36.8

(69.1)
(0.5)
(6.0)
(75.6)

14.0
0.2
14.2

2.4
(85.5)

(83.1)
(0.2)
(0.1)
(5.6)

(89.0)
12.6
(76.4)

146.3
(7.5)
(145.9)
(7.1)

109.6
(10.9)
(175.1)
(76.4)

The Weir Group PLC Annual Report 2006 79

Notes to the Group Financial Statements (Continued)

27. Commitments & contingencies

Operating lease commitments

The Group has entered into commercial leases for land and buildings, motor vehicles and plant and equipment. Land and building leases have an average
term of between three and ten years, motor vehicles leases have an average term of between three and four years and plant and equipment leases have
an average term of between ﬁve and six years. Certain leases have terms of renewal, at the option of the lessee, but there are no purchase options or
escalation clauses. Future minimum rentals payable under non-cancellable operating leases are as follows

Within one year
After one year but not more than ﬁve years
More than ﬁve years

Finance lease commitments

2006
£m

6.5
12.8
2.3
21.6

2005
£m

7.5
13.7
1.9
23.1

The Group has ﬁnance leases for various items of plant and equipment and purchased software. Future minimum lease payments under ﬁnance leases
together with the present value of the net minimum lease payments are as follows

Within one year
After one year but not more than ﬁve years
More than ﬁve years
Total minimum lease payments
Less amounts representing ﬁnance charges
Present value of minimum lease payments

2006

2006
Minimum Present value
of payments
payments
£m
£m

2005
Minimum
payments
£m

2005
Present value
of payments
£m

0.3
0.5
0.1
0.9
(0.1)
0.8

0.2
0.5
0.1

0.8

0.5
0.7
0.2
1.4
(0.2)
1.2

0.4
0.6
0.2

1.2

It is the Group's policy to lease certain of its assets under ﬁnance leases. The weighted average outstanding lease term is 4.45 years (2005: 5.93 years).
For the 52 weeks ended 29 December 2006, the weighted average effective borrowing rate was 5.55% (2005: 5.69%). All leases are on a ﬁxed repayment
basis and no arrangements have been entered into for contingent rental payments.

Capital commitments

Outstanding capital commitments contracted but not provided for
Property, plant & equipment

The Group's share of the capital commitments of its joint ventures amounted to £0.1m (2005: £0.1m).

2006
£m

2005
£m

2.5

1.2

Legal claims

The Company and certain subsidiaries are, from time to time, parties to legal proceedings and claims which arise in the normal course of business. To the
extent not already provided for, the directors do not anticipate that the outcome of these proceedings and claims, either individually or in aggregate, will
have a material adverse effect upon the Group's ﬁnancial position.

Guarantees

The Company has given a limited counter-indemnity to Halliburton Company and Brown & Root Limited in respect of Devonport Management Limited up to a
maximum of the Group's investment in that company.

The Weir Group PLC Annual Report 2006

28. Equity settled share-based payments

L-TIP

Three types of award may be made under the L-TIP to senior executives: Performance shares, matching shares and investment shares. The awards vest over
a three year service period.

Performance shares

Performance shares are conditional awards to acquire free shares subject to company performance. In 2006, conditional awards of performance shares were
made worth 70% (2005: 70%) of salary to the chief executive. In addition, one conditional award of 100% of salary and one conditional award of 45% of
salary were awarded to other executive directors. Awards of 45% of salary were awarded to other executive directors in 2005. Other conditional awards of
performance shares made in 2006 were 40% (2005: 40%) of salary to other senior executives who participate in the Matching shares awards, and 25%
(2005: 25%) of salary to other senior executives who do not participate in that plan. It is the Remuneration Committee's intention to make awards of the
same value in 2007 except for the award to the chief executive which is expected to be 70% of salary, the award to the corporate services director which
is expected to be 80% of salary and the award to the group ﬁnance director which is expected to be 45% of salary.

Matching and investment shares

Matching shares are conditional awards to acquire free shares, subject to Company performance. The chief executive, other executive directors and senior
executives are required to compulsorily defer an element of any Group bonus earned for the preceding ﬁnancial year in exchange for which they are
awarded investment shares. They are also allowed to voluntarily invest the balance of the Group bonus (subject to any cap imposed by the Remuneration
Committee, currently 10%) in shares. In return, they receive a conditional award of matching shares worth a maximum of 2.5 times the pre-tax value of
the bonus invested. It is intended that the maximum voluntary element will be increased to 20% for the 2007 awards.

The value of shares for this purpose will be the average published closing price of a share for the three dealing days immediately preceding the date of
grant of the award of shares.

The conditional awards of performance shares and matching shares only vest if a highly demanding performance condition is achieved. For awards
granted in 2004, 2005 and 2006, the performance condition is based on the growth in the Company's Total Shareholder Return ("TSR") over a single
three year performance period (three consecutive ﬁnancial years beginning with the year in which the grant is made) relative to the growth in the TSR of
a comparator group, to comprise the following 20 companies: AGA Foodservice Group, Bodycote International, Cookson Group, Domnick Hunter Group,
Enodis, FKI, Halma, IMI, Kidde, Meggitt, Mitie Group, Morgan Crucible Company, Rolls-Royce, Rotork, Senior, Smiths Group, Spirax-Sarco Engineering,
Tomkins, Wood Group and WS Atkins, except that Domnick Hunter Group and Kidde were not included in the comparator group for the 2006 awards as
they were de-listed from the London Stock Exchange in December 2005 and April 2005 respectively. Only if the company's TSR ranks in the upper quintile
of this group will the full awards vest. This reduces on a sliding scale so that for median performance, 25% of the awards will vest. For below median
performance, none of the awards will vest.

In addition to TSR performance, for any of the performance and matching shares to vest, the growth in the Company's earnings per share over the
performance period must be equal to or greater than the growth in the UK Retail Price Index over the same period.

The following table illustrates the number of shares awarded under the L-TIP

Outstanding at the beginning of period
Awarded during the period
Expired during the period
Outstanding at the end of the period
Exercisable at the end of the period

2006
Number

2005
Number

1,720,426
715,658
(144,953)
2,291,131
-

850,965
869,461
-
1,720,426
-

An amount of £1.3m (2005: £0.9m) has been charged to the income statement in respect of the number of awards which are expected to be made at
the end of the vesting period. This comprises an amount of £0.4m (2005: £0.2m) in respect of parent company employees and £0.9m (2005: £0.7m)
in respect of employees of subsidiaries. Subsidiary companies made a cash contribution to the parent company of £0.9m (2005: £0.7m) in the year in
respect of their L-TIP awards.

The remaining contractual lives of the outstanding L-TIP awards at the period end are as follows

Year of award

2004
2005
2006

2006
Number of
shares

2006
Remaining
outstanding contractual life

2005
Number of
shares
outstanding

2005
Remaining
contractual life

771,692
809,388
710,051

5 months
15 months
27 months

850,965
869,461
-

17 months
27 months
-

The Weir Group PLC Annual Report 2006 81

Notes to the Group Financial Statements (Continued)

28. Equity settled share-based payments (continued)

Share option schemes

The Company operated a discretionary executive share option scheme ("the Executive Scheme") under which options could be granted to those senior
executives of the Group whose skills and experience the Remuneration Committee believed to be important to the success of the Group.

The Executive Scheme, which was approved in 1994, expired in May 2004. Under the rules of the Scheme, share options could be granted up to a
maximum value of four times a participant's earnings. Options were granted at the mid market price of the share at the date of grant. The right to exercise
an Executive Scheme option is subject to performance conditions as determined by the Committee at the date of grant.

The performance criteria applicable for the options granted after 2000 were for the growth in the Company's normalised earnings per share over a three
year period, to either exceed by nine percent the growth in the retail price index of the UK over that three year period, or exceed the weighted average
growth during that three year period of the normalised earnings per share of those companies in the FTSE All Share Industrial Engineering sector. This is
re-tested every year from the third anniversary of the grant of the option to the date the option lapses.

In addition, the Company operated a Savings-related Share Option Scheme in the UK which was not subject to performance criteria. This scheme was
closed in 2004.

The following table illustrates the number and weighted average exercise prices (WAEP) of share options.

Outstanding at the beginning of the period
Forfeited during the period
Expired during the period
Exercised during the period
Outstanding at the end of the period (i)
Exercisable at the end of the period

2006
Number

2,824,739
-
(218,868)
(1,328,633)
1,277,238
568,448

2006
WAEP

£2.40
-
£2.43
£2.35
£2.45
£2.51

2005
Number

5,785,341
(323,669)
(28,809)
(2,608,124)
2,824,739
1,374,189

2005
WAEP

£2.41
£2.36
£2.35
£2.43
£2.40
£2.54

(i) Included within this balance are options over 804,225 (2005: 1,959,282) shares that have not been recognised in accordance with IFRS2 as the options
were granted on or before 7 November 2002. These options have not been subsequently modiﬁed and therefore do not need to be accounted for in
accordance with IFRS2.

The weighted average share price during the period was 458.4p (2005: 342.5p)

Share options outstanding at the end of the period have the following exercise prices

Savings Related Share Option Scheme 1991

Executive Share Option Scheme 1994

Savings Related Share Option Scheme 2001

Price per
share

226.00p

260.00p
239.00p
246.50p
197.50p
251.50p
262.50p
273.00p
295.75p

201.00p
260.00p
201.00p

2006
Number

2006
Remaining
of shares contractual life

2005
Number
of shares

2005
Remaining
contractual life

317,916

12 months

-
30,000
176,250
9,701
176,000
173,000
164,835
15,165

-
3 months
39 months
51 months
63 months
80 months
99 months
99 months

3,497
239,274
289,516

2 days
12 months
24 months

7,692
30,000
254,600
45,959
301,938
734,000
164,835
15,165

335,760
267,177
349,697

3 months
15 months
51 months
63 months
75 months
92 months
111 months
111 months

12 months
24 months
36 months

Fair value of equity settled share-based payments

The fair value of the conditional awards under the L-TIP has been estimated using the Monte Carlo simulation model. The following table gives the
assumptions made during the 52 weeks ended 29 December 2006 and the 52 weeks ended 30 December 2005.

2006

Weighted average dividend yield (%)
Weighted average expected volatility (%)
Weighted average expected life (years)
Weighted average risk free rate (%)
Weighted average share price (£)
Weighted average fair value (£)

4.11
23.11
3.00
4.44
445p
219p

2005

4.25
35.00
3.00
4.60
322p
155p

The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may occur. The expected volatility
reﬂects the assumption that the historical volatility is indicative of future trends which may also not necessarily be the actual outcome. Market related
performance conditions have been taken into account in the calculation of fair values.

The Weir Group PLC Annual Report 2006

29. Related party disclosures

The following table provides the total amount of signiﬁcant transactions which have been entered into with related parties for the relevant ﬁnancial year
and outstanding balances at the period end.

Income tax
consortium relief
from related parties
£m

Management
charge to
related parties
£m

Sales to
related parties
- goods
£m

Sales to
related parties
- services
£m

Amounts owed Amounts owed
to related
parties
£m

by related
parties
£m

Joint Ventures

Associates

Group pension plans

2006
2005

-
-

-
2.7

-
-

0.7
0.7

-
-

0.2
0.5

0.3
0.8

-
-

0.4
1.6

1.1
0.4

-
-

0.2
1.6

-
-

-
0.3

0.6
0.5

Contributions to the Group pension plans are disclosed in notes 4 and 24.

Terms and conditions of transactions with related parties

Sales to and from related parties are made at normal market prices. Outstanding balances at the year end are unsecured and settlement occurs in cash.
There have been no guarantees provided or received for any related party balances. For the 52 weeks ended 29 December 2006, the Group has not raised
any provision for doubtful debts relating to amounts owed by related parties as the payment history has been excellent (2005: £nil). This assessment
is undertaken each ﬁnancial year through examining the ﬁnancial position of the related party and the market in which the related party operates.
Full value, calculated at appropriate tax rates, is paid for consortium relief claimed from related parties.

Compensation of key management personnel

Short-term employee beneﬁts
Share-based payments

2006
£m

2.4
0.4
2.8

2005
£m

2.2
0.3
2.5

Key management comprises the Board of directors. Further details of their remuneration can be found in the Remuneration Committee Report on pages 34 to 36.

30. Financial instruments

Hedging activities

Included in current assets
Forward foreign currency contracts designated as cash ﬂow hedges
Other forward foreign currency contracts

Included in current liabilities
Forward foreign currency contracts designated as cash ﬂow hedges
Other forward foreign currency contracts

2006
£m

2005
£m

5.1
1.4
6.5

2.5
0.5
3.0

1.7
0.6
2.3

3.5
1.1
4.6

The forward foreign currency contracts included within non-current assets amounting to £4.9m (2005: £0.4m) and non-current liabilities amounting to
£1.8m (2005: £3.1m) have all been designated as cash ﬂow hedges.

The Weir Group PLC Annual Report 2006 83

Notes to the Group Financial Statements (Continued)

30. Financial instruments (continued)

Cash ﬂow hedges

At 29 December 2006, the Group held over 900 (2005: over 600) forward foreign currency contracts designated as hedges of expected future sales or
purchases for which the Group has ﬁrm commitments. The forward foreign currency contracts are being used to eliminate the material currency risk of
the ﬁrm commitments. The terms of the contracts are negotiated to match the terms of the commitments. Any gains and losses on ineffective hedges
were taken to the income statement in the year. The weighted average terms of the contracts are as follows

Forward foreign currency contracts to hedge expected future sales and purchases

52 weeks ended 29 December 2006

Canadian dollar
Euro

Danish kroner

Norwegian kroner

Swiss franc

United States dollar

Yen

52 weeks ended 30 December 2005

Euro

Danish kroner

Swiss franc

United States dollar

Yen

Sell
currency
000

Sterling
equivalent
£000

Weighted
average
exchange rate

Buy
currency
000

Sterling
equivalent
£000

Weighted
average
exchange rate

Maturity
dates

639
11,768
2,889
-
-
-
-
2,000
2,000
-
-
-
-
126,943
135,622
45,519
638
3,042
7
48,600
-
-

Sell
currency
000

20,913
7,707
1,500
-
-
-
-
-
-
102,600
66,092
43,671
-
48,600
-

299
8,244
2,034
-
-
-
-
177
178
-
-
-
-
77,702
73,514
24,048
355
1,658
4
255
-
-

2.14
1.43
1.42
-
-
-
-
11.30
11.24
-
-
-
-
1.63
1.84
1.89
1.80
1.83
1.75
190.59
-
-

Sterling
equivalent
£000

Weighted
average
exchange rate

14,888
5,444
1,057
-
-
-
-
-
-
68,039
38,669
24,442
-
255
-

1.40
1.42
1.42
-
-
-
-
-
-
1.51
1.71
1.79
-
190.59
-

-
16,135
24,441
5,721
70,020
121,500
33,050
11,400
28,450
11,820
27,853
19,700
4,235
3,243
631
-
-
-
-
334,650
328,050
106,300

Buy
currency
000

30,494
8,176
3,650
44,535
53,070
36,000
19,947
15,843
2,800
5,780
300
-
207,050
233,450
47,700

-
11,465
17,151
4,008
6,731
11,495
3,092
1,013
2,478
994
12,959
8,985
1,919
2,207
325
-
-
-
-
1,729
1,641
525

-
1.41
1.43
1.43
10.40
10.57
10.69
11.25
11.48
11.89
2.15
2.19
2.21
1.47
1.94
-
-
-
-
193.55
199.91
202.48

2007
2007
2008
2009
2007
2008
2009
2007
2008
2009
2007
2008
2009
2007
2008
2009
2010
2011
2012
2007
2008
2009

Sterling
equivalent
£000

Weighted
average
exchange rate

Maturity
dates

21,224
5,912
2,634
4,228
5,143
3,494
9,379
7,579
1,345
3,615
163
-
1,080
1,239
245

1.44
1.38
1.39
10.53
10.32
10.30
2.13
2.09
2.08
1.60
1.84
-
191.71
188.42
194.69

2006
2007
2008
2006
2007
2008
2006
2007
2008
2006
2007
2008
2006
2007
2008

The net credit included in the income statement in respect of the change in fair value of forward currency contracts that have not been subject to hedge
accounting was £1.5m (2005: charge of £0.4m).

The Weir Group PLC Annual Report 2006

31. Financial risk management objectives and policies

The Group's principal ﬁnancial instruments, other than derivatives, comprise bank overdrafts, short term debt, loans, cash and short term deposits.
The main purpose of these ﬁnancial instruments is to manage the Group's funding and liquidity requirements. The Group has other ﬁnancial instruments
such as trade receivables and trade payables which arise directly from its operations. The principal ﬁnancial risks to which the Group is exposed are those
relating to foreign currency, commodity price, credit, liquidity and interest rate. These risks are managed in accordance with Board approved policies.

Foreign currency risk

The Group has invested in operations outside the United Kingdom and also buys and sells goods and services in currencies other than in the functional
currency of its subsidiary operations. As a result, the Group's non sterling revenues, proﬁts, assets, liabilities and cash ﬂows can be affected by movements
in exchange rates. The Group seeks to minimise its transaction exposure by maintaining a policy that all operating units hedge using forward currency
contracts to eliminate exposures on material committed transactions. In addition, it is Group policy that those companies where the most signiﬁcant
concentration of foreign currency risk has been identiﬁed also apply hedge accounting. It is Group policy not to engage in any speculative transaction
of any kind.

Commodity price risk

The Group's exposure to raw material price risk is generally diminished by restricting bid validity to periods within those quoted by suppliers
and by material price escalation clauses.

Credit risk

The credit risk on liquid funds and derivative ﬁnancial instruments is limited because the counterparties are ﬁnancial institutions with high credit-
ratings assigned by international credit rating agencies. The Group's credit risk is primarily attributable to its trade receivables and amounts due under
construction contracts. The Group is exposed to risk over a large number of countries and customers and there is no signiﬁcant concentration of risk.
Where appropriate, the Group endeavours to minimise risk by the use of trade ﬁnance instruments such as letters of credit and insurance. Credit worthiness
checks are also undertaken before entering into contracts with new customers and credit limits are set as appropriate. The amounts presented in the
balance sheet are net of allowance for doubtful receivables. An allowance for impairment is made where there is an identiﬁable loss event which,
based on previous experience, is evidence of a reduction in the recoverability of cash ﬂows.

Liquidity risk

The Group's objective is to maintain a balance between continuity of funding and ﬂexibility through the use of bank overdrafts and bank loans.

Interest rate risk

The majority of the Group's borrowings are at variable rates of interest. Interest rate risk is regularly monitored to ensure that the mix of variable and
ﬁxed rate borrowing is appropriate for the Group in the short to medium term. Based on current levels of net debt, interest rate risk is not considered
to be material.

32. Exchange rates

The principal exchange rates applied in the preparation of these ﬁnancial statements were as follows

Average rate
US dollar (per £)
Australian dollar (per £)
Euro (per £)
Canadian dollar (per £)

Closing rate
US dollar (per £)
Australian dollar (per £)
Euro (per £)
Canadian dollar (per £)

2006

2005

1.86
2.45
1.47
2.10

1.96
2.48
1.49
2.28

1.81
2.39
1.47
2.19

1.72
2.35
1.46
2.01

The Weir Group PLC Annual Report 2006 85

Directors Statement of Responsibilities

The directors are responsible for preparing the annual report and
the Company ﬁnancial statements in accordance with applicable
law and regulations.

Company law requires the directors to prepare Company ﬁnancial
statements for each ﬁnancial year. Under that law the directors
have elected to prepare the ﬁnancial statements in accordance
with United Kingdom Generally Accepted Accounting Practice
(United Kingdom Accounting Standards and applicable law).
The Company ﬁnancial statements are required by law to give a
true and fair view of the state of affairs of the Company and of
the proﬁt or loss of the Company for that period. In preparing
those ﬁnancial statements, the directors are required to

• select suitable accounting policies and then apply them

consistently;

• make judgements and estimates that are reasonable and

prudent; and

• state whether applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and
explained in the Company ﬁnancial statements.

The directors are responsible for keeping proper accounting
records that disclose with reasonable accuracy at any time the
ﬁnancial position of the Company and enable them to ensure that
the Company ﬁnancial statements comply with the Companies
Act 1985. They are also responsible for safeguarding the assets
of the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.

The Weir Group PLC Annual Report 2006

Independent Auditors Report

Independent Auditors Report to the members of
The Weir Group PLC

We have audited the Company ﬁnancial statements of The Weir
Group PLC for the 52 weeks ended 29 December 2006 which
comprise the Company Balance Sheet and the related notes
1 to 15. These Company ﬁnancial statements have been prepared
under the accounting policies set out therein. We have also audited
the information in the Remuneration Committee Report that is
described as having been audited.

We have reported separately on the Group ﬁnancial statements
of The Weir Group PLC for the 52 weeks ended 29 December 2006.

This report is made solely to the Company's members, as a body,
in accordance with Section 235 of the Companies Act 1985. Our
audit work has been undertaken so that we might state to the
Company's members those matters we are required to state to
them in an auditors report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company and the Company's members
as a body, for our audit work, for this report, or for the opinions
we have formed.

Respective responsibilities of directors and auditors

The directors responsibilities for preparing the annual report,
the Remuneration Committee Report and the Company ﬁnancial
statements in accordance with applicable United Kingdom law
and Accounting Standards (United Kingdom Generally Accepted
Accounting Practice) are set out in the Directors Statement of
Responsibilities.

Our responsibility is to audit the Company ﬁnancial statements
and the part of the Remuneration Committee Report to be audited
in accordance with relevant legal and regulatory requirements and
International Standards on Auditing (UK and Ireland).

We report to you our opinion as to whether the Company ﬁnancial
statements give a true and fair view and whether the Company
ﬁnancial statements and the part of the Remuneration Committee
Report to be audited have been properly prepared in accordance
with the Companies Act 1985. We also report to you whether
in our opinion the information given in the Directors Report is
consistent with the Company ﬁnancial statements. The information
given in the Directors Report includes speciﬁc information that is
contained in the Chief Executive’s Report, the Operational Review,
the Financial Review and the Corporate Social Responsibility Report
that is cross referred from the Directors Report.

In addition we report to you if, in our opinion, we have not
received all the information and explanations we require for our
audit, or if information speciﬁed by law regarding directors
remuneration and other transactions is not disclosed.

We read other information contained in the annual report and
consider whether it is consistent with the audited Company
ﬁnancial statements. The other information comprises only
the Financial Highlights 2006, 2006 Highlights, the Chairman’s
Statement, the Chief Executive’s Report, the Operational Review,
the Financial Review, the Board of Directors, the Directors Report,
the Corporate Governance Statement, the Audit Committee

Report, the Nomination Committee Report, the unaudited part
of the Remuneration Committee Report and the Corporate Social
Responsibility Report. We consider the implications for our report
if we become aware of any apparent misstatements or material
inconsistencies with the Company ﬁnancial statements. Our
responsibilities do not extend to any other information.

Basis of audit opinion

We conducted our audit in accordance with International Standards
on Auditing (UK and Ireland) issued by the Auditing Practices
Board. An audit includes examination, on a test basis, of evidence
relevant to the amounts and disclosures in the Company ﬁnancial
statements and the part of the Remuneration Committee Report
to be audited. It also includes an assessment of the signiﬁcant
estimates and judgments made by the directors in the preparation
of the Company ﬁnancial statements and of whether the
accounting policies are appropriate to the Company’s
circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the
information and explanations which we considered necessary in
order to provide us with sufﬁcient evidence to give reasonable
assurance that the Company ﬁnancial statements and the part
of the Remuneration Committee Report to be audited are free
from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated
the overall adequacy of the presentation of information in the
Company ﬁnancial statements and the part of the Remuneration
Committee Report to be audited.

Opinion

In our opinion

• the Company ﬁnancial statements give a true and fair view,
in accordance with United Kingdom Generally Accepted
Accounting Practice, of the state of the Company’s affairs
as at 29 December 2006;

• the Company ﬁnancial statements and the part of the

Remuneration Committee Report to be audited have been
properly prepared in accordance with the Companies Act
1985; and

• the information given in the Directors Report is consistent

with the Company ﬁnancial statements.

Ernst & Young LLP
Registered Auditor
Glasgow
21 March 2007

The Weir Group PLC Annual Report 2006 87

29 December 2006
£m

30 December 2005
£m

Notes

3
4

10
11
11
11
11
11

0.5
422.7
423.2

16.5
0.5
92.6
109.6

46.4
26.3
0.5
73.2
36.4

459.6

134.8

13.4

311.4
0.8

310.6

26.4
35.4
(10.7)
0.5
1.8
257.2
310.6

0.5
435.3
435.8

13.8
0.2
50.4
64.4

29.7
24.0
0.2
53.9
10.5

446.3

118.5

11.7

316.1
0.8

315.3

26.2
32.5
(10.7)
0.5
1.8
265.0
315.3

Company Balance Sheet

at 29 December 2006

Fixed assets
Tangible assets
Investments
Total ﬁxed assets

Current assets
Debtors
Forward foreign currency contracts
Cash at bank & in hand

Creditors falling due within one year
Bank overdrafts & short term debt
Other creditors
Forward foreign currency contracts

Net current assets

Total assets less current liabilities
Creditors falling due after more than one year
Loans

Provisions for liabilities & charges

Net assets excluding retirement beneﬁts
Retirement beneﬁts

Net assets including retirement beneﬁts

Capital & reserves
Share capital
Share premium
Treasury shares
Capital redemption reserve
Special reserve
Proﬁt & loss account
Total equity

Approved by the Board of Directors on 21 March 2007

Mark Selway Director

Keith Cochrane Director

The Weir Group PLC Annual Report 2006

Notes to the Company Financial Statements

1. Accounting Policies

The accounting policies which follow have been applied consistently to all periods presented in these ﬁnancial statements.

Basis of preparation

The Company ﬁnancial statements have been prepared in accordance with UK GAAP and applicable accounting standards.

Foreign currency translation

The presentation and functional currency of the Company is sterling. Transactions denominated in foreign currencies are translated into the Company’s
functional currency at the exchange rate ruling on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are
retranslated at the exchange rate ruling on the balance sheet date. Currency translation differences are recognised in the proﬁt and loss account.

Tangible assets

Tangible assets are stated at cost and the cost is depreciated over the estimated useful life by equal annual instalments at rates of 7.5% for ofﬁce
equipment and 25% for computer equipment.

Investments

Investments in subsidiaries and associates are held at historical cost less a provision for impairment.

Deferred tax

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events
have occurred at that date that will result in an obligation to pay more, or a right to pay less or to receive more, tax, with the exception that deferred tax
assets are recognised only to the extent that the directors consider that it is more likely than not that there will be suitable taxable proﬁts from which the
future reversal of the underlying timing differences can be deducted.

Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timing differences reverse, based on
tax rates and laws enacted or substantively enacted at the balance sheet date.

Post-employment beneﬁts

The Company and other major UK subsidiaries of the Group participate in multi-employer deﬁned beneﬁt pension plans which are set up under separate
trusts. These plans are operated on a basis that does not enable individual companies to identify their share of the underlying assets and liabilities and in
accordance with FRS17 the Company accounts for its contributions to the plans as if they are deﬁned contribution plans.

In addition, the Company has unfunded unapproved pension promises. Contributions are made to the plans on the advice of an independent qualiﬁed
actuary. Pension plan liabilities are measured using the projected unit method and discounted at the current rate of return on a high quality corporate
bond of equivalent term and currency to the liability. Any increase in the present value of the liabilities of the Company’s unfunded unapproved pension
promises expected to arise from employee service in the period is charged against operating proﬁt. The increase in the period in the present value of the
plan’s liabilities, arising from the passage of time, is included in other ﬁnance income. Actuarial gains and losses are recognised in the statement of total
recognised gains and losses.

Contributions to deﬁned contribution pension plans are charged to the proﬁt and loss account when they become payable.

Leases

Rentals paid under operating leases are charged to income on a straight-line basis over the term of the lease.

Share-based payments

Equity settled share-based incentives are provided to employees under the Company’s executive share option scheme, the savings-related share option
scheme and the long-term incentive plan. The Company recognises a compensation cost in respect of these schemes that is based on the fair value of the
awards. For equity-settled schemes, the fair value is determined at the date of grant and is not subsequently re-measured unless the conditions on which
the award was granted are modiﬁed. The fair value at the date of the grant is calculated using appropriate option pricing models and the cost is recognised
on a straight-line basis over the vesting period. Adjustments are made to reﬂect expected and actual forfeitures during the vesting period due to failure to
satisfy service conditions or non-market performance conditions.

As permitted by FRS20, the Company has applied FRS20 “Share-based Payment” retrospectively only to equity-settled awards that had not vested as at
1 January 2005 and were granted on or after 7 November 2002.

The Weir Group PLC Annual Report 2006 89

Notes to the Company Financial Statements (Continued)

1. Accounting Policies (continued)

Derecognition of ﬁnancial assets & liabilities

The Company's principal ﬁnancial assets and liabilities, other than derivatives, comprise bank overdrafts, short term debt, loans, cash and short term deposits.

A ﬁnancial asset or liability is generally derecognised when the contract that gives rise to it is settled, sold, cancelled or expires.

A ﬁnancial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. Where an existing ﬁnancial liability is
replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modiﬁed, such an exchange
or modiﬁcation is treated as a derecognition of the original liability and the recognition of a new liability, such that the difference in the respective carrying
amounts together with any costs or fees incurred are recognised in proﬁt or loss.

Financial instruments

The Company uses derivative ﬁnancial instruments, principally forward foreign currency contracts, to reduce its exposure to exchange rate movements.
The Company does not hold or issue derivatives for speculative or trading purposes. Derivative ﬁnancial instruments are recognised as assets and liabilities
measured at their fair values at the balance sheet date. The fair value of forward foreign currency contracts is calculated by reference to current forward
exchange rates for contracts with similar maturity proﬁles. Changes in their fair values have been recognised in the proﬁt and loss account.

Treasury shares

The Weir Group PLC shares held by the Company are classiﬁed in shareholders equity as ‘treasury shares’ and are recognised at cost. Consideration
received for the sale of such shares is also recognised in equity, with any difference between the proceeds from sale and the original cost being taken
directly to revenue reserves. No gain or loss is recognised in the performance statements on the purchase, sale, issue or cancellation of equity shares.

2. Proﬁt attributable to the Company

The proﬁt dealt with in the accounts of the Company was £18.2m (2005: £32.0m). In accordance with the concession granted under section 230 of the
Companies Act 1985, the proﬁt and loss account of the Company has not been separately presented in these ﬁnancial statements.

Dividends paid and proposed

Declared & paid during the period
Equity dividends on ordinary shares
Final dividend for 2005: 9.65p (2004: 9.35p)
Interim dividend for 2006: 3.75p (2005: 3.55p)

Proposed for approval by shareholders at the AGM
Final dividend for 2006: 10.75p (2005: 9.65p)

2006
£m

19.9
7.8
27.7

22.3

2005
£m

19.3
7.3
26.6

19.9

The proposed dividend is based on the number of shares in issue, excluding treasury shares, at the date the ﬁnancial statements were approved and
authorised for issue. The ﬁnal dividend may differ due to increases or decreases in the number of shares in issue between the date of approval of the
report and ﬁnancial statements and the record date for the ﬁnal dividend.

Directors

Details of directors remuneration, pension beneﬁts, share options and L-TIP awards are included in the Remuneration Committee Report on pages 34 to 36.

Auditors remuneration

The total fees payable by the Company to Ernst & Young LLP for work performed in respect of the audit of the Company were £11,000 (2005: £11,000).
Fees paid to Ernst & Young LLP for non-audit services to the Company itself are not disclosed in these accounts as the Company’s consolidated accounts
are required to disclose such fees on a consolidated basis.

The Weir Group PLC Annual Report 2006

3. Tangible assets

Cost
At 30 December 2005
Additions
At 29 December 2006

Aggregate depreciation
At 30 December 2005
Charge for year
At 29 December 2006
Net book value at 29 December 2006
Net book value at 30 December 2005

4. Fixed asset investments

Cost
At 30 December 2005
Disposals / repayments
At 29 December 2006

Impairment
At 30 December 2005
Charge for period
At 29 December 2006
Net book value at 29 December 2006
Net book value at 30 December 2005

The principal subsidiaries and associates of the Company are listed on page 97.

5. Debtors

Amounts recoverable within one year
Amounts owed by subsidiaries
Amounts owed by associate
Tax recoverable
Deferred tax recoverable
Other debtors
Prepayments & accrued income

6. Other creditors

Amounts owed to subsidiaries
Other taxes & social security costs
Tax payable
Other creditors
Accruals & deferred income

7. Loans

Amounts due are repayable as follows
in more than two years but not more than ﬁve years

- loans from subsidiaries

Subsidiaries

Shares
£m

Loans
£m

447.6
(3.7)
443.9

99.4
-
99.4
344.5
348.2

106.5
(8.9)
97.6

21.1
-
21.1
76.5
85.4

Ofﬁce &
computer
equipment
£m

0.8
0.1
0.9

0.3
0.1
0.4
0.5
0.5

Associates
£m

Total
£m

1.7
-
1.7

-
-
-
1.7
1.7

555.8
(12.6)
543.2

120.5
-
120.5
422.7
435.3

2006
£m

4.3
-
-
2.3
7.7
2.2
16.5

2006
£m

16.0
0.6
3.1
0.8
5.8
26.3

2006
£m

2005
£m

5.6
0.9
2.9
2.0
1.4
1.0
13.8

2005
£m

14.4
0.8
-
0.7
8.1
24.0

2005
£m

134.8
134.8

118.5
118.5

The Weir Group PLC Annual Report 2006 91

Notes to the Company Financial Statements (Continued)

8. Provisions for liabilities & charges

At 30 December 2005
Additions
Utilised
At 29 December 2006

Subsidiaries

Subsidiaries
£m

2.0
-
-
2.0

Discontinued
operations
warranty and
indemnity
£m

9.7
3.8
(2.1)
11.4

Total
£m

11.7
3.8
(2.1)
13.4

As at 29 December 2006, a provision of £2.0m (2005: £2.0m) has been made against the deﬁciency of underlying net assets in certain subsidiaries.
It is anticipated that this amount will be settled within two years of the balance sheet date.

Discontinued operations warranty and indemnity

During 2005, the Company provided in full for residual liabilities of discontinued operations for which the Company retains responsibility. £2.1m of these
provisions were utilised during 2006.

Following the completion of the negotiation of a claim settlement, provisions have been increased by £3.8m. A recently agreed associated insurance recovery of
£5.2m has been included within other debtors. The overall effect of the negotiations has been the recognition of a £1.4m credit in the proﬁt and loss account.

The provision as at 29 December 2006 is based on management's current best estimate of the remaining liabilities. The actual outcome may differ, and in some
cases, this will be dependent on the outcome of legal proceedings. It is expected that the majority of these costs will be incurred within one year of the balance
sheet date with the remaining costs expected to be incurred within ﬁve years of the balance sheet date.

9. Retirement beneﬁts

The Company participates in the deﬁned beneﬁt plan arrangements within The Weir Group Pension & Retirement Savings Scheme and The Weir Group
1972 Pensions and Life Assurance Plan for Senior Executives. These deﬁned beneﬁt plans are multi employer plans which are operated by The Weir Group
PLC and which are run on a basis that does not enable individual companies to identify their share of the underlying assets and liabilities. In accordance
with FRS17 the Company accounts for its contributions to these plans as if they were deﬁned contribution plans.

As at 29 December 2006, there is an overall surplus of £5.3m (2005: deﬁcit of £46.1m) in these pension plans. The latest full actuarial valuation of the
deﬁned beneﬁt plan within The Weir Group Pension and Retirement Savings Scheme was as at 31 December 2005 and this has been adjusted to reﬂect the
position at the 2006 year end by a qualiﬁed independent actuary. The latest full actuarial valuation of The Weir Group 1972 Pensions and Life Assurance
Plan for Senior Executives was as at 31 December 2004 and this has been adjusted to reﬂect the positions at the 2005 and 2006 year ends by a qualiﬁed
independent actuary.

The assumptions used by the actuary were (in nominal terms)

Rate of increase in salaries
Rate of increase in pensions in payment

Pre 6 April 2006
Post 6 April 2006

Discount rate
Inﬂation assumption

The assets and liabilities of the plans and the long term expected rates of return are

Equities
Bonds

Total market value of assets
Actuarial value of plan liabilities

Net surplus (deﬁcit) in the plans
Related deferred tax (liability) asset
Net pension asset (liability)

The Weir Group PLC Annual Report 2006

2005
%

7.1
3.9

2006
%

7.7
4.5

2006
£m

398.2
188.2

586.4
(581.1)

5.3
(1.6)
3.7

2006
%

3.1

2.8
2.5
5.2
3.1

2005
£m

382.6
166.7

549.3
(595.4)

(46.1)
13.8
(32.3)

2005
%

3.9

2.8
2.8
4.8
2.8

2004
%

7.5
4.4

2004
%

3.8

2.7
2.7
5.3
2.7

2004
£m

308.9
155.8

464.7
(547.2)

(82.5)
24.7
(57.8)

9. Retirement beneﬁts (continued)

The movement in the surplus (deﬁcit) during the period is analysed as follows

Deﬁcit in plans at beginning of period
Movement in year:

Current service costs
Past service credit (costs)
Curtailment gains and losses
Other ﬁnance income
Proﬁt before tax impact
Contributions
Actual return less expected return on pension plan assets
Experience loss arising on retirement beneﬁts plan liabilities
Changes in ﬁnancial assumptions underlying retirement beneﬁts plan liabilities
Variance between actuarial assumptions & actual experience
Surplus (deﬁcit) in the plans at end of period

Company unapproved plan

The major assumptions used by the actuary for the Company unapproved plan were

Rate of increase in pensions in payment
Discount rate
Inﬂation assumption

The liabilities of the Company unapproved plan were

Actuarial value of plan liabilities
Related deferred tax asset
Net pension liability

The movement in the deﬁcit during the period is analysed as follows

Deﬁcit in plan at beginning of period
Movement in year:

Interest on pension liabilities being proﬁt before tax impact

Contributions
Changes in ﬁnancial assumptions underlying pension plan liabilities being

variance between pension fund actuarial assumptions & actual experience

Deﬁcit in the plan at end of period

2006
£m

2005
£m

(46.1)

(82.5)

(4.5)
10.7
-
5.1
11.3
10.7
12.5
(0.4)
17.3
29.4
5.3

2005
%

2.8
4.8
2.8

2005
£m

(1.1)
0.3
(0.8)

2006
£m

(1.1)

(0.1)
0.1

-
(1.1)

(5.2)
(1.8)
3.4
1.1
(2.5)
14.5
60.2
(0.8)
(35.0)
24.4
(46.1)

2004
%

2.7
5.3
2.7

2004
£m

(1.0)
0.3
(0.7)

2005
£m

(1.0)

(0.1)
0.1

(0.1)
(1.1)

2006
%

3.1
5.2
3.1

2006
£m

(1.1)
0.3
(0.8)

The Weir Group PLC Annual Report 2006 93

Notes to the Company Financial Statements (Continued)

9. Retirement beneﬁts (continued)

The history of experience gains and losses is as follows

Experience gains & losses on plan liabilities
Amount £m
Percentage of present value of plan liabilities

Total gross amount recognised in statement of total recognised gains & losses
Amount £m
Percentage of present value of plan liabilities

2006

2005

2004

2003

2002

-
-

(0.1)
9%

-
-

(0.1)
7%

(0.1)
8%

(0.1)
14%

0.3
27%

0.2
24%

10. Share capital

Authorised share capital
Ordinary shares of 12.5p each

Allotted, called up & fully paid
Ordinary shares of 12.5p each

Shares allotted

Exercise of share options

Aggregate nominal value of share options exercised
Share premium
Consideration received on exercise of share options

Treasury shares

Purchase of treasury shares

Cost
Transaction costs
Consideration paid

The Weir Group PLC Annual Report 2006

2006
£m

2005
£m

36.0

26.4

26.2

2006
Number
Million

2005
Number
Million

1.3

2.6

2006
£m

0.2
2.9
3.1

2005
£m

0.3
6.0
6.3

2006
Number
Million

2005
Number
Million

3.3

2006
£m

-
-
-

2005
£m

10.6
0.1
10.7

10. Share capital (continued)

Equity settled share-based payments

Share options outstanding at the end of the period
L-TIP awards outstanding at the end of the period

2006
Number

2005
Number

1,277,238
2,291,131

2,824,739
1,720,426

Further details of the equity settled share-based payments and the associated cost for the year can be found in note 28 to the consolidated ﬁnancial statements.

11. Reserves

At 31 December 2004
Proﬁt for year
Dividends
Actuarial loss net of deferred tax
Cost of share based payment net of deferred tax
Exercise of options
Purchase of treasury shares
Transaction costs

At 30 December 2005
Proﬁt for year
Dividends
Cost of share based payment net of deferred tax
Exercise of options
At 29 December 2006

Share
premium
£m

Treasury
shares
£m

Capital
redemption
reserve
£m

Special
reserve
£m

Proﬁt & loss
account
£m

26.5
-
-
-
-
6.0
-
-

32.5
-
-
-
2.9
35.4

-
-
-
-
-
-
(10.6)
(0.1)

(10.7)
-
-
-
-
(10.7)

0.5
-
-
-
-
-
-
-

0.5
-
-
-
-
0.5

1.8
-
-
-
-
-
-
-

1.8
-
-
-
-
1.8

258.0
32.0
(26.6)
(0.1)
1.7
-
-
-

265.0
18.2
(27.7)
1.7
-
257.2

Total
£m

286.8
32.0
(26.6)
(0.1)
1.7
6.0
(10.6)
(0.1)

289.1
18.2
(27.7)
1.7
2.9
284.2

The proﬁt and loss account above is stated after deducting an accumulated loss in respect of retirement beneﬁts of £0.8m (2005: £0.8m).

12. Balance sheet - deferred tax

At 30 December 2005
Credit for the year included in equity
At 29 December 2006

Included in debtors (note 5)
Included in retirement beneﬁts (note 9)

Other timing differences
Retirement beneﬁts

Deferred tax asset
£m

2.3
0.3
2.6

2005
£m

2.0
0.3
2.3

2006
£m

2.3
0.3
2.6

The Weir Group PLC Annual Report 2006 95

Notes to the Company Financial Statements (Continued)

13. Operating lease commitments

As at 29 December 2006, annual commitments
under non-cancellable operating leases amounted to
Ofﬁce equipment

of which payable in respect of operating leases ending
in the second to ﬁfth years inclusive

14. Contingent liabilities & guarantees

Guarantees

2006
£000

2005
£000

The Company has given a limited counter-indemnity to Halliburton Company and Brown & Root Limited in respect of Devonport Management Limited up to a
maximum of the Group's investment in that company.

The Company has given guarantees in relation to the bank and other borrowings of certain subsidiary companies. The net debt of the companies party
to these facilities at 29 December 2006 amounted to £94.1m. As at 30 December 2005, the Company had given guarantees relating to the borrowings
of subsidiary companies up to a maximum of £50.0m.

Legal claims

The Company is, from time to time, party to legal proceedings and claims which arise in the normal course of business. The directors do not anticipate that
the outcome of these proceedings and claims, either individually or in aggregate, will have a material adverse effect upon the Company's ﬁnancial position.

15. Financial risk management objectives and policies

A description of the Group's ﬁnancial risk management objectives and policies is provided in note 31 to the consolidated ﬁnancial statements.
These ﬁnancial risk management objectives and policies also apply to the Company.

The Weir Group PLC Annual Report 2006

Principal Companies of the Group

The principal subsidiaries, joint ventures and associates of the Group are as follows

Name

Subsidiaries

EnviroTech Pumpsystems Inc.
Liquid Gas Equipment Ltd *
Strachan & Henshaw Ltd
Vulco S.A.
Weir Canada Inc.
Weir do Brasil Ltda
Weir Engineering Services (India) Ltd
Weir Floway Inc.
Weir Gabbioneta S.r.L
Weir Group Trading (Shanghai) Co Ltd
Weir Hazleton Inc.
Weir Minerals Africa (Pty) Ltd (formerly Weir-EnviroTech (Pty) Ltd)
Weir Minerals Australia Ltd (formerly Weir Warman Ltd)
Weir Minerals China Co. Ltd
Weir Minerals Europe Ltd (formerly Weir Warman Ltd)
Weir Minerals France SAS. (formerly Weir EnviroTech SAS )
Weir Minerals (India) Private Ltd (formerly Warman International (India) Pvt Ltd)
Weir Minerals Netherlands B.V. (formerly Weir Netherlands B.V.)
Weir Minerals Services (Africa) (Pty) Ltd
Weir Pumps Ltd
Weir Services Australia Pty Ltd
Weir Services USA Inc.
Weir Slurry Group Inc.
Weir Valves & Controls France S.A.S.
Weir Valves & Controls (Suzhou) Co, Ltd
Weir Valves & Controls UK Ltd *
Weir Valves & Controls USA Inc.

Joint ventures

Weir Arabian Metals Company Limited
Wesco Abu Dhabi L.L.C.

Associate

Devonport Management Ltd *

* Companies whose shares are owned directly by The Weir Group PLC

Country of registration
or incorporation

% equity interest
2006

USA
Scotland
England
Chile
Canada
Brazil
India
USA
Italy
China
USA
South Africa
Australia
China
England
France
India
Netherlands
South Africa
Scotland
Australia
USA
USA
France
China
England
USA

Saudi Arabia
U.A.E.

100
100
100
100
100
100
74
100
100
100
100
100
100
100
100
100
97
100
75
100
100
100
100
100
100
100
100

49
49

England

24.5

The Weir Group PLC Annual Report 2006 97

Shareholder Information

Registrars

Taxation

The Company’s registrars are Computershare Investor Services
PLC, PO Box 82, The Pavilions, Bridgwater Road, Bristol,
BS99 7NH.

Shareholder enquiries relating to shareholding, dividend payments,
change of address, loss of share certiﬁcate etc. should be addressed
to Computershare Investor Services PLC at the above address.

The registrars provide an on-line service that enables shareholders
to access details of their Weir Group shareholdings. A shareholder
wishing to view the information, together with additional
information such as indicative share prices and details of recent
dividends, should visit www-uk.computershare.com.

For the purpose of capital gains tax, the market value of The
Weir Group PLC ordinary shares as at 31 March 1982 was 29.75p.
Rights issues of ordinary shares took place in April 1987 at 157p
per share on the basis of one new ordinary share for every seven
ordinary shares held, in July 1990 at 250p per share on the basis
of one new ordinary share for every ﬁve ordinary shares held and
in September 1994 at 252p per share on the basis of one new
ordinary share for every four ordinary shares held.

With effect from 28 June 1993, each ordinary share of 25p was
sub-divided into two ordinary shares of 12.5p and the market
value of an ordinary share as at 31 March 1982 takes account
of the sub-division.

Dividends – payment direct to banks

Dividends can be paid direct to your bank or building society
account using the Bankers Automated Clearing Service (BACS).
This means that your dividend will be in your account on the same
day the Company makes the payment. Your tax voucher will be
posted directly to your own address. Shareholders who have not
yet arranged to use this method of payment, can telephone the
registrars on 0870 702 0010. The Company encourages you to
have your dividends paid direct to a bank or building society.

Annual General Meeting

The Annual General Meeting will be held in the Lecture Room,
The Burrell Collection, Pollok Park, Glasgow on 9 May 2007 at
11am. Details of the resolutions to be proposed at the Annual
General Meeting are contained in the shareholders circular.

Shareholder communications

You can now register to receive shareholder communications
(annual reports, interim reports and other company communications)
electronically (and also appoint a proxy and vote electronically)
provided you have internet access and a valid e-mail address.
To register, you will need your Shareholder Reference Number,
which is given on your Share Certiﬁcate or Tax Dividend Voucher.
This service is provided in conjunction with our registrars,
Computershare Investor Services PLC. To obtain more
information and register for this service, please visit
www-uk.computershare.com.

The Weir Group PLC Annual Report 2006

Website

You may wish to view the Company website containing details
of Group activities and investor information including the Notice
of the Annual General Meeting and the full annual report.
The address is: www.weir.co.uk.

Share dealing services

Share dealing services have been established with the Company’s
registrars, Computershare Investor Services PLC which provide
shareholders with an easy way to buy or sell Weir Group shares
on the London Stock Exchange.

Internet Share Dealing commission is just 0.5%, subject to a
minimum charge of GBP15. In addition stamp duty, currently
0.5%, is payable on purchases. There is no need to open an
account in order to deal. Real time dealing is available during
market hours. In addition there is a convenient facility to
place your order outside of market hours. Up to 90 day limit
orders are available for sales. To access the service log on to
www.computershare.com/dealing/uk. Shareholders should have
their Shareholder Reference Number (SRN) available. The SRN
appears on share certiﬁcates. A bank debit card will be required
for purchases. Please note that, at present, this service is only
available to shareholders in certain European jurisdictions. Please
refer to the website for an up-to-date list of these countries.

Telephone Share Dealing commission is 1%, subject to a
minimum charge of GBP15. In addition stamp duty, currently
0.5%, is payable on purchases. The service is available from
8am to 4.30pm Monday to Friday, excluding bank holidays,

on telephone number 0870 703 0084. Shareholders should have
their Shareholder Reference Number (SRN) ready when making
the call. The SRN appears on share certiﬁcates. A bank debit card
will be required for purchases. Detailed terms and conditions are
available on request by telephoning 0870 703 0119. Please note
this service is, at present, only available to shareholders resident
in the UK and Ireland.

These services are offered on an execution only basis and subject to
the applicable terms and conditions. This is not a recommendation
to buy, sell or hold Weir Group shares. Shareholders who are
unsure of what action to take should obtain independent ﬁnancial
advice. Share values may go down as well as up which may result
in a shareholder receiving less than he/she originally invested.

To the extent that this statement is a ﬁnancial promotion for the
share dealing service provided by Computershare Investor Services
PLC, it has been approved by Computershare Investor Services
PLC for the purpose of Section 21 (2) (b) of the Financial Services
and Markets Act 2000 only. Computershare Investor Services PLC
is authorised and regulated by the Financial Services Authority.
Where this has been received in a country where the provision
of such a service would be contrary to local laws or regulations,
this should be treated as information only.

Voting

Information on how you can vote electronically can be obtained
through our registrars by visiting
www-uk.computershare.com/investor/proxy.

The Weir Group PLC Annual Report 2006 99

Shareholder Information (Continued)

Online share management

As part of our commitment to improve shareholder communications our registrars now offer you a free, secure share management
website. Managing your shares online means you can access information quickly, securely and minimise postal communications.
This service will allow you to:

• view your share portfolio and see the latest market price of your shares

• elect to receive your shareholder communications online

• calculate the total market price of each shareholding

• view price histories and trading graphs

• update bank mandates and change address details

• use online dealing services.

To take advantage of this service, please log in at www-uk.computershare.com/investor and enter your Shareholder Reference Number
and Company Code (this information can be found on the last dividend voucher or your share certiﬁcate).

100

The Weir Group PLC Annual Report 2006

Financial Highlights 2006

Group results - continuing operations

Revenue

£940.9m

Up 19%

Operating profit (2)

£87.7m

Up 32%

Pre-tax profit (2)

£87.1m

Up 40%

Order input (1)

£1,099.5m

Up 23%

Earnings per share (2)

32.4p

Up 38%

Dividend

14.5p

Up 10%

Net debt

£7.1m

Down 91%

2005
23.5p

2006
32.4p

2005
13.2p

2006
14.5p

(1) Excludes Joint Ventures & Associates; calculated at constant 2006

exchange rates

(2) Adjusted to exclude exceptional items

Contents:

The Reports

2006 Highlights

Chairman’s Statement

Chief Executive’s Review

7 Operational Review

17 Financial Review

20 Board of Directors

22 Directors Report

26 Corporate Governance Statement

29 Audit Committee Report

30 Nomination Committee Report

31 Remuneration Committee Report

37 Corporate Social Responsibility Report

Group Financial Statements

42 Directors Statement of Responsibilities

43 Independent Auditors Report

44 Consolidated Income Statement

45 Consolidated Balance Sheet

46 Consolidated Cash Flow Statement

47 Consolidated Statement of Recognised

Income & Expense

48 Notes to the Group Financial Statements

Company Financial Statements

86 Directors Statement of Responsibilities

87 Independent Auditors Report

88 Company Balance Sheet

89 Notes to the Company Financial

Statements

97 Principal Companies of the Group

98 Shareholder Information

100 On-line Share management

Inside back cover - Financial Calendar

Financial Calendar

Ex-dividend date for final dividend

2 May 2007

Record date for final dividend*

4 May 2007

Annual General Meeting

9 May 2007

Final dividend paid

1 June 2007

*shareholders on the register at this date will receive the dividend

Registered office & company number

Clydesdale Bank Exchange
20 Waterloo Street
Glasgow G2 6DB, Scotland
Registered in Scotland
Company Number 2934

The Weir Group PLC
Clydesdale Bank Exchange
20 Waterloo Street
Glasgow G2 6DB, Scotland

Telephone: +44 (0)141 637 7111
Facsimile: +44 (0)141 221 9789

Email: investor-relations@weir.co.uk
Website: www.weir.co.uk

The Weir Group PLC
Annual Report 2006

Excellent
Engineering
Solutions

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